Kerry Regulatory News (KYGA)

30 Aug 2005 07:02

Kerry Group PLC30 August 2005 Press Announcement Tuesday 30 August 2005 Interim Report Half Year Ended 30 June 2005 Kerry, the global ingredients, flavours, and consumer foods group, reportsinterim results for the half year ended 30 June 2005. Financial Highlights • Sales revenue increased by 8.3% to €2,117m • Trading profit up 6.2% to €160m • Adjusted earnings* increased by 7.1% to €101m • Adjusted earnings per share* increased by 6.5% to 53.8 cent • Interim dividend per share up 11.1% to 5 cent *before intangible amortisation and non-trading items Kerry Group Chief Executive, Hugh Friel said; "In a highly competitive tradingenvironment, exacerbated by energy and raw material cost increases and adversecurrency movements, the Group performed well in the first half of 2005. Weexpect further business improvements in the second half, with an outcome for thefull year in line with market 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 StatementFor the half year ended 30 June 2005 Results Kerry delivered solid operating and financial results in the first half of 2005despite significant input cost pressures and highly competitive tradingconditions in international food and beverage markets. While the tradingenvironment proved challenging and adverse currency movements were againsignificant relative to the same period last year, Group businesses performedwell - benefiting from the continuing trends towards convenient, nutritionalproducts. Group sales revenue grew to €2,117m, an increase of 8.3% over January - June2004. The continued depreciation of the US dollar and sterling exchange ratesversus the euro again impacted reported sales and profit performance. On alike-for-like basis total sales grew by 3.4% relative to the same period of2004. Input cost inflation also impacted on performance, in particular as energy costscontinued to surge to ever higher record levels throughout the first half of2005. Trading profit increased by 6.2% to €160m. While all core Groupbusinesses performed satisfactorily notwithstanding the difficult tradingenvironment, the adverse trading currency impact together with input costinflation led to a reduction of 10 basis points in the Group trading margin to7.6%. Group accounts for the period are reported in line with International FinancialReporting Standards. Adjusted earnings grew by 7.1% to €101m. Earnings pershare before intangible amortisation and non trading items increased by 6.5% to53.8 cent. Business Reviews Food Ingredients Kerry's food ingredients businesses increased sales revenue by 12.1% relative tothe first half of 2004 to €1,453m, reflecting like-for-like sales revenue growthof 3.8%. Trading profits increased by 10.1% to €118m, reflecting a tradingmargin of 8.2%. In European ingredients markets sales revenue increased by 15.2% relative to theprior year period to €614m, reflecting like-for-like sales revenue growth of3.1%. The continued growth of premium categories in the prepared meals sectoragain provided solid development opportunities for Kerry's ingredients, flavoursand culinary offerings. The increased focus on nutritional values of menu linesin the quick-serve-restaurant sector also contributed to sustained growth. TheUK, German and Italian markets delivered strong underlying growth. Franceremained difficult where conditions particularly in the fruit preparationsmarket again proved highly competitive. Development of dairy proteins and speciality ingredients from the Listowel andCharleville operations continued to yield good results. Despite the majorchanges in EU Institutional dairy market supports and significant energy costincreases, continued investment and a strong focus on operational efficienciesacross both sites contributed to a satisfactory performance in the sector.Further advances were achieved through protein hydrolysate applications ininfant foods and in nutrient therapy. The Sports and Lifestyle Nutritioncommercial business unit achieved good progress in European sports, dietetic,health and wellness markets. Cremo Ingredients, based in Glamsbjerg Denmarkacquired in 2004, performed well through its specialist lines of dairyingredients and flavourings in the European and Asian savoury, convenience andsnack food industries. Kerry Ingredients continued to achieve good growth inRussian and Middle Eastern snack markets. The Kerry Bio-Science division, established on acquisition of Quest FoodIngredients in 2004, performed well across all markets. The division hasrefocused its business activities across core product groupings and markets.Continued progress has been achieved through fermented ingredients in Europeanmarkets. An expansion programme is underway at the Menstrie facility inScotland in response to increased demand for speciality yeast products. Enzymesgrew satisfactorily in the meat and dairy markets. Emulsifiers also continued togrow satisfactorily in European markets. Mastertaste, the Group's international flavour division performed well inEuropean markets, in particular in the UK and Italy. The acquisition ofFructamine in Italy, completed in 2004, has given a significant boost toMastertaste in servicing the flavour requirements of savoury processors andcarbonated beverage producers. In the UK, Mastertaste has continued to benefitfrom the expansion of the premium prepared meals and culinary categories. In American ingredients markets sales revenue increased by 6.5% to €573m,reflecting growth of 2.6% on a like-for-like basis relative to the same periodof 2004. In the USA, development in many food and beverage categories recoveredslowly in the first half of 2005 following the decline in the low-carbphenomenon in 2004. By the end of the period demand for functional ingredientshad returned to prior year levels. In particular, demand for soy-based systemsand nutritional lines improved to encouraging levels. Kerry continued tore-organise its operations and technologies in the speciality ingredients sectordue to the prevailing competitive market conditions. While conditions in thesweet ingredients category also proved highly competitive, Kerry continued tomake good progress in the premium ice-cream and ready-to-eat cereals sectors.Added value meat processors and regional snack processors again provided a goodplatform for growth through Kerry's complete sauces, coatings and seasoningsofferings. Kerry's strong development into high growth segments of the U.S. foodserviceindustry and through customised food and beverage creations for retail / privatelabel markets again progressed satisfactorily in the first half of 2005. TheOregon Chai and JetTea brands acquired in 2004 performed well. Syrup lines forcold and hot beverage applications with major coffeehouse chains again benefitedthrough category growth and new store openings. Market development through Kerry's Mexican facilities continued with good growthrecorded in Central America and the Caribbean. Expansion of the meat sector inSouth America provided good growth for Kerry Brazil's meat seasonings lines. InBrazil, the continued development of the artisan ice cream sector deliveredsolid growth for Kerry's sweet ingredients business. Kerry Bio-Science made good progress in American markets through its fermentedingredients and cultures product development programmes, particularly in thedairy sector. In the bakery sector consumer demand and new labellingrequirements for trans-fat-free products has provided increased marketopportunities for the Kerry Bio-Science product range. Solid progress was alsoachieved in the pharma sector in the first half of 2005. Kerry Bio-Sciencesuccessfully launched new functional ingredients designed to enhancepharmaceutical manufacturing capabilities of complex therapeutic drug deliverysystems. In cell nutrition, the introduction of new products under theSheffield Pharma Ingredients brand was significantly increased during the periodunder review. Addressing evolving industry requirements, these novel systemsare utilised in pharmaceutical fermentation, cell culture and diagnostic media. In American markets Mastertaste consolidated its flavours and fragrance marketpositioning following the acquisitions of U.S. based Manheimer and Flavurenceacquired in 2004. In line with competitive pressures on U.S. based branded foodmanufacturers, flavour businesses found difficulty gaining necessary priceincreases to compensate for input cost increases. As a result, returns onsavoury flavours were static relative to the first half of 2004. However,Mastertaste continued to achieve good growth through functional and enhancedflavoured beverage applications and new product introductions in Americanmarkets. Manheimer fragrances maintained its market positioning in the homeenvironmental and personal care markets. In Asia Pacific markets, Kerry continued to make excellent progress. Salesrevenue grew by 26.5% to €160m, reflecting like-for-like growth of 10.5% overthe same period of 2004. Good growth was recorded through seasonings and saucesin the prepared foods and quick-serve-restaurant sectors in Australia and NewZealand. Kerry Pinnacle again strengthened its market position throughapplication of specialist bakery ingredients with in-store bakeries in majorretail chains in Australia. Kerry Ingredients Asia achieved further growththrough nutritional bases and beverage lines and through specialist nutrientlines for infant/young adult diets. The division's core technologies alsoproved successful in development of new menu items for the developingquick-serve-restaurant chains in the region. A major focus for the division inthe period under review was the successful roll-out and establishment of Kerry'sbranded specialist flavoured beverage offerings across major consumer markets inthe Asia Pacific region. Uptake to-date of the Da Vinci, Oregon Chai and JetTeabranded lines of flavoured syrups, chocolate and caramel sauces, frappe mixes,smoothies and speciality tea latte mixes has progressed encouragingly. In January 2005, the Group announced details of a €20m investment programme inChina. The acquisition of Hangzhou Lanli Food Industry Company ("Lanli")located in Hangzhou in the Zhejiang Province was completed in March. Throughthis acquisition and the establishment in 2006 of a new multi-processingingredients manufacturing facility and technical centre on a 16 acre greenfieldsite in the adjacent HEDA economic zone, Kerry will be well positioned to meetthe significant sectoral ingredients requirements in the nutritional, dairy,flavoured noodle, brewing, flavoured beverage, snack and baking segments of thisfast growing consumer marketplace. Kerry Bio-Science continued to progress its market development in Asia Pacificmarkets through its enzyme, fermentation, protein and emulsifier technologies.The division's Malaysia and Philippines based production and technicaldevelopment facilities performed well. Mastertaste flavours has continued to make good progress in Australia and hasestablished flavour production and technical facilities in China to meet therequirements of its international and local customer base in Asia. Consumer Foods Kerry Foods performed well in the first half of 2005 despite input costinflation and an increasingly competitive retail environment in the UK and Irishmarkets. Benefiting from its positioning in growth categories and its strongbranded presence, the division increased sales revenue by 1.5% to €820m - whichrepresents 3.1% growth in sales revenue on a like-for-like basis when account istaken of the currency translation impact. The division achieved trading profitsin the period of €55m in line with the first half of 2004, notwithstanding theimpact of currency and cost inflation. Good volume growth was achieved in Kerry's branded, convenience and food-to-gocategories. In Ireland, Charleville Cheese continued to out-perform marketgrowth rates. Denny consolidated its brand leadership position in the premiumcooked meats and sausage categories. In the convenience sector the division'srange of sandwiches, salads, desserts, juices and mineral waters performed well.In addition the Kerryfresh chilled foodservice business continued to grow itsdedicated offerings to the food-to-go deli sector and specialist convenienceoutlets. In the UK market, Kerry Foods leading brands - Wall's, Richmond, Mattessons andCheestrings - all performed satisfactory in their respective categories.Cheestrings continued to increase market share in the UK and is makingencouraging progress in the French market under the Ficello brand. In the UKadult snacking sector, Brunchettas, launched prior to year-end 2004, gainedsolid market support for its offering of wholesome nutritious cheese snacks foreating on-the-go. While conditions in the frozen ready meals sector remainedcompetitive, Rye Valley Foods recorded a satisfactory performance throughfurther operational efficiency advances and new business development. The premium sector of the chilled ready meals category continued to growsatisfactorily. Kerry Foods achieved solid growth in the sector but profitgrowth in the first half of 2005 was impacted by once-off start up costsassociated with the new production facility in Hartlepool. In the UK conveniencestore marketplace, while Kerry Foods Direct to Store continued to grow its rangeand food-to-go service capability, performance in the business was impacted byhigher distribution costs in the period under review. Geographic Markets Total Group sales revenue throughout European markets in the first half of 2005increased by 7.2% to €1.38 billion. In American markets the Group's ingredientsand flavour businesses increased sales revenue by 6.5% to €573m. Sales revenuein Asia Pacific markets grew by 26.5% to €160m. Finance Earnings before interest, tax, non-trading items, depreciation and amortisation(EBITDA) increased by 7.6% to €212m. Working capital increased by €77m in theperiod reflecting seasonality and growth of the business. The higher financecost payments in the first half at €29m (H1 2004: €21m) reflect the finance costof acquisitions, rate increases and the impact of pension finance costs. Expenditure on Group acquisitions during the period amounted to €38m (€36mcash). Notwithstanding a currency translation adjustment of €81m, net debt atthe end of the half year reduced to €1,265m, compared to €1,334m at the end ofthe first half of 2004. The ratio of debt to EBITDA reduced to 2.8 times (H12004: 2.9 times). Debt to market capitalisation reduced from 42% at the end ofthe first half of 2004 to 34% at the end of June 2005. Dividend The Board has declared an interim dividend of 5 cent per share, an increase of11.1% on the 2004 interim dividend of 4.5 cent per share. The interim dividendwill be paid on 25 November 2005 to shareholders registered on the record date21 October 2005. Events after the Balance Sheet date Since the end of the period, the Group has announced a major expansion of itschilled ready meals business in the UK through the acquisition of Noon GroupLimited. Noon is market leader in the development and production of authenticAsian chilled ready meals in the UK. Operating from three modern productionfacilities located in the Great Western Industrial Estate in south-west London,the acquired business produces a range of premium quality Indian, Oriental, Thaiand other Asian and international cuisine ready meals, snacks andaccompaniments, principally for major UK multiple retailers. The totalconsideration for the acquisition was Stg£124m financed through existing linesof credit with Group banks. Complementing Kerry Foods' existing chilled ready meals businesses, Noon haswell established relationships with leading UK multiple retail groups and anexcellent reputation for quality, authenticity and innovation in the ethnicsub-category of the fast growing premium sector of the UK chilled ready mealsmarket. Current Trading and Outlook Despite the competitive challenges across international food and beveragemarkets, the Group's core businesses continue to perform well. In ingredientsand flavour markets our technologies and applications are focused on added valuegrowth categories. Similarly our UK and Irish consumer foods brands andcustomer branded offerings are well positioned in industry growth segments.On-going consolidation in the ingredients and foods sector will continue toprovide further bolt-on acquisition opportunities. The Group expects furtherbusiness improvement in the second half, with an outcome for the full year inline with market expectations. Kerry Group plcGeneral Information and Accounting Policies Basis of preparation These interim accounts for the six months ended 30 June 2005, have been preparedon the basis of the recognition and measurement requirements of InternationalFinancial Reporting Standards (IFRS) and are covered by IFRS 1, 'First-timeAdoption of Financial Reporting Standards', as they form part of the periodcovered by the Group's first IFRS financial statements for the year ended 31December 2005. The interim accounts have been prepared in accordance with IFRS andInternational Financial Reporting Interpretations Committee (IFRIC)interpretations expected to be applicable at 31 December 2005. The IFRS andIFRIC interpretations that will be applicable at 31 December 2005, includingthose that will be applicable on an optional basis are subject to amendments andinterpretations by the International Accounting Standards Board (IASB) and IFRICand there is an ongoing process of review and endorsement by the EuropeanCommission. In particular, the Group has elected to early adopt the 'Amendment toInternational Accounting Standard (IAS) 19 Employee Benefits'. The Group hasselected the option available within this standard for immediate recognition ofall actuarial gains and losses outside of the Consolidated Income Statement. In addition the Group has early adopted the amendment that the IASB has proposedin respect of IAS 21 'The Effects of Changes to Foreign Exchange Rates' which isexpected to become effective before the end of 2005. IAS 21 requires exchangedifferences arising on monetary items that form part of the parent company's netinvestment in a foreign operation to be recognised in equity. The application ofthe requirement is restricted to monetary items denominated in the functionalcurrency of the parent or the foreign operation and to funding transacteddirectly between the two entities. The proposed amendment clarifies thatexchange differences arising on monetary items that form part of a reportingentity's net investment in a foreign operation should be recognised in equityirrespective of the currency and of whether it is the parent or a fellowsubsidiary that enters into the transaction with the foreign operation. The Group's consolidated financial statements were prepared in accordance withIrish/UK Generally Accepted Accounting Principles (GAAP) until 31 December 2004,including the 2004 interim accounts. As part of the transition from Irish/UKGAAP to IFRS the Group presented its 'Preliminary Restatement of 2004 FinancialInformation' on the 24 May 2005 which is available on the Group's website(www.kerrygroup.com). The Group's accounting policies are as published in the 24May 2005 announcement including IAS 32 'Financial Instruments: Disclosure andPresentation' and IAS 39 'Financial Instruments: Recognition and Measurement'accounting policies which were adopted with effect from 1 January 2005. The Group applied the exemption available within IFRS 1 that permits the hedgeaccounting applied under Irish/UK GAAP to be used in the comparative period to31 December 2004. Note 7 of these accounts discloses the impact of the adoptionof IAS 32 and IAS 39 on the Consolidated Balance Sheet as at 1 January 2005. The comparative figures in respect of the 2004 interim accounts have beenrestated to reflect the Group's adoption of IFRS and reconciliation workingsbetween the results as reported under Irish/UK GAAP and under IFRS are availableon the Group's website (www.kerrygroup.com). These accounts are not full accounts. Full consolidated financial statements to31 December 2004 under Irish/UK GAAP, which received an unqualified auditreport, have been filed with the Registrar of Companies. These interim accounts have been prepared under the historical cost convention,as modified by the revaluation of available for sale financial assets, financialassets and financial liabilities (including derivative financial instruments),which are held at fair value. IFRS does not define certain income statement headings. For clarity, thefollowing are the definitions as applied by the Group: 'Trading profit' refers to the adjusted operating profit generated by thebusinesses before intangible asset amortisation and any profits or lossesgenerated from the disposal of non-current assets or businesses and any materialacquisition and other restructuring costs. 'Operating profit' is profit before taxation and finance costs. The Group makes this distinction so as to exclude items that do not impact thecontinuous performance of the businesses. Kerry Group plcConsolidated Income Statementfor the half year ended 30 June 2005 Half year ended Half year ended Year ended 30 June 2005 30 June 2004 31 Dec. 2004 Unaudited Unaudited Notes •'000 •'000 •'000 Revenue 1 2,117,238 1,955,344 4,128,736 ___________ ___________ ___________ Trading profit 159,876 150,507 355,780 Intangible asset amortisation (4,820) (4,883) (9,822) Acquisition and other restructuring costs - (6,720) (41,108) Profit on sale of non-current assets 9,015 1,643 15,592 Loss on sale of business (2,761) - - ___________ ___________ ___________Operating profit 161,310 140,547 320,442 Finance costs (30,409) (24,525) (51,815) ___________ ___________ ___________Profit before taxation 130,901 116,022 268,627 Taxation (30,335) (29,894) (64,577) ___________ ___________ ___________ Profit after taxation and attributable to equity 100,566 86,128 204,050shareholders ___________ ___________ ___________ Earnings per ordinary share (cent) - basic 2 53.8 46.3 109.5 - fully diluted 2 53.5 46.1 108.9 Kerry Group plcConsolidated Balance Sheetas at 30 June 2005 30 June 2005 30 June 2004 31 Dec. 2004 Unaudited Unaudited •'000 •'000 •'000Non-current assetsProperty, plant and equipment 1,015,943 972,791 960,667Intangible assets 1,453,991 1,349,633 1,354,845Financial assets 6,113 - -Deferred tax assets 15,314 8,772 12,812 ___________ ___________ ____________ 2,491,361 2,331,196 2,328,324Current assetsInventories 568,988 530,011 457,662Trade and other receivables 642,352 652,434 566,938Cash and cash equivalents 97,701 50,695 65,328Assets classified as held for sale 4,616 4,687 4,418 ___________ ___________ ____________ 1,313,657 1,237,827 1,094,346Current liabilitiesTrade and other payables (854,869) (837,982) (729,142)Financial liabilities (211,344) (165,685) (64,293)Tax liabilities (49,793) (48,623) (47,118)Provisions (6,302) - (12,661)Deferred income (3,860) (3,114) (3,142) ___________ ___________ ____________ (1,126,168) (1,055,404) (856,356) Net current assets 187,489 182,423 237,990 ___________ ___________ ____________Total assets less current liabilities 2,678,850 2,513,619 2,566,314 Non-current liabilitiesFinancial liabilities (1,153,001) (1,218,948) (1,138,473)Retirement benefit obligation (267,115) (179,640) (199,262)Other non-current liabilities (93,837) (99,846) (132,436)Deferred tax liabilities (103,261) (100,060) (103,279)Deferred income (22,537) (25,849) (24,704) ___________ ___________ ____________ (1,639,751) (1,624,343) (1,598,154) ___________ ___________ ____________ 1,039,099 889,276 968,160 ___________ ___________ ____________Capital and reservesShare capital 23,386 23,307 23,356Capital conversion reserve fund 340 340 340Share premium account 377,844 370,377 375,032Available for sale investment reserve 6,113 - -Translation reserve 17,660 3,200 (7,601)Hedging reserve (675) - -Retained earnings 614,431 492,052 577,033 ___________ ___________ ____________ Shareholders' equity 1,039,099 889,276 968,160 ___________ ___________ ____________ Kerry Group plc Consolidated Statement of Recognised Income and Expensefor the half year ended 30 June 2005 Half year ended Half year ended Year ended 30 June 2005 30 June 2004 31 Dec. 2004 Unaudited Unaudited •'000 •'000 •'000 Fair value movements on available for sale investments (338) - -Fair value movements on cash flow hedges (3,652) - -Exchange difference on translation of foreign operations 25,261 3,200 (7,601)Actuarial (losses) / gains on defined benefit pension schemes (59,166) 6,538 (21,402)Deferred tax on items taken directly to reserves 15,193 (1,500) 1,926 ___________ ___________ ____________Net (expense) / income recognised directly in equity (22,702) 8,238 (27,077) TransfersCash flow hedges to profit or loss from equity (122) - - Profit for the period 100,566 86,128 204,050 ___________ ___________ ____________Total recognised income and expense for the period attributable to equity shareholders 77,742 94,366 176,973 ___________ ___________ ____________ Consolidated Statement of Changes in Equityfor the half year ended 30 June 2005 Half year ended Half year ended Year ended 30 June 2005 30 June 2004 31 Dec. 2004 Unaudited Unaudited •'000 •'000 •'000 At beginning of period 968,160 805,730 805,730Impact of adoption of IAS 32 and IAS 39 8,131 - - ___________ ___________ ____________At beginning of period as adjusted 976,291 805,730 805,730 Total recognised income and expense for the period 77,742 94,366 176,973Dividends paid (17,776) (16,041) (24,468)Shares issued during the period 2,858 5,264 10,021Share issue costs (16) (43) (96) ___________ ___________ ____________ At end of period 1,039,099 889,276 968,160 ___________ ___________ ____________ Kerry Group plcConsolidated Cash Flow Statementfor the half year ended 30 June 2005 Half year ended Half year ended Year ended 30 June 2005 30 June 2004 31 Dec. 2004 Unaudited Unaudited •'000 •'000 •'000Operating activitiesTrading profit 159,876 150,507 355,780Adjustments for:Depreciation (net) 51,877 46,339 91,585Change in working capital (78,144) (3,575) 35,306Exchange translation adjustment 1,270 (309) (914) ___________ ___________ ____________Cash generated from operations 134,879 192,962 481,757 Taxation (22,831) (22,860) (53,618)Interest (net) (29,122) (21,107) (45,775) ___________ ___________ ____________Net cash from operating activities 82,926 148,995 382,364 ___________ ___________ ____________Investing activitiesPurchase of property, plant and equipment (70,993) (50,252) (110,235)Proceeds on the sale of non-current assets 11,895 2,275 18,010Capital grants received 336 233 907Purchase of subsidiary undertakings (35,937) (668,431) (695,701)Sale of business (2,761) - -Deferred creditors paid (7,797) (28,767) (29,955)Acquisition and other restructuring costs paid (6,359) (1,761) (16,785)Consideration adjustment on previous acquisitions (1,345) (895) (935) ___________ ___________ ____________Net cash used in investing activities (112,961) (747,598) (834,694) ___________ ___________ ____________Financing activitiesDividends paid (17,776) (16,041) (24,468)Issue of share capital 2,842 5,221 9,925Net proceeds from bank borrowings 100,785 582,059 429,388(Decrease) / increase in bank overdrafts (23,443) 21,197 45,951 ___________ ___________ ____________Net cash from financing activities 62,408 592,436 460,796 ___________ ___________ ____________ Net increase / (decrease) in cash and cash equivalents 32,373 (6,167) 8,466Cash and cash equivalents at beginning of period 65,328 56,862 56,862 ___________ ___________ ____________Cash and cash equivalents at end of period 97,701 50,695 65,328 ___________ ___________ ____________ Reconciliation of Net Cash Flow to Movement in Net Debtfor the half year ended 30 June 2005 Net increase / (decrease) in cash and cash equivalents 32,373 (6,167) 8,466Cash inflow from debt financing (77,342) (603,256) (475,339) ___________ ___________ ____________Changes in net debt resulting from cash flows (44,969) (609,423) (466,873) Exchange translation adjustment on net debt (80,801) (19,315) 34,635 ___________ ___________ ____________Movement in net debt in the period (125,770) (628,738) (432,238) Net debt at beginning of period (1,137,438) (705,200) (705,200)Impact of adoption of IAS 32 and IAS 39 (1,419) - - ___________ ___________ ____________Net debt at end of period (1,264,627) (1,333,938) (1,137,438) ___________ ___________ ____________ Kerry Group plcNotes to the Interim Reportfor the half year ended 30 June 2005 1. Analysis of results Half year ended Half year ended Year ended 30 June 2005 30 June 2004 31 Dec. 2004 Unaudited Unaudited Segment Segment Segment Segment Segment Segment Revenue Result Revenue Result Revenue Result •'000 •'000 •'000 •'000 •'000 •'000 By business segment:Ingredients 1,453,161 118,450 1,296,743 107,622 2,780,779 261,433Consumer foods 820,301 54,605 807,804 54,589 1,660,533 118,361Unallocated and Group eliminations (156,224) (13,179) (149,203) (11,704) (312,576) (24,014) ________ ________ ________ ________ _______ ________ 2,117,238 159,876 1,955,344 150,507 4,128,736 355,780 ________ ________ ________ Intangible asset amortisation (4,820) (4,883) (9,822)Acquisition and other restructuring costs - (6,720) (41,108)Profit on sale of non-current assets 9,015 1,643 15,592Loss on sale of business (2,761) - - ________ ________ ________ Operating profit 161,310 140,547 320,442 ________ ________ ________ Segment Segment Segment Revenue Revenue Revenue •'000 •'000 •'000By destination:Europe 1,384,352 1,290,859 2,721,074Americas 573,254 538,246 1,120,884Asia Pacific 159,632 126,239 286,778 ________ ________ ________ 2,117,238 1,955,344 4,128,736 ________ ________ ________ 2. Earnings per ordinary share Half year ended Half year ended Year ended 30 June 2005 30 June 2004 31 Dec. 2004 Unaudited Unaudited EPS EPS EPS cent •'000 cent •'000 cent •'000 Adjusted earnings * 53.8 100,549 50.5 93,918 122.9 229,046Intangible asset amortisation (2.6) (4,820) (2.6) (4,883) (5.3) (9,822)Acquisition and other restructuring costs (net) - - (2.5) (4,550) (16.2) (30,339)Profit on sale of non-current assets (net) 3.9 7,294 0.9 1,643 8.1 15,165Loss on sale of business (net) (1.3) (2,457) - - - - _____ ________ _____ ________ _____ ________Profit after taxation and attributable to equity shareholders 53.8 100,566 46.3 86,128 109.5 204,050 Share option dilution (0.3) - (0.2) - (0.6) - _____ ________ _____ ________ _____ ________ 53.5 100,566 46.1 86,128 108.9 204,050 _____ ________ _____ ________ _____ ________ The basic weighted average number of ordinary shares in issue for the period was186,948,613 (half year ended 30 June 2004: 186,087,228; year ended 31 December2004: 186,401,228). The diluted weighted average number of ordinary shares inissue for the period was 187,854,384 (half year ended 30 June 2004: 186,993,765;year ended 31 December 2004: 187,308,737). The dilution arises in respect ofexecutive share options outstanding. The actual number of shares in issue on 30June 2005 was 187,092,180 (30 June 2004: 186,501,145; 31 December 2004:186,848,865). * In addition to the basic and diluted earnings per share, an adjusted earningsper share is also provided as it more accurately reflects the Group's underlyingtrading performance. Adjusted earnings is profit after taxation, beforeintangible asset amortisation, acquisition and other restructuring costs (net),profit on sale of non-current assets (net) and loss on sale of business (net). 3. Dividends Since the end of the interim period the Board has declared an interim dividendof 5.00 cent per share. The interim dividend will be paid on 25 November 2005 toshareholders registered on the record date of 21 October 2005. Theseconsolidated interim accounts do not reflect this dividend payable. Half year ended Half year ended Year ended 30 June 2005 30 June 2004 31 Dec. 2004 Unaudited Unaudited •'000 •'000 •'000 Amounts recognised as distributions to equity holders in theperiod:Final dividend of 9.50 cent per A ordinary share paid 27 May 17,776 16,041 16,0412005 (2004: 8.60 cent per A ordinary share paid 28 May 2004) Interim dividend of 5.00 cent per A ordinary share (2004: 4.50 - - 8,427cent) ______________ _____________ ___________ 4. Defined benefit pension schemes Half year ended Half year ended Year ended 30 June 2005 30 June 2004 31 Dec. 2004 Unaudited Unaudited •'000 •'000 •'000 Retirement benefit obligation 267,115 179,640 199,262Deferred tax (67,485) (43,542) (51,874) ______________ _____________ ___________ Net retirement benefit obligation 199,630 136,098 147,388 ______________ _____________ ___________ 5. 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 acquisitionsamounted to €38m. The acquisition method of accounting has been used to consolidate the businessesacquired. The accounting for business acquisitions is provisional. Other thanthe valuation of intangible assets there are no material differences arisingbetween the fair value of the assets and liabilities acquired and the acquiree'scarrying value at this date. If however any fair values need to be adjusted theywill be reflected in the acquisition accounting within one year of theacquisition date. The principal acquisitions completed in the period are summarised as follows: In March 2005, the Group acquired Hangzhou Lanli Food Industry Company Limited,located in China. The company has a spray drying facility and gives the Group anestablished base into the Chinese food ingredients market. In January 2005, the Group acquired Gordon Jopling (Foods) Limited. Based in theUK the company principally supplies made-to-order vegetable based ingredientsinto the ready meals, pizzas, sauces and dressings markets in the UK andIreland. 6. Events after the balance sheet date In August 2005, the Group acquired the entire issued share capital of Noon GroupLimited at a cost of Stg £124m. Noon is the market leader in the development andproduction of authentic Asian chilled ready meals in the UK. The fair value ofthe net assets acquired has not yet been determined. Other than the above and the approval of an interim dividend (see note 3) therehave been no significant events, outside the ordinary course of business,affecting the Group since 30 June 2005. 7. Impact of adoption of IAS 32 'Financial Instruments: Presentation andDisclosure' and IAS 39 'Financial Instruments: Recognition and Measurement' As permitted under IFRS 1, the Group applied hedge accounting in accordance withIrish/UK GAAP for the year ended 31 December 2004 and adopted IAS 32 and IAS 39from 1 January 2005. IFRS Effect of IFRS 31 Dec. 2004 adoption 1 Jan 2005 of IAS 32 and IAS 39 •'000 •'000 •'000 Non-current assets (a) 2,328,324 6,451 2,334,775Current assets (b) 1,094,346 3,542 1,097,888Current liabilities (856,356) - (856,356)Non-current liabilities (c) (1,598,154) (1,862) (1,600,016) ____________ ____________ ___________ 968,160 8,131 976,291 ____________ ____________ ___________ ____________ ____________ ___________ Capital and reserves (d) 968,160 8,131 976,291 ____________ ____________ ___________ The following notes explain the adjustments made to the Group's ConsolidatedBalance Sheet as at 1 January 2005 to reflect the adoption of IAS 32 and IAS 39. (a) Available for sale financial assets €6,451,000 has been included in non-current assets as a financial asset. This isthe remeasurement to fair value of investments in other companies, which have acost base of •nil. (b) Financial derivatives €3,542,000 has been included in current assets as financial derivatives. This isthe recognition of derivative financial instruments (cash flow hedges) at fairvalue. (c) Financial derivatives and deferred tax liabilities €1,419,000 has been recognised in non-current liabilities as a financialliability as the fair value movement of interest rate swaps. €443,000 has been included in non-current liabilities as deferred tax. This is the deferred tax impact of the recognition of derivative financial instruments (cash flow hedges) at fair value. (d) Available for sale investment reserve, hedging reserve and retained earnings €6,451,000 has been included in capital and reserves as an available for saleinvestment reserve. This is the impact of the recognition of available for salefinancial assets. €3,099,000 has been included in capital and reserves as a hedging reserve. Thisis the recognition of derivative financial instruments (cash flow hedges) atfair value, net of related deferred tax liability. €1,419,000 has been included in capital and reserves in retained earnings. Thisis the recognition of the fair value movement of interest rate swaps. This information is provided by RNS The company news service from the London Stock Exchange