We could not find any results for:
Make sure your spelling is correct or try broadening your search.
Register for real-time alerts, custom portfolio, and market movers
| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Dairy Crest | LSE:DCG | London | Ordinary Share | GB0002502812 | ORD 25P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 620.50 | 619.50 | 620.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMDCG
RNS Number : 7951O
Dairy Crest Group PLC
10 November 2016
10 November 2016
Dairy Crest Group plc ("Dairy Crest")
Interim Results Announcement for the six months ended 30 September 2016
Highlights
-- Increased profits - adjusted profit before tax up 19% to GBP19.1m(1,2) -- Cathedral City launched new branding and packaging with a successful marketing campaign -- Clover, Country Life and Frylight all enjoyed strong volume growth
-- Improved underlying cash generation - operating cash inflow(3) of GBP17.5m, up GBP27.9m on last year
Hot Features
Premium
-- Good progress made in functional ingredients for the infant formula market
-- Proposed interim dividend up 2%
-- Full year expectations remain unchanged
Financial Summary
Half year ended 30 September
2016 2015 Change
Revenue (1) : GBP190.0m GBP203.8m -7%
Adjusted profit before tax
(1,2) : GBP19.1m GBP16.0m +19%
Profit before tax (1) : GBP15.6m GBP13.1m +19%
Adjusted basic earnings
per share(1, 2) : 11.1p 9.3p +19%
Basic earnings per share
(1) : 9.3p 7.6p +22%
Profit/(loss) for the period: GBP10.2m GBP(109.4)m +GBP119.6m
Operating cash flow (3) GBP17.5m GBP(10.4)m +GBP27.9m
:
Net debt: GBP262.3m GBP242.3m +8%
Interim dividend: 6.2p 6.1p +2%
(1) From continuing operations
(2) Before exceptional items, amortisation of acquired intangibles and pension interest (see notes 3 and 7 to the interim financial statements)
(3) Cash generated from operations, less capital expenditure, before exceptional cash outflows of GBP12.0m (2015: GBP8.1m)
Mark Allen, Chief Executive, said:
"We are pleased to have delivered a strong set of interim results in our first full trading period since the sale of Dairies. Our four key brands are continuing to perform well in a challenging marketplace, with strong volume growth for Clover, Country Life and Frylight and a successful launch of new branding and packaging for Cathedral City.
"We are also seeing the benefits of Dairy Crest's transformation into a leaner and more focused organisation, with strong profit growth and significantly improved cash generation during the first half. Our expectations for the full year remain unchanged.
"Looking further ahead, the significant investment at Davidstow has opened up attractive opportunities in high-margin, global infant formula markets as well as the potential to develop new functional ingredients. Combined with our continued focus on innovation within our key brands, this will underpin future growth and help us to maintain our strong track record of rewarding shareholders with higher dividends."
For further information:
Dairy Crest Group plc Alistair Smith 01372 472236 Olivia Seccombe 01372 472249 Brunswick Max McGahan/Mike Smith/Rebecca 020 7404 Lum 5959
A video interview with Mark Allen, Chief Executive, and Tom Atherton, Group Finance Director, will be available from 07:00 (UK time) from the investor section of the Group's website investor.dairycrest.co.uk.
There will be an analyst and investor meeting at 9.00 (UK time) today at The Lincoln Centre, 18 Lincoln's Inn Fields, London, WC2A 3ED. An audiocast of the presentation will be available from the investor section of the Group's website investor.dairycrest.co.uk later today.
This announcement contains inside information.
Operating review
A new era of growth
Our success has been built on our links to the countryside, our dairy heritage and the people in our business. Following last year's sale of our Dairies business, we are now a lean, more focused organisation with a simple business strategy to produce high-quality food and added value functional ingredients.
The significant investment at Davidstow gives us further growth opportunities in high-margin, global infant formula markets as well as the potential to develop new functional ingredients. The Innovation Centre at Harper Adams University demonstrates our increased focus on innovation in our branded and ingredients businesses.
Innovation is at the heart of what we do and we have a successful track record of delivering consumer-focused innovation and new product development. Recently we have introduced, amongst other things, a new Clover recipe with 'no artificial ingredients', a much improved Cathedral City Spreadable range and a number of new Frylight variants. We target 10% of revenue from innovation less than three years old and delivered 11% in the year to 31 March 2016. We have improved that to 13% in the first half of this year.
Market background
After two years of very pronounced deflation, most dairy markets, both in the UK and worldwide, have seen a return to inflation in recent months as milk supply has fallen.
We continue to pay our farmers a competitive, sustainable, market-related price to ensure a secure supply of high quality milk. We have announced farmgate milk price increases of 4.3 pence per litre (20%) since the summer.
Key brand performance
Brand Market Volume growth* Value growth* ----------- --------- --------------- -------------- Cathedral City Cheese -5% -11% ----------- --------- --------------- -------------- Country Life Butters +8% -2% ----------- --------- --------------- -------------- Clover Spreads +7% -8% ----------- --------- --------------- -------------- Frylight Oil +16% +16% ----------- --------- --------------- -------------- Total +2% -8% ---------------------- --------------- --------------
* Dairy Crest volume and value sales 6 months to 30 September 2016 v 6 months to 30 September 2015
In aggregate, volumes of our four key brands (Cathedral City, Country Life, Clover and Frylight) grew by 2% in the first half of 2016/17 versus last year. This is a strong performance in a challenging marketplace. Deflationary pressures persisted for much of the first half and this impacted sales, which were down 8%.
Cathedral City maintains category leadership
In the first six months of the year we successfully rolled out a new master brand identity for Cathedral City. The new design simplifies the brand, improves visibility on shelf and strengthens our range, allowing us to build equity across all subsectors of the growing cheese category. It was supported by significant investment including a successful new TV advertisement, "The Rules of Cheese". We have seen a positive consumer reaction both to the new packaging and the marketing campaign.
The first half also saw the relaunch of Cathedral City spreadable in three flavours: Mature, Extra Mature and Garlic & Herb. The second half will see increased listings and the launch of a new flavour, Lighter Mature. Innovation will remain key to our future growth.
IRI data for the 28 weeks ended 8 October 2016 compared to the same period last year shows that the Everyday Cheese market grew 1% in volume but was down 4% in value terms. For much of the first half there were high levels of cheese stocks in the market. In order to maintain the brand's premium positioning within the category we chose not to discount too aggressively. Consequently, Cathedral City volumes were down 5% compared to the six months ended 30 September 2015 and sales fell by 11%. We expect volumes to improve in the second half of the year.
Our butters and spreads brands continue to grow share
IRI data for the 28 weeks ended 8 October 2016 shows that butters volumes grew by 3% but spreads volumes declined by 9%, leaving combined butters and spreads volumes down 4%. Selling prices fell in both markets resulting in retail sales down 2% for butters, 11% for spreads and 6% combined. Country Life and Clover have both outperformed their respective markets by some margin.
Clover, our dairy spread, has grown volumes by 7% in the six months ended 30 September 2016. This, together with the strong momentum seen in the second half of last year, has resulted in a 1.4 percentage points gain in volume market share over the last 12 months.
In September 2015 we re-launched Clover with 'no artificial ingredients', positioning it as a natural dairy spread, made with buttermilk and with a buttery taste. We believe that Clover is well placed should the retail price of butters inflate more than spreads in future. We once again reinforced the 'no artificial ingredients' naturalness positioning through a marketing campaign in September 2016. We will launch new packaging in the second half of the year, further supporting the natural messaging around the brand.
Country Life has continued to perform very well since the launch of the new 'Union Jack' packaging. Volumes have grown by 8% in the six months ended 30 September 2016 and volume share is up 0.5 percentage points over the last 12 months. Our new, improved spreadable recipe will launch in the second half of the year.
Since June 2016 there have been significant increases in prices for dairy products. In particular, the cream price has more than doubled. We expect this sharp increase in input costs to have an impact on the volumes and profitability of our butters business in the second half of the year.
We continue to drive efficiency improvements at our manufacturing site in Kirkby, where all of the butter and spreads brands are produced.
Frylight enjoys excellent growth in sales
Kantar data for the 24 weeks ended 11 September 2016 indicate that the volume and value of the retail oil market increased by 1% and 2% respectively.
Frylight, the UK's leading oil brand, continued to grow well ahead of the market. Sales and volumes grew by 16% compared to the six months ended 30 September 2015. We expect this strong performance to continue in the second half of the year.
The second half will see the launch of new packaging, which will emphasise the new 'no artificial ingredients' credentials. This will be supported by TV advertising across the important fourth quarter period, which encompasses both the start of the New Year and Pancake Day. Innovation has continued, with an avocado oil due to be launched in the second half of the year. The business is also exploring export opportunities in Europe to support its medium-term growth ambitions. We are delighted that Frylight has been singled out by the industry, winning the Institute of Grocery and Distribution (IGD) 'Health and Wellness' product award in October 2016.
Functional Ingredients
The new functional ingredients facility at Davidstow is a significant investment that gives Dairy Crest access to the fast-growing global infant formula market and potential access to the adult functional foods and the animal feed additives markets. This marks a significant new sales channel for Dairy Crest.
We have been producing demineralised whey since May 2016. The focus since then has been on operational efficiency and consistency. Yields are improving and wastage is declining. The required specification for infant formula grade demineralised whey is demanding and there is no room for variability. During the first six months of the year, a high proportion of our demineralised whey was sold as non-infant formula grade, which, although it commands a premium to sweet whey powder, is lower value than infant formula grade. However, the proportion of whey that is meeting the infant formula quality threshold is increasing and we expect to consistently reach our target of over 80% by the end of the financial year.
Whey, along with other dairy products, has experienced price rises recently. Demineralised whey continues to deliver a price premium compared to the sweet whey powder that we produced previously. The demineralised whey price has not risen as sharply as underlying sweet whey prices, but there is often a lag. We believe we are very well placed to benefit from any price rises in the coming months.
The galacto-oligosaccharide ("GOS") business is proceeding in line with plan. In the first six months of the year we produced initial batches of GOS and we are on track to produce and sell the planned level of infant formula grade GOS in the financial year.
In partnership with Fonterra we are developing the customer base for both products.
Our research into the potential positive impacts of GOS in animal feed continues. Initial academic trials have shown there are several benefits to feeding chickens GOS. Chickens receiving GOS exhibited improvements of over 10% in both weight gain and feed conversion rates, when compared to chickens not fed GOS. We also identified that chickens fed GOS had increased levels of beneficial bacteria and developed a greater surface area in the birds' gut which enables better absorption of nutrients. Furthermore, there are some encouraging signs of the positive benefit that GOS might be able to bring in offsetting the negative impact of pathogens, e.g. campylobacter, on bird development. This includes improved bird performance and potentially reduced infection rates.
We are now moving from highly-controlled academic trials to commercial trials to see whether these benefits can be sustained in the market place and we are increasing our investment by GBP2 million this year to support this programme. There has already been interest from a number of commercial partners in our progress and we expect to agree a product development partnership in the near future. We have also registered Nutrabiotic(R) as the brand name for our GOS in animal feed.
Leaner, more focused organisation
Following the sale of the Dairies business, overheads have been significantly reduced. We are driving further efficiencies and cost reductions, including the implementation of new, simplified IT systems. The new platform will be more standardised than that which it replaces and will drastically reduce the number of systems we use. Reducing costs and improving efficiencies are an integral part of doing business at Dairy Crest. The agreement with Fowler Welch, reached in June 2016, is just the latest example of this. This transferred Dairy Crest's transport operations to Fowler Welch and opens up opportunities for both companies to build a larger warehousing and logistics operation at Nuneaton, therefore improving utilisation at this site.
Financial review
Group revenue from continuing operations of GBP190 million represents a 7% decrease from last year, reflecting the deflationary conditions that remained a feature of our markets for much of the first half.
Total product group profit from continuing operations increased by 16% to GBP23.1 million (2015: GBP20.0 million). Cheese and whey product group profits increased by GBP2.5 million. Butters and spreads product group profits increased by GBP0.6 million. Efficiencies at our butters and spreads plant in Kirkby and good growth in profits from Frylight helped to offset the effects of lower revenues and rising input costs.
Finance costs of GBP4.0 million are in line with last year and adjusted profit before tax (from continuing operations, before exceptional items, amortisation of acquired intangibles and pension interest) was GBP19.1 million, up 19% from GBP16.0 million in 2015. Product group analysis and a reconciliation to both adjusted and reported profit before tax is included in note 3 to the interim financial statements.
Net exceptional costs on continuing operations of GBP2.9 million were incurred during the six months ended 30 September 2016 (2015: GBP2.4 million). Exceptional income of GBP2.2 million was recognised in relation to the settlement of claims between the Group, Farmright Limited and Quadra Foods Limited at GBP1 million, which was lower than the creditor balance held of GBP3.2 million. However this exceptional income was offset by continued exceptional costs of GBP5.1 million in relation to the ongoing commissioning of the demineralised whey and GOS facilities at Davidstow. Exceptional costs this financial year could be further offset by the profit on disposal of an ex-manufacturing facility in Fenstanton, Cambridgeshire, should this complete before 31 March 2017.
The pension interest charge of GBP0.4 million is GBP0.1 million higher than last year. The GBP0.2 million amortisation charge for acquired intangible assets is unchanged. This results in a reported profit before tax of GBP15.6 million, an increase of 19% compared to last year (2015: GBP13.1 million)
The effective rate of tax for continuing operations is 18.9% and is representative of the expected rate for the year ending 31 March 2017.
Adjusted basic earnings per share on continuing operations amount to 11.1 pence (2015: 9.3 pence) an increase of 19% broadly consistent with higher adjusted profit before tax. Basic earnings per share on continuing operations increased by 22% to 9.3 pence.
The post-tax loss on discontinued operations, being the operations of the Dairy business disposed of in December 2015, totalled GBP2.8 million. This predominantly reflects the final consideration reduction of GBP2.5 million paid back to Muller UK & Ireland Group LLP ("Müller") following the final determination of consideration adjustments by the independent expert. Further information is reported in note 8 to the interim financial statements.
Operating cash inflow (before exceptional items and after capital expenditure) in the six months ended 30 September 2016 amounted to GBP17.5 million (2015: GBP10.4 million outflow). Working capital inflows of GBP3.0 million were lower than the GBP21.4 million seen last year. Milk cost deflation in the first half of 2015 was more pronounced than in the first half of 2016 as UK milk supply has tightened in recent months. Furthermore, the business carried higher than anticipated stocks of demineralised whey powder at 30 September 2016 as the testing, grading and sales process resulted in increased stock levels.
Capital expenditure was GBP10.1 million. This represents a significant reduction compared to the GBP35.5 million incurred in the six months ended 30 September 2015, when we were investing in the new demineralised whey and GOS facility at Davidstow.
The Dairies business was sold in December 2015 and initial proceeds received during the year ended 31 March 2016 amounted to GBP54.5 million. These initial proceeds were subject to further adjustments relating to profit and working capital amounts in the pre-sale Dairies business compared to targeted levels. In April 2016 GBP25.9 million was repaid to Muller with a further GBP2.5 million repaid in August 2016 following the independent expert's determination of final adjustments to the consideration. There will be no further adjustments to consideration received.
The impact of the repayment to Muller was partly offset by a sale and lease back agreement to finance the galacto-oligosaccharide investment in Davidstow resulting in proceeds of GBP18 million. Overall, in line with normal seasonality, net debt increased in the first half of the year to GBP262.3 million but this is expected to reduce over the second half of the year. Dairy Crest remains committed to reducing levels of net debt with a medium term target of net debt to EBITDA of 1.5 to 2.0 times.
The reported defined benefit pension scheme deficit was GBP120.5 million at 30 September 2016 compared to GBP42.5 million at 31 March 2016. The principal driver of this increase is reduced yields on corporate bonds, which are used to determine the discount rate applied to the pension scheme liabilities under IAS19. These fell from 3.5% at March 2016 to 2.3% at September 2016 but have strengthened since then.
We are currently in discussions with the Pension Fund Trustee on the actuarial valuation and revised funding plan based on a March 2016 valuation date. Until such time that this is agreed, we are subject to the March 2013 plan. This plan results in cash contributions by the Company of GBP13.2 million in 2016/17.
The principal risks and uncertainties affecting the Group are set out below the statement of directors' responsibilities and further details are disclosed on pages 16 and 17 of the 2016 Annual Report and Accounts.
Summary and outlook
We are pleased to have delivered a strong set of interim results in our first full trading period since the sale of Dairies. Our four key brands are continuing to perform well in a challenging marketplace, with strong volume growth for Clover, Country Life and Frylight and a successful launch of new branding and packaging for Cathedral City.
We are also seeing the benefits of Dairy Crest's transformation into a leaner and more focused organisation, with strong profit growth and significantly improved cash generation during the first half. Our expectations for the full year remain unchanged.
Looking further ahead, the significant investment at Davidstow has opened up attractive opportunities in high-margin, global infant formula markets as well as the potential to develop new functional ingredients. Combined with our continued focus on innovation within our key brands, this will underpin future growth and help us to maintain our strong track record of rewarding shareholders with higher dividends.
Mark Allen
Chief Executive
10 November 2016
Consolidated income statement
(Unaudited)
Half year ended Half year ended
Year ended 30 September 30 September
31 March 2016 2016 2015
------------------------------------- ------------------------------------- -------------------------------------
Before Before Before
exceptional Exceptional exceptional Exceptional exceptional Exceptional
items items Total items items Total items items Total
GBPm GBPm GBPm Note GBPm GBPm GBPm GBPm GBPm GBPm
----------- ----------- ------- ------------- ---- ----------- ----------- ------- ----------- ----------- -------
422.3 - 422.3 Revenue 3 190.0 - 190.0 203.8 - 203.8
Operating
(360.3) (17.3) (377.6) costs (167.1) (2.9) (170.0) (184.4) (2.4) (186.8)
Remeasurement
gain
on Promovita
- 6.0 6.0 Ingredients - - - - - -
Other income
3.6 - 3.6 - property - - - 0.4 - 0.4
----------- ----------- ------- ------------- ---- ----------- ----------- ------- ----------- ----------- -------
Profit on
continuing
65.6 (11.3) 54.3 operations 22.9 (2.9) 20.0 19.8 (2.4) 17.4
(8.3) - (8.3) Finance costs (4.0) - (4.0) (4.0) - (4.0)
Other finance
expense
(0.6) - (0.6) - pensions (0.4) - (0.4) (0.3) - (0.3)
----------- ----------- ------- ------------- ---- ----------- ----------- ------- ----------- ----------- -------
Profit before
tax
from
continuing
56.7 (11.3) 45.4 operations 3,4 18.5 (2.9) 15.6 15.5 (2.4) 13.1
Tax (expense)
(9.9) 3.0 (6.9) / credit 5 (3.5) 0.9 (2.6) (3.1) 0.4 (2.7)
----------- ----------- ------- ------------- ---- ----------- ----------- ------- ----------- ----------- -------
Profit for
the period
from
continuing
46.8 (8.3) 38.5 operations 15.0 (2.0) 13.0 12.4 (2.0) 10.4
Loss for the
period
from
discontinued
(26.4) (125.1) (151.5) operations 8 (0.8) (2.0) (2.8) (16.7) (103.1) (119.8)
(133.4) Profit /
(loss) for
20.4 ( (113.0) the period 14.2 (4.0) 10.2 (4.3) (105.1) (109.4)
----------- ----------- ------- ------------- ---- ----------- ----------- ------- ----------- ----------- -------
All amounts are attributable to owners of the parent.
Year Half year
ended ended 30 Half year ended
31 March September 30 September
2016 Earnings per share 2016 2015
-------- ----------------------------- ---------- ------------------
Basic earnings per share
27.9p from continuing operations 7 9.3p 7.6p
Diluted earnings per share
27.7p from continuing operations 7 9.2p 7.5p
Adjusted basic earnings
per share from continuing
34.5p operations * 7 11.1p 9.3p
Adjusted diluted earnings
per share from continuing
34.2p operations * 7 11.0p 9.2p
Basic earnings/(loss) per
(81.9)p share 7 7.3p (79.4)p
Diluted earnings/(loss)
(81.3)p per share 7 7.2p (78.5)p
*Adjusted earnings per share calculations exclude exceptional items, amortisation of acquired intangibles and pension interest in relation to the Group's defined benefit pension scheme.
A final dividend of GBP22.4 million (16.0 pence per share) was paid in the period to 30 September 2016 (2015: GBP21.6 million; 15.7 pence per share). A dividend of GBP8.7 million (6.2 pence per share) was approved by the Board on 9 November 2016 for payment on 26 January 2017 (2015: GBP8.4 million; 6.1 pence per share). See Note 6.
Consolidated statement of comprehensive income
(Unaudited)
Year
ended Half year ended
31 March 30 September
-------------------
2016 2016 2015
GBPm Note GBPm GBPm
-------- ------------------------------------- ---------- ------ ------- --------
Profit/(loss) for
(113.0) the period 10.2 (109.4)
-------- ----------------------------------------- ---------- ------ ------- --------
Other comprehensive income to be
reclassified to profit and loss
in subsequent periods:
Cash flow hedges - reclassification
adjustment for (losses) / gains
4.4 in income statement (8.2) 2.6
Cash flow hedges - gains / (losses)
recognised in other comprehensive
(5.4) income 5.2 (2.3)
Tax credit / (expense) relating
to components of other comprehensive
0.2 income 0.5 (0.1)
-------- ----------------------------------------------------- ---- ---- ------- --------
(0.8) (2.5) 0.2
-------- ------------------------------------- ---------- ---- ------- --------
Other comprehensive income not
to be reclassified to profit and
loss in subsequent periods:
Remeasurements of defined benefit
(20.5) pension plans 10 (83.5) 1.8
Tax credit relating to components
1.0 of other comprehensive income 11.0 0.4
--------------------------------------------------- ---- ----
(19.5) (72.5) 2.2
-------- ------- --------
Other comprehensive (loss) /
(20.3) gain for the period, net of tax (75.0) 2.4
-------- --------------------------------------------------- ---- ---- ------- --------
Total comprehensive loss for
(133.3) the period, net of tax (64.8) (107.0)
-------- --------------------------------------------------- ---- ---- ------- --------
All amounts are attributable
to owners of the parent.
Consolidated balance sheet
(Unaudited)
31 March 30 September
------- ------------
2016 2016 2015
GBPm Note GBPm GBPm
-------- ------------------------------- ----------------------- ---- ------- ------------
Assets
Non-current
assets
Property, plant and
233.9 equipment 219.1 217.8
86.3 Goodwill 86.3 74.3
Intangible
11.1 assets 10.8 18.1
0.5 Investments - 0.5
Financial assets - Derivative
2.3 financial instruments 11 9.8 0.2
Deferred tax
19.3 asset 29.0 7.7
-------- --------------------------------- ----------------------- ---- ------- ------------
353.4 355.0 318.6
-------- ------------------------------- ----------------------- ---- ------- ------------
Current assets
152.1 Inventories 152.3 156.0
43.2 Trade and other receivables 31.2 65.4
Financial assets - Derivative
16.0 financial instruments 11 0.1 12.0
Cash and short-term
100.3 deposits 9 21.1 41.6
311.6 204.7 275.0
Assets of the disposal group
- classified as held for sale - 72.3
-------- ------------------------------------------------------------ ---- ------- ------------
311.6 204.7 347.3
-------- ------------------------------- ----------------------- ---- ------- ------------
665.0 Total assets 559.7 665.9
-------- --------------------------------- ----------------------- ---- ------- ------------
Equity and
liabilities
Non-current liabilities
(250.3) Financial liabilities - Long-term borrowings 9 (282.3) (202.5)
- Derivative financial
(1.3) instruments 11 - (1.9)
Retirement benefit
(42.5) obligations 10 (120.5) (33.2)
(4.5) Deferred income (3.7) (5.3)
-------- --------------------------------- ----------------------- ---- ------- ------------
(298.6) (406.5) (242.9)
-------- ------------------------------- ----------------------- ---- ------- ------------
Current liabilities
(120.3) Trade and other payables (78.7) (119.0)
(96.5) Financial liabilities - Short-term borrowings 9 (13.5) (92.5)
- Derivative financial
- instruments 11 (1.2) -
Current tax
(3.8) liability (3.8) (2.9)
(1.6) Deferred income (1.6) (1.7)
(10.0) Provisions (5.4) (1.9)
(232.2) (104.2) (218.0)
Liabilities associated with the
assets of the disposal group
- classified as held for sale - (42.7)
-------- ------------------------------------------------------------ ---- ------- ------------
(232.2) (104.2) (260.7)
-------- ------------------------------- ----------------------- ---- ------- ------------
(530.8) Total liabilities (510.7) (503.6)
-------- --------------------------------- ----------------------- ---- ------- ------------
Shareholders'
equity
(35.2) Ordinary shares (35.3) (34.5)
(84.3) Share premium (85.6) (80.0)
Interest in
0.5 ESOP 0.5 0.1
(50.6) Other reserves (48.1) (51.6)
35.4 Retained earnings 119.5 3.7
-------- --------------------------------- ----------------------- ---- ------- ------------
Total shareholders'
(134.2) equity (49.0) (162.3)
(665.0) Total equity and liabilities (559.7) (665.9)
-------- ----------------------------------- ----------------------- ---- ------- ------------
The interim results were approved by the directors on 9 November 2016.
Consolidated statement of changes in equity
(Unaudited)
Ordinary Share Interest Other Retained
shares premium in ESOP reserves earnings Total
Half year ended 30
September 2016 GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- -------- ------- -------- -------- -------- -------
At 31 March 2016 35.2 84.3 (0.5) 50.6 (35.4) 134.2
Profit for the
period - - - - 10.2 10.2
-------
Other comprehensive
gain / (loss):
Cash flow hedges - - - (3.0) - (3.0)
Remeasurement of defined
benefit pension plan - - - - (83.5) (83.5)
Tax on components of
other comprehensive
income - - - 0.5 11.0 11.5
---------------------------- -------- ------- -------- -------- -------- -------
Other comprehensive
loss - - - (2.5) (72.5) (75.0)
---------------------------- -------- ------- -------- -------- -------- -------
Total comprehensive
loss - - - (2.5) (62.3) (64.8)
Issue of share
capital 0.1 1.3 - - - 1.4
Share-based payments - - - - 0.6 0.6
Equity dividends - - - - (22.4) (22.4)
--------------------------- -------- ------- -------- -------- -------- -------
At 30 September
2016 35.3 85.6 (0.5) 48.1 (119.5) 49.0
--------------------------- -------- ------- -------- -------- -------- -------
Half year ended 30
September 2015
---------------------------- -------- ------- -------- -------- -------- -------
At 31 March 2015 34.4 79.8 (0.1) 51.4 124.3 289.8
Loss for the period - - - - (109.4) (109.4)
-------
Other comprehensive
gain / (loss):
Cash flow hedges - - - 0.3 - 0.3
Remeasurement of defined
benefit pension plan - - - - 1.8 1.8
Tax on components of
other comprehensive
income - - - (0.1) 0.4 0.3
---------------------------- -------- ------- -------- -------- -------- -------
Other comprehensive
gain - - - 0.2 2.2 2.4
--------------------------- -------- ------- -------- -------- -------- -------
Total comprehensive
gain / (loss) - - - 0.2 (107.2) (107.0)
Issue of share
capital 0.1 0.2 - - - 0.3
Share-based payments - - - - 0.8 0.8
Equity dividends - - - - (21.6) (21.6)
--------------------------- -------- ------- -------- -------- -------- -------
At 30 September
2015 34.5 80.0 (0.1) 51.6 (3.7) 162.3
--------------------------- -------- ------- -------- -------- -------- -------
Year ended 31 March
2016
--------------------------- -------- ------- -------- -------- -------- -------
At 31 March 2015 34.4 79.8 (0.1) 51.4 124.3 289.8
Loss for the period - - (0.3) - (112.7) (113.0)
-------
Other comprehensive
gain / (loss):
Cash flow hedges - - - (1.0) - (1.0)
Remeasurement of defined
benefit pension plan - - - - (20.5) (20.5)
Tax on components of
other comprehensive
income - - - 0.2 1.0 1.2
---------------------------- -------- ------- -------- -------- -------- -------
Other comprehensive
loss - - - (0.8) (19.5) (20.3)
---------------------------- -------- ------- -------- -------- -------- -------
Total comprehensive
loss - - (0.3) (0.8) (132.2) (133.3)
Issue of share
capital 0.8 4.5 - - - 5.3
Shares acquired
by ESOP - - (0.3) - - (0.3)
Exercise of options - - 0.2 - (0.2) -
Share-based payments - - - - 2.3 2.3
Tax on share-based
payments - - - - 0.4 0.4
Equity dividends - - - - (30.0) (30.0)
--------------------------- -------- ------- -------- -------- -------- -------
At 31 March 2016 35.2 84.3 (0.5) 50.6 (35.4) 134.2
--------------------------- -------- ------- -------- -------- -------- -------
All amounts are attributable to owners of the parent.
Consolidated cash flow statement
(Unaudited)
Year Half year
ended ended
31 March 30 September
------- ------------
2016 2016 2015
GBPm Note GBPm GBPm
-------- ---------------------------------------- ---- ------- ------------
Cash flow from operating activities
Profit before taxation - continuing
45.4 operations 15.6 13.1
Loss before taxation - discontinued
(187.2) operations 8 (3.5) (141.2)
Finance costs and other finance
8.9 income - continuing operations 4.4 4.3
137.3 Loss on disposal of Dairies operation 8 2.5 116.1
-------- ---------------------------------------------- ---- ------- ------------
4.4 Profit / (loss) on operations 19.0 (7.7)
23.4 Depreciation 7.6 14.9
Amortisation of internally generated
2.0 intangible assets 0.3 1.7
Amortisation of acquired intangible
0.4 assets 0.2 0.2
- Impairment of investment 0.4 -
Difference between cash outflow
on exceptional items and amounts
recognised in the income statement
(excluding disposal of Dairies
10.3 operation) (9.1) (1.1)
(1.7) Release of grants (0.8) (0.8)
2.2 Share-based payments 0.7 0.8
Profit on disposal of
(3.7) depots - (0.6)
Difference between pension contributions
paid and amounts recognised in
the income
(20.0) statements (5.9) (6.7)
- R&D tax credits 0.2 0.2
14.0 Decrease in working capital 3.0 21.4
-------- ---------------------------------------------- ---- ------- ------------
31.3 Cash generated from operations 15.6 22.3
Interest
(12.8) paid (7.4) (5.2)
-------- ---- ------- ------------
Net cash inflow from operating
18.5 activities 8.2 17.1
-------- ---------------------------------------------- ---- ------- ------------
Cash flow from investing activities
(66.8) Capital expenditure (10.1) (35.5)
Purchase of businesses and investments
(6.0) (net of cash and debt acquired) - -
Proceeds from disposal of property,
5.4 plant and equipment 18.0 1.4
Proceeds/(repayment) relating to
49.0 sale of business net of fees 8 (28.4) -
(18.4) Net cash used in investing activities (20.5) (34.1)
-------- ---------------------------------------------- ---- ------- ------------
Cash flow from financing activities
Issue/(repayment and cancellation)
76.1 of loan notes (80.2) -
Net drawdown under revolving credit
- facilities 35.0 30.0
(30.0) Dividends paid (22.4) (21.6)
Proceeds from issue of shares (net
5.0 of issue costs) 1.4 0.3
(1.5) Finance lease repayments (0.7) (0.7)
-------- -------------------------------------------- ---- ------- ------------
Net cash (used in) / generated
49.6 from financing activities (66.9) 8.0
-------- ---------------------------------------------- ---- ------- ------------
Net (decrease) / increase in cash
49.7 and cash equivalents (79.2) (9.0)
Cash and cash equivalents at beginning
50.6 of period 100.3 50.6
-------- ---- ------- ------------
Cash and cash equivalents at end
100.3 of period 9 21.1 41.6
-------- ---------------------------------------------- ---- ------- ------------
Memo: Net debt at end
(229.0) of period 9 (262.3) (242.3)
-------- -------------------------------------------- ---- ------- ------------
Notes to the interim financial statements
(Unaudited)
1 General information
Dairy Crest Group plc (the "Company") is a public limited company incorporated in the United Kingdom under the Companies Act 2006. The address of the registered office and principal place of business is Claygate House, Littleworth Road, Esher, Surrey, KT10 9PN. The principal activity of the Company and its subsidiaries (the "Group") in the period was the processing, manufacture and sale of branded dairy products in the UK and Europe as described in the Group's annual financial statements for the year ended 31 March 2016.
2 Basis of preparation, accounting policies and approval of interim statement
Basis of preparation and approval of interim statement
These condensed interim financial statements comprise the consolidated balance sheet as at 30 September 2016 and related income statement, statement of comprehensive income, statement of cash flows, statement of changes in equity and supporting notes (hereinafter referred to as "financial information").
The financial information is not audited and does not constitute statutory financial statements as defined in section 435 of the Companies Act 2006. Comparative figures for the year ended 31 March 2016 have been extracted from the Group's 2016 statutory accounts, on which the auditors gave an unqualified opinion, did not include an emphasis of matter reference and did not include a statement under section 498(2) or (3) of the Companies Act 2006. The comparative figures for the year ended 31 March 2016 and the half year ended 30 September 2015 reflect the impact of the Dairies operation as a discontinued operation. These sections address whether adequate accounting records have been kept, whether the Company's financial statements are in agreement with those records and whether the auditors have obtained all the information and explanations necessary for the purposes of the audit. The Group financial statements for the year ended 31 March 2016 have been filed with the Registrar of Companies and can be found on our corporate website, www.dairycrest.co.uk.
The financial information for the period ended 30 September 2016 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, "Interim Financial Reporting" as adopted by the European Union. The financial information should be read in conjunction with the Group's financial statements for the year ended 31 March 2016, which have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union.
The results for operations for the half year are not necessarily indicative of the results expected for the full year.
This financial information was approved for issue on 9 November 2016.
Going concern
The Directors have reviewed current performance and forecasts, combined with expenditure commitments, including capital expenditure. After making appropriate enquiries, the Directors have a reasonable expectation that the Group has adequate financial resources to continue its current operations, including contractual and commercial commitments, for the foreseeable future. For this reason, they have continued to adopt the going concern basis in preparing the interim financial statements.
Accounting policies and areas of estimation and judgement
The financial information has been prepared in accordance with accounting policies used for the Group's financial statements for the year ended 31 March 2016, with the exception of the adoption of the new standards and interpretations that came into effect in the half year.
2 Basis of preparation, accounting policies and approval of interim statement (continued)
New standards, interpretations and amendments
The following accounting standards and interpretations became effective for the current reporting period:
- Amendment to IFRS 5: Non-current Assets Held for Sale and Discontinued Operations
- Amendment to IFRS 7: Financial Instruments: Disclosures
- Amendment to IFRS 10: Consolidated Financial Statements
- Amendment to IFRS 11: Joint Arrangements
- Amendment to IFRS 12: Disclosure of Interests in Other Entities
- Amendment to IAS 1: Presentation of Financial Statements
- Amendment to IAS 16: Property, Plant & Equipment
- Amendment to IAS 28: Investments in Associates and Joint Ventures
- Amendment to IAS 34: Interim Financial Reporting
- Amendment to IAS 38: Intangible Assets
The adoption of these standards and interpretations do not have a material impact on the Group's interim financial statements in the period.
Taxation
Taxes on income in the interim periods are accrued using the tax rate that is expected to be applicable to total annual earnings for the full year in each tax jurisdiction based on substantively enacted or enacted tax rates at the interim date.
Key areas of judgement and estimation
The areas of particular significance to the Group's financial information which include the application of judgement and estimation, which is fundamental in the completion of a set of condensed consolidated interim statement, are detailed below.
The key areas where judgement has been applied are:
(i) Nature of exceptional items
Items of a material, one-off nature, which result from a restructuring of the business or some other event of circumstance, are disclosed separately in the consolidated income statement as exceptional. Management considers this to be an area of judgement due to the assumptions made around the nature of exceptional cost. See Note 4 and Note 8.
(ii) Deferred Tax Asset
The Group has recognised a deferred tax asset in relation to the trading losses of the Dairies operation. Management considers this to be an area of judgement due to the assumption made that this deferred tax asset can be set off against future trading profits despite the disposal of the Dairies operation.
The key sources of estimation uncertainty that have a significant risk of causing material adjustments to the carrying amounts of assets and liabilities within the next year are:
(i) Calculation of promotional discount accruals
The Group accrues for agreed promotional funding. Accruals for promotional funding are calculated based on an estimated redemption rate of the promotion. The redemption rate used is dependent on the promotional mechanic and considers known historical data on the performance of that mechanic. Management considers this to be an area of judgement which is dependent on the customer mix and promotion mechanic.
(ii) Measurement of defined benefit pension scheme assets and obligations
The Group recognises and discloses its retirement benefit obligation in accordance with the measurement and presentational requirement of IAS 19 'Retirement Benefit Obligations'. The calculations include a number of judgements and estimations in respect of the expected rate of return on assets, the discount rate, inflation assumptions, the rate of increase in salaries and life expectancy, amongst others. Changes in these assumptions can have a significant effect on the value of the retirement benefit obligation. There has been a change in the discount rate assumption for the valuation as at 30 September 2016 that has had a significant effect on the valuation. See Note 10.
2 Basis of preparation, accounting policies and approval of interim statement (continued) (iii) Estimation of tax costs in France in relation to the sale of St Hubert
The sale of St Hubert resulted in the tax payable in France both on the chargeable gain on disposal and on dividend payments made to the UK parent between 31 March 2012 and the date of disposal in August 2012. An estimate has been made of the likely tax a cost resulting from these transactions, however, the final assessment has yet to be agreed with the French tax authorities which may result in a change to the level of tax provisioning.
3 Segmental analysis
IFRS 8 requires operating segments to be determined based on the Group's internal reporting to the Chief Operating Decision Maker ("CODM"). The CODM has been determined to be the Company's Board members as they are primarily responsible for the allocation of resources to segments and the assessment of performance of the segments.
The business is managed centrally by functional teams (Demand, Supply, Procurement and Finance) that have responsibility for the whole of the Group's product portfolio. Although some discrete financial information is available to provide insight to the management team of the key performance drivers, the product group profit is not part of the CODM's review. Management has judged that the Group comprises one operating segment under IFRS 8. As such, disclosures required under IFRS 8 for the financial statements are shown on the face of the consolidated income statement and balance sheet.
To assist the readers of the financial statements, management considers it appropriate to provide voluntary disclosure on a basis consistent with historical reporting of the cheese and spreads product groups results included within the consolidated income statement. In disclosing the product group profit for the period, certain assumptions have been made when allocating resources which are centralised at a group level for the continuing business and property income.
The 'Other' product group comprises revenue earned from distributing products for third parties and certain central costs net of recharges to the other product groups. Generally, central costs less external 'Other' revenue is recharged back into the product groups such that their result reflects the total cost base of the Group. 'Other' operating profit therefore is nil.
The results under the historical segmentation basis for the continuing business included in the financial information are as follows:
Half
Year year
ended ended
31 March 30 September
----- ------------
2016 2016 2015
GBPm GBPm GBPm
-------- --------------------------------------- ----- ------------
External revenue
263.7 Cheese 115.8 128.5
152.6 Spreads 68.2 73.4
6.0 Other 6.0 1.9
-------- --------------------------------------- ----- ------------
Total product group external revenue
422.3 - continuing operations 190.0 203.8
-------------------------------------------------
Product group profit
*
36.4 Cheese 11.6 9.1
29.6 Spreads 11.5 10.9
-------- --------------------------------------- ----- ------------
Total product group profit - continuing
66.0 operations 23.1 20.0
(8.3) Finance costs (4.0) (4.0)
-------- --------------------------------------- ----- ------------
Adjusted profit before tax - continuing
57.7 operations ** 19.1 16.0
(0.4) Acquired intangible amortisation (0.2) (0.2)
Exceptional items (see
(11.3) Note 4) (2.9) (2.4)
Other finance expense
(0.6) - pensions (0.4) (0.3)
---------------------------------------------
Group profit before tax - continuing
45.4 operations 15.6 13.1
-------- ----------------------------------------------- ----- ------------
* Profit on operations before exceptional items and amortisation of acquired intangibles.
**Before exceptional items, amortisation of acquired intangibles and pension interest.
Seasonality of results
Consumer demand for our products tends to be lower during the summer months as it is impacted by warm weather and school holidays. Certain products experience increased sales in the run up to Christmas. Working capital normally increases in the first six months of the year as milk production is higher during the spring and summer, however, this impact can be offset by other factors including levels of cheese sales volumes, promotional activity and milk cost movements.
4 Exceptional items
Exceptional items comprise those items that are material and one-off in nature that the Group believes should be separately disclosed to assist in the understanding of the underlying financial performance of the Group.
The exceptional items charge to the operating costs of the continuing operations are analysed below. The exceptional items charged in relation to discontinued operations are analysed in Note 8.
Year Half year
ended ended
31 March 30 September
----- ------------
2016 2016 2015
GBPm GBPm GBPm
-------- --------------------------------------------- ----- ------------
Operating costs
Demineralised whey powder and GOS
(16.2) projects (5.1) (2.4)
(1.8) Property provision - -
Spreads restructuring
0.7 costs - -
Gain on settlement of claim by Farmright
- Limited 2.2 -
------------------------------------------------------- ----- ------------
(17.3) (2.9) (2.4)
Gain on remeasurement to fair value of
original investment in Promovita Ingredients
6.0 Limited - -
-------- ------------------------------------------------------- ----- ------------
(11.3) (2.9) (2.4)
Tax relief on exceptional
3.0 items 0.9 0.4
--------
(8.3) (2.0) (2.0)
-------- --------------------------------------------- ----- ------------
Demineralised whey powder and GOS projects
The Group has completed an investment in its cheese creamery at Davidstow, Cornwall enabling the Group to manufacture demineralised whey powder, a base ingredient of infant formula, and galacto-oligosaccharide ("GOS"), widely used in infant formula. During the six months ended 30 September 2016 GBP5.1 million of exceptional costs were incurred relating to the commissioning of the facility. In the year ended 31 March 2016, GBP16.2 million was incurred of which GBP5.3 million related to the commissioning of the facility and GBP6.5 million on project review costs. The tax credit relating to this exceptional charge in the period was GBP1.3 million (year ended 31 March 2016: GBP2.7 million).
Settlement of liability in relation to Farmright Limited
On 9 May 2016, the Group paid GBP1.0 million in full and final settlement of claims arising out of the debt originally owed to Farmright Limited. Claims between the Group, Farmright Limited and Quadra Foods Limited (and any assignees of the claims) are now resolved. Following settlement, GBP2.1 million plus a provision for professional fees of GBP0.1 million which was no longer required, have been released as an exceptional credit in the period. The tax charge relating to this exceptional credit was GBP0.4 million.
Property provision
During the year ended 31 March 2016, the Group commissioned a dilapidation assessment on some of its leasehold properties. The GBP1.8 million exceptional charge represents an increase in provision for property dilapidation liabilities on properties where the Group considers there to be a high likelihood of exiting when the lease term expires. The tax credit on this exceptional charge was GBP0.4 million.
Spreads restructuring costs
During the year ended 31 March 2015, the Group completed the consolidation of its spreads production operations into one site in Kirkby, Liverpool. As a result of the consolidation, the site at Crudgington, Shropshire ceased production in December 2014. The exceptional credit of GBP0.7 million in the year ended 31 March 2016 represents the release of a prior year provision relating to the completion of this project that was not required. The tax charge relating to this exceptional credit was GBP0.3 million.
5 Taxation
The tax expense for continuing operations for the half year ended 30 September 2016 has been calculated on the basis of the estimated effective tax rate on pre-exceptional profit for the full year of 18.9% (September 2015: 20.0%; March 2016: 17.5%). Tax relief on exceptional costs incurred by continuing operations for the half year ended 30 September 2016 was GBP0.9 million (September 2015: GBP0.4 million; year ended 31 March 2016: GBP3.0 million).
5 Taxation (continued)
The tax attributable to discontinued operations is disclosed in Note 8. As a result of the disposal of the Dairies operation on 26 December 2015, the tax credit has been calculated on actual loss for the six months ended 30 September 2016 with an effective rate of 20.0%. Tax relief on exceptional costs incurred by discontinued operations for the half year ended 30 September 2016 was GBP0.5 million (September 2015: GBP17.6 million; year ended 31 March 2016: GBP26.6 million).
The deferred tax asset of GBP29.0 million as at 30 September 2016 has increased by GBP9.7 million. The main reason for this is an increase of GBP90.0 million to the retirement benefit obligation.
6 Dividends
A dividend of GBP8.7 million (6.2 pence per share) (2015: GBP8.4 million; 6.1 pence per share) will be payable on 26 January 2017 to shareholders on the register on 6 January 2017. This dividend is not recorded in the balance sheet as a liability at 30 September 2016 because it had not been committed to at the balance sheet date.
7 Earnings per share
The basic earnings per share ("EPS") measures for the period have been calculated by dividing the profit attributable to equity shareholders from the relevant operations (continuing, discontinued and total group) by the weighted average shares in issue during the period, excluding those held by the Dairy Crest Employees' Share Ownership Plan Trust which are held as treasury shares and treated as cancelled.
The weighted average number of shares used in the calculation of basic EPS is detailed below along with the diluted weighted average number of shares used for the calculation of diluted EPS. The diluted weighted average number of shares reflects the dilutive impact of share options exercisable under the Group's share option schemes. Note that in the circumstances where there is a basic loss per share from continuing operations, share options are anti-dilutive and therefore are not included in the calculation of any other EPS measures.
To show earnings per share on a consistent basis, which in the Directors' opinion reflects the underlying performance of the Group more appropriately, adjusted earnings per share has been calculated.
Year Half year
ended ended
31 March 30 September
----- ------------
2016 2016 2015
GBPm GBPm GBPm
-------- -------------------------------------------- ------ ----- ------------
Continuing operations:
Profit attributable to equity
38.5 shareholders 13.0 10.4
Exceptional items (net
8.3 of tax) 2.0 2.0
Amortisation of acquired
intangible assets (net of
0.3 tax) 0.2 0.2
Pension interest expense
0.5 (net of tax) 0.3 0.2
Adjusted earnings attributable to
47.6 equity shareholders - continuing operations 15.5 12.8
-------- ---------------------------------------------------------------------- ----- ------------
Total profit / (loss) attributable
(113.0) to equity shareholders 10.2 (109.4)
-------- ------------------------------------------------------ ---- ---- ----- ------------
Weighted average number
137.9 of shares (million) 139.7 137.7
Diluted weighted average
139.0 number of shares (million) 141.0 139.3
Earnings per share
Continuing operations:
Basic earnings per share from
27.9p continuing operations 9.3p 7.6p
Diluted earnings per share from
27.7p continuing operations 9.2p 7.5p
Adjusted basic earnings per share
34.5p from continuing operations 11.1p 9.3p
Adjusted diluted earnings per share
34.2p from continuing operations 11.0p 9.2p
Total Group:
Basic earnings / (loss)
(81.9)p per share 7.3p (79.4)p
Diluted earnings / (loss) per
(81.3)p share 7.2p (78.5)p
8 Discontinued operations
On 26 December 2015, the Group completed the disposal Dairies operation to Muller UK & Ireland Group LLP. The Dairies operation was a major product group of the business and was therefore classified as a discontinued operation in the six months ended 30 September 2015 and in the year ended 31 March 2016. The results of the Dairies operation which have been included in the consolidated income statement within discontinued operations can be analysed as follows:
Year Half year
ended ended
31 March 30 September
------ ------------
2016 2016 2015
GBPm GBPm GBPm
-------- ------------------------------------------- ------ ------------
529.1 Revenue - 355.8
(562.5) Operating costs (1.0) (376.5)
0.1 Other income - property - 0.2
-------- ------------------------------------------- ------ ------------
Operating loss before exceptional
operating items and tax attributable
(33.3) to discontinued operations (1.0) (20.5)
(16.6) Exceptional operating items - (4.6)
-------------------------------------------
Operating loss before tax attributable
(49.9) to discontinued operations (1.0) (25.1)
9.1 Attributable tax 0.2 4.2
-------- ------------------------------------------- ------ ------------
(40.8) Loss after tax from discontinued operations (0.8) (20.9)
(137.3) Loss on disposal (2.5) (116.1)
26.6 Attributable tax on disposal 0.5 17.2
Loss for the period from discontinued
(151.5) operations (2.8) (119.8)
-------- ------------------------------------------- ------ ------------
Loss per share from discontinued operations
(109.9)p Basic (2.0)p (87.0)p
(109.0)p Diluted (2.0)p (86.0)p
The operating costs included in the income statement comprise certain costs relating to the Dairies operation that was not fully provided for at the date of disposal.
a. Net cash flows attributable to discontinued operations
Net cash flows attributable to the Dairies operation in the period and comparative periods are as follows:
Half
Year year
ended ended
31 March 30 September
----- ------------
2016 2016 2015
GBPm GBPm GBPm
-------- ------------------------------------------- ----- ------------
(51.6) Cash flow from operating activities (1.0) (16.4)
(10.4) Cash used in investing activities - (6.2)
Net cash flows attributable to discontinued
(62.0) operations (1.0) (22.6)
-------- ------------------------------------------- ----- ------------
b. Exceptional items
Half
Year year
ended ended
31 March 30 September
----- ------------
2016 2016 2015
GBPm GBPm GBPm
-------- ------------------------------------- ----- ------------
Exceptional operating items after
(14.4) attributable tax - (4.2)
Loss on disposal after attributable
(110.7) tax (2.0) -
Held for sale loss after attributable
- tax - (98.9)
-------------------------------------
(125.1) Exceptional items after tax (2.0) (103.1)
-------- ------------------------------------- ----- ------------
8 Discontinued operations (continued)
Exceptional operating costs
Half
Year year
ended ended
31 March 30 September
---- ------------
2016 2016 2015
GBPm GBPm GBPm
-------- ------------------------------------------ ---- ------------
(7.7) Rationalisation of operating sites - (1.6)
Costs associated with the separation
(8.9) and sale of the Dairies operation - (3.0)
-------- ------------------------------------------ ---- ------------
Exceptional operating costs - discontinued
(16.6) operations - (4.6)
2.2 Tax relief on exceptional items - 0.4
(14.4) - (4.2)
-------- ------------------------------------------ ---- ------------
Rationalisation of operating sites
During the year ended 31 March 2016 an exceptional charge of GBP1.7 million was incurred in relation to the closure of the glass bottling site in Hanworth, West London (six months ended 30 September 2015: GBP1.2 million). This charge primarily comprised accelerated depreciation of assets as well as other associated closure costs. An exceptional charge of GBP6.0 million (six months ended 30 September 2015: GBP0.4 million) was recognised in relation to the decommissioning and demolition of the cream potting factory in Chard, Somerset which closed in September 2015. The tax credit on these exceptional items was GBP0.3 million (six months ended 30 September 2015: GBP0.3 million)
Costs associated with the separation and sale of the Dairies operations
In the year ended 31 March 2016, the Group incurred GBP8.9 million of exceptional costs in relation to the separation of its Dairies operation into a standalone operating unit. These costs included one-off systems costs and professional fees (six months ended 30 September 2015: GBP3.0 million). The tax credit on this exceptional charge was GBP1.9 million (six months ended 30 September 2015: GBP0.1 million)
Disposal of Discontinued Operations
The disposal of the Dairies operation has resulted in a post-tax loss of GBP112.7 million of which GBP110.7 million was recognised in the year ended 31 March 2016 and GBP2.0 million in the six months ended 30 September 2016. The net cash received consists of GBP54.5 million received during the year ended 31 March 2016, less GBP28.4 million which has been repaid to Muller in the six months ended 30 September 2016. GBP25.9 million was accrued for in the year ended 31 March 2016.
GBPm
---------------------------------------------- -------
Gross consideration 80.0
Purchase price adjustments (38.9)
Contribution to Muller re cost of undertaking
to Competition and Markets Authority (15.0)
-----------------------------------------------
Net cash received 26.1
Disposal costs (5.5)
Net assets and liabilities disposed (160.4)
----------------------------------------------- -------
Loss on disposal before tax (139.8)
Attributable tax 27.1
----------------------------------------------- -------
Loss on disposal of discontinued operations (112.7)
----------------------------------------------- -------
9 Analysis of net debt
Year Half year
ended Closing net debt ended
31 March 30 September
------ ------------
2016 2016 2015
GBPm GBPm GBPm
-------- ------------------------------------- ------ ------------
Loans repayable in less than one year
95.6 * 12.0 91.2
Finance leases repayable within one
1.5 year 1.5 1.4
Debt issuance
(0.6) costs - (0.1)
-------- ----------------------------------------- ------ ------------
96.5 Short-term borrowings 13.5 92.5
-------- ----------------------------------------- ------ ------------
Loans repayable in greater than one
249.2 year 282.3 199.4
Finance leases repayable in greater
2.4 than one year 1.7 3.2
Debt issuance
(1.3) costs (1.7) (0.1)
-------------------------------------
250.3 Long-term borrowings 282.3 202.5
-------- ----------------------------------------- ------ ------------
(100.3) Cash and short-term deposits (21.1) (41.6)
-------- ------------------------------------------- ------ ------------
Borrowings and cash - before impact
246.5 of cross-currency swaps 274.7 253.4
1.9 Debt issuance costs excluded 1.7 0.2
(19.4) Impact of cross-currency swaps ** (14.1) (11.3)
229.0 Net Debt 262.3 242.3
-------- ------------------------------------- ------ ------------
* The Group has EUR10.7 million (GBP9.2 million) and GBP2.8 million of loan notes that will expire on 4 April 2017. On 4 April 2016, the Group repaid $123 million (GBP70.2 million) and GBP10 million of 2006 fixed coupon loan notes on maturity.
**The Group has US$126.3 million and EUR10.7 million of loan notes against which cross-currency swaps have been put in place to fix interest and principal repayments in Sterling (September 2015: US$204.4 million and EUR10.7 million; March 2016: US$249.4 million and EUR10.7 million). Under IFRS, currency borrowings are retranslated into Sterling at year end exchange rates. The cross-currency swaps are recorded at fair value and incorporate movements in both market exchange rates and interest rates. The Group defines net debt so as to include the effective Sterling liability where cross-currency swaps have been used to convert foreign currency borrowings into Sterling. The GBP14.1 million adjustment included above (September 2015: GBP11.3 million; March 2016: GBP19.4 million) converts the Sterling equivalent of Dollar and Euro loan notes from year end exchange rates (GBP106.5 million (September 2015: GBP142.8 million; March 2016: GBP182.0 million)) to the fixed Sterling liability of GBP92.4 million.
9 Analysis of net debt (continued)
Movement in net debt Opening Cash Non-cash Exchange Closing
balances flow movement* movement balances
Six months ended 30
September 2016 GBPm GBPm GBPm GBPm GBPm
-------------------------- -------- ------ --------- -------- --------
Cash and short-term
deposits 100.3 (79.2) - - 21.1
Borrowings (344.8) 60.6 - (10.1) (294.3)
Finance leases (3.9) 0.7 - - (3.2)
Cross-currency swaps 19.4 (15.4) - 10.1 14.1
-------- ------ --------- --------
(229.0) (33.3) - - (262.3)
----------------------- -------- ------ --------- -------- --------
Six months ended 30
September 2015
-------------------------- -------- ------ --------- -------- --------
Cash and short-term
deposits 50.6 (9.0) - - 41.6
Borrowings (263.2) (30.0) - 2.6 (290.6)
Finance leases - 0.7 (5.3) - (4.6)
Cross-currency swaps 13.9 - - (2.6) 11.3
(198.7) (38.3) (5.3) - (242.3)
---------------------- -------- ------ --------- -------- --------
Year ended 31 March
2016
-------------------------- -------- ------ --------- -------- --------
Cash and short-term
deposits 50.6 49.7 - - 100.3
Borrowings (263.2) (76.3) - (5.3) (344.8)
Finance leases - 1.5 (5.4) - (3.9)
Cross-currency swaps 13.9 0.2 - 5.3 19.4
(198.7) (24.9) (5.4) - (229.0)
------------------------ -------- ------ --------- -------- --------
*Non-cash movement relates to the recognition of finance leases on the agreement of a secondary lease term
for assets at Nuneaton.
10 Retirement benefit obligations
The Group has a defined benefit pension scheme (Dairy Crest Group Pension Fund), which is closed to future service accrual and a defined contribution scheme (Dairy Crest Group Defined Contribution Scheme).
The net pension liability of the Group's defined benefit pension scheme at 30 September 2016 can be analysed as follows:
31 March 30 September
--------- ------------
2016 2016 2015
GBPm GBPm GBPm
--------- ---------------------------------- -------------------- --------- ------------
43.7 Equities 18.9 46.1
592.9 Bonds and cash 740.2 574.8
Equity return
1.9 swaps valuation 18.5 (6.1)
Property and
114.6 other 110.9 109.3
Insured retirement
291.3 obligations 317.0 288.8
1,044.4 1,205.5 1,012.9
--------- ---------------------------------- -------------------- --------- ------------
Defined benefit Uninsured retirement
(786.8) obligation: obligations (1,012.6) (741.7)
Insured retirement
(288.0) obligations (313.4) (285.5)
--------- ---------------------------------- ------------------------ --------- ------------
Total defined
(1,074.8) benefit obligation (1,326.0) (1,027.2)
Recognition of liability for
(12.1) unrecoverable notional surplus - (18.9)
------------------------------------------ -------------------- --------- ------------
(1,086.9) (1,326.0) (1,046.1)
--------- --------- ------------
Net liability recognised in
(42.5) the balance sheet (120.5) (33.2)
Related deferred
12.5 tax asset 22.2 14.4
--------- ------------------------------------ -------------------- --------- ------------
(30.0) Net pension liability (98.3) (18.8)
--------- ------------------------------------ -------------------- --------- ------------
Analysis of movements in the
Group pension deficit during
the period:
--------- ------------------------------------------ -------------------- --------- ------------
Opening deficit before recognition
of liability for unrecoverable
(24.5) notional surplus (30.4) (24.5)
(0.6) Net finance cost (0.4) (0.3)
Administration
(0.8) costs incurred (0.4) (0.4)
Actuarial (loss)
(25.3) / gain (95.6) 3.8
Contributions
20.8 by employer 6.3 7.1
--------- ------------------------------------ -------------------- --------- ------------
Closing liability (excluding
liability for unrecoverable
(30.4) notional surplus) (120.5) (14.3)
--------- ------------------------------------------ -------------------- --------- ------------
10 Retirement benefit obligations (continued)
The principal assumptions used in determining the retirement benefit obligations for the Group's pension scheme are as follows:
Mar
16 Sep 16 Sep 15
---- --------------------------------------------------- ------ ------
3.2 Price inflation - RPI (%) 3.2 3.2
2.1 Price inflation - CPI (%) 2.1 2.1
Life expectancy at 65
for a male currently aged
24.0 50 (years) 24.0 23.9
Average expected remaining
life of a 65 year old
22.4 retired male (years) 22.4 22.4
Life expectancy at 65
for a female currently
26.9 aged 50 (years) 26.9 26.8
Average expected remaining life of
24.7 a 65 year old retired female (years) 24.7 24.6
3.5 Discount rate (%) 2.3 3.8
---- --------------------------------------------------- ------ ------
The Company and Trustee have agreed a long-term strategy for reducing investment risk as and where appropriate. This includes an asset-liability matching policy, which aims to reduce the volatility of the funding level of the pension plan by investing in assets which perform in line with the liabilities of the plan so as to protect against inflation being higher than expected. In December 2008 and June 2009, certain obligations relating to retired members were hedged by the purchase of annuity contracts.
Under the latest schedule of contributions, which was signed in March 2014, the level of contributions is GBP13.2 million for 2016/17, GBP17.2 million until June 2018 and then GBP20.0 million per annum until March 2020. Until November 2015, the contributions included GBP2.8 million per annum of rental payments for land and buildings that were subject to a sale and leaseback arrangement between the Group and the Fund as part of the final schedule of contributions. The Group bought back the land and buildings for GBP8.3 million in November 2015 with rental payments ceasing from this date.
The Group is entitled to any surplus on winding up of the Fund albeit refunds are subject to tax deductions of 35% at source. Based on the present value of committed cash contributions at 30 September 2016 and the IAS 19 valuation at that date of GBP120.5 million there is no notional surplus and therefore no additional liability has been recognised in accordance with IFRIC 14. It should be noted that cash contributions are determined by reference to the triennial actuarial valuation, not the IAS 19R valuation.
11 Financial Instruments
The following table summarises the Group's financial instruments.
31 March 30 September
------- ------------
2016 2016 2015
GBPm GBPm GBPm
-------- ------- ------------
Financial Assets
18.3 Cross currency swaps (cash flow hedges) 9.9 12.2
18.3 9.9 12.2
-------- ------- ------------
Financial Liabilities
Forward currency
(1.3) contracts (1.2) (1.9)
Bank loans (at amortised
(105.0) cost) (140.0) (135.0)
Loan notes (at amortised
(239.8) cost) (154.3) (155.6)
Obligations under
(3.9) finance leases (3.2) (4.6)
1.9 Debt issuance costs 1.7 0.2
(348.1) (297.0) (296.9)
-------- ------- ------------
Fair values of financial assets and financial liabilities
The carrying amounts and the fair values of all of the Group's financial instruments that are carried in the financial statements are the same with the exception of the loan notes. The carrying value of the loan notes was GBP154.3 million and the fair value was GBP153.8 million. The fair value of borrowing has been calculated by discounting the expected future cash flows at a prevailing interest rate.
11 Financial Instruments (continued)
Fair value hierarchy
All derivative financial instruments and loan notes are fair valued at each balance sheet date and all comprise Level 2 valuations under IFRS 13: Fair value measurement, namely, that they are based on inputs observable directly (from prices) or indirectly (derived from prices).
Valuation techniquesThe fair values of cross currency swaps and forward exchange contracts are measured by the external counterparties to the contracts and verified using present value of future cash flows at discount rates implied by the forward curve. These valuation techniques maximise the use of observable market data where it is available.
The fair value of loan notes has been measured by reference to yields of publicly quoted debt of equivalent duration, coupon and credit-worthiness.
12 Commitments and contingencies
Capital expenditure contracted for but not provided for in the interim financial statements amounts to GBP10.7 million (September 2015: GBP32.7 million; March 2016: GBP13.1 million).
During the six months ended 30 September 2016, certain assets at the the galacto-oligosaccharide ('GOS') facility at Davidstow were sold for a cash consideration of GBP18.0 million. This equipment has been leased back under an operating lease for a seven year term. The future rentals payable under the operating lease are GBP2.5 million per annum.
Statement of directors' responsibilities
The directors confirm that this condensed set of financial statements has been prepared in accordance with IAS 34 as adopted by the European Union and that the interim management report herein includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R of the Disclosure and Transparency Rules. The Board of Directors that served during the six months ended 30 September 2015, and their respective responsibilities, can be found on pages 28 and 29 of the 2016 Annual Report and Accounts.
By order of the Board
M Allen T Atherton Chief Executive Finance Director 9 November 2016 9 November 2016
Principal risks and uncertainties
The Board considers risk assessment, identification of mitigating actions and internal controls to be fundamental to achieving Dairy Crest's strategic corporate objectives. The principal factors considered when assessing Dairy Crest's ability to achieve its short-term and long-term objectives are:
- Economic, cultural and market conditions which influence consumer and customer behaviour; - Relationships with dairy farmers and future milk sourcing;
- The impact of increased milk costs and the volatility of ingredients and other commodity markets;
- Investing in our brand portfolio and innovative new product development; - Attracting and retaining the best people;
- Maintaining high levels of food safety standards and operational performance across the manufacturing base;
- Impact of financial market turmoil on pension scheme assets and future funding requirements;
- Regulatory and legal risks; and - Environmental trends and risks.
There have been no significant changes in the material risks faced by the Group since publication of the 2016 Annual Report. The processes by which the Board safeguards shareholder value and the assets of the Group and risks and uncertainties that would have a significant impact on long-term value generation are set out in the 2016 Annual Report and Accounts on pages 16 to 17.
INDEPENDENT REVIEW REPORT TO DAIRY CREST GROUP plc
Introduction
We have been engaged by the Dairy Crest Group plc ("the Company") to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2016 which comprises consolidated income statement, consolidated statement of comprehensive income, consolidated balance sheet, consolidated statement of changes in equity, consolidated cash flow statement and notes to the interim financial statements (unaudited). We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2016 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
London
9 November 2016
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR AKCDDOBDDNDK
(END) Dow Jones Newswires
November 10, 2016 02:00 ET (07:00 GMT)
1 Year Dairy Crest Chart |
1 Month Dairy Crest Chart |
It looks like you are not logged in. Click the button below to log in and keep track of your recent history.
Support: +44 (0) 203 8794 460 | support@advfn.com
By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions
