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Greencore Group PLC (GNC)

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Tuesday 20 May, 2014

Greencore Group PLC

Half Yearly Report

RNS Number : 5034H
Greencore Group PLC
20 May 2014
 



GREENCORE GROUP PLC

INTERIM RESULTS

Strong performance driven by food to go businesses

 

Greencore Group plc, a leading international convenience food producer, today announces its unaudited interim results for the 26 weeks ended 28 March 2014

 

FINANCIAL HIGHLIGHTS

 

§ Group revenue of £619.8m, up 8.2% (as reported) and up 9.3% on a like for like1 basis

§ Convenience Foods like for like1 revenue growth of 9.6%

§ Group operating profit2 up 14.0% to £37.2m

§ Strong growth in adjusted EPS3, up 18.6% to 7.0 pence

§ Interim dividend of 2.20 pence per share, an increase of 15.8% versus H1 13

§ Net exceptional charge of £12.6m, of which £10.0m relates to non-cash items

 

STRATEGIC DEVELOPMENTS

 

§ Further build out of US food to go business with the acquisition of Lettieri's LLC ("Lettieri's"), investment in Jacksonville and announcement of new site construction in Rhode Island

§ Announcement today of major investment in Northampton food to go facility to facilitate new business win

§ Disposal of foodservice desserts business, Ministry of Cake

 

SUMMARY FINANCIAL PERFORMANCE

 


H1 14 (£m)

Change

(as reported)

Change

(like for like1)

Group revenue

619.8

+8.2%

+9.3%

Group operating profit2

37.2

+14.0%


Group operating margin2

6.0%

+30 bps


Adjusted PBT3

30.7

+20.5%


Adjusted EPS (pence)3

7.0

+18.6%






Net debt

257.9

+£25.1m






Convenience Foods Division




Revenue

587.9

+8.4%

+9.6%

Operating profit2

35.9

+14.9%


Operating margin2

6.1%

+30 bps


 

 

 

Patrick Coveney, Chief Executive Officer, commented:

"The business delivered a strong first half performance, driving 18.6% EPS growth. Our strategy of focusing on the food to go market is working well in both the UK and the US. Over the past six months we have stepped up our strategic investments in Minneapolis, Jacksonville, Rhode Island and Northampton to support confirmed new business with several large customers. These investments, as well as the strong trading momentum that we are seeing across our Group, have left us well positioned for further growth in the months and years ahead."

 

 

____________________________________________________

1 References to like for like ("LFL") revenue growth exclude the desserts activity which was sold to Müller Dairy UK in January 2013, Lettieri's revenue since acquisition and are expressed in constant currency

2 Operating profit and margin are stated before exceptional items and acquisition related amortisation.  Operating profit and financing for H1 13 have been restated to reflect the impact of IAS19 (Revised 2011): Employee Benefits ("IAS19 (Revised)")

3 Adjusted PBT and adjusted earnings measures are stated before exceptional items, pension finance items, acquisition related amortisation, FX on inter-company and certain external balances, and the movement in the fair value of all derivative financial instruments and related debt adjustments.  H1 13 comparatives have been restated to reflect the impact of IAS19 (Revised)

4 Market / category growth rates are based on Nielsen data for the 26 weeks to 29 March 2014

____________________________________________________

 

 

 

 

Presentation

A presentation of the interim results will be held for analysts and institutional investors at 8.30am today at Jefferies, Vintners Place, 68 Upper Thames Street, London EC4V 3BJ.

 

This presentation can be accessed live through the following channels:

§ Webcast - details on  www.greencore.com

§ Conference call

 

Ireland number:

+353 1 247 6528

UK number:

+44 20 3427 1903

Pass code:

8332131

 

 

A replay of the presentation will be available on www.greencore.com.  It will also be available through a conference call replay facility which will be available for one week - to dial into the replay:-

 

 

Ireland replay number:

+353 1 486 0902

UK replay number:

+44 20 3427 0598

Replay code:

8332131

 

 

For further information, please contact:

Patrick Coveney

Chief Executive Officer

Tel: +353 (0) 1 605 1045

Alan Williams

Chief Financial Officer

Tel: +353 (0) 1 605 1045

Rob Greening or Lisa Kavanagh

Powerscourt

Tel: +44 (0) 20 7250 1446

 

 

About Greencore

·      A leading manufacturer of convenience food in the UK and the US

·      Strong market positions in the UK convenience food market across food to go, chilled prepared meals, chilled soups and sauces, ambient sauces & pickles, cakes & desserts and Yorkshire Puddings

·      A fast growing food to go business in the US, serving both the convenience and small store channel and the grocery channel

 

 



SUMMARY

 

Strategic Development1 - Food to Go Focus

 

The vision and strategy of Greencore is to be a fast growing international convenience food leader.  We have chosen to focus on food to go, supplemented by strong positions in other attractive convenience food categories, in order to capitalise on favourable, long-term consumer and channel trends.  This strategy is bearing fruit, and H1 14 has seen strong food to go led growth and further significant development in line with our vision. 

 

In the UK, our food to go business has maintained the strong revenue momentum seen in Q4 13.  We are today announcing a multi-year investment of £30m in our Northampton facility to service a new business award in the chilled sandwich category and to underpin specific future growth opportunities with the same customer. 

 

In the US, following the commencement of supply to a major new customer in FY13, the Group has announced three further developments during H1 14:

-       the acquisition of Lettieri's, a leading manufacturer of frozen food to go products for the convenience channel;

-       an investment of approximately £6m in the Jacksonville facility to manufacture frozen food to go products supporting a key customer; and

-       the construction of a greenfield sandwich manufacturing facility in Rhode Island for £20m which will facilitate the closure of existing leased sites in Newburyport and Brockton, Massachusetts.

 

The UK and US food to go businesses combined have delivered excellent like for like revenue growth in the half of 18.9%.  In addition, both the UK Prepared Meals and Grocery businesses have delivered steady performances during the period against the backdrop of extremely competitive grocery market conditions.

 

We continue to focus our portfolio further and today announce the disposal of our foodservice desserts business, Ministry of Cake for upfront cash consideration of £8m and deferred consideration of up to £3m.

 

Financial and Operating Performance1, 2,3

 

Whilst the UK grocery market overall remains challenging, our portfolio of products has benefitted from the high rate of new convenience store openings by the major retailers. This factor, coupled with increasing employment and a milder winter, led to strong revenue growth in the half.  Reported Group revenue increased in the period by 8.2% to £619.8m with like for like revenue growth in the Convenience Foods division of 9.6%.  Operating profit conversion was strong with Group operating profit up 14.0% and Convenience Foods divisional operating profit 14.9% higher than in the prior year. Adjusted earnings per share were 18.6% higher at 7.0 pence as a result of the growth in operating profit combined with lower year-on-year financing costs. 

 

Interim Dividend

 

The Board of Directors is announcing an interim dividend of 2.20 pence per share, an increase of 15.8% versus H1 13.  It remains the Board's intention to increase the total dividend distribution for the financial year in line with the growth in adjusted earnings per share.

 

 

OUTLOOK

The Group has delivered a strong first half outperforming a buoyant food to go market in the UK and benefiting from the first full year of supply to a major new customer in the US. Although economic conditions are steadily improving, the UK grocery market is facing continued pressure and uncertainty. While input cost inflation remains variable across major spend categories, we have seen a moderation and now expect inflation to average around 2% for the year. Notwithstanding the strong comparator period, we expect to deliver good revenue growth in H2 14 and remain confident in our ability to deliver adjusted EPS growth for the financial year in line with market expectations.



OPERATING REVIEW 1,2,3,4

 

Convenience Foods

 


H1 14

£m

H1 13

£m

Change

(As reported)

Change

(Like for like)

Reported Revenue

587.9

542.1

+8.4%

+9.6%






Operating profit

35.9

31.3

+14.9%


Operating margin

6.1%

5.8%

+30 bps


 

Reported revenue in the Convenience Foods division increased by 8.4% in the period to £587.9m.  On a like for like basis, revenue was 9.6% ahead with the UK up by 7.9% and the US ahead by 25.7%. Growth in both the UK and US was driven by food to go products which benefitted from the strongly performing convenience channel. Operating profit increased by 14.9% to £35.9m driven by both strong growth and continued underlying performance improvement in lower margin activities.

 

UK Convenience Foods

 

Food to Go

The UK Food to Go business represents approximately 40% of Convenience Foods revenues and comprises sandwiches, sushi, snack and side of plate salads. 

 

The sandwich category experienced robust growth in the period of 12.0% while the broader food to go market (sandwiches, salads and sushi) grew by 9.4%.  The strong category growth was driven by the rate of opening of smaller convenience stores, increasing employment, a milder winter and positive mix with strong growth in premium sandwiches.

 

The Food to Go business outperformed the market with revenue growth of 17.2%.  This outstanding performance was driven by investment in significant relaunch activity with several key customers and net listing gains.

 

Prepared Meals

The Prepared Meals business comprises chilled ready meals, quiches, chilled soup and chilled sauces. 

The chilled ready meals market grew by 0.9% in the period, while the Italian ready meals market, our principal sub-category, grew by 2.8%.  Category growth was weighted towards the second quarter which was impacted in the previous year by the horsemeat scandal.  The quiche market grew by 3.4% in the period while the soup market declined by 6.9% given a milder winter than the prior year.

 

Revenue in the Prepared Meals business was 0.3% higher than in H1 13 with an improving trajectory through the period.  This improvement reflected both the comparison in chilled ready meals against the horsemeat scandal in February 2013 as well as changes in the product portfolio with our largest ready meal customer which saw us exit certain product categories in Q1 and increase our share in Italian ready meals in Q2.  Revenue in the rest of the Prepared Meals portfolio (quiche, chilled soup and sauces) was modestly lower year on year impacted by both milder weather and promotional phasing.

 

Grocery

The Grocery business groups together our other activities in the UK market. It provides meal components such as cooking sauces, table sauces, pickles and Yorkshire Puddings. The Grocery management team also has responsibility for our cakes and desserts activity in Hull and Evercreech together with the foodservice desserts activity which was sold in May 2014. 

 

The own label cooking sauce market was 4.0% lower in the period whilst the Yorkshire Puddings market declined by 4.3%.  The largest sub-category in cakes and desserts in which we participate, celebration cakes, grew by 3.9%, whilst chilled desserts exhibited modest decline. 

 

Like for like revenue in the Grocery business (excluding the desserts activity which was sold to Müller Dairy UK Group in January 2013) grew by 1.6%. The Selby cooking sauce and pickles business outperformed its markets with growth driven by net listing gains. In Yorkshire Puddings, revenues declined broadly in line with the category.  In the cakes and desserts activity, like for like revenue was 2.5% higher than the prior year with new business wins the key driver. 

 

After the period end, the business sold its foodservice desserts business, Ministry of Cake, for upfront cash consideration of £8.0m and deferred consideration of up to £3.0m.  The business represented less than 2% of Group revenue and a similar proportion of Group operating profit.  As at 28 March 2014, Ministry of Cake was classified as held for sale and an impairment charge of £5.8m, representing the difference between the net consideration and net asset value, was recognised as an exceptional item.

 

US Convenience Foods

The US business is focused on food to go products supplied predominantly to the faster growing convenience and small store channels, including the coffee shop market. 

 

During the period, revenues grew by 25.2% on a reported basis and by 25.7% on a like for like basis (excluding the five weeks contribution from Lettieri's and in constant currency). Underlying growth was driven predominantly by the roll out of activity with a new customer which commenced in Q2 2013 and by a solid performance with our largest US customer. 

 

In February, the Group announced that it had acquired Lettieri's, a leading manufacturer of frozen food to go products for the convenience channel. The products are served hot at the point of purchase and complement the chilled sandwich and salads activity. The Group also announced an investment of £6m in its Jacksonville facility in order to create the capability to manufacture frozen food to go products.  This capacity of approximately £60m in revenue terms will come on stream in Q4 of FY14 and will support confirmed business with a leading customer. 

 

In March, the Group announced that it is to build a greenfield sandwich manufacturing facility in Quonset, Rhode Island, at an approximate capital cost of £20m. It is anticipated that the site will commence production in the spring of 2015 enabling the closure of both the Newburyport and Brockton sites upon lease termination in 2015.  The strategic location of the new facility will enable the Group to supply both its existing New England markets and to develop future business opportunities closer to New York.  A non-cash impairment charge of £8.6m and a provision for site exit costs and redundancies of £1.2m have been recognised as exceptional items as described in the Financial Review.

 

Ingredients & Property

 


H1 14

£m

H1 13

£m

Change Actual Currency

Change Constant Currency

Revenue

31.9

30.8

+3.7%

+2.8%

Operating profit

1.3

1.4

-6.6%

-7.7%

 

The Ingredients & Property division accounts for around 5% of Group activity. Revenue grew by 2.8% in constant currency in the period predominantly due to a higher volume of trading in the edible oils business. Revenue was lower in the molasses feed business given the milder winter.

 

The Group is engaged in negotiations on the disposal of the Littlehampton site in the UK. In Ireland, environmental remediation is continuing on the former sugar processing sites.

  

 

 

FINANCIAL REVIEW 1,2,3

 

Revenue and Operating Profit

Revenue in the period was £619.8m, an increase of 8.2% versus H1 13. Group operating profit of £37.2m was 14.0% ahead of the prior year. Operating margin of 6.0% was 30 basis points higher than in H1 13. 

 

The impact of currency in the period was a modest reduction in revenue and operating profit, predominantly driven by the relative strengthening of sterling against the US dollar compared with H1 13.

 

Interest Payable

The Group's bank interest payable in H1 14 was £7.0m compared to £7.7m in H1 13. This reduction was driven by a lower effective interest rate on the Group's primary bank facilities and lower average net debt in the period. The composition of the charge was £6.3m of interest payable, commitment fees for undrawn facilities of £0.4m and an amortisation charge in respect of facility fees of £0.3m.

 

Non-Cash Finance Charges/Credit

The Group's net non-cash finance charge in H1 14 was £2.1m (£0.9m charge in H1 13).  The change in the fair value of derivatives and related debt adjustments was a non-cash credit of £0.9m (£1.9m credit in H1 13) reflecting the impact of marking to market the Group's interest rate swap portfolio. The charge in respect of the increase in the present value of assets and liabilities held was unchanged at £0.1m. The non-cash pension financing charge of £2.9m was £0.2m higher than the charge in H1 13 reflecting a lower discount rate.  The non-cash pension financing charge reflects the adoption of IAS19 (Revised) both in H1 14 and the restatement of H1 13. 

 

Taxation

The Group's effective tax rate in H1 14 (including the tax impact associated with pension finance items) was 1% compared to a restated credit of 1% in H1 13. 

 

The Group's effective tax rate continues to benefit from historic tax losses.

 

Exceptional Items

The Group recognised a net exceptional charge in the period of £12.6m, of which £10.0m relates to non-cash items. The breakdown is as follows:

 

-       a £9.8m charge related to the planned exit from the Newburyport and Brockton manufacturing facilities in the US.  The charge is composed of a non-cash impairment of fixed assets (principally leasehold improvements) of £6.1m, a non-cash impairment of intangible assets of £2.5m and a provision for site exit costs and redundancy and retention costs of £1.2m;

-       a non-cash charge of £5.8m relating to the recognition of an impairment charge in the Ministry of Cake business upon its classification as held for sale during the period;

-       a charge of £1.3m in relation to transaction and integration costs of the Lettieri's acquisition;

-       a tax credit of £2.3m related to the resolution of an overseas tax case; and

-       a tax credit of £2.1m related to the US exceptional charges in the period, primarily due to a deferred tax movement in relation to the asset impairment charge.

 

Earnings per Share

Adjusted earnings of £28.1m in the period were 22.3% ahead of the prior year. Adjusted earnings per share of 7.0 pence were 18.6% ahead of H1 13.

 

Cash Flow and Net Debt

A net cash inflow from operating activities of £18.7m was recorded compared to an inflow of £5.3m in H1 13.  The increased inflow was driven primarily by higher operating profit, a lower seasonal working capital outflow than in H1 13 and lower cash spend on exceptional items.

 

Capital expenditure of £17.2m was incurred in the period compared to £18.4m in H1 13. This reduction is predominantly due to phasing. H2 capital expenditure will be significantly higher than in FY13 given the construction of a new facility in Rhode Island, the investment in Jacksonville and the investment in Northampton announced today. Interest costs of £8.3m were paid in the period with cash dividends to equity holders of £4.5m. 

  

The Group's net debt at 28 March 2014 was £257.9m, an increase of £25.1m from 27 September 2013.  This increase was driven predominantly by the acquisition of Lettieri's together with seasonal working capital outflow.  During the period, the Group arranged a new committed non-bank debt facility of €70m (£57.9m) with a maturity of 6 years.  As a result, the Group is well financed with committed facilities at 28 March 2014 of £487.2m and a weighted average maturity of 3.2 years.

 

Pensions

The net pension deficit(before related deferred tax) decreased to £127.8m at 28 March 2014 from £137.5m at 27 September 2013.  The net pension deficit after related deferred tax was £105.5m, a decrease of £8.7m from 27 September 2013.

 

The fair value of total plan assets relating to the Group's defined benefit pension schemes (excluding associates) increased to £381.0m at 28 March 2014 from £373.5m at 27 September 2013.  The present value of the total pension liabilities for these schemes decreased to £508.7m from £511.0m over the same period. 

 

All defined benefit pension scheme plans are closed to future accrual and the Group's pension policy with effect from 1 January 2010 is that future service for current employees and new entrants is provided under defined contribution pension arrangements.

 

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.

 

Principal Risks and Uncertainties

There are a number of potential risks and uncertainties which could have a material impact on the Group's performance over the remainder of the financial year and could cause actual results to differ materially from expected and historical results.   The Board considers the risks and uncertainties described on pages 10 to 13 of the Annual Report and Accounts for the year ended 27 September 2013 issued on 26 November 2013 to remain applicable.  These risks are as follows:

 

Strategic risks

§ Competitor activity

§ Growth

 

Commercial risks

§ Changes in consumer behaviour and demand

§ Loss of key customer relationships

§ Margin and cost pressures

 

Operational risks

§ Food industry regulations

§ Product contamination

§ Disruption to day to day operations

§ Loss of key personnel

 

Financial risks

§ Interest rates, foreign exchange rates, liquidity and credit

§ Employee retirement obligations

 

Forward-Looking Statements

Certain statements made in this announcement are forward-looking.  These represent expectations for the Group's business, and involve risks and uncertainties.  The Group has based these forward-looking statements on current expectations and projections about future events.  The Group believes that expectations and assumptions with respect to these forward-looking statements are reasonable.  However, because they involve known and unknown risks, uncertainties and other factors, which in some cases are beyond the Group's control, actual results or performance, may differ materially from those expressed or implied by such forward-looking statements.

 

P.G. Kennedy, Chairman

19 May 2014

 

 

 

 

 

GROUP CONDENSED INCOME STATEMENT

for the half year ended 28 March 2014

 



Half Year Ended 28 March 2014

 

(Unaudited)

Half Year ended 29 March 2013

*As restated

(Unaudited)


Notes

Pre - exceptional

Exceptional

(Note 5)

Total

Pre - exceptional

Exceptional

(Note 5)

Total



£'000

£'000

£'000

£'000

£'000

£'000

Revenue

3

619,824

-

619,824

572,886

-

572,886

Cost of sales


(431,781)

-

(431,781)

(399,288)

-

(399,288)

Gross profit


188,043

-

188,043

173,598

-

173,598

Operating costs, net


(150,804)

(16,934)

(167,738)

(140,930)

(8,133)

(149,063)

Group operating profit before acquisition related amortisation

3

37,239

(16,934)

20,305

32,668

(8,133)

24,535

Amortisation of acquisition

related intangibles


(3,564)

-

(3,564)

(4,128)

-

(4,128)

Group operating profit

3

33,675

(16,934)

16,741

28,540

(8,133)

20,407

Finance income

11

25

-

25

72

-

72

Finance costs

11

(9,138)

-

(9,138)

(8,660)

-

(8,660)

Share of profit of associates

after tax


405

-

405

389

-

389

Profit before taxation


24,967

(16,934)

8,033

20,341

(8,133)

12,208

Taxation

6

(236)

4,383

4,147

137

8,559

8,696

Profit for the financial period


24,731

(12,551)

12,180

20,478

426

20,904

Attributable to:








Equity shareholders


24,052

(12,551)

11,501

19,677

426

20,103

Non-controlling interests


679

-

679

801

-

801



24,731

(12,551)

12,180

20,478

426

20,904









 

 

Basic earnings per share

8


2.9


5.1







Diluted earnings per share

8


2.8


5.1

 

 

* The comparatives for 2013 have been restated to reflect the adoption of IAS 19 Employee Benefits (revised) as set out in note 14



 

GROUP CONDENSED STATEMENT OF RECOGNISED INCOME AND EXPENSE

for the half year ended 28 March 2014

 


Half Year ended

28 March

2014

(Unaudited)

£'000

Half year

ended

29 March

2013

*As restated

(Unaudited)

£'000

Items of income and expense taken directly to equity






Items that will not be reclassified to profit or loss:



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

6,462

(19,686)

Deferred tax on Group defined benefit pension schemes

(1,032)

3,924


5,430

(15,762)

Items that may subsequently be reclassified to profit or loss:



Currency translation adjustment

(2,556)

3,568

Current tax on currency translation adjustment

15

(127)

Hedge of net investment in foreign currency subsidiaries

2,488

(4,884)

Cash flow hedges:



   fair value movement taken to equity

84

(625)

   transfer to Income Statement for the period

561

326

   deferred tax on transfer to Income Statement for the period

(129)

69


463

(1,673)

Net income/(expense) recognised directly within equity

5,893

(17,435)

Group result for the financial period

12,180

20,904

Total recognised income and expense for the financial period

18,073

3,469




Attributable to:



Equity shareholders

17,445

2,466

Non-controlling interests

628

1,003

Total recognised income and expense for the financial period

18,073

3,469

 

* The comparatives for 2013 have been restated to reflect the adoption of IAS 19 Employee Benefits (revised) as set out in note 14

 



GROUP CONDENSED BALANCE SHEET

at 28 March 2014


Notes

March

2014

 

(Unaudited)

March

2013

*As restated

(Unaudited)

September

 2013

 

(Unaudited)



£'000

£'000

£'000

ASSETS





Non-current assets





Intangible assets

9

502,550

503,587

499,924

Property, plant and equipment

9

223,176

226,322

229,246

Investment property

9

29,402

28,635

28,870

Investments in associates


1,230

918

826

Other receivables


1,014

941

1,033

Derivative financial instruments

11

5,680

13,811

8,235

Deferred tax assets


67,320

61,165

66,586

Total non-current assets


830,372

835,379

834,720






Current assets





Inventories


52,376

50,170

53,144

Trade and other receivables


118,072

100,232

115,720

Derivative financial instruments

11

-

2,665

966

Cash and cash equivalents

11

18,794

13,102

6,310

Assets held for sale

16

15,543

-

-

Total current assets


204,785

166,169

176,140

Total assets


1,035,157

1,001,548

1,010,860






EQUITY





Capital and reserves attributable to equity holders of the Company





Share capital

10

4,039

117,637

4,013

Share premium


180,477

176,859

177,330

Reserves


74,062

(88,893)

67,236



258,578

205,603

248,579

Non-controlling interests


4,096

4,047

3,468

Total equity


262,674

209,650

252,047






LIABILITIES





Non-current liabilities





Borrowings

11

280,893

251,332

199,665

Derivative financial instruments

11

2,031

5,728

2,246

Retirement benefit obligations

14

127,769

142,488

137,545

Other payables


2,033

2,252

2,239

Provisions for liabilities

12

7,918

15,852

10,968

Deferred tax liabilities


20,604

31,839

21,288

Government grants


52

64

57

Total non-current liabilities


441,300

449,555

374,008






Current liabilities





Bank overdraft

11

488

-

4,554

Borrowings

11

-

50,713

44,094

Derivative financial instruments

11

202

1,876

346

Trade and other payables


296,367

258,580

303,141

Consideration payable on acquisitions


379

1,316

918

Provisions for liabilities

12

6,831

5,490

6,928

Current taxes payable


21,388

24,368

24,824

Liabilities held for sale

16

5,528

-

-

Total current liabilities


331,183

342,343

384,805

Total liabilities


772,483

791,898

758,813

Total equity and liabilities


1,035,157

1,001,548

1,010,860

 

* The comparatives for 2013 have been restated to reflect the adoption of IAS 19 Employee Benefits (revised) as set out in note 14

 

 



GROUP CONDENSED CASH FLOW STATEMENT

for the half year ended 28 March 2014


Half year ended

28 March 2014

 

Half year

ended

29 March

2013

*As restated


(Unaudited)

(Unaudited)


£'000

£'000

Profit before taxation

8,033

12,208

Finance income

(25)

(72)

Finance costs

9,138

8,660

Share of profit of associates (after tax)

(405)

(389)

Exceptional items

16,934

8,133

Operating profit (pre-exceptional)

33,675

28,540

Depreciation

12,528

11,525

Amortisation of intangible assets

4,413

4,831

Employee share based payment expense

1,369

935

Amortisation of government grants

(6)

(6)

Difference between pension charge and cash contributions

(5,138)

(5,283)

Working capital movement

(14,055)

(17,320)

Other movements

(132)

442

Net cash inflow from operating activities before exceptional items

32,654

23,664

Cash outflow related to exceptional items

(5,571)

(10,585)

Interest paid

(8,299)

(7,491)

Tax paid

(95)

(254)

Net cash inflow from operating activities

18,689

5,334




Cash flow from investing activities



Dividends received from associates

-

20

Purchase of property, plant and equipment

(14,565)

(17,309)

Purchase of investment property

(605)

(237)

Purchase of intangible assets

(2,074)

(856)

Acquisition of undertakings

(23,018)

(1,984)

Disposal of undertakings

-

10,393

Interest received

4

176

Net cash outflow from investing activities

(40,258)

(9,797)




Cash flow from financing activities



Proceeds from issue of shares

68

125

Ordinary shares purchased - own shares

(1,897)

(709)

Increase in bank borrowings

44,594

3,107

Increase in finance lease liabilities

111

1,045

Dividends paid to equity holders of the Company

(4,534)

(4,847)

Dividends paid to non-controlling interests

-

(202)

Net cash inflow/(outflow) from financing activities

38,342

(1,481)

Net increase/(decrease) in cash and cash equivalents

16,773

(5,944)




Reconciliation of opening to closing cash and cash equivalents



Cash and cash equivalents at beginning of period

1,756

18,751

Translation adjustment

(223)

295

Increase/(decrease) in cash and cash equivalents

16,773

(5,944)

Cash and cash equivalents at end of period

18,306

13,102

 

* The comparatives for 2013 have been restated to reflect the adoption of IAS 19 Employee Benefits (revised) as set out in note 14



 

GROUP CONDENSED STATEMENT OF CHANGES IN EQUITY

for the half year ended 28 March 2014


Share capital

Share premium

Other reserves

Retained earnings

Total

Non-controlling interest

Total equity


£'000

£'000

£'000

£'000

£'000

£'000

£'000

At 27 September 2013

4,013

177,330

107,904

(40,668)

248,579

3,468

252,047

Items of income and expense taken

directly to equity








Currency translation adjustment

-

-

(2,505)

-

(2,505)

(51)

(2,556)

Current tax on currency translation

adjustment

-

-

-

15

15

-

15

Net investment hedge

-

-

2,488

-

2,488

-

2,488

Actuarial loss on Group defined

benefit pension schemes

-

-

-

6,462

6,462

-

6,462

Deferred tax on Group defined benefit

pension schemes

-

-

-

(1,032)

(1,032)

-

(1,032)

Cashflow hedge taken to equity

-

-

84

-

84

-

84

Cashflow hedge transferred to Income

Statement

-

-

561

-

561

-

561

Deferred tax on cashflow hedge

-

-

(129)

-

(129)

-

(129)

Profit for the financial period

-

-

-

11,501

11,501

679

12,180

Total recognised income and expense

for the financial period

-

-

499

16,946

17,445

628

18,073

Employee share based payment expense

-

-

2,257

-

2,257

-

2,257

Exercise, lapse or forfeit of share based payments

1

67

(3,305)

3,305

68

-

68

Shares acquired by Employee Benefit Trust

-

-

(1,978)

81

(1,897)

-

(1,897)

Shares granted to beneficiaries of the      

Employee Benefit Trust

-

-

1,050

(1,050)

-

-

-

Transfer to retained earnings on grant of shares to beneficiaries of the Employee Benefit Trust*

-

-

7,334

(7,334)

-

-

-

 Deferred tax on share based payments

-

-

-

731

731

-

731

Dividends

25

3,080

-

(11,710)

(8,605)

-

(8,605)

At 28 March 2014

4,039

180,477

113,761

(39,699)

258,578

4,096

262,674

 

* In the prior year, the Group converted 3,904,716 treasury shares into ordinary shares of £0.01 each and subsequently transferred these shares to the Employee Benefit Trust at nominal value. These shares were previously held in the own share reserve at a value of £17.8m, which represented the cost of acquisition of the shares on the open market at a price of £4.24 per share. As these shares are granted to the beneficiaries of the Employee Benefit Trust, the related residual amount in the own shares reserve is transferred to retained earnings.

 



GROUP CONDENSED STATEMENT OF CHANGES IN EQUITY (continued)

for the half year ended 28 March 2014


Share capital

Share premium

Other reserves

Retained earnings

Total

Non-controlling interest

Total equity


£'000

£'000

£'000

£'000

£'000

£'000

£'000

At 28 September 2012

Opening balance as previously reported

120,920

171,469

(11,758)

(83,358)

197,273

3,246

200,519

Prior year adjustment*

-

-

-

13,372

13,372

-

13,372

Opening balance as restated

120,920

171,469

(11,758)

(69,986)

210,645

3,246

213,891

Items of income and expense taken

directly to equity








Currency translation adjustment

-

-

3,366

-

3,366

202

3,568

Current tax on currency translation

adjustment

-

-

-

(127)

(127)

-

(127)

Net investment hedge

-

-

(4,884)

-

(4,884)

-

(4,884)

Actuarial loss on Group defined benefit pension schemes

-

-

-

(19,686)

(19,686)

-

(19,686)

Deferred tax on Group defined benefit

pension schemes

-

-

-

3,924

3,924

-

3,924

Cashflow hedge taken to equity

-

-

(625)

-

(625)

-

(625)

Cashflow hedge transferred to Income       Statement

-

-

326

-

326

-

326

Deferred tax on cashflow hedge

-

-

69

-

69

-

69

Profit for the financial period

-

-

-

20,103

20,103

801

20,904

Total recognised income and

expense for the financial period

-

-

(1,748)

4,214

2,466

1,003

3,469

Currency translation adjustment

-

-

-

-

-

-

-

Employee share based payment expense

-

-

935

-

935

-

935

Exercise, lapse or forfeit of share based   payments

-

-

(1,160)

1,160

-

-

-

Shares acquired by Employee Benefit Trust

-

-

(738)

29

(709)

-

(709)

Shares granted to beneficiaries of the    Employee Benefit Trust

-

-

839

(839)

-

-

-

 Cancellation of deferred shares

(3,312)

3,312

-

-

-

-

-

Issue of shares

2

123

-

-

125

-

125

Dividends

27

1,955

-

(9,841)

(7,859)

(202)

(8,061)

At 29 March 2013

117,637

176,859

(13,630)

(75,263)

205,603

4,047

209,650

 

* The comparatives for 2013 have been restated to reflect the adoption of IAS 19 Employee Benefits (revised) as set out in note 14


 


GROUP CONDENSED STATEMENT OF CHANGES IN EQUITY
(continued)

for the half year ended 28 March 2014

 

Other Reserves


Share options

Own shares

Hedging reserve

Total


£'000

£'000

£'000

£'000

£'000

£'000

£'000

At 27 September 2013

6,250

(18,800)

116,977

804

(54)

2,727

107,904

Items of income and expense taken directly to equity








Currency translation adjustment

-

-

-

(2,505)

Net investment hedge

-

-

-

2,488

Actuarial gain on Group defined benefit pension schemes

-

-

-

-

Cashflow hedges  taken to equity

-

-

84

84

Cashflow hedges transferred to    Income Statement

-

-

561

561

Deferred tax on cashflow hedge

-

-

(129)

(129)

Total recognised income and

expense for the financial period

-

-

 

-

-

516

(17)

499

Currency translation adjustment

(40)

-


-

-

40

-

Employee share based payment expense

2,257

-

-

2,257

Exercise, lapse or forfeit of share based payments

(3,305)

-

-

(3,305)

Shares acquired by Employee

Benefits Trust

-

(1,978)

-

(1,978)

Shares granted to beneficiaries of the Employee Benefits Trust

-

1,050

-

1,050

Transfer to retained earnings

-

7,334

-

7,334

At 28 March 2014

5,162

(12,394)

116,977

804

462

2,750

113,761

 


Share options

Own shares

Hedging reserve

Total


£'000

£'000

£'000

£'000

£'000

£'000

£'000

At 28 September 2012

4,218

(18,870)

-

804

(2,003)

4,093

(11,758)

Items of income and expense taken directly to equity








Currency translation adjustment

-

-

-

3,366

Net investment hedge

-

-

-

(4,884)

Cashflow hedges taken to equity

-

-

(625)

(625)

Cashflow hedges transferred  to Income Statement

-

-

326

326

Deferred tax on transfer to Income Statement for the period

-

-

69

69

Total recognised income and

expense for the financial period

-

-

 

-

-

(230)

(1,518)

(1,748)

Currency translation adjustment

222

-

-

-

-

(222)

-

Employee share based payment  expense

935

-

-

935

Exercise, lapse or forfeit of share based payments

(1,160)

-

-

(1,160)

Shares acquired by Employee Benefit Trust

-

(738)

-

(738)

Shares granted to beneficiaries of the Employee Benefit Trust

-

839

-

839

At 29 March 2013

4,215

(18,769)

-

804

(2,233)

2,353

(13,630)

 

NOTES TO THE GROUP CONDENSED FINANCIAL STATEMENTS

 

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 Authority and 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 27 September 2013 represents an abbreviated version of the Group Financial Statements for that year. Those financial statements, upon which the auditor issued an unqualified audit report, have been filed with the Registrar of Companies.

 

After making enquiries, the directors have a reasonable expectation that the Group has adequate resources to continue operating for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the Group Condensed Financial Statements.

 

 

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 27 September 2013 and are as set out in those financial statements.

 

The adoption of IAS 19 Employee Benefits (revised) resulted in a number of amendments to prior year results. As required by IAS 34, the nature and effect of changes arising as a result of the adoption of IAS 19 (revised) are disclosed in note 14.

 

The adoption of the remaining new standards and interpretations (as set out in the 2013 Annual Report) that became effective for the Group's financial statements for the year ended 26 September 2014 did not have any significant impact on the Group Consolidated Financial Statements.         

                                                                                               

                                               

3.    Segment Information

 

The Group is organised around different product portfolios. The Group's reportable segments under IFRS 8 are as follows:

 

Convenience Foods - this reportable segment is the aggregation of two operating segments, Convenience Foods UK and Convenience Foods US. This segment derives its revenue from the production and sale of convenience food.

 

Ingredients & Property - this segment represents the aggregation of 'all other segments' as permitted under IFRS 8 (IFRS 8 specifies that, where the external revenue of reportable segments exceeds 75% of the total Group revenue, it is permissible to aggregate all other segments into one reportable segment). The Ingredients & Property reportable segment derives its revenue from the distribution of edible oils, molasses and the management of the Group's surplus property assets.

 

The Chief Operating Decision Maker monitors the operating results of segments separately in order to allocate resources between segments and to assess performance. Segment performance is predominantly evaluated based on operating profit before exceptionals and acquisition related amortisation. Exceptional items, net finance costs and income tax are managed on a centralised basis, therefore, these items are not allocated between operating segments for the purposes of the information presented to the Chief Operating Decision Maker and are accordingly omitted from the segmental information below. Intersegment revenue is not material.

 


Convenience Foods

Ingredients & Property

Total


Half

Year

2014

 

£'000

Half

year

2013

*As restated

£'000

Half Year 2014

 

£'000

Half

year

2013

*As restated

£'000

Half

Year

2014

 

£'000

Half

year

2013

*As restated

£'000

Revenue

587,915

542,130

31,909

30,756

619,824

572,886

Group operating profit before exceptional items and acquisition related amortisation

35,938

31,275

1,301

1,393

37,239

32,668

Amortisation of acquisition related intangible assets

(3,564)

(4,128)

-

-

(3,564)

(4,128)

Group operating profit before exceptional items

32,374

27,147

1,301

1,393

33,675

28,540

Exceptional items





(16,934)

(8,133)

Group operating profit

32,374

27,147

1,301

1,393

16,741

20,407

Finance income





25

72

Finance costs





(9,138)

(8,660)

Share of profit of associates after tax

-

-

405

389

405

389

Profit before taxation





8,033

12,208

                                                                                               

* The comparatives for 2013 have been restated to reflect the adoption of IAS 19 Employee Benefits (revised) as set out in note 14

 

 

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

 



Half year 2014

£'000

Half year

2013

£'000

US restructuring cost

(a)

(9,841)

-

Impairment of Disposal Group Held For Sale

(b)

(5,830)

-

Transaction and Integration costs relating to US acquisitions

(c)

(1,263)

(1,101)

Integration costs relating to UK acquisitions

(d)

-

(2,248)

Pension curtailment gain

(e)

-

4,368

Property related charge

(f)

-

(9,152)



(16,934)

(8,133)

Taxation on exceptional items

(g)

2,128

724

Exceptional tax credit

(g)

2,255

7,835

Total exceptional (charge)/credit


(12,551)

426

 

(a) US restructuring charge                                                                                                     

During the period, the Group recognised a £9.8m charge related to a planned exit from its Newburyport and Brockton manufacturing facilities in the US. The charge is composed of a non-cash impairment of fixed assets (principally leasehold improvements) of £6.1m, a non-cash impairment of intangible assets of £2.5m and a provision for site exit costs and redundancy and retention costs of £1.2m.

                                                                                           

(b) Impairment of Disposal Group Held For Sale                                

During the period, the Group recognised a non-cash impairment charge of £5.8m on the classification as held for sale of its Food Service Desserts business, Ministry of Cake Limited. This amount represents the difference between the net consideration and net asset value.            

                                                                           

(c) Transaction and Integration costs relating to US acquisitions                               

During the period, the Group recognised a charge of £1.3m relating to the transaction and integration costs associated with its acquisition of Lettieri's, a business based in Minneapolis, which was announced on 25 February 2014. During the prior period, the Group incurred an exceptional charge of £1.1m in connection with the integration of the acquisitions of MarketFare Foods and Schau in the US.                                                     

                                                                      

(d) Integration cost relating to the UK acquisitions                                                                 

During the prior period, the Group incurred an exceptional charge of £2.2m in connection with (i) the completion of the integration of the Uniq business including the Chilled Desserts restructuring and (ii) the integration of the International Cuisine business acquired in August 2012.                                                                        

                                                                                   

(e) Pension curtailment credit                                                                                                

During the prior period, the Group recognised a curtailment gain of £4.4m as the trustees of the Greencore Group pension scheme resolved to pass on the cost of the Irish pensions levy to beneficiaries of the pension scheme in the form of a reduction in future pension payments. The cost of the levy had previously been assumed to be borne by the scheme and had been treated as a reduction in assets of the scheme when paid and as an increase in scheme liabilities for future amounts payable.                   

                                                                                                                                                         

(f) Property related charge                                                                                                     

During the prior period, the Group recognised a property related charge of £9.2m arising on its Irish property portfolio which comprised of a property impairment charge together with a provision for remediation costs on the former sugar processing sites. The property impairment charge of £4.3m arose due to the rezoning of a large proportion of the Group's property assets in Ireland together with the continued softening of demand for land and the related impact on prices being achieved on sales. The Group also re-evaluated the expected costs to be incurred in meeting the requirements of the Environmental Protection Agency regarding the remediation of the former sugar processing sites and an additional provision of £4.8m was recognised in this respect.

 

(g) Exceptional tax credit                                                                                                       

During the period, a tax credit of £2.3m was recognised following on from the final resolution of an overseas tax case, the terms of settlement of which were agreed on in the prior year. During the prior period, a tax credit of £7.8m arose as the Group resolved a number of tax positions including the settlement of the overseas tax case finalised in 2014. A tax credit of £2.1m (2013: £0.7m) was recognised in respect of exceptional charges in the period.                                                                                                                   

 

                                                         

6.   Taxation

 

Interim period tax is accrued using the tax rate that is estimated to be applicable to expected total annual earnings based on tax rates that were enacted or substantively enacted at the half year end that is the estimated average annual effective income tax rate based on management's judgement applied to the taxable income of the interim period.                                                                       

                                       

                                           

7.   Dividends Paid and Proposed

 

A dividend of 2.9 pence per share was approved at the Annual General Meeting on 28 January 2014 as a final dividend in respect of the year ended 27 September 2013 and a total of £6.6m was paid on 2 April 2014 to those shareholders that did not avail of the Group scrip dividend scheme.

 

An interim dividend of 2.2 pence (2013: 1.9 pence) per share is payable on 3 October 2014 to shareholders on the Register of Members as of 6 June 2014. The ordinary shares will be quoted ex-dividend from 4 June 2014. 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 as at 28 March 2014 because the interim dividend had not been approved at the balance sheet date (but was subsequently declared by the Directors of the Company).                   

                                                                                                                      

 

8.   Earnings per Ordinary Share

 

Basic 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 and shares held in trust in respect of Group Employee Share Schemes. The adjusted figures for basic and diluted earnings per ordinary share are after the elimination of exceptional items, the effect of foreign exchange (FX) on inter-company and external balances where hedge accounting is not applied, the movement in fair value of all derivative financial instruments and related debt adjustments, the amortisation of acquisition related intangible assets and the effect of pension financing.                                                                                                                                                                                   


Half year 2014

 

Half year 2013

*As restated


£'000

£'000

Profit attributable to equity holders of the Company

11,501

20,103

Exceptional items (post tax)

12,551

(426)

Fair value of derivative financial instruments and related debt adjustments

(647)

(2,159)

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

(273)

240

Amortisation of acquisition related intangible assets

3,564

4,128

Pension financing

2,941

2,740

Tax effect of pension financing and amortisation of acquisition related intangibles

(1,541)

(1,661)

Numerator for adjusted earnings per share calculation

28,096

22,965

 

 

Denominator for earnings per share and adjusted earnings per share calculation

 


Half year 2014

Half year

2013


'000

'000

Shares in issue at the beginning of the period

401,369

394,357

Treasury shares

-

(3,905)

Shares held by Employee Benefit Trust

(4,131)

(1,641)

Effect of shares issued in period

2,394

2,722

Weighted average number of ordinary shares in issue during the period

399,632

391,533

 


Half year 2014

Half year 2013

*As restated


pence

pence

Basic earnings per ordinary share

2.9

5.1

 



Adjusted basic earnings per ordinary share

7.0

5.9

 

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 benefits which are performance based are treated as contingently issuable shares because their issue is contingent upon satisfaction of specified performance conditions in addition to the passage of time. These contingently issuable ordinary shares are excluded from the computation of diluted earnings per ordinary share where the conditions governing exercisability have not been satisfied as at the end of the reporting period. Options over 9,451,796 (2013: 8,557,582) 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. 

 

Denominator for diluted earnings per share and adjusted earnings per share calculation

The reconciliation of the weighted average number of ordinary shares used for the purpose of calculating the diluted earnings per share amounts is as follows:


2014

2013


'000

'000

Weighted average number of ordinary shares in issue during the period

399,632

391,533

Dilutive effect of share options

8,957

7,518

Weighted average number of ordinary shares for diluted earnings per share

408,589

399,051

                                                                                   


Half Year

2014

Half Year

2013

*As restated


pence

pence

Diluted basic earnings per ordinary share

2.8

5.1




Adjusted diluted basic earnings per ordinary share

6.9

5.8

 

* The comparatives for 2013 have been restated to reflect the adoption of IAS 19 Employee Benefits (revised) as set out in note 14

 

 

9.   Intangible Assets, Property, Plant and Equipment, Investment Property, Capital Expenditure and Commitments

 

During the six month period to 28 March 2014, the Group made approximately £17.1m (2013: £15.7m) of additions to property, plant and equipment, investment property and intangible assets. The Group disposed of certain assets with a carrying amount of £0.8m (2013: £4.0m) for proceeds of £0.8m (2013: £4.0m). In addition, the Group recognised a total impairment charge of £14.4m to property, plant & equipment and intangible assets in the period. 

 

At 28 March 2014, the Group had entered into contractual commitments for the acquisition of property, plant and equipment amounting to £13.3m (2013: £4.0m).                           

 

                                                                                                                            

10.  Equity Share Capital

 

Issued capital as at 28 March 2014 amounted to £4.0m (27 September 2013: £4.0m). During the six month period to 28 March 2014, 2,387,446 shares (2013: 2,678,410) were issued in respect of the scrip dividend scheme and 97,292 shares (2013:181,125) were issued in respect of the Group's Sharesave schemes.

 

Pursuant to the Deferred Bonus Plan and the Performance Share Plan, 971,803 shares were purchased by the Trustees of the Plan during the period ended 28 March 2014 (2013: 727,885).  In addition, the Trustees utilised dividend income of £0.08m (2013: £0.03m) to acquire 62,384 (2013: 32,111) shares in the Group with a nominal value of £0.001m. In the period 3,046,238, (2013: 674,192) shares with a nominal value of £0.03m (2013: £0.013m) were transferred to beneficiaries of the Deferred Bonus Plan.

 

During the period, no share options were granted under the Executive Share Option Scheme (2013: nil), no share options were granted under the Sharesave schemes (2013: nil), 1,008,148 (2013: 3,477,711) shares, with a fair value of £1.86 per share (2013: £0.92 per share),were awarded under the Deferred Bonus Plan and 1,807,712 (2013: 4,298,604) conditional share awards, with a fair value of £1.86 per share (2013: £0.98 per share), were granted under the Performance Share Plan.

  

 

11.  Components of Net Debt and Financing

 

The cash flows from financing activities are set out in the Group Condensed Cash Flow Statement.

 

Net finance costs

2014

 

2013

*As restated

£'000

£'000

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

(6,927)

(7,674)

Net pension financing charge

(2,941)

(2,740)

Interest on obligations under finance leases

(93)

-

Change in fair value of derivatives and related debt adjustments

647

2,159

Foreign exchange on inter-company and external balances where hedge accounting is not applied

273

(240)

  Unwind of present value discount on non-current payables and receivables

(72)

(93)

(9,113)

(8,588)



  Finance income

25

72

  Finance costs

(9,138)

(8,660)


(9,113)

(8,588)

 

 

Net debt

 

March

2014

March

2013

September

2013


£'000

£'000

£'000

Cash and cash equivalents

18,306

13,102

1,756

Bank borrowings

(117,301)

(180,691)

(129,676)

Private placement notes

(104,515)

(120,309)

(113,036)

Non-bank borrowings

(57,858)

-

-

Finance lease

(1,219)

(1,045)

(1,047)

Cross currency interest rate swaps - fair value hedges

4,715

16,365

9,201

Group net debt

(257,872)

(272,578)

(232,802)

 

 

Fair value hierarchy - IFRS 13 (level 2 inputs)**


March

2014

Level 2

£'000

September

2013

Level 2

£'000

Assets carried at fair value



Cross currency swaps - fair value hedges

4,959

9,201

Interest rate swaps - cash flow hedges

721

-


5,680

9,201

Liabilities carried at fair value



Cross currency swaps - cash flow hedges

(147)

-

Cross currency swaps - fair value hedges

(244)

-

Interest rate swaps - cash flow hedges

-

(70)

Interest rate swaps - not designed as fair value hedges

(1,736)

(2,453)

Forward foreign exchange contracts - not designated as cash flow hedges

(106)

(69)


(2,233)

(2,592)

 

 

Fair Value of financial instruments at amortised cost

 

Except as set out below, it is considered that the carrying amounts of financial assets and financial liabilities recognised at amortised cost in the condensed consolidated interim financial statements approximate their fair values.

 


March 2014

September 2013


Carrying amount

£'000

Fair

value

£'000

Carrying amount

£'000

Fair

value

£'000

Bank borrowings

(117,301)

(119,956)

(129,676)

(132,050)

Private placement

(104,515)

(111,518)

(113,036)

(113,952)

Non-bank finance

(57,858)

(65,417)

-

-

Finance leases

(1,219)

(1,720)

(1,047)

(1,625)

 

 

In October 2013, the Group issued USD65m in USD Notes maturing in October 2021 to replace USD and GBP Notes that matured at the end of October 2013.

 

In March 2014, the Group borrowed EUR70m in non-bank borrowings maturing in March 2020. The funds received were swapped from floating EUR to fixed USD rates using cross-currency interest rate swaps designated as hedges under IAS39 Financial Instruments: Recognition and Measurement.

 

* The comparatives for 2013 have been restated to reflect the adoption of IAS 19 Employee Benefits (revised) as set out in note 14

** For definition of level 2 inputs please refer to the 2013 Annual Report

 

 

12.  Provisions for Liabilities


Half year

March


2014

£'000

At beginning of period

17,896

Utilised in period

(3,149)

Currency translation differences

(70)

Unwind of discount

72

At end of period

14,749

 


March

2014

£'000

September

2013

£'000

Analysed as:



Non-current liabilities

7,918

10,968

Current liabilities

6,831

6,928


14,749

17,896

 

 

The significant provisions are as follows:                                                                                     

 

Leases                                                                                                

Lease provisions consist 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) provisions for onerous contractual obligations for properties held under operating lease. It is anticipated that these will be payable within seven years.

 

Remediation and closure                                                                                                       

Remediation and closure obligations were established to cover either a statutory, contractual or constructive obligation of the Group.

 

In the Ingredients & Property segment, remediation and closure obligations primarily relate to the closure of Irish Sugar and the exit from sugar processing.

 

Other                                                                                                  

Other provisions primarily consist of provisions for litigation, warranty claims and other uninsured claims relating to legacy business activities. It is anticipated that these will be payable within five years.


                                                           

13.  Contingencies

 

The Group and certain of its subsidiaries continue to be subject to various legal proceedings relating to its current and former activities. 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.

 

                                                                                               

14.  Retirement Benefit Schemes

 

In consultation with the independent actuaries to the schemes, the valuations of the pension obligations have been updated to reflect current market discount rates, rates of increase in salaries, pension payments and inflation, current market values of investments and actual investment returns.         

The principal actuarial assumptions are as follows:

 


March 2014

September 2013


Ireland

UK

Ireland

UK

Rate of increase in pension payments*

*0%

3.20%

*0%

3.20%

Discount rate

3.30%

4.60%

3.50%

4.60%

Inflation rate

1.90%

3.30%

1.90%

3.30%

 

The financial position of the schemes was as follows:

 


March 2014

September 2013


Irish

Schemes

£'000

UK

Schemes

£'000

 

Total

£'000

Irish

Schemes

£'000

UK

Schemes

£'000

 

Total

£'000

Total market value of assets

222,838

158,116

380,954

223,091

150,379

373,470

Effect of paragraph 58(b) limit**

-

(20)

(20)

-

(8)

(8)

Present value of scheme liabilities

(236,946)

(271,757)

(508,703)

(241,585)

(269,422)

(511,007)

Deficit in schemes

(14,108)

(113,661)

(127,769)

(18,494)

(119,051)

(137,545)

Deferred tax asset

-

22,222

22,222

-

23,266

23,266

Net liability

(14,108)

(91,439)

(105,547)

(18,494)

(95,785)

(114,279)

 

* The pension increase rate shown above applies to the majority of the liability base. However, there are certain categories within the Group that have an entitlement to pension indexation and this is allowed for in the calculation

**Restriction in IAS 19R on recognition of surplus in a defined benefit plan that cannot be recovered through refunds or reductions to future contributions

 

 

Adoption of IAS 19 Employee Benefits (Revised)                                                                    

The adoption of IAS 19 (Revised) resulted in a number of amendments to the Group's accounting for retirement benefit obligations. The scheme administration costs, including the UK pension protection fund levy, are recognised as an operating cost through the Income Statement. These costs had previously been taken directly to scheme liabilities as the schemes are all closed to future accrual. On adoption, the Group has recognised an adjustment to opening retained earnings at 1 October 2012 of £13.4m with a corresponding reduction in the Group's retirement benefit obligations. Under IAS 19 (Revised), the full year 2013 operating costs increased by £2.0m (H1 2013: £1.0m) and the Group no longer takes a credit for the expected return on plan assets. The net interest expense has been calculated by multiplying the year-end discount rate by the year-end net pension liability adjusted for contributions and benefits in the period, thereby increasing the full year interest charge by £1.7m (H1 2013: £0.9m). In addition the Group has recognised a reduction in the deferred tax charge of £0.6m (H1 2013: £0.3m). These amendments to prior period reported Group profit resulted in a corresponding net increase in other comprehensive income of £3.1m (H1 2013: £1.5m).

 

The tables below set out the impact on the financial statements:

 

Impact on Condensed Consolidated Income Statement

 


Six month ended 29 March

2013

Year ended 27 September

2013


As

reported

(unaudited)

£'000

Change in

accounting

policy

£'000

As

Restated

(unaudited)

£'000

As

reported (audited)

£'000

Change in

accounting

policy

£'000

As restated

(unaudited)

£'000

Group operating profit

21,424

(1,017)

20,407

59,679

(2,034)

57,645

Finance costs, net

(7,732)

(856)

(8,588)

(15,091)

(1,713)

(16,804)

Share of profit of associates after tax

 

389

 

-

 

389


 
648

 

-

 
648

Profit before taxation

14,081

(1,484)

12,208

45,236

(3,747)

41,489

Taxation

8,361

335

8,696

26,503

634

27,137

 

Profit for financial period

 

22,442

 

(1,538)

 

20,904

 

71,739

 

(3,113)

 

68,626








 

Basic earnings per Ordinary Share (pence)

 

5.5

 

(0.4)

 

5.1

 

18.0

 

(0.9)

 

17.1

 

Diluted earnings per Ordinary Share (pence)

 

5.4

 

(0.4)

 

5.0

 

17.6

 

(0.8)

 

16.8

 

Impact on Condensed Consolidated Statement of Other Comprehensive Income

 


Six month ended 29 March

2013

Year ended 27 September 2013


As reported (unaudited)

 

£'000

Change in

accounting

policy

 

£'000

As

Restated

(unaudited)

 

£'000

As

Reported audited

 

£'000

Change in

accounting

policy

 

£'000

As

Restated

(unaudited)

 

£'000

 

Group profit for the financial period

 

22,442

 

(1,538)

 

20,904

 

71,739

 

(3,113)

 

68,626

 

Items which will not be reclassified to profit or loss:







 

 

Actuarial loss on Group defined benefit pension schemes

 

 

(21,559)

 

 

1,873

 

 

(19,686)

 

 

(8,958)

 

 

3,747

 

 

(5,211)

 

Deferred tax on Group defined benefit pension schemes

 

4,259

 

(335)

 

3,924

 

(1,613)

 

(634)

 

(2,247)

 

Impact on Condensed Consolidated Balance Sheet

 


As at 29 March 2013


As reported

(unaudited)

 

£'000

Change in

accounting policy

 

£'000

As

 restated

 

£'000

Equity




Retained earnings

(88,635)

13,372

(76,263)

Other components of equity

284,913

-

284,913

Total equity

196,278

13,372

209,650





 

Liabilities




Non-current liabilities

307,067

-

307,067

Retirement benefit obligations

155,860

(13,372)

142,488

Current liabilities

342,343

-

342,343

Total liabilities

805,270

(13,372)

791,898

Total equity and liabilities

1,001,548

-

1,001,548





 

   The change in accounting policy had no effect on the Group balance sheet at 27 September 2013.                            

                      

 

15.  Acquisition of Undertakings

 

On 25 February 2014, the Group announced the acquisition of 100% of Lettieri's, a leading manufacturer of food to go products for the US convenience store channel. It operates from a modern, purpose-built facility in Shakopee, Minnesota and employs approximately 130 staff. The acquisition deepens the Group's manufacturing capability and widens its product range to serve more fully the food to go needs of customers in the small store channels.

 

The provisional fair values of the assets acquired, determined in accordance with IFRS, were as follows:                              

                                                                       


 

March

2014


£'000

Assets


Intangible assets

7,012

Property, plant and equipment

2,128

Inventory

1,858

Trade and other receivables

1,094

Total assets

12,092

Liabilities


Trade and other payables

(1,561)

Total liabilities

(1,561)

Net assets acquired

10,531

Goodwill

11,990

Total enterprise value

22,521



Satisfied by:


Cash payments

22,553

Net debt acquired

(32)

Net cash outflow

22,521

 

 

The fair values of acquired net assets have been determined provisionally as at 28 March 2014 and are subject to change, as the Group has yet to finalise the fair value of all the assets and liabilities acquired due to the timing of the completion of the acquisition.

 

The principal factor contributing to the recognition of goodwill on the acquisition of Lettieri's is the expected realisation of product synergies with existing customers, through the complementary product offering of Lettieri's with the existing offering of the Group. The principal intangible assets acquired were customer related intangibles. As part of the acquisition, the Group acquired trade receivables with a fair value of £1.1m. Management estimates that acquired receivables will be collected in full. The goodwill arising on acquisition is deductible for tax purposes.

 

The post-acquisition impact of Lettieri's on the Group was to increase revenue by £1.7m and to increase Group profit by £0.1m.

 

If the acquisition of Lettieri's had taken place at the beginning of the period, Group revenue would have been £627.4m, and the profit for the period would have been £12.6m.

 

 

16.  Disposal Group Held For Sale

 

In January 2014, management committed to a plan to sell its foodservice desserts business, Ministry of Cake (MOC) which was part of the Convenience Foods segment. Accordingly, MOC was presented as a disposal group held for sale at 28 March 2014. The disposal of this business was completed in May 2014.

 

As at 28 March 2014, the disposal group comprised assets of £15.5m, less liabilities of £5.5m, detailed as follows:

 


March

2014


£'000

Intangible assets

3,762

Property, plant and equipment

3,507

Inventory

2,974

Trade and other receivables

5,300

Trade and other payables

(4,905)

Deferred tax liability

(623)

Total

10,015

 

A non cash impairment charge of £5.8m was recognised on the write down of the carrying amount of the disposal group to its fair value less costs to sell and has been included in exceptional items (note 5) in the Group Condensed Income Statement.

 

 

17.  Information

 

Copies of the Half Yearly Financial Report are available for download from the Group's website at www.greencore.com.

 

 

18.  Auditor Review

 

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

 

                                                                       

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 2014 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 2014 and a description of the principal risks and uncertainties for the remaining six months; and                      

                                                                                   

● 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.                                  

 

 

                                                             

On behalf of the Board,

 

P.F. Coveney

A.R. Williams

Chief Executive Officer

Chief Financial Officer

19 May 2014

19 May 2014

 

 

* * *

 


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