TIDMGNC
RNS Number : 6052U
Greencore Group PLC
26 November 2019
26 November 2019
A resilient outturn for the refocused business
Greencore Group plc ('Greencore' or the 'Group'), a leading
manufacturer of convenience food in the UK, today issues its
results for the year ending 27 September 2019.
HIGHLIGHTS (1)
-- Pro Forma Revenue Growth in continuing operations of 2.6%,
driven by 3.3% growth in food to go categories
-- Adjusted Operating Profit growth of 0.9%, representing a 30
bps improvement in Adjusted Operating Margin
-- Adjusted EPS growth of 6.0% to 16.0 pence
-- Strong improvement in Free Cash Flow Conversion on an underlying basis
-- Completed strategic reset of the Group following disposal of US business
-- Reshaped the capital structure including the return of GBP509.0m of capital to shareholders
-- Acquired Freshtime, a well-established supplier of meal
salads and chilled snacking in the UK, in September 2019
-- Net Debt of GBP288.5m, a reduction of GBP212.6m since the end
of FY18, with Net Debt:EBITDA of 1.8x as measured under financing
agreements
-- Proposed total dividend increased by 11.3% to 6.20 pence
SUMMARY FINANCIAL PERFORMANCE
FY19 FY18 Change
GBPm GBPm
Group Revenue 1,446.1 1,498.5 -3.5%
Pro Forma Revenue Growth +2.6%
Adjusted EBITDA 142.0 140.0 +1.4%
Adjusted Operating Profit 105.5 104.6 +0.9%
Adjusted Operating Margin 7.3% 7.0% +30 bps
Group Operating Profit 99.8 49.8 +100.4%
Adjusted Profit Before Tax 92.3 79.6 +16.0%
Group Profit before taxation 56.4 17.8 +216.9%
Adjusted EPS (pence) 16.0 15.1 +6.0%
Group Exceptional Items (after
tax) 25.9 (51.7)
Basic EPS (pence) 19.9 4.8 +314.6%
Total proposed dividend per
share (pence) 6.20 5.57 +11.3%
Free Cash Flow 54.9 92.4 -GBP37.5m
Net Debt 288.5 501.1
Net Debt:EBITDA as per financing
agreements 1.8x 2.3x
Return on Invested Capital
("ROIC") 14.4% 15.6% -120bps
Commenting on the results, Patrick Coveney, Chief Executive
Officer, said:
"Over the past twelve months we have fundamentally reset our
business, anchored by a clear strategy to drive shareholder value
by expanding our category and channel capabilities within the
diverse, growing and attractive UK food to go market. The evidence
of this can be seen in the launch of multiple commercial and
innovation projects with key customers, and in the recent
acquisition of Freshtime. As a result of this reset strategy, we
anticipate another year of profitable growth in FY20."
___________________________________________________________________________________________________
(1) The Group uses Alternative Performance Measures ('APMs')
which are non-IFRS measures to monitor the performance of its
operations and of the Group as a whole. These APMs along with their
definitions are provided in the Appendix to the Full Year Results
Statement.
OUTLOOK
Greencore has entered FY20 with a clear set of strategic
objectives. These are to drive growth in an expanding food to go
market, to deepen its relevance with customers, and to adopt a
distinctive and repeatable Greencore Way of working. These are
underpinned by an economic model of disciplined growth and
investment.
The Group anticipates a year of profitable growth in FY20. The
Group's medium term financial ambitions are for mid single-digit
organic revenue growth, high single-digit Adjusted EPS growth, the
conversion of half of its Adjusted EBITDA to Free Cash Flow and for
mid-teen ROIC.
A strong balance sheet and improved Free Cash Flow Conversion
leaves the Group well placed to deliver on these ambitions and to
consider further organic and inorganic investment in line with its
capital allocation policy and strategic objectives.
Basis of preparation
The financial information included within this Results Statement
has been extracted from the audited consolidated financial
statements of Greencore Group plc. Details of the basis of
preparation can be found in Note 1 to the attached financial
information. This also includes details of the implementation of
IFRS16 Leases which the Group will adopt in its FY20 financial
statements.
Forward--looking statements
Certain statements made in this document are forward--looking.
These represent expectations for the Group's business, and involve
known and unknown risks and uncertainties, many of which are beyond
the Group's control. The Group has based these forward--looking
statements on current expectations and projections about future
events. These forward-looking statements may generally, but not
always, be identified by the use of words such as 'will', 'aims',
'anticipates', 'continue', 'could', 'should', 'expects', 'is
expected to', 'may', 'estimates', 'believes', 'intends',
'projects', 'targets', or the negative thereof, or similar
expressions.
By their nature, forward-looking statements involve risk and
uncertainty because they relate to events and depend on
circumstances that may or may not occur in the future and reflect
the Group's current expectations and assumptions as to such future
events and circumstances that may not prove accurate. A number of
material factors could cause actual results and developments to
differ materially from those expressed or implied by
forward-looking statements. You should not place undue reliance on
any forward-looking statements. These forward-looking statements
are made as of the date of this announcement. The Group expressly
disclaims any obligation to publicly update or review these
forward-looking statements other than as required by law.
PRESENTATION
A presentation of the results for analysts and institutional
investors will take place at 8.30am today at the Lincoln Centre, 18
Lincoln's Inn Fields, London, WC2A 3ED. This presentation can also
be accessed live from the Investor Relations section on
www.greencore.com or alternatively via conference call.
Participants wishing to dial into the conference call can do so
using the following details:
Ireland number: +353 (0)1 431 9615
UK number: +44 (0)20 7192 8000
US number: +1 631 510 7495
Confirmation code: 1685147
A replay of the presentation will be available on
www.greencore.com and also through a 7 day conference call replay
facility.
Ireland replay number: +353 (0)1 553 8777
UK replay number: +44 (0)33 3300 9785
US replay number: +1 917 677 7532
Replay code: 1685147
For further information, please contact:
Patrick Coveney Chief Executive Officer Tel: +353 (0) 1 486
3313
Eoin Tonge Chief Financial Officer Tel: +353 (0) 1 486
3316
Jack Gorman Head of Investor Relations Tel: +353 (0) 1 486
3308
Rob Greening or Powerscourt Tel: +44 (0) 20 7250
Sam Austrums 1446
Billy Murphy or Drury | Porter Novelli Tel: +353 (0) 1 260
Louise Walsh 5000
About Greencore
Greencore is a leading manufacturer of convenience food in the
UK. It supplies grocery and other retailers including all of the
major UK supermarkets. The Group has strong market positions in a
range of categories including sandwiches, salads, sushi, chilled
snacking, chilled ready meals, chilled soups and sauces, chilled
quiche, ambient sauces and pickles, and frozen Yorkshire
Puddings.
On an annual basis, Greencore manufactures around 717 million
sandwiches and other food to go products, 123 million chilled
prepared meals, and 231 million bottles of cooking sauces, pickles
and condiments. The Group carries out around 7,500 deliveries to
stores each day.
Greencore has 21 production units in 16 world-class
manufacturing sites in the UK, with industry-leading technology and
supply chain capabilities. The Group also operates 2 ingredients
trading businesses in Ireland. The Group employs c.11,500 people
and is headquartered in Dublin, Ireland.
For further information go to www.greencore.com or follow
Greencore on social media.
OPERATING REVIEW(1)
Convenience Foods UK & Ireland
FY19 FY18 Change Change
GBPm GBPm (As reported) (Pro Forma
basis)
Revenue 1,446.1 1,498.5 -3.5% +2.6%
-------- -------- --------------- ------------
Adjusted Operating
Profit 105.5 104.6 +0.9%
-------- -------- --------------- ------------
Adjusted Operating
Margin % 7.3% 7.0% +30 bps
-------- -------- --------------- ------------
Group Operating Profit 99.8 49.8 +100.4%
-------- -------- --------------- ------------
Strategic developments
The Group refocused its strategic direction during FY19 on its
convenience food business in the UK and Ireland. It introduced a
clear set of strategic objectives, aimed at optimising Greencore's
growth potential, namely:
-- To drive growth in an expanding food to go market by both
broadening the Group's product proposition and enabling consumers
to buy more in existing space and new channels and formats
-- To deepen customer relevance by driving shared returns,
leveraging the scale of its overall portfolio and doing more with
customers across the value chain
-- To adopt a distinctive and repeatable Greencore Way of working, centred on the Group's four differentiated capabilities: Great Food, People at the Core, Greencore Excellence, and Sustainable Business
These objectives are underpinned by an economic model of
disciplined growth and investment, driving shareholder value.
There were a number of highlights that demonstrated this
strategy in action in FY19. The Group launched multiple commercial
projects with key customers including product launches in salads,
sushi and chilled snacking and bespoke café channel initiatives. In
total, during FY19, 47% of the Group's products in the UK were new
to market as it worked with customers on product or packaging
development initiatives. The Group also initiated exploratory work
in other areas, including hot food and event-specific vending. In
September 2019, the Group acquired Freshtime, extending Greencore's
presence in meal salads and chilled snacking. The growth outlook
for Greencore in food to go categories remains positive, driven by
a combination of an expanding underlying market and the Group's
initiatives to broaden its category and channel reach.
From a specific category perspective, the Group completed the
reset of its ready meals product and facility footprint at
Warrington, Kiveton and Consett in the first half of the year. This
provides a platform for the Group to drive growth and improve
returns in this category.
The Group continued to strengthen its position as a strategic
supplier in key growth categories. The Group extended contracts
with some core customers in the period. Specifically, the Group
partnered with existing customers to improve availability and
merchandising in store. More customers also worked with the Group
during the year on 'earned recognition', a process of self auditing
of food quality and safety.
In FY19, the Group made further progress in developing and
executing against its Greencore Excellence efficiency programmes.
In its Greencore Purchasing Excellence and Greencore Manufacturing
Excellence programmes, the Group is now deploying analytical and
data technology solutions to support operating activities, while
the Group invested further in its consumer insight capability as
part of its Greencore Commercial Excellence initiative. The Group
also began to step up work on its automation programme in the
period. Furthermore, Greencore up-weighted its sustainability
agenda, including making specific commitments around the way in
which the business is run and the contributions that it makes to
industry sustainability. As part of that, the Group agreed its new
primary bank debt agreement with embedded sustainability targets,
the first of its kind in Ireland.
Performance
As expected, reported revenue from continuing operations
declined by 3.5% to GBP1,446.1m in FY19, primarily reflecting the
impact of site disposals and exits (Hull, Evercreech and Kiveton
longer life ready meals). Pro Forma Revenue Growth was 2.6%.
Adjusted Operating Profit rose by 0.9% to GBP105.5m and Adjusted
Operating Margin rose by 30bps to 7.3%. The FY19 performance was
delivered against the backdrop of a subdued UK trading environment,
especially in the second half of the year, with cautious consumer
demand particularly in the context of uncertainty around
Brexit.
FY19 revenue in the Group's activities in food to go categories
(comprising sandwiches, salads, sushi and chilled snacking)
totalled GBP962.5m and accounted for approximately 66% of reported
revenue. Reported revenues grew by 3.6% in these categories.
Excluding the acquisition of Freshtime, Pro Forma Revenue Growth
was 3.3%, with the contribution from underlying product revenue
growth modestly higher than that of revenue from the distribution
of third party products. Pro Forma Revenue Growth was weighted
towards the first half of the year, with 7.0% in H1 19 and 0.3%
growth in H2 19.
Underlying product revenue growth in food to go categories
continued to outperform the market during the year. Market growth
was below historical trends due to a mix of the challenging market
conditions, unseasonal weather, a varied trading performance across
customers, and a strong comparative period in the second half of
the year.
Revenue for the distribution of third party products accounted
for approximately 8% of sales in continuing operations with strong
growth in H1 19 benefitting from the annualised impact of new
business won during FY18. Following the acquisition of Freshtime in
September 2019, revenue from its products previously distributed by
Greencore is now classified as underlying product revenue.
The Group's other convenience categories comprise activities in
the chilled ready meals, chilled soups and sauces, chilled quiche,
ambient sauces and pickles, and frozen Yorkshire Pudding
categories, as well as Irish ingredients trading businesses in
Ireland. Reported revenue across these businesses declined by 15.0%
to GBP483.6m. Pro forma revenue increased by 1.2%, when excluding
sites either disposed of or that have ceased trading, the impact on
transition to IFRS 15 Revenue from Contracts with Customers and
foreign exchange movements. Pro Forma Revenue Growth was driven by
the ambient cooking sauce business, with ready meals revenue
broadly unchanged. The performance in the cooking sauce business
was driven by strong volume growth in the first quarter. Revenue in
the Group's Irish ingredients trading businesses also advanced on
higher volumes.
Inflation trends in the Group's main UK cost components were
broadly as anticipated. Raw material and packaging costs rose by
0.4% in FY19 as certain commodity costs continued to increase.
Direct labour inflation in the UK accelerated in the period, to
approximately 5%, primarily due to the impact of increased National
Living Wage levels on the Group's wage structure. The Group
mitigated the overall effects of this increased inflation by
stepping up the delivery in its Greencore Excellence programmes and
by working with customers to optimise product mix and supply chain
costs.
Overall, Adjusted Operating Profit in continuing operations grew
modestly in FY19, with an increase of GBP0.9m to GBP105.5m. In its
food to go categories, the Group generated an improved performance
in the period, driven by volume growth and a strong operational
performance. In the Group's other convenience categories, an
improvement in the ready meals business in H2 19 following the
reset of its product and facility footprint was offset by a mixed
performance in the Group's cooking sauce business.
Brexit
The Group has been engaged in Brexit planning since the result
of the referendum was first announced and monitors closely the
potential implications of Brexit on its business, particularly in
the areas of volume, material sourcing and labour availability. A
multi-functional team meets on an ongoing basis to assess
Brexit-related risks, build mitigation plans, test alternative
scenarios and support dialogue with our customers, government, the
wider industry and other stakeholders.
The Group continues to believe that the risks from Brexit are
manageable in the medium term, while acknowledging potential
near-term challenges associated with a disorderly exit.
The direct financial impact associated with preparation for
Brexit was modest in the period. Some incremental working capital
outflows in H1 19 unwound as the financial year progressed.
Discontinued operations
On 25 November 2018, the Group completed the disposal of its US
business to Hearthside Food Solutions LLC. Results for the US
business are presented as discontinued operations in the Group
Financial Statements. A profit on disposal of GBP55.9m was reported
in FY19 to reflect this transaction. Details of FY19 performance of
discontinued operations and disposal of undertakings are included
in Note 9.
Group Cash Flow and Returns
FY19 FY18 Change
GBPm GBPm (as reported)
Free Cash Flow 54.9 92.4 -GBP37.5m
------ ------ ---------------
Net Debt 288.5 501.1
------ ------ ---------------
Net Debt:EBITDA as per financing
agreements 1.8x 2.3x
------ ------ ---------------
ROIC 14.4% 15.6% -120bps
------ ------ ---------------
Strategic developments
Following the disposal of its US business on 25 November 2018,
the Group fully reset its capital structure. The Group returned
GBP509.0m of capital to shareholders in the form of a tender offer
executed on 31 January 2019, with 261,025,641 Ordinary Shares
acquired and immediately cancelled by the Group. The Group also
reshaped its debt and associated derivative portfolio to reflect
the removal of US dollar assets from the business and also
refinanced its primary sterling bank debt agreements. An
exceptional charge of GBP25.4m was recognised in FY19 to reflect
this reset.
The Group also defined its capital allocation model following
the strategic reset of the business. Central to this is the Group's
medium term target leverage range of 1.5x to 2.0x Net Debt:EBITDA,
as measured under financing agreements. This model facilitates a
progressive dividend policy, disciplined organic and inorganic
investment, and potential incremental shareholder return over
time.
Performance
Free Cash Flow was GBP54.9m in FY19 compared to GBP92.4m in
FY18, the decrease primarily reflecting the impact of US cash
flows. This represents a conversion rate of 36% of Adjusted EBITDA
(FY18: 45%). Excluding the US cash flows, Free Cash Flow conversion
increased to 47% from 33% in FY18, driven by improved EBITDA, lower
working capital outflows, lower interest costs and lower
exceptional cashflows.
Several other factors had a specific impact on cash flow during
FY19. These included the effects of the disposal of the US business
and associated capital restructuring, as well as the timing of
dividend payments.
Net Debt decreased to GBP288.5m from GBP501.1m at the end of
FY18. The Group's Net Debt:EBITDA leverage as measured under
financing agreements was 1.8x at year end. This compared to 1.9x at
the end of March 2019 and 2.3x at the end of September 2018. This
outturn includes the increased debt associated with the Freshtime
acquisition completed in early September 2019. As at 27 September
2019, the Group had committed facilities of GBP506m with a weighted
average maturity of 4.0 years.
ROIC was 14.4% for the 12 months ended 27 September 2019,
compared to 15.6% for the 12 months ended 28 September 2018. The
reduction was primarily driven by increased investment, in
particular the timing of the acquisition of Freshtime and was also
impacted by an increased tax rate.
FINANCIAL REVIEW(1)
The Group completed the disposal of its US business on 25
November 2018. The results of this business have been included as
discontinued operations in the Group Financial Statements in FY19
and FY18.
Revenue and Operating Profit - Continuing operations
Reported revenue in the period was GBP1,446.1m, a decrease of
3.5% compared to FY18, primarily reflecting the impact of site
disposals and exits in the period. Pro Forma Revenue Growth was
2.6%.
Group Operating Profit increased from GBP49.8m to GBP99.8m as a
result of a material reduction in the level of exceptional items in
FY19. Adjusted Operating Profit of GBP105.5m was 0.9% higher than
in FY18 with improved profits in food to go categories in FY19
offsetting a mixed performance in the Group's other convenience
categories. Adjusted Operating Margin was 7.3%, 30 basis points
higher than the prior year.
Net finance costs - Continuing operations
The Group's net bank interest payable was GBP14.2m in FY19, a
decrease of GBP12.0m versus FY18. The decrease was driven by lower
average Net Debt levels following the disposal of the Group's US
business.
The Group's non-cash finance charge, before exceptional items,
in FY19 was GBP4.7m (FY18: GBP6.7m). The change in the fair value
of derivatives and related debt adjustments was a GBP2.1m charge in
FY19 (FY18 charge: GBP3.3m). The non-cash pension financing charge
of GBP2.5m was GBP0.9m lower than the FY18 charge of GBP3.4m.
The exceptional non-cash finance charges are detailed below in
Exceptional Items.
Profit before taxation - Continuing operations
The Group's Profit before taxation increased from GBP17.8m in
FY18 to GBP56.4m in FY19, as the higher Group Operating Profit more
than offset an increase in net finance costs which include an
exceptional finance charge. Adjusted Profit Before Tax in the
period was GBP92.3m (FY18: GBP79.6m), primarily driven by a
reduction in the Group's net bank interest payable.
Taxation - Continuing operations
The Group's effective tax rate in FY19 (including the tax impact
associated with pension finance items) was 15% (FY18: 13%). The
future rate is expected to continue to reflect the blend of profits
within the Group, heavily influenced by the UK statutory rate.
Exceptional items
The Group had a pre--tax exceptional credit of GBP25.7m in FY19,
and an after tax credit of GBP25.9m, comprised as follows:
Exceptional Items GBPm
Guaranteed Minimum Pension ('GMP')
equalisation (3.0)
-------
Transaction costs associated with
acquisition of Freshtime (1.8)
-------
Network optimisation and rationalisation 0.0
-------
Debt restructuring post disposal
of Greencore's US business (25.4)
-------
Profit on disposal of Greencore's
US business 55.9
-------
Exceptional items (before tax) 25.7
-------
Tax credit on exceptional items 0.2
-------
Exceptional items (after tax) 25.9
-------
A cash outflow of GBP12.6m is included in the debt restructuring
charge to reflect the net cash cost of terminating US dollar
related swaps. Cash items associated with the disposal of
Greencore's US business are detailed in Note 9.
Earnings per share
Basic earnings per share for total operations was 19.9 pence
(FY18: 4.8 pence). This was driven by a GBP72.2m increase in
Earnings from total operations as the movement in exceptional
items, from a net charge of GBP51.7m in FY18 to a net credit of
GBP25.9m in FY19, more than offset a reduction in profits due to
the disposal of the Group's US business. Basic earnings per share
also benefitted from a reduction of 261m in the number of shares in
issue as a result of the tender offer which was executed in January
2019. The weighted average number of shares in issue in FY19 was
532.0m (FY18: 703.3m).
Adjusted Earnings from total operations were GBP84.9m in the
period, GBP21.0m behind prior year levels largely due to the
disposal of the Group's US business. Adjusted earnings per share
for total operations of 16.0 pence was 6.0% ahead of FY18 which
primarily reflects the impact of a reduction in the number of
shares in issue as a result of the tender offer.
Illustratively, if the tender offer had been executed at the
beginning of FY19 and the weighted average number of shares in
issue was equivalent to the total shares in issue on 27 September
2019 (446.0m), and if earnings from discontinued operations were
excluded Adjusted EPS would have been 17.0 pence.
Cash Flow and Net Debt
Adjusted EBITDA from continuing operations was GBP2.0m higher at
GBP142.0m. EBITDA relating to discontinued operations was GBP9.1m.
The Group incurred a working capital outflow of GBP22.8m. This
included a GBP21.2m outflow associated with the US business, offset
in part by an element of the net cash proceeds from the disposal of
the US business. The working capital outflow in continuing
operations was GBP1.6m. Maintenance capital expenditure of GBP30.6m
was incurred in the period (FY18: GBP36.7m). The cash outflow in
respect of exceptional charges was GBP9.6m (FY18: GBP15.0m), of
which GBP8.7m related to prior year exceptional charges.
Interest paid in the period was GBP16.9m (FY18: GBP26.7m)
reflecting lower net debt levels following the disposal of the US
business. Cash tax remained low as the Group utilised historical
tax losses. The cash tax rate in the period was 4% (FY18: 1%). The
cash tax rate for the Group is expected to rise towards the Group's
effective rate in the medium term as a result of increased
profitability and a reduction in the degree to which UK losses may
be utilised in any one year. The Group's cash funding for defined
benefit pension schemes increased to GBP16.0m (FY18: GBP15.1m), as
the Trustees of one of the smaller legacy defined benefit pension
schemes in the UK agreed to the purchase of an insurance policy
over the scheme liabilities in the period.
These movements resulted in Free Cash Flow of GBP54.9m compared
to GBP92.4m in FY18, the reduction driven primarily by the effects
of the disposal of the Group's US business.
In FY19, the Group incurred strategic capital expenditure of
GBP13.6m (FY18: GBP26.8m), including expenditure of GBP1.2m
incurred in discontinued operations.
The net cash outflow associated with acquisitions totalled
GBP56.2m, reflecting the acquisition of Freshtime in September
2019. Net cash proceeds from disposals totalled GBP811.9m, of which
GBP810.9m related to the disposal of the US business. Following the
disposal of the US business, the Group also returned GBP509.0m of
capital to shareholders in the form of a tender offer and used the
remainder of the net proceeds to reduce leverage, GBP12.6m of which
was used to repay swaps as part of the reshaping of its debt and
derivative portfolio.
Equity dividend cash payments increased significantly to
GBP50.3m (FY18: GBP35.7m), reflecting the change in the phasing of
dividend cash payments resulting from the removal of the scrip
dividend option (both the interim and final dividend for FY18 were
paid during H1 19, and the interim dividend for FY19 was paid
during H2 19).
The Group's Net Debt at 27 September 2019, a seasonal low point,
was GBP288.5m, a decrease of GBP212.6m from 28 September 2018.
Financing
In FY19 the Group reshaped its debt and associated derivative
portfolio to reflect the removal of US dollar assets from the
business as well as, in January 2019, refinancing its primary
sterling bank debt agreements. The Group remains well financed with
committed facilities of GBP506m at 27 September 2019 and a weighted
average maturity of 4.0 years. The Group had undrawn committed
facilities of GBP175.0m at 27 September 2019 (FY18: GBP188.3m).
Pensions
All legacy defined benefit pension schemes are closed to future
accrual. The net pension deficit relating to legacy defined pension
schemes, before related deferred tax, at 27 September 2019 was
GBP92.0m, GBP2.7m higher than the position at 28 September 2018.
The net pension deficit after related deferred tax was GBP74.8m, an
increase of GBP1.2m from 28 September 2018. The increase in net
pension deficit was driven principally by an increase in UK scheme
liabilities, resulting in a GBP13.3m actuarial loss, as relevant
bond yield assumptions were reduced. This includes an increase in
liabilities to meet GMP equalisation of benefits for males and
females in the Group's legacy defined benefit pension scheme in the
UK.
The valuations and funding obligations of the Group's legacy
defined benefit pension schemes are assessed on a triennial basis
with the relevant trustees. Following the most recent reviews, the
Group's annual cash funding requirement for defined benefit pension
schemes is approximately GBP15m. The Group is assessing
opportunities to further de-risk liabilities, that if implemented,
could modestly increase annual cash funding requirements.
Dividends
The Board of Directors is recommending a final dividend of 3.75
pence per share. This will result in a total dividend for the full
year of 6.20 pence per share (FY18: 5.57 pence per share). The
total dividend represents a pay-out amount of approximately 36% of
Adjusted Earnings.
Principal risks and uncertainties
There are a number of potential risks and uncertainties which
could have a material impact on future Group performance and could
cause actual results to differ materially from expected and
historical results. The risks and uncertainties are described in
detail in the section Risks and Risk Management in the Annual
Report and Financial Statements for the year ended 27 September
2019 issued on 26 November 2019.
Responsibility Statement
Each of the Directors of Greencore Group plc confirm that, to
the best of each person's knowledge and belief as required by the
Transparency Regulations:
-- The Financial Statements, prepared in accordance with IFRS as
adopted by the EU and the Company Financial Statements prepared in
accordance with FRS 101: Reduced Disclosure Framework, give a true
and fair view of the assets, liabilities, financial position of the
Group and Company at 27 September 2019 and the profit/loss of the
Group for the year 27 September 2019; and
-- The Financial Statements include a fair review of the
development and performance of the business and the position of the
Group and Company, together with a description of the principal
risks and uncertainties that they face.
P.G. Kennedy
Chairman
Date: 25 November 2019
GROUP INCOME STATEMENT
For year ended 27 September 2019
2019 2018
Exceptional
Exceptional (Note
Notes Pre - exceptional (Note 3) Total Pre - exceptional 3) Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------ ------ ------------------ ------------ -------- ------------------ ------------ ----------
Continuing operations
Revenue 2 1,446.1 - 1,446.1 1,498.5 - 1,498.5
Cost of sales (972.4) - (972.4) (1,023.0) - (1,023.0)
------------------ ------ ------------------ ------------ -------- ------------------ ------------ ----------
Gross profit 473.7 - 473.7 475.5 - 475.5
Operating costs,
net (368.2) (4.8) (373.0) (370.9) (52.2) (423.1)
------------------ ------ ------------------ ------------ -------- ------------------ ------------ ----------
Group Operating
Profit
before
acquisition
related
amortisation 105.5 (4.8) 100.7 104.6 (52.2) 52.4
Amortisation of
acquisition
related
intangibles (0.9) - (0.9) (2.6) - (2.6)
------------------ ------ ------------------ ------------ -------- ------------------ ------------ ----------
Group Operating
Profit 104.6 (4.8) 99.8 102.0 (52.2) 49.8
Finance income 7 0.8 - 0.8 0.2 - 0.2
Finance costs 7 (19.7) (25.4) (45.1) (33.1) - (33.1)
Share of profit
of
associates after
tax 0.9 - 0.9 0.9 - 0.9
------------------ ------ ------------------ ------------ -------- ------------------ ------------ ----------
Profit before
taxation 86.6 (30.2) 56.4 70.0 (52.2) 17.8
Taxation (13.2) 0.2 (13.0) (13.0) 7.8 (5.2)
------------------ ------ ------------------ ------------ -------- ------------------ ------------ ----------
Profit for the
period
from continuing
operations 73.4 (30.0) 43.4 57.0 (44.4) 12.6
------------------ ------ ------------------ ------------ -------- ------------------ ------------ ----------
Discontinued
Operations
Result from
discontinued
operations 9 8.9 55.9 64.8 31.2 (7.3) 23.9
------------------ ------ ------------------ ------------ -------- ------------------ ------------ ----------
Profit for the
financial
year 82.3 25.9 108.2 88.2 (51.7) 36.5
------------------ ------ ------------------ ------------ -------- ------------------ ------------ ----------
Attributable to:
Equity
shareholders 80.1 25.9 106.0 85.5 (51.7) 33.8
Non-controlling
interests 2.2 - 2.2 2.7 - 2.7
------------------ ------ ------------------ ------------ -------- ------------------ ------------ ----------
82.3 25.9 108.2 88.2 (51.7) 36.5
------------------ ------ ------------------ ------------ -------- ------------------ ------------ ----------
Earnings per share (pence) - continuing operations
Basic earnings
per
share 6 7.7 1.4
Diluted earnings
per share 6 7.7 1.4
------------------ ------ ------------------ ------------ -------- ------------------ ------------ ----------
Earnings per share (pence) - total
Basic earnings
per
share 6 19.9 4.8
Diluted earnings
per share 6 19.9 4.8
------------------ ------ ------------------ ------------ -------- ------------------ ------------ ----------
GROUP STATEMENT OF COMPREHENSIVE INCOME
for year ended 27 September 2019
2019 2018
GBPm GBPm
---------------------------------------------------------- ------- --------
Items of comprehensive income taken directly to equity for continuing
and discontinued operations
Items that will not be reclassified to profit
or loss:
Actuarial (loss)/gain on Group legacy defined
benefit pension schemes (13.3) 24.3
Tax credit / (charge) on Group legacy defined
benefit pension schemes 2.9 (4.5)
----------------------------------------------------------- ------- --------
(10.4) 19.8
---------------------------------------------------------- ------- --------
Items that may subsequently be reclassified to
profit or loss:
Currency translation adjustment 10.3 15.4
Translation reserve transferred to Income Statement
on discontinued operation (24.5) -
Hedge of net investment in foreign currency subsidiaries - (10.6)
Net Investment hedge transferred to Income Statement
for the year 22.3 -
Cash flow hedges:
fair value movement taken to equity 0.2 4.1
transfer to Income Statement for the year 0.3 5.9
8.6 14.8
---------------------------------------------------------- ------- --------
Net (expense)/ income recognised directly within
equity (1.8) 34.6
Profit for the financial year 108.2 36.5
----------------------------------------------------------- ------- --------
Total comprehensive income for the financial year 106.4 71.1
----------------------------------------------------------- ------- --------
Attributable to:
Equity shareholders 104.2 68.4
Non-controlling interests 2.2 2.7
----------------------------------------------------------- ------- --------
Total comprehensive income for the financial year 106.4 71.1
----------------------------------------------------------- ------- --------
Attributable to:
Continuing operations 49.8 27.4
Discontinued operations 56.6 43.7
----------------------------------------------------------- ------- --------
Total comprehensive income for the financial year 106.4 71.1
----------------------------------------------------------- ------- --------
GROUP STATEMENT OF FINANCIAL POSITION
at 27 September 2019
2019 2018
Notes GBPm GBPm
----------------------------------------------------- ------ -------- --------
ASSETS
Non-current assets
Goodwill and intangible assets 483.3 425.3
Property, plant and equipment 332.5 323.0
Investment property 5.8 6.3
Investment in associates 1.2 1.3
Retirement benefit assets 8 36.4 15.3
Derivative financial instruments 5.5 0.5
Deferred tax assets 37.1 41.7
----------------------------------------------------- ------ -------- --------
Total non-current assets 901.8 813.4
----------------------------------------------------- ------ -------- --------
Current assets
Inventories 45.9 39.1
Trade and other receivables 173.8 181.0
Derivative financial instruments - 0.3
Cash and cash equivalents 7 41.6 37.0
Current tax receivable 0.7 -
Assets held for sale 9 - 944.7
----------------------------------------------------- ------ -------- --------
Total current assets 262.0 1,202.1
----------------------------------------------------- ------ -------- --------
Total assets 1,163.8 2,015.5
----------------------------------------------------- ------ -------- --------
EQUITY
Capital and reserves attributable to equity holders
of the Company
Share capital 4.5 7.1
Share premium 0.1 650.8
Reserves 294.8 79.3
----------------------------------------------------- ------ -------- --------
299.4 737.2
Non-controlling interests 6.4 6.4
----------------------------------------------------- ------ -------- --------
Total equity 305.8 743.6
----------------------------------------------------- ------ -------- --------
LIABILITIES
Non-current liabilities
Borrowings 7 330.1 537.9
Derivative financial instruments 3.3 13.4
Retirement benefit obligations 8 128.4 104.6
Other payables 3.7 3.7
Provisions 6.7 8.9
Deferred tax liabilities 6.9 4.2
----------------------------------------------------- ------ -------- --------
Total non-current liabilities 479.1 672.7
----------------------------------------------------- ------ -------- --------
Current liabilities
Borrowings 7 - 0.2
Derivative financial instruments 0.3 0.1
Trade and other payables 358.4 377.9
Provisions 5.5 6.7
Current tax payable 14.7 11.3
Liabilities directly associated with assets held
for sale 9 - 203.0
----------------------------------------------------- ------ -------- --------
Total current liabilities 378.9 599.2
----------------------------------------------------- ------ -------- --------
Total liabilities 858.0 1,271.9
----------------------------------------------------- ------ -------- --------
Total equity and liabilities 1,163.8 2,015.5
----------------------------------------------------- ------ -------- --------
GROUP STATEMENT OF CASH FLOWS
for the year ended 27 September 2019
2019 2018
Notes GBPm GBPm
----------------------------------------------------- ------ -------- ----------
Profit before taxation 56.4 17.8
Finance income 7 (0.8) (0.2)
Finance costs 7 19.7 33.1
Share of profit of associates (after tax) (0.9) (0.9)
Exceptional items 3 30.2 52.2
----------------------------------------------------- ------ -------- ----------
Continuing Operating Profit (pre-exceptional) 104.6 102.0
Discontinued Operating Profit (pre-exceptional) 9.1 30.4
----------------------------------------------------- ------ -------- ----------
Operating Profit (pre-exceptional) 113.7 132.4
Depreciation of property, plant and equipment 32.9 47.3
Amortisation of intangible assets 4.5 25.3
Employee share-based payment expense 3.6 1.6
Contributions to legacy defined benefit pension
scheme (16.0) (15.1)
Working capital movement (22.8) (15.9)
Other movements 0.8 (3.2)
----------------------------------------------------- ------ -------- ----------
Net cash inflow from operating activities
(pre-exceptional) 116.7 172.4
Cash outflow related to exceptional items (9.6) (15.0)
Interest paid (16.9) (26.7)
Tax paid (3.5) (0.9)
----------------------------------------------------- ------ -------- ----------
Net cash inflow from operating activities 86.7 129.8
----------------------------------------------------- ------ -------- ----------
Cash flow from investing activities
Dividends received from associates 1.0 0.8
Purchase of property, plant and equipment (39.6) (60.5)
Purchase of intangible assets (4.6) (3.0)
Acquisition of undertakings 4 (56.2) -
Disposal of undertakings 9 811.9 -
Disposal of investment property 0.5 -
----------------------------------------------------- ------ -------- ----------
Net cash inflow/(outflow) from investing activities 713.0 (62.7)
----------------------------------------------------- ------ -------- ----------
Cash flow from financing activities
Proceeds from issue of shares 0.1 0.2
Ordinary shares purchased - own shares (0.6) (2.0)
Capital return via tender offer (509.0) -
Drawdown of bank borrowings 7 67.0 -
Repayment of bank borrowings (210.0) (9.6)
Repayment of non-bank borrowings (63.1) (1.3)
Repayment of private placement notes (14.6) -
Termination of swaps (12.6) -
Decrease in finance lease liabilities (0.4) -
Dividends paid to equity holders of the Company (50.3) (35.7)
Dividends paid to non-controlling interests (2.2) (1.5)
Net cash outflow from financing activities (795.7) (49.9)
----------------------------------------------------- ------ -------- ----------
Net increase in cash and cash equivalents 4.0 17.2
----------------------------------------------------- ------ -------- ----------
Reconciliation of opening to closing cash
and cash equivalents
Cash and cash equivalents at beginning of
year 37.0 19.8
Translation adjustment 0.6 -
Increase in cash and cash equivalents 4.0 17.2
----------------------------------------------------- ------ -------- ----------
Cash and cash equivalents at end of year 41.6 37.0
----------------------------------------------------- ------ -------- ----------
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 27 September 2019
1. Basis of preparation
The financial information included within this full year results
statement has been extracted from the audited Consolidated
Financial Statements of Greencore Group plc for the year ended 27
September 2019, to which an unqualified audit opinion is attached.
Full details of the basis of preparation of the Group Financial
Statements for the year ended 27 September 2019 are included in
Note 1 of the 2019 Annual Report.
The directors, after making enquiries have a reasonable
expectation that the Group has adequate resources to continue
operating for the foreseeable future having consideration for all
risks including Brexit. As part of these resources, the Group had
undrawn committed facilities of GBP175.0m as at 27 September 2019.
For these reasons, they continue to adopt the going concern basis
in preparing the Group Financial Statements.
The financial information presented in this full year results
statement has been prepared in accordance with the recognition and
measurement principles of International Financial Reporting
Standards (IFRS) and IFRS Interpretations Committee interpretations
adopted by the European Union (EU).
Following the disposal of Greencore's US business which was
completed in November 2018, in accordance with IFRS 5 Non-current
assets held for sale and discontinued operations, the results of
Greencore's US business have been presented within profit from
discontinued operations in the Group Income Statement.
New Standards and Interpretation
IFRS 9 Financial Instruments
IFRS 9 Financial Instruments was effective for the Group from 29
September 2018 and replaces IAS 39 Financial Instruments:
Recognition and Measurement. The new standard introduces new
classification and measurement for financial assets, new rules for
hedge accounting and a new impairment model for financial assets.
The Group has transitioned to the new standard using the modified
retrospective transition option and in accordance with the
provisions of the new standard, comparative figures have not been
restated. The Group's evaluation of the effect of IFRS 9 is
outlined below.
In line with the new impairment model, the Group assessed its
historic credit loss experience on aged trade receivables adjusting
for future economic conditions which resulted in a one-off
adjustment of GBP0.9m, increasing trade receivables impairment
provision through retained earnings on 29 September 2018.
The hedge accounting requirements in IFRS 9 are optional. The
Group has chosen not to apply the new hedge accounting rules under
IFRS 9 and will continue to apply IAS 39. The decision has not
impacted on how the Group accounts for effective hedges.
The new IFRS 9 classification rules did not impact the
measurement or carrying amount of the Group's financial assets on
transition.
IFRS 15 Revenue from Contracts with Customers
IFRS 15 Revenue from Contracts with Customers was effective for
the Group for the reporting period commencing 29 September 2018.
The Group adopted the new standard having completed a detailed
review of its customer contracts and the new IFRS 15 revenue
recognition requirements, resulting in a change to how the Group
currently recognises revenue on third party manufactured goods as
set out below.
In transitioning to IFRS 15, the Group assessed how revenue from
the sale of third party manufactured goods is accounted for and
whether it was more appropriate to account for revenue on an agency
or net basis, versus principal or gross basis. The majority of the
Group's contracts for the sale of third party manufactured goods
are accounted for on a gross basis. On completion of the
assessment, one customer contract in the Irish ingredients trading
business changed from a principal to agent relationship, on the
basis that the Group did not control the goods prior to transfer to
the customer. The impact of the change in accounting treatment in
the current period is a reduction of GBP6.9m to reported revenue
and costs of goods sold with no impact on net profit. The Group has
applied a modified approach on the transition to IFRS 15 meaning
there has been no restatement to the prior year numbers included in
the Group Income Statement.
In accordance with the requirements of IFRS 15, the Group has
included additional disclosure on the disaggregation of revenue by
product category in note 2.
Accounting standards not yet adopted
IFRS 16 Leases
IFRS 16 Leases sets out the principle for the recognition,
measurement, presentation and disclosure of leases for both lessee
and lessor. It eliminates the classification of leases as either
operating leases or finance leases and introduces a single lessee
accounting model where the lessee is required to recognise assets
and liabilities for all material leases that have a term of greater
than a year. The standard will primarily affect the accounting for
the Group's operating leases. The application of IFRS 16 will
result in the recognition of additional assets and liabilities in
the Group Statement of Financial Position and in the Group Income
Statement. It will replace the straight-line operating lease
expense with a depreciation charge for the right-of-use asset and
an interest expense on the lease liabilities. Given that
depreciation is charged on a straight-line basis, but interest
reduces over the life of a lease (as it is based on outstanding
lease liabilities) the impact on the Group Income Statement will
depend on the maturity of the Group's lease portfolio. In addition,
the Group will no longer recognise provisions for operating leases
that it assesses to be onerous, instead the Group will perform
impairment testing on the right-of-use asset.
IFRS 16 is effective for annual periods beginning on or after 1
January 2019. The Group will apply IFRS 16 from 28 September 2019
using the modified retrospective approach. Therefore, the
cumulative effect of adopting IFRS 16 will be recognised as an
adjustment to the opening balance of retained earnings at 28
September 2019, with no restatement of comparative information.
The Group's assessment of the impact of adopting IFRS 16 is at
an advanced stage. The estimated impact on the Group's results are
summarised below, however the actual adjustment on transition could
differ from the estimated impact due to changes in underlying
assumptions or assessments of the expected term of lease.
Estimated adjustments on transition on 28 September 2019:
- Property, plant and equipment increase of GBP41m
- Net debt increase of GBP46m
Estimated impact on the results for the year ended 25 September
2020:
- Profit after tax is marginal
- EBITDA increase of approximately GBP13m
IFRIC 23
IFRIC 23 Uncertainty over Income Tax Treatments (effective date:
financial year beginning 28 September 2019): This IFRIC clarifies
the accounting for uncertainties in income taxes and is to be
applied to the determination of taxable profit (or tax loss), tax
bases, unused tax losses, unused tax credits and tax rates, when
there is uncertainty over income tax treatments under IAS 12 Income
Taxes. The Group does not expect the adoption of this IFRIC to have
a material impact on the Group Financial Statements.
Other changes to IFRS have been issued but are not yet effective
for the Group. However, they are either not expected to have a
material effect on the Financial Statements or they are not
currently relevant for the Group.
2. Segment Information
Following the disposal of Greencore's US business on 25 November
2018, the Group reviewed its reporting structure to ensure that it
continues to reflect the Group's organisational structure and the
nature of the financial information reported to and assessed by the
Chief Operating Decision Maker ('CODM') as defined by IFRS 8
Operating Segments. The CODM has been identified as the Group's
Chief Executive Officer. Following the disposal of the US business
the Group operates a single operating segment, the Convenience
Foods UK & Ireland segment. There has been no change to how the
CODM reviews the performance of this segment and allocates
resources to it.
Convenience Foods UK & Ireland is the Group's operating
segment, which represents its reporting segment. The segment
incorporates many UK convenience food categories including
sandwiches, salads, sushi, chilled snacking, chilled ready meals,
chilled soups and sauces, chilled quiche, ambient sauces and
pickles and, frozen Yorkshire Puddings as well as the Irish
ingredients trading businesses. The prior year includes the cakes
and desserts categories which were disposed of in FY18.
Revenue earned individually from four customers in Convenience
Foods UK & Ireland of GBP304.0m, GBP247.5m, GBP163.3m and
GBP146.9m respectively represent more than 10% of the Group's
revenue (2018: Revenue earned individually from two customers in
Convenience Foods UK & Ireland of GBP283.0m and GBP240.1m
respectively represented more than 10% of the Group's revenue).
Convenience Foods
UK & Ireland
2019 2018
GBPm GBPm
------------------------------------------- --- ----------------- ---------
Revenue 1,446.1 1,498.5
------------------------------------------------- ----------------- ---------
Group operating profit before exceptional
items and amortisation
of acquisition related intangible assets 105.5 104.6
Amortisation of acquisition related
intangible assets (0.9) (2.6)
Exceptional items (4.8) (52.2)
------------------------------------------------- ----------------- ---------
Group operating profit 99.8 49.8
Finance income 0.8 0.2
Finance costs (45.1) (33.1)
Share of profit of associates after
tax 0.9 0.9
Taxation (13.0) (5.2)
Results from discontinued operations 64.8 23.9
------------------------------------------------- ----------------- ---------
Profit for the period 108.2 36.5
------------------------------------------------- ----------------- ---------
In line with the new disclosure requirements in IFRS 15 Revenue
from Contracts with Customers, the following table disaggregates
revenue by product categories in the Convenience Foods UK and
Ireland reporting segment.
2019 2018
GBPm GBPm
Revenue
Food to go categories 962.5 929.4
Other convenience categories 483.6 569.1
-------------------------------------------------- -------- --------
Total revenue for Convenience Foods UK & Ireland 1,446.1 1,498.5
-------------------------------------------------- -------- --------
Food to go categories includes sandwiches, salads, sushi and
chilled snacking while the other convenience categories includes
chilled ready meals, chilled soups and sauces, chilled quiche,
ambient sauces and pickles, and frozen Yorkshire Puddings as well
as Irish Ingredients trading businesses. The prior year includes
the cakes and desserts categories which were disposed of in
FY18.
3. Exceptional Items
Exceptional items are those which, in management's judgement,
should be disclosed separately by virtue of their nature or amount.
Such items are included within the Group 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:
2019
Continuing Discontinued
Operations Operations Total
GBPm GBPm GBPm
------------------------------------------------- ----- ------------ ------------- -------
Guaranteed Minimum Pension ("GMP") equalisation (A) (3.0) - (3.0)
Transaction costs (B) (1.8) - (1.8)
Network rationalisation and optimisation (C) 0.0 - 0.0
Debt restructuring post disposal of Greencore's
US business (D) (25.4) - (25.4)
Profit on disposal of Greencore's US business (E) - 55.9 55.9
------------------------------------------------- ----- ------------ ------------- -------
(30.2) 55.9 25.7
------------------------------------------------------- ------------ ------------- -------
Tax on exceptional items 0.2 - 0.2
-------------------------------------------------------- ------------ ------------- -------
Total exceptional items (30.0) 55.9 25.9
-------------------------------------------------------- ------------ ------------- -------
2018
Continuing Discontinued
Operations Operations Total
GBPm GBPm GBPm
------------------------------------------------------------------------ --------------------------- -------------------------------------- --------------------------------------- ------------------------------
Network rationalisation and optimisation (F) (21.2) (23.6) (44.8)
Exit from Cakes and Desserts (G) (13.9) - (13.9)
Reorganisation and integration costs (H) (15.9) (3.0) (18.9)
Pre-commissioning and start-up costs (I) (1.2) - (1.2)
Transaction costs (J) - (1.3) (1.3)
------------------------------------------------------------------------ --------------------------- -------------------------------------- --------------------------------------- ------------------------------
(52.2) (27.9) (80.1)
---------------------------------------------------------------------------------------------------- -------------------------------------- --------------------------------------- ------------------------------
Tax on exceptional items 7.8 - 7.8
Tax credit (K) - 20.6 20.6
------------------------------------------------------------------------ --------------------------- -------------------------------------- --------------------------------------- ------------------------------
Total exceptional items (44.4) (7.3) (51.7)
----------------------------------------------------------------------------------------------------- -------------------------------------- --------------------------------------- ------------------------------
Year ended 27 September 2019
(A) GMP equalisation
Continuing operations
Due to a ruling in the High Court of Justice of England and
Wales in October 2018, pension schemes are under a duty to equalise
benefits for all members, regardless of gender, in relation to
minimum pension benefits. At 29 March 2019, an estimate was made of
the impact of equalisation for the Group, which increased the
legacy defined benefit pension scheme liabilities in the UK by
GBP3.0m with a corresponding charge to exceptional items. Whilst
guidance has been issued by the Department of Work and Pensions,
legislative provisions regarding the change are still being
finalised. Therefore in the continued absence of guidance, the
Group has maintained the estimate of GBP3.0m as at 27 September
2019.
(B) Transaction costs
Continuing operations
In the year, the Group recognised a charge of GBP1.8m,
comprising of transaction costs in relation to the acquisition of
Freshtime UK Limited. Details of the acquisition are set out in
note 4.
(C) Network rationalisation and optimisation
Continuing operations
Following the completion of the rationalisation and optimisation
of the Group's ready meals network in the UK, the Group assessed
the recoverability of related assets at the year ended 27 September
2019. The impairment testing indicated a reversal of an impairment,
which had been recognised in the prior year relating to land and
buildings and plant and machinery totalling GBP1.1m and GBP3.4m
respectively. In addition, the Group recognised an impairment of
plant and equipment in the network with a total value of
GBP4.5m.
(D) Debt restructuring post disposal of Greencore's US
business
Continuing operations
Following the disposal of Greencore's US business in November
2018, the Group reshaped its debt and associated derivative
portfolio to reflect the removal of US dollar assets from the
business. This resulted in a GBP25.4m exceptional charge in the
period comprising the recycling of the net investment hedge of
GBP22.3m including foreign exchange differences arising on debt and
derivatives relating to US dollar exposure, and the cash cost of
terminating a US dollar related swap. It also includes the
recycling of interest rate swaps of GBP1.0m which became
ineffective during the period from the date of disposal of
Greencore's US business and the date of the capital return via the
tender offer. In addition, the charge includes the write off of
capitalised finance fees on debt facilities of GBP2.1m following
the cancellation and refinancing of debt facilities following the
disposal.
(E) Profit on disposal of Greencore's US business
Discontinued Operations
During the year, the Group completed the disposal of Greencore's
US business to Hearthside Food Solutions LLC. A profit of GBP55.9m
was recognised which included transaction and separation costs of
GBP17.9m. Details of the disposal are set out in note 9.
Year ended 28 September 2018
(F) Network rationalisation and optimisation
Continuing operations
In the prior year, the Group recognised a charge of GBP21.2m
relating to the rationalisation and optimisation of its ready meals
manufacturing network in the UK, following the Group's announcement
in July 2018 to phase out of manufacturing of longer life ready
meals at its Kiveton facility. The charge comprised an impairment
of property, plant and equipment of GBP15.6m, an impairment of
goodwill of GBP1.4m and a provision for other costs associated with
the exit.
Discontinued operations
In the prior year, the Group recognised a charge of GBP23.6m
relating to the optimisation of its manufacturing network in its US
operations. The Group recognised an impairment charge of GBP20.6m
in relation to the exit from the Rhode Island business and
subsequent disposal, and in relation to the repurposing of its
Jacksonville manufacturing facility. The charge also includes other
onetime costs associated with the closure of the Rhode Island
facility.
(G) Exit from Cakes and Desserts
Continuing operations
In February 2018, the Group disposed of its cakes and desserts
business in Hull to Bright Blue Foods Ltd and subsequently disposed
of its dessert manufacturing facility at Evercreech in July 2018,
following its closure as announced in 2017 leading to a net loss of
GBP13.9m. The sale of the business in Hull and the exit from
dessert manufacturing at Evercreech marks Greencore's complete exit
from the UK cakes and desserts sector.
(H) Reorganisation and integration costs
Continuing operations
In the prior year, the Group recognised a charge of GBP15.9m
relating to the implementation of its streamlining and efficiency
programme across Convenience Foods UK & Ireland.
Discontinued operations
In the prior year, the Group recognised a charge of GBP3.0m in
relation to the restructure of the US leadership team and ongoing
integration costs associated with the Peacock Foods
acquisition.
(I) Pre- Commissioning and start-up costs
Continuing operations
In the prior year, the Group recognised a charge of GBP1.2m in
relation to pre-commissioning and start-up activities on the
expansion of its facility in Warrington.
(J) Transaction Costs
Discontinued Operations
In the prior year, the Group recognised a GBP1.3m charge
comprising of transactions costs associated with the disposal of
Greencore's US business which completed in November 2018.
(K) Tax Credit
Discontinued Operations
In the prior year, the Group recognised a tax credit of GBP20.6m
on the revaluation of tax assets and liabilities as a result of the
taxation rate change in the US.
Cash flow on Exceptional Items
The total net cash outflow during the year in respect of
exceptional charges was GBP9.6m (2018: GBP15.0m), of which GBP8.7m
was in respect of prior year exceptional charges. The remaining
current year exceptional cash flow includes the transaction costs
on the acquisition of Freshtime UK Limited.
4. Acquisition of Undertakings
On 3 September 2019, the Group acquired 100% of Freshtime UK
Limited ("Freshtime"). Freshtime is a well-established supplier of
meal salads, chilled snacking and prepared produce in the UK. Its
products are distributed primarily in the grocery and convenience
channels and the business operates from a single facility in
Boston, Lincolnshire.
The principal factors contributing to the recognition of
goodwill on the acquisition of Freshtime is the expected
realisation of future growth potential with new and existing
customers in fast growing categories, the synergies that will be
achieved by the enlarged group, and a highly skilled management
team. The goodwill is not deductible for tax purposes. The
acquisition resulted in the recognition of a customer related
intangible asset of GBP17.5m and goodwill of GBP38.7m. The
intangible asset relates to key customer relationships and is
considered to have a remaining useful life of not more than 7
years.
As part of the acquisition the Group acquired trade receivables
with a fair value of GBP11.7m (which includes GBP5.9m of
intercompany trade receivables with Group undertakings). Management
estimate that acquired receivables will be collected in full.
Acquisition related costs of GBP1.8m were charged to exceptional
items in the Income Statement for the year ended 27 September
2019.
The post-acquisition impact of the Freshtime acquisition on the
Group was to increase revenue by GBP2.3m and Group profit by
GBP0.3m. If the acquisition had occurred at the beginning of the
Group's financial year, revenue (excluding intercompany revenue
with Group undertakings) would have been GBP36.0m higher and the
profit for the year would have been GBP4.7m higher.
The provisional fair value of the assets acquired, determined in
accordance with IFRS, were as follows:
2019
GBPm
------------------------------- ---- -------
Assets
Intangible
assets 17.5
Property, plant and
equipment 5.3
Inventory 1.2
Current tax receivable 0.5
Trade and other receivables 11.7
-------------------------------------- -------
Total assets 36.2
----------------------------------------- -------
Liabilities
Provisions (0.1)
Deferred tax liabilities (3.1)
Trade and other
payables (14.2)
Current tax payable (1.3)
------------------------------------- -------
Total liabilities (18.7)
------------------------------------- -------
Net assets acquired 17.5
Goodwill 38.7
----------------------------------------- -------
Total enterprise
value 56.2
------------------------------------- -------
Satisfied
by:
Cash payments 65.2
Cash and cash equivalents
acquired (9.2)
Working capital consideration 0.2
-------------------------------------- -------
Net cash outflow 56.2
------------------------------------- -------
The fair values of the acquired net assets have been determined
provisionally as at the 27 September 2019 and are subject to
change, as the Group has yet to finalise the fair value of all the
identifiable assets and liabilities acquired due to the timing of
the completion of the acquisition.
5. Dividends Paid and Proposed
2019 2018
GBPm GBPm
-------------------------------------------------------------------- ------- -------
Amounts recognised as distributions to equity holders in the
year:
Equity dividends on Ordinary Shares:
Final dividend of 3.37 pence for the year ended 28 September 23.8 23.8
2018 (2017: 3.37 pence)
Interim dividend of 2.45 pence for the year ended 27 September 10.9 15.6
2019 (2018: 2.20 pence)
-------------------------------------------------------------------- ------- -------
Total 34.7 39.4
-------------------------------------------------------------------- ------- -------
Proposed for approval at AGM:
Equity dividends on Ordinary Shares:
Final Dividend of 3.75 pence for the year ended 27 September
2019 (2018: 3.37 pence) 16.7 23.8
-------------------------------------------------------------------- ------- -------
The proposed final dividend for the year ended 27 September 2019
will be payable on 28 February 2020 to shareholders on the Register
of Members at 3 January 2020.
6. Earnings per Ordinary Share
Basic earnings per Ordinary Share is calculated by dividing the
profit attributable to equity holders of the Company by the
weighted average number of Ordinary Shares in issue during the
period, excluding Ordinary Shares purchased by the Company and held
in trust in respect of the Annual Bonus Scheme and the Performance
Share Plan.
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.
The numerator for adjusted earnings per share calculation for
both basic and diluted earnings per Ordinary Share is calculated as
profit attributable to equity holders of the Company adjusted to
exclude exceptional items (net of tax), the effect of foreign
exchange ('FX') on inter-company and certain external balances
where hedge accounting is not applied, the movement in the fair
value of all derivative financial instruments and related debt
adjustments, the amortisation of acquisition related intangible
assets (net of tax) and the effect of interest expense relating to
legacy defined benefit pension liabilities (net of tax).
The Group returned GBP509.0m to shareholders by way of a Tender
Offer, executed on 31 January 2019. The Group acquired 261,025,641
Ordinary Shares in the Company on the London Stock Exchange, at the
Tender Offer Price of GBP1.95 per Ordinary Share and the shares
were subsequently cancelled. The Ordinary Shares acquired
represented approximately 36.92% of the voting rights attributable
to the Ordinary Shares immediately prior to acquisition. The total
Ordinary Shares in issue as at 28 September 2018 was 706,978,416,
the total Ordinary Shares in issue at 27 September 2019 is
446,006,581. The effect of the Tender Offer on the weighted average
number of Ordinary Shares was a reduction of 171,633,298
shares.
Numerator for Earnings per Share Calculations
2019 2018
Continuing Discontinued Continuing Discontinued
operations operations Total operations operations Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------ ------------ ------------- ------- ------------ ------------- ------
Profit attributable to equity
holders of the Company (numerator
for basic earnings per share
calculations) 41.2 64.8 106.0 9.9 23.9 33.8
------------------------------------ ------------ ------------- ------- ------------ ------------- ------
Exceptional items (net of
tax) 30.0 (55.9) (25.9) 44.4 7.3 51.7
Movement of fair value of
derivative financial instruments
and related debt adjustments 0.9 - 0.9 3.4 - 3.4
FX effect on inter-company
and external balances where
hedge accounting is not
applied 1.2 - 1.2 (0.1) - (0.1)
Amortisation of acquisition
related intangible assets
(net of tax) 0.7 - 0.7 2.1 12.3 14.4
Pension financing (net of
tax) 2.0 - 2.0 2.7 - 2.7
------------------------------------ ------------ ------------- ------- ------------ ------------- ------
Numerator for adjusted earnings
per share calculations 76.0 8.9 84.9 62.4 43.5 105.9
------------------------------------ ------------ ------------- ------- ------------ ------------- ------
Denominator for Basic Earnings Per Share Calculations
2019 2018
'000 '000
----------------------------------------------------- ---------- --------
Shares in issue at the beginning of the year 706,978 705,647
Effect of shares held by Employee Benefit Trust (3,389) (3,389)
Effect of shares issued during the year 15 1,054
Effect of share reduction due to tender offer (171,633) -
----------------------------------------------------- ---------- --------
Weighted average number of Ordinary Shares in issue
during the year 531,971 703,312
----------------------------------------------------- ---------- --------
Denominator for Diluted Earnings Per Share Calculations
Employee performance share plan awards, which are performance
based, are treated as contingently issuable shares, because their
issue is contingent upon satisfaction of specified performance
conditions in addition to the passage of time. These contingently
issuable ordinary shares are excluded from the computation of
diluted earnings per ordinary share where the conditions governing
exercisability have not been satisfied as at the end of the
reporting period.
A total of 6,809,266 (2018: 12,886,062) unvested shares across
the Group's share schemes were excluded from the diluted earnings
per share calculation as they were either antidilutive or
contingently issuable ordinary shares which had not satisfied the
performance conditions attaching at the end of the 2019 financial
year.
A reconciliation of the weighted average number of Ordinary
Shares used for the purposes of calculating the diluted earnings
per share amounts is as follows:
2019 2018
'000 '000
-------------------------------------------------------- -------- --------
Weighted average number of Ordinary Shares in issue
during the year 531,971 703,312
Dilutive effect of share awards 1,587 747
-------------------------------------------------------- -------- --------
Weighted average number of Ordinary Shares for diluted
earnings per share 533,558 704,059
-------------------------------------------------------- -------- --------
Earnings Per Share Calculations
2019 2018
Continuing Discontinued Continuing Discontinued
operations operations Total operations operations Total
pence pence pence pence pence pence
-------------------------------- ------------ ------------- ------- ------------ ------------- -------
Basic earnings per Ordinary
Share 7.7 12.2 19.9 1.4 3.4 4.8
-------------------------------- ------------ ------------- ------- ------------ ------------- -------
Adjusted earnings per Ordinary
Share 16.0 15.1
-------------------------------- ------------ ------------- ------- ------------ ------------- -------
2019 2018
Continuing Discontinued Continuing Discontinued
operations operations Total operations operations Total
pence pence pence pence pence pence
------------------------------- ------------ ------------- ------- ------------ ------------- -------
Diluted earnings per Ordinary
Share 7.7 12.2 19.9 1.4 3.4 4.8
------------------------------- ------------ ------------- ------- ------------ ------------- -------
Adjusted diluted earnings
per Ordinary
Share 15.9 15.1
------------------------------- ------------ ------------- ------- ------------ ------------- -------
7. Components of Net Debt and Financing
The cash flows from financing activities are set out in the
Group Statement of Cashflows.
Net Debt
2019 2018
GBPm GBPm
Cash and cash equivalents (net of bank overdraft) 41.6 37.0
Bank borrowings (213.9) (350.5)
Private placement notes (116.2) (124.8)
Non-bank borrowings - (62.3)
Finance leases - (0.5)
-------------------------------------------------- ------- --------
Group Net Debt (288.5) (501.1)
-------------------------------------------------- ------- --------
2019 2018
GBPm GBPm
------------------------------------------------------------------ ------ ------
Net Finance Costs - continuing operations
Net finance costs on interest bearing cash and cash equivalents,
borrowings and other financing costs (14.2) (26.1)
Pension financing (2.5) (3.4)
Interest on obligations under finance leases - (0.1)
Unwind of discount on liabilities (0.1) -
Fair value of derivative financial instruments and related
debt adjustments (0.9) (3.4)
FX on inter-company and external balances where hedge
accounting is not applied (1.2) 0.1
------------------------------------------------------------------ ------ ------
(18.9) (32.9)
------------------------------------------------------------------ ------ ------
Analysed as:
Finance income 0.8 0.2
Finance costs (19.7) (33.1)
------------------------------------------------------------------ ------ ------
(18.9) (32.9)
------------------------------------------------------------------ ------ ------
Following the disposal of the US business, the Group fully reset
its capital structure, reshaping its debt and associated derivative
portfolio to reflect the removal of US dollar assets from the
business and also refinanced its primary sterling bank debt
agreements.
In January 2019 the Group completed the refinancing of its
GBP300m revolving credit bank facility with a new five-year
facility at similar terms. In addition, the Group also refinanced
its GBP50m bank bilateral loan with a new three-year facility at
similar terms.
In September 2019, under the terms of the existing revolving
credit facility, the Group entered into a new GBP40m revolving
credit bank facility, with a matching maturity date to the primary
GBP300m facility.
At 27 September 2019, the Group's bank borrowings, net of
finance fees comprised of GBP213.9m (2018: GBP350.9m, denominated
as GBP148m, $261m, EUR5m), with maturities ranging from January
2022 to January 2024. In addition, the Group had available
GBP175.0m (2018: GBP188.3m) of undrawn committed borrowing
facilities in respect of which all conditions precedent had been
met. Uncommitted facilities undrawn at 27 September 2019 amounted
to GBP7.0m (2018: GBP12.2m).
The Group's outstanding Private Placement Notes net of finance
fees comprised of GBP116.2m (denominated as $120.9m and GBP18m) at
27 September 2019 (2018: GBP124.8m, denominated as $139.5m and
GBP18m). These were issued as fixed rate debt in October 2013
($65m) and June 2016 ($74.5m and GBP18m) with maturities ranging
between October 2021 and June 2026. In December 2018 the Group
repaid $18.6m of its $139.5m US Private Placement Notes at par and
swapped the remaining balance of $120.9m from fixed rate US dollar
to fixed rate sterling (using cross currency interest rate swaps
designated as cash flow hedges). The applicable fixed rates on the
Private Placement Notes as at 27 September 2019 ranged from 4.14%
to 6.15%.
In December 2018 the Group repaid its EUR70m non-bank borrowings
and terminated the associated cross currency interest rate swaps,
which had converted the EUR70m loan to a fixed rate US dollar debt
instrument.
8. Retirement Benefit Schemes
The Group operates three legacy defined benefit pension schemes
in the Republic of Ireland (the 'Irish schemes') and two legacy
defined benefit pension schemes and one legacy defined benefit
commitment in the UK (the 'UK schemes'). The Projected Unit Credit
actuarial cost method has been employed in determining the present
value of the defined benefit pension obligation, the related
current service cost and, where applicable, past service cost.
The Group continues to seek ways to reduce its liabilities
through various restructuring initiatives in co-operation with the
respective schemes which if implemented could modestly increase the
annual cash funding requirements. In the period the trustees of one
of the smaller legacy defined benefit pension schemes in the UK
agreed to the purchase of an insurance policy over the scheme
liabilities which is accounted for as a plan asset under IAS 19
Employee Benefits.
In consultation with the independent actuaries to the scheme,
the valuation of pension obligations have been updated to reflect
current market discount rates, rates of increase in salaries,
pension payments and inflation, current market values of
investments and actual investment returns.
The principal actuarial assumptions are as follows:
UK Schemes Irish Schemes
2019 2018 2019 2018
------------------------------------------------- ------------ ----------- ------------- ------------
Rate of increase in pension payments
* 2.95% 3.10% 0.00% 0.00%
Discount rate 1.80% 2.90% 0.85% 1.60%
Inflation rate** 3.05% 3.20% 1.50% 1.60%
------------------------------------------------- ------------ ----------- ------------- ------------
* The rate of increase in pension payments applies to the majority
of the liability base. However, there are certain categories within
the Group's Irish Scheme that have an entitlement to pension indexation.
**Inflation is Retail Price Index (RPI) for UK Schemes, for reference
Consumer Price Index (CPI) is assumed to be 1% less than RPI.
On 26 October 2018, the High Court of Justice of England and
Wales issued a judgement on a claim regarding the rights of members
to equality in defined benefit pension schemes. The ruling
concluded that schemes are under a duty to equalise benefits for
all members, regardless of gender, in relation to Guaranteed
Minimum Pension ('GMP') benefits. The court ruling impacts the
majority of companies with a UK defined benefit pension plan that
was in existence before 1997. For the Group, an estimate was made
of the impact of GMP equalisation, which increased the pension
scheme liabilities by GBP3.0m with a corresponding charge to
exceptional operating items. Whilst guidance has been issued by the
Department of Work and Pensions, legislative provisions regarding
the change are still being finalised. Therefore in the continued
absence of guidance, the Group has maintained the estimate of
GBP3.0m as at 27 September 2019.
UK Irish 2019 2018
Schemes Schemes Total Total
GBPm GBPm GBPm GBPm
------------------------------------------ ---------- ---------- -------- --------
Fair value of plan assets 251.3 273.4 524.7 473.4
Present value of scheme liabilities (378.8) (237.9) (616.7) (562.7)
------------------------------------------ ---------- ---------- -------- --------
(Deficit)/surplus in schemes (127.5) 35.5 (92.0) (89.3)
Deferred tax asset 21.6 (4.4) 17.2 15.7
------------------------------------------ ---------- ---------- -------- --------
Net (liability)/asset at end of year (105.9) 31.1 (74.8) (73.6)
------------------------------------------ ---------- ---------- -------- --------
Presented as:
Retirement benefit asset* 36.4 15.3
Retirement benefit obligation (128.4) (104.6)
------------------------------------------ ---------- ---------- -------- --------
*The value of a net pension benefit asset is the value of any amount
the Group reasonably expects to recover by way of a refund of a surplus
from the remaining assets of a plan at the end of the plan's life.
7. Discontinued Operations and Disposal of Undertakings
Greencore US Business
On 25 November 2018, the Group completed the disposal of its US
business to Hearthside Food Solutions LLC. The disposal met the
recognition criteria for the year ended 28 September 2018 under
IFRS 5 Non-current assets held for sale and discontinued operations
and so the results of the business are presented as discontinued
and are shown separately from continuing operations.
Results of discontinued operations:
2019 2018
GBPm GBPm
--------------------------------------------------- -------- --------
Revenue 172.8 1,061.8
Cost of sales (136.4) (836.2)
--------------------------------------------------- -------- --------
Gross profit 36.4 225.6
Operating costs, net (27.3) (177.6)
--------------------------------------------------- -------- --------
Group Operating Profit before acquisition related
amortisation and exceptional items 9.1 48.0
Amortisation of acquisition related intangibles - (17.6)
--------------------------------------------------- -------- --------
Group Operating Profit before exceptional items 9.1 30.4
Exceptional items 55.9 (27.9)
Finance costs (0.2) (1.0)
Taxation - 22.4
--------------------------------------------------- -------- --------
Profit for the year from discontinued operations 64.8 23.9
--------------------------------------------------- -------- --------
The profit from discontinued operations of GBP64.8m (2018:
profit of GBP23.9m) is attributable entirely to the owners of the
Company.
Cash inflows / (outflows) from discontinued operations:
2019 2018
GBPm GBPm
-------------------------------------- ------- -------
Discontinued operating profit 9.1 30.4
Working capital movement (21.2) (7.3)
Other movements (0.1) 32.7
-------------------------------------- ------- -------
Cash flows from operating activities (12.2) 55.8
Cash flows from investing activities (1.2) (11.9)
Cash flows for financing activities - (0.5)
-------------------------------------- ------- -------
Net cash flow for the year (13.4) 43.4
-------------------------------------- ------- -------
Effect of disposal on the financial statements:
2019
GBPm
-------------------------------------------------------------------- --------
Goodwill and intangibles assets (658.7)
Property, plant and equipment (126.3)
Deferred tax assets (28.6)
Inventory (38.7)
Trade and other receivables (104.8)
Cash and cash equivalents (10.0)
Trade and other payables 84.5
Provisions for liabilities 22.5
Deferred tax liabilities 71.1
-------------------------------------------------------------------- --------
Net assets and liabilities disposed of (789.0)
-------------------------------------------------------------------- --------
Disposal consideration
Total consideration* 827.5
Working capital adjustments 12.4
Provision for legal and onerous contacts (1.6)
Transaction and separation related costs (17.9)
-------------------------------------------------------------------- --------
Total net consideration 820.4
-------------------------------------------------------------------- --------
Translation reserve classification to Income Statement on disposal 24.5
-------------------------------------------------------------------- --------
Profit on disposal 55.9
-------------------------------------------------------------------- --------
*This includes a GBP15.1m loss relating to a foreign currency exchange
contract put in place to hedge the proceeds
Reconciliation of consideration to cash received:
2019
GBPm
--------------------------------------------------------- -------
Total consideration 827.5
Cash received in respect of working capital adjustments 12.4
Transaction and separation costs paid (19.0)
--------------------------------------------------------- -------
Net consideration received on completion 820.9
Cash and cash equivalents disposed of (10.0)
--------------------------------------------------------- -------
Net cash inflow arising on disposal 810.9
--------------------------------------------------------- -------
Assets and liabilities of the disposal group held for sale:
At 28 September 2018 the following assets and liabilities were
classified as held for sale:
2019 2018
GBPm GBPm
------------------------------------------------------ ------- ------
Goodwill and intangible assets - 644.9
Property, plant and equipment - 122.7
Deferred tax assets - 28.0
Inventory - 38.7
Trade and other receivables - 110.4
------------------------------------------------------ ------- ------
Assets held for sale - 944.7
------------------------------------------------------ ------- ------
Trade and other payables - 111.4
Provisions for liabilities - 22.0
Deferred tax liabilities - 69.6
------------------------------------------------------ ------- ------
Liabilities directly associated with the assets held
for sale - 203.0
------------------------------------------------------ ------- ------
Hull
In February 2018, the Group disposed of its Cakes and Desserts
business at Hull ("Hull") to Bright Blue Foods Limited. Under the
terms of the agreement the trade and assets of the business were
transferred to the purchaser for a deferred cash consideration of
GBP1.0m which was received in February 2019.
Reconciliation of total cash inflow from disposal of
undertakings:
2019
GBPm
------------------------------------------------------- ------
Greencore's US business 810.9
Hull 1.0
------------------------------------------------------- ------
Net cash inflow arising from disposal of undertakings 811.9
------------------------------------------------------- ------
9. Information
Copies of the Yearly Financial Report are available for download
from the Group's website at www.greencore.com.
Appendix: Alternative Performance Measures
The Group uses the following Alternative Performance Measures
('APMs') which are non-IFRS measures to monitor the performance of
its operations and of the Group as a whole: Pro Forma Revenue
Growth, Adjusted EBITDA, Adjusted Operating Profit, Adjusted
Operating Margin, Adjusted Profit before Tax ('PBT'), Adjusted
Earnings, Adjusted Earnings per Share, Maintenance and Strategic
Capital Expenditure, Operating Cash Flow, Free Cash Flow, Free Cash
Flow Conversion, Net Debt and Return on Invested Capital
('ROIC').
The Group believes that these APMs provide useful historical
information to help investors evaluate the performance of the
underlying business and are measures commonly used by certain
investors and security analysts for evaluating the performance of
the Group. In addition, the Group uses certain APMs which reflect
the underlying performance on the basis that this provides a more
relevant focus on the core business performance of the Group.
Pro Forma Revenue Growth
The Group uses Pro Forma Revenue Growth as a supplemental
measure of its performance. The Group believes that Pro Forma
Revenue Growth provides a more accurate guide to underlying revenue
performance.
Pro Forma Revenue Growth adjusts FY19 reported revenue to
exclude the impact on transition to IFRS 15 Revenue from Contracts
with Customers on the Group's Irish ingredients trading business,
and to exclude the impact of the acquisition of Freshtime in the
year. It also presents the numbers on a constant currency
basis.
FY18 reported revenue excludes revenue from the Group's cakes
and desserts businesses which were disposed of in the prior year
and to reflect the impact of exiting manufacturing of longer life
ready meals at the Kiveton facility.
2019
Convenience
Foods
UK & Ireland
%
------------------------------- --------------
Reported revenue (3.5%)
Impact of disposals and exits 5.8%
Impact of acquisitions (0.2%)
Impact of IFRS 15 0.5%
Impact of currency 0.0%
------------------------------- --------------
Pro Forma Revenue Growth (%) 2.6%
------------------------------- --------------
The table below shows the Pro Forma Revenue split by food to go
categories and other convenience categories. This is in line with
the new disclosure requirements in IFRS 15 Revenue from Contracts
with Customers requiring revenue to be disaggregated.
Food to go Other convenience
categories categories
H1 H2 Full H1 H2 Full
19 19 Year 19 19 Year
% % % % % %
------------------------------- ----- ------- ------- --- -------- ------- --------
Reported revenue 7.0% 0.8% 3.6% (19.8%) (9.0%) (15.0%)
Impact of disposals and exits - - - 21.4% 7.4% 15.0%
Impact of acquisitions - (0.5%) (0.3%) - - -
Impact of IFRS 15 - - - 1.2% 1.2% 1.2%
Impact of currency - - - 0.0% 0.0% 0.0%
-------------------------------
Pro Forma Revenue Growth (%) 7.0% 0.3% 3.3% 2.8% (0.4%) 1.2%
------------------------------- ----- ------- ------- --- -------- ------- --------
ADJUSTED EBITDA, ADJUSTED OPERATING PROFIT AND ADJUSTED
OPERATING MARGIN
Adjusted EBITDA, Adjusted Operating Profit and Adjusted
Operating Margin are used by the Group to measure the underlying
and ongoing operating performance of each business unit and of the
Group as a whole.
The Group calculates Adjusted Operating Profit as operating
profit before amortisation of acquisition related intangibles and
exceptional items. Adjusted EBITDA is calculated as Adjusted
Operating Profit plus depreciation and amortisation of computer
software intangible assets. Adjusted Operating Margin is calculated
as Adjusted Operating Profit divided by reported revenue.
The following table sets forth a reconciliation from the Group's
profit for the financial year to Adjusted Operating Profit,
Adjusted EBITDA and Adjusted Operating Margin:
2019 2018
Convenience Convenience
Foods Discontinued Foods Discontinued
UK & Ireland operations Total UK & Ireland operations Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------- -------------- ------------- ------- -------------- ------------- -------
Profit for the financial
year 43.4 64.8 108.2 12.6 23.9 36.5
Taxation (A) 13.0 - 13.0 5.2 (22.4) (17.2)
Net finance costs (B) 18.9 0.2 19.1 32.9 1.0 33.9
Share of profit of associates
after tax (0.9) - (0.9) (0.9) - (0.9)
Exceptional items 30.2 (55.9) (25.7) 52.2 27.9 80.1
Amortisation of acquisition
related intangibles 0.9 - 0.9 2.6 17.6 20.2
------------------------------- -------------- ------------- ------- -------------- ------------- -------
Adjusted Operating Profit 105.5 9.1 114.6 104.6 48.0 152.6
Depreciation and amortisation
(C) 36.5 - 36.5 35.4 17.0 52.4
------------------------------- -------------- ------------- ------- -------------- ------------- -------
Adjusted EBITDA 142.0 9.1 151.1 140.0 65.0 205.0
------------------------------- -------------- ------------- ------- -------------- ------------- -------
Adjusted Operating Margin
(%) 7.3% 5.3% 7.1% 7.0% 4.5% 6.0%
------------------------------- -------------- ------------- ------- -------------- ------------- -------
(A) Includes tax credit on exceptional items for continuing operations
of GBP0.2m (2018: GBP7.8m) and for discontinued operations GBPnil(2018:GBP20.6m).
(B) Finance costs less finance income.
(C) Excludes amortisation of acquisition related intangibles.
ADJUSTED PROFIT BEFORE TAX ('PBT') FOR CONTINUING OPERATIONS
Adjusted PBT is used as a measure by the Group to measure
overall performance before associated tax charge and exceptional
items.
The Group calculates Adjusted PBT as profit before taxation,
excluding tax on share of profit of associates and before
exceptional items, pension finance items, amortisation of
acquisition related intangibles, FX on inter-company and certain
external balances and the movement in the fair value of all
derivative financial instruments and related debt adjustments.
The following table sets out the calculation of Adjusted
PBT:
2019 2018
GBPm GBPm
----------------------------------------------------------- ------- ------
Profit before taxation for continuing operations 56.4 17.8
Taxation on share of profit of associates 0.2 0.3
Exceptional items 30.2 52.2
Pension finance items 2.5 3.4
Amortisation of acquisition related intangibles 0.9 2.6
FX and fair value movements(A) 2.1 3.3
----------------------------------------------------------- ------- ------
Adjusted Profit Before Tax for continuing operations 92.3 79.6
----------------------------------------------------------- ------- ------
(A) FX on inter-company and certain external balances and the movement
in the fair value of all derivative financial instruments and related
debt adjustments.
ADJUSTED EARNINGS PER SHARE ('EPS')
The Group uses Adjusted Earnings and Adjusted EPS as key
measures of the overall underlying performance of the Group and
returns generated for each share.
Adjusted Earnings is calculated as Profit attributable to equity
holders (as shown on the Group Income Statement) adjusted to
exclude exceptional items (net of tax), the effect of foreign
exchange (FX) on inter-company and external balances where hedge
accounting is not applied, the movement in the fair value of all
derivative financial instruments and related debt adjustments, the
amortisation of acquisition related intangible assets (net of tax)
and the interest expense relating to legacy defined benefit pension
liabilities (net of tax). Adjusted EPS is calculated by dividing
Adjusted Earnings by the weighted average number of Ordinary Shares
in issue during the year, excluding Ordinary Shares purchased by
Greencore and held in trust in respect of the Annual Bonus Plan and
the Performance Share Plan. Adjusted EPS described as an APM here
is Adjusted Basic EPS.
The following table sets forth a reconciliation of the Group's
Profit attributable to equity holders of the Group to its Adjusted
Earnings for the financial years indicated.
2019 2018
GBPm GBPm
------------------------------------------------------------ -------- --------
Profit attributable to equity holders of the Group 106.0 33.8
Exceptional items (net of tax) (25.9) 51.7
FX effect on inter-company and external balances where
hedge accounting is not applied 1.2 (0.1)
Movement in fair value of derivative financial instruments
and related debt adjustments 0.9 3.4
Amortisation of acquisition related intangible assets
(net of tax) 0.7 14.4
Pension financing (net of tax) 2.0 2.7
------------------------------------------------------------ -------- --------
Adjusted Earnings 84.9 105.9
------------------------------------------------------------ -------- --------
2019 2018
'000 '000
------------------------------------------------------------ -------- --------
Weighted average number of ordinary shares in issue
during the year 531,971 703,312
------------------------------------------------------------ -------- --------
2019 2018
pence pence
------------------------------------------------------------ -------- --------
Adjusted Earnings Per Share 16.0 15.1
------------------------------------------------------------ -------- --------
CAPITAL EXPITURE
Maintenance Capital Expenditure
The Group defines Maintenance Capital Expenditure as the
expenditure required for the purpose of sustaining the operating
capacity and asset base of the Group, and of complying with
applicable laws and regulations. It includes continuous improvement
projects of less than GBP1m that will generate additional returns
for the Group.
Strategic Capital Expenditure
The Group defines Strategic Capital Expenditure as the
expenditure required for the purpose of facilitating growth and
developing and enhancing relationships with existing and new
customers. It includes continuous improvement projects of greater
than GBP1m that will generate additional returns for the Group.
Strategic Capital Expenditure is generally expansionary expenditure
creating additional capacity beyond what is necessary to maintain
the Group's current competitive position and enables the Group to
service new customers and/or contracts or to enter into new
categories and/or new manufacturing competencies.
The following table sets forth the breakdown of the Group's
purchase of property, plant and equipment and purchase of
intangible assets between Strategic Capital Expenditure and
Maintenance Capital Expenditure:
2019 2018
Convenience Convenience
Foods Discontinued Foods Discontinued
UK & Ireland operations Total UK & Ireland operations Total
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------- -------------- ------------- ------ -------------- ------------- -------
Purchase of property, plant,
and equipment 38.4 1.2 39.6 48.8 11.7 60.5
Purchase of intangible assets 4.6 - 4.6 2.8 0.2 3.0
--------------------------------- -------------- ------------- ------ -------------- ------------- -------
Net cash outflow from capital
expenditure 43.0 1.2 44.2 51.6 11.9 63.5
--------------------------------- -------------- ------------- ------ -------------- ------------- -------
Strategic Capital Expenditure 12.4 1.2 13.6 24.6 2.2 26.8
Maintenance Capital Expenditure 30.6 - 30.6 27.0 9.7 36.7
--------------------------------- -------------- ------------- ------ -------------- ------------- -------
Net cash outflow from capital
expenditure 43.0 1.2 44.2 51.6 11.9 63.5
--------------------------------- -------------- ------------- ------ -------------- ------------- -------
FREE CASH FLOW AND FREE CASH FLOW CONVERSION
The Group uses Free Cash Flow to measure the amount of
underlying cash generation and the cash available for distribution
and allocation.
The Group calculates the Free Cash Flow as the net cash
inflow/outflow from operating and investing activities before
Strategic Capital Expenditure, acquisition and disposal of
undertakings, disposal of investment property and adjusting for
dividends paid to non-controlling interests.
Free Cash Flow Conversion is a new APM introduced in the current
financial year. The Group calculates Free Cash Flow Conversion as
Free Cash Flow divided by Adjusted EBITDA.
The following table sets forth a reconciliation from the Group's
net cash inflow from operating activities and net cash outflow from
investing activities to Free Cash Flow:
2019 2018
Convenience Convenience
Foods Discontinued Foods Discontinued
UK & Ireland operations Total UK & Ireland operations Total
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------- -------------- ------------- -------- -------------- ------------- -------
Net cash inflow from operating
activities 98.9 (12.2) 86.7 74.0 55.8 129.8
Net cash inflow/(outflow)
from investing activities 714.2 (1.2) 713.0 (50.8) (11.9) (62.7)
----------------------------------- -------------- ------------- -------- -------------- ------------- -------
Net cash inflow/(outflow)
from operating and investing
activities 813.1 (13.4) 799.7 23.2 43.9 67.1
Strategic Capital Expenditure 12.4 1.2 13.6 24.6 2.2 26.8
Acquisition of undertakings,
net of cash acquired 56.2 - 56.2 - - -
Disposal of undertakings (811.9) - (811.9) - - -
Disposal of investment
property (0.5) - (0.5) - - -
Dividends paid to non-controlling
interest (2.2) - (2.2) (1.5) - (1.5)
----------------------------------- -------------- ------------- -------- -------------- ------------- -------
Free Cash Flow 67.1 (12.2) 54.9 46.3 46.1 92.4
----------------------------------- -------------- ------------- -------- -------------- ------------- -------
Adjusted EBITDA 142.0 9.1 151.1 140.0 65.0 205.0
----------------------------------- -------------- ------------- -------- -------------- ------------- -------
Free Cash Flow Conversion
(%) 47.3 (134.1) 36.3 33.1 70.9 45.1
----------------------------------- -------------- ------------- -------- -------------- ------------- -------
NET DEBT
Net Debt is used by the Group to measure overall cash generation
of the Group and to identify cash available to reduce borrowings.
Net Debt comprises current and non-current borrowings less net cash
and cash equivalents.
The following table sets out the calculation of Net Debt:
2019 2018
GBPm GBPm
--------------------------- -------- --------
Bank borrowings (213.9) (350.5)
Private Placement Notes (116.2) (124.8)
Non-bank borrowings - (62.3)
Finance leases - (0.5)
--------------------------- -------- --------
Total borrowings (330.1) (538.1)
--------------------------- -------- --------
Cash and cash equivalents 41.6 37.0
--------------------------- -------- --------
Net Debt (288.5) (501.1)
--------------------------- -------- --------
RETURN ON INVESTED CAPITAL ('ROIC')
The Group uses ROIC as a key measure to determine returns from
each business unit and for the Group as a whole and as a key
measure to determine potential new investments. With the
significant change in the Group structure following the disposal of
Greencore's US business, the Group only calculates ROIC relating to
continuing operations.
The Group uses invested capital as a basis for this calculation
as it reflects the tangible and intangible assets the Group has
added through its capital investment programme, the intangible
assets the Group has added through acquisition, as well as the
working capital requirements of the business. Invested Capital is
calculated as net assets (total assets less total liabilities)
excluding Net Debt, the carrying value of derivatives not
designated as fair value hedges and retirement benefit obligations
(net of deferred tax assets). Average Invested Capital is
calculated by adding together the invested capital from the opening
and closing Statement of Financial Position and dividing by
two.
The Group calculates ROIC as Net Adjusted Operating Profit After
Tax ('NOPAT') divided by average invested capital for continuing
operations. NOPAT is calculated as Adjusted Operating Profit plus
share of profit of associates before tax, less tax at the effective
rate in the Income Statement.
The following table sets forth the calculation of Net Operating
Profit After Tax ('NOPAT') and invested capital used in the
calculation of ROIC for the financial years.
2019 2018
GBPm GBPm
------------------------------------------ ------- -----------------------------------
Adjusted Operating Profit 105.5 104.6
Share of profit of associates before tax 1.1 1.1
Taxation at the effective tax rate (A) (16.0) (13.7)
------------------------------------------ ------- -----------------------------------
Group NOPAT 90.6 92.0
------------------------------------------ ------- -----------------------------------
2019 2018
GBPm GBPm
------------------------------------------------------- -------- ----------
Invested Capital
Total assets 1,163.8 2,015.5
Total liabilities (858.0) (1,271.9)
Net Debt 288.5 501.1
Derivatives not designated as fair value hedges (1.9) 12.7
Retirement benefit obligation (net of deferred tax
asset) 74.8 73.6
Net assets of the disposal group held for sale - (741.7)
------------------------------------------------------- -------- ----------
Invested Capital for the Group (B) 667.2 589.3
------------------------------------------------------- -------- ----------
Average Invested Capital for ROIC calculation for the
Group 628.3 590.4
------------------------------------------------------- -------- ----------
ROIC for the Group (%) 14.4 15.6
------------------------------------------------------- -------- ----------
(A) The effective tax rates for continuing operations for the
financial year ended 27 September 2019 and 28 September 2018 were
15% and 13% respectively.
(B) The invested capital for continued operations was GBP591.4m
in 2017 which excludes GBP755.7m of invested capital in
discontinued operations.
The reduction in ROIC is primarily driven by increased
investment, in particular the timing of the acquisition of
Freshtime and also impacted by increased tax rate.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR UVUWRKRAAUAA
(END) Dow Jones Newswires
November 26, 2019 02:02 ET (07:02 GMT)
Greencore (LSE:GNC)
과거 데이터 주식 차트
부터 6월(6) 2024 으로 7월(7) 2024
Greencore (LSE:GNC)
과거 데이터 주식 차트
부터 7월(7) 2023 으로 7월(7) 2024
