Kerry Regulatory News (KYGA)

5 Sep 2006 07:00

Kerry Group PLC05 September 2006 Press Announcement Tuesday 5 September 2006 Interim ReportHalf Year Ended 30 June 2006 Kerry, the global ingredients, flavours, and consumer foods group, reportsinterim results for the half year ended 30 June 2006. Financial Highlights • Sales revenue growth of 7% to €2,265m• Like-for-like revenue growth of 3.5%• EBITDA up 1.9% to €216m• Trading profit growth of 1.5% to €162m• Adjusted earnings per share* up 2% to 54.9 cent• Interim dividend per share up 10% to 5.5 cent *before intangible amortisation and non-trading items Kerry Group Chief Executive, Hugh Friel said; "As previously signalled, thefirst six months of 2006 have proved extremely challenging. The delay inrecovering the significant energy related cost increases slowed growth duringthe period. However, we have full confidence in our growth strategies and ourlonger term growth performance will benefit from critical attention to on-goingcost recovery programmes, supply chain efficiencies, increased investment inproduct innovation and asset optimisation - including elimination of non-coreactivities. Earnings for the full year are expected to be in line with currentmarket expectations". For further information please contact: Frank HayesDirector of Corporate Affairs Tel no + 353 66 7182304 Fax no + 353 66 7182972Kerry Web Site: www.kerrygroup.com Chairman's Statement For the half year ended 30 June 2006 As signalled in our Annual General Meeting Statement, the first six months of2006 have proved extremely challenging. The delay in recovering the significantenergy related cost increases slowed growth during the period. In the face offurther raw material price fluctuations, this meant that the results for theperiod, while marginally ahead of the first half of 2005, are reported in linewith our revised expectations. The Group continues to have full confidence in its business model and strategiesto achieve our growth objectives. In the aftermath of a long series ofpredominantly bolt-on acquisitions in recent years, our focus on supply chaininitiatives and in optimising processing and business support structures whileeliminating non-core activities is achieving good operational results. Ourfocus on new product developments and on further cost recovery initiatives tomaintain Kerry's business operating growth model will continue to beaggressively pursued. Delivery of enhanced health, wellness and nutritionalvalues now extends across all food and beverage categories and Kerry businessesare to the fore in leading product developments in association with our keycustomers. Group trading since the end of the period continues in line withmarket expectations. Results Total Group revenue in the period grew by 7% to €2,265m, reflectinglike-for-like growth of 3.5% relative to the same period of last year. Whilstcost recovery programmes proved successful in most territories, theunprecedented impact of energy related cost increases (180 basis points onmargin or €40m) limited trading profit growth to 1.5% to a level of €162m in theperiod. This resulted in a Group trading margin of 7.2%, 40 basis points belowthe same period of 2005. Profit after taxation was maintained at €101m with earnings before intangibleasset amortisation and non-trading items increased by 2.3% to €103m. Adjustedearnings per share increased by 2% to 54.9 cent. The interim dividend of 5.5cent per share reflects an increase of 10% over the 2005 interim dividend. While Group businesses had budgeted for significant cost inflation during theperiod, the impact and scale of energy and energy related cost increasesadversely impacted the performance of individual Kerry business units and theperformances of their respective customers. Crude oil prices, having grown onaverage by 42% in 2005, increased by a further 32% in the period. The adverse impact of energy related and raw material cost inflation hascontinued into the second half of the current year and the Group continues tofocus critical attention through its long-term customer relationships andpartnerships on necessary cost recovery programmes. Business Reviews Food Ingredients Despite the prevailing market difficulties, Kerry's food ingredients businessesrecorded successful results in the period delivering a satisfactorylike-for-like revenue growth rate of 5% (total growth adjusted for acquisitions,disposals and currency translation). Total sales revenue increased by 6.5% to€1,548m. Trading profits grew by 4% to €123m. The 20 basis points reductionin the trading margin to 8% reflects the time lag in recovery of cost increasesparticularly in European markets. In the face of significant pressures, theGroup's performance throughout food and beverage ingredients markets reflectsthe resilience of Kerry's ingredients, flavours and bio-science businessesoperationally and technically. In American ingredients markets the Group's strong nutritional focus,leveraging its broad technological base delivered 5.5% like-for-like revenuegrowth with encouraging roll-out of new product developments and line extensionsthrough major accounts. Total revenue in the region during the period grew by10.9% to €635m. In the USA, Kerry's ingredients businesses have been successfully re-organisedinto Integrated Business Units to better meet market needs for healthyconvenient food and beverage offerings and to support growth through integratedplatforms for delivery of added-value solutions. Demand for nutritionalfunctional foods and specialty food and beverage products continues to grow atencouraging levels, providing good opportunities for Kerry's breadth oftechnology-based ingredients and integrated solutions. In the sweet sector strong progress has been recorded in 2006 in the cereal,ice-cream, confectionery and nutritional categories. During the period, theGroup's technical capabilities in nutritional and wellness food categories wasfurther advanced through the acquisition of Custom Industries and NuvexIngredients. Both acquisitions complement our existing facilities in the U.S.and Canada, adding new proprietary technologies and valuable production capacityto meet Kerry's growth plans. Custom Industries is a leading manufacturer ofparticulates for bakery and ready-to-eat cereal applications and confectioneryingredients for sweet goods. Operating from two modern manufacturing facilitieslocated in St. Genevieve, Missouri and Toronto, Canada; Custom has experiencedstrong growth through leading food manufacturers, foodservice channels andregional bakeries. Nuvex Ingredients operates from a state-of-the-art,organically certified, production facility located in Blue Earth, Minnesota.Specialising in customised high-protein and fibre nutritional lines, thebusiness has well-established core supplier relationships with leadingmanufacturers of breakfast cereals, functional foods and nutritional snacks. Progress was also achieved in the savoury ingredients sector, in particularthrough regional snack processors and added-value meat processors. Marketconditions in the speciality dairy sector remained challenging but developmentinitiatives in functional nutritional lines and proprietary liquid formats areachieving encouraging results. A new Proteins and Nutritionals business unitwas established to support development through soy systems, dairy proteins,hydrolysed proteins and nutritional/fortified beverage systems acrossnutritional categories including the medical and infant nutrition sectors.Kerry's dedicated food and beverage business unit again reported good growth inthe U.S. market through restaurant chain accounts and coffee house chains.Re-branding programmes and new product introductions in the Da Vinci, OregonChai and JetTea range proved successful. Good progress continues in Mexico, Central American and South American markets.In Mexico and Central America strong top-line growth was accomplished in snackand convenience categories whilst food and beverage applications in thefoodservice sector are making good headway. In Brazil, market developmentprogress was maintained through meat seasonings into the growing added-valuemeat sectors and sweet ingredients into the ice-cream sectors. Kerry Bio-Science delivered good top-line growth in the first half of 2006. InAmerican markets, good revenue growth was achieved in fermented ingredientsthrough cultures and natural shelf life extender products in the culinary, meatand dairy sectors. Following a review of Kerry's emulsifier manufacturingcapability and the need to optimise supply chain management and customer servicein the sector, the Group has confirmed that the Brantford facility in Canadawill close by year-end and production will transfer to Malaysia and theNetherlands. Enzymes and beverage ingredients recorded satisfactory growth inAmerican markets in the period. Proteins showed strong growth year-on-yearparticularly in the pharma segment. Progress in cell nutrition through proteinsand yeast extracts was again very encouraging in biopharmaceutical applications.Good sales growth in Sheffield(TM) Pharma excipients continued, but margins werereduced due to the time lag in recovery of raw material and energy related costincreases. Energy related cost increases and raw material supply issues due to citrus cropdamage arising from the hurricanes of '05 impacted performance in the Americanflavours industry in the period under review. Nevertheless, Mastertaste grew inline with market trends and the division has a promising project pipeline withmajor accounts. Following successful trials, it's unique anti-microbial flavourtechnology is expected to yield good results in added-value meat applicationsand personal care products. In Asia Pacific markets, Kerry's market development programme continues torecord good results. Sales revenue grew by 9.1% to €174m reflectinglike-for-like growth of 9.4%. Nutritional bases and speciality lipids achievedgood growth in the hot and cold beverage sectors in Asian markets. Progressthrough savoury systems continued in the snack products category in North Asia.Seasonings and marinades achieved good growth in the added-value fish and meatindustries. The Group's branded beverage applications continued to grow in thefast growing foodservice sector in the region and were successfully introducedto the Chinese market. Mastertaste flavours is also making good progress inestablishing a robust business platform in the region. Equally KerryBio-Science is successfully complementing other Group businesses in the regionthrough application of its technologies in the beverage, meat, dairy,confectionery and bakery sectors. A $10m programme to significantly expandproduction at the Esterol emulsifier plant in Malaysia was commenced during theperiod which will establish a 'Centre of Excellence' for the division's globalemulsifier business. Despite the slowdown in industry development in the Australian and New Zealandmarkets, Kerry businesses performed well. Coffee house chains and specialistfoodservice outlets provided good opportunity for Kerry's flavoured beverageapplications. Pinnacle again recorded excellent growth in Australian multipleretail chains and specialist bakery groups through its branded offerings ofconvenience bakery products. European Ingredients markets endured a challenging trading environment due tothe well reported difficulties in many food industry categories particularly inthe UK market. Sales revenue growth across Kerry's European based ingredientsbusinesses slowed to 2.8% to a level of €631m. However this reflectslike-for-like revenue growth of 4.2% relative to the same period of 2005 whenaccount is taken of business disposals. Against such industry pressures, rawmaterial pricing issues and energy related cost inflation; ingredients providershave not achieved adequate cost recovery in the marketplace. The slowdown ingrowth in the prepared foods sector impacted margins in the seasonings andcoating sectors. However, Kerry continued to achieve good progress throughseasonings, culinary systems and sauces in premium growth sectors. Snackseasonings performed well in regional customer accounts throughout Europeanmarkets including Eastern Europe. A major focus on cost cutting and operationalefficiencies is yielding good results particularly in Italy, France and Germany.Two manufacturing facilities were closed in the UK and one in Italy during theperiod. Kerry's sweet and fruit ingredients businesses in the UK performed well with newlistings in the growing health and nutritional sectors. However conditions inthe fruit preparations market in France remained very difficult. Dairy markets in Europe continued to weaken during the first half of 2006. Thetransition in EU Institutional support for dairying over the past three years,from processor/market supports to direct dairy farmer payments, has had acontinuing negative impact on market returns. This impacted significantly onKerry's Irish based dairy processing and dairy ingredients operations which,while accounting for a relatively small percentage of total Group activity,remain an important constituent of our portfolio of businesses. The effect ofsuch market support issues will continue to adversely impact returns atprocessor and primary producer level in the near term - until global supply/demand levels come into balance as consumption progressively increases. KerryGroup remains confident with respect to the long-term outlook for dairy productsand dairy ingredients. Improved manufacturing efficiencies at the Kerry Bio-Science plant in Menstrie,Scotland contributed to a good performance through yeast extracts in Europeanculinary markets, notwithstanding significant raw material and energy costs.This resulted from the major investment programme completed in late 2005.Enzymes saw greater development in the brewing sector. Development of KerryBio-Science functional systems yielded good results in the bakery and ice-creamsectors. The Group's heightened focus on meeting customer demands for enhancednutritional offerings was significantly boosted by the new Kerry Group NutritionTechnical Centre established in Almere, the Netherlands. Mastertaste flavours grew in line with industry trends in European markets withgood growth recorded in savoury and beverage applications. Consumer Foods Against a background of significant cost pressures, a weak performance inpoultry markets and losses connected with the Hartlepool operation, Kerry Foods'consumer food businesses in the UK and Irish markets performed robustly in thefirst half of 2006. Divisional revenue grew by 6.6% to €875m reflecting staticoverall like-for-like growth as a result of sectoral price deflation. Thedifficult market conditions restricted cost recovery programmes to offset thesignificant energy, packaging and distribution cost increases incurred duringthe period. The cost/price squeeze together with the aforementioned operationalissues resulted in a 4.6% reduction in trading profits to €52m. The performance of Kerry's consumer foods business in such difficult marketconditions is testament to its brand positioning and investment, and to acontinuing focus on health/wellness offerings and nutritional improvements, newproduct development, category premiumisation and lowest cost productionsystems. In Ireland, Kerry Foods' category leading brands all grew market share in thefirst half of 2006. Denny achieved excellent growth in sausage, rasher andpre-packed sliced meats benefiting from its new brand identity and marketingprogrammes. Similarly, Ballyfree also benefited from the positive nutritionalprofile and food values of its range. In the convenience food-to-go sectorstrong market development continued through the Freshways, Dawn, Kerry Springand Kerryfresh offerings. Double digit growth was achieved in the Freshwayssandwich range, assisted by the re-launch of the Freshways 'Healthy Ways' line.Three new health juice offerings were introduced in the Dawn range; DawnBenefits - with Multi-vitamins and Calcium, Probiotic and Omega-3 - supported bynational TV and press campaigns. The Irish and UK poultry markets remained highly competitive during the period,with further cost pressures significantly impacting profitability of the sector.Cheese and spreads had a good performance across both markets, with continuedprogress through Charleville and Low Low in Ireland. Cheestrings continued togrow successfully during the period assisted by new TV advertising campaignsemphasising its natural nutritional values. In the adult healthy snack market,Brunchettas has continued to achieve strong double digit growth as the marketprogressively develops. In the chilled ready meals sector the slowdown in overall market growthcontinued into the first half of 2006, but by the end of the period the rate ofgrowth again accelerated - driven primarily by premium categories. Kerry Foods'chilled ready meals business continued to achieve satisfactory growth due to itspositioning in premium sectors. The Hartlepool facility was closed so as tomaximise production efficiencies. Noon Group acquired in August 2005 continuedto perform well. A focus on consumer requirements for more significant natural,nutritionally balanced recipes using premium quality healthy ingredients has ledKerry Foods to introduce significant new product innovations in the sector inconjunction with major UK retail groups. 'The Food Doctor' innovative range ofready meals has been successfully launched within the premium health sectorusing a combination of raw and cooked ingredients that can be steamed in themicrowave in seconds to give great tasting meals. Kerry Foods will also launchits 'Champneys' wellbeing brand of multi-cuisine meals in the second half of2006. The rate of decline in the frozen ready meals sector slowed during the period.Rye Valley Foods achieved good volume growth due to its quality asset base andlowest cost producer status. However intense competition in a declining marketand energy related cost increases adversely impacted profitability relative tothe same period of last year. Richmond continued to achieve a strong performance, growing its market share inboth the fresh and frozen segments of the UK sausage market. Wall's saw revenuevalues decline in the standard segment but enjoyed good growth in the parchmentsector and through Wall's Micro Sausages. Porkinsons also recorded good volumeand value growth year-on-year. The growth of meat snacking continues atencouraging levels and Mattessons Fridge Raiders has captured a major share ofthis growing category. Kerry Foods recorded good volume growth in the UK pastry sector but costrecovery proved difficult in a highly competitive marketplace. As well asmaximising processing efficiencies through closure of facilities in Sligo,Limerick, Mitcham and Hartlepool, the consumer foods division also sold the St.Brendan's Irish Cream Liqueur business based in Derry. Geographic Markets Total Group sales revenue throughout European markets in the first half of 2006grew by 5.2% to €1.5 billion. In American markets, the Group's ingredients andflavours businesses increased sales revenue by 10.9% to €635m. Sales revenuein Asia Pacific markets grew by 9.1% to €174m. Finance Like-for-like revenue growth of 3.5% and a 40 basis point reduction in tradingmargin reflects an overall robust trading performance in difficult marketconditions. The latter in particular was impacted by the significant increasein the market price of energy (up 32% in the period) and the related impact onpackaging and certain soft commodities. This increase of approximately €40m (or180 basis points on the margin) was partially recovered during the periodthrough ongoing pricing, procurement and supply chain initiatives. Free cash flow for the period at €20m (H1 2005: €24m) reflects the increasedseasonal investment in working capital of €100m. Earnings before interest, tax,non-trading items, depreciation and amortisation (EBITDA) increased by 1.9% to€216m. The return on shareholders' equity was 14.7% for the period. Expenditure on Group acquisitions during the period amounted to €86m net ofdisposals. Net debt at the end of the half year increased to €1,338m compared to€1,265m at the end of the first half of 2005. The ratio of net debt to EBITDAremained at 2.8 times. Finance costs were €35m, compared to €30m in the sameperiod of 2005 (reflecting an increase in interest rates) with EBITDA to netinterest covered 7.0 times (H1 2005: 8.6 times). Share Buy Back Programme At the 2006 Annual General Meeting shareholders approved the repurchase of up to5% of the issued share capital of the Company. In June 2.8m shares (1.5%) werepurchased and are now held as treasury shares pending their reissue to meetobligations arising from the Company's share option schemes and long termincentive plan. As a result the total number of shares in issue at 30 June 2006reduced to 184,560,310 compared to 187,092,180 at the end of June 2005. TheBoard may utilise this authority up to the remaining balance of 6.5m shares overthe course of the period for which the authority is valid (the 2007 AnnualGeneral Meeting). The Group continues to pursue acquisition opportunities and should suchopportunities not materialise in significant quantum in any given period, theBoard may, if it is in the best interest of shareholders, use it's cash toinvest in Share Buy Back Programmes. Dividend The Board has declared an interim dividend of 5.5 cent per share, an increase of10% on the 2005 interim dividend of 5 cent per share. The interim dividend willbe paid on 24 November 2006 to shareholders registered on the record date 20October 2006. Current Trading and Outlook Despite the current competitive trading environment and difficulties inrecovering the unprecedented level of cost increases in some territories, KerryGroup is well positioned across global growth markets and its strong technologyplatforms will continue to lead innovation and category growth. In globalingredients markets Kerry is satisfied that its strong organic growth rates areachievable into the future. In consumer food categories the underlying strengthof Kerry Foods' brands, their focus on health and wellness product innovationsand positioning in convenience growth categories, will ensure that the divisioncontinues to outperform category growth rates. The recent competitive pressures in the food industry will inevitably increasethe pace of industry consolidation. Kerry is well positioned to actively pursuestrategic opportunities arising from such consolidation which will contributefurther supply chain efficiencies for the Group and support top-line andearnings growth into the future. The Group is currently exploring a busypipeline of bolt-on acquisition opportunities. We continue to focus on operational efficiency improvements. During the pastyear eight manufacturing facilities were closed and a further four were soldwith the associated non-core businesses. In the near term, it is planned tosell or close a further ten manufacturing facilities across Group operations.The benefits of this action programme on completion will contribute animprovement of 25 basis points per annum in the Group trading margin. We continue to focus on necessary cost recovery programmes to overcome thecurrent cost pressures in our industry segments. Earnings for the full yearare expected to be in line with current market expectations. Results for the half year ended 30 June 2006 Kerry Group plcConsolidated Income Statementfor the half year ended 30 June 2006 Half year ended Half year ended Year ended 30 June 2006 30 June 2005 31 Dec. 2005 Unaudited Unaudited Audited Notes •'000 •'000 •'000 Revenue 1 2,265,336 2,117,238 4,429,777 ___________ ___________ ___________ Trading profit 162,249 159,876 380,213 Intangible asset amortisation (5,433) (4,820) (10,331)Non-trading items 2 3,223 6,254 (3,623) ___________ ___________ ___________Operating profit 160,039 161,310 366,259 Finance costs (34,772) (30,409) (68,353) ___________ ___________ ___________Profit before taxation 125,267 130,901 297,906 Income taxes (24,534) (30,335) (62,030) ___________ ___________ ___________Profit after taxation and attributable to equity shareholders 100,733 100,566 235,876 ___________ ___________ ___________ Earnings per ordinary share (cent) - basic 3 53.8 53.8 126.1 - fully diluted 3 53.6 53.5 125.5 Kerry Group plcConsolidated Balance Sheetas at 30 June 2006 30 June 2006 30 June 2005 31 Dec. 2005 Unaudited Unaudited Audited •'000 •'000 •'000Non-current assetsProperty, plant and equipment 1,061,266 1,015,943 1,066,931Intangible assets 1,679,400 1,453,991 1,633,367Financial asset investments 14,131 6,113 12,442Deferred tax assets 4,168 15,314 12,115 ___________ ___________ ____________ 2,758,965 2,491,361 2,724,855 ___________ ___________ ____________Current assetsInventories 573,469 568,988 544,438Trade and other receivables 623,276 642,352 558,831Cash and cash equivalents 101,235 97,701 163,903Financial assets 7,378 - 1,862Assets classified as held for sale - 4,616 10,415 ___________ ___________ ____________ 1,305,358 1,313,657 1,279,449 ___________ ___________ ____________Total assets 4,064,323 3,805,018 4,004,304 ___________ ___________ ____________Current liabilitiesTrade and other payables 886,117 854,869 845,285Financial liabilities 205,185 211,344 143,854Tax liabilities 50,501 49,793 44,659Provisions - 6,302 -Deferred income 4,226 3,860 3,078Liabilities classified as held for sale - - 1,899 ___________ ___________ ____________ 1,146,029 1,126,168 1,038,775 ___________ ___________ ____________Non-current liabilitiesFinancial liabilities 1,233,889 1,153,001 1,297,210Retirement benefit obligation 178,561 267,115 249,103Other non-current liabilities 103,767 93,837 107,297Deferred tax liabilities 126,721 103,261 112,276Deferred income 19,147 22,537 21,959 ___________ ___________ ____________ 1,662,085 1,639,751 1,787,845 ___________ ___________ ____________ Total liabilities 2,808,114 2,765,919 2,826,620 ___________ ___________ ____________Net assets 1,256,209 1,039,099 1,177,684 ___________ ___________ ____________Capital and reservesShare capital 23,419 23,386 23,399Share premium account 381,022 377,844 378,979Other reserves (31,826) 23,438 23,501Retained earnings 883,594 614,431 751,805 ___________ ___________ ____________Shareholders' equity 1,256,209 1,039,099 1,177,684 ___________ ___________ ____________ Kerry Group plcConsolidated Statement of Recognised Income and Expensefor the half year ended 30 June 2006 Half year ended Half year ended Year ended 30 June 2006 30 June 2005 31 Dec. 2005 Unaudited Unaudited Audited •'000 •'000 •'000 Fair value movements on available-for-sale investments 1,689 (338) 12,209Fair value movements on cash flow hedges 7,248 (3,652) (3,383)Exchange difference on translation of foreign operations (15,258) 25,261 17,747Actuarial gains / (losses) on defined benefit pension schemes 64,640 (59,166) (50,387)Deferred tax on items taken directly to reserves (12,987) 15,193 16,412 ___________ ___________ ____________Net income / (expense) recognised directly in equity 45,332 (22,702) (7,402) TransfersCash flow hedges to profit or loss from equity (564) (122) 857Sale of available-for-sale investments - - (6,218)Profit for the period after taxation 100,733 100,566 235,876 ___________ ___________ ____________Total recognised income and expense for the period attributable to equity shareholders 145,501 77,742 223,113 ___________ ___________ ____________ Kerry Group plcConsolidated Reconciliation of Changes in Shareholders' Equityfor the half year ended 30 June 2006 Half year ended Half year ended Year ended 30 June 2006 30 June 2005 31 Dec. 2005 Unaudited Unaudited Audited Notes •'000 •'000 •'000 At beginning of period 1,177,684 968,160 968,160Impact of adoption of IAS 32 and IAS 39 - 8,131 9,550Total recognised income and expense for the period 145,501 77,742 223,113Dividends paid 4 (20,597) (17,776) (27,129)Purchase of treasury shares 3 (48,442) - -Shares issued during the period 2,063 2,858 4,014Share issue costs - (16) (24) ___________ ___________ ____________ At end of period 1,256,209 1,039,099 1,177,684 ___________ ___________ ____________ Kerry Group plcConsolidated Cash Flow Statementfor the half year ended 30 June 2006 Half year ended Half year ended Year ended 30 June 2006 30 June 2005 31 Dec. 2005 Unaudited Unaudited Audited •'000 •'000 •'000Operating activitiesTrading profit 162,249 159,876 380,213Adjustments for:Depreciation (net) 53,450 51,877 101,643Change in working capital (98,909) (78,144) 260Exchange translation adjustment (615) 1,270 494 ___________ ___________ ____________Cash generated from operations 116,175 134,879 482,610Income taxes paid (13,466) (22,831) (50,656)Finance costs paid (net) (35,015) (29,122) (64,314) ___________ ___________ ____________Net cash from operating activities 67,694 82,926 367,640 ___________ ___________ ____________Investing activitiesPurchase of non-current assets (56,450) (70,993) (149,262)Proceeds from the sale of non-current assets 7,937 11,895 28,928Capital grants received 974 336 446Net expenditure on acquisitions and disposals of businesses (86,435) (38,698) (230,929)Payment of deferred payables (1,253) (7,797) (11,353)Expenditure on non-trading items (3,457) (6,359) (15,236)Consideration adjustment on previous acquisitions - (1,345) (18) ___________ ___________ ____________Net cash used in investing activities (138,684) (112,961) (377,424) ___________ ___________ ____________Financing activitiesDividends paid (20,597) (17,776) (27,129)Purchase of treasury shares (4,314) - -Issue of share capital 2,063 2,842 3,990Net proceeds from bank borrowings 89,967 100,785 199,349Decrease in bank overdrafts (55,336) (23,443) (72,853) ___________ ___________ ____________Net cash from financing activities 11,783 62,408 103,357 ___________ ___________ ____________Net (decrease) / increase in cash and cash equivalents (59,207) 32,373 93,573Cash and cash equivalents at beginning of period 163,903 65,328 65,328Exchange translation adjustment on cash and cash equivalents (3,461) - 5,002 ___________ ___________ ____________Cash and cash equivalents at end of period 101,235 97,701 163,903 ___________ ___________ ____________ Reconciliation of Net Cash Flow to Movement in Net Debtfor the half year ended 30 June 2006 Net (decrease) / increase in cash and cash equivalents (59,207) 32,373 93,573Cash inflow from debt financing (34,631) (77,342) (126,496) ___________ ___________ ____________Changes in net debt resulting from cash flows (93,838) (44,969) (32,923) Exchange translation adjustment on net debt 31,642 (80,801) (104,997) ___________ ___________ ____________Movement in net debt in the period (62,196) (125,770) (137,920) Net debt at beginning of period (1,275,358) (1,137,438) (1,137,438)Impact of adoption of IAS 32 and IAS 39 - (1,419) - ___________ ___________ ____________Net debt at end of period (1,337,554) (1,264,627) (1,275,358) ___________ ___________ ____________ Kerry Group plcNotes to the Interim Report for the half year ended 30 June 2006 1. Analysis of results Half year ended Half year ended Year ended 30 June 2006 30 June 2005 31 Dec. 2005 Unaudited Unaudited Audited Segment Segment Segment Segment Segment Segment Revenue Result Revenue Result Revenue Result •'000 •'000 •'000 •'000 •'000 •'000By business segment:Ingredients 1,547,769 123,206 1,453,161 118,450 3,021,944 283,816Consumer foods 874,768 52,075 820,301 54,605 1,725,839 123,018Unallocated and Group eliminations (157,201) (13,032) (156,224) (13,179) (318,006) (26,621) _________ ________ _________ ________ _________ ________ 2,265,336 162,249 2,117,238 159,876 4,429,777 380,213 _________ _________ _________ Intangible asset amortisation (5,433) (4,820) (10,331)Non-trading items 3,223 6,254 (3,623) ________ ________ ________ Operating profit 160,039 161,310 366,259 ________ ________ ________ Segment Segment Segment Revenue Revenue Revenue •'000 •'000 •'000By destination:Europe 1,455,739 1,384,352 2,885,039Americas 635,480 573,254 1,212,877Asia Pacific 174,117 159,632 331,861 _________ _________ _________ 2,265,336 2,117,238 4,429,777 _________ _________ _________ 2. Non-trading items Half year ended Half year ended Year ended 30 June 2006 30 June 2005 31 Dec. 2005 Unaudited Unaudited Audited •'000 •'000 •'000 Profit on sale of non-current assets 6,898 9,015 14,702Loss on sale of businesses and plant closures (3,675) (2,761) (18,325) _________ ________ ________ 3,223 6,254 (3,623) Tax credit / (charge) on non-trading items 119 (1,417) 3,665 _________ ________ ________ 3,342 4,837 42 _________ ________ ________ The 2006 profit on sale of non-current assets primarily relates to the sale ofproperties. The loss on sale of businesses and plant closures in 2006 relates to the closureof plants including Bingham and Hartlepool in the UK and Platters in Ireland. The 2005 profit on sale of non-current assets primarily relates to the sale ofIrish properties, plant and equipment and the disposal of available-for-sale investments. The loss on sale of businesses and plant closures in 2005 relates to the sale ofnon-core businesses and the closure of plants. 3. Earnings per ordinary share Half year ended Half year ended Year ended 30 June 2006 30 June 2005 31 Dec. 2005 Unaudited Unaudited Audited EPS EPS EPS Notes cent •'000 cent •'000 cent •'000Basic earnings per share Profit after taxation and attributable to equity shareholders 53.8 100,733 53.8 100,566 126.1 235,876Intangible asset amortisation 2.9 5,433 2.6 4,820 5.5 10,331Non-trading items (net of tax) 2 (1.8) (3,342) (2.6) (4,837) - (42) _____ _______ _____ ________ _____ ________Adjusted earnings* 54.9 102,824 53.8 100,549 131.6 246,165 _____ _______ _____ ________ _____ ________ Diluted earnings per share Profit after taxation and attributable to equity shareholders 53.6 100,733 53.5 100,566 125.5 235,876Adjusted earnings* 54.7 102,824 53.5 100,549 131.0 246,165 *In addition to the basic and diluted earnings per share, an adjusted earningsper share is also provided as it is considered more reflective of the Group's underlying trading performance. Adjusted earnings is profit after taxation before intangible asset amortisation and non-trading items (net of tax). Number of Number of Number of Shares Shares Shares 000's 000's 000's 30 June 30 June 31 Dec. 2006 2005 2005 Basic weighted average number of shares 187,271 186,949 187,051Impact of executive share options outstanding 760 905 879 _________ _________ ________Diluted weighted average number of shares 188,031 187,854 187,930 _________ _________ _________Actual number of shares in issue 184,560 187,092 187,196 _________ _________ _________ On 26 June 2006 the Company commenced a share buy back programme of up to2,800,000 A ordinary shares, representing approximately 1.5% of the issued share capital of the Company. By 30 June 2006, these shares had been repurchased at a total cost of €48 million. All repurchases conducted under the programme were in accordance with theCompany's general authority to repurchase securities as approved at the 2006 Annual General Meeting of the Company and in accordance with the Listing Rules of the Irish Stock Exchange, the Listing Rules of the UK Listing Authority, the Market Abuse Directive and any other applicable legislation andregulatory requirements. 4. Dividends Half year ended Half year ended Year ended 30 June 2006 30 June 2005 31 Dec. 2005 Unaudited Unaudited Audited •'000 •'000 •'000 Amounts recognised as distributions to equity shareholders in the period: Final 2005 dividend of 11.00 cent per A ordinary share paid 26 May 2006 (2004: 9.50 cent per A ordinary share paid 27May 2005) 20,597 17,776 17,776 Interim 2006 dividend of 5.50 cent per A ordinary share payable 24 November 2006 (2005: 5.00 cent per A ordinaryshare paid 25 November 2005) - - 9,353 ______________ _____________ ___________ 20,597 17,776 27,129 ______________ _____________ ___________ Since the end of the period, the Board has declared an interim dividend of 5.50cent per share. The interim dividend will be paid on 24 November 2006 to shareholders registered on the record date 20 October 2006. These consolidated interim financial statements do not reflect this dividend payable. 5. Retirement benefits The Group's defined benefit pension schemes' deficit which has been recognisedin full in the Consolidated Balance Sheet in non-current liabilities, was as follows: 30 June 2006 30 June 2005 31 Dec. 2005 Unaudited Unaudited Audited •'000 •'000 •'000 Deficit in plans before deferred tax at end of period (178,561) (267,115) (249,103)Related deferred tax asset 57,386 67,485 70,462 ______________ _____________ ___________Deficit in plans after deferred tax at end of period (121,175) (199,630) (178,641) ______________ _____________ ___________ 6. Businesses acquired During the period the Group completed the acquisition of a number of businesses,all of which were 100% acquired. The total consideration for acquisitions amounted to €96 million. The acquisition method of accounting has been used to consolidate the businessesacquired. The accounting for business acquisitions is provisional. Other than the valuation of intangible assets there are no material differences arising between the fair value of the assets and liabilities acquired and the acquiree's carrying value at the acquisition date. If however any fair values need to be adjusted they will be reflected in the acquisition accounting within one year of the acquisition date. The principal acquisitions completed in the period are summarised as follows: In April 2006, the Group acquired Nuvex Ingredients. Based in the USA thecompany specialises in customised high-protein and fibre nutritional lines. The Group also acquired Custom Industries in March 2006. Located in the USA andCanada, the company is a leading manufacturer of particulates for bakery and ready-to-eat cereal applications and confectionery ingredients for sweet goods. 7. Events after the balance sheet date Other than the approval of the interim dividend (see note 4 above) there havebeen no significant events, outside the ordinary course of business, affecting the Group since 30 June 2006. 8. Accounting policies and general information These unaudited consolidated interim accounts for the six months ended 30 June2006 have been prepared in accordance with the accounting policies detailed in the 2005 Annual Report. These accounts are not full accounts and except where indicated are unaudited.Full consolidated financial statements to 31 December 2005 which received an unqualified audit report, have been filed with the Registrar of Companies. This information is provided by RNS The company news service from the London Stock Exchange