We could not find any results for:
Make sure your spelling is correct or try broadening your search.
Register for Free to get streaming real-time quotes, interactive charts, live options flow, and more.
| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Kerry Group Plc | LSE:KYGA | London | Ordinary Share | IE0004906560 | 'A'ORD EUR0.125 (CDI) |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 2.00 | 2.50% | 82.10 | 78.40 | 79.70 | 80.90 | 79.10 | 80.90 | 116,083 | 16:35:26 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Food Preparations, Nec | 8.02B | 728.3M | 4.1150 | 19.34 | 14.09B |
From Apr 2019 to Apr 2024
TIDMKYGA
RNS Number : 5895N
Kerry Group PLC
10 August 2017
News release
Thursday, 10 August 2017
Interim Management Report
for the half year ended 30 June 2017
Kerry, the global taste & nutrition and consumer foods group reports a solid underlying business performance for the half year ended 30 June 2017.
Hot Features
Premium
HIGHLIGHTS
----------------------------------------------------------------------------
* Group revenue increased by 4.8% to EUR3.2 billion
reflecting 3.8% business volume growth
* Taste & Nutrition +4.2% volume growth
* Consumer Foods +2.3% volume growth
* Trading profit increased by 5.2% to EUR338m
* Group trading margin maintained at 10.6%
* Taste & Nutrition +20bps to 13%
* Consumer Foods -70bps to 7.6%
* Adjusted EPS* up 7.5% to 143.8 cent
* Basic EPS of 127.6 cent (H1 2016: 126.4 cent)
* Interim dividend per share increased by 11.9% to 18.8
cent
* Free cash flow of EUR357m (H1 2016: EUR379m)
*Before brand related intangible asset amortisation and non-trading
items (net of related tax)
----------------------------------------------------------------------------
Commenting on the results Kerry Group Chief Executive Stan McCarthy said; "Against a background of significant adverse currency movements, we achieved a strong overall business performance in the first half of 2017, outperforming market growth rates and delivering a 7.5% increase in adjusted earnings per share. In February 2017 we guided growth in adjusted earnings per share of 5% to 9% at prevailing exchange rates. Taking into account increased currency translation headwinds of 4% and a 2% improvement in underlying performance at constant currency rates, we now expect to achieve growth in adjusted earnings per share of 3% to 7% on a reported basis to a range of 333.1 to 346 cent per share (2016: 323.4 cent)."
Contact Information
Media
Frank Hayes Director of Corporate +353 66 7182304 corpaffairs@kerry.ie
Affairs
Investor Relations
Brian Mehigan +353 66 7182292 investorrelations@kerry.
Ronan Deasy Chief Financial +353 66 7182292 ie
William Lynch Officer +353 66 7182292 investorrelations@kerry.
Group Financial ie
Website Controller investorrelations@kerry.
www.kerrygroup.com Head of Investor ie
Relations
INTERIM MANAGEMENT REPORT
for the half year ended 30 June 2017
Kerry Group maintained a strong overall business performance in the first half of 2017 despite significant adverse currency movements and increased raw material pricing. Business volume growth rates outpaced industry levels, capitalising on Kerry's unique taste & nutrition technologies and systems which are well positioned to deliver innovative solutions for the Group's global, regional and local customers in response to ever-changing consumer requirements. Consumer trends favouring clean label, nutritious, tasteful, natural and convenient food and beverage offerings continue to drive a strong innovation pipeline across all end-use-markets in all regions. Growth in the foodservice channel continues to outpace growth in traditional retail outlets. E-tail and convenience channels also continue to grow strongly in selected consumer preferred categories.
The Group's developing markets strategic growth model continues to achieve excellent results, particularly in Asia. Business performance in all regions continues to benefit from Group investments in its Technology & Innovation network, Development & Application Centres, and in its in-market commercial / technical support facilities through delivery of speedy innovative solutions to meet local taste preferences and consumer requirements.
Kerry Foods continues to perform well delivering sustained volume growth, despite the uncertainty following the UK electorate's decision to leave the European Union and the significant devaluation of sterling. Retail fragmentation continues to drive marketplace competitiveness as growth through convenience formats, discounter chains and online grocery shopping outperforms traditional retail channel growth.
Business Performance
Group revenue on a reported basis increased by 4.8% to EUR3.2 billion driven by strong organic growth offset by adverse currency movements. Business volumes grew by 3.8% in the period reflecting a good performance in American markets, an improved performance in the EMEA region and double digit growth in the Asia-Pacific region. Net pricing increased by 1.8%. Currency headwinds increased during Q2 contributing an adverse 1% translation impact and an adverse 0.4% transaction currency impact to revenue relative to H1 2016.
Taste & Nutrition delivered 4.2% growth in business volumes and pricing increased by 1.7%. Kerry Foods' business volumes increased by 2.3% and divisional pricing increased by 1.9% across the half year.
The Group trading margin was maintained at 10.6% reflecting 20 basis points improvement in Taste & Nutrition, positive underlying margin improvement in Kerry Foods offset by adverse sterling exchange rates resulting in a 70 basis points margin reduction, and an increased spend on the Kerryconnect Programme.
Adjusted earnings per share increased by 7.5% to 143.8 cent (H1 2016: 133.8 cent). Basic earnings per share increased by 0.9% to 127.6 cent (H1 2016: 126.4 cent).
The interim dividend of 18.8 cent per share represents an increase of 11.9% over the 2016 interim dividend.
Net capital expenditure amounted to EUR102m (H1 2016: EUR63m). The Group achieved a strong free cash flow of EUR357m in the period (H1 2016: EUR379m).
Business Reviews
Taste & Nutrition
H1 2017 Growth
------------------- ------------- ----------
Revenue EUR2,543m 4.2%*
Trading profit EUR331m +8.8%
Trading margin 13% +20bps
------------------- ------------- ----------
*Volume growth
Kerry provides the largest, most innovative portfolio of Taste & Nutrition Technologies and Systems, and Functional Ingredients & Actives for the global food, beverage and pharmaceutical industries.
The changing marketplace and consumer consumption trends continued to drive demand for Kerry's globally connected Taste & Nutrition technologies and innovation capabilities, facilitated by the Group's 'in-market' development & applications expertise and local customer service infrastructure. Retail and foodservice channel disruption and expansion, coupled with growth of ecommerce and demand for convenience plus localised taste preferences benefited Kerry's unique Taste & Nutrition business model and differentiated consumer-led innovation network. Increased consumer demand for 'better-for-you', balanced nutrition and health offerings provided a strong platform for growth through Kerry's market leading clean label solutions across all end-use-markets and foodservice channels. Growth in out-of-home consumption drove strong business development in the foodservice sector. The Group's developing market strategies and investment again recorded excellent progress in all regions and double digit volume growth in Asia.
Taste & Nutrition reported revenue increased by 6.9% to EUR2.5 billion reflecting 4.2% volume growth. Net pricing increased by 1.7%. Trading profit grew by 8.8% to EUR331m, reflecting a 20 basis points improvement in divisional trading margin to 13%.
Americas Region
While consumer trends and increased market fragmentation impacted 'centre of store' branded offerings and industry growth rates, Kerry Taste & Nutrition 'go-to-market' strategies continued to deliver a strong innovation pipeline across core food & beverage end-use-markets, direct-to-retail and foodservice channels. Kerry's taste and nutrition technologies are well positioned to meet increased consumer requirements for convenient, clean label, natural, organic, gluten-free, non-GMO and meat-free solutions, together with enhanced natural food preservation. Acquisitions completed in 2015 maintained a strong market development momentum across North and South American markets. Market conditions in Brazil improved relative to H1 2016 but Mexico and Central American markets were impacted by lower regional economic growth.
Sales revenue in the Americas region on a reported basis increased by 7.6% to EUR1,339m, reflecting 3.6% volume growth, a 1.5% increase in net pricing and a favourable translation currency impact of 2.5%.
Taste technologies achieved a solid performance throughout American markets in particular in the meat, bakery and beverage categories. Smoke & Grill technologies maintained excellent progress throughout retail and foodservice applications - benefiting from the Red Arrow acquisition completed in late 2015. Seasonings and coatings applications grew throughout the Latin American meat industry. Dairy & Culinary systems were impacted by challenging market conditions in North American prepared meals and side dish categories. However, dairy & culinary technologies achieved good growth in Latin America - particularly in foodservice solutions. Brazil based Ben Alimentos was acquired in June, expanding the Group's dairy technology capability in the region.
The decline in the traditional R.T.E. cereals sector led to continued challenges in Cereal Systems. However, snacking trends provided solid growth opportunities in the nutritional bar sector in North America. The savoury snacks sector remains challenged due to consumer trends and industry issues in Mexico, Central America and the Caribbean region. Beverage systems grew well through R.T.D. coffee and all natural smoothie applications. Kerry's branded beverage offerings, including Island Oasis, Da Vinci, Café D'Amore, Big Train and Oregon Chai continued to progress market development.
The Group's core Functional Ingredients & Actives business continued to perform well. Solid growth was achieved through Food Preservation Systems and through cell nutrition applications in the pharmaceutical sector. Wellmune(R) branded food, beverage and supplement immune enhancing ingredients maintained strong growth, with successful market development in wider global nutritional and food product markets.
EMEA Region
Whilst the retail environment remained challenging across European markets, the continued growth of out-of-home consumption and channel diversification provided good opportunities for growth and market development. Kerry's increased focus on commercial effectiveness and 'in market' customer engagement achieved good progress - contributing to a strong performance relative to H1 2016.
Demand for enhanced nutrition, clean label, authentic, sustainably produced offerings provided a strong platform for growth through Kerry Taste & Nutrition Technologies & Systems supported by the Group's Technology & Innovation Centre network.
Sales revenue in the EMEA region on a reported basis increased by 2.3% to EUR750m, reflecting 2.3% business volume growth, 2.2% increase in net pricing, a 3.1% adverse translation currency impact and an adverse 0.3% transaction currency impact. Underlying business momentum improved across regional end-use-markets and channels in particular in Q2. Kerry performed well in the UK market despite food and beverage inflationary trends and the uncertainty following the UK electorate decision to leave the European Union.
Kerry's taste technologies and systems grew solidly, in particular in the meat sector through foodservice applications. Good progress was achieved in Italy, Spain, Russia and the MENAT region. Establishment of a new manufacturing facility commenced near Moscow to meet customer requirements in the meat and savoury snack sectors. Dairy & Culinary systems benefited from snacking trends with a strong performance reported through Kerry's unique 'infused oil' applications. Innovation in the sweet sector improved with good growth in nutritional applications, yoghurt and the premium ice cream sector. Clean label trends in the bakery sector also provided a solid platform for growth. Market conditions in Sub-Saharan Africa stabilised.
Sugar reduction continued to drive innovation in the beverage sector. Beverage systems performed well in the foodservice and c-store channels, supported by market development through the recently acquired Island Oasis and Vendin beverage solutions businesses. Kerry's branded beverage offerings continued to perform well through the major chains and convenience channels.
Dairy based nutritional technologies continued to grow through infant and adult life-stage applications, in particular in Asian markets. Returns from primary dairy markets progressively improved due to lower production year-to-date in some exporting countries and to improved butterfat market demand.
Asia-Pacific Region
Kerry's strong market development and business performance momentum was maintained throughout Asia-Pacific markets in the half year. Business volumes grew by 10.3% and net pricing increased by 1.7%. Reported revenue in the region grew by 14.2% to EUR419m.
Solid growth was achieved through all Kerry's core technologies, end-use-markets and geographic markets in the region. In particular foodservice growth remains highly favourable - providing excellent innovation opportunities for Kerry technologies and a strong impetus for product diversification in competing channels. Strategic expansion of Kerry's Asian footprint to meet customer requirements was maintained throughout the region through organic investment in Group facilities and completion of a number of acquisitions. The acquisition of Tianning Flavours was completed in April strengthening Kerry's savoury and sweet flavour development capabilities in China. In March, Taste Master was acquired in Australia providing a significant boost to the Group's taste capabilities in the beverage, snack, meat and culinary industries in Australia and New Zealand. New production facilities were established in Batangas, the Philippines and in Cikarang, Indonesia. In India, establishment of a new production facility to support taste and clean-label technology delivery commenced. The Group has also reached agreement to acquire Hangzhou, China based Hangman Flavours - a leading producer of sweet and savoury flavours.
Kerry's Taste, Nutrition & General Wellness technologies all performed well throughout the Asia-Pacific region. Dry beverage applications grew strongly in Thailand and China. Liquid beverage systems achieved solid growth in particular in the foodservice and convenience channels in Japan, China and Thailand. Branded beverage systems including DaVinci continued to successfully progress market development throughout the region. The snack and bakery categories provided strong development opportunities for Kerry dairy technologies & systems in Indonesia, Japan, China and Malaysia. Culinary systems also benefited from foodservice trends in Australia, New Zealand, China and Malaysia. Similarly, the meat sector provided good development opportunities in the latter geographies and in Thailand.
Nutritional applications including specialised proteins and enzyme technologies maintained solid growth. Wellmune(R) achieved strong growth in the regional nutritional beverage sector.
Consumer Foods
H1 2017 Growth
------------------- ----------- -----------
Revenue EUR677m 2.3%*
Trading profit EUR51m (11.1%)
Trading margin 7.6% (70bps)
------------------- ----------- -----------
*Volume growth
Kerry Foods is an industry-leading manufacturer of added-value branded and customer branded chilled food products to the Irish, UK and selected international markets.
The consumer foods marketplace in the UK and Ireland remained highly competitive due to increasing inflationary pressures in the UK and overall competitiveness in a more fragmented market landscape. The decline in retailer promotional activity continued as the major chains responded through EDLP strategies to the growth in convenience outlets, channel proliferation and expansion of discounter chains. 'Food-to-go', foodservice and e-tail channels continue to grow at the expense of traditional outlets.
Kerry Foods' business volumes grew by 2.3% and net pricing increased by 1.9%. Reported revenue at EUR677m declined by 2.8% due to significant adverse currency movements. The divisional trading profit margin decreased by 70 basis points to 7.6% as the underlying margin improvement was more than offset by adverse sterling exchange rate movements. This resulted in a trading profit decrease of 11.1% to EUR51m.
Demand for nutritional tasteful convenience products continued to drive good growth through meat and dairy snacking lines. 'Mattessons' performed well in meat snacking. 'Cheestrings' grew market share in the UK children's cheese snack sector. 'Cheestrings Scoffies' extended the division's cheese snack offering into the after-school segment and 'Go-Go's' achieved encouraging results in the adults' snack sector. 'Cheestrings' continued to develop its market positioning in mainland Europe. 'Attack-A-Snack' achieved double digit growth in the light snacks category. 'Yollies' maintained solid growth in the children's yoghurt snack sector.
Conditions in the UK sausage sector stabilised. The relaunched 'Richmond' brand performed satisfactorily and the 'Walls' fresh sausage portfolio achieved good market penetration. 'Fire & Smoke' maintained good development momentum in the UK and Irish sliced cooked meats categories. 'Denny' branded lines performed satisfactorily in Ireland. In May 'Henry Denny's Meat Masters' was launched successfully in the premium meats sub-category.
Premiumisation and health trends contributed to a good performance in Kerry Foods' chilled and frozen prepared meals. Foodservice and 'direct-to-consumer' channels also provided good growth opportunities.
Excellent progress was achieved in the UK private label spreads category through Kerry's spreadable butter based offerings. 'Dairygold' maintained market share in the Irish spreads category assisted by successful new product introductions.
Financial Review
Reconciliation of adjusted* earnings % H1 2017 H1 2016
to profit after taxation change EUR'm EUR'm
-------------------------------------- ----------- ----------- -----------
Revenue 4.8% 3,181.3 3,036.6
Trading profit 5.2% 338.4 321.6
Trading margin 10.6% 10.6%
Computer software amortisation (11.9) (11.4)
Finance costs (net) (34.4) (39.1)
Adjusted earnings before taxation 292.1 271.1
Income taxes (excluding non-trading
items) (38.5) (35.7)
----------- -----------
Adjusted earnings after taxation 7.7% 253.6 235.4
Brand related intangible asset
amortisation (10.7) (10.2)
Non-trading items (net of related
tax) (17.8) (2.8)
Profit after taxation 225.1 222.4
----------- -----------
EPS EPS
cent cent
Adjusted EPS 7.5% 143.8 133.8
Brand related intangible asset
amortisation (6.1) (5.8)
Non-trading items (net of related
tax) (10.1) (1.6)
Basic EPS 0.9% 127.6 126.4
----------- -----------
* Before brand related intangible asset amortisation and non-trading items (net of related tax)
Analysis of Results
Revenue
On a reported basis Group revenue increased by 4.8% to EUR3.2 billion (H1 2016: EUR3.0 billion). Volumes grew by 3.8%, net product pricing increased by 1.8% and there was a negative transaction related currency impact of 0.4%. Business acquisitions contributed 0.6% and there was a negative translation currency impact of 1.0%.
In Taste & Nutrition, reported revenue increased by 6.9% to EUR2.5 billion (H1 2016: EUR2.4 billion). Volumes grew by 4.2%, product pricing increased by 1.7% and there was a negative transaction related currency impact of 0.1%. Business acquisitions contributed 0.7% and there was a positive translation currency impact of 0.4%.
In Consumer Foods, reported revenue decreased by 2.8% to EUR677m (H1 2016: EUR697m). Volumes increased by 2.3% and product pricing increased by 1.9%. There was a negative impact of 1.4% from transaction related currency and a negative translation currency impact of 5.6% due to weaker sterling.
Trading Profit & Margin
Group trading profit increased by 5.2% to EUR338.4m (H1 2016: EUR321.6m). Group trading profit margin in the period was maintained at 10.6%. Underlying margin expansion attributable to improved product mix, operating leverage and efficiencies was offset by transaction currency headwinds, increased Kerryconnect investment and the denominator pricing effect.
Trading profit margin in Taste & Nutrition increased by 20 bps to 13.0%, due to the benefits of improved product mix, leverage and efficiencies, offset by the denominator pricing effect and currency headwinds.
Trading profit margin in Consumer Foods decreased by 70 bps to 7.6% due to significant transaction currency headwinds in the period, partly offset by underlying margin expansion.
Finance Costs (net)
Finance costs (net) for the period decreased by EUR4.7m to EUR34.4m (H1 2016: EUR39.1m) due to strong cash generation in the period.
Taxation
The tax charge for the period, before non-trading items was EUR38.5m (H1 2016: EUR35.7m) which represents an effective tax rate of 13.7% (H1 2016: 13.7%).
Acquisitions
During the period, the Group completed three bolt-on acquisitions, Tianning Flavours was acquired in China, Taste Master was acquired in Australia, and Ben Alimentos was acquired in Brazil. The Group also reached agreement to acquire Hangman Flavours in China.
Non-Trading Items
The Group recorded EUR17.8m of costs net of tax (H1 2016: EUR2.8m) primarily relating to costs associated with integrating the acquisitions completed since 2015.
Free Cash Flow
The Group achieved free cash flow of EUR357.2m (H1 2016: EUR379.1m). This reflects improved profit, offset by higher capital expenditure relative to the prior period.
H1 2017 H1 2016
Free Cash Flow EUR'm EUR'm
---------------------------------------- -------- --------------------
Trading profit 338.4 321.6
Depreciation (net) 68.6 66.9
Movement in average working capital 118.1 120.0
Pension contributions paid less
pension expense (22.7) (20.0)
-------- --------------------
Cash flow from operations 502.4 488.5
Finance costs paid (net) (21.0) (23.9)
Income taxes paid (21.8) (22.6)
Purchase of non-current assets (102.4) (62.9)
-------- --------------------
Free cash flow 357.2 379.1
---------------------------------------- -------- --------------------
Balance Sheet
A summary balance sheet as at 30 June 2017 is presented below:
H1 2017 H1 2016 FY 2016
EUR'm EUR'm EUR'm
-------------------------------- --------- --------- ---------
Property, plant & equipment 1,430.1 1,385.1 1,451.9
Intangible assets 3,414.2 3,414.4 3,444.3
Other non-current assets 211.1 261.6 285.7
Current assets 2,159.8 1,989.0 2,240.0
================================ ========= ========= =========
Total assets 7,215.2 7,050.1 7,421.9
================================ ========= ========= =========
Current liabilities 1,546.8 1,581.8 1,693.4
Non-current liabilities 2,418.0 2,591.3 2,634.5
================================ ========= ========= =========
Total liabilities 3,964.8 4,173.1 4,327.9
================================ ========= ========= =========
Net assets 3,250.4 2,877.0 3,094.0
================================ ========= ========= =========
Shareholders' equity 3,250.4 2,877.0 3,094.0
-------------------------------- --------- --------- ---------
Property, Plant & Equipment
Property, plant & equipment decreased by EUR21.8m to EUR1,430.1m (Dec 2016: EUR1,451.9m, H1 2016: EUR1,385.1m), as additions made in the period were more than offset by foreign exchange translation movements and the depreciation charge.
Intangible Assets
Intangible assets decreased by EUR30.1m to EUR3,414.2m (Dec 2016: EUR3,444.3m, H1 2016: EUR3,414.4m) as additions during the period were offset by foreign exchange movements and the amortisation charge.
Current Assets
Current assets decreased by EUR80.2m to EUR2,159.8m (Dec 2016: EUR2,240.0m, H1 2016: EUR1,989.0m), primarily due to a decrease in cash in hand at 30 June 2017 arising from the repayment of US Senior Notes of $192m which matured on 20 January 2017.
Retirement Benefits
At the balance sheet date, the net deficit for all defined benefit schemes (after deferred tax) was EUR186.4m (Dec 2016: EUR291.9m, H1 2016: EUR313.9m). The decrease in the net deficit from year end arises from good investment returns, a favourable movement in discount and inflation rates, and a liability management programme implemented in 2017.
Net Debt
At 30 June 2017, net debt stood at EUR1,222m, a decrease of EUR102m relative to the December 2016 debt of EUR1,324m.
Key Financial Covenants
At 30 June the key financial ratios were as follows:
Covenant H1 2017 H1 2016 FY 2016
Times Times Times
----------------------------------------------------- ------------- ------------ --------------
Net debt: EBITDA* Maximum 3.5 1.3 1.7 1.5
EBITDA: Net interest* Minimum 14.9 15.7 14.0
4.75
----------------------------------------------------- ------------- -------------- ------------
*Calculated in accordance with lenders facility agreements which take account of adjustments as outlined in the financial definitions accompanying the Interim Financial Statements.
The average maturity profile of net debt was 6.5 years at the end of the period (Dec 2016: 6.4 years). At the period end 60% of gross debt was carried at fixed rates and the weighted average period for which rates were fixed was 7.2 years. The Group's balance sheet is in a healthy position. With a net debt to EBITDA* ratio of 1.3 times, the organisation has sufficient headroom to support its future growth plans.
Related Party Transactions
There were no changes in related party transactions from the 2016 Annual Report that could have a material effect on the financial position or performance of the Group in the first half of the year.
Exchange Rates
Group results are impacted by fluctuations in exchange rates year on year versus the euro. The table below (see link) details the movement in spot rates since February guidance for the principal exchange rates used to translate results of non-euro denominated subsidiaries.
http://www.rns-pdf.londonstockexchange.com/rns/5895N_1-2017-8-9.pdf
Principal Risks & Uncertainties
Details of the principal risks and uncertainties facing the Group can be found in the 2016 Annual Report on pages 62 to 67. These risks include but are not limited to; the identification and integration of acquisition targets, a slowdown in the rate of innovation, quality & food safety risks, failure to attract/retain key talent, systems implementation risks, unauthorised use of Group intellectual property, geopolitical risk and ongoing operational and compliance risks. However, risks with increased potential impact in the second half of the year include fluctuating raw materials together with volatile currencies. The Group actively manages these and all other risks through its control and risk management process.
Going Concern
The Group Condensed Consolidated Interim Financial Statements have been prepared on the going concern basis. The Directors report that they have satisfied themselves that the Group is a going concern, having adequate resources to continue in operational existence for the foreseeable future. In forming this view, the Directors have reviewed the Group's budget for a period not less than 12 months, the medium term plans as set out in the rolling five year plan, and have taken into account the cash flow implications of the plans, including proposed capital expenditure, and compared these with the Group's committed borrowing facilities and projected gearing ratios.
Dividend
The Board has declared an interim dividend of 18.8 cent per share (an increase of 11.9% on the 2016 interim dividend of 16.8 cent) payable on 10 November 2017 to shareholders registered on the record date 13 October 2017.
Board & Management Changes
As announced in February, Mr Stan McCarthy, who became Chief Executive of the Group in January 2008, will retire as Chief Executive on 30 September 2017 and as Director of the Group at year end.
Mr Edmond Scanlon has been appointed Chief Executive Designate to succeed Mr McCarthy on his retirement. Having joined Kerry's Graduate Development Programme in 1996, Mr Scanlon worked in Finance until his appointment as Vice President Finance, Supply Chain and Operations of Kerry's Global Flavours Division in 2004. In 2007, he was appointed Vice President Mergers & Acquisitions, Kerry Americas region, before being appointed Global President Kerry Functional Ingredients & Actives in late 2008. In 2012, he was appointed President of Kerry China, prior to his appointment as President & CEO Kerry Asia Pacific region in November 2013.
Mr Flor Healy has retired as an Executive Director of the Board and signalled his intention to step down from his position as CEO of Kerry Foods, the Group's consumer foods division, at year end. Over the coming months Mr Healy will assist the transition to a new CEO of Kerry Foods to be appointed by Mr Edmond Scanlon, Chief Executive Designate. Mr Healy joined Kerry's Graduate Development Programme in 1984 and served in a number of key positions across the Group's foods' businesses prior to his appointment as CEO of Kerry Foods in 2004.
Future Prospects
Notwithstanding significant currency headwinds, Group businesses are well positioned to meet customer and consumer needs in the changing marketplace and deliver sustained underlying growth. Kerry's globally connected, localised Taste & Nutrition business model, supported by the Group's Technology & Innovation Centre network, holds a strategic advantage in meeting customer requirements across all market channels in developed and developing markets. We continue to capitalise on out-of-home consumption trends and channel expansion. Prospects for sustained strong growth throughout Asian markets will be supported by deployment of increased resources. Organic and acquisition growth opportunities will continue to be pursued in all geographic regions.
Kerry Foods will continue to embrace meat and dairy snacking, meal solution and out-of-home channel growth opportunities.
In February 2017 we guided growth in adjusted earnings per share of 5% to 9% at prevailing exchange rates. Taking into account increased currency translation headwinds of 4% and a 2% improvement in underlying performance at constant currency rates, we now expect to achieve growth in adjusted earnings per share of 3% to 7% on a reported basis to a range of 333.1 to 346 cent per share (2016: 323.4 cent).
Responsibility Statement
The Directors are responsible for preparing the Half Yearly Financial Report in accordance with the Transparency (Directive 2004/109/EC) Regulations 2007 of Ireland (S.I. No. 277 of 2007) ("the Regulations"), the Transparency Rules of the Central Bank of Ireland and with IAS 34 "Interim Financial Reporting" as adopted by the European Union.
The Directors confirm that to the best of their knowledge:
-- the Group Condensed Consolidated Interim Financial Statements for the half year ended 30 June 2017 have been prepared in accordance with the international accounting standard applicable to interim financial reporting adopted pursuant to the procedure provided for under Article 6 of the Regulation (EC) No. 1606/2002 of the European Parliament and of the Council of 19 July 2002;
-- the Interim Management Report includes a fair review of the important events that have occurred during the first six months of the financial year, and their impact on the Group Condensed Consolidated Interim Financial Statements for the half year ended 30 June 2017, and a description of the principal risks and uncertainties for the remaining six months;
-- the Interim Management Report includes a fair review of the related party transactions that have occurred during the first six months of the current financial year and that have materially affected the financial position or the performance of the Group during that period, and any changes in the related parties' transactions described in the last Annual Report that could have a material effect on the financial position or performance of the Group in the first six months of the current financial year.
On behalf of the board
Stan McCarthy Brian Mehigan Chief Executive Chief Financial Officer
9 August 2017
Disclaimer Forward Looking Statements
This Announcement contains forward looking statements which reflect management expectations based on currently available data. However actual results may differ materially from those expressed or implied by these forward looking statements. These forward looking statements speak only as of the date they were made and the Company undertakes no obligation to publicly update any forward looking statement, whether as a result of new information, future events or otherwise.
RESULTS FOR THE HALF YEARED 30 JUNE 2017
Kerry Group plc
Condensed Consolidated Income
Statement
for the half year ended 30 June 2017
Before Non-Trading Half year Half year Year
Non-Trading Items ended ended ended
Items 30 June 30 June 30 June 31 Dec.
30 June 2017 2017 2017 2016 2016
Unaudited Unaudited Unaudited Unaudited Audited
Notes EUR'm EUR'm EUR'm EUR'm EUR'm
Continuing operations
Revenue 2 3,181.3 - 3,181.3 3,036.6 6,130.6
_________ _________ _________ _________ _________
Trading profit 2 338.4 - 338.4 321.6 749.6
Intangible asset amortisation (22.6) - (22.6) (21.6) (46.4)
Non-trading items 3 - (24.8) (24.8) (4.8) (21.0)
_________ _________ _________ _________ _________
Operating profit 315.8 (24.8) 291.0 295.2 682.2
Finance income 4 0.1 - 0.1 0.8 1.1
Finance costs 4 (34.5) - (34.5) (39.9) (71.5)
_________ _________ _________ _________ _________
Profit before taxation 281.4 (24.8) 256.6 256.1 611.8
Income taxes (38.5) 7.0 (31.5) (33.7) (78.7)
_________ _________ _________ _________ _________
Profit after taxation and
attributable to owners
of the parent 242.9 (17.8) 225.1 222.4 533.1
_________ _________ _________ _________ _________
Earnings per A ordinary share Cent Cent Cent
- basic 5 127.6 126.4 302.9
- diluted 5 127.5 126.2 302.0
_________ _________ _________
Kerry Group plc
Condensed Consolidated Statement of Comprehensive Income
for the half year ended 30 June 2017
Half year Year
Half year ended ended
ended 30 June 31 Dec.
30 June 2017 2016 2016
Unaudited Unaudited Audited
Note EUR'm EUR'm EUR'm
Profit after taxation and attributable to owners of the parent 225.1 222.4 533.1
Other comprehensive income:
Items that are or may be reclassified subsequently to profit or
loss:
Fair value movements on cash flow hedges 7.4 17.0 29.3
Cash flow hedges - reclassified to profit or loss from equity (17.0) (0.3) (13.3)
Deferred tax effect of fair value movements on cash flow hedges 1.3 (2.4) 0.9
Exchange difference on translation and disposal of foreign
operations 10 (60.8) (14.9) (17.9)
Deferred tax effect of exchange difference on translation of
foreign
operations - 0.6 -
Items that will not be reclassified subsequently to profit or loss:
Re-measurement on retirement benefits obligation 74.7 (93.5) (170.3)
Deferred tax effect of re-measurement on retirement benefits
obligation (9.8) 15.3 25.5
_________ _________ _________
Net expense recognised directly in other comprehensive income (4.2) (78.2) (145.8)
_________ _________ _________
Total comprehensive income 220.9 144.2 387.3
_________ _________ _________
Kerry Group plc
Condensed Consolidated Balance Sheet
as at 30 June 2017
30 June 2017 30 June 2016 31 Dec. 2016
Unaudited Unaudited Audited
Notes EUR'm EUR'm EUR'm
Non-current assets
Property, plant and equipment 1,430.1 1,385.1 1,451.9
Intangible assets 3,414.2 3,414.4 3,444.3
Financial asset investments 40.2 35.6 39.3
Investment in associates 5.9 40.4 40.7
Non-current financial instruments 111.7 142.3 153.0
Deferred tax assets 53.3 43.3 52.7
__________ ___________ ___________
5,055.4 5,061.1 5,181.9
__________ ___________ ___________
Current assets
Inventories 744.1 736.0 743.0
Trade and other receivables 897.5 864.0 847.3
Cash at bank and in hand 8 457.4 329.8 564.7
Other current financial instruments 56.0 42.3 80.1
Assets classified as held for sale 4.8 16.9 4.9
__________ __________ ___________
2,159.8 1,989.0 2,240.0
__________ __________ ___________
Total assets 7,215.2 7,050.1 7,421.9
__________ __________ ___________
Current liabilities
Trade and other payables 1,383.1 1,234.2 1,351.6
Borrowings and overdrafts 8 7.5 199.7 192.5
Other current financial instruments 15.7 13.2 20.9
Tax liabilities 99.2 102.3 95.2
Provisions 36.9 28.1 30.4
Deferred income 4.4 4.3 2.8
__________ __________ ___________
1,546.8 1,581.8 1,693.4
__________ __________ ___________
Non-current liabilities
Borrowings 8 1,782.7 1,810.9 1,867.0
Other non-current financial instruments 0.6 - 7.3
Retirement benefits obligation 7 233.8 377.7 352.8
Other non-current liabilities 89.1 93.6 95.1
Deferred tax liabilities 250.4 230.4 247.2
Provisions 40.1 57.0 40.8
Deferred income 21.3 21.7 24.3
__________ __________ ___________
2,418.0 2,591.3 2,634.5
__________ __________ ___________
Total liabilities 3,964.8 4,173.1 4,327.9
__________ __________ ___________
Net assets 3,250.4 2,877.0 3,094.0
__________ __________ ___________
Issued capital and reserves attributable to owners of the parent
Share capital 9 22.0 22.0 22.0
Share premium 398.7 398.7 398.7
Other reserves (163.9) (97.8) (98.0)
Retained earnings 2,993.6 2,554.1 2,771.3
__________ __________ ___________
Shareholders' equity 3,250.4 2,877.0 3,094.0
__________ __________ ___________
Kerry Group plc
Condensed Consolidated Statement of Changes in Equity
for the half year ended 30 June 2017
Share Other
Capital Share Premium Reserves Retained Earnings Total
Note EUR'm EUR'm EUR'm EUR'm EUR'm
At 1 January 2016 22.0 398.7 (103.9) 2,473.3 2,790.1
Profit after tax attributable to
owners of
the parent - - - 222.4 222.4
Other comprehensive income/(expense) - - 1.8 (80.0) (78.2)
Dividends paid 6 - - - (61.6) (61.6)
Share-based payment expense - - 4.3 - 4.3
_______ _______ ________ ________ ________
At 30 June 2016 - unaudited 22.0 398.7 (97.8) 2,554.1 2,877.0
Profit after tax attributable to
owners of
the parent - - - 310.7 310.7
Other comprehensive expense - - (3.7) (63.9) (67.6)
Dividends paid 6 - - - (29.6) (29.6)
Share-based payment expense - - 3.5 - 3.5
________ ________ ________ ________ ________
At 31 December 2016 - audited 22.0 398.7 (98.0) 2,771.3 3,094.0
Profit after tax attributable to
owners of
the parent - - - 225.1 225.1
Other comprehensive (expense)/income - - (70.4) 66.2 (4.2)
Dividends paid 6 - - - (69.0) (69.0)
Share-based payment expense - - 4.5 - 4.5
_______ _______ ________ ________ ________
At 30 June 2017 - unaudited 22.0 398.7 (163.9) 2,993.6 3,250.4
_______ _______ ________ ________ ________
Other Reserves comprise the
following:
Capital Share-Based
Redemption Other Undenominated Payment Translation Hedging
Reserve Capital Reserve Reserve Reserve Total
EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
At 1 January 2016 1.7 0.3 30.5 (129.1) (7.3) (103.9)
Total comprehensive
(expense)/income - - - (14.9) 16.7 1.8
Share-based payment
expense - - 4.3 - - 4.3
________ ________ ________ ________ ________ ________
At 30 June 2016 -
unaudited 1.7 0.3 34.8 (144.0) 9.4 (97.8)
Total comprehensive
expense - - - (3.0) (0.7) (3.7)
Share-based payment
expense - - 3.5 - - 3.5
________ ________ ________ ________ ________ ________
At 31 December 2016 -
audited 1.7 0.3 38.3 (147.0) 8.7 (98.0)
Total comprehensive
expense - - - (60.8) (9.6) (70.4)
Share-based payment
expense - - 4.5 - - 4.5
_______ ________ _______ ________ _______ _______
At 30 June 2017 -
unaudited 1.7 0.3 42.8 (207.8) (0.9) (163.9)
_______ ________ _______ ________ _______ _______
Kerry Group plc
Condensed Consolidated Statement of Cash Flows
for the half year ended 30 June 2017
Half year Half year Year
ended ended ended
30 June 2017 30 June 2016 31 Dec. 2016
Unaudited Unaudited Audited
Notes EUR'm EUR'm EUR'm
Operating activities
Trading profit 338.4 321.6 749.6
Adjustments for:
Depreciation (net) 68.6 66.9 129.8
Change in working capital (42.9) (58.8) 61.7
Pension contributions paid less pension expense (22.7) (20.0) (118.2)
Payments on acquisition integration and restructuring costs (12.5) (7.0) (21.2)
Exchange translation adjustment 10 (1.8) (0.8) 0.1
__________ __________ ___________
Cash generated from operations 327.1 301.9 801.8
Income taxes paid (21.8) (22.6) (57.3)
Finance income received 0.1 0.8 1.1
Finance costs paid (21.1) (24.7) (62.6)
__________ __________ ___________
Net cash from operating activities 284.3 255.4 683.0
__________ __________ ___________
Investing activities
Purchase of assets (103.4) (73.5) (223.8)
Proceeds from the sale of assets 0.9 10.6 12.1
Capital grants received 0.1 - 1.5
Purchase of businesses (net of cash acquired) 11 (89.1) (22.4) (22.2)
Disposal/(purchase) of share in associates 30.1 - (6.7)
Income received from associates - - 5.0
Disposal of businesses - - (2.0)
Payments relating to previous acquisitions (0.1) (7.2) (0.1)
__________ __________ ___________
Net cash used in investing activities (161.5) (92.5) (236.2)
__________ __________ ___________
Financing activities
Dividends paid 6 (69.0) (61.6) (91.2)
Issue of share capital 9 - - -
Repayment of borrowings (155.6) - (25.6)
__________ __________ ___________
Net cash movement due to financing activities (224.6) (61.6) (116.8)
__________ __________ ___________
Net (decrease)/increase in cash and cash equivalents (101.8) 101.3 330.0
Cash and cash equivalents at beginning of period 561.1 231.2 231.2
Exchange translation adjustment on cash and cash equivalents 10 (9.4) (2.7) (0.1)
__________ __________ ___________
Cash and cash equivalents at end of period 8 449.9 329.8 561.1
__________ __________ ___________
Reconciliation of Net Cash Flow to Movement in Net Debt
Net (decrease)/increase in cash and cash equivalents (101.8) 101.3 330.0
Cash inflow from debt financing 155.6 - 25.6
__________ __________ ___________
Changes in net debt resulting from cash flows 53.8 101.3 355.6
Fair value movement on interest rate swaps (net of adjustment
to borrowings) 0.9 (1.6) (5.4)
Exchange translation adjustment on net debt 10 47.3 30.7 (23.8)
__________ __________ ___________
Movement in net debt in the period 102.0 130.4 326.4
Net debt at beginning of period (1,323.7) (1,650.1) (1,650.1)
__________ __________ ___________
Net debt at end of period 8 (1,221.7) (1,519.7) (1,323.7)
__________ __________ ___________
Kerry Group plc
Notes to the Condensed Consolidated Interim Financial Statements
for the half year ended 30 June 2017
1. Accounting policies
These Condensed Consolidated Interim Financial Statements for the half year ended 30 June 2017 have been prepared in accordance with the requirements of IAS 34 'Interim Financial Reporting' and using accounting policies consistent with International Financial Reporting Standards as adopted by the European Union. The accounting policies applied by the Group in these Condensed Consolidated Interim Financial Statements are the same as those detailed in the 2016 Annual Report. Some comparative information has been re-presented to align with the current half year presentation.
The following standards and interpretations are effective for the Group from 1 January 2017 but do not have a material effect on the results or financial position of the Group:
- IAS 7 (amendments) Statement of Cash Flows - IAS 12 (amendments) Income Taxes
The following revised standards are not yet effective and the impact on Kerry Group is currently under review:
Effective Date
- IFRS 9 Financial Instruments 1 January 2018
IFRS 9, published in July 2014, replaces
the existing guidance in IAS 39 'Financial
Instruments: Recognition and Measurement'.
IFRS 9 includes revised guidance on the
classification and measurement of financial
instruments, including a new expected credit
loss model for calculating impairment on
financial assets, and the new general hedge
accounting requirements. It also carries
forward the guidance on recognition and
derecognition of financial instruments from
IAS 39. The Group is continuing to assess
the potential impact on its consolidated
financial statements resulting from the
application of IFRS 9. The vast majority
of financial assets held are trade receivables
and cash, which are expected to continue
to be accounted for at amortised cost. The
majority of financial asset investments
are expected to continue to be accounted
for at fair value through profit or loss.
On this basis, the classification and measurement
changes are not expected to have a material
impact on the Group's consolidated financial
statements. Given historic loss rates, normal
receivable ageing and the significant portion
of trade receivables that are within agreed
terms, the move from an incurred loss model
to an expected loss model is not expected
to have a material impact. The new hedging
requirements of IFRS 9 will align hedge
accounting more closely to the Group's risk
management policies, as well as making more
hedging relationships eligible for hedge
accounting. Current hedging arrangements
continue to be appropriate under IFRS with
the only difference being a change to the
cost of hedging. This change to cost is
not expected to be material. The Group's
implementation plan for IFRS 9 is ongoing
and is expected to be complete by the end
of quarter 3 2017.
- IFRS 15 Revenue from Contracts with Customers 1 January 2018
IFRS 15, published in May 2014, was issued
to establish a single comprehensive model
for entities to use in accounting for revenue
arising from contracts with customers. The
core principle of IFRS 15 is that an entity
should recognise revenue to depict the transfer
of promised goods or services to customers
in an amount that reflects the consideration
to which the entity expects to be entitled
to in exchange for those goods or services.
Under IFRS 15, an entity recognises revenue
when (or as) a performance obligation is
satisfied i.e. when 'control' of the goods
or services underlying the particular performance
obligation is transferred to the customer.
The Group is continuing to assess the potential
impact on its consolidated financial statements
resulting from the application of IFRS 15.
Findings from our initial review of IFRS
15 are that the impact of this new standard
on the Groups' results is unlikely to be
material. Kerry do not supply services and
generally legal title of goods sold is transferred
on shipment. As a result, our impact analysis
identifies that it is unlikely that the
impact of moving from a risk and reward
model to the IFRS 15 control model will
be material. The Group's implementation
plan for IFRS 15 is ongoing and is expected
to be complete by the end of quarter 3 2017.
- IFRS 16 Leases 1 January 2019
IFRS 16, published in January 2016, replaces
the existing guidance in IAS 17 'Leases'.
IFRS 16 eliminates the classification of
leases as either operating leases or finance
leases. It introduces a single lessee accounting
model, which requires a lessee to recognise
assets and liabilities for all leases with
a term of more than 12 months and depreciation
of lease assets separately from interest
on lease liabilities in the income statement.
The Group is assessing the potential impact
on its consolidated financial statements
resulting from the application of IFRS 16.
Indications from our continued review of
IFRS 16 are that this will result in an
increase in finance leased assets of approximately
EUR58.0m, and a corresponding increase in
financial liabilities of the same amount,
on the consolidated balance sheet of the
Group's financial statements.
2. Analysis by business segment
The Group has determined it has two reportable segments: Taste & Nutrition and Consumer Foods. The Taste & Nutrition segment manufactures and distributes an innovative portfolio of taste & nutrition solutions and functional ingredients & actives for the global food, beverage and pharmaceutical industries. The Consumer Foods segment manufactures and supplies added value branded and consumer branded chilled food products to the Irish, UK and selected international markets. Corporate activities, such as the cost of corporate stewardship and the cost of the kerryconnect programme, are reported along with the elimination of inter-group activities under the heading 'Group Eliminations and Unallocated'.
Half year Year
Half year ended ended
ended 30 June 31 Dec.
30 June 2017 2016 2016
Unaudited Unaudited Audited
EUR'm EUR'm EUR'm
External revenue
- Taste & Nutrition 2,507.9 2,344.2 4,800.1
- Consumer Foods 673.4 692.4 1,330.5
__________ __________ ___________
3,181.3 3,036.6 6,130.6
Inter-segment revenue
- Taste & Nutrition 35.2 35.0 79.4
- Consumer Foods 3.6 4.3 2.0
- Group Eliminations and Unallocated (38.8) (39.3) (81.4)
__________ __________ ___________
- - -
Total revenue
- Taste & Nutrition 2,543.1 2,379.2 4,879.5
- Consumer Foods 677.0 696.7 1,332.5
- Group Eliminations and Unallocated (38.8) (39.3) (81.4)
__________ __________ ___________
3,181.3 3,036.6 6,130.6
__________ __________ ___________
Trading profit
- Taste & Nutrition 330.6 303.8 716.4
- Consumer Foods 51.3 57.7 117.3
- Group Eliminations and Unallocated (43.5) (39.9) (84.1)
__________ __________ ___________
338.4 321.6 749.6
Intangible asset amortisation (22.6) (21.6) (46.4)
Non-trading items (24.8) (4.8) (21.0)
__________ __________ ___________
Operating profit 291.0 295.2 682.2
Finance income 0.1 0.8 1.1
Finance costs (34.5) (39.9) (71.5)
__________ __________ ___________
Profit before taxation 256.6 256.1 611.8
Income taxes (31.5) (33.7) (78.7)
__________ __________ ___________
Profit after taxation and attributable to
owners of the parent 225.1 222.4 533.1
__________ __________ ___________
Information about geographical areas
Half year Year
Half year ended ended
ended 30 June 31 Dec.
30 June 2017 2016 2016
Unaudited Unaudited Audited
EUR'm EUR'm EUR'm
Revenue by location of external customers
EMEA 1,423.7 1,426.0 2,777.0
Americas 1,338.8 1,243.8 2,588.5
Asia Pacific 418.8 366.8 765.1
__________ __________ ___________
3,181.3 3,036.6 6,130.6
__________ ___________ ___________
The accounting policies of the reportable segments are the same as those detailed in the Statement of Accounting Policies in the 2016 Annual Report.
3. Non-trading items
Half year Half year Year
ended ended ended
30 June 2017 30 June 31 Dec.
Unaudited 2016 2016
Notes EUR'm Unaudited Audited
EUR'm EUR'm
(Loss)/profit on disposal of
assets* and businesses (i) (4.9) 2.1 (1.3)
Acquisition integration and restructuring
costs (ii) (19.9) (6.9) (19.6)
Impairment of assets held for
sale (iii) - - (0.1)
__________ __________ ___________
(24.8) (4.8) (21.0)
Tax 7.0 2.0 8.0
__________ __________ ___________
(17.8) (2.8) (13.0)
__________ __________ ___________
*Assets represent non-current assets and assets classified as held for sale.
(i) (Loss)/profit on disposal of assets and businesses
During the period the Group disposed of property, plant and equipment primarily in Ireland and the UK and disposed of its 22.5% shareholding in Addo Food Group Limited for a total consideration of EUR31.0m. The investment in Addo Food Group Limited was disposed from the investment in associate line on the Condensed Consolidated Balance Sheet. In 2016, the Group disposed of property, plant and equipment and assets classified as held for sale primarily in Ireland and the UK and a small business in the Taste & Nutrition segment.
A net tax credit of EUR0.2m (30 June 2016: a tax charge of EUR0.4m; 31 December 2016: a tax credit of EUR1.0m) arose on the disposal of assets and businesses.
(ii) Acquisition integration and restructuring costs
During the period, acquisition integration and restructuring costs of EUR19.9m (30 June 2016: EUR6.9m; 31 December 2016: EUR19.6m) primarily related to costs of integrating acquisitions completed since 2015, including Red Arrow and Island Oasis, into the Group's operations and transaction expenses incurred in completing current year acquisitions. In the period ended 30 June 2017, a tax credit of EUR6.8m (30 June 2016: a tax credit of EUR2.4m; 31 December 2016: a tax credit of EUR7.0m) arose due to tax deductions available on acquisition integration and restructuring costs.
(iii) Impairment of assets held for sale
There were no impairments of assets held for sale recorded in the period. In 2016, assets classified as held for sale were impaired to their value less costs to sell by EUR3.7m. In addition in 2016 it was determined that the value of the Group's remaining businesses held for sale, would no longer be recovered principally through a sale. As a result, the assets were reclassified from 'Assets classified as held for sale' and a remeasurement gain of EUR3.6m was recorded in 'Non-trading items' to recognise the assets at their recoverable amount, which was determined using a value in use calculation.
4. Finance income and costs
Half year Year
Half year ended ended
ended 30 June 31 Dec.
30 June 2017 2016 2016
Unaudited Unaudited Audited
EUR'm EUR'm EUR'm
Finance income:
Interest income on deposits 0.1 0.8 1.1
__________ ___________ ___________
Finance costs:
Interest payable (27.7) (30.7) (64.1)
Interest rate derivative (2.7) (4.8) 0.5
__________ ___________ ___________
(30.4) (35.5) (63.6)
Net interest cost on retirement benefits obligation (4.1) (4.4) (7.9)
__________ ___________ ___________
Finance costs (34.5) (39.9) (71.5)
__________ ___________ ___________
The interest rate derivative cost represents credit value adjustments to the fair values of derivative financial instruments designated in a hedge relationship of EUR2.7m (30 June 2016: EUR4.8m; 31 December 2016: a credit of EUR0.5m).
5. Earnings per A ordinary share
Half year ended Half year Year ended
30 June 2017 ended 31 Dec. 2016
Unaudited 30 June 2016 Audited
Unaudited
EPS EPS EPS
cent EUR'm cent EUR'm cent EUR'm
Basic earnings per share
Profit after taxation and attributable
to owners of the parent 127.6 225.1 126.4 222.4 302.9 533.1
Brand related intangible asset amortisation 6.1 10.7 5.8 10.2 13.1 23.0
Non-trading items (net of related
tax) 10.1 17.8 1.6 2.8 7.4 13.0
______ ______ ______ ______ ______ ______
Adjusted earnings 143.8 253.6 133.8 235.4 323.4 569.1
______ ______ ______ ______ ______ ______
Diluted earnings per share
Profit after taxation and attributable
to owners of the parent 127.5 225.1 126.2 222.4 302.0 533.1
Adjusted earnings 143.7 253.6 133.6 235.4 322.4 569.1
______ ______ ______ ______ ______ ______
In addition to the basic and diluted earnings per share, an adjusted earnings per share is also provided as it is considered more reflective of the Group's underlying trading performance. Adjusted earnings is profit after taxation and attributable to owners of the parent before brand related intangible asset amortisation and non-trading items (net of related tax). These items are excluded in order to assist in the understanding of underlying earnings.
Number of Number of Number of
Shares Shares Shares
30 June 2017 30 June 2016 31 Dec. 2016
Unaudited Unaudited Audited
m's m's m's
Number of Shares
Basic weighted average number of shares 176.4 175.9 176.0
Effect of dilutive potential shares 0.1 0.3 0.5
_______ _______ _______
Diluted weighted average number of shares 176.5 176.2 176.5
_______ _______ _______
6. Dividends
Half year Half year Year
ended ended ended
30 June 30 June 31 Dec.
2017 2016 2016
Unaudited Unaudited Audited
EUR'm EUR'm EUR'm
Amounts recognised as distributions to equity
shareholders in the period
Final 2016 dividend of 39.20 cent per A ordinary
share paid 19 May 2017
(Final 2015 dividend of 35.00 cent per A ordinary
share paid 13 May 2016) 69.0 61.6 61.6
Interim 2016 dividend of 16.80 cent per A ordinary
share paid 18 November 2016 - - 29.6
________ ________ _________
69.0 61.6 91.2
________ ________ _________
Since the end of the period, the Board has proposed an interim dividend of 18.80 cent per A ordinary share. The payment date for the interim dividend will be 10 November 2017 to shareholders registered on the record date as at 13 October 2017. These Condensed Consolidated Interim Financial Statements do not reflect this dividend.
7. Retirement benefits obligation
The net deficit recognised in the Condensed Consolidated Balance Sheet for the Group's defined benefit post retirement schemes was as follows:
Year
Half year Half year ended
ended ended 31 Dec.
30 June 2017 30 June 2016 2016
Unaudited Unaudited Audited
EUR'm EUR'm EUR'm
Net recognised deficit in plans before deferred
tax (233.8) (377.7) (352.8)
Net related deferred tax asset 47.4 63.8 60.9
________ ________ _________
Net recognised deficit in plans after deferred
tax (186.4) (313.9) (291.9)
________ ________ _________
At 30 June 2017, the net deficit before deferred tax for defined benefit post-retirement schemes was EUR233.8m (30 June 2016: EUR377.7m; 31 December 2016: EUR352.8m). This was calculated by rolling forward the defined benefit post-retirement schemes' liabilities at 31 December 2016 to reflect material movements in underlying assumptions over the period while the defined benefit post-retirement schemes' assets at 30 June 2017 are measured at market value. The decrease in the net deficit before deferred tax of EUR119.0m arises from good investment returns, favourable movements in discount and inflation rates and to a liability management programme implemented in 2017.
8. Financial instruments
i) The following table outlines the components of net debt by category at the balance sheet date:
Liabilities
Loans & Other at Derivatives
Financial Assets/(Liabilities) Fair Value Designated Total Net
at Amortised through Profit as Hedging Debt
Cost or Loss Instruments by Category
EUR'm EUR'm EUR'm EUR'm
Assets:
Interest rate swaps - - 111.7 111.7
Cash at bank and in hand 457.4 - - 457.4
__________ ________ ________ __________
457.4 - 111.7 569.1
__________ ________ ________ __________
Liabilities:
Interest rate swaps - - (0.6) (0.6)
Bank overdrafts (7.5) - - (7.5)
Bank loans - - - -
Senior notes (1,756.9) (25.8) - (1,782.7)
__________ ________ ________ __________
Borrowings and overdrafts (1,764.4) (25.8) - (1,790.2)
__________ ________ ________ __________
(1,764.4) (25.8) (0.6) (1,790.8)
__________ ________ ________ __________
At 30 June 2017 - unaudited (1,307.0) (25.8) 111.1 (1,221.7)
__________ ________ ________ __________
Assets:
Interest rate swaps - - 161.1 161.1
Cash at bank and in hand 329.8 - - 329.8
__________ ________ ________ __________
329.8 - 161.1 490.9
__________ ________ ________ __________
Liabilities:
Interest rate swaps - - - -
Bank loans (31.1) - - (31.1)
Senior notes (1,926.2) (53.3) - (1,979.5)
__________ ________ ________ __________
Borrowings and overdrafts (1,957.3) (53.3) - (2,010.6)
__________ ________ ________ __________
(1,957.3) (53.3) - (2,010.6)
__________ ________ ________ __________
At 30 June 2016 - unaudited (1,627.5) (53.3) 161.1 (1,519.7)
__________ ________ ________ __________
Assets:
Interest rate swaps - - 178.3 178.3
Cash at bank and in hand 564.7 - - 564.7
__________ ________ ________ __________
564.7 - 178.3 743.0
__________ ________ ________ __________
Liabilities:
Interest rate swaps - - (7.2) (7.2)
Bank overdrafts (3.6) - - (3.6)
Bank loans (6.9) - - (6.9)
Senior notes (2,020.6) (28.4) - (2,049.0)
__________ ________ ________ __________
Borrowings and overdrafts (2,031.1) (28.4) - (2,059.5)
__________ ________ ________ __________
(2,031.1) (28.4) (7.2) (2,066.7)
__________ ________ ________ __________
At 31 December 2016 - audited (1,466.4) (28.4) 171.1 (1,323.7)
__________ ________ ________ __________
As part of the Group's debt portfolio it holds US$750m of senior notes issued in 2013 and US$408m (30 June 2016: US$600m; 31 December 2016: US$600m) of senior notes issued in 2010. At the time of issuance, US$250m of the 2013 senior notes and US$500m of the 2010 senior notes were swapped, using cross currency swaps, to euro. $92m of the 2010 senior notes swapped were repaid in January 2017. In addition, the Group holds EUR750m of senior notes issued in 2015, of which EUR175m were swapped, using cross currency swaps, to US dollar.
The adjustment to senior notes classified under liabilities at fair value through profit or loss of EUR25.8m (30 June 2016: EUR53.3m; 31 December 2016: EUR28.4m) represents the part adjustment to the carrying value of debt from applying fair value hedge accounting for interest rate risk. This amount is primarily offset by the fair value adjustment on the underlying cross currency interest rate swap.
ii) The following table sets out the currency profile of the Group's net debt, highlighting the impact of cross currency swaps (CCS) on net debt:
Pre CCS Notional CCS Post CCS Half year Year ended
Half year ended Half year ended Half year ended ended 31 Dec.
30 June 2017 30 June 2017 30 June 2017 30 June 2016 2016
EUR'm EUR'm EUR'm EUR'm EUR'm
Euro (447.7) (401.9) (849.6) (960.4) (789.5)
Sterling 165.8 - 165.8 62.1 116.8
US Dollar (964.0) 401.9 (562.1) (681.6) (698.2)
Other 24.2 - 24.2 60.2 47.2
_________ ________ _________ _________ _________
(1,221.7) - (1,221.7) (1,519.7) (1,323.7)
_________ ________ _________ _________ _________
iii) The following table details the maturity profile of the Group's net debt:
On demand
&
up to 1 year Up to 2 years 2 - 5 years > 5 years Total
EUR'm EUR'm EUR'm EUR'm EUR'm
Cash at bank and in hand 457.4 - - - 457.4
Interest rate swaps - - 76.6 34.5 111.1
Bank overdrafts (7.5) - - - (7.5)
Bank loans - - - - -
Senior notes - - (307.5) (1,475.2) (1,782.7)
________ ________ _________ _________ _________
At 30 June 2017 - unaudited 449.9 - (230.9) (1,440.7) (1,221.7)
________ ________ _________ _________ _________
Cash at bank and in hand 329.8 - - - 329.8
Interest rate swaps 19.8 - 56.8 84.5 161.1
Bank loans (31.1) - - - (31.1)
Senior notes (168.6) - (199.3) (1,611.6) (1,979.5)
________ ________ _________ _________ _________
At 30 June 2016 - unaudited 149.9 - (142.5) (1,527.1) (1,519.7)
________ ________ _________ _________ _________
Cash at bank and in hand 564.7 - - - 564.7
Interest rate swaps 25.6 - 64.1 81.4 171.1
Bank overdrafts (3.6) - - - (3.6)
Bank loans (6.9) - - - (6.9)
Senior notes (182.0) - (207.9) (1,659.1) (2,049.0)
_________ ________ _________ _________ _________
At 31 December 2016 - audited 397.8 - (143.8) (1,577.7) (1,323.7)
_________ ________ _________ _________ _________
In April 2017, the Group exercised the second 1 year extension option on the 5 year EUR1,100m revolving credit facility as agreed in 2015.
At 30 June 2017, the Group had undrawn committed bank facilities of EUR1,100m, comprising primarily of a revolving credit facility maturing in 2022.
iv) Fair value of financial instruments
a) Fair value of financial instruments carried at fair value
Financial instruments recognised at fair value are analysed between those based on:
- quoted prices in active markets for identical assets or liabilities (Level 1);
- those involving inputs other than quoted prices included in Level 1 that are observable for the assets or liabilities, either directly (as prices) or indirectly (derived from prices) (Level 2); and
- those involving inputs for the assets or liabilities that are not based on observable market data (unobservable inputs) (Level 3).
30 June
2017 30 June 2016 31 Dec. 2016
Fair Value Unaudited Unaudited Audited
Hierarchy EUR'm EUR'm EUR'm
Financial assets
Interest rate swaps Level 2 111.7 161.1 178.3
Forward foreign exchange contracts Level 2 56.0 23.5 54.8
Financial asset investments: Fair value
through profit or loss Level 1 36.1 31.5 35.2
Available-for-sale Level 3 4.1 4.1 4.1
Financial liabilities
Interest rate swaps Level 2 (0.6) - (7.2)
Forward foreign exchange contracts Level 2 (15.7) (13.2) (21.0)
_________ _________ _________
There have been no transfers between levels and there was no movement for the financial asset investments categorised at Level 3 for the current period.
b) Fair value of financial instruments carried at amortised cost
Except as detailed in the following table, it is considered that the carrying amounts of financial assets and financial liabilities recognised at amortised cost in the Condensed Consolidated Interim Financial Statements approximate their fair values.
Carrying Fair Carrying Fair Carrying Fair
Amount Value Amount Value Amount Value
30 June 30 June 30 June 30 June 31 Dec. 31 Dec.
Fair Value 2017 2017 2016 2016 2016 2016
Hierarchy Unaudited Unaudited Unaudited Unaudited Audited Audited
EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
Financial liabilities
Senior notes - Public Level 2 (1,399.2) (1,425.0) (1,399.2) (1,481.5) (1,451.8) (1,471.0)
Senior notes - Private Level 2 (357.7) (373.3) (527.0) (559.0) (568.8) (585.4)
_________ _________ _________ _________ _________ _________
(1,756.9) (1,798.3) (1,926.2) (2,040.5) (2,020.6) (2,056.4)
_________ _________ _________ _________ _________ _________
c) Valuation principles
The fair value of financial assets and liabilities are determined as follows:
- assets and liabilities with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market prices;
- other financial assets and liabilities (excluding derivatives) are determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices from observable current market transactions and dealer quotes for similar instruments; and
- derivative financial instruments are calculated using quoted prices. Where such prices are not available, a discounted cash flow analysis is performed using the applicable yield curve for the duration of the instruments. Forward foreign exchange contracts are measured using quoted forward exchange rates and yield curves derived from quoted interest rates adjusted for counterparty credit risk, which is calculated based on credit default swaps of the respective counterparties. Interest rate swaps are measured at the present value of future cash flows estimated and discounted based on the applicable yield curves derived from quoted interest rates adjusted for counterparty credit risk which is calculated based on credit default swaps of the respective counterparties.
9. Share capital
Half year Half year
ended ended Year
30 June 2017 30 June ended
Unaudited 2016 31 Dec. 2016
EUR'm Unaudited Audited
EUR'm EUR'm
Authorised
280,000,000 A ordinary shares of 12.50
cent
each 35.0 35.0 35.0
_________ _________ _________
Allotted, called-up and fully paid (A
ordinary
shares of 12.50 cent each)
At beginning of the financial period 22.0 22.0 22.0
Shares issued during the financial period - - -
_________ _________ _________
At end of financial period 22.0 22.0 22.0
_________ _________ _________
Kerry Group plc has one class of ordinary share which carries no right to fixed income.
Shares issued during the period
During the period, a total of 103,175 A ordinary shares were issued at the nominal value of 12.50 cent per share under the Group's Long Term Incentive Plan and Short Term Incentive Plans.
The total number of shares in issue at 30 June 2017 was 176,114,006 (30 June 2016: 175,981,485; 31 December 2016: 176,010,831).
10. Effect of exchange translation adjustments on the Condensed Consolidated Balance Sheet
Half year Half year
ended ended Year
30 June 2017 30 June ended
Unaudited 2016 31 Dec. 2016
EUR'm Unaudited Audited
EUR'm EUR'm
(Decrease)/increase in assets
Property, plant and equipment (55.3) (33.2) (18.1)
Intangible assets (94.5) (50.6) (28.9)
Financial asset investments (2.7) (1.4) 0.8
Inventories (31.4) (16.7) (3.4)
Trade and other receivables (26.5) (13.0) (9.1)
Cash at bank and in hand (9.4) (2.7) (0.1)
Assets classified as held for sale (0.1) (0.3) (1.0)
Deferred tax assets (0.7) - 0.1
Decrease/(increase) in liabilities
Trade and other payables 75.0 53.2 49.1
Tax liabilities 2.8 1.8 6.1
Financial liabilities 56.7 33.4 (23.7)
Retirement benefits obligation 7.7 5.9 12.9
Other non-current liabilities 10.0 5.0 (3.1)
Deferred tax liabilities 9.4 1.7 (6.4)
Provisions (0.3) 2.6 6.8
Deferred income 0.3 0.2 -
Retained earnings (1.8) (0.8) 0.1
_________ _________ _________
(60.8) (14.9) (17.9)
_________ _________ _________
The above exchange translation adjustments arise primarily on the retranslation of the Group's opening net investment in its foreign currency subsidiaries.
11. Business combinations
In March 2017 the Group acquired assets of Australia based Taste Master Limited, a leading flavours provider to the beverage, sweet & savoury snack and meat & culinary industries in Australia and New Zealand. In April 2017 the Group acquired China based Tianning Flavour & Fragrance Co. Ltd., which strengthens the Group's sweet and savoury flavour development capability in the Chinese food and beverage industry. In June 2017 the Group acquired Brazil based Ben Alimentos Ltda., which will allow the Group to serve increasing customer demand in the LATAM region, primarily through dry dairy technologies.
The total consideration for these acquisitions was EUR97.4m, including a deferred element of EUR8.3m. Transaction expenses related to these acquisitions were charged against non-trading items in the Group's Condensed Consolidated Statement of Comprehensive Income during the period and represented less than one percent of the total consideration.
The provisional net assets acquired before combination were EUR37.0m and the Group recognised goodwill on these acquisitions of EUR60.4m. Given that the valuation of the fair value of assets and liabilities recently acquired is still in progress, these values are determined provisionally. The goodwill is attributable to the expected profitability, revenue growth, future market development and assembled workforce of the acquired businesses and the synergies expected to arise within the Group after the acquisitions. None of the goodwill is expected to be deductible for income tax purposes.
The acquisition method of accounting has been used to consolidate the businesses acquired in the Group's financial statements. Due to the fact that these acquisitions were recently completed, the revenue and results included in the Group's reported figures are not material. For the acquisitions completed in 2016 there have been no material revisions of the provisional fair value adjustments since the initial values were established.
12. Events after the balance sheet date
Since the period end, the Group has:
- proposed an interim dividend of 18.80 cent per A ordinary share (see note 6).
- progressed with the acquisition of the business of Hangman Flavours, based in Hangzhou, China - a leading producer of sweet and savoury flavours serving the beverage, ice cream, confectionery and snacks sectors in China.
There have been no other significant events, outside the ordinary course of business, affecting the Group since 30 June 2017.
13. General information
These unaudited Condensed Consolidated Interim Financial Statements for the half year ended 30 June 2017 are not full financial statements and were not reviewed by the auditors. The Board of Directors approved these Condensed Consolidated Interim Financial Statements on 9 August 2017. The figures disclosed relating to 31 December 2016 have been derived from the consolidated financial statements which were audited, received an unqualified audit report and have been filed with the Registrar of Companies.
These unaudited Condensed Consolidated Interim Financial Statements have been prepared on the going concern basis. The Directors report that they have satisfied themselves that the Group is a going concern, having adequate resources to continue in operational existence for the foreseeable future. In forming this view, the Directors have reviewed the Group's budget for a period not less than 12 months, the medium term plans as set out in the rolling five year plan, and have taken into account the cash flow implications of the plans, including proposed capital expenditure, and compared these with the Group's committed borrowing facilities and projected gearing ratios.
In relation to seasonality, trading profit is lower in the first half of the year due to the nature of the food business and stronger in December trading. While revenue is relatively evenly spread, margin has traditionally been higher in the second half of the year due to product mix and the timing of promotional activity. There is also a material change to the levels of working capital between December and June mainly due to the seasonal nature of the dairy and crop-based businesses.
As permitted by the Transparency (Directive 2004/109/EC) Regulations 2007 this Interim Report is available on www.kerrygroup.com. However, if a physical copy is required, please contact the Corporate Affairs department.
FINANCIAL DEFINITIONS
1. Revenue
Volume growth
This represents the sales volume growth year-on-year from ongoing business, excluding volumes from acquisitions net of disposals.
Volume growth is an important metric as it is seen as the key driver of top-line business improvement. This is used as the key revenue metric, as Kerry operates a pass-through pricing model with its customers to cater for raw material price fluctuations. A full reconciliation to reported revenue growth is detailed in the revenue reconciliation below.
Revenue Reconciliation
Reported
Volume Transaction Translation Acquisitions/ revenue
growth Price currency currency Disposals growth
Taste & Nutrition 4.2% 1.7% (0.1%) 0.4% 0.7% 6.9%
Consumer Foods 2.3% 1.9% (1.4%) (5.6%) 0.0% (2.8%)
Group 3.8% 1.8% (0.4%) (1.0%) 0.6% 4.8%
2. EBITDA
EBITDA represents profit after taxation and attributable to owners of the parent before finance income and costs, income taxes, depreciation (net), intangible asset amortisation and non-trading items.
H1 2017 H1 2016
EUR'm EUR'm
Profit after taxation and attributable to owners
of the parent 225.1 222.4
Finance income (0.1) (0.8)
Finance costs 34.5 39.9
Income taxes 31.5 33.7
Non-trading items 24.8 4.8
Intangible asset amortisation 22.6 21.6
Depreciation (net) 68.6 66.9
_______ _______
407.0 388.5
_______ _______
3. Trading Profit
Trading Profit refers to the operating profit generated by the businesses before intangible asset amortisation and gains or losses generated from non-trading items. Trading Profit represents operating profit before specific items that are not reflective of underlying trading performance and therefore hinder comparison of the trading performance of the Group's businesses, either year-on-year or with other businesses.
4. Trading Margin
Trading Margin represents trading profit, expressed as a percentage of revenue.
5. Non-trading Items
Non-trading items refers to gains or losses on the disposal of businesses, disposal of assets (non-current assets and assets classified as held for sale), costs in preparation of disposal of assets, material acquisition transaction costs and material acquisition integration and restructuring costs.
6. Operating Profit
Operating profit is profit before income taxes, finance income and finance costs.
7. Adjusted Earnings Per Share
In addition to the basic and diluted earnings per share, an adjusted earnings per share is also provided as it is considered more reflective of the Group's underlying trading performance. Adjusted earnings is profit after taxation and attributable to owners of the parent before brand related intangible asset amortisation and non-trading items (net of related tax). These items are excluded in order to assist in the understanding of underlying earnings. A full reconciliation of adjusted earnings per share is provided in note 5 of these Condensed Consolidated Interim Financial Statements.
H1 2017 H1 2016
EPS EPS
cent cent
Basic earnings per share 127.6 126.4
Brand related intangible asset amortisation 6.1 5.8
Non-trading items (net of related tax) 10.1 1.6
_________ _________
Adjusted earnings per share 143.8 133.8
_________ _________
8. Free Cash Flow
Free Cash Flow is trading profit plus depreciation, movement in average working capital, capital expenditure, pension costs less pension expense, finance costs paid (net) and income taxes paid.
Free Cash Flow is seen as an important indicator of the strength and quality of the business and of the availability to the Group of funds for reinvestment or for return to shareholders. Movement in average working capital is used when calculating free cash flow as management believes this provides a more accurate measure of the increase or decrease in working capital needed to support the business over the course of the period rather than at two distinct points in time. Movement in average working capital measures more accurately fluctuations caused by seasonality and other timing factors. Below is a reconciliation of free cash flow to the nearest IFRS measure, which is 'Net cash from operating activities'.
H1 2017 H1 2016
EUR'm EUR'm
Net cash from operating activities 284.3 255.4
Difference between movement in average working capital and
movement in the period end working capital 161.0 178.8
Expenditure on acquisition integration and restructuring costs 12.5 7.0
Purchase of assets (103.4) (73.5)
Proceeds from the sale of assets* 0.9 10.6
Capital grants received 0.1 -
Exchange translation adjustment 1.8 0.8
_________ _________
Free Cash Flow 357.2 379.1
_________ _________
*Assets represent property, plant and equipment.
9. Financial Ratios
The Net debt: EBITDA and EBITDA: Net interest ratios disclosed are calculated in accordance with lender's facility agreements using an adjusted EBITDA, adjusted finance costs (net of finance income) and an adjusted net debt value to adjust for the impact of non-trading items, acquisitions net of disposals and deferred payments in relation to acquisitions. As outlined above these ratios are calculated in accordance with lender's facility agreements and these agreements specifically require these adjustments in the calculation.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR UKAKRBSAWRAR
(END) Dow Jones Newswires
August 10, 2017 02:01 ET (06:01 GMT)
1 Year Kerry Chart |
1 Month Kerry 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
