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Greencore Group PLC (GNC)

  Print      Mail a friend       Annual reports

Wednesday 28 May, 2008

Greencore Group PLC

Interim Results

RNS Number : 3570V
Greencore Group PLC
28 May 2008
 



Greencore Group plc

Half yearly Financial Report 2008


Interim Management Report

for the half year ended 28 March 2008


Greencore Group plc, a leading international convenience food and malt producer, today announces a good performance for the half year ended 28 March 2008 and good prospects for the remainder of the year.

Highlights

  • Group sales up 2.5% to 648.7m and by 10.4% on a constant currency basis

  • Group operating profit1 up 2.5% to 41.1m and by 11.8% on a constant currency basis

  • Adjusted EPS2 up 7.4% to 13.0 cent

  • Solid underlying momentum in Convenience Foods Division

    • Strong performance in recovering input price inflation

    • Increase in core sales3 by 6.5%

    • Constant currency operating profit1 decreased by 3.8%

  • Very strong Malt performance driving Ingredients & Related Property division

    • 61% increase in continuing operating profit

    • 27% increase in sales

  • Significant momentum on the convenience foods development agenda with three acquisitions in the financial year to date

  • Net exceptional gain of 18.1m contributing to a 36% increase in profit for financial period

  • 30% reduction in comparable net debt year on year to 275.4m

  • 5% increase in interim dividend to 5.30 cent per share

1    Before exceptional items and acquisition related amortisation.

2    Before exceptional items, acquisition related amortisation, FX on inter-company and certain external loan balances and the movement in the fair value of all derivative financial instruments and related debt adjustments.

3    At constant exchange rates and excluding factored sales from the comparative period.

COMMENTING ON THE RESULTS, GROUP CHIEF EXECUTIVE PATRICK COVENEY SAID:

'These results represent very good progress in an environment characterised by substantial food inflation and a significant decline in the value of sterling relative to the euro. On a constant currency basis, we delivered strong double digit growth in sales, profit and EPS. This performance reflects a portfolio that is working, strong customer relationships across Convenience Foods and Malt, excellent cost control and good inflation recovery. Furthermore, we acquired Ministry of Cake and Danone Flavoured Water, both in the UK, in December and Home Made Brand Foods, in the USA, in April. These acquisitions are bang in line with our strategy of extending our category leading businesses in the UK and entering the US chilled food market in the right way.'

FOR FURTHER INFORMATION, PLEASE CONTACT:

Patrick Coveney

Chief Executive Officer

Tel:

+353 1 605 1045

Geoff Doherty

Chief Financial Officer

Tel:

+353 1 605 1018

Eoin Tonge

Capital Markets Director

Tel:

+353 1 605 1036

Billy Murphy/Anne Marie Curran

Drury Communications

Tel:

+353 1 260 5000

Marie Cairney/Elizabeth Rous

Powerscourt

Tel:

+44 207 250 1446

ABOUT GREENCORE

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

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

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

The leading malt producer in Ireland, the UK and Belgium

Significant property assets in Ireland and the UK

Summary

Overall

Greencore has delivered a solid overall performance in a testing environment in the first half of FY08 with adjusted EPS up 7.4% to 13.0 cent. The Group made significant progress in each part of its business most notably substantial recovery of input price inflation; laying the foundations for geographic expansion in Convenience Foods; achieving good traction on the development agenda and delivering a very strong malt performance. Group operating profit and sales on a constant currency basis increased by 11.8% and 10.4% respectively on the comparative period with a strong Ingredients & Related Property performance, in particular Malt, more than offsetting a modest decline in Convenience Foods.

Convenience Foods

The Convenience Foods division, which accounted for 68% of Group operating profit in the first half of FY08, performed solidly in tough conditions. Operating profit, on a constant currency basis, decreased by 3.8% (a decrease of 12.5% to 27.9m after the impact of currency translation). This headline masks a positive underlying performance with good delivery on confronting the inflation experienced by the global food industry in the period. The operating margin decreased by 50 bps from 6.7% in the first half of FY07 to 6.2% in the first half of FY08. The key driver of this was margin attrition in our ambient cooking sauces and pickles ('Grocery') business in the period, reflecting a particularly challenging input price inflation environment, which had a more pronounced impact on its supply chain than in chilled categories.

The achievement of price increases was prioritised over volume growth in the period. Actual sales were 451.2m compared to 477.8m last year, a decrease of 5.6%. On a constant currency basis sales increased by 3.4%. The comparative period benefited from non-manufactured distribution volumes and in March 2007 (following Starbucks trade loss) we took a strategic decision not to perform pure distribution business in isolation. When this 14.1m of 'factored' or distribution sales are eliminated, from the first half of last year, core sales growth was 6.5% on a constant currency basis in the first half of FY08.

The first half of the year has also continued to see significant momentum in the development agenda in convenience foods through both organic and acquisition activity.

Ingredients & Related Property

The Ingredients & Related Property division recorded a very strong performance. Operating profit, on a constant currency basis, increased by 72.4% (representing an increase of 61.0% to 13.2m after the impact of currency translation). Total sales were 197.4m in the period representing a 31.9% increase on a constant currency basis (27.5% increase after the impact of currency translation). The improvement seen in global malt markets in 2007 has continued in 2008 with a much tighter supply/demand balance than has been seen in recent times. Brewers and Distillers are increasingly moving some of their requirements to long-term agreements, which provide some opportunity to secure a portion of future profitability. In addition, the Group's property team has continued to make progress in adding value to our significant property assets, albeit in a weaker property market.

Finance and Treasury

The Group’s net finance charge4 of9.6m increased by 6.6% during the period reflecting, in the main, a reduction in the net pension credit by0.6m. The Group’s net debt position has improved with comparable net debt at 28 March 2008 totalling275.4m representing a reduction of117.6m, or 30%, on the same period last year. Cash generated from operations was 2.1m compared to 40.8m in the first half of FY07. A working capital outflow of 52.2m was recorded in the first half of FY08 compared to an outflow of 13.6m in the first half of FY07. Approximately 33.0m of the outflow is due to normal seasonal outflows in our Ingredients businesses, which will largely unwind by year-end, being significantly impacted by price and volume increases. Sales in this division increased by 31.9% on a constant currency basis over the first half of FY07.

The Board of Directors is recommending that the interim dividend be increased by 5% on the prior year to 5.30 cent per share (2007: 5.05 cent).


4    Excluding FX on inter-company and certain external loan balances and the movement in the fair value of all derivative financial instruments and related debt adjustments.

Outlook

The Group is well placed to deliver a good performance in the seasonally more significant second half of its financial year.

In Convenience Foods, from a trading perspective, the key sensitivities are consumer sentiment, ongoing input price inflation and weather. Whilst in the financial year to date we are seeing more volatility in month-on-month sales patterns, overall sales are holding up well and we expect the underlying sales performance seen in the first half to carry through to the second half. We continue to manage input price inflation through aggressive management of our cost base and our price increase agenda. On the issue of weather, our expectations are based on more 'normal' summer conditions than those seen last year. Overall, after taking account of the issues referred to above, we expect a good second half and modest profit growth in the division (albeit at a level below existing market expectations) on a constant currency basis for the full year.

In Ingredients & Related Property, we expect to see a continuation of the good performance seen in the first half. Our Malt business remains very well positioned to deliver a good profit performance in the year. We will continue to build on the progress made to date on reducing and eliminating zoning and planning risk to best position our Related Property portfolio in anticipation of a return to more favourable property market conditions.

Currency translation has impacted our results in the first half and given current levels of EUR/GBP we expect this to be more pronounced in the second half. Approximately 80% of total operating profit is expected to be delivered in sterling (with revenues and costs similarly denominated) and the change in the EUR/GBP exchange rate seen in the year to date will impact on the year on year translation of our results. If the EUR/GBP level continues in the 0.78-0.80 range, the translation effect year on year would reduce Group operating profit by c. 11.0m and profit before tax by c. 8.5m for the full financial year.

The Group remains well placed in the current year and beyond to take advantage of our strong category market positions, our well-invested facilities, our reputation for 'true' food innovation and our growing geographic footprint. 

Review of Operations

Convenience Foods

The Convenience Food division represents the 'engine' of the Group and comprised 68% of Group operating profit in the first half of FY08. The division performed solidly in the period in a particularly demanding environment with relentless input price inflation. The quality of our market positions, which we have spoken much of in recent years, was demonstrated in a very tangible way in the period under review. Highlights for the period include:

  • Recovery of raw material price inflation

In FY08, an estimated 57m of cost of goods price inflation will be experienced by our Convenience Foods business. Of this c. 22m impacted the first half. Recovery of this is centre stage on our commercial agenda. As a result, all businesses with the exception of our ambient Grocery business maintained underlying margins. Our Grocery business was significantly impacted with its supply chain experiencing higher levels of inflation in areas such as glass, processed tomatoes and onions. Primarily, as a result of this impact on our Grocery business, the overall operating margin in the first half of FY08 decreased to 6.2% from 6.7% in the first half of FY07.

  • TLC - the 'right' platform in the current environment

Our 'Total Lowest Cost' culture and support programmes has set our business apart from our competitors in recent years. It represents a distinctive approach where inefficiency is chased out of the business. The model is not based on 'cheapness' but is much more about a culture of efficiency which permeates our organisation and people. In an environment of high inflation we continue to look to our own cost base first and to our customers second. We do not look for 'unchallenged' price increases and seek them only to maintain acceptable returns on capital. There are in excess of 300 separate initiatives underway across the Group currently. In the first half of FY08 c. 2% of sales was generated in savings resulting from TLC initiatives with an expected annualised benefit in FY08 of c. 17m.

  • 'Top-drawer' private label food players

Our customers value us, in particular, for our private label category management skill, innovation and technical excellence. They trust us with 'their' brands. Our job is to lead category innovation for our customers so that they ultimately can be successful with consumers. Examples of this private label innovation in the period are the 'King Prawn Nori Wrap' for Sainsbury, the Tesco 'Light Choice Crustless Quiche' (launched in January), ASDA's 'Good for You Soft Cheese, Ham and Caramelised Onion Plait' and our range of Cocktail Gherkins for M&S (launched in December 2007). We can successfully marry through new and existing product development our customers need for true food innovation and our need to make acceptable returns on capital.

  • Stretching our geography

A key pillar of our strategy is to grow our international operations. We believe we can leverage the expertise from our market leading positions in the UK to take advantage of consumer needs in other geographies. Our acquisition of Home Made Brand Foods Inc. ('HMBF') is an exciting step for us. This business, located in a well-invested chilled facility near Boston, has an excellent management team, a strong record of innovation with its customers and a customer base who want chilled food. Additionally, our Continental European business is having a strong year driven by a positive sandwich and meals solutions performance. We have launched a new 'Bakerstreet' range of sandwiches and rolls and our 'Kies en Kook' (pick 'n' mix) range of sauces at Albert Heijn is performing well. We are also making good progress in Ireland supplying meal, quiche and ambient cake products to leading Irish retailers from our UK facilities. In aggregate, the non-UK portion of our sales has current annualised sales run rate of approximately 100m (including HMBF) and we have more than doubled our sales on the Continent and in Ireland over those recorded in the first half of FY07.

  • Cost advantage through scale, well-invested facilities

The bedrock of our business is the quality of our manufacturing facilities. The Group has c. 300m invested in state of the art production competence and equipment. In an era of ever increasing focus on efficiency and costs our facilities are a source of competitive advantage to us. Manton Wood, our 160,000 square foot sandwich facility is the largest such facility internationally, our Cakes and Desserts facility in Hull, with three production zones is unrivalled in the category and our Ambient Grocery facility in Selby is the largest cooking sauce facility in Europe. Category and factory scale matters in food and delivers a lower cost per unit advantage for our customers and consumers. This scale also helps 'pay' for the innovation, which helps underpin our No.1 and No.2 category market positions. In the first half of FY08, we invested a further 16.6m on enhancing our Convenience food facilities. The investments included a significant upgrade of our Sushi facility and the commissioning of new chilled meal lines at our Warrington and Wisbech facilities.

  • Health, Well-being and the Environment

The consumer is increasingly conscious of health and the importance of food in achieving a better lifestyle. Throughout 2008, we have continued to strive to achieve a healthier product portfolio. An example of this is that we have continued to develop and further increase the quantity of our product lines which meet the UK Food Safety Authority (FSA) salt target (84% of our product ranges comply with the 2010 FSA target ahead of schedule). Additionally, we invest in nutrition with a dedicated nutrition team working with our customers to provide more information about the food we produce thus empowering consumers to make healthier choices. We are particularly proud of our partnership with WeightWatchers® which delivers a healthier range of meal solutions to the consumer. Annual sales are now running at 41m increasing 91% year on year with new categories of sandwiches, wraps & salads, quiche, cooking sauces and mayonnaise added in the period.

  • Business and portfolio risk - how we think about it

A balanced set of customer relationships - our core retail customers in the UK market remain at the heart of what we do. Geographic diversification - we have grown our business beyond the UK and over the next five to ten years we would like to achieve a 50/50 Europe/International split of our business. Channel diversification - 32% of convenience food sales are now delivered from Foodservice and Convenience store outlets. Examples of new trade in the period include Deep Filled Apple Pie business with Burger King and Steak Fanatic Sauce for Domino's Pizza.

  • Value-add through acquisition

In FY08 to date we have made three acquisitions, including HMBF after the period end. We are selective acquirers and only acquire where we can tangibly add value to the acquired business. Our 'value-add' criteria are based on:

  • Acquiring 'on strategy' people and competencies which we do not currently have;

  • An opportunity existing for Greencore to leverage its people and competencies (e.g. through sales growth, synergies or process improvement);

  • Building on, or getting us to, the No.1 or No.2 category market position we aspire to;

  • Businesses which are available at valuations which make sense.

Our acquisition of Ministry of Cake in December 2007, a leading foodservice provider of desserts solutions opened up our access to this channel and provides an opportunity for us to leverage an innovative and winning team into other foodservice categories. Our acquisition of a former Danone water business at Blaen Twyni in December 2007 will provide valuable capacity to help underpin our No.1 market position in private label water. The acquisition of HMBF marked the Group's entry into the growing chilled convenience food market in the US. Based in Newburyport, Massachusetts, HMBF is a regional leader in fresh prepared food. It manufactures and supplies a range of fresh food products, including fresh prepared meals and salads, sandwiches and quiche to a customer base that includes leading regional retailers such as Stop & Shop, Hannaford and Publix.

Ingredients & Related Property

Continuing on the progress made in FY07 the Ingredients & Related Property division recorded a strong first half performance. Operating profit, on a constant currency basis, increased by 72.4% representing an increase of 61.0% to 13.2m after the impact of currency translation. Sales were up 31.9% on a constant currency basis (by 27.5% after the impact of currency translation). The key driver of the divisional performance was Malt, which comprises c. 60% of divisional sales. Progress continues to be made on the Group's property agenda with each of the key sites making headway on the zoning and planning processes.

  • Continued momentum in Malt

The recovery seen in 2007 has continued through to 2008 with an improvement in overall sales and malting margins. Returns on capital are now at more acceptable levels. A much closer alignment of global supply and demand has continued to underpin malt margins. Because of the relatively extended time frame for construction of new malting capacity current indications are that the 'tightness' of supply and demand should extend into 2009. Our business remains well placed to take advantage of this, in particular, as a result of the restructuring efforts undertaken in 2005 and 2006. Additionally, we are seeing some crossover between our competences and processes in Convenience Foods and Malt. In particular 'food' safety is becoming increasingly important for our brewing and distilling customers and there is some opportunity to add value for our customers in this area. Critical Group processes such as TLC are firmly embedded in Malt which positions us well to capitalise fully on stronger markets.

  • Further zoning progress in Related Property

We continue to make progress in addressing zoning and planning risk across our four key sites. Carlow County Council has adopted a Draft Local Area Plan, which is expected to be adopted in final form in the next two months. This proposes a significant mixed use re-zoning of the Carlow aspects (220 acres) of 'Carlow Gateway'. Efforts are underway to re-zone the Laois aspects (113 acres) with better visibility on this expected by year-end. In Mallow, our 'Mallow West' Masterplan is currently under consideration by Cork County Council. We had expected a decision on this prior to half-year end but the process is not the subject of a formal statutory timetable. We do, however, expect an outcome by the end of FY08. Preparatory work has now commenced on our planning application for c. 1,500 residential units on our consortium lands at Littlehampton (Greencore owns 68% of the land) with a planning application targeted by the end of the 2008 calendar year. Allowing for the various milestones in the planning process, a planning and re-zoning decision is expected by the end of 2010. Two separate planning applications, covering 20 acres out of a total of 40, have been made in respect of our Athy lands. These are currently under consideration by Kildare County Council. Property markets have softened considerably in recent times. Our Property business is, however, well placed to deal with these conditions as our entry costs are low and ongoing investment in planning and zoning in the near term will be modest. We will continue to target zoning and planning gains to best position our Related Property portfolio in anticipation of a return to more favourable property market conditions in due course.

  • Resolution of EU Sugar restructuring aid

In January 2008 the Irish Government informed the Group of its decision to allocate 87.3% (representing a total of 127.0m) of EU restructuring aid to Greencore. This followed the Group's successful legal challenge of the Government's original allocation decision of July 2006. The revised allocation resulted in a final settlement of 83.4m received on 29 February 2008. The Group recorded a net exceptional gain of 18.1m in the period reflecting, primarily, the increased amount of EU restructuring aid received. We continue to make good progress in the delivery of our restructuring plan, the costs of which have already been provided for in 2007.



Financial Review

  • Overview

In headline terms the strengthening of the euro against sterling has had a significant translation impact on the results when compared to the same period last year. The average EUR/GBP exchange rate was 0.67 in the first half of FY07 compared to 0.74 in the first half of FY08, impacting translation of our sterling results negatively by 10.1% in the period. Approximately 80% of total operating profits are sterling dominated. Actual operating profit1 in the half year of41.1m was 2.5% ahead of last year after the impact of currency translation. On a constant currency basis, operating profit was 11.8% ahead. Group sales of648.7m were 2.5% ahead of last year’s632.7m and were 10.4% ahead on a constant currency basis. Profit before tax2 was32.2m, 3.2% ahead of last year’s amount of31.3m.
  • Financing

The Group's net finance charge in the first half of FY08 was 11.7m (5.4m in the first half of FY07). The change in the fair value of derivatives, related debt adjustments and FX movements on inter-company and certain external loan balances was a cost of 2.0m in the period compared to a gain of 3.6m in the first half of FY07, reflecting capital market volatility. Excluding this, the net finance charge was modestly higher than last year, increasing by 0.6m. The net increase of 0.6m primarily reflects an increase in bank interest by 0.2m, a reduction in the net pension financing credit by 0.6m and an increase in the unwind of the discount to present value of the EU receivable by 0.3m. Underlying bank interest costs increased reflecting both higher average working capital levels, with malt stocks in particular, increasing because of year on year increases in pricing and higher levels of Euribor and Libor.

  • Taxation

The Group's effective tax rate in first half of FY08 was 17% (first half of FY07 22.5%) with the reduction of the overall % charge reflecting a change in the mix of the Group's profits and a reduction in the UK corporation tax rate from 30% to 28%.

  • Earnings per share

Adjusted EPS2 for the first half of FY08 was 7.4% ahead at 13.0 cent compared to 12.1 cent in the first half of FY07. On a constant currency basis, adjusted EPS was 16.5% ahead of last year. This is based on a weighted average number of ordinary shares of 199.8m in the period (first half of FY07: 198.6m).

  • Exceptional items

In the period under review, the Group made an exceptional gain (net of tax) of 18.1m reflecting the higher amount of EU aid received, than the amount accrued, by 16.9m and 1.2m from the reversal of a write down and impairment of assets.

  • Cash flow and net debt

Comparable net debt (excluding the impact of marking to market all derivative financial instruments and related debt) at 28 March 2008 was 275.4m, a year on year reduction of 29.9% from last year's 393.0m. During the period, the final instalment of EU restructuring aid, 83.4m, was received. Cash inflow from operating activities of 2.1m was recorded compared to an inflow of 40.8m in the first half of FY07. The Group seasonally increases working capital in the first half particularly in its Ingredients business. A working capital outflow of 52.2m (first half of FY07 outflow 13.6m) was recorded in the first half of FY08 reflecting, in the main, the impact of higher prices and volumes on ingredient working capital levels. This will largely unwind by year-end. In addition, 8.2m of invoice financing drawings were repaid during the first half of FY08 leaving a net amount outstanding at the period end of 15.4m. The first half of FY07 cash flows benefited by 12.2m in respect of the terminal working capital release in Sugar. Net capital expenditure of 20.8m was incurred as we continue to invest in our convenience food and malt facilities.

  • Acquisitions

The Group made two acquisitions during the period for an aggregate consideration of 19.6m including debt acquired. Further amounts of up to c. 3.0m may become payable in, or following, FY09 depending on performance. The acquisitions were Ministry of Cake, the leading UK foodservice desserts player and the former Danone bottled water business at Blaen Twyni in Wales. Following the period end, the Group acquired a US business, Home Made Brand Foods Inc., for an initial consideration of 28m. Further amounts of up to 6.4m may become payable in FY09 depending on performance.

  • Dividends

A dividend of 5.30 cent per share is proposed representing a 5% increase on the first half of FY07. Dividend cover remains c. 2.5 times on a full year basis.

  • Employee Benefits

The fair value of total plan assets relating to the Group's defined benefit pension schemes (excluding associates) decreased to 452.4m at March 2008 from 547.3m at September 2007. The present value of total pension liabilities for these schemes decreased to 489.7m from 573.1m over the same period. This is reflected in an increase in the net pension deficit (before related deferred tax) to 37.3m at March 2008 (from a net pension deficit of 25.8m at September 2007).

  • Total Equity

Total equity at 28 March 2008 was 278.5m a 31% increase on the 212.6m amount at 30 March 2007. Total equity decreased by 4.5m, or 1.6%, on the amount of 283.0m at 28 September 2007 due primarily to retained profit in the period of 42.9m being offset by currency translation differences of 6.0m (reflecting the depreciation of sterling against the euro), losses on cash flow hedges taken to equity of 2.7m and an actuarial loss of 25.0m on the Group's defined benefit pension schemes.

  • Principal Risks and Uncertainties

Under the Transparency (Directive 2004/109/EC) Regulations 2007, the Group is required to give a description of the principal risks and uncertainties it faces. As with any large group, Greencore faces a number of risks and uncertainties. Individual business unit management teams primarily drive the process by which individual risks and uncertainties are identified, these teams being best placed to identify significant and emerging risks and uncertainties in their businesses. The key risks facing the business include the following:

  • The loss of a significant manufacturing/operational site through fire, natural catastrophe, act of vandalism or critical plant failure could potentially have a material impact on the Group.

  • Our cost base can be affected by fluctuating raw material and energy prices.

  • The Group benefits from close commercial relationships with a number of key customers. The loss of any of these key customers, or a significant worsening in commercial terms, could result in a material impact on the Group's results.

  • As a producer of convenience foods, Greencore is subject to general market related risks, including product contamination and general food scares.

  • In common with the food industry manufacturers, unforeseen changes in food consumption patterns or changes in government legislation regarding the composition of food products may impact the Group.

  • Financial risks associated with interest rate, foreign currency, liquidity and credit risk.

  • The Group's defined benefit pension schemes are exposed to the risk of changes in interest rates and the market value of investments, as well as inflation and increasing longevity of scheme members.

  • A significant IT system failure could adversely impact on operations.

  • The value of the Group's property assets is subject to the macro-economic environment in Ireland and the UK, the successful environmental clean up of the Brownfield sugar factory sites and the nature and timing of any zoning and subsequent planning permission.

  • Related Party Transactions

There were no related party transactions in the half year that have materially affected the financial position or performance of the Group in the period. In addition, there were no changes in related party transactions from the last annual report that could have had a material effect on the financial position or performance of the Group in the first six months.

  • Auditor Review

This half yearly financial report has not been audited or reviewed by the auditors of the Group pursuant to the Auditing Practices board guidance on Review of Interim Financial Information.

  • Forward-Looking Statements

Certain statements made in these interim results are forward-looking statements. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual events or results to differ materially from the expected future events or results referred to in these forward-looking statements.

E.F. Sullivan

Chairman

28 May 2008

Responsibility Statement


The Directors are responsible for preparing the Half Yearly Financial Report in accordance with the Transparency (Directive 2004/109/EC) Regulations 2007, the related Transparency Rules of the Irish Financial Services Regulatory Authority and with IAS 34, Interim Financial Reporting as adopted by the European Union.

The Directors confirm that, to the best of their knowledge:

  • the Group Condensed Financial Statements for the half year ended 28 March 2008 have been prepared in accordance with the international accounting standard applicable to interim financial reporting adopted pursuant to the procedure provided for under Article 6 of the Regulation (EC) No. 1606/2002 of the European Parliament and of the Council of 19 July 2002;

  • the Interim Management Report includes a fair review of the important events that have occurred during the first six months of the financial year, and their impact on the Group Condensed Financial Statements for the half year ended 28 March 2008, and a description of the principal risks and uncertainties for the remaining six months;

  • the Interim Management Report includes a fair review of related party transactions that have occurred during the first six months of the current financial year and that have materially affected the financial position or the performance of the Group during that period, and any changes in the related parties' transactions described in the last Annual Report that could have a material effect on the financial position or performance of the Group in the first six months of the current financial year.


P.F. Coveney  

G.P. Doherty

Chief Executive Officer  

28 May 2008   

Chief Financial Officer


  Group Condensed Income Statement

for the half year ended 28 March 2008

Half year ended 28 March 2008 (Unaudited)

Half year ended 30 March 2007 (Unaudited)

Year ended 28 September 2007 (Audited)

Note


Pre-
except-ional

'000

Except-ional

'000

Total

'000

Pre-
except-ional

'000

Except-ional

'000

Total

'000

Pre-
except-ional

'000

Except-ional

'000

Total

'000

Continuing operations

Revenue

3

648,655

-

648,655

632,711

-

632,711

1,267,156

-

1,267,156

Cost of sales

  (472,803)

  -

  (472,803)

(456,653)

  -

  (456,653)

  (903,296)

  -

  (903,296)

Gross profit

175,852

-

175,852

176,058

  -

176,058

363,860

-

363,860

Operating costs, net

  (134,977)

  -

  (134,977)

(136,012)

  -

  (136,012)

  (272,819)

  (5,923)

  (278,742)

Group operating profit/(loss)

3

40,875

-

40,875

40,046

-

40,046

91,041

(5,923)

85,118

Finance income

12

22,915

-

22,915

21,227

-

21,227

43,645

-

43,645

Finance costs

12

(34,580)

-

(34,580)

(26,672)

-

(26,672)

(60,343)

-

(60,343)

Share of profit of associates after tax

  825

  -

  825

  252

  -

  252

  733

  -

  733

Profit/(loss) before taxation

30,035

-

30,035

34,853

-

34,853

75,076

(5,923)

69,153

Taxation

6

(5,295)

  -

(5,295)

(6,976)

  -

  (6,976)

  (13,131)

  1,658

  (11,473)

Profit/(loss) from continuing operations

24,740

-

24,740

27,877

-

27,877

61,945

(4,265)

57,680

Profit from discontinued operations

5

  -

  18,128

  18,128

  571

  3,064

  3,635

  1,628

  52,455

  54,083

Profit for the financial period

  24,740

________

  18,128

________

  42,868

________

  28,448

________

  3,064

________

  31,512

_________

  63,573

________

  48,190

_________

  111,763

_________










Attributable to:

Equity shareholders

23,670

18,128

41,798

27,571

3,064

30,635

62,200

48,190

110,390

Minority interests

  1,070

  -

  1,070

  877

  -

  877

  1,373

  -

  1,373

  24,740

________

  18,128

________

  42,868

________

  28,448

________

  3,064

________

  31,512

_________

  63,573

________

  48,190

________

  111,763

________


Note


Basic earnings per share (cent)

Continuing operations

11.8

13.6

28.3

Discontinued operations

  9.1

  1.8

  27.2

8

  20.9

  15.4

  55.5


Diluted earnings per share (cent)

Continuing operations

11.8

13.6

28.2

Discontinued operations


  9.0

  1.8

  27.1

8

  20.8

  15.4

  55.3

  Group Condensed Balance Sheet

as at 28 March 2008

Note


28 March 2008
(Unaudited)

'000

30 March 2007
(Unaudited)

'000

28 September 2007

 (Audited)

'000

ASSETS

Non-current assets

Intangible assets

9

368,593

355,543

357,229

Property, plant and equipment

9

362,046

387,023

393,424

Investment property

857

954

905

Investments in associates

1,605

9,569

1,404

Trade and other receivables

-

-

64,967

Retirement benefit assets

17

4,436

46,356

37,674

Deferred tax assets


  15,667

  24,476

  17,098

Total non-current assets


  753,204

  823,921

  872,701


Current assets

Inventories

129,153

110,920

142,789

Trade and other receivables

136,255

199,132

114,417

Cash and cash equivalents

12

126,039

70,532

117,949

Available for sale financial assets

79

612

290

Derivative financial instruments

  -

  2,803

  1,836

Total current assets

  391,526

  383,999

  377,281

Total assets


 1,144,730

_________

 1,207,920

_________

 1,249,982

_________


EQUITY

Capital and reserves attributable to equity holders of the Company

Share capital

10

128,371

127,595

128,125

Share premium

11

111,808

107,751

110,366

Other reserves

11

(5,906)

1,800

1,659

Retained earnings

11

  38,995

  (28,853)

  38,663

273,268

208,293

278,813

Minority interest in equity

  5,241

  4,350

  4,196

Total equity

  278,509

  212,643

  283,009


LIABILITIES

Non-current liabilities

Borrowings

12

377,523

426,069

316,334

Derivative financial instruments

25,044

38,973

42,086

Retirement benefit obligations

17

41,732

81,508

63,458

Other payables

7,647

11,537

8,033

Provisions for other liabilities and charges

13

13,436

13,937

18,804

Deferred tax liabilities

38,868

42,114

37,845

Government grants

  1,113

  1,121

  1,160

Total non-current liabilities

  505,363

  615,259

  487,720


Current liabilities

Borrowings

12

20

219

81,919

Derivative financial instruments

4,817

-

120

Trade and other payables

317,291

323,945

359,278

Provisions for other liabilities and charges

13

10,802

27,313

10,902

Income taxes payable

  27,928

  28,541

  27,034

Total current liabilities

  360,858

  380,018

  479,253

Total liabilities

  866,221

  995,277

  966,973

Total equity and liabilities


  1,144,730

__________

  1,207,920

__________

  1,249,982

__________


  Group Condensed Cash Flow Statement

for the half year ended 28 March 2008


Note


Half year ended 
28 March 2008

(Unaudited)

'000

Half year ended 
30 March 2007

(Unaudited)

'000

Year ended 
28 September 2007

(Audited)

'000

Cash flows from operating activities

Cash generated from operations before exceptional items

16

2,141

40,827

101,544

Cash inflows/(outflows) related to exceptional items

81,820

(9,438)

17,981

Interest paid

(17,666)

(16,345)

(33,842)

Tax paid

  (59) 

  (251)

  (1,386)

Net cash inflows from operating activities

  66,236

  14,793

  84,297


Cash flows from investing activities

Dividends received from associates

44

537

728

Purchase of property, plant, equipment and software

(20,836)

(22,456)

(49,200)

Acquisition of undertakings

(19,577)

(1,036)

(1,840)

Disposal of undertakings and investment in associate

(75)

5,099

40,640

Interest received

4,458

755

2,741

Government grants (repaid)/received

  (14) 

  -

  69

Net cash outflows from investing activities

  (36,000)

  (17,101)

  (6,862)


Cash flows from financing activities

Proceeds from issue of shares

193

133

899

Decrease in borrowings

(1,144)

(348)

(16,956)

Decrease in finance lease liabilities

(48)

(53)

(128)

Dividends paid to equity holders of the Company

(8,563)

(5,687)

(18,361)

Dividends paid to minority interests

  (25) 

  (99)

  (749)

Net cash outflows from financing activities

  (9,587)

  (6,054)

  (35,295)

Net increase/(decrease) in cash and cash equivalents


  20,649

________

  (8,362)

________

  42,140

________


Reconciliation of opening to closing cash and cash equivalents

Cash and cash equivalents at beginning of period

117,949

78,967

78,967

Translation adjustment

(12,559)

(73)

(3,158)

Increase/(decrease) in cash and cash equivalents

  20,649 

  (8,362)

  42,140

Cash and cash equivalents at end of period


  126,039

________

  70,532

________

  117,949

________


  Group Condensed Statement of Recognised Income & Expense

for the half year ended 28 March 2008


Half year ended 
28 March 2008

(Unaudited)

'000

Half year ended 
30 March 2007

(Unaudited)

'000

Year ended 
28 September 2007

(Audited)

'000

Items of income and expense taken directly within equity

Currency translation differences

(5,977)

(884)

(723)

Actuarial (loss)/gain on Group defined benefit pension schemes

(25,018)

7,617

6,764

Deferred tax on Group defined benefit pension schemes

(51)

1,177

(1,171)

Share of actuarial gain on defined benefit pension schemes of associates (net)

-

894

1,947

Fair value available for sale financial assets

(178)

82

(223)

Cash flow hedges:

  (Loss)/gain taken to equity

(2,714)

58

(166)

  Transferred to income statement in the period

70

(246)

(333)

Deferred tax on cash flow hedge

  740

  56

  150

Net (expense)/income recognised directly within equity

(33,128)

8,754

6,245

Group result for the financial period

  42,868

  31,512

  111,763

Total recognised income and expense for the financial period

  9,740

________

  40,266

________

  118,008

________


Attributable to:

Equity shareholders

8,670

39,389

116,635

Minority interests

  1,070

  877

  1,373

Total recognised income and expense for the financial period

  9,740

________

  40,266

________

  118,008

________


  Notes to the Group Condensed Financial Statements

for the half year ended 28 March 2008

1. Basis of Preparation

The Group Condensed Financial Statements have been prepared in accordance with the Transparency (Directive 2004/109/EC) Regulations 2007, the related Transparency Rules of the Irish Financial Services Regulatory Authority and with IAS 34 - Interim Financial Reporting as adopted by the European Union.

These condensed financial statements do not comprise statutory accounts within the meaning of Section 19 of the Companies (Amendment) Act 1986. The Group condensed financial information for the year ended 28 September 2007 represents an abbreviated version of the Group's full year financial statements for that year. Those financial statements contained an unqualified audit report and have been filed with the Registrar of Companies.

2. Accounting Policies

The accounting policies and methods of computation adopted in the preparation of the Group Condensed Financial Statements are consistent with those applied in the Annual Report for the financial year ended 28 September 2007 and are described in those financial statements.

The Group did not adopt any new International Financial Reporting Standards (IFRS) or Interpretations in the period that have had a material impact on the Group Condensed Financial Statements for the half year. The Group adopts IFRS 7 - Financial Instruments: Disclosures in the current year, however, as this report contains only condensed financial statements, full IFRS 7 disclosures are not required at this time. The Group will disclose the required additional information about its financial instruments, their significance and the nature and extent of risks to which they give rise in the annual financial statements.

3. Segment Information

The Group's primary reporting format is by business segment. There are two primary business segments: (i) Convenience Foods and (ii) Ingredients & Related Property.

Revenue - half year

Operating Profit (before amortisation) 
- half year

Amortisation of acquisition related intangible assets
- half year

Operating Profit 
(after amortisation) 

- half year

2008

'000

2007

'000

2008

'000

2007

'000

2008

'000

2007

'000

2008

'000

2007

'000

Continuing Operations

Convenience Foods

451,240

477,821

27,853

31,846

(180)

-

27,673

31,846

Ingredients & Related Property

197,415

154,890

13,202

8,200

          -

         -

  13,202

  8,200

648,655

  _____

632,711

  _____

41,055

 _____

40,046

 _____

(180)

  _____

-

 _____

40,875

  _____

40,046

 _____

4. Seasonality

The Group's convenience foods portfolio is second-half weighted. This weighting is primarily driven by weather and seasonal buying patterns impacting, in particular, the demand for chilled product categories.

5. Exceptional Items

Note

Half year
2008

Half year
2007

'000

'000

Discontinued operations



  Exit from sugar processing

(a)

18,128

-

  Profit on business disposals

(b)

              -

  3,064

Total discontinued operations (net of tax)

18,128

  ______  

3,064

  ______


(a) Exit from sugar processing

During 2006, Greencore confirmed its intention to exit sugar processing in Ireland, renounce its quota and apply for EU restructuring aid under the Council Regulations (EC) No. 320/2006 and No. 968/2006 (the Regulations). The total EU restructuring aid available for the sugar quota renounced by Greencore was 145.5m. The Regulations gave the Member State responsibility for the allocation of this aid between Greencore, sugar beet growers and machinery contractors.

In July 2006, the Government announced that it was allocating 98.4m to Greencore. The Board of Directors of Greencore rejected the basis of this allocation and sought a judicial review of the decision in the High Court. At March 2007, the Group had recognised the present value of a receivable totalling 98.4m while continuing to pursue the High Court challenge. The findings of this judicial review were issued in June 2007 and the Government's decision regarding allocation of the restructuring aid was quashed.

On 26 September 2007, the European Council approved changes to the sugar restructuring scheme and, on 9 October 2007, the EU published amendments to the relevant regulations. These amendments resulted in Greencore becoming entitled to a minimum amount of 112.1m. As a result, Greencore recognised restructuring aid totalling the present value of 112.1m in its accounts for the year ended 28 September 2007.

Subsequent to the year end the Government entered into a new EU aid allocation process. As a consequence of this process, the Government concluded that Greencore was entitled to 127.0m of restructuring aid. The Group recognises an exceptional gain of 16.9m in the half year to March 2008 as a result of this decision. At March 2008, the Group has received payment of its entire allocation of 127.0m. As required by the Regulations, the Group has provided security to the Government of Ireland for an amount equivalent to 120% of restructuring aid received in February 2008. The security totals 100.1m and is in the form of a bank guarantee. The guarantee becomes payable if the Group does not complete its commitments under its restructuring plan, at which time, the part of the aid granted in respect of the commitment concerned can be recovered from the Group (see note 14).

The financial consequences to Greencore are as follows:

Half year
2008

Half year
2007

'm

'm

Reversal of write-down and impairment of assets

1.2

-

Recognition of additional EU restructuring aid

  _16.9

 ____-

Net exceptional gain

18.1

 _____

-

 _____


(b) Profit on business disposals

Exceptional gains of 3.1m arose on the disposal of Agribusinesses whose activities were closely related to sugar processing (a business which Greencore exited during the year ended 29 September 2006).

6. Taxation

Interim period tax is accrued using the tax rate that is estimated to be applicable to expected total annual earnings, that is the estimated average annual effective income tax rate applied to the taxable income of the interim period.

7. Dividends Paid and Proposed

A dividend of 8.21 cent per share was approved at the AGM on 14 February 2008 as a final dividend in respect of the year ended 28 September 2007 and a total of 8.1m was paid, to those shareholders that did not avail of the Group scrip dividend scheme, on 4 April 2008.

An interim dividend of 5.30 cent (2007: 5.05 cent) per share is payable on 3 October 2008 to the shareholders on the Register of Members as of 6 June 2008. The ordinary shares will be quoted ex-dividend from 4 June 2008. The dividend will be subject to dividend withholding tax, although certain classes of shareholders may qualify for exemption.

The liability in respect of this interim dividend is not recognised in the balance sheet of the Group for the half year ended 28 March 2008 because the interim dividend had not been approved at this balance sheet date (but was subsequently declared by the Directors of the Company).

8. Earnings per Ordinary Share

Basic earnings per ordinary share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period, excluding ordinary shares purchased by the Company and held as treasury shares. The adjusted figures for basic and diluted earnings per ordinary share are after the elimination of exceptional items, effect of foreign exchange (FX) on inter-company balances and external loans where hedge accounting is not applied, the movement in the fair value of all derivative financial instruments and related debt adjustments and the amortisation of acquisition related intangible assets.

Half year
2008

'000

Half year
2007

'000

Adjusted EPS

Profit attributable to equity holders of the Company

41,798

30,635

Exceptional items

(18,128)

(3,064)

Fair value of derivative financial instruments and related debt adjustments

3,354

(3,574)

FX on inter-company balances & external loans where hedge accounting is not applied

(1,325)

(22)

Amortisation of acquisition related intangible assets

  180

           -

Adjusted profit after taxation and minority interests

  25,879

  23,975


Half year
2008

cent

Half year
2007

cent

Basic earnings per ordinary share

20.9

15.4

Exceptional items

(9.1)

(1.5)

Fair value of derivative financial instruments and related debt adjustments

1.7

(1.8)

FX on inter-company balances & external loans where hedge accounting is not applied

(0.6)

(0.0)

Amortisation of acquisition related intangible assets

    0.1

        -

Adjusted basic earnings per ordinary share

  13.0

  12.1


Weighted average number of ordinary shares in issue during the period (thousands)

 199,813

 198,564


Half year
2008

'000

Half year
2007

'000

Continuing adjusted EPS

Profit attributable to equity holders of the Company

41,798

30,635

Discontinued profit for the period

-

(571)

Exceptional items

(18,128)

(3,064)

Fair value of derivative financial instruments and related debt adjustments

3,354

(3,574)

FX on inter-company balances & external loans where hedge accounting is not applied

(1,325)

(22)

Amortisation of acquisition related intangible assets

  180

  -

Adjusted profit after taxation and minority interests

  25,879

  23,404


Half year
2008

cent


Half year
2007

cent


Basic earnings per ordinary share

20.9

15.4

Discontinued profit for the period

-

(0.3)

Exceptional items

(9.1)

(1.5)

Fair value of derivative financial instruments and related debt adjustments

1.7

(1.8)

FX on inter-company balances & external loans where hedge accounting is not applied

(0.6)

(0.0)

Amortisation of acquisition related intangible assets

  0.1

  -

Adjusted continuing basic earnings per ordinary share

  13.0

  11.8


Half year
2008

'000

Half year
2007

'000

Discontinued adjusted EPS

Discontinued profit for the period

  -

  571


Half year
2008

cent

Half year
2007

cent

Discontinued adjusted earnings per ordinary share

  -

  0.3


Diluted earnings per ordinary share

Diluted earnings per ordinary share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. Employee share options, which are performance based, are treated as contingently issuable shares, because their issue is contingent upon satisfaction of specified performance conditions in addition to service. These contingently issuable ordinary shares are excluded from the computation of diluted earnings per ordinary share where the conditions governing vesting have not been satisfied as at the end of the reporting period. Options over 6,140,838 (2007: 6,275,000) shares were excluded from the diluted EPS calculation as they were either antidilutive or contingently issuable ordinary shares which had not satisfied the performance conditions attaching at the end of the reporting period.

Half year
2008 

cent


Half year
2007

cent


Diluted earnings per ordinary share

20.8

15.4

Exceptional items

(9.0)

(1.5)

Fair value of derivative financial instruments and related debt adjustments

1.6

(1.8)

FX on inter-company balances & external loans where hedge accounting is not applied

(0.6)

(0.0)

Amortisation of acquisition related intangible assets

    0.1

        -

Adjusted diluted earnings per ordinary share

  12.9

  12.1


Weighted average number of ordinary shares (thousands)

 200,506

 199,064


Half year
2008 

cent

Half year
2007

cent

Diluted earnings per ordinary share

20.8

15.4

Discontinued profit for the period

-

(0.3)

Exceptional items

(9.0)

(1.5)

Fair value of derivative financial instruments and related debt adjustments

1.6

(1.8)

FX on inter-company balances & external loans where hedge accounting is not applied

(0.6)

(0.0)

Amortisation of acquisition related intangible assets

  0.1

       -

Adjusted continuing diluted earnings per ordinary share

  12.9

  11.8


Adjusted discontinued diluted earnings per ordinary share

       -

  0.3


A reconciliation of the weighted average number of ordinary shares used for the purposes of calculating the diluted earning per share amounts is as follows:

Half year
2008

Half year
2007

Weighted average number of ordinary shares in issue during the period (thousands)

199,813

198,564

Dilutive effect for share options (thousands)

  693

  500

Weighted average number of ordinary shares for diluted earnings per share (thousands)

200,506

________

199,064

________


9. Capital Expenditure and Commitments

During the six month period to 28 March 2008 the Group spent 20.8m (2007: 22.5m) on additions to tangible and intangible fixed assets. The Group also disposed of certain assets with a carrying amount of 7.4m (2007: 0.5m) for proceeds of 9.7m (2007: 2.6m).

At 28 March 2008 the Group had entered into contractual commitments for the acquisition of property, plant and equipment amounting to 11.5m (2007: 3.0m).

10. Equity Share Capital

Issued capital as at 28 March 2008 amounted to 128.4m (28 September 2007: 128.1m) of which 2.5m (28 September 2007: 2.5m) is attributable to treasury shares. The increase in capital was due to the issue of 291,958 shares in respect of the Group scrip dividend scheme and 98,091 share options exercised under the Group Save As You Earn (SAYE) scheme. There were no share options granted under the Group Executive Share Options Scheme or the Group SAYE scheme in the period from 29 September 2007 to 28 March 2008.

11. Reconciliation of Movements in Shareholders' Equity



Other reserves




Share premium

Share options

Capital

conversion

 reserve
fund

Hedging reserve

Foreign

 currency

 translation

 reserve

Available-for-sale

 investment

 reserve

Retained earnings

Total

'000

'000

'000

'000

'000

'000

'000

'000

At 29 September 2007

110,366

1,056

934

(77)

101

(355)

38,663

150,688

Premium on issue of shares

1,442

-

-

-

-

-

-

1,442

Actuarial loss on Group defined benefit pension schemes

-

-

-

-

-

-

(25,018)

(25,018)

Employee share option expense

-

494

-

-

-

-

-

494

Dividends

-

-

-

-

-

-

(16,397)

(16,397)

Cash flow hedges

  fair value losses in period

-

-

-

(2,714)

-

-

-

(2,714)

  tax on fair value loss

-

-

-

760

-

-

-

760

  transfers to income statement

-

-

-

70

-

-

-

70

  tax on transfers to income statement

-

-

-

(20)

-

-

-

(20)

Fair value available for sale financial assets

-

-

-

-

-

(178)

-

(178)

Currency translation differences

-

-

-

-

(5,944)

(33)

-

(5,977)

Deferred tax on Group defined benefit pension schemes

-

-

-

-

-

-

(51)

(51)

Group profit for the financial period attributable to equity holders of the Company

           -

            -

           -

            -

            -

            -

  41,798

  41,798

At 28 March 2008


111,808

________

1,550

________

934

________

(1,981)

________

(5,843)

________

(566)

________

38,995

________

144,897

________




Other reserves




Share premium

Share options

Capita

conversion

 reserve

fund

Hedging reserve

Foreign currency

 translation

reserve

Available-for-sale

 investment

 reserve

Retained earnings

Total


'000

'000

'000

'000

'000

'000

'000

'000

At 30 September 2006

104,137

674

934

272

807

(115)

(54,156)

52,553

Premium on issue of shares

3,614

-

-

-

-

-

-

3,614

Actuarial gain on Group defined benefit pension schemes

-

-

-

-

-

-

7,617

7,617

Share of actuarial gains on pension of associates (net)

-

-

-

-

-

-

894

894

Employee share option expense

-

162

-

-

-

-

-

162

Dividends

-

-

-

-

-

-

(15,053)

(15,053)

Cash flow hedges

  fair value gains in period

-

-

-

58

-

-

-

58

  tax on fair value gains

-

-

-

(18)

-

-

-

(18)

  transfers to income statement

-

-

-

(246)

-

-

-

(246)

  tax on transfers to income statement

-

-

-

74

-

-

-

74

Fair value available for sale financial assets

-

-

-

-

-

82

-

82

Currency translation differences

-

-

-

-

(884)

-

-

(884)

Deferred tax on Group defined benefit pension schemes

-

-

-

-

-

-

1,177

1,177

Deferred tax on employee share options

-

-

-

-

-

-

33

33

Group profit for the financial period attributable to equity holders of the Company

           -

           -

           -

           -

           -

           -

30,635

30,635

At 30 March 2007


107,751

________

836

____ ____

934

__ ______

140

________

 (77)

________

(33)

____ ____

(28,853)

________

80,698

________


12. Components of Net Debt and Financing

During the period the Group maintained its existing bank facilities. Acquisitions in the period were financed out of the existing facilities. The cash flows from financing activities are set out in the Group Condensed Cash Flow Statement.

28-Mar-08

30-Mar-07

'000

'000

Net Debt

Current assets

Cash and cash equivalents

126,039

70,532

Current liabilities

Borrowings

(20)

(219)

Non-current liabilities

Borrowings before fair value adjustment

  (401,426)

  (463,291)

Comparable net debt

(275,407)

(392,978)

Borrowings - fair value adjustment (non-current liabilities)

  23,903

  37,222

Group net debt

(251,504)

 _________

(355,756)

 _________


Half year
2008

Half year
2007

'000

'000

Net Finance Costs

Net finance costs on interest bearing cash and cash equivalents and borrowings

(15,588)

(15,356)

Net pension financing credit

4,487

5,077

Change in fair value of derivatives, related debt adjustments and foreign exchange on inter-company balances & external loans where hedge accounting is not applied

(2,029)

3,596

Unwind of present value discount on non-current payables

(57)

-

Income arising on the increase in the present value of the EU receivable

  1,522

  1,238


(11,665)

_________

(5,445)

_________

Analysed as:

Finance income

22,915

21,227

Finance costs

  (34,580)

  (26,672)

(11,665)

__ _______

(5,445)

_ ________


Comparable net debt is a non-IFRS measure used by the Group as a key performance indicator.

13. Provisions for Liabilities and Charges

Half year
2008

'000

Six months ended 28 March 2008

At beginning of period

29,706

Utilised in period

(4,383)

Currency translation differences

  (1,085)

At end of period


24,238

________


28-Mar-08
'000

28-Sep-07
'000

Analysed as:

Non-current liabilities

13,436

18,804

Current liabilities

  10,802

  10,902

24,238

________

29,706

________


Provisions for liabilities and charges are comprised of environmental, restructuring and other provisions.

Environmental

Environmental obligations and related costs arose primarily from the Group's discontinued sugar processing operations and have been established to cover either a statutory or constructive obligation of the Group to carry out remedial works.

Restructuring

Restructuring provisions relate to irrevocable commitments in respect of programmes commenced and committed to in the Ingredients & Related Property segment, primarily related to the exit from sugar processing.

Other

Other provisions primarily consists of a) provisions for leasehold dilapidations in respect of certain leases, relating to the estimated cost of reinstating leasehold premises to their original condition at the time of the inception of the lease as provided for in the lease agreement, and b) provision for onerous contractual obligations for properties held under operating leases.

14. Contingencies

Certain subsidiaries of the Group continue to be subject to legal proceedings. Provisions for anticipated settlement costs and associated expenses arising from legal and other disputes are made where a reliable estimate can be made of the probable outcome of the proceedings.

As required by Commission Regulation (EC) No 968/2006, the Group has provided security to the Government of Ireland in the form of a bank guarantee amounting to 120% of restructuring aid received in February 2008 (83.4m). Previous security provided for amounts received in 2007 has been released in the period. The guarantee becomes payable if the Group does not complete its commitments under it's restructuring plan, at which time, that part of the aid granted in respect of the commitment concerned can be recovered from the Group. The Group continues to perform its commitments under its restructuring plan and accordingly, in the opinion of the Directors, the repayment of any restructuring aid received is considered to be remote and therefore no provision has been recognised in the Group Condensed Financial Statements in respect of this guarantee.

15. Acquisition of Undertakings

During the period the Group completed two business combinations which are reported within the Convenience Foods business segment. These transactions have been accounted for by the purchase method of accounting and the details of each are as follows:

Blaen Twyni

On 7 December 2007, the Group acquired a 100% interest in the Danone water business in Wales. The consideration was in the form of a cash payment. An excess of the fair value of identifiable net assets acquired over consideration paid arose on this acquisition. This amount of 1.4m has been recognised immediately in the Group Condensed Income Statement.

Ministry of Cake Holdings Ltd

On 10 December 2007, the Group acquired 100% of the issued share capital of Ministry of Cake Holdings Ltd, a foodservice dessert manufacturer. The consideration comprises both a cash payment and a deferred contingent cash element.

Neither of these acquisitions are considered sufficiently material to warrant separate disclosure of the fair values attributable to these combinations and accordingly they are disclosed in aggregate. The carrying amounts of the assets and liabilities acquired, determined in accordance with IFRS before completion of the combination, together with the adjustments made to those carrying values to arrive at the fair values were as follows:

Book 
value

Fair value adjustment

Fair 
value

'000

'000

'000

Identifiable net assets acquired (excluding net debt assumed)

Assets

Property, plant and equipment

9,421

(379)

9,042

Intangible assets

  Goodwill

-

12,342

12,342

  Excess of fair value of identifiable net assets over consideration paid

-

(1,390)

(1,390)

  Other intangibles

-

2,695

2,695

Inventories

2,068

(230)

1,838

Trade and other receivables

  3,896

  -

  3,896

Total assets

15,385

13,038

28,423

Liabilities

Trade & other payables & deferred tax

  (4,268)

  (1,549)

  (5,817)

Total enterprise value

11,117

________

11,489

________

22,606

________

Satisfied by:

Cash payments

12,677

Professional fees incurred on business combinations

296

Cash acquired

  (34)

Net cash outflow

12,939

Net debt assumed on acquisition:

Debt acquired

6,655

Deferred acquisition consideration (stated at net present cost)

  3,012

Total consideration - enterprise value

22,606

________


The fair values of the assets acquired have been determined provisionally as at 28 March 2008 and may be subject to change in the financial statements for the year ended 26 September 2008 as the Group has yet to finalise the fair value of the net identifiable assets acquired.

The principal factors contributing to the recognition of goodwill on the above business combination are accessing new markets and the realisation of cost savings and synergies with existing entities in the Group.

The post acquisition impact of the business combinations completed during the period on Group profit for the financial period was an increase in profit of 0.1m.

The revenue and profit for the financial period of the Group determined in accordance with IFRS as though the acquisition date for the business combinations effected during the period had been the beginning of the period would be 652.6m and 43.0m respectively.

16.    Reconciliation of Operating Profit to Net Cash Flow from Operating Activities before Exceptional Items

Half year
2008

'000

Half year
2007

'000

Year ended
2007

'000

Operating profit (pre-exceptional)

40,875

40,046

91,041

Depreciation, net of grants

14,099

16,732

29,649

Amortisation of intangibles

625

406

1,148

Employee share option expense

494

162

382

Difference between pension charge and cash contributions (pre-exceptional)

(3,434)

(3,143)

(5,998)

Changes in working capital

(52,153)

(13,593)

(16,097)

Other movements

  1,635 

  217

  1,419

Net cash inflow from operating activities before exceptional items

2,141

 ________

40,827

________

101,544

________


17. Retirement Benefit Schemes

In consultation with the independent actuaries to the schemes, the valuation of the pension obligation has been updated to reflect current market discount rates and rates of increases in salaries, pension payments and inflation, current market values of investments and actual investment returns.

The principal actuarial assumptions are as follows:

28-Mar-08

28-Sep-07

Rate of increase in salaries

3.5% - 4.5%

3.25% - 4.25%

Rate of increase in pension payment

2.4% - 3.5%

2.3% - 3.25%

Discount rate

6.1% - 6.8%

5.4% - 5.8%

Inflation assumptions

2.4% - 3.5%

2.3% - 3.25%


The market value of the assets of the schemes were as follows:

28-Mar-08

Eurozone
'000

UK
'000

Total
'000

Total market value of assets

298,810

153,550

452,360

Present value of scheme liabilities

 (300,681)

 (188,975)

 (489,656)

Deficit in scheme

(1,871)

(35,425)

(37,296)

Deferred tax asset

  295

  9,714

  10,009

Net liability at 28 March 2008


(1,576)

_ _______

(25,711)

________

(27,287)

 ________



28-Sep-07

Eurozone
'000

UK
'000

Total
'000

Total market value of assets

355,342

191,971

547,313

Present value of scheme liabilities

 (322,998)

 (250,099)

 (573,097)

Surplus/(deficit) in schemes

32,344

(58,128)

(25,784)

Deferred tax (liability)/asset

  (4,454)

  16,046

  11,592

Net asset/(liability) at 28 September 2007


27,890

_ _______ 

(42,082)

  ________

(14,192)

 _ ______


18. Subsequent Events

On 29 April 2008 the Group acquired 100% of the share capital of Home Made Brand Foods Inc (HMBF), a chilled foods manufacturer, for a cash consideration of US$44m plus deferred contingent consideration up to a maximum of US$10m, depending on HMBF's performance in the financial year to 31 December 2008. The acquisition is expected to be modestly EPS accretive from the financial year ended September 2009. The Group is in the process of assessing the fair values of the net assets acquired and as such, the provisional fair values of assets and the goodwill arising on the transaction will be disclosed in the Group Financial Statements for the year ended 26 September 2008.

After the period end, Greencore Malt experienced an incident which led to significant fire damage to part of its malting facility at Ghlin, Belgium. The facility is insured as part of the Group's insurance programme and Greencore Malt is working with its customers to ensure continuity of supply. Production will be disrupted for a number of weeks but the financial impact of the fire is unlikely to be material.

19. Information

The Half Yearly Financial Report is being sent to registered shareholders by post or electronically to those who have elected for the Electronic Shareholder Communications Option.

Copies are also available from the Company's registered office at St Stephen's Green House, Earlsfort Terrace, Dublin 2, Ireland and from its registrar, Computershare Investor Services (Ireland) Limited, Heron House, Corrig Road, Sandyford Industrial Estate, Dublin 18, Ireland. The statement will also be available on the Company's website at www.greencore.com.


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
IR ILFEREVIDFIT