TIDMKYGA
RNS Number : 2671X
Kerry Group PLC
09 August 2018
News release
Thursday, 9 August 2018
Kerry Group - Interim Management Report
for the half year ended 30 June 2018
Kerry Group, the global taste & nutrition and consumer foods
group reports a solid underlying business performance for the half
year ended 30 June 2018.
HIGHLIGHTS
* Adjusted EPS* in constant currency up 9.0% to 144.2
cent
* Group revenue of EUR3.2 billion reflecting 3.6%
business volume growth
* Taste & Nutrition +4.1% volume growth
* Consumer Foods +1.3% volume growth
* Group trading margin -10bps to 10.5% reflecting a
40bps currency headwind
* Taste & Nutrition +10bps to 13.1%
* Consumer Foods -60bps to 7.0%
* Basic EPS of 128.3 cent (H1 2017: 127.6 cent)
* Interim dividend per share increased 11.7% to 21.0
cent
* Free cash flow of EUR201m (H1 2017: EUR357m)
* Full year guidance updated
* Before brand related intangible asset amortisation and non-trading
items (net of related tax)
Edmond Scanlon - Chief Executive Officer
"Evolving consumer trends and the changing marketplace have
provided increased opportunities and demand for Kerry's industry
leading RD&A and broad technology portfolio. This, along with
the Group's enhanced end use market focus, drove healthy volume
growth and underlying margin expansion in the first half of 2018.
We also continued to make progress with and invest in business
development initiatives aligned to our strategic growth
priorities.
In light of the above, we update our guidance and now expect to
achieve growth in adjusted earnings per share of 7% to 10% in
constant currency."
Contact Information
Media
Frank Hayes Director of +353 66 7182304 corpaffairs@kerry.ie
Corporate Affairs
Investor
Relations +353 66 7182292 investorrelations@kerry.
Brian Mehigan Chief Financial +353 66 7182292 ie
William Lynch Officer investorrelations@kerry.
Head of Investor ie
Website Relations
www.kerrygroup.
com
INTERIM MANAGEMENT REPORT
For the half year ended 30 June 2018
The breadth and pace of changing consumer demands continued to
drive major fragmentation and change along the supply chain and
within the industry. Major global consumer trends such as
authenticity, healthfulness, sustainability, premiumisation, clean
label and convenience aligned with local consumer preferences
continue to drive increased innovation opportunities. The agility
of Kerry's business model and integrated solution capability is
more relevant than ever in supporting customers to optimise speed
to market, in order to meet consumer preferences.
The Group again delivered volume growth ahead of its markets.
Taste & Nutrition achieved sustained volume growth in North
America, solid growth in Latin America, a good performance in
Europe and continued strong growth in APMEA.
UK and Irish consumer foods markets encountered challenges in
the period, however Kerry's Consumer Foods division delivered a
solid underlying performance.
Business Performance
Group revenue on a reported basis increased by 1.4% to EUR3.2
billion reflecting strong volume growth and contribution from
acquisitions, offset by adverse currency movements. Business
volumes grew by 3.6% and pricing increased by 0.6% in the period.
The reported revenue increase reflects the aforementioned business
volume growth and positive pricing, contribution from acquisitions
of 3.9%, an adverse translation currency impact of 6.6% and an
adverse transaction currency impact of 0.1%.
Taste & Nutrition delivered 4.1% volume growth and pricing
increased by 0.6%. Consumer Foods' business volumes increased by
1.3% and pricing increased by 0.9%.
Group trading margin reduced by 10 basis points to 10.5%,
reflecting a 10 basis points improvement in Taste & Nutrition,
positive underlying margin improvement in Consumer Foods offset by
adverse sterling exchange rates resulting in a 60 basis points
margin reduction.
Constant currency adjusted earnings per share increased by 9.0%
to 144.2 cent (H1 2017 currency adjusted: 132.3 cent). Basic
earnings per share increased by 0.5% to 128.3 cent (H1 2017: 127.6
cent).
The interim dividend of 21.0 cent per share represents an
increase of 11.7% over the 2017 interim dividend. The Group
achieved free cash flow of EUR201m in the period (H1 2017:
EUR357m).
Business Reviews
Taste & Nutrition
H1 2018 Growth
------------------- ------------- -----------
Revenue EUR2,579m 4.1%(1)
Trading margin 13.1% +10bps
------------------- ------------- -----------
(1)volume growth
-- Volume growth driven by Meat, Beverage & Snacks End Use Markets (EUMs)
-- Pricing +0.6% - easing raw material inflation managed through
customer pass-through pricing model
-- Trading margin +10bps - good underlying growth driven by
operating leverage, portfolio enhancement and efficiencies, offset
by currency headwinds and growth investments
The division achieved good growth across an increasingly diverse
customer base. Developing markets delivered strong growth of 9.6%,
with APMEA being the main driver. Foodservice delivered a good
performance across all regions, growing at 6.2% overall in the
period. Reported revenue increased by 1.4% to EUR2,579m, as volume
growth and the contribution from business acquisitions were offset
by significant translation currency headwinds.
Kerry's taste technologies recorded a strong performance across
all regions, with TasteSense(TM) sugar-reduction technology and
natural extracts being key drivers of growth. Kerry's broad clean
label technology portfolio performed well, with fermented
ingredients, proteins, nutritional bioactives and enzyme
technologies all delivering good growth in the period. The Group
maintained a strong innovation pipeline, anchored by the ability to
create new nutritional product solutions that meet local consumer
taste preferences across the globe.
Americas Region
-- 2.8% volume growth
-- Good performance in North America, driven by Meat, Snacks & Beverage EUMs
-- LATAM delivering solid growth
High levels of product churn continued right across the
marketplace, with clean label being a major driver of product
innovation across retail categories and foodservice channels.
Centre of store categories continued to weigh on industry growth
levels. Kerry delivered volume growth ahead of the market by
winning market share through speedy innovation across broader
customer alliances and partnerships. Reported revenue in the region
decreased by 2.4% to EUR1,307m, with significant translation
currency headwinds more than offsetting volume growth and the
contribution from business acquisitions.
In North America, Kerry's Meat EUM continued to deliver strong
growth, meeting consumer demands for authentic taste, natural shelf
life preservation and a broader range of alternative protein based
products. Kerry's natural extract capabilities were a key driver of
growth in the Beverage EUM, where strong progress was continued
through new launches with Kerry's 'Cold Brew' technology.
The Snacks EUM delivered strong growth through new innovative
healthier snacks and indulgent world taste experiences. Kerry's
dairy taste and clean label technologies benefitted from enhanced
wellness and premiumisation trends within the Meals EUM.
The acquisitions of the Kettle business from Tyson Foods and
Dottley Spice in late 2017 strengthened Kerry's positioning and
contributed to a strong performance in the foodservice channel in
the period. Good progress was also made in the expansion of
fermented ingredient manufacturing capacity at the Group's
Rochester, Minnesota facility.
In LATAM, Mexico and Central America delivered good growth,
while Brazil performed well, but was impacted by the truck drivers
industrial action in Q2. The Snacks and Bakery & Confectionery
EUMs delivered good growth, along with foodservice chains across
the region. The implementation of Kerryconnect progressed
successfully in line with expectations.
The global Pharma EUM continued to grow well, with excipients in
North America delivering strong growth. The Group acquired the
pharmaceutical lactose manufacturing facility of Rothschild,
Wisconsin based Foremost Farms in the period, further strengthening
Kerry's pharmaceutical lactose supply base. Kerry's Ganeden(R)
probiotics & Wellmune(R) branded immunity enhancing ingredients
delivered excellent performance, as they continued to broaden
market reach with a number of new launches into wider
applications.
Europe Region
-- 2.7% volume growth
-- Good performance in Beverage, Meat & Dairy EUMs
-- Foodservice delivered strong growth through both chains & independent operators
Good growth was achieved, as Kerry continued to develop its
in-market customer engagement to meet evolving local consumer
preferences across the region. Reported revenue increased by 2.9%
to EUR700m, with volume growth and the contribution from business
acquisitions partially offset by translation currency
headwinds.
The Beverage EUM delivered a strong performance in both the
retail and foodservice channels, with a number of innovations
deploying Kerry's TasteSense(TM) sugar-reduction technology and
natural extracts portfolio. New beverage menu ranges were developed
with key foodservice partners.
The Meat EUM continued to provide good growth opportunities, as
Kerry's clean label and innovative texture technologies performed
well. Kerry's Smoke & Grill and Meat-Free technologies were
successfully deployed in a number of new launches in the UK and
Northern Europe. A majority shareholding was acquired in
Netherlands based Ojah - a market leading plant-based protein
manufacturer in Europe producing textured meat alternatives,
enhancing the Group's meat-free technology portfolio. The Meals EUM
was challenged in the period, as retailers in some geographies
reduced promotional activity. The Bakery & Confectionery EUM
delivered a solid performance, while the Snacks EUM performed well
with better-for-you offerings and indulgent taste products. Russia
delivered good growth, particularly into the Meat and Snacks EUMs,
while production commenced in Kerry's first manufacturing facility
in the country, providing a key platform for future business
development and growth.
The Dairy EUM had good growth in the ice cream category, with a
number of new launches in both premium and dairy-free ranges using
Kerry's taste technologies. International dairy markets remained
challenging during the half year. Demand from major dairy importing
countries for primary dairy products continued to benefit from the
nutritional values of dairy. While demand for butterfat in
particular remained relatively strong, market stability was
impacted by continued shifts in supply / demand balances.
APMEA Region
-- 10.1% volume growth
-- Good performance across all EUMs - in particular Snacks, Meals & Bakery
-- Progressing strategic expansion - both organic and acquisitive
The APMEA region continues to evolve as a highly fragmented
marketplace with broad-based market dynamics and consumer trends
including convenience, healthfulness, snacking, e-commerce and
increased regulation. Such trends, together with local consumer
taste preferences, are driving major consumption change and
underlying market growth in both retail and foodservice channels.
Excellent growth was achieved in the period, as Kerry's business
model continued to be successfully deployed. Kerry continued to
invest in capabilities to capitalise on these ongoing local market
opportunities. The recent acquisitions of Tianning Flavours, Taste
Master and Hangman have all further strengthened Kerry's authentic
local taste capabilities.
Reported revenue in the region increased by 9.7% to EUR537m,
with volume growth and the contribution from business acquisitions
partially offset by translation currency headwinds.
The Snacks EUM delivered strong growth due to the continued
development of new snacking occasions across the region. Local
category leaders continued to innovate through the introduction of
new authentic world flavours, with Kerry's Smoke & Grill,
Barbecue, and Dairy technologies being deployed across a range of
products.
The Meals EUM performed strongly, through increased consumer
demand across the region for new fusion flavours, using both sweet
and savoury technologies, combined with better-for-you offerings in
both the retail and foodservice channels, most notably in
China.
The Bakery EUM continued to deliver strong growth in both sweet
and savoury applications, through integrated solutions that
supported customers in broadening their ranges.
Sub-Saharan Africa and MENAT achieved strong growth, through
better-for-you applications into the Snacks & Beverage EUMs.
The Group continued to invest in its strategic growth priorities in
the region. Good progress was made through investments in ongoing
footprint expansion in Malaysia, Indonesia and China. Two further
acquisitions were made in the period; SIAS Food Co. - a leading
China-based supplier of culinary and fruit ingredients and systems
to the foodservice and food manufacturing industries, and Season to
Season - a leading South African supplier of taste ingredients and
systems to the African snack and food sectors.
Consumer Foods
H1 2018 Growth
------------------- ----------- -----------
Revenue EUR685m 1.3%(1)
Trading margin 7.0% (60bps)
------------------- ----------- -----------
(1)volume growth
-- Volume growth led by good performance across the Food to Go range
-- Pricing +0.9% - easing raw material inflation across the period
-- Trading margin - growth more than offset by the negative impact of transaction currency
Changing consumer behaviours in the UK and Ireland and the
evolving market landscape continue to drive heightened competition.
Discounter chains continue to gain market share, with retailers in
general focusing more on range simplification, customer brands and
EDLP strategies. Within this rapidly changing environment,
retailers are seeking to capitalise on higher growth areas of
snacking and 'on the go' consumption, while consumers'
multi-shopping behaviours continue to evolve, and online shopping
maintains strong growth.
Reported revenue increased by 1.2% to EUR685m, as volume growth
and the contribution from business acquisitions were offset by
translation currency headwinds. 'Everyday Fresh' enjoyed solid
growth, as the Richmond range delivered good growth across the
period, with Richmond chicken sausages also being successfully
launched in the second quarter. Denny benefitted from increased
marketing support in Ireland. The traditional spreads category
continues to be challenged, however the division's softer butter
technology delivered good growth with private label brands within
the UK, as did the Dairygold brand in Ireland.
'Convenience Meal Solutions' were impacted by reduced
promotional activity as well as the extended warm weather spell
towards the end of the period. While there was good business
development in 'better-for-you' ranges, the frozen meals category
continued to be challenged.
'Food to Go' performed well with strong growth in Cheestrings.
The relaunch of Fridge Raiders commenced towards the end of the
period, and the Fridge Raiders brand will now embrace a broader
range of snacking products across a wider consumer demographic.
Good progress was achieved in the development of the out of home
segments with good growth into pub and restaurant chains. Rollover
delivered strong growth with a number of new listings into
retailers, as they developed broader food to go platforms in their
stores.
The Brexit mitigation programme made further progress in the
period and is on track to deliver on its objectives.
Financial Review
Constant
Currency Reported H1 2018 H1 2017
Analysis of Results % change % change EUR'm EUR'm
--------------------------------------- ---------- --------- -------- --------
Revenue 8.0% 1.4% 3,225.3 3,181.3
-------- --------
Trading profit 8.7% 0.5% 340.0 338.4
Trading margin 10.5% 10.6%
Computer software amortisation (14.9) (11.9)
Finance costs (net) (33.8) (34.4)
-------- --------
Adjusted earnings before taxation 291.3 292.1
Income taxes (excluding non-trading
items) (36.5) (38.5)
-------- --------
Adjusted earnings after taxation 254.8 253.6
Brand related intangible asset
amortisation (12.7) (10.7)
Non-trading items (net of related
tax) (15.4) (17.8)
-------- --------
Profit after taxation 226.7 225.1
-------- --------
EPS EPS
Cent Cent
Basic EPS 0.5% 128.3 127.6
Brand related intangible asset
amortisation 7.2 6.1
Non-trading items (net of related
tax) 8.7 10.1
-------- --------
Adjusted* EPS 0.3% 144.2 143.8
Impact of retranslating prior year
adjusted EPS at current year average
exchange rates - (11.5)
-------- --------
Constant Currency Adjusted* EPS 9.0% 144.2 132.3
-------- --------
* 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 1.4% to EUR3.23
billion (H1 2017: EUR3.18 billion) and 8.0% in constant currency.
Volumes grew by 3.6%, pricing increased by 0.6%, adverse
transaction currency of 0.1%, contribution from business
acquisitions of 3.9% and adverse translation currency of 6.6%.
H1 2017: Group reported revenue +4.8%, volumes +3.8%, pricing
+1.8%, transaction currency (0.4%), acquisitions +0.6%, translation
currency (1.0%).
In Taste & Nutrition, reported revenue increased by 1.4% to
EUR2.58 billion (H1 2017: EUR2.54 billion). Volumes grew by 4.1%,
pricing increased by 0.6%, contribution from business acquisitions
of 4.6% and adverse translation currency of 7.9%.
H1 2017: Taste & Nutrition reported revenue +6.9%, volumes
+4.2%, pricing +1.7%, transaction currency (0.1%), acquisitions
+0.7%, translation currency +0.4%.
In Consumer Foods, reported revenue increased by 1.2% to EUR685m
(H1 2017: EUR677m). Volumes increased by 1.3%, pricing increased by
0.9%, adverse transaction currency of 0.4%, contribution from
business acquisitions of 1.0% and adverse translation currency of
1.6%.
H1 2017: Consumer Foods reported revenue (2.8%), volumes +2.3%,
pricing +1.9%, transaction currency (1.4%), translation currency
(5.6%).
Trading Profit & Margin
Group trading profit increased by 0.5% to EUR340.0m (H1 2017:
EUR338.4m) reflecting 8.7% growth, after taking account of an
adverse translation currency impact of 8.2% in the period.
Group trading profit margin reduced by 10 basis points to 10.5%,
as underlying margin expansion attributable to improved product
mix, operating leverage and efficiencies was offset by currency
headwinds and growth investments.
Trading profit margin in Taste & Nutrition increased by 10
basis points to 13.1%, due to the benefits of improved product mix,
operating leverage and efficiencies, offset by currency headwinds
and growth investments.
Trading profit margin in Consumer Foods decreased by 60 basis
points to 7.0%, due to significant transaction currency headwinds
partly offset by underlying margin expansion.
Finance Costs (net)
Finance costs (net) for the period decreased by EUR0.6m to
EUR33.8m (H1 2017: EUR34.4m) due to cash generation and a reduction
in pension interest, offset by acquisition activity.
Taxation
The tax charge for the period, before non-trading items was
EUR36.5m (H1 2017: EUR38.5m) which represents a reduction of 30bps
since year end to an effective tax rate of 13.1% (H1 2017: 13.7%).
The reduction in the tax rate was due to changes in tax rates in a
number of jurisdictions.
Acquisitions
During the period, the Group completed a total of four
acquisitions and entered into a joint venture at a total cost of
EUR120.3m.
Non-Trading Items
The Group recorded EUR15.4m of costs net of tax (H1 2017:
EUR17.8m) due to costs associated with acquisition integration and
the Brexit mitigation programme.
Free Cash Flow
The Group achieved free cash flow of EUR200.6m (H1 2017:
EUR357.2m). This decrease is due to increased investments in
working capital and capital expenditure.
Free Cash Flow H1 2018 H1 2017
EUR'm EUR'm
------------------------------------------------- -------- --------
Trading profit 340.0 338.4
Depreciation (net) 66.8 68.6
Movement in average working capital (29.6) 118.1
Pension contributions paid less pension expense (21.7) (22.7)
-------- --------
Cash flow from operations 355.5 502.4
Finance costs paid (net) (22.8) (21.0)
Income taxes paid (18.2) (21.8)
Purchase of non-current assets (113.9) (102.4)
-------- --------
Free cash flow 200.6 357.2
-------- --------
Balance Sheet
A summary balance sheet as at 30 June 2018 is provided
below:
H1 2018 H1 2017 FY 2017
EUR'm EUR'm EUR'm
----------------------------- --------- --------- ---------
Property, plant & equipment 1,607.9 1,430.1 1,529.6
Intangible assets 3,728.6 3,414.2 3,646.7
Other non-current assets 198.1 211.1 192.2
Current assets 2,141.3 2,159.8 2,031.7
--------- --------- ---------
Total assets 7,675.9 7,215.2 7,400.2
--------- --------- ---------
Current liabilities 1,696.5 1,546.8 1,567.8
Non-current liabilities 2,205.8 2,418.0 2,259.2
--------- --------- ---------
Total liabilities 3,902.3 3,964.8 3,827.0
--------- --------- ---------
Net assets 3,773.6 3,250.4 3,573.2
--------- --------- ---------
Shareholders' equity 3,773.6 3,250.4 3,573.2
--------- --------- ---------
Property, Plant & Equipment
Property, plant & equipment increased by EUR78.3m to
EUR1,607.9m (Dec 2017: EUR1,529.6m, H1 2017: EUR1,430.1) due to
additions made in the period and foreign exchange translation
movements, offset by the depreciation charge.
Intangible Assets
Intangible assets increased by EUR81.9m to EUR3,728.6m (Dec
2017: EUR3,646.7m, H1 2017: EUR3,414.2m) due to additions made in
the period and foreign exchange translation movements, offset by
the amortisation charge.
Current Assets
Current assets increased by EUR109.6m to EUR2,141.3m (Dec 2017:
EUR2,031.7m, H1 2017: EUR2,159.8m), as increased trade and other
receivables and inventories were offset by a reduced level of cash
in hand at 30 June 2018.
Retirement Benefits
At the balance sheet date, the net deficit for all defined
benefit schemes (after deferred tax) was EUR35.4m (Dec 2017:
EUR102.0m, H1 2017: EUR186.4m). The decrease in the net deficit
from year end relates to a favourable movement in discount rates
and inflation rates.
Net Debt
At 30 June 2018, net debt stood at EUR1,403.3m, an increase of
EUR61.6m relative to the December 2017 debt of EUR1,341.7m.
Key Financial Covenants
At 30 June the key financial ratios were as follows:
H1 2018 H1 2017 FY 2017
Covenant Times Times Times
-------------- -------- --------
Net debt: EBITDA* Maximum 3.5 1.5 1.3 1.4
EBITDA: Net interest* Minimum 4.75 14.8 14.9 16.2
----------------------- -------------- -------- -------- --------
*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 5.5 years at the
end of the period (Dec 2017: 6.0 years). At the period end 72% of
net debt was carried at fixed rates. The Group's balance sheet is
in a healthy position. With a net debt to EBITDA* ratio of 1.5
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
2017 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 chart below outlines the
difference in average exchange rates from H1 2018 compared with H1
2017.
http://www.rns-pdf.londonstockexchange.com/rns/2671X_1-2018-8-8.pdf
Principal Risks & Uncertainties
Details of the principal risks and uncertainties facing the
Group can be found in the 2017 Annual Report on pages 62 to 68.
These risks include but are not limited to; the identification and
integration of acquisition targets, failure to adapt the portfolio
to respond to unprecedented marketplace dynamics, quality &
food safety risks, inability to secure, build, and engage a robust
talent pipeline, systems implementation risks, unauthorised use of
Group intellectual property, geopolitical risks, Brexit, and
ongoing operational and compliance risks. However, risks with
increased potential impact in the second half of the year include
fluctuating currencies and ongoing geopolitical volatility
including Brexit. 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 of accounting. 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 21.0 cent per
share (an increase of 11.7% on the 2017 interim dividend of 18.8
cent) payable on 16 November 2018 to shareholders registered on the
record date 19 October 2018.
Future Prospects
Kerry has embraced the changing marketplace and is well placed
to respond to localised consumer trends and customer requirements
through industry leading innovation. Kerry's Taste & Nutrition
model is uniquely positioned to deliver for customers in this
environment. Growth prospects for the full year remain strong due
to a good innovation pipeline, while bearing in mind the strong
comparatives from the second half of 2017. While remaining cautious
on the consumer landscape within the UK, Consumer Foods is well
placed to continue to outperform its markets.
The Group will continue to invest in business development
aligned to strategic growth priorities and lead the continued
consolidation of the industry benefiting from the Groups strong
balance sheet and scalable business model.
In February 2018, we guided growth in adjusted earnings per
share of 6% to 10% on a constant currency basis. Given the momentum
of the business, we now expect to achieve growth in adjusted
earnings per share of 7% to 10% in constant currency.
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 2018 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 2018, 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
Edmond Scanlon Brian Mehigan
Chief Executive Officer Chief Financial Officer
8 August 2018
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 2018
Kerry Group plc
Condensed Consolidated Income
Statement
for the half year ended 30 June 2018
Before
Non-Trading Non-Trading Half year Half year Year
Items Items ended ended ended
30 June 30 June 30 June 30 June 31 Dec.
2018 2018 2018 2017 2017
Unaudited Unaudited Unaudited Unaudited Audited
Notes EUR'm EUR'm EUR'm EUR'm EUR'm
Continuing operations
Revenue 2 3,225.3 - 3,225.3 3,181.3 6,407.9
_________ _________ _________ _________ _________
Trading profit 2 340.0 - 340.0 338.4 781.3
Intangible asset amortisation (27.6) - (27.6) (22.6) (47.9)
Non-trading items 3 - (19.9) (19.9) (24.8) (54.5)
_________ _________ _________ _________ _________
Operating profit 312.4 (19.9) 292.5 291.0 678.9
Finance income 4 0.2 - 0.2 0.1 0.1
Finance costs 4 (34.0) - (34.0) (34.5) (65.7)
_________ _________ _________ _________ _________
Profit before taxation 278.6 (19.9) 258.7 256.6 613.3
Income taxes (36.5) 4.5 (32.0) (31.5) (24.8)
_________ _________ _________ _________ _________
Profit after taxation attributable to
owners of the parent 242.1 (15.4) 226.7 225.1 588.5
_________ _________ _________ _________ _________
Earnings per A ordinary share Cent Cent Cent
- basic 5 128.3 127.6 333.6
- diluted 5 128.2 127.5 333.2
_________ _________ _________
Kerry Group plc
Condensed Consolidated Statement of Comprehensive Income
for the half year ended 30 June 2018
Half year Half year Year
ended ended ended
30 June 2018 30 June 2017 31 Dec. 2017
Unaudited Unaudited Audited
EUR'm EUR'm EUR'm
Profit after taxation attributable to owners of the parent 226.7 225.1 588.5
Other comprehensive income:
Items that are or may be reclassified subsequently to profit or
loss:
Fair value movements on cash flow hedges (3.6) 7.4 5.3
Cash flow hedges - reclassified to profit or loss from equity (1.4) (17.0) (29.2)
Deferred tax effect of fair value movements on cash flow hedges 0.5 1.3 (0.6)
Exchange difference on translation of foreign operations (2.6) (60.8) (108.8)
Fair value movements on revaluation of available for sale financial
assets - - 3.5
Items that will not be reclassified subsequently to profit or
loss:
Re-measurement on retirement benefits obligation 60.6 74.7 130.1
Deferred tax effect of re-measurement on retirement benefits
obligation (9.8) (9.8) (20.2)
_________ _________ _________
Net income/(expense) recognised directly in other comprehensive
income 43.7 (4.2) (19.9)
_________ _________ _________
Total comprehensive income 270.4 220.9 568.6
_________ _________ _________
Kerry Group plc
Condensed Consolidated Balance Sheet
as at 30 June 2018
30 June 2018 30 June 2017 31 Dec. 2017
Unaudited Unaudited Audited
Notes EUR'm EUR'm EUR'm
Non-current assets
Property, plant and equipment 1,607.9 1,430.1 1,529.6
Intangible assets 3,728.6 3,414.2 3,646.7
Financial asset investments 40.3 40.2 44.6
Investment in associates and joint ventures 19.6 5.9 5.8
Non-current financial instruments 92.5 111.7 95.4
Deferred tax assets 45.7 53.3 46.4
__________ ___________ ___________
5,534.6 5,055.4 5,368.5
__________ ___________ ___________
Current assets
Inventories 848.4 744.1 797.5
Trade and other receivables 989.8 897.5 893.1
Cash at bank and in hand 8 290.3 457.4 312.5
Other current financial instruments 10.3 56.0 20.3
Assets classified as held for sale 2.5 4.8 8.3
__________ __________ ___________
2,141.3 2,159.8 2,031.7
__________ __________ ___________
Total assets 7,675.9 7,215.2 7,400.2
__________ __________ ___________
Current liabilities
Trade and other payables 1,497.7 1,383.1 1,410.5
Borrowings and overdrafts 8 30.7 7.5 13.3
Other current financial instruments 8.1 15.7 9.1
Tax liabilities 122.4 99.2 108.4
Provisions 35.7 36.9 25.3
Deferred income 1.9 4.4 1.2
__________ __________ ___________
1,696.5 1,546.8 1,567.8
__________ __________ ___________
Non-current liabilities
Borrowings 8 1,743.7 1,782.7 1,728.4
Other non-current financial instruments 11.4 0.6 7.9
Retirement benefits obligation 7 44.6 233.8 124.3
Other non-current liabilities 96.2 89.1 96.7
Deferred tax liabilities 250.8 250.4 241.9
Provisions 37.7 40.1 37.1
Deferred income 21.4 21.3 22.9
__________ __________ ___________
2,205.8 2,418.0 2,259.2
__________ __________ ___________
Total liabilities 3,902.3 3,964.8 3,827.0
__________ __________ ___________
Net assets 3,773.6 3,250.4 3,573.2
__________ __________ ___________
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 (214.6) (163.9) (214.4)
Retained earnings 3,567.5 2,993.6 3,366.9
__________ __________ ___________
Shareholders' equity 3,773.6 3,250.4 3,573.2
__________ __________ ___________
Kerry Group plc
Condensed Consolidated Statement of Changes in Equity
for the half year ended 30 June 2018
Share Share Other Retained
Capital Premium Reserves Earnings Total
Note EUR'm EUR'm EUR'm EUR'm EUR'm
At 1 January 2017 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)
________ ________ ________ ________ ________
Total comprehensive (expense)/income - - (70.4) 291.3 220.9
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
Profit after tax attributable to owners of the
parent - - - 363.4 363.4
Other comprehensive (expense)/income - - (58.8) 43.1 (15.7)
________ ________ ________ ________ ________
Total comprehensive (expense)/income - - (58.8) 406.5 347.7
Dividends paid 6 - - - (33.2) (33.2)
Share-based payment expense - - 8.3 - 8.3
________ ________ ________ ________ ________
At 31 December 2017 - audited 22.0 398.7 (214.4) 3,366.9 3,573.2
Profit after tax attributable to owners of the
parent - - - 226.7 226.7
Other comprehensive (expense)/income - - (7.6) 51.3 43.7
_______ ________ ________ ________ ________
Total comprehensive (expense)/income - - (7.6) 278.0 270.4
Dividends paid 6 - - - (77.4) (77.4)
Share-based payment expense - - 7.4 - 7.4
_______ _______ ________ ________ ________
At 30 June 2018 - unaudited 22.0 398.7 (214.6) 3,567.5 3,773.6
_______ _______ ________ ________ ________
Other Reserves comprise the
following:
FVOCI/ Capital Other Share-Based
AFS Redemption Undenominated Payment Translation Hedging
Reserve* Reserve Capital Reserve Reserve Reserve Total
EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
At 1 January 2017 - 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)
Total
comprehensive
income/(expense) 3.5 - - - (48.0) (14.3) (58.8)
Share-based
payment
expense - - - 8.3 - - 8.3
________ ________ ________ ________ ________ ________ ______
At 31 December
2017 - audited 3.5 1.7 0.3 51.1 (255.8) (15.2) (214.4)
Total
comprehensive
expense - - - - (2.6) (5.0) (7.6)
Share-based
payment
expense - - - 7.4 - - 7.4
_______ _______ _______ _______ _______ _______ ______
At 30 June 2018
- unaudited 3.5 1.7 0.3 58.5 (258.4) (20.2) (214.6)
_______ _______ _______ _______ _______ _______ ______
*The available for sale reserve under IAS 39 becomes the fair
value through other comprehensive income reserve (FVOCI) under
IFRS 9 at 1 January 2018.
Kerry Group plc
Condensed Consolidated Statement of Cash
Flows
for the half year ended 30 June 2018
Half year Half year Year
ended ended ended
30 June 30 June 31 Dec.
2018 2017 2017
Unaudited Unaudited Audited
Notes EUR'm EUR'm EUR'm
Operating activities
Trading profit 340.0 338.4 781.3
Adjustments for:
Depreciation (net) 66.8 68.6 134.0
Change in working capital (66.9) (42.9) 9.1
Pension contributions paid less pension
expense (21.7) (22.7) (95.3)
Payments on non-trading items (17.3) (12.5) (34.0)
Exchange translation adjustment (0.1) (1.8) (8.8)
__________ __________ ___________
Cash generated from operations 300.8 327.1 786.3
Income taxes paid (18.2) (21.8) (54.7)
Finance income received 0.1 0.1 0.1
Finance costs paid (22.9) (21.1) (60.3)
__________ __________ ___________
Net cash from operating activities 259.8 284.3 671.4
__________ __________ ___________
Investing activities
Purchase of assets (122.4) (103.4) (301.3)
Proceeds from the sale of assets 8.3 0.9 3.1
Capital grants received 0.2 0.1 0.9
Purchase of businesses (net of cash acquired) 10 (86.0) (89.1) (396.5)
(Purchase)/disposal of share in associates
and joint ventures (15.6) 30.1 29.5
Income received from associates - - -
Disposal of businesses - - -
Payments relating to previous acquisitions (8.7) (0.1) (0.9)
__________ __________ ___________
Net cash used in investing activities (224.2) (161.5) (665.2)
__________ __________ ___________
Financing activities
Dividends paid 6 (77.4) (69.0) (102.2)
Issue of share capital 9 - - -
Repayment of borrowings (net of swaps) (5.9) (155.6) (144.3)
__________ __________ ___________
Net cash movement due to financing activities (83.3) (224.6) (246.5)
__________ __________ ___________
Net decrease in cash and cash equivalents (47.7) (101.8) (240.3)
Cash and cash equivalents at beginning
of period 305.6 561.1 561.1
Exchange translation adjustment on cash
and cash equivalents 1.7 (9.4) (15.2)
__________ __________ ___________
Cash and cash equivalents at end of period 8 259.6 449.9 305.6
__________ __________ ___________
Reconciliation of Net Cash Flow to Movement
in Net Debt
Net decrease in cash and cash equivalents (47.7) (101.8) (240.3)
Cash flow from debt financing 5.9 155.6 144.3
__________ __________ ___________
Changes in net debt resulting from cash
flows (41.8) 53.8 (96.0)
Fair value movement on interest rate
swaps (net of adjustment to borrowings) (4.0) 0.9 2.8
Exchange translation adjustment on net
debt (15.8) 47.3 75.2
__________ __________ ___________
Movement in net debt in the period (61.6) 102.0 (18.0)
Net debt at beginning of period (1,341.7) (1,323.7) (1,323.7)
__________ __________ ___________
Net debt at end of period 8 (1,403.3) (1,221.7) (1,341.7)
__________ __________ ___________
Kerry Group plc
Notes to the Condensed Consolidated Interim Financial
Statements
for the half year ended 30 June 2018
1. Accounting policies
These Condensed Consolidated Interim Financial Statements for
the half year ended 30 June 2018 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 2017 Annual Report except for changes in accounting
policies in respect of IFRS 9 'Financial Instruments' and IFRS 15
'Revenue from Contracts with Customers' outlined below. Some
comparative information has been re-presented to align with the
current half year presentation. In the 2018 Condensed Consolidated
Interim Financial Statements, the Group has re-presented
corresponding balances of 'Revenue by location of external
customers' in note 2 for 2017 comparatives to align with the
current year presentation. In addition the Group has included an
accounting policy in relation to joint ventures as follows:
Basis of Consolidation - Joint Ventures
Joint ventures are all entities over which the Group has joint
control, whereby the Group has rights to the net assets of the
arrangement, rather than rights to its assets and obligations for
its liabilities. Investments in joint ventures are accounted for
using the equity method of accounting and are initially recognised
at cost. On acquisition of the investment in joint venture, any
excess of the cost of the investment over the Group's share of the
net fair value of the identifiable assets and liabilities of the
investee is recognised as goodwill, which is included within the
carrying value of the investment.
The Group's share of its joint ventures' post-acquisition
profits or losses is recognised in 'Share of associate and joint
ventures' loss/(profit) after tax' within Trading Profit in the
Consolidated Income Statement, and its share of post-acquisition
movements in reserves is recognised in reserves until the date on
which joint control ceases. The cumulative post-acquisition
movements are adjusted against the carrying amount of the
investment, less any impairment in value. Where indicators of
impairment arise, the carrying amount of the joint venture is
tested for impairment by comparing its recoverable amount with its
carrying amount.
Unrealised gains arising from transactions with joint ventures
are eliminated to the extent of the Group's interest in the entity.
Unrealised losses are eliminated to the extent that they do not
provide evidence of impairment. The accounting policies of joint
ventures are amended where necessary to ensure consistency of
accounting treatment at Group level.
The following Standards and Interpretations are effective for
the Group from 1 January 2018 but do not have a material effect on
the results or financial position of the Group:
- IFRS 2 (amendment) Classification and Measurement of Share-Based Payment Transactions
- IFRS 4 (amendment) Insurance Contracts
- IFRS 9 Financial Instruments
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.
IFRS 9 largely retains the existing requirements in IAS 39 for the classification and measurement
of financial liabilities. However, it eliminates the previous IAS 39 categories for financial
assets of held-to-maturity, loans and receivables and available for sale. Under IFRS 9, on
initial recognition, a financial asset is classified as measured at amortised cost or fair
value through other comprehensive income (FVOCI), or fair value through profit or loss (FVPL).
The classification is dependent on the business model for managing the financial assets and
on whether the cash flows represent solely the payment of principal and interest. The Group
has quantified the 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
continue to be accounted for at amortised cost. The majority of financial asset investments
will continue to be accounted for at fair value through profit or loss with the exception
of certain equity instruments which were previously classified as available for sale (AFS).
Under IFRS 9, the Group will continue to measure these instruments at FVOCI. The AFS reserve
will now become the FVOCI reserve. On this basis, the classification and measurement changes
do not 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
has not had a material impact. For trade receivables, the Group applies the IFRS 9 simplified
approach to measure expected credit losses which uses a lifetime expected loss allowance.
The Group has elected to adopt the new general hedge accounting model in IFRS 9. The new hedging
requirements of IFRS 9 aligns 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. Under IFRS 9 when designating
a cross currency swap contract as a hedging instrument the currency basis spread can be excluded
and accounted for separately through other comprehensive income as a cost of hedging, being
recognised in the income statement at the same time as the hedged item affects profit or loss.
Accounting for the cost of hedging, which is not material, has been applied prospectively,
without restating comparatives.
The impact of adopting IFRS 9 on the consolidated financial statements was not material for
the Group and there was no adjustment to retained earnings on application at 1 January 2018.
In line with the transition guidance in IFRS 9 the Group has not restated the 2017 prior year
/ half year on adoption.
- IFRS 15 Revenue from Contracts with Customers
IFRS 15 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 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. At the date of adoption,
the Group assessed the impact on its consolidated financial statements resulting from the
application of IFRS 15. Kerry do not supply services and generally legal title of goods sold
is transferred on shipment. In general there is one performance obligation in each of our
sale contracts. In certain parts of the Group's business, the performance does not create
an asset with an alternative use to the Group and the Group has an enforceable right to payment
(cost plus a margin) for performance completed to date. In these circumstances, revenue is
recorded over time rather than at a point in time. Based on the Group's contractual and trading
relationships, the impact of adopting IFRS 15 on the consolidated financial statements was
not material for the Group and there was no adjustment to retained earnings on application
at 1 January 2018. The Group has not restated the 2017 prior year / half year on adoption.
- IFRIC 22 Foreign Currency Transactions and Advance Consideration
The following revised standards are not yet effective Effective Date
and the impact on Kerry Group is currently under review:
- IAS 40 (amendment) Investment Property 1 July 2018
- 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. During 2017 the Group commenced a review of its contractual
leases
and early indications from this initial review is that IFRS 16 will result in an
increase
in finance leased assets (right-of-use asset) of approximately EUR59.0m 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 Half year Year
ended ended ended
30 June 2018 30 June 2017 31 Dec. 2017
Unaudited Unaudited Audited
EUR'm EUR'm EUR'm
External revenue
- Taste & Nutrition 2,543.6 2,507.9 5,080.5
- Consumer Foods 681.7 673.4 1,327.4
__________ __________ ___________
3,225.3 3,181.3 6,407.9
Inter-segment revenue
- Taste & Nutrition 35.4 35.2 78.3
- Consumer Foods 3.7 3.6 3.6
- Group Eliminations and Unallocated (39.1) (38.8) (81.9)
__________ __________ ___________
- - -
Total revenue
- Taste & Nutrition 2,579.0 2,543.1 5,158.8
- Consumer Foods 685.4 677.0 1,331.0
- Group Eliminations and Unallocated (39.1) (38.8) (81.9)
__________ __________ ___________
3,225.3 3,181.3 6,407.9
__________ __________ ___________
Trading profit
- Taste & Nutrition 338.9 330.6 767.2
- Consumer Foods 47.8 51.3 107.8
- Group Eliminations and Unallocated (46.7) (43.5) (93.7)
__________ __________ ___________
340.0 338.4 781.3
Intangible asset amortisation (27.6) (22.6) (47.9)
Non-trading items (19.9) (24.8) (54.5)
__________ __________ ___________
Operating profit 292.5 291.0 678.9
Finance income 0.2 0.1 0.1
Finance costs (34.0) (34.5) (65.7)
__________ __________ ___________
Profit before taxation 258.7 256.6 613.3
Income taxes (32.0) (31.5) (24.8)
__________ __________ ___________
Profit after taxation attributable to owners of the parent 226.7 225.1 588.5
__________ __________ ___________
Information about geographical areas
Half year Year
Half year ended ended
ended 30 June 31 Dec.
30 June 2018 2017* 2017*
Unaudited Unaudited Audited
EUR'm EUR'm EUR'm
Revenue by location of external customers
Europe 1,381.6 1,353.3 2,725.4
Americas 1,306.9 1,338.8 2,678.3
APMEA** 536.8 489.2 1,004.2
__________ __________ ___________
3,225.3 3,181.3 6,407.9
__________ ___________ ___________
*The 2017 segmental analysis has been re-presented to reflect
the change in management responsibility whereby the revenues of
external customers located in the Middle East & Africa are now
reported as part of APMEA (formerly APAC) instead of Europe
(formerly EMEA).
**Asia Pacific, Middle East & Africa
The accounting policies of the reportable segments are the same
as those detailed in the Statement of Accounting Policies in the
2017 Annual Report. Under IFRS 15 'Revenue from Contracts with
Customers' revenue is recognised at a point in time.
3. Non-trading items
Half year Half year Year
ended ended ended
30 June 30 June 31 Dec.
2018 2017 2017
Notes Unaudited Unaudited Audited
EUR'm EUR'm EUR'm
Acquisition integration and
restructuring costs (i) (13.7) (19.9) (36.0)
Consumer Foods Brexit mitigation
programme (ii) (5.1) - (11.7)
Loss on disposal of businesses
and assets* (iii) (1.1) (4.9) (6.8)
__________ __________ ___________
(19.9) (24.8) (54.5)
Tax on above (i)-(iii) 4.5 7.0 11.9
Tax credit due to change
in tax rates (iv) - - 52.8
__________ __________ ___________
(15.4) (17.8) 10.2
__________ __________ ___________
*including impairment of assets held for sale
(i) Acquisition integration and restructuring costs
During the period, acquisition integration and restructuring
costs of EUR13.7m (30 June 2017: EUR19.9m; 31 December 2017:
EUR36.0m) primarily related to costs of integrating acquisitions
into the Group's operations and transaction expenses incurred in
completing current year acquisitions. These costs reflect the
closure of factories, relocation of resources and the restructuring
of operations in order to integrate the businesses into the
existing Kerry operating model. In the period ended 30 June 2018, a
tax credit of EUR3.4m (30 June 2017: a tax credit of EUR6.8m; 31
December 2017: a tax credit of EUR10.8m) arose due to tax
deductions available on acquisition integration and restructuring
costs.
(ii) Consumer Foods Brexit mitigation programme
Kerry continues to implement the Brexit mitigation programme
which was initiated in 2017. As part of this programme, certain
sourcing and production activity has been relocated and other
activities restructured as a result of the impending changes due to
Brexit. The charge relating to this in 2018 is EUR5.1m (30 June
2017: EURnil; 31 December 2017: a charge of EUR11.7m) and the
associated tax credit is EUR0.9m (30 June 2017: EURnil; 31 December
2017: a credit of EUR1.0m).
(iii) Loss on disposal of businesses and assets (including
impairment of assets held for sale)
During the period the Group disposed of property, plant and
equipment primarily in Ireland, Malaysia and the US for a
consideration of EUR8.3m. In 2017, the Group disposed of unused
property, plant and equipment and in the period to 30 June 2017
disposed of its 22.5% shareholding in Addo Food Group Limited for a
combined consideration of EUR33.3m (30 June 2017: EUR31.0m). The
investment in Addo Food Group Limited was disposed from the
investment in associate line on the Condensed Consolidated Balance
Sheet. A net tax credit of EUR0.2m (30 June 2017: a net tax credit
of EUR0.2m; 31 December 2017: a tax credit of EUR0.1m) arose on the
disposal of businesses and assets. There were no impairments of
assets held for sale recorded in the period. In 2017, assets
classified as held for sale were impaired to their fair value less
costs to sell by EUR1.0m.
(iv) Tax credit due to change in tax rates
On 22 December 2017, the US Tax Cuts and Jobs Act ("the Act")
was enacted into law. This Act brings about fundamental changes to
the US tax system, both from an individual and corporate tax
perspective. As a result of the Act, the statutory rate of US
federal corporate income tax has been reduced from 35% to 21% with
effect from 1 January 2018. The reduction in the US corporate
income tax rate to 21% required revaluation of Kerry's US deferred
tax liabilities. This resulted in a one-off deferred tax credit in
2017, which is reported in the Income Statement as a non-trading
item of EUR52.8m.
4. Finance income and costs
Half year Year
Half year ended ended
ended 30 June 31 Dec.
30 June 2018 2017 2017
Unaudited Unaudited Audited
EUR'm EUR'm EUR'm
Finance income:
Interest income on deposits 0.2 0.1 0.1
__________ __________ ___________
Finance costs:
Interest payable (32.8) (27.7) (58.1)
Interest rate derivative - (2.7) 0.6
__________ __________ ___________
(32.8) (30.4) (57.5)
Net interest cost on retirement benefits
obligation (1.2) (4.1) (8.2)
__________ __________ ___________
Finance costs (34.0) (34.5) (65.7)
__________ __________ ___________
5. Earnings per A ordinary share
Half year ended Half year ended Year ended
30 June 2018 30 June 2017 31 Dec. 2017
Unaudited Unaudited Audited
EPS EPS EPS
cent EUR'm cent EUR'm cent EUR'm
Basic earnings per share
Profit after taxation attributable to owners of the
parent 128.3 226.7 127.6 225.1 333.6 588.5
Brand related intangible asset amortisation 7.2 12.7 6.1 10.7 13.4 23.6
Non-trading items (net of related tax) 8.7 15.4 10.1 17.8 (5.8) (10.2)
______ ______ ______ ______ ______ ______
Adjusted earnings 144.2 254.8 143.8 253.6 341.2 601.9
______ ______ ______ ______ ______ ______
Diluted earnings per share
Profit after taxation attributable to owners of the
parent 128.2 226.7 127.5 225.1 333.2 588.5
Adjusted earnings 144.1 254.8 143.7 253.6 340.8 601.9
______ ______ ______ ______ ______ ______
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 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 2018 30 June 2017 31 Dec. 2017
Unaudited Unaudited Audited
m's m's m's
Number of Shares
Basic weighted average number of shares 176.7 176.4 176.4
Impact of share options outstanding 0.1 0.1 0.2
_______ _______ _______
Diluted weighted average number of shares 176.8 176.5 176.6
_______ _______ _______
6. Dividends
Half year Half year Year
ended ended ended
30 June 2018 30 June 2017 31 Dec. 2017
Unaudited Unaudited Audited
EUR'm EUR'm EUR'm
Amounts recognised as distributions to equity shareholders in the
period
Final 2017 dividend of 43.90 cent per A ordinary share paid 18 May
2018
(Final 2016 dividend of 39.20 cent per A ordinary share paid 19
May 2017) 77.4 69.0 69.0
Interim 2017 dividend of 18.80 cent per A ordinary share paid 10
November 2017 - - 33.2
________ ________ _________
77.4 69.0 102.2
________ ________ _________
Since the end of the period, the Board has proposed an interim
dividend of 21.00 cent per A ordinary share. The payment date for
the interim dividend will be 16 November 2018 to shareholders
registered on the record date as at 19 October 2018. 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:
Half year Half year Year
ended ended ended
30 June 2018 30 June 2017 31 Dec. 2017
Unaudited Unaudited Audited
EUR'm EUR'm EUR'm
Net recognised deficit in plans before deferred tax (44.6) (233.8) (124.3)
Net related deferred tax asset 9.2 47.4 22.3
________ ________ _________
Net recognised deficit in plans after deferred tax (35.4) (186.4) (102.0)
________ ________ _________
At 30 June 2018, the net deficit before deferred tax for defined
benefit post-retirement schemes was EUR44.6m (30 June 2017:
EUR233.8m; 31 December 2017: EUR124.3m). This was calculated by
rolling forward the defined benefit post-retirement schemes'
liabilities at 31 December 2017 to reflect material movements in
underlying assumptions over the period while the defined benefit
post-retirement schemes' assets at 30 June 2018 are measured at
market value. The decrease in the net deficit before deferred tax
of EUR189.2m was driven primarily by favourable movements in
discount and inflation rates.
8. Financial instruments
i) The following table outlines the components of net debt by
category at the balance sheet date:
Liabilities at
Loans & Other Financial Fair Value
Assets/(Liabilities) at through Profit Derivatives Designated
Amortised Cost or Loss as Hedging Instruments Total
EUR'm EUR'm EUR'm EUR'm
Assets:
Interest rate swaps - - 92.2 92.2
Cash at bank and in hand 290.3 - - 290.3
__________ ________ ________ __________
290.3 - 92.2 382.5
__________ ________ ________ __________
Liabilities:
Interest rate swaps - - (11.4) (11.4)
Bank overdrafts (30.7) - - (30.7)
Bank loans - - - -
Senior notes (1,737.9) (5.8) - (1,743.7)
__________ ________ ________ __________
Borrowings and overdrafts (1,768.6) (5.8) - (1,774.4)
__________ ________ ________ __________
(1,768.6) (5.8) (11.4) (1,785.8)
__________ ________ ________ __________
At 30 June 2018 - unaudited (1,478.3) (5.8) 80.8 (1,403.3)
__________ ________ ________ __________
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)
Banks 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 - - 95.4 95.4
Cash at bank and in hand 312.5 - - 312.5
__________ ________ ________ __________
312.5 - 95.4 407.9
__________ ________ ________ __________
Liabilities:
Interest rate swaps - - (7.9) (7.9)
Bank overdrafts (6.9) - - (6.9)
Bank loans (6.4) - - (6.4)
Senior notes (1,708.4) (20.0) - (1,728.4)
__________ ________ ________ __________
Borrowings and overdrafts (1,721.7) (20.0) - (1,741.7)
__________ ________ ________ __________
(1,721.7) (20.0) (7.9) (1,749.6)
__________ ________ ________ __________
At 31 December 2017 - audited (1,409.2) (20.0) 87.5 (1,341.7)
__________ ________ ________ __________
All Group borrowings are guaranteed by Kerry Group plc. No
assets of the Group have been pledged to secure the borrowings.
Part of the Group's debt portfolio includes US$750m of senior
notes issued in 2013 and US$408m of senior notes issued in 2010. At
the time of issuance and at the date of reporting, US$250m of the
2013 senior notes and US$408m of the 2010 senior notes were
swapped, using cross currency swaps, to euro. 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 EUR5.8m (30 June 2017:
EUR25.8m; 31 December 2017: EUR20.0m) 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 corresponding hedge items
being the underlying cross currency interest rate swaps.
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 ended Half year ended Half year ended Half year ended Year ended
30 June 2018 30 June 2018 30 June 2018 30 June 2017 31 Dec. 2017
Unaudited Unaudited Unaudited Unaudited Audited
EUR'm EUR'm EUR'm EUR'm EUR'm
Euro (627.9) (390.4) (1,018.3) (849.6) (1,000.2)
Sterling 86.0 - 86.0 165.8 123.7
US Dollar (914.7) 390.4 (524.3) (562.1) (531.8)
Other 53.3 - 53.3 24.2 66.6
_________ ________ _________ _________ _________
(1,403.3) - (1,403.3) (1,221.7) (1,341.7)
_________ ________ _________ _________ _________
iii) The following table details the maturity profile of the
Group's net debt:
On demand & Up to
up to 1 year 2 years 2 - 5 years > 5 years Total
EUR'm EUR'm EUR'm EUR'm EUR'm
Cash at bank and in hand 290.3 - - - 290.3
Interest rate swaps - 40.0 14.2 26.6 80.8
Bank overdrafts (30.7) - - - (30.7)
Bank loans - - - - -
Senior notes - (181.3) (743.9) (818.5) (1,743.7)
________ ________ _________ _________ _________
At 30 June 2018 - unaudited 259.6 (141.3) (729.7) (791.9) (1,403.3)
________ ________ _________ _________ _________
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 312.5 - - - 312.5
Interest rate swaps - - 62.2 25.3 87.5
Bank overdrafts (6.9) - - - (6.9)
Bank loans (6.4) - - - (6.4)
Senior notes - - (289.1) (1,439.3) (1,728.4)
_________ ________ _________ _________ _________
At 31 December 2017 - audited 299.2 - (226.9) (1,414.0) (1,341.7)
_________ ________ _________ _________ _________
At 30 June 2018, 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 30 June 31 Dec.
2018 2017 2017
Fair Value Unaudited Unaudited Audited
Hierarchy EUR'm EUR'm EUR'm
Financial assets
Interest rate swaps Level 2 92.2 111.7 95.4
Forward foreign exchange contracts: Non-current Level 2 0.3 - -
Current Level 2 10.3 56.0 20.3
Financial asset investments: Fair value through profit or
loss Level 1 33.1 36.1 37.4
FVOCI /
AFS
reserve Level 3 7.2 4.1 7.2
Financial liabilities
Interest rate swaps Level 2 (11.4) (0.6) (7.9)
Forward foreign exchange contracts Level 2 (8.1) (15.7) (9.1)
_________ _________ _________
There have been no transfers between levels during the current
or prior financial period.
b) Fair value of financial instruments carried at amortised
cost
Except as defined 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
Amount Value Amount Carrying
30 June 30 June 30 June Fair Value Amount Fair Value
Fair 2018 2018 2017 30 June 2017 31 Dec. 2017 31 Dec. 2017
Value Unaudited Unaudited Unaudited Unaudited Audited Audited
Hierarchy EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
Financial
liabilities
Senior notes
- Public Level 2 (1,387.3) (1,382.9) (1,399.2) (1,425.0) (1,368.0) (1,407.0)
Senior notes
- Private Level 2 (350.6) (355.3) (357.7) (373.3) (340.4) (354.9)
_________ _________ _________ _________ _________ _________
(1,737.9) (1,738.2) (1,756.9) (1,798.3) (1,708.4) (1,761.9)
_________ _________ _________ _________ _________ _________
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.
Net debt reconciliation
Other assets Liabilities from financing
activities
Cash Overdrafts Borrowings Borrowings
at bank Interest due within due within due after
and in Rate Swaps 1 year 1 year 1 year Total
hand EUR'm EUR'm EUR'm EUR'm EUR'm
EUR'm
Net debt as at 31 December
2016 564.7 171.1 (3.6) (188.9) (1,867.0) (1,323.7)
Cash flows (97.8) (25.3) (4.0) 181.4 (0.5) 53.8
Foreign exchange adjustments (9.5) 0.5 0.1 7.5 48.7 47.3
Other non-cash movements - (35.2) - - 36.1 0.9
_______ _______ _______ _______ ________ ________
Net debt as at 30 June
2017 - unaudited 457.4 111.1 (7.5) - (1,782.7) (1,221.7)
Cash flows (139.1) (0.1) 0.6 (10.7) (0.5) (149.8)
Foreign exchange adjustments (5.8) 0.4 - 4.3 29.0 27.9
Other non-cash movements - (23.9) - - 25.8 1.9
_______ _______ _______ _______ ________ ________
Net debt as at 31 December
2017 - audited 312.5 87.5 (6.9) (6.4) (1,728.4) (1,341.7)
Cash flows (23.1) - (24.6) 6.5 (0.6) (41.8)
Foreign exchange adjustments 0.9 0.4 0.8 (0.1) (17.8) (15.8)
Other non-cash movements - (7.1) - - 3.1 (4.0)
______ ______ ______ ______ _______ _______
Net debt as at 30 June 290.3 80.8 (30.7) - (1,743.7) (1,403.3)
2018 - unaudited ______ ______ ______ ______ _______ _______
9. Share capital
Half year Half year Year
ended ended ended
30 June 2018 30 June 2017 31 Dec. 2017
Unaudited Unaudited Audited
EUR'm 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 the 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 104,736 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 2018 was
176,287,141 (30 June 2017: 176,114,006; 31 December 2017:
176,182,405).
10. Business combinations and joint ventures
During the period, the Group completed a total of four
acquisitions, all of which are 100% owned by the Group.
Acquisition Acquired Principal activity
Zhejiang Hangman Food Technologies January Hangman is a China-based sweet and
Co. Ltd savoury flavour and natural extract
manufacturer that serves primarily
the Chinese market.
Season to Season Flavour February Season to Season is a leading South
Manufacturers (Pty) Limited African supplier of taste ingredients
and systems to the African snack
and food sectors.
SIAS Food Co. March SIAS is a leading China-based supplier
of culinary and fruit ingredients
and systems to the foodservice and
food manufacturing industries.
Foremost Farms Pharma Lactose May A producer of pharma lactose, based
in the USA.
The total consideration for these acquisitions was EUR104.7m, of
which EUR15.1m was prepaid in December 2017 and EUR3.6m is a
deferred element. Transaction expenses related to these
acquisitions were charged against non-trading items in the Group's
Condensed Consolidated Income Statement during the period and
represented less than one percent of the total consideration.
The provisional net assets acquired before combination were
EUR41.6m and the Group recognised goodwill on these acquisitions of
EUR63.1m. 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. EUR4.7m of goodwill recognised 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 2017,
to date, there have been no material revisions of the provisional
fair value adjustments since the initial values were
established.
During the period, the Group entered into a joint venture
through the purchase of a 55% shareholding in Proparent B.V. for a
total consideration of EUR15.6m. Proparent B.V. owns Ojah B.V., an
alternative protein and extrusion business based in the
Netherlands.
11. Events after the balance sheet date
Since the period end, the Group has proposed an interim dividend
of 21.00 cent per A ordinary share (see note 6).
There have been no other significant events, outside the
ordinary course of business, affecting the Group since 30 June
2018.
12. General information
These unaudited Condensed Consolidated Interim Financial
Statements for the half year ended 30 June 2018 are not full
financial statements and were not reviewed by the auditors. The
Board of Directors approved these Condensed Consolidated Interim
Financial Statements on 8 August 2018. The figures disclosed
relating to 31 December 2017 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 of
accounting. 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 trading in December. 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 growth year-on-year, excluding
pass-through pricing, currency impacts, acquisitions (net of
disposals) and rationalisation volumes.
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 Acquisitions/ Constant Translation revenue
H1 2018 growth Price currency Disposals currency currency growth
Taste &
Nutrition 4.1% 0.6% 0.0% 4.6% 9.3% (7.9%) 1.4%
Consumer Foods 1.3% 0.9% (0.4%) 1.0% 2.8% (1.6%) 1.2%
--------- ------ ---------------- -------------- ---------------- ---------------- ----------
Group 3.6% 0.6% (0.1%) 3.9% 8.0% (6.6%) 1.4%
H1 2017
----------------- --------- ------ ---------------- -------------- ---------------- ---------------- ----------
Taste &
Nutrition 4.2% 1.7% (0.1%) 0.7% 6.5% 0.4% 6.9%
Consumer Foods 2.3% 1.9% (1.4%) 0.0% 2.8% (5.6%) (2.8%)
--------- ------ ---------------- -------------- ---------------- ---------------- ----------
Group 3.8% 1.8% (0.4%) 0.6% 5.8% (1.0%) 4.8%
----------------- --------- ------ ---------------- -------------- ---------------- ---------------- ----------
2. EBITDA
EBITDA represents profit before finance income and costs, income
taxes, depreciation (including impairment), intangible asset
amortisation and non-trading items.
H1 2018 H1 2017
EUR'm EUR'm
------------------------------------------------------------ -------- ----------
Profit after taxation attributable to owners of the parent 226.7 225.1
Finance income (0.2) (0.1)
Finance costs 34.0 34.5
Income taxes 32.0 31.5
Non-trading items 19.9 24.8
Intangible asset amortisation 27.6 22.6
Depreciation (including impairment) 66.8 68.6
EBITDA 406.8 407.0
------------------------------------------------------------ -------- ----------
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.
H1 2018 H1 2017
EUR'm EUR'm
-------------------------------- -------- ----------
Operating profit 292.5 291.0
Intangible asset amortisation 27.6 22.6
Non-trading items 19.9 24.8
-------------------------------- -------- ----------
Trading profit 340.0 338.4
-------------------------------- -------- ----------
Reported trading profit growth 0.5% 5.2%
Translation currency impact 8.2% 0.6%
Constant currency growth 8.7% 5.8%
-------------------------------- -------- ----------
4. Trading Margin
Trading margin represents trading profit, expressed as a
percentage of revenue.
H1 2018 H1 2017
EUR'm EUR'm
---------------- -------- ----------
Trading profit 340.0 338.4
Revenue 3,225.3 3,181.3
Trading margin 10.5% 10.6%
---------------- -------- ----------
5. Operating profit
Operating profit is profit before income taxes, finance income
and finance costs.
H1 2018 H1 2017
EUR'm EUR'm
------------------- -------- ----------
Profit before tax 258.7 256.6
Finance income (0.2) (0.1)
Finance costs 34.0 34.5
Operating profit 292.5 291.0
------------------- -------- ----------
6. Growth in Adjusted Earnings Per Share on a Constant Currency Basis
The growth in adjusted earnings per share on a constant currency
basis 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. Constant
currency eliminates the translational effect that arises from
changes in foreign currency year-on-year. The growth in adjusted
earnings per share on a constant currency basis is calculated by
comparing current year adjusted earnings per share, to the prior
year adjusted earnings per share retranslated at current year
average exchange rates.
H1 2018 H1 2017
EPS EPS
cent cent
------------------------------------------------------------------------------------------------- -------- --------
Basic earnings per share 128.3 127.6
Brand related intangible asset amortisation 7.2 6.1
Non-trading items (net of related tax) 8.7 10.1
Adjusted earnings per share 144.2 143.8
Impact of retranslating prior year adjusted earnings per share at current year average exchange
rates - (11.5)
Adjusted earnings per share on a constant currency basis 144.2 132.3
Growth in adjusted earnings per share on a constant currency basis 9.0% 8.6%
------------------------------------------------------------------------------------------------- -------- --------
7. 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 and more accurately reflects fluctuations caused by
seasonality and other timing factors. Average working capital is
the sum of each months working capital over 12 months. Below is a
reconciliation of free cash flow to the nearest IFRS measure, which
is 'Net cash from operating activities'.
H1 2018 H1 2017
EUR'm EUR'm
----------------------------------------------------------------------------- -------- --------
Net cash from operating activities 259.8 284.3
Difference between movement in monthly average working capital and movement
in the period end working capital 37.3 161.0
Expenditure on acquisition integration and restructuring costs 17.3 12.5
Purchase of assets (122.4) (103.4)
Proceeds from the sale of property, plant and equipment 8.3 0.9
Capital grants received 0.2 0.1
Exchange translation adjustment 0.1 1.8
Free cash flow 200.6 357.2
----------------------------------------------------------------------------- -------- --------
8. Financial Ratios
The Net debt: EBITDA and EBITDA: Net interest ratios disclosed
are calculated in accordance with lenders' 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 on page 8 these
ratios are calculated in accordance with lenders' facility
agreements and these agreements specifically require these
adjustments in the calculation.
H1 2018 H1 2017
Covenant Times Times
---------------------- -------------- -------- --------
Net debt: EBITDA Maximum 3.5 1.5 1.3
EBITDA: Net interest Minimum 4.75 14.8 14.9
---------------------- -------------- -------- --------
9. Net Debt
Net debt comprises borrowings and overdrafts, derivative
financial instruments and cash at bank and in hand. See full
reconciliation of net debt in note 8 of these Condensed
Consolidated Interim Financial Statements.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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