TIDMGNC
RNS Number : 0293D
Greencore Group PLC
25 November 2009
PRELIMINARY STATEMENT OF RESULTS
for the year ended 25 September 2009
Greencore Group plc, a leading international convenience food and ingredient
producer, today issues the following preliminary statement of results for the
year ended 25 September 2009.
HIGHLIGHTS1
Financial
* Group sales of EUR1,103.8m, a decrease of 0.8% in continuing businesses on a
constant currency basis
* Group operating profit2 of EUR72.9m, an increase of 7.9% in continuing businesses
on a constant currency basis
* 13% decline in average EUR/GBP exchange rate versus FY08 impacted translation of
operating profit by EUR9.1m
* Adjusted EPS3 of 17.4c in line with FY08 on a constant currency basis
* Net exceptional loss of EUR25.2m on discontinued activities and restructuring
initiatives, substantially non cash
* Final dividend of 4.5 cent per share (FY08: 8.21 cent) resulting in total
dividend for the year of 7.5 cent per share (FY08: 13.51 cent per share)
* Successful refinancing completed of EUR410m of banking facilities
* Comparable net debt of EUR283.8m in line with the amount of EUR283.4m at the end of
FY08
Recovery in Convenience Foods Division
* Sales in continuing businesses of EUR794.4m ahead of FY08 by 2.2% on a constant
currency basis
* Operating profit2 in continuing businesses increased by 14.1% on a constant
currency basis
* Continued progress in the US with fourth quarter sales ahead of the same period
in FY08 by 46% on a constant currency basis
* Restoration of operating margin with a 50 bps increase to 5.8%
Resilient performance in Ingredients
* Sales in continuing businesses decreased by 8.2% on a constant currency basis
* Operating profit2 in continuing businesses decreased by 1.5% on a constant
currency basis
* Disposal during the year of Drummonds grain trading business
Commenting on the results, Patrick Coveney, Group chief executive said:
"This has been a year of real achievement in the face of considerable headwinds.
Most importantly, we have driven significant performance improvement in our core
convenience foods business - performance that improved with each passing
quarter. In addition, we successfully re-financed our Group, reshaped our
business portfolio and have embedded a new leadership team at all levels. While
of course there remains a lot to be done, our strategy is clear and we are
encouraged by the progress that we are making in all areas."
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(1) Continuing business comparisons exclude Drummonds in the Ingredients and
Related property division and frozen desserts in the Convenience Foods division.
Both of these businesses were discontinued during the first half of FY09 but
have not been classified as discontinued operations in the preliminary
statement.
(2) Before exceptional items and acquisition related amortisation.
(3) Before exceptional items, pension finance items, acquisition related
amortisation, FX on inter-company and certain external loan balances and the
movement in the fair value of all derivative financial instruments and related
debt adjustments.
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Presentation
A presentation of the results will be made to analysts and institutional
investors at 9.00am on Wednesday 25 November 2009 at Greencore Group plc., 2
Northwood Avenue, Northwood Business Park, Santry, Dublin 9.
This presentation can be accessed live through the following channels:
* Webcast - details on www.greencore.com
* Conference call
Ireland number: +353 (0) 1 436 0959
UK number: +44 (0) 203 037 9148
The participant code is 'Greencore' in both cases
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, the Ireland number is +353 (0) 1 486
4035; the UK number is +44 (0) 208 196 1998. The replay pass code is 271009#.
For further information, please contact
+----------------------------+--------------------------+----------------------+
| Patrick Coveney | Chief Executive Officer | Tel: +353 (0) 1 |
| | | 6051045 |
+----------------------------+--------------------------+----------------------+
| Geoff Doherty | Chief Financial Officer | Tel: +353 (0) 1 |
| | | 6051018 |
+----------------------------+--------------------------+----------------------+
| Eoin Tonge | Group Capital Markets | Tel: +353 (0) 1 |
| | Director | 6051017 |
+----------------------------+--------------------------+----------------------+
| Billy Murphy or Anne Marie | Drury Communications | Tel: +353 (0) 1 260 |
| Curran | | 5000 |
+----------------------------+--------------------------+----------------------+
| Elizabeth Rous or Rob | Powerscourt | Tel: + 44 (0) 207 |
| Greening | | 250 1446 |
+----------------------------+--------------------------+----------------------+
Greencore Group
* A leading international producer of convenience food with operations in the UK,
the US and the Netherlands
* Strong market leadership positions in the UK convenience food market across
sandwiches, chilled prepared meals, chilled soups and sauces, ambient sauces &
pickles, cakes & desserts, bottled water and Yorkshire puddings
* Extending presence outside the UK with fast-growing convenience food businesses
in the US, The Netherlands and Ireland
* An established ingredients supplier with leading market positions in malt
production for the brewing and distilling industries in Ireland, the UK and
Belgium
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SUMMARY 1&2
Overall
The Group delivered a good performance overall against the backdrop of a
challenging consumer environment which was particularly evident in the first
quarter of the year. Adjusted EPS of 17.4 cent was in line with FY08 on a
constant currency basis but was down by 14.3% on the comparative amount for last
year of 20.3 cent after the impact of currency translation. The EUR/GBP exchange
rate impacted the translation of the Group results year on year with a 13%
decrease in the average exchange rate compared to FY08. The Convenience Foods
division delivered strong constant currency operating profit growth of 14.1% on
continuing businesses with Ingredients and Related Property behind by 1.5% on
the same basis. Group operating profit on continuing businesses was ahead by
7.9% on a constant currency basis, representing a decrease of 3.9% after the
impact of currency translation.Bank interest payable for the year was higher by
5.2% on FY08 on a constant currency basis due in the main to higher interest
costs associated with the Group's bank debt refinancing in April 2009.
Convenience Foods
The Convenience Foods division which accounted for 64% of Group operating profit
in FY09 (60% in FY08) delivered a strong performance in the year, particularly
in the second half. Operating profit in continuing businesses of EUR46.4m
increased by 14.1% on a constant currency basis and was in line with FY08 after
the impact of currency translation. Sales in continuing businesses of EUR794.4m
increased by 2.2% on FY08 on a constant currency basis, a decrease of 9.4% after
the impact of currency translation. The operating margin increased by 50 bps to
5.8% reflecting, in the main, cost saving initiatives in the division and the
benefits of restructuring initiatives undertaken, primarily, in the second half
of FY08 at the Group's prepared meals, ambient grocery and water businesses. The
trend highlighted at half year of greater consistency in weekly performance in
the period between January and March 2009 continued through the second half. The
momentum in our US business continued in FY09 with its contribution to Group
operating profit almost doubling in the year, albeit from a small base.
Ingredients & Related Property
The Ingredients and Related Property division delivered a resilient performance
overall against the backdrop, in particular, of weaker malt demand from the
Group's brewing and distilling customers. Operating profits in continuing
businesses decreased by 1.5% on a constant currency basis representing a
decrease of 10.6% to EUR26.9m after the impact of currency translation. Sales in
continuing businesses of EUR304.6m were down 8.2% on a constant currency basis, a
decrease of 13.8% after the impact of currency translation. The key driver of
the divisional performance, Malt, delivered a constant currency operating profit
lower than in FY08, a very strong year, with deliveries 14% down due to weaker
brewing and distilling demand. The adverse impact of this volume decline was
partially offset by more favourable energy pricing in particular.
Notwithstanding the decline in Malt earnings year-on-year FY09 represented a
very good year in a historical context.
Finance, Treasury and Taxation
As reported previously, the Group in April 2009 secured a new three year bank
debt facility of EUR360m which fully refinanced the Group's previous syndicated
banking facility of EUR336m. In addition, a new bi-lateral facility of EUR50m was
concluded in August 2009 with a maturity of August 2011. On that basis all 2010
maturities have either been fully refinanced or repaid. The Group's bank
interest charge of EUR28.4m reduced by 2.8% during the period reflecting, in the
main, the favourable impact of the EUR/GBP exchange rate on the sterling
denominated portion of the Group's interest expense which offset the higher cost
of the refinanced facilities in the second half of the year. The significant
reduction in global interest rates resulted in a non-cash mark to market loss of
EUR20.9m in our fixed rate debt instruments. This does not relate to the cash
interest charge for FY09 but to the impact of marking to market the fixed
interest contracts in place at the end of the year which will unwind in the next
three years. The Group's comparable net debt position was EUR283.8m, a reduction
of EUR48.8m on the position at the end of March 2009. A net cash inflow from
pre-exceptional operating activities of EUR93.8m was recorded compared to EUR83.0m
in FY08. The Group's effective tax rate of 16%, including the tax impact
associated with pension finance items, was in line with FY08.
Dividends
As highlighted in our interim results statement, the Board resolved in May 2009
to rebase the dividend to reflect a payout policy of a ratio in the range of
40-50% of adjusted EPS. This reflects the desire of the Board to adopt a
prudent approach in the current environment that balances payout to shareholders
with medium-term capital needs. In accordance with this policy a final dividend
of 4.50 cent per share is proposed (FY08 final dividend 8.21 cent per share).
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OUTLOOK 1&2
The Group recorded significant progress in its Convenience Foods division in
FY09, albeit against a weak comparative period in FY08. Our UK business
performed well after a weak first quarter with most categories delivering good
earnings growth year on year. Our US business continued to make headway almost
doubling its contribution to Group operating profit year on year. In Ingredients
& Related Property, particularly in Malt, the consumer environment was
challenging with weak brewing and distilling demand.
The Group has made a good start to FY10 with a continuation of an improving
performance in UK Convenience Foods and progress in the US offsetting a weaker
performance in Malt and higher finance costs. The higher finance costs reflect
the effect of the Group's refinancing in April 2009 with FY10 reflecting a full
year effect of the associated increase in the Group's interest charge. The
average EUR/GBP exchange rate was 0.88 in FY09 and is likely to have a less
material year on year impact on the translation of earnings in FY10 than was the
case in FY09. Notwithstanding the recent evidence of recovery in our key UK and
US markets we take nothing for granted in an environment where consumer
sentiment is both fragile and reactive. However, the combination of our core
private label offering and our well invested facilities position us favourably
to significantly progress the Group over the coming years.
Taking account of all of the above, and at this early stage in the year, the
Group is on track to deliver modest earnings growth in FY10.
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REVIEW OF OPERATIONS 1&2
Convenience Foods
+--------------------+--------------+---------------+--------------+--------------+
| | FY09 | FY08 | Change | Constant |
| | EUR'm | EUR'm | | Currency |
| | | | | change |
+--------------------+--------------+---------------+--------------+--------------+
| Turnover | 794.4 | 877.1 | -9.4% | +2.2% |
+--------------------+--------------+---------------+--------------+--------------+
| Operating profit | 46.4 | 46.2 | +0.4% | +14.1% |
+--------------------+--------------+---------------+--------------+--------------+
| Operating margin | 5.8% | 5.3% | | |
+--------------------+--------------+---------------+--------------+--------------+
The above table excludes the discontinued frozen desserts business.
The Convenience Foods division recorded a strong performance in FY09,
particularly in the second half. In the first quarter of FY09 divisional
earnings declined year on year but growth was recorded on a constant currency
basis in each successive quarter of the year. Constant currency operating profit
for the year grew by 14.1%. A significant element of this growth is attributable
to the operational improvements in our ambient grocery, prepared meals and water
businesses. Specifically, in prepared meals, the Group closed one of its
facilities in the first quarter, with the associated restructuring charge taken
in FY08, and has benefited from operational efficiencies through the second half
of FY09. In addition, a series of restructuring initiatives were undertaken at
water, significantly improving its operating performance in FY09.
The flight to value was a key consumer theme during the year. The combination of
our private label offering and low cost leadership has positioned us well for
this. During FY09 we eliminated the equivalent of 2% of sales from our cost base
through our lean manufacturing and cost reduction programmes with a particular
focus on overheads.Additionally, the capacity environment in the UK is improving
somewhat through a combination of factory closures by larger players as well as
smaller, poorly capitalised players, exiting the industry. Our agenda to
recover our operating margin progressed during the year with a 50 bps increase
in the divisional operating margin to 5.8%. Finally, FY09 also marked a year of
real progress for our emerging US business with development of existing
customers together with the addition of new customers and categories and the
opening of our second, albeit smaller, manufacturing facility.
Food to Go
Food to go is our largest category business comprising fresh sandwiches, salads
and sushi. During the first quarter of FY09 a significant downturn occurred in
the food to go market with consumers, for example, opting temporarily to make
more of their own sandwiches. However, the decline was short lived with
consumers returning to the sandwich fixture over time. Despite a food to go
market decline of 3.9% in the first quarter we grew our overall sales by 2.4%
for the year in FY09. There has been a significant mix change with consumers
buying cheaper lines rather than giving up the convenience of a pre packaged
food-to-go offering. Sandwich volumes were broadly flat year on year with salads
and sushi gaining food to go share, and driving category growth, with growth
levels of 30% and 31% respectively. We remain the No. 1 player in the UK with a
26% market share, growing or holding share across all customers.
Prepared Meals
Our prepared meals business comprises the chilled ready meals and quiche
categories and represented 20% of Convenience food sales in FY09. Our chilled
ready meals business had a good year with consumers returning to the category
combined with operating efficiencies due to restructuring initiatives
undertaken, primarily in FY08. Greencore is the UK's largest producer of chilled
Italian ready meals manufacturing 5 of the top 10 selling lines in the market.
The category has been re-energised in 2009 as retailers attempt to bring
consumers back to ready meals in an era where consumers are eating out less. An
overall market decline of 0.4% was recorded in the year but the twelve week data
to 4 October 2009 showed growth of 5.1%. As well as market recovery our business
recorded significant operational improvements in the year by reducing SKUs by
20% as well as efficiency gains associated with the closure of one of our
Sheffield meal facilities in FY08. Greencore is also the market leader in
UK quiche holding a 45% market share and producing 5 of the top 10 quiche lines
in the market. The quiche market has suffered somewhat in the current consumer
environment with the market contracting by 4.3% in the year. We offset the
impact of this decline by increasing our share of trade with two significant
customers. Notwithstanding the progress in our prepared meals business during
the year it still earns a lower than average portfolio return on capital,
although this is improving.
Grocery
Our grocery business comprises ambient cooking sauces, pickles and salad
dressings. Our business recorded an improved performance in FY09 reflecting a
consumer move from brand to private label combined with an increase in 'at home'
dining. Additionally, a 7% increase in evening meals made from 'scratch'
supported demand for stir in cooking sauces. The business completely refocused
its offering during the year by exiting trade with poor returns. Operationally
the business made significant progress as a result of this simplification agenda
reducing its SKU count by 350. Niche and poorly performing categories such as
sandwich spread, sweet pickle and sweet spreads were exited and selected
tertiary brands discontinued. Co-pack volumes for branded customers decreased
during the year, albeit these volumes carry the lowest margins in the category.
Overall category sales increased by 0.9% year-on-year with strong cooking sauce
volumes partially offset by trade we exited in the year. Our Selby
manufacturing facility is Europe's largest cooking sauce facility which
underpins its position as the lowest cost producer in the industry.
Cakes and Desserts
Our cakes & desserts business, which comprises 10.3% of convenience sales, had a
challenging year. Whilst consumers are still willing to spend in indulgent
categories they are doing so with less frequency than before. In addition, a
significantly higher volume is being sold on promotion as retailers seek to
attract the consumer. Our overall category sales were adverse on FY08 by 5.1%
with a reduced gross margin reflecting the higher promotional mix.
Chilled Sauces and Soups
We are the UK's number one chilled sauce manufacturer with a 34% market
share and a complementary position in chilled soup. The category recorded a
strong sales performance in FY09 with sales increasing by 7.7% driven by higher
soup volumes. We increased our soup business by 31% in the year. However, a
higher promotional mix resulted in a reduced margin in the year albeit with
comparatively fewer promotions in the last quarter. In the core sauces category
the economic climate saw some consumers switching into ambient from chilled for
pasta sauces although this trend levelled off towards the end of FY09. In
addition, a significant relaunch of JS Italian Sauces in the summer supported a
good chilled sauce sales performance in the fourth quarter.
Frozen Foods
Our frozen foods business comprises frozen Yorkshire puddings following the
Group's decision to exit its sub-scale position in frozen desserts in December
2008. Our Yorkshire pudding business had a good year recording modest sales
growth during the year. The sales outturn reflected a good performance with
retail customers who benefited from consumers choosing to eat more often at home
than in prior years. Additionally, our foodservice customers who represent the
larger chains grew volume during the year at the expense of smaller independents
that we do not trade with.
Foodservice Desserts - Ministry of Cake
We are the number one supplier to the UK foodservice desserts trade with a
market share of c. 20%. We recorded sales growth of c. 8% with our customers
representing the larger value players who are performing well in the current
market. In addition, we continue to display adaptability, essential in
foodservice, in an environment where the consumer is changing their tastes and
preferences with more frequency than before. By way of example we won a "Special
Recognition Award" from Pizza Hut UK for launching a new line, 'Sicilian Lemon
Tarts', within two weeks of being briefed of a general requirement.
Water
Our water business recorded a good recovery from the pre-exceptional trading
loss of EUR4.0m in FY08. A programme of initiatives was executed to reduce costs
and to eliminate loss making trade. The bottled water market itself has been
impacted significantly by the consumer downturn with volumes adverse by 7% year
on year. The benefit of the operational improvements more than offset the
impact of weaker demand. The Water business represents 3.6% of divisional sales
and maintained its number one market position in UK private label bottled water.
Subsequent to year end the Group announced that it had reached an agreement to
sell its water business for a consideration of up to EUR19.6m. EUR5.0m of the
proceeds is contingent upon the future performance of the business with
completion of the disposal expected to occur on, or before, 30 April 2010.
US Convenience Foods
FY09 was a year of significant progress building on the platform acquired in
FY08. Our US business recorded a strong year with its contribution to Group
operating profit almost doubling in FY09 versus FY08. It exited FY09 on a strong
trajectory with fourth quarter sales increasing by 46% on the comparable period
for FY08. Of particular note, and a strong driver of the growth, has been the
sales performance in chilled sandwiches. This is business which started from a
zero base in April 2009 and now comprises 26% of our US sales. During the year
we opened a new satellite facility in Cincinnati which gives us a platform for
growth in the mid western US. We launched our partnership with Weight Watchers
during the year and are currently selling to four large retailers and are listed
in 1000 stores with further listings planned.
Continental Convenience Foods
Our Continental business had a challenging year with sales decreasing by 6.1% on
FY08. The Dutch chilled foods market is down 5% year on year and this has been
compounded by a weaker airlines market, a significant sandwich channel.
Notwithstanding the weaker sales performance the business has delivered a solid
operating profit for the year. We have strong market positions in The
Netherlands in sandwiches, chilled sauces and chilled pizza with market shares
of 45%, 75% and 92% respectively.
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Ingredients and Related Property
+--------------------+--------------+---------------+--------------+--------------+
| | FY09 | FY08 | Change | Constant |
| | EUR'm | EUR'm | | Currency |
| | | | | change |
+--------------------+--------------+---------------+--------------+--------------+
| Sales | 304.6 | 353.5 | -13.8% | -8.2% |
+--------------------+--------------+---------------+--------------+--------------+
| Operating profit | 26.9 | 30.1 | -10.6% | -1.5% |
+--------------------+--------------+---------------+--------------+--------------+
| Operating margin | 8.8% | 8.5% | | |
+--------------------+--------------+---------------+--------------+--------------+
The above table excludes Drummonds
The Ingredients & Related Property division delivered a resilient performance
overall in the context of a very challenging market in Malt due to weaker UK
brewing and distilling demand. Sales and operating profit in continuing
businesses declined by 8.2% and 1.5% respectively on a constant currency basis.
These measures showed year on year decreases of 13.8% and 10.6% after the impact
of currency translation.
Ingredients
As highlighted previously the global malt market has deteriorated in the past
year. Overall, malt deliveries were down by 14% in FY09 over FY08. In the third
quarter a slight recovery was experienced versus the volume shortfalls seen in
the first half. However, in the fourth quarter the market weakened further. A
key driver of the weakness in malt demand has been the decline in UK beer sales
which are adverse by 8% year on year which has been compounded by destocking by
brewers and distillers. Our business has been significantly insulated from the
full impact of these volume shortfalls in FY09 because of our policy of forward
selling and entering into long term agreements with customers as well as more
favourable energy pricing. Against this backdrop we are cautious about the
prospects for malt demand in FY10. However, a combination of committed forward
contracts, the level of potentially unrepeatable destocking which took place in
FY09 and favourable energy forward contracts should provide a good level of
support to the operating result for FY10.
Our edible oils business, Trilby Trading, had a challenging year with overall
tonnage significantly adverse on FY08 reflecting weakened demand from Irish food
and snack manufacturers. Our Premier Molasses business had a good year with
molasses volumes holding up well year on year. Our associate molasses business
in Northern Ireland was weaker in FY09 than in FY08 reflecting the combined
impact of a 13% decrease in the EUR/GBP exchange rate and additional capacity in
the Northern Irish market. As previously reported, in December 2008 we made a
decision to exit the Drummonds agri-trading business in Ireland. This was the
result of lower than acceptable returns on capital being achieved in an industry
which is likely to face significant challenges in the coming years. This
disposal although cash positive together with the EUR3.0m of costs associated with
the very poor 2008 Irish harvest resulted in an exceptional accounting loss of
EUR15.5m in the division which was recorded in the first half.
On 17 November, the Board announced that it was exploring a number of
unsolicited approaches it had received in respect of the Group's malt business,
in the recent past, from international ingredient companies with large-scale
malting businesses. At this stage there can be no certainty that a transaction
will be forthcoming.
Property
The outlook for Irish property is poor in the medium term with an excess supply
of zoned land and a weak bank lending environment. We continue to remediate both
our Carlow and Mallow sites and are 'land banking' the properties for the
foreseeable future. The prospects for our Littlehampton site in the UK are
somewhat more positive, with house prices no longer on a deflationary track and
recent evidence of a recovery in transactions. The consortium, of which we own
68%, is on track to lodge a planning application for 1,800 residential units
before the end of 2009 with a planning decision expected before the end of 2010.
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FINANCIAL REVIEW 1&2
* Overview
In headline terms, the strengthening of the euro against sterling has had a
significant translation impact on the results when compared to the same period
last year. The average EUR/GBP exchange rate was 0.764 in FY08 compared to 0.88
in FY09, impacting translation of our sterling results negatively by 13% in the
period. Constant currency calculations are made by re-stating FY09 financial
information at the average rate for FY08. Approximately 80% of operating
profits are sterling denominated. Operating profit2 in the year of EUR72.9m was
5.7% behind FY08 after the impact of currency translation. On a constant
currency basis operating profit was 6.1% ahead. Group sales of EUR1.10 billion
were behind FY08 on a constant currency basis by 6.3% and 15.6% behind after the
impact of currency translation. Profit before tax, exceptional items, pension
financing and market to market items was EUR43.4m compared to EUR50.0m in FY08 with
currency, in particular, having an impact year on year.
* Capital Structure
The Group employs a combination of debt and equity to fund its operations. At
the end of FY09 the total capital employed in the Group was EUR496.3m (FY08:
EUR545.6m). Capital employed is defined as the sum of the book value of
shareholders equity plus comparable net debt but excluding land subject to
remediation and pension scheme assets or deficits. The Group's primary source
of incremental capital, outside of the capital markets, is its cash flow from
operations which was EUR93.8m, before exceptional items, during FY09. The Group
funds its acquisition activity from a combination of cash flow and available
headroom within committed bank facilities. All acquisitions are made within
internally prescribed group net debt to EBITDA targets both on acquisition and
within 18 months of acquisition.
As at 25 September 2009 the Group's comparable net debt was EUR283.8m represented
2.8 times EBITDA, comfortably within the Group's key debt covenant. At
September 2009 the Group had committed facilities of EUR615.0m with maturity dates
between 2010 and October 2015. EUR416.8m of our facilities are provided by a
group of international banks with the remainder being private placement notes.
Subsequent to year end the Group repaid EUR49.3m of scheduled 2010 maturities and
has facilities in place to fully repay the remaining 2010 maturities of EUR36.1m.
* Financing
The Group's net finance charge in FY09 was EUR47.7m (EUR22.6m in FY08). The change
in the fair value of derivatives and related debt adjustments was a non cash
prospective charge of EUR20.9m at the end of September 2009 (EUR3.8m at the end of
September 2008) reflecting, in the main, the significant reduction in interest
rates and the associated impact of marking to market on the Group's fixed
interest rate swaps. The non cash pension financing credit of EUR1.1m was
significantly less than the credit in FY08 of EUR9.1m reflecting the reduction in
interest rates and the lower expected returns on pension assets.The bank
interest charge of EUR28.4m reduced by 2.8% on the charge in FY08 reflecting
the net favourable impact of the EUR/GBP exchange rate on the sterling
denominated portion of the Group's interest expense offsetting a higher interest
margin subsequent to the Group's refinancing.
* Taxation
The Group's effective tax rate in FY09 was 16% including the tax impact
associated with pension finance items, which is the same as the full year
effective tax percentage in FY08. The amount of cash taxation continues to be
well below the tax charge reflecting the availability of losses forward and
other reliefs.
* Exceptional items
An exceptional charge, after a related tax credit of EUR2.1m, of EUR25.2m was
recorded in FY09. The gross charge is a composite item which primarily comprises
a loss on the disposal of Drummonds (our former grain trading business) and the
EUR3.0m of costs associated with the adverse Irish grain harvest which in
aggregate was EUR15.5m, a restructuring charge in Convenience Foods of EUR12.1m
largely due to the exit from frozen desserts, a gain of EUR3.6m on the settlement
of a malt property damage insurance claim and a loss of EUR3.8m on the settlement
of a legal case against the Group's former sugar business.
* Earnings per share 3
Adjusted earnings per share for FY09 were 17.4 cent which is in line with the
restated FY08 comparative on a constant currency basis. Adjusted earnings per
share in FY09 were 14.3% behind FY08 after the impact of currency translation.
This is based on a weighted average number of ordinary shares of 202.7 million
for the year (FY08 200.7m). The adjusted earnings per share calculation is
stated before exceptional items, fair value items, intercompany foreign
exchange, pension finance items and amortisation of intangibles.
* Pensions
The fair value of total plan assets relating to the Group's defined benefit
pension schemes (excluding associates) decreased to EUR347.1m at September 2009
from EUR386.6m at September 2008. The present value of the total pension
liabilities for these schemes decreased to EUR447.0m from EUR454.7m over the same
period. This is reflected in an increase in the net pension deficit (before
related deferred tax) to EUR99.9m at September 2009 (from a net pension deficit of
EUR68.1m at September 2008). The Group is closing, to future accrual, its two
principal schemes which comprise 87% of the Group's defined benefit obligations
with effect from 31 December 2009. The Group's remaining defined benefit schemes
will be closed to future accrual in FY10 following consultation with trustees
and employees. In addition, discussions are underway with the trustee boards on
revised funding plans for the Group's two principal schemes. Whilst these
discussions are not yet complete the period in which to recover deficits is
likely to be extended beyond what has been the norm up until recently. The
Group's pension policy with effect from 1 January 2010 is that future service
for current employees and new entrants will be under defined contribution
pension arrangements.
* Cash Flow and Net Debt
Net debt (excluding the impact of marking to market all derivative financial
instruments and related debt) at 25 September 2009 was EUR283.8m, in line with
last year's EUR283.4m. The Group made deferred consideration and minority
interest acquisition payments during the year of EUR4.9m. A net cash inflow (pre
exceptional items) from operating activities of EUR93.8m was recorded compared to
an inflow of EUR83.0m in FY08. Working capital increased in the period by EUR3.0m
due in the main to higher levels in Malt which offset a normalised working
capital benefit of EUR9.4m associated with the timing of the Drummonds disposal.
The total cash outflow in the year in respect of current and prior year
exceptional charges was EUR21.2m. Of this EUR10.3m related to exceptional charges
recorded in FY08. Additionally, the exceptional cash flow excludes the Drummonds
normalised working capital benefit referred to above. Finally, the translation
of the GBP component of the Group's net debt positively impacted net debt at
September 2009 by EUR23.4m.
* Financial control and risk
The water cost concealment issue in FY08 led the Group to conduct a thorough
review of its control environment and material Group risks. As a result of this
review, we implemented a new set of financial control procedures, performance
measures and monitoring controls to significantly improve the control
environment of the Group. We widened the definition of what is meant by control
to all functions of the business rather than examining and monitoring through
the finance function in isolation. An element of compensation for our senior
business leaders is directly connected to the maintenance of a strong control
environment. In addition, we established a Risk Management Group (RMG) to
identify and monitor key Group risks supported by a programme of work approved
by, and reporting periodically to, the Board's Audit committee. During FY09 the
Group's financial control environment was subjected to further review by the
Group's finance function with a particular focus on hiring additional finance
talent to ensure the improved financial control environment is maintained.
Additionally, individual businesses are measured against each other internally
and there is continual measuring of all key controls.
* Key Performance Indicators
The Group uses a set of headline key performance indicators to measure the
performance of its operations. Although separate measures, the relationship
between all four is also monitored. In addition, other performance indicators
are measured at individual business unit level.
Return on capital employed
Capital is defined as the sum of the book value of shareholders' equity plus
comparable net debt but excluding land subject to remediation and pension scheme
assets or deficits with the returns measure expressed as operating profit2
including share of associates. The Group's return on capital in FY09 was 14.8%
(FY08:14.5%).
Sales Growth
Group sales on a constant currency basis decreased by 0.8% in FY09 (excluding
Frozen Desserts and the Drummonds grain trading business). In our Convenience
Foods business the Group measures weekly sales growth. In FY09 we recorded 2.2%
growth on a constant currency basis (excluding Frozen Desserts). In the
Ingredients & Related Property division we track monthly sales. In FY09 we
recorded an 8.2% sales decline on a constant currency basis (excluding
Drummonds).
Operating Margin
The Group's pre-exceptional operating margin in FY09 was 6.6% compared to 5.9%
in FY08. In Convenience Foods the operating margin was 5.8% compared to 5.3% in
FY08.
Free Cash flow
The Group's free cash measure is net cash flow from operating activities before
exceptional items adjusted for replacement capital expenditure. Group free cash
was EUR84.4m in FY09 or 116% of Group operating profit of EUR72.9m.
=------------------------------------------------------------------------------
=------------------
GROUP INCOME STATEMENT
year ended 25 September 2009
+-----------------+-----+----+-------------+-------------+-----------+-------------+-------------+-----------+
| | | 2009 | 2008 |
+-----------------------+----+---------------------------------------+---------------------------------------+
| | | Pre - | Exceptional | Total | Pre - | Exceptional | Total |
| | Notes | exceptional | Note 3 | | exceptional | Note 3 | |
+-----------------+----------+-------------+-------------+-----------+-------------+-------------+-----------+
| | | EUR'000 | EUR'000 | EUR'000 | EUR'000 | EUR'000 | EUR'000 |
+-----------------------+----+-------------+-------------+-----------+-------------+-------------+-----------+
| Continuing operations | | | | | | | |
+-----------------------+----+-------------+-------------+-----------+-------------+-------------+-----------+
| Revenue | 2 | 1,103,800 | - | 1,103,800 | 1,308,097 | - | 1,308,097 |
+-----------------------+----+-------------+-------------+-----------+-------------+-------------+-----------+
| Cost of sales | | (742,521) | (4,388) | (746,909) | (947,221) | - | (947,221) |
+-----------------------+----+-------------+-------------+-----------+-------------+-------------+-----------+
| Gross profit | | 361,279 | (4,388) | 356,891 | 360,876 | - | 360,876 |
+-----------------------+----+-------------+-------------+-----------+-------------+-------------+-----------+
| | | | | | | | |
+-----------------------+----+-------------+-------------+-----------+-------------+-------------+-----------+
| Operating costs, net | | (288,352) | (19,563) | (307,915) | (283,571) | (13,586) | (297,157) |
+-----------------------+----+-------------+-------------+-----------+-------------+-------------+-----------+
| Group operating | 2 | 72,927 | (23,951) | 48,976 | 77,305 | (13,586) | 63,719 |
| profit/(loss) before | | | | | | | |
| acquisition related | | | | | | | |
| intangibles | | | | | | | |
+-----------------------+----+-------------+-------------+-----------+-------------+-------------+-----------+
| Amortisation of | | (2,101) | - | (2,101) | (672) | - | (672) |
| acquisition related | | | | | | | |
| intangibles | | | | | | | |
+-----------------------+----+-------------+-------------+-----------+-------------+-------------+-----------+
| Group operating | 2 | 70,826 | (23,951) | 46,875 | 76,633 | (13,586) | 63,047 |
| profit/(loss) | | | | | | | |
+-----------------------+----+-------------+-------------+-----------+-------------+-------------+-----------+
| Finance income | 6 | 32,711 | - | 32,711 | 43,167 | - | 43,167 |
+-----------------------+----+-------------+-------------+-----------+-------------+-------------+-----------+
| Finance costs | 6 | (80,429) | - | (80,429) | (65,788) | - | (65,788) |
+-----------------------+----+-------------+-------------+-----------+-------------+-------------+-----------+
| Share of profit of | | 437 | - | 437 | 1,329 | - | 1,329 |
| associates after tax | | | | | | | |
+-----------------------+----+-------------+-------------+-----------+-------------+-------------+-----------+
| | | | | | | | |
+-----------------------+----+-------------+-------------+-----------+-------------+-------------+-----------+
| Profit/(loss) before | | 23,545 | (23,951) | (406) | 55,341 | (13,586) | 41,755 |
| taxation | | | | | | | |
+-----------------------+----+-------------+-------------+-----------+-------------+-------------+-----------+
| Taxation | | (6,724) | 2,136 | (4,588) | (9,189) | 3,854 | (5,335) |
+-----------------------+----+-------------+-------------+-----------+-------------+-------------+-----------+
| Result for the period | | 16,821 | (21,815) | (4,994) | 46,152 | (9,732) | 36,420 |
| from continuing | | | | | | | |
| operations | | | | | | | |
+-----------------------+----+-------------+-------------+-----------+-------------+-------------+-----------+
| | | | | | | | |
+-----------------------+----+-------------+-------------+-----------+-------------+-------------+-----------+
| Discontinued | | | | | | | |
| operations | | | | | | | |
+-----------------------+----+-------------+-------------+-----------+-------------+-------------+-----------+
| Result from | | - | (3,415) | (3,415) | - | 18,892 | 18,892 |
| discontinued | | | | | | | |
| operations | | | | | | | |
+-----------------------+----+-------------+-------------+-----------+-------------+-------------+-----------+
| Result for the | | 16,821 | (25,230) | (8,409) | 46,152 | 9,160 | 55,312 |
| financial period | | | | | | | |
+-----------------------+----+-------------+-------------+-----------+-------------+-------------+-----------+
| | | | | | | | |
+-----------------------+----+-------------+-------------+-----------+-------------+-------------+-----------+
| Attributable to: | | | | | | | |
+-----------------------+----+-------------+-------------+-----------+-------------+-------------+-----------+
| Equity shareholders | | 15,332 | (25,230) | (9,898) | 44,249 | 9,160 | 53,409 |
+-----------------------+----+-------------+-------------+-----------+-------------+-------------+-----------+
| Minority interests | | 1,489 | - | 1,489 | 1,903 | - | 1,903 |
+-----------------------+----+-------------+-------------+-----------+-------------+-------------+-----------+
| | | | | | | | |
+-----------------------+----+-------------+-------------+-----------+-------------+-------------+-----------+
| | | 16,821 | (25,230) | (8,409) | 46,152 | 9,160 | 55,312 |
+-----------------------+----+-------------+-------------+-----------+-------------+-------------+-----------+
| | | | | | | | |
+-----------------------+----+-------------+-------------+-----------+-------------+-------------+-----------+
| Basic (loss)/earnings | 5 | | | | | | |
| per share (cent) | | | | | | | |
+-----------------------+----+-------------+-------------+-----------+-------------+-------------+-----------+
| Continuing | | | | (3.2) | | | 17.2 |
| operations | | | | | | | |
| | | | | | | | |
+-----------------------+----+-------------+-------------+-----------+-------------+-------------+-----------+
| Diluted | 5 | | | | | | |
| (loss)/earnings per | | | | | | | |
| share (cent) | | | | | | | |
+-----------------------+----+-------------+-------------+-----------+-------------+-------------+-----------+
| Continuing | | | | (3.2) | | | 17.1 |
| operations | | | | | | | |
| | | | | | | | |
+-----------------------+----+-------------+-------------+-----------+-------------+-------------+-----------+
| Adjusted basic | 5 | | | | | | |
| earnings per share | | | | | | | |
| (cent) | | | | | | | |
+-----------------------+----+-------------+-------------+-----------+-------------+-------------+-----------+
| Continuing | | | | 17.4 | | | 20.3 |
| operations | | | | | | | |
+-----------------+-----+----+-------------+-------------+-----------+-------------+-------------+-----------+
=------------------------------------------------------------------------------
=------------------
GROUP BALANCE SHEET
at 25 September 2009
+----------------------------------------------------------+-----------+-----------+
| | 2009 | 2008 |
+----------------------------------------------------------+-----------+-----------+
| | EUR'000 | EUR'000 |
+----------------------------------------------------------+-----------+-----------+
| ASSETS | | |
+----------------------------------------------------------+-----------+-----------+
| Non-current assets | | |
+----------------------------------------------------------+-----------+-----------+
| Intangible assets | 404,305 | 402,986 |
+----------------------------------------------------------+-----------+-----------+
| Property, plant and equipment | 319,233 | 367,388 |
+----------------------------------------------------------+-----------+-----------+
| Investment property | 710 | 808 |
+----------------------------------------------------------+-----------+-----------+
| Investment in associates | 638 | 1,244 |
+----------------------------------------------------------+-----------+-----------+
| Retirement benefit assets | - | 866 |
+----------------------------------------------------------+-----------+-----------+
| Derivative financial instruments | 16,358 | - |
+----------------------------------------------------------+-----------+-----------+
| Deferred tax assets | 42,993 | 35,722 |
+----------------------------------------------------------+-----------+-----------+
| Total non-current assets | 784,237 | 809,014 |
+----------------------------------------------------------+-----------+-----------+
| | | |
+----------------------------------------------------------+-----------+-----------+
| Current assets | | |
+----------------------------------------------------------+-----------+-----------+
| Inventories | 82,369 | 125,160 |
+----------------------------------------------------------+-----------+-----------+
| Trade and other receivables | 95,562 | 138,834 |
+----------------------------------------------------------+-----------+-----------+
| Cash and cash equivalents | 43,933 | 139,040 |
+----------------------------------------------------------+-----------+-----------+
| Available for sale financial assets | - | 23 |
+----------------------------------------------------------+-----------+-----------+
| Total current assets | 221,864 | 403,057 |
+----------------------------------------------------------+-----------+-----------+
| Total assets | 1,006,101 | 1,212,071 |
+----------------------------------------------------------+-----------+-----------+
| | | |
+----------------------------------------------------------+-----------+-----------+
| EQUITY | | |
+----------------------------------------------------------+-----------+-----------+
| Capital and reserves attributable to equity holders of | | |
| the Company | | |
+----------------------------------------------------------+-----------+-----------+
| Share capital | 131,250 | 129,641 |
+----------------------------------------------------------+-----------+-----------+
| Share premium | 119,623 | 118,961 |
+----------------------------------------------------------+-----------+-----------+
| Reserves | (82,156) | (9,364) |
+----------------------------------------------------------+-----------+-----------+
| | 168,717 | 239,238 |
+----------------------------------------------------------+-----------+-----------+
| Minority interest in equity | 3,591 | 4,816 |
+----------------------------------------------------------+-----------+-----------+
| Total equity | 172,308 | 244,054 |
+----------------------------------------------------------+-----------+-----------+
| | | |
+----------------------------------------------------------+-----------+-----------+
| LIABILITIES | | |
+----------------------------------------------------------+-----------+-----------+
| Non-current liabilities | | |
+----------------------------------------------------------+-----------+-----------+
| Borrowings | 343,769 | 407,500 |
+----------------------------------------------------------+-----------+-----------+
| Derivative financial instruments | - | 15,346 |
+----------------------------------------------------------+-----------+-----------+
| Retirement benefit obligations | 99,859 | 68,956 |
+----------------------------------------------------------+-----------+-----------+
| Other payables | 6,924 | 10,148 |
+----------------------------------------------------------+-----------+-----------+
| Provisions for liabilities | 6,188 | 11,831 |
+----------------------------------------------------------+-----------+-----------+
| Deferred tax liabilities | 47,648 | 51,183 |
+----------------------------------------------------------+-----------+-----------+
| Government grants | 1,096 | 1,047 |
+----------------------------------------------------------+-----------+-----------+
| Total non-current liabilities | 505,484 | 566,011 |
+----------------------------------------------------------+-----------+-----------+
| | | |
+----------------------------------------------------------+-----------+-----------+
| Current liabilities | | |
+----------------------------------------------------------+-----------+-----------+
| Borrowings | 21 | 69 |
+----------------------------------------------------------+-----------+-----------+
| Derivative financial instruments | 27,237 | 5,286 |
+----------------------------------------------------------+-----------+-----------+
| Trade and other payables | 262,845 | 356,953 |
+----------------------------------------------------------+-----------+-----------+
| Provisions for liabilities | 11,288 | 12,601 |
+----------------------------------------------------------+-----------+-----------+
| Income taxes payable | 26,918 | 27,097 |
+----------------------------------------------------------+-----------+-----------+
| Total current liabilities | 328,309 | 402,006 |
+----------------------------------------------------------+-----------+-----------+
| Total liabilities | 833,793 | 968,017 |
+----------------------------------------------------------+-----------+-----------+
| Total equity and liabilities | 1,006,101 | 1,212,071 |
+----------------------------------------------------------+-----------+-----------+
=------------------------------------------------------------------------------
=------------------
GROUP CASH FLOW STATEMENT
year ended 25 September 2009
+----------------------------------------------------------+-----------+-----------+
| | 2009 | 2008 |
+----------------------------------------------------------+-----------+-----------+
| | EUR'000 | EUR'000 |
+----------------------------------------------------------+-----------+-----------+
| | | |
+----------------------------------------------------------+-----------+-----------+
| (Loss)/profit before taxation | (406) | 41,755 |
+----------------------------------------------------------+-----------+-----------+
| Finance income | (32,711) | (43,167) |
+----------------------------------------------------------+-----------+-----------+
| Finance costs | 80,429 | 65,788 |
+----------------------------------------------------------+-----------+-----------+
| Share of profit of associates (after tax) | (437) | (1,329) |
+----------------------------------------------------------+-----------+-----------+
| Exceptional items - continuing | 23,951 | 13,586 |
+----------------------------------------------------------+-----------+-----------+
| Operating profit - continuing (pre-exceptional) | 70,826 | 76,633 |
+----------------------------------------------------------+-----------+-----------+
| Depreciation | 26,774 | 26,716 |
+----------------------------------------------------------+-----------+-----------+
| Amortisation of intangibles | 3,544 | 1,710 |
+----------------------------------------------------------+-----------+-----------+
| Employee share option expense | 910 | 319 |
+----------------------------------------------------------+-----------+-----------+
| Amortisation of government grants | (116) | (88) |
+----------------------------------------------------------+-----------+-----------+
| Difference between pension charge and cash contributions | (8,455) | (6,379) |
+----------------------------------------------------------+-----------+-----------+
| Changes in working capital | (2,966) | (14,243) |
+----------------------------------------------------------+-----------+-----------+
| Other movements | 3,235 | (1,678) |
+----------------------------------------------------------+-----------+-----------+
| Net cash inflow from operating activities before | 93,752 | 82,990 |
| exceptional items | | |
+----------------------------------------------------------+-----------+-----------+
| Cash (outflow)/inflow related to exceptional items | (21,210) | 73,187 |
+----------------------------------------------------------+-----------+-----------+
| Interest paid | (30,304) | (33,327) |
+----------------------------------------------------------+-----------+-----------+
| Tax paid | (367) | (470) |
+----------------------------------------------------------+-----------+-----------+
| Net cash inflow from operating activities | 41,871 | 122,380 |
+----------------------------------------------------------+-----------+-----------+
| | | |
+----------------------------------------------------------+-----------+-----------+
| Cash flow from investing activities | | |
+----------------------------------------------------------+-----------+-----------+
| Dividends received from associates | 901 | 531 |
+----------------------------------------------------------+-----------+-----------+
| Purchase of property, plant and equipment | (33,908) | (43,667) |
+----------------------------------------------------------+-----------+-----------+
| Purchase of intangible assets | (6,795) | (1,144) |
+----------------------------------------------------------+-----------+-----------+
| Acquisition of undertakings and purchase of minority | (4,940) | (48,555) |
| interest | | |
+----------------------------------------------------------+-----------+-----------+
| Disposal of undertakings & investment in associate | 2,944 | 1,311 |
+----------------------------------------------------------+-----------+-----------+
| Interest received | 2,548 | 2,690 |
+----------------------------------------------------------+-----------+-----------+
| Government grants received/(repaid) | 159 | (25) |
+----------------------------------------------------------+-----------+-----------+
| Net cash outflow from investing activities | (39,091) | (88,859) |
+----------------------------------------------------------+-----------+-----------+
| | | |
+----------------------------------------------------------+-----------+-----------+
| Cash flow from financing activities | | |
+----------------------------------------------------------+-----------+-----------+
| Proceeds from issue of shares | - | 281 |
+----------------------------------------------------------+-----------+-----------+
| Ordinary shares purchased - own shares | - | (800) |
+----------------------------------------------------------+-----------+-----------+
| (Decrease)/increase in borrowings | (57,104) | 19,870 |
+----------------------------------------------------------+-----------+-----------+
| Decrease in finance lease liabilities | (60) | (38) |
+----------------------------------------------------------+-----------+-----------+
| Dividends paid to equity holders of the Company | (24,998) | (16,633) |
+----------------------------------------------------------+-----------+-----------+
| Dividends paid to minority interests | (1,530) | (1,273) |
+----------------------------------------------------------+-----------+-----------+
| Net cash (outflow)/inflow from financing activities | (83,692) | 1,407 |
+----------------------------------------------------------+-----------+-----------+
| Net (decrease)/increase in cash & cash equivalents | (80,912) | 34,928 |
+----------------------------------------------------------+-----------+-----------+
| | | |
+----------------------------------------------------------+-----------+-----------+
| Reconciliation of opening to closing cash and cash | | |
| equivalents | | |
+----------------------------------------------------------+-----------+-----------+
| Cash and cash equivalents at beginning of year | 139,040 | 117,949 |
+----------------------------------------------------------+-----------+-----------+
| Translation adjustment | (14,195) | (13,837) |
+----------------------------------------------------------+-----------+-----------+
| (Decrease)/increase in cash and cash equivalents | (80,912) | 34,928 |
+----------------------------------------------------------+-----------+-----------+
| Cash and cash equivalents at end of year | 43,933 | 139,040 |
+----------------------------------------------------------+-----------+-----------+
=------------------------------------------------------------------------------
=------------------
GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE
year ended 25 September 2009
+----------------------------------------------------------+-----------+-----------+
| | 2009 | 2008 |
+----------------------------------------------------------+-----------+-----------+
| | EUR'000 | EUR'000 |
+----------------------------------------------------------+-----------+-----------+
| | | |
+----------------------------------------------------------+-----------+-----------+
| Items of income and expense taken directly within equity | | |
+----------------------------------------------------------+-----------+-----------+
| Currency translation differences | (5,391) | (2,522) |
+----------------------------------------------------------+-----------+-----------+
| Hedge of net investment in foreign currency subsidiary | 679 | (2,280) |
+----------------------------------------------------------+-----------+-----------+
| Actuarial loss on Group defined benefit pension schemes | (49,431) | (64,704) |
+----------------------------------------------------------+-----------+-----------+
| Deferred tax on Group defined benefit pension schemes | 13,218 | 7,746 |
+----------------------------------------------------------+-----------+-----------+
| Fair value of available for sale financial assets | - | 347 |
+----------------------------------------------------------+-----------+-----------+
| Cash flow hedges: | | |
+----------------------------------------------------------+-----------+-----------+
| Loss taken to equity | (1,691) | (2,141) |
+----------------------------------------------------------+-----------+-----------+
| Transferred to profit or loss for the period | 1,594 | 98 |
+----------------------------------------------------------+-----------+-----------+
| Deferred tax on cash flow hedge | (65) | 570 |
+----------------------------------------------------------+-----------+-----------+
| | | |
+----------------------------------------------------------+-----------+-----------+
| Net expense recognised directly within equity | (41,087) | (62,886) |
+----------------------------------------------------------+-----------+-----------+
| Group result for the financial period | (8,409) | 55,312 |
+----------------------------------------------------------+-----------+-----------+
| | | |
+----------------------------------------------------------+-----------+-----------+
| Total recognised income and expense for the financial | (49,496) | (7,574) |
| period | | |
+----------------------------------------------------------+-----------+-----------+
| Restatement | | (12,318) |
+----------------------------------------------------------+-----------+-----------+
| Total recognised income and expense | | (19,892) |
+----------------------------------------------------------+-----------+-----------+
| | | |
+----------------------------------------------------------+-----------+-----------+
| Attributable to: | | |
+----------------------------------------------------------+-----------+-----------+
| Equity shareholders | (50,985) | (21,795) |
+----------------------------------------------------------+-----------+-----------+
| Minority Interests | 1,489 | 1,903 |
+----------------------------------------------------------+-----------+-----------+
| | | |
+----------------------------------------------------------+-----------+-----------+
| Total recognised income and expense for the financial | (49,496) | (19,892) |
| period | | |
+----------------------------------------------------------+-----------+-----------+
=------------------------------------------------------------------------------
=---------------------------------------
NOTES TO THE PRELIMINARY STATEMENT
year ended 25 September 2009
1. Basis of Preparation of Financial Information under IFRS
The financial information presented in this preliminary announcement has
been prepared in accordance with the recognition and measurement principles of
International Financial Reporting Standards (IFRS) and International Financial
Reporting Interpretations Committee (IFRIC) interpretations adopted by the
European Union (EU), and the requirements of Listing Rule 6.7 of the Irish Stock
Exchange.
The financial information, which is presented in euro and rounded to the nearest
thousand (unless otherwise stated), has been prepared under the historical cost
convention, as modified by the measurement at fair value of certain financial
assets and financial liabilities, including share options at grant date,
available for sale investments and derivative financial instruments. The
carrying values of recognised assets and liabilities that are hedged are
adjusted to record the changes in the fair values attributable to the risks
being hedged. Full details of the Group's accounting policies will be included
in the 2009 annual report which will be distributed in January 2010. The
accounting policies are consistent with those applied in the Group Financial
Statements for the year ended 26 September 2008.
2. Segmental Reporting
The Group's primary reporting segment is by class of business. The Group has two
primary reporting segments: (i) Convenience Foods and (ii) Ingredients & Related
Property.
+--------------------+---------+--+---------+--+---------+--+---------+--+-----------+--+-----------+
| Continuing | Convenience Foods | Ingredients & Related | Total |
| Operations | | Property | |
+--------------------+----------------------+----------------------------+--------------------------+
| | | | | | | | | | | | |
+--------------------+---------+--+---------+--+---------+--+---------+--+-----------+--+-----------+
| | 2009 | | 2008 | | 2009 | | 2008 | | 2009 | | 2008 |
| | EUR'000 | | EUR'000 | | EUR'000 | | EUR'000 | | EUR'000 | | EUR'000 |
+--------------------+---------+--+---------+--+---------+--+---------+--+-----------+--+-----------+
| | | | | | | | | | | | |
+--------------------+---------+--+---------+--+---------+--+---------+--+-----------+--+-----------+
| Revenue | 794,404 | | 893,989 | | 309,396 | | 414,108 | | 1,103,800 | | 1,308,097 |
+--------------------+---------+--+---------+--+---------+--+---------+--+-----------+--+-----------+
| Operating Profit | 46,354 | | 46,166 | | 26,573 | | 31,139 | | 72,927 | | 77,305 |
| (pre-exceptional | | | | | | | | | | | |
| and amortisation) | | | | | | | | | | | |
+--------------------+---------+--+---------+--+---------+--+---------+--+-----------+--+-----------+
| Amortisation of | (2,101) | | (672) | | - | | - | | (2,101) | | (672) |
| acquisition | | | | | | | | | | | |
| related intangible | | | | | | | | | | | |
| assets | | | | | | | | | | | |
+--------------------+---------+--+---------+--+---------+--+---------+--+-----------+--+-----------+
| Operating profit | 44,253 | | 45,494 | | 26,573 | | 31,139 | | 70,826 | | 76,633 |
| (pre-exceptional) | | | | | | | | | | | |
+--------------------+---------+--+---------+--+---------+--+---------+--+-----------+--+-----------+
3. Exceptional Items
Exceptional items are those that, in management's judgment, need to be disclosed
by virtue of their nature or amount. Such items are included within the income
statement caption to which they relate and are separately disclosed in the notes
to the Group Financial Statements.
The Group reports the following exceptional items:
+-------------------------------------------------+-----+----------------------------+-------------------------+
| | | 2009 | 2008 |
| | | EUR'000 | EUR'000 |
+-------------------------------------------------+-----+----------------------------+-------------------------+
| Continuing operations | | | |
+-------------------------------------------------+-----+----------------------------+-------------------------+
| Convenience Foods |(a) | (12,062) | (12,449) |
+-------------------------------------------------+-----+----------------------------+-------------------------+
| Ingredients & Related Property |(b) | (15,469) | - |
+-------------------------------------------------+-----+----------------------------+-------------------------+
| Insurance settlement |(c) | 3,580 | - |
+-------------------------------------------------+-----+----------------------------+-------------------------+
| Water Investigation and associated |(a) | - | (1,137) |
| Group financial review | | | |
+-------------------------------------------------+-----+----------------------------+-------------------------+
| | | (23,951) | (13,586) |
+-------------------------------------------------+-----+----------------------------+-------------------------+
| Taxation on exceptional items | | 2,136 | 3,854 |
+-------------------------------------------------+-----+----------------------------+-------------------------+
| Total continuing operations | | (21,815) | (9,732) |
+-------------------------------------------------+-----+----------------------------+-------------------------+
| | | | |
+-------------------------------------------------+-----+----------------------------+-------------------------+
| Discontinued operations (net of tax) | | | |
+-------------------------------------------------+-----+----------------------------+-------------------------+
| Exit from sugar processing |(d) | 417 | 18,892 |
+-------------------------------------------------+-----+----------------------------+-------------------------+
| Legal settlement and related costs |(e) | (3,832) | - |
+-------------------------------------------------+-----+----------------------------+-------------------------+
| Total discontinued operations | | (3,415) | 18,892 |
+-------------------------------------------------+-----+----------------------------+-------------------------+
| Total exceptional (loss)/gain | | (25,230) | 9,160 |
+-------------------------------------------------+-----+----------------------------+-------------------------+
(a) Convenience Foods
During 2008, the Group undertook a detailed strategic review of production
facilities. As a consequence of that review, it was decided that one ready meal
facility at Kiveton and the frozen desserts facility at Huddersfield should be
closed. Additionally, the Group embarked on a restructuring program which
resulted in head count reductions at both business units and in central
functions. The total cost of these initiatives was EUR12.4m (EUR8.9m net of
taxation).
In 2009, the Group completed its review of the frozen desserts category and
concluded that it should exit from this category, due to its tertiary market
position. As a result the facility at Crosshills was closed. The Group also
completed its restructuring program, resulting in further head count reductions
at business units. Additionally the Group intends to exit from certain leased
facilities as a result of which a provision for onerous lease obligations has
been recognised. The total cost of this restructuring, which comprised
principally asset write-offs and redundancy costs, was EUR12.1m (EUR8.7m net of
tax).
In 2008, the Group undertook an investigation into the deliberate concealment of
cost in the water business. The cost of the water Investigation along with
related business restructuring and review costs was EUR1.1m (EUR0.8m net of tax).
(b) Ingredients & Related Property
During the year, the Group determined that it would either close or sell off its
grain trading business at Drummonds. As a result of this decision, provisions of
EUR12.3m were recognised to write assets down to fair value less costs to sell.
The Group disposed of Drummonds on 26 June 2009 and a loss of EUR0.3m was
recognised on the disposal. Additionally, the Group has taken a charge of EUR3.0m
related to grain/barley stocks associated with the poor harvest quality arising
as a result of the extreme adverse 2008 weather conditions experienced during
the harvest period.
(c) Insurance settlement
During the year, the Group settled an insurance claim in relation to an incident
at its malting facility at Ghlin, Belgium in 2008 resulting in the recognition
of an exceptional gain of EUR3.6m (EUR2.4m net of tax) being the excess over
previously anticipated receipts.
(d) Exit from sugar processing
The Group exited its sugar processing business in 2006. The Group continues to
sell off assets and remediate the former sugar processing sites. A net gain of
EUR0.4m arose on the disposal of previously impaired assets. In the prior year, a
gain of EUR2.0m was recognised on the disposal of previously impaired assets and a
gain of EUR16.9m arose on the resolution of the allocation of restructuring aid
under the Council Regulations (EC) No. 320/2006 (as amended in September 2007).
(e) Legal settlement and related costs
The Group settled an historical outstanding claim relating back to its previous
sugar activities and recognised an exceptional charge of EUR3.8m in respect of
both settlement and legal costs.
4. Dividends
+--------------------------------------------------------------+--------+----------+
| | 2009 | 2008 |
| | EUR'000 | EUR'000 |
+--------------------------------------------------------------+--------+----------+
| Amounts recognised as distributions to equity holders during | | |
| the year: | | |
+--------------------------------------------------------------+--------+----------+
| Equity dividends on ordinary shares: | | |
+--------------------------------------------------------------+--------+----------+
| Final dividend of 8.21c for the year ended 26 September 2008 | 16,574 | 16,404 |
| (2007: 8.21c) | | |
+--------------------------------------------------------------+--------+----------+
| Interim dividend of 3.00c for the year ended 25 September | 6,143 | 10,691 |
| 2009 (2008: 5.30c) | | |
+--------------------------------------------------------------+--------+----------+
| | 22,717 | 27,095 |
+--------------------------------------------------------------+--------+----------+
| | | |
+--------------------------------------------------------------+--------+----------+
| Proposed for approval at AGM: | | |
+--------------------------------------------------------------+--------+----------+
| Equity dividends on ordinary shares: | | |
+--------------------------------------------------------------+--------+----------+
| Final dividend of 4.5c for the year ended 26 September 2009 | 9,199 | 16,574 |
| (2008: 8.21c) | | |
+--------------------------------------------------------------+--------+----------+
This proposed dividend is subject to approval by the shareholders at the annual
general meeting and has not been included as a liability in the balance sheet of
the Group as at 25 September 2009, in accordance with IAS 10 'Events after the
Balance Sheet Date'.
This proposed final dividend will be payable on 1 April 2010 to shareholders on
the Register of Members at 4 December 2009.
5. 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 which are held as treasury shares and own shares purchased in
respect of the deferred bonus share awards. The adjusted figures for basic and
diluted earnings per ordinary share are after the elimination of exceptional
items, effect of foreign exchange (FX) on inter-company balances and external
loans where hedge accounting is not applied, the movement in fair value of all
derivative financial instruments and related debt adjustments, the amortisation
of acquisition related intangible assets, and pension financing costs and
income. The Group changed the basis of measurement of adjusted earnings per
share in 2009 to exclude the effect of pension financing costs and income. The
comparative adjusted earnings per share numerator has been adjusted to reflect
this change.
+------------------------------------------------------+-------------+------------+
| | 2009 | 2008 |
| | | as |
| | | restated |
+------------------------------------------------------+-------------+------------+
| | EUR'000 | EUR'000 |
+------------------------------------------------------+-------------+------------+
| (Loss)/profit attributable to equity holders of the | (9,898) | 53,409 |
| Company | | |
+------------------------------------------------------+-------------+------------+
| Exceptional items | 25,230 | (9,160) |
+------------------------------------------------------+-------------+------------+
| Fair value of derivative financial instruments and | 20,923 | 3,755 |
| related debt adjustments where hedge accounting is | | |
| not applied | | |
+------------------------------------------------------+-------------+------------+
| FX on inter-company balances and external loans | (928) | (337) |
| where hedge accounting is not applied | | |
+------------------------------------------------------+-------------+------------+
| Amortisation of acquisition related intangible | 1,471 | 607 |
| assets (net of tax) | | |
+------------------------------------------------------+-------------+------------+
| Pension financing (net of tax) | (1,614) | (7,619) |
+------------------------------------------------------+-------------+------------+
| Numerator for adjusted earnings per share | 35,184 | 40,655 |
| calculation | | |
+------------------------------------------------------+-------------+------------+
+------------------------------------------------------+-------------+------------+
| | 2009 | 2008 |
| | | as |
| | | restated |
+------------------------------------------------------+-------------+------------+
| | Cent | Cent |
+------------------------------------------------------+-------------+------------+
| Basic (loss)/earnings per share | | |
+------------------------------------------------------+-------------+------------+
| Continuing operations | (3.2) | 17.2 |
+------------------------------------------------------+-------------+------------+
| Discontinued operations | (1.7) | 9.4 |
+------------------------------------------------------+-------------+------------+
| | (4.9) | 26.6 |
+------------------------------------------------------+-------------+------------+
| | | |
+------------------------------------------------------+-------------+------------+
| Adjusted basic earnings per ordinary share | 17.4 | 20.3 |
+------------------------------------------------------+-------------+------------+
| | | |
+------------------------------------------------------+-------------+------------+
| | | |
+------------------------------------------------------+-------------+------------+
| Denominator for earnings per share and adjusted | | |
| earnings per share calculation | | |
+------------------------------------------------------+-------------+------------+
| Weighted average number of ordinary shares in issue | 202,716 | 200,695 |
| during the year (thousands) | | |
+------------------------------------------------------+-------------+------------+
Diluted earnings per ordinary share
Diluted earnings per ordinary share is calculated by adjusting the weighted
average number of ordinary shares outstanding to assume conversion of all
dilutive potential ordinary shares. Employee share options, which are
performance based, are treated as contingently issuable shares, because their
issue is not 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 6,114,678 (2008: 5,648,807) shares were excluded
from the diluted EPS calculation as they were either anti dilutive or
contingently issuable ordinary shares which had not satisfied the performance
conditions attaching at the end of the reporting period.
+------------------------------------------------------+-------------+------------+
| | 2009 | 2008 |
+------------------------------------------------------+-------------+------------+
| | Cent | Cent |
+------------------------------------------------------+-------------+------------+
| Diluted (loss)/earnings per ordinary share | | |
+------------------------------------------------------+-------------+------------+
| Continuing operations | (3.2) | 17.1 |
+------------------------------------------------------+-------------+------------+
| Discontinued operations | (1.7) | 9.4 |
+------------------------------------------------------+-------------+------------+
| | (4.9) | 26.5 |
+------------------------------------------------------+-------------+------------+
| | | |
+------------------------------------------------------+-------------+------------+
| Adjusted diluted earnings per ordinary share | 17.3 | 20.2 |
+------------------------------------------------------+-------------+------------+
| | | |
+------------------------------------------------------+-------------+------------+
A reconciliation of the weighted average number of ordinary shares used for the
purpose of calculating the diluted earnings per share amounts is as follows:
+------------------------------------------------------+-------------+------------+
| | 2009 | 2008 |
+------------------------------------------------------+-------------+------------+
| Denominator for diluted earnings per share and | | |
| adjusted diluted earnings per share calculation | | |
+------------------------------------------------------+-------------+------------+
| Weighted average number of ordinary shares in issue | 202,716 | 200,695 |
| during the year (thousands) | | |
+------------------------------------------------------+-------------+------------+
| Dilutive effect of share options (thousands) | 248 | 729 |
+------------------------------------------------------+-------------+------------+
| Weighted average number of ordinary shares for | 202,964 | 201,424 |
| diluted earnings per share (thousands) | | |
+------------------------------------------------------+-------------+------------+
6. Comparable Net Debt and Financing
+------------------------------------------------------+-------------+------------+
| | 2009 | 2008 |
+------------------------------------------------------+-------------+------------+
| | EUR'000 | EUR'000 |
+------------------------------------------------------+-------------+------------+
| Net Debt | | |
+------------------------------------------------------+-------------+------------+
| Current assets | | |
+------------------------------------------------------+-------------+------------+
| Cash and cash equivalents | 43,933 | 139,040 |
+------------------------------------------------------+-------------+------------+
| Current liabilities | | |
+------------------------------------------------------+-------------+------------+
| Borrowings | (21) | (69) |
+------------------------------------------------------+-------------+------------+
| Non-current liabilities | | |
+------------------------------------------------------+-------------+------------+
| Borrowings before fair value adjustment | (327,707) | (422,378) |
+------------------------------------------------------+-------------+------------+
| Comparable net debt | (283,795) | (283,407) |
+------------------------------------------------------+-------------+------------+
| Borrowings - fair value hedge adjustment | (16,062) | 14,878 |
| (non-current liabilities) | | |
+------------------------------------------------------+-------------+------------+
| Total cash, cash equivalents and borrowings | (299,857) | (268,529) |
+------------------------------------------------------+-------------+------------+
Comparable net debt is a non-IFRS measure used by the Group as a key performance
indicator.
During the year, the Group concluded a refinancing of existing bank borrowings
which resulted in the repayment of existing facilities totalling EUR257.6m on 15
April 2009 and the draw down of EUR261.5m of new facilities on the same date.
+------------------------------------------------------+-------------+------------+
| | 2009 | 2008 |
+------------------------------------------------------+-------------+------------+
| | EUR'000 | EUR'000 |
+------------------------------------------------------+-------------+------------+
| Finance (Costs)/Income | | |
+------------------------------------------------------+-------------+------------+
| Net finance costs on interest bearing cash, cash | (28,359) | (29,177) |
| equivalents & borrowings and available for sale | | |
| financial assets | | |
+------------------------------------------------------+-------------+------------+
| Net pension financing credit | 1,076 | 9,070 |
+------------------------------------------------------+-------------+------------+
| Fair value of derivative financial instruments and | (20,923) | (3,755) |
| related debt adjustments where hedge accounting is | | |
| not applied | | |
+------------------------------------------------------+-------------+------------+
| Foreign exchange gain | 928 | 337 |
+------------------------------------------------------+-------------+------------+
| Increase in the present value of the EU receivable | - | 1,522 |
+------------------------------------------------------+-------------+------------+
| Increase in the present value of provisions held | (440) | (618) |
+------------------------------------------------------+-------------+------------+
| | (47,718) | (22,621) |
+------------------------------------------------------+-------------+------------+
| | | |
+------------------------------------------------------+-------------+------------+
| Analysed as: | | |
+------------------------------------------------------+-------------+------------+
| Finance income | 32,711 | 43,167 |
+------------------------------------------------------+-------------+------------+
| Finance costs | (80,429) | (65,788) |
+------------------------------------------------------+-------------+------------+
| | (47,718) | (22,621) |
+------------------------------------------------------+-------------+------------+
7. Information
The financial information in this unaudited preliminary announcement for the
years ended 25 September 2009 and 26 September 2008 are not the statutory
accounts of the Company. The statutory financial statements of the Company for
the year ended 26 September 2008, to which an unqualified audit opinion was
attached, were annexed to the annual return of the Company and filed with the
Registrar of Companies. The statutory financial statements of the Company for
the year ended 25 September 2009 will, together with the auditor's report
thereon, be filed with the Registrar of Companies.
The annual report and accounts will be circulated to shareholders on 11 January
2010, prior to the annual general meeting to be held on 11 February 2010 in the
Crowne Plaza Hotel, Northwood Park, Santry Demense, Santry, Dublin 9.
By order of the Board, CM Bergin, Company Secretary, 25 November 2009, Greencore
Group plc, 2 Northwood Avenue, Santry, Dublin 9, Ireland.
* * *
This information is provided by RNS
The company news service from the London Stock Exchange
END
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