TIDMKYGA
RNS Number : 2755D
Kerry Group PLC
18 February 2020
18 February 2020
Preliminary Statement of Results
for the year ended 31 December 2019
Kerry Group, the global taste & nutrition and consumer foods
group, reports business performance for the year ended 31 December
2019.
HIGHLIGHTS
-- Group revenue of EUR7.2 billion reflecting 9.6% reported growth
- Taste & Nutrition 4.0% volume growth
- Consumer Foods 2.2% volume reduction (0.9% growth excluding contract exit)
-- Group trading profit of EUR903m reflecting 12.1% reported growth
-- Group trading margin +30bps to 12.5%
- Taste & Nutrition trading margin of 15.3%
- Consumer Foods trading margin of 7.6%
-- Adjusted EPS up 8.3% on a constant currency basis to 393.7 cent (11.4% reported growth)
-- Basic EPS of 320.4 cent (2018: 305.9 cent)
-- Final dividend per share of 55.1 cent (total 2019 dividend up 12% to 78.6 cent)
-- Free Cash Flow of EUR515m (2018: EUR447m)
Edmond Scanlon - Chief Executive Officer
"We are pleased with the business performance and the strategic
development of the Group in 2019. Taste & Nutrition delivered
good volume growth, particularly against the backdrop of softer
market volumes in some developed markets. We also enhanced our
trading profit margin and achieved growth in adjusted earnings per
share of 8.3% in constant currency.
Significant progress was made right across our strategic growth
priorities of taste, nutrition, foodservice and developing markets.
We successfully integrated a number of strategic acquisitions,
expanded our strategic footprint in high growth developing markets,
while further enhancing our industry-leading global integrated
solutions portfolio."
Contact Information
Media
Catherine Keogh VP Corporate Affairs +353 66 7182304 corpaffairs@kerry.com
& Communications
Investor Relations
Marguerite Chief Financial +353 66 7182292 investorrelations@kerry.ie
Larkin Officer
William Lynch Head of Investor +353 66 7182292 investorrelations@kerry.ie
Relations
Website
www.kerrygroup.com
PRELIMINARY STATEMENT OF RESULTS
For the year ended 31 December 2019
Group Performance
Strong growth was achieved in the year, driven by good volume
growth in Taste & Nutrition and the contribution from strategic
acquisitions. Group reported revenue increased by 9.6% to EUR7.2
billion, reflecting volume growth of 2.8%, flat overall pricing,
favourable translation currency impact of 2.1% and contribution
from business acquisitions of 4.7%. Taste & Nutrition achieved
good volume growth in the Americas, a solid performance in Europe
and continued strong growth in APMEA. Consumer Foods delivered a
solid underlying performance versus the market, offset by the
impact of the ready meals contract exit previously announced.
Group trading profit increased by 12.1% (+9.5% in constant
currency), reflecting good growth and the contribution from
business acquisitions. Group trading margin increased by 30bps,
reflecting portfolio enhancement, operating leverage, efficiencies
and acquisitions, partially offset by Brexit risk management costs,
investments for growth and net investment on the KerryExcel
programme.
Constant currency adjusted earnings per share increased by 8.3%
to 393.7 cent (2018 currency adjusted : 363.5 cent). Basic earnings
per share increased by 4.7% to 320.4 cent (2018: 305.9 cent). The
Board recommends a final dividend of 55.1 cent per share, an
increase of 12.0% on the final 2018 dividend. Together with the
interim dividend of 23.5 cent per share, this brings the total
dividend for the year to 78.6 cent, an increase of 12% on 2018.
Kerry's industry-leading r esearch and development expenditure
increased to EUR291m (2018: EUR275m) due to additional investment
in Taste & Nutrition. Net capital expenditure amounted to
EUR315m (2018: EUR286m) as the Group continued to invest in its
strategic priorities for growth, particularly across taste,
nutrition and developing markets. The Group achieved free cash flow
of EUR515m reflecting cash conversion of 74% in the year (2018:
EUR447m / 72%).
The Marketplace
The food and beverage industry continues to evolve at pace, with
a heightened focus on sustainability as consumers are demanding
more, which is challenging traditional business models right along
the end-to-end supply chain.
Consumers want great taste, including authentic, natural and
local taste experiences. They want enhanced nutrition for better
health and overall wellbeing, and they expect more convenient and
affordable options to match today's on-the-go and digital
lifestyles. Consumers are demanding that these experiences are
produced and delivered without compromise, in ways that are good
for people and the planet. Products are increasingly required to
reflect consumers' values on sustainability and provide additional
fulfilment by creating positive outcomes beyond the consumption
occasion. Our Purpose to Inspire Food and Nourish Life helps define
the key role Kerry plays in addressing these needs. As our
customers continue to meet these rapidly changing consumer demands
and increase speed to market, Kerry is best positioned as the
co-creation partner of choice with our unique business model, broad
taste and nutrition technology portfolio, and industry-leading
integrated solutions capability.
Taste & Nutrition
Kerry is the global leader in the development of taste and
nutrition solutions for the food, beverage and pharmaceutical
markets. Our broad technology foundation, customer-centric business
model, and industry-leading integrated solutions capability make
Kerry the co-creation partner of choice.
2019 Growth
================ ========== ==================
Revenue EUR6,018m 4.0%(1)
Trading margin 15.3% +20bps
---------------- ---------- ------------------
(1) volume growth
-- Volume growth driven by Beverage and Food End Use Markets (EUMs) - led by Meat and Snacks
-- Pricing of +0.1% - reflecting broadly neutral raw material costs in the period
-- Trading margin +20bps - key drivers were enhanced product
mix, operating leverage and efficiencies, partially offset by
investments for growth and Brexit risk management costs
Reported revenue increased by 12.5%, reflecting volume growth of
4.0%, pricing of 0.1%, favourable translation currency impact of
2.6% and contribution from business acquisitions of 5.8%. This
performance included the recent acquisitions of Fleischmann's
(FVC), Southeastern Mills (SEM) and Ariake U.S.A. Inc. Trading
profit grew by 14.1% to EUR918.5m, reflecting a 20bps improvement
in trading margin to 15.3%.
Developing markets delivered strong volume growth of 10.0%, with
APMEA developing markets being the main driver. Key drivers of
growth were localisation, regulatory changes, food safety,
convenience and home delivery, which drove increased new product
development. Foodservice performed well, with volume growth of 5.5%
despite some softness in the North American market.
Kerry's nutrition and wellbeing technology portfolio had a
strong performance, as Kerry further evolved its position as the
industry-leading nutrition and wellness partner across Beverage and
Food EUMs, particularly in Meat and Snacks. Demand for great
tasting products with improved nutritional attributes continued to
accelerate across the globe. Our unique taste and nutrition
positioning, food science expertise and deep understanding of the
intersection of taste and nutrition were key drivers of increased
innovation across a wide range of applications. This led to good
sales growth in solutions incorporating Kerry's fermented
ingredients, broad speciality protein portfolio, probiotics,
TasteSense(TM), botanicals and natural extracts.
Americas Region
-- 2.7% volume growth
-- Solid performance in North America led by Food EUMs of Meat and Snacks
-- LATAM performed well
Reported revenue in the region increased by 16.5% to EUR3,198m,
reflecting 2.7% volume growth, 0.2% increase in net pricing,
favourable translation currency impact of 4.4% and contribution
from business acquisitions of 9.2%. North America delivered good
volume growth against a backdrop of softer market volume growth
rates.
Within the Food EUMs, Kerry's Meat sub-EUM delivered strong
growth, with plant-based offerings in particular delivering an
excellent performance, as customers continue to seek innovative
solutions to meet the consumer demand for cleaner label and next
generation offerings. This performance was complemented by the
acquisition of the coatings and seasonings business of Southeastern
Mills (SEM) which performed very well. The Snacks sub-EUM delivered
good growth, as Kerry's integrated solutions capability was key to
a number of successful customer launches addressing consumer
demands for new world taste and healthier snacking experiences. The
Cereal & Sweet sub-EUM remained challenged and the Meals
sub-EUM was impacted by churn within the category. The Dairy
sub-EUM benefitted from the ongoing evolution of the ice cream
category towards healthy indulgence and added wellness
benefits.
While Beverage EUMs were impacted by subdued market volume
growth in Foodservice, there were a number of plant-based beverage
launches and innovations utilising Ganeden(R) probiotics,
contributing to a good finish to the year.
LATAM performed well with good growth in Brazil and Mexico, and
a solid performance in Central America. The Beverage EUM delivered
strong growth across the region, with particularly good growth in
the ice cream category in Brazil and the Snacks sub-EUM in
Mexico.
The global Pharma EUMs had a good performance, led by strong
growth in excipients in North America.
Good progress was made on the integration of Fleischmann's (FVC)
business and Ariake U.S.A. Inc. and both performed well. These were
complemented by the acquisitions of Isoage Technologies, Biosecur
Lab and Diana Food (Georgia, USA), further enhancing Kerry's
leading authentic taste and clean label technology portfolio, which
the Group plans to leverage in meeting the increasing demand across
a broader range of applications.
Europe Region
-- 2.0% volume growth
-- Good performance in Beverage and Food EUMs of Meat and Snacks
-- Foodservice performed well across the region
Reported revenue in the region increased by 2.4% to EUR1,456m,
reflecting 2.0% volume growth, 0.1% increase in net pricing,
favourable translation currency impact of 0.1% and contribution
from business acquisitions of 0.2%. This represented a good overall
performance versus the marketplace, with Kerry's performance in the
Foodservice channel contributing strongly to growth in the
region.
Kerry's Beverage EUMs achieved strong broad-based growth across
a number of sub-categories from low/non-alcoholic beverage, tea and
coffee to plant-based offerings. There was a strong performance
within Foodservice, as customers enhanced their beverage offerings
across their menus, with a number of 'better for you' and seasonal
product launches incorporating Kerry's botanicals, natural extracts
and sugar reduction technologies.
Within the Food EUMs, Kerry's Meat sub-EUM performed very well,
with its industry-leading portfolio deployed to create solutions
which met a variety of customer and consumer needs. Strong growth
and very good business development were achieved in plant-based
meat alternatives, supported by the launch of the Radicle (TM)
portfolio. The Snacks sub-EUM performed well, with a number of new
authentic world taste launches and healthy snack products
incorporating Kerry's Ganeden(R) probiotics. The Confectionery
sub-EUM achieved good growth through a number of local novel taste
LTOs across the region. The Dairy sub-EUM was impacted by softer
demand in the ice cream category during the period. International
dairy markets were relatively stable in the period, reflecting less
volatility in global supply/demand dynamics.
Russia and Eastern Europe delivered good growth, as we continue
to develop our presence and offering across the region. The Group
also completed the acquisition of Pevesa Biotech - a specialist
plant protein isolates and hydrolysates business based in Spain and
serving key nutrition applications.
APMEA Region
-- 10.3% volume growth
-- Strong growth right across all Food and Beverage EUMs
-- Good progress in strategic expansion and business development
Reported revenue in the region increased by 16.2% to EUR1,285m,
reflecting 10.3% volume growth, 0.1% increase in net pricing, 0.1%
favourable transaction currency impact, 0.6% favourable translation
currency impact and contribution from business acquisitions of
5.1%. Key to the strong growth in the region was the further
deployment of Kerry's business model with customers across existing
and new markets. This approach was key in supporting our customers
as they meet evolving local consumer demands.
Within Food EUMs, Kerry's Meat sub-EUM delivered excellent
growth with both global and regional customers, particularly in
China and South East Asia, with a range of innovations meeting key
consumer preferences for premium local authentic taste and a
superior home delivery experience. The Snacks sub-EUM delivered
strong growth, particularly with savoury taste innovations that
meet local consumer preferences.
Kerry's Beverage EUMs delivered strong growth underpinned by a
number of successful launches in refreshing beverages with enhanced
wellness and functional benefits. The branded DaVinci range enjoyed
strong growth across the year.
We continued to make good progress in expanding our capacity and
deploying our technology capabilities in the region. Our strategic
expansion in China progressed well, as we upgraded the recently
acquired SIAS facility to serve our customers in the Greater
Beijing region, and continued the expansion programme at our
Nantong facility. In June, the Group opened a new facility in
Tumkur, India, which will serve our rapidly expanding South West
Asia market. Further to the acquisition of AATCO at the end of
2018, the Group invested in expanding its capabilities in the
Middle East region.
Consumer Foods
Kerry Foods is an industry-leading manufacturer of chilled food
products primarily to the Irish and UK markets.
2019 Growth
=============== =============== =======================
Revenue EUR1,307m -2.2% (+0.9%)(1)
Trading margin 7.6% +10bps
--------------- --------------- -----------------------
(1) volume growth (excluding contract
exit)
-- Overall volume performance impacted by ready meals contract exit
-- Pricing of -0.5% reflective of lower input costs and market pricing
-- Trading margin - strong efficiencies partially offset by
pricing and Brexit risk management costs
Reported revenue decreased by 2.4% to EUR1,307m, reflecting a
2.2% reduction in volumes, a 0.5% decrease in net pricing, and a
favourable translation currency impact of 0.3%. Excluding the
impact of the previously reported ready meals contract exit, Kerry
delivered a robust performance in the context of a subdued UK
marketplace, where lower consumer confidence impacted overall
market volumes. The divisional trading margin increased by 10bps to
7.6%. Trading profit decreased by 1.2% to EUR98.9m in the year. The
realignment programme was completed during the year and delivered
to plan.
The Richmond chilled sausage range delivered a solid
performance, led by growth in chicken sausages and the new
plant-based sausage which was launched at the end of September,
along with a range of meat-free products under the Naked Glory
brand. The Denny brand in Ireland performed well. A number of
business wins supported our overall performance within spreads.
Chilled meals continued to be impacted by reduced promotional
activity, while frozen meals had a good performance across the
range. As previously announced, production was ceased in the ready
meals facility in Burton in September and the site was sold prior
to the year end.
The Cheestrings range had strong growth supported by a number of
innovations. Fridge Raiders also extended its snacking range to
reach a broader consumer market.
Financial Review
Reported
% 2019 2018
change EUR'm EUR'm
===================================== ========= ======== ========
Revenue 9.6% 7,241.3 6,607.6
-------------------------------------- --------- -------- --------
Trading profit 12.1% 902.7 805.6
Trading margin 12.5% 12.2%
Computer software amortisation (26.5) (25.0)
Finance costs (net) (81.6) (67.0)
-------------------------------------- --------- -------- --------
Adjusted earnings before taxation 794.6 713.6
Income taxes (excluding non-trading
items) (98.6) (89.2)
-------------------------------------- --------- -------- --------
Adjusted earnings after taxation 11.5% 696.0 624.4
Brand related intangible asset
amortisation (37.8) (28.8)
Non-trading items (net of related
tax) (91.7) (55.1)
-------------------------------------- --------- -------- --------
Profit after taxation 566.5 540.5
-------------------------------------- --------- -------- --------
EPS EPS
Cent Cent
------------------------------------- --------- -------- --------
Basic EPS 4.7% 320.4 305.9
Brand related intangible asset
amortisation 21.4 16.3
Non-trading items (net of related
tax) 51.9 31.2
-------------------------------------- --------- -------- --------
Adjusted* EPS 11.4% 393.7 353.4
Impact of retranslating prior
year adjusted earnings per
share at current year average
exchange rates - 10.1
-------------------------------------- --------- -------- --------
Adjusted* EPS in constant currency 8.3% 393.7 363.5
-------------------------------------- --------- -------- --------
* Before brand related intangible asset amortisation and
non-trading items (net of related tax).
Revenue
Group reported revenue increased by 9.6% to EUR7.2 billion
(2018: EUR6.6 billion), reflecting volume growth of 2.8% , flat
overall pricing impact, favourable translation currency impact of
2.1% and contribution from business acquisitions of 4.7% .
2018: Group reported revenue +3.1%, volume growth +3.5%, pricing
(0.5%), transaction currency (0.1%), translation currency (3.4%)
and contribution from business acquisitions of +3.6%.
Taste & Nutrition reported revenue increased by 12.5% to
EUR6.0 billion (2018: EUR5.4 billion), reflecting volume growth of
4.0% , pricing increase of 0.1% related to raw material movements,
translation currency impact of 2.6% and contribution from business
acquisitions of 5.8% .
2018: Taste & Nutrition reported revenue +3.7%, volume
growth +4.1%, pricing (0.5%), transaction currency (0.1%),
translation currency (4.0%), acquisitions +4.2%.
Consumer Foods reported revenue decreased by 2.4% to EUR1.31
billion (2018: EUR1.34 billion), reflecting volume decline of 2.2%
, pricing decrease of 0.5% related to raw material pricing
pass-through and market pricing, and positive translation currency
impact of 0.3% . The volume decrease reflects the exit of a ready
meals contract during the year - excluding the impact of this
contract exit, volume would have increased by 0.9% .
2018: Consumer Foods reported revenue +0.6%, volume growth
+1.1%, pricing (0.4%), transaction currency (0.3%), translation
currency (0.6%), acquisitions of +0.8%.
Trading Profit & Margin
Group trading profit increased by 12.1% to EUR902.7m (2018:
EUR805.6m). Group trading margin increased by 30bps to 12.5% driven
by portfolio enhancement, operating leverage, efficiencies and the
impact of acquisitions, partially offset by investments for growth,
Brexit risk management costs and increased Kerryconnect investment
due to the commencement of the rollout across our sites in North
America.
Trading margin in Taste & Nutrition increased by 20bps to
15.3% (2018: 15.1%), driven by portfolio enhancement, operating
leverage and efficiencies, partially offset by investments for
growth, the impact of acquisitions and Brexit risk management
costs.
Trading margin in Consumer Foods increased by 10bps to 7.6%
(2018: 7.5%), driven by efficiencies from the Realignment Programme
which delivered to plan, partially offset by a decrease in
operating leverage as a result of the contract exit, Brexit risk
management costs and net price in a challenging market.
The trading profit reflects an EBITDA of EUR1.1 billion (2018:
EUR0.9 billion) and an EBITDA margin of 15.1% (2018: 14.2%).
Finance Costs (net)
Finance costs (net) for the year increased by EUR14.6m to
EUR81.6m (2018: EUR67.0m) primarily due to acquisition activity and
the impact of IFRS 16 'Leases'. The Group's average interest rate
for the year was 3.7% (2018: 3.8%).
Impact of IFRS 16 'Leases'
In January 2019, the Group adopted the new accounting standard
IFRS 16 'Leases', which resulted in a EUR3.4m reduction in
operating expenses and an increase of EUR4.6m in finance costs on
transition.
Taxation
The tax charge for the year before non-trading items was
EUR98.6m (2018: EUR89.2m) representing an effective tax rate of
13.0% (2018: 13.0%) and is reflective of the geographical mix of
earnings.
Acquisitions
During the year, the Group completed eleven acquisitions at a
total consideration of EUR561.7m . These investments were aligned
to the Group's strategic priorities for growth, bringing additional
taste and nutritional technologies, expanding its presence in
developing markets and adding to its foodservice offering.
Non-Trading Items
During the year, the Group incurred a non-trading item charge of
EUR91.7m (2018: EUR55.1m) net of tax. The charge in the year
related to costs associated with the integration of recent
acquisitions, a material transaction process in our sector that we
participated in, and the Consumer Foods Realignment Programme. The
prior year non-trading charge related primarily to costs associated
with the integration of acquisitions and the completion of the
Brexit Currency Mitigation Programme.
Adjusted EPS in Constant Currency
Adjusted EPS in constant currency increased by 8.3% in the year
(2018: +8.6%). This was achieved through volume growth ahead of our
markets, good margin progression, together with the contribution
from the acquired businesses.
Basic EPS
Basic EPS increased by 4.7% to 320.4 cent (2018: 305.9 cent).
Basic EPS is calculated after accounting for brand related
intangible asset amortisation of 21.4 cent (2018: 16.3 cent) and a
non-trading item charge of
51.9 cent net of related tax (2018: 31.2 cent).
Return on Average Capital Employed
The Group achieved ROACE of 11.8% (2018: 12.0%) reflective of
strategic acquisitions completed and investments made in the
year.
Exchange Rates
Group results are impacted by year-on-year fluctuations in
exchange rates versus the euro. The average rates below are the
principal rates used for the translation of results. The closing
rates below are used to translate assets and liabilities at year
end.
Average Rates Closing Rates
2019 2018 2019 2018
======================== ================= ================ =================== ===================
Australian Dollar 1.61 1.58 1.60 1.62
------------------------ ----------------- ---------------- ------------------- -------------------
Brazilian Real 4.44 4.34 4.53 4.44
------------------------ ----------------- ---------------- ------------------- -------------------
British Pound Sterling 0.88 0.89 0.85 0.90
------------------------ ----------------- ---------------- ------------------- -------------------
Chinese Yuan Renminbi 7.73 7.82 7.82 7.85
------------------------ ----------------- ---------------- ------------------- -------------------
Malaysian Ringgit 4.65 4.77 4.60 4.74
------------------------ ----------------- ---------------- ------------------- -------------------
Mexican Peso 21.59 22.72 21.19 22.50
------------------------ ----------------- ---------------- ------------------- -------------------
Russian Ruble 72.28 74.05 69.34 79.46
------------------------ ----------------- ---------------- ------------------- -------------------
South African Rand 16.20 15.89 15.77 16.47
------------------------ ----------------- ---------------- ------------------- -------------------
US Dollar 1.12 1.18 1.12 1.14
------------------------ ----------------- ---------------- ------------------- -------------------
Balance Sheet
A summary balance sheet as at 31 December is provided below:
2019 2018
EUR'm EUR'm
============================= ======== ========
Property, plant & equipment 2,062.9 1,767.0
Intangible assets 4,589.7 4,095.6
Other non-current assets 179.5 189.7
Current assets 2,672.2 2,271.4
----------------------------- -------- --------
Total assets 9,504.3 8,323.7
----------------------------- -------- --------
Current liabilities 2,014.0 1,650.8
Non-current liabilities 2,928.1 2,638.5
----------------------------- -------- --------
Total liabilities 4,942.1 4,289.3
----------------------------- -------- --------
Net assets 4,562.2 4,034.4
----------------------------- -------- --------
Shareholders' equity 4,562.2 4,034.4
----------------------------- -------- --------
Property, Plant & Equipment
Property, plant and equipment increased by EUR295.9m to
EUR2,062.9m (2018: EUR1,767.0m) primarily due to capital
expenditure in the year and the impact of the change in the lease
accounting policy, partially offset by the annual depreciation
charge. Net capital expenditure in the year amounted to EUR315.3m
(2018: EUR285.5m). The level of capital investment supports the
Group's growth initiatives and included upgrading the recently
acquired SIAS facility in the Greater Beijing region, continuing
the expansion programme at the Nantong facility in China and
opening a new facility in Tumkur, India to serve the rapidly
expanding South West Asia market and expanding the Group's
capabilities in the Middle East region.
Intangible Assets
Intangible assets increased by EUR494.1m to EUR4,589.7m (2018:
EUR4,095.6m) due to additions of EUR437.7m relating to the eleven
acquisitions completed during the year, the increased investment in
Kerryconnect related software and positive foreign exchange
movements, partially offset by the annual amortisation charge.
Current Assets
Current assets increased by EUR400.8m to EUR2,672.2m (2018:
EUR2,271.4m), primarily due to an increase in cash on hand at 31
December 2019 and trade receivables, other receivables and
inventories from the businesses acquired during the year.
Retirement Benefits
At the balance sheet date, the total net deficit for all defined
benefit schemes (after deferred tax) was EUR8.6m (2018: EUR44.0m).
The decrease in the net deficit is primarily driven by a strong
return on assets and a reduction in the deficit from the liability
management programme offsetting unfavourable movements in discount
rates. The net deficit expressed as a percentage of market
capitalisation at 31 December 2019 was 0.04% (2018: 0.3%).
Free Cash Flow
Free cash flow is an important indicator of the strength and
quality of the business and of the availability of funds to the
Group for reinvestment or for return to the shareholder. In 2019,
the Group achieved free cash flow of EUR514.6m (2018:
EUR446.5m).
2019 2018
Free Cash Flow EUR'm EUR'm
================================ ======== ========
Trading profit 902.7 805.6
Depreciation (net) 191.4 134.1
Movement in average working
capital (89.5) (57.1)
Pension contributions paid
less pension expense (26.7) (40.0)
-------------------------------- -------- --------
Cash flow from operations 977.9 842.6
-------------------------------- -------- --------
Finance costs paid (net) (80.8) (64.5)
Income taxes paid (67.2) (46.1)
Purchase of non-current assets (315.3) (285.5)
-------------------------------- -------- --------
Free cash flow 514.6 446.5
-------------------------------- -------- --------
Cash conversion(1) 74% 72%
(1) Cash conversion is free cash flow expressed as a percentage
of adjusted earnings after tax.
Net Debt
Net debt at the end of the year was EUR1,862.8m (2018:
EUR1,623.5m) reflecting acquisitions completed and dividends paid,
partially offset by cash flow generated.
Financing
In June 2019, the Group renewed its EUR1.1 billion revolving
credit facility, extending the maturity date to June 2024. The
facility contains two 1-year extension options, exercisable on the
1(st) and 2(nd) anniversaries of the facility and which, if
exercised, would extend the maturity date of the facility to June
2026. In line with the Group's commitment to environmental and
social matters, the revolving credit facility carries a price
adjustment mechanism, which is linked to the Group meeting or
exceeding certain carbon, water and waste efficiency metrics. This
facility is not subject to a financial covenant.
In September 2019, the Group issued 10 year EUR750m euro bond
notes. The bonds are listed on Euronext Dublin and are rated by
S&P and Moody's.
Key Financial Covenants
The Group's balance sheet is in a strong position with a Net
debt to EBITDA* ratio of 1.8 times. At this ratio the Group has
significant liquidity headroom to support future growth plans. A
small element of the Group's finance facilities is subject to
financial covenants. Group Treasury monitors compliance with all
financial covenants and at 31 December the key covenants were as
follows:
2019 2018
Covenant Times Times
====================== ============== ======= =======
Net debt: EBITDA* Maximum 3.5 1.8 1.7
EBITDA: Net interest Minimum 4.75 13.2 14.7
---------------------- -------------- ------- -------
* Calculated on a pro-forma basis.
Share Price and Market Capitalisation
The Company's shares traded in the range EUR86.50 to EUR117.90
during the year. The share price at 31 December 2019 was EUR111.10
(2018: EUR86.50) giving a market capitalisation of EUR19.6 billion
(2018: EUR15.2 billion). Total Shareholder Return for 2019 was
29.3% (2018: (6.8%)).
Annual Report and Annual General Meeting
The Group's Annual Report will be published at the end of March
and the Annual General Meeting will be held in Tralee on 30 April
2020.
Future Prospects
Our markets and the end-to-end supply chain are experiencing
unprecedented disruption, as consumers are demanding more than ever
before, and traditional business models are being challenged as a
result. What consumers want from food and beverage offerings is
changing at pace. They want great tasting products that nourish
their bodies, enhance their lives and are sustainable for the
planet. New entrants and challenger brands have added significant
fragmentation to the marketplace. Key for customers to win in this
fast-moving environment is the ability to bring more products to
market and to do so quicker. This changing marketplace is creating
a significant opportunity for enterprises that can deliver on these
new requirements. Kerry's unique business model, broad taste and
nutrition technology portfolio, and industry-leading integrated
solutions capability positions it as the co-creation partner of
choice for the food, beverage and pharma industries.
Taste & Nutrition has strong growth prospects, as we
continue to further deploy our industry-leading business model in
supporting our customers. Consumer Foods continues to selectively
focus on growth opportunities.
The Group will continue to invest for growth aligned to the
changing market landscape and pursue M&A opportunities aligned
to our strategic growth priorities.
Over the past number of weeks, we have been working with our
team in China to manage the ongoing developments relating to the
coronavirus. Our first priority remains the safety of our people
and their families. Our team in China are taking all appropriate
protective measures in our facilities and we are working with the
Chinese authorities, our customers and other stakeholders to manage
through the situation. We have included in our full year guidance
the estimated first quarter impact on our China business.
The Group has a strong innovation pipeline and remains confident
in its ability to continue to outperform its markets. We have
reflected our estimate of the impact in the first quarter from the
developments in China and expect to achieve adjusted earnings per
share growth in 2020 of 5% to 9% on a constant currency basis.
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 YEARED 31 DECEMBER 2019
Consolidated Income Statement
for the financial year ended 31 December
2019
Before Non- Before Non-
Non-Trading Trading Non-Trading Trading
Items Items Total Items Items Total
2019 2019 2019 2018 2018 2018
Notes EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
Continuing operations
Revenue 2 7,241.3 - 7,241.3 6,607.6 - 6,607.6
_______ _______ _______ _______ _______ _______
Trading profit 2 902.7 - 902.7 805.6 - 805.6
Intangible asset amortisation (64.3) - (64.3) (53.8) - (53.8)
Non-trading items 3 - (110.9) (110.9) - (66.9) (66.9)
_______ _______ _______ _______ _______ _______
Operating profit 838.4 (110.9) 727.5 751.8 (66.9) 684.9
Finance income 0.3 - 0.3 0.5 - 0.5
Finance costs (81.9) - (81.9) (67.5) - (67.5)
_______ _______ _______ _______ _______ _______
Profit before taxation 756.8 (110.9) 645.9 684.8 (66.9) 617.9
Income taxes (98.6) 19.2 (79.4) (89.2) 11.8 (77.4)
_______ _______ _______ _______ _______ _______
Profit after taxation attributable to
owners of the parent 658.2 (91.7) 566.5 595.6 (55.1) 540.5
_______ _______ _______ _______ _______ _______
Earnings per A ordinary share Cent Cent
- basic 4 320.4 305.9
- diluted 4 319.9 305.7
_______ _______
Consolidated Statement of Comprehensive Income
for the financial year ended 31 December 2019
2019 2018
EUR'm EUR'm
Profit after taxation attributable to owners of the parent 566.5 540.5
Other comprehensive income:
Items that are or may be reclassified subsequently to profit or
loss:
Fair value movements on cash flow hedges 7.2 2.2
Cash flow hedges - reclassified to profit or loss
from equity 0.1 (2.5)
Net change in cost of hedging 0.6 (2.0)
Deferred tax effect of fair value movements on cash
flow hedges (1.4) (0.2)
Exchange difference on translation of foreign operations 67.0 (0.9)
Fair value movement on revaluation of financial assets held at (1.0) (1.9)
fair value through other comprehensive income
Items that will not be reclassified subsequently to profit
or loss:
Re-measurement on retirement benefits obligation 14.0 34.5
Deferred tax effect of re-measurement on retirement benefits
obligation (2.0) (6.3)
_______ _______
Net income recognised directly in total other comprehensive
income 84.5 22.9
_______ _______
Total comprehensive income 651.0 563.4
_______ _______
Consolidated Balance Sheet 31 December 31 December
as at 31 December 2019 2019 2018
EUR'm EUR'm
Non-current assets
Property, plant and equipment 2,062.9 1,767.0
Intangible assets 4,589.7 4,095.6
Financial asset investments 41.7 35.3
Investment in associates and joint ventures 16.2 15.6
Other non-current financial instruments 82.7 101.7
Deferred tax assets 38.9 37.1
_______ _______
6,832.1 6,052.3
_______ _______
Current assets
Inventories 993.3 877.8
Trade and other receivables 1,066.3 967.8
Cash at bank and in hand 554.9 413.8
Other current financial instruments 57.7 10.0
Assets classified as held for sale - 2.0
_______ _______
2,672.2 2,271.4
_______ _______
Total assets 9,504.3 8,323.7
_______ _______
Current liabilities
Trade and other payables 1,643.0 1,482.1
Borrowings and overdrafts 190.8 13.8
Other current financial instruments 12.1 11.0
Tax liabilities 140.7 122.4
Provisions 25.2 20.3
Deferred income 2.2 1.2
_______ _______
2,014.0 1,650.8
_______ _______
Non-current liabilities
Borrowings 2,355.3 2,119.7
Other non-current financial instruments - 5.6
Retirement benefits obligation 11.9 53.2
Other non-current liabilities 167.9 82.6
Deferred tax liabilities 338.9 324.1
Provisions 33.2 32.1
Deferred income 20.9 21.2
_______ _______
2,928.1 2,638.5
_______ _______
Total liabilities 4,942.1 4,289.3
_______ _______
Net assets 4,562.2 4,034.4
_______ _______
Issued capital and reserves attributable to owners of the parent
Share capital 22.1 22.0
Share premium 398.7 398.7
Other reserves (119.0) (207.3)
Retained earnings 4,260.4 3,821.0
_______ _______
Shareholders' equity 4,562.2 4,034.4
_______ _______
Consolidated Statement of
Changes
in Equity
for the financial year ended
31 December 2019
Note Share Share Other Retained
Capital Premium Reserves Earnings Total
EUR'm EUR'm EUR'm EUR'm EUR'm
Group:
At 1 January 2018 22.0 398.7 (214.4) 3,366.9 3,573.2
Profit after tax attributable to owners of the
parent - - - 540.5 540.5
Other comprehensive (expense)/income - - (5.1) 28.0 22.9
___ _______ _______ _______ ______
Total comprehensive (expense)/income - - (5.1) 568.5 563.4
Dividends paid 5 - - - (114.4) (114.4)
Share-based payment expense - - 12.2 - 12.2
___ _______ _______ _______ ______
At 31 December 2018 22.0 398.7 (207.3) 3,821.0 4,034.4
Adjustment on initial application
of IFRS 16 'Leases' - - - (9.4) (9.4)
___ _______ _______ _______ ______
Adjusted balances at 1 January
2019 22.0 398.7 (207.3) 3,811.6 4,025.0
Profit after tax attributable to owners of the
parent - - - 566.5 566.5
Other comprehensive income - - 73.9 10.6 84.5
___ _______ _______ _______ ______
Total comprehensive income - - 73.9 577.1 651.0
Shares issued during the financial year 0.1 - - - 0.1
Dividends paid 5 - - - (128.3) (128.3)
Share-based payment expense - - 14.4 - 14.4
___ _______ _______ _______ ______
At 31 December 2019 22.1 398.7 (119.0) 4,260.4 4,562.2
___ _______ _______ _______ ______
Other Reserves comprise the following:
Share-
Capital Other Based Cost
of
FVOCI Redemption Undenominated Payment Translation Hedging Hedging
Reserve Reserve Capital Reserve Reserve Reserve Reserve Total
EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
At 1 January 2018 3.5 1.7 0.3 51.1 (255.8) (15.2) - (214.4)
Other comprehensive expense (1.9) - - - (0.9) (0.3) (2.0) (5.1)
Share-based payment expense - - - 12.2 - - - 12.2
_______ _______ _______ _______ _______ _______ _______ ______
At 31 December 2018 1.6 1.7 0.3 63.3 (256.7) (15.5) (2.0) (207.3)
Other comprehensive
(expense)/income (1.0) - - - 67.0 7.3 0.6 73.9
Share-based payment expense - - - 14.4 - - - 14.4
_______ _______ _______ _______ _______ _______ _______ ______
At 31 December 2019 0.6 1.7 0.3 77.7 (189.7) (8.2) (1.4) (119.0)
_______ _______ _______ _______ _______ _______ _______ ______
Consolidated Statement of Cash Flows
for the financial year ended 31 December 2019 2019 2018
Notes EUR'm EUR'm
Operating activities
Trading profit 902.7 805.6
Adjustments for:
Depreciation (net) 191.4 134.1
Change in working capital (63.9) (78.8)
Pension contributions paid less pension expense (26.7) (40.0)
Payments on non-trading items (89.1) (59.8)
Exchange translation adjustment (2.5) 0.5
_______ ______
Cash generated from operations 911.9 761.6
Income taxes paid (67.2) (46.1)
Finance income received 0.5 0.5
Finance costs paid (81.3) (65.0)
_______ ______
Net cash from operating activities 763.9 651.0
_______ ______
Investing activities
Purchase of assets (net) (315.6) (296.1)
Proceeds from the sale of assets 32.8 10.6
Capital grants received 3.0 -
Purchase of businesses (net of cash acquired) 6 (562.7) (476.8)
Payments relating to previous acquisitions (5.3) (11.9)
Purchase of share in associates and joint ventures - (14.5)
Income received from associates and joint ventures - -
_______ ______
Net cash used in investing activities (847.8) (788.7)
_______ ______
Financing activities
Dividends paid 5 (128.3) (114.4)
Payment of lease liabilities (35.5) -
Issue of share capital 0.1 -
Repayment of borrowings (564.4) (2.5)
Increase in borrowings 950.0 352.7
_______ ______
Net cash movement due to financing activities 221.9 235.8
_______ ______
Net increase in cash and cash equivalents 138.0 98.1
Cash and cash equivalents at beginning of the financial
year 403.9 305.6
Exchange translation adjustment on cash and cash
equivalents 7.8 0.2
_______ ______
Cash and cash equivalents at end of the financial year 549.7 403.9
_______ ______
Reconciliation of Net Cash Flow to Movement in
Net Debt
Net increase in cash and cash equivalents 138.0 98.1
Cash flow from debt financing (385.6) (350.2)
_______ ______
Changes in net debt resulting from cash flows (247.6) (252.1)
Fair value movement on interest rate swaps (net of adjustment to
borrowings) 12.5 (2.6)
Exchange translation adjustment on net
debt (4.2) (27.1)
_______ ______
Movement in net debt in the financial
year (239.3) (281.8)
Net debt at beginning of the financial
year (1,623.5) (1,341.7)
_______ ______
Net debt at end of the financial year (1,862.8) (1,623.5)
_______ ______
Notes to the Financial Statements
for the financial year ended 31 December 2019
1. Accounting policies
The financial information included within this statement has
been extracted from the audited financial statements of Kerry Group
plc for the financial year ended 31 December 2019. The auditors'
report was unqualified. The financial information set out in this
document does not constitute full statutory financial statements
for the financial years ended 31 December 2019 or 2018 but is
derived from same. The consolidated financial statements of Kerry
Group plc have been prepared in accordance with International
Financial Reporting Standards ('IFRS'), International Financial
Reporting Interpretations Committee ('IFRIC') interpretations and
those parts of the Companies Act 2014 applicable to companies
reporting under IFRS. The financial statements comprise of the
Consolidated Income Statement, the Consolidated Statement of
Comprehensive Income, the Consolidated Balance Sheet, the
Consolidated Statement of Changes in Equity, the Consolidated
Statement of Cash Flows and the notes to the financial statements.
The Group's financial statements have also been prepared in
accordance with IFRS adopted by the European Union ('EU') which
comprise standards and interpretations approved by the
International Accounting Standards Board ('IASB'). The Group's
financial statements comply with Article 4 of the EU IAS
Regulation. IFRS adopted by the EU differs in certain respects from
IFRS issued by the IASB. References to IFRS hereafter refer to IFRS
adopted by the EU.
The consolidated financial statements have been prepared under
the historical cost convention, as modified by the revaluation of
certain financial assets and liabilities (including derivative
financial instruments) and financial asset investments which are
held at fair value. Assets classified as held for sale are stated
at the lower of carrying value and fair value less costs to sell.
The investments in associates and joint ventures are accounted for
using the equity method.
The Group's accounting policies will be included in the 2019
Annual Report & Accounts, which will be published at the end of
March, and are consistent with those described in the 2018 Annual
Report & Accounts, except for changes in respect of IFRS 16
'Leases' outlined below.
Leasing
At the commencement date of the lease, the Group recognises a
right-of-use asset and a lease liability on the balance sheet. The
right-of-use asset is measured at cost, which consists of the
initial measurement of the lease liability, any initial direct
costs incurred by the Group in setting up/entering into the lease,
an estimate of any costs to dismantle and remove the asset at the
end of the lease and any payments made in advance of the lease
commencement date (net of any incentive received).
The Group depreciates right-of-use assets on a straight-line
basis from the lease commencement date to the earlier of the end of
the useful life or the end of the lease term. The carrying amounts
of right-of-use assets are reviewed at each balance sheet date to
determine whether there is any indication of impairment. An
impairment loss is recognised when the carrying value of an asset
exceeds its recoverable amount.
The Group measures the lease liability at the present value of
the lease payments unpaid at that date, discounted using the
applicable incremental borrowing rate. Lease payments included in
the measurement of the lease liability comprises of fixed or
variable payments (based on an index or rate), amounts expected to
be payable under a residual value guarantee and payments arising
from options reasonably certain to be exercised.
Subsequent to the initial measurement, the liability will be
reduced for payments made and increased for the interest applied
and it is remeasured to reflect any reassessment or contract
modifications. When the lease liability is remeasured, the
corresponding adjustment is reflected in the right-of-use asset or
in the Consolidated Income Statement if the right-of-use asset is
already reduced to zero.
The Group has elected to record short-term leases of less than
12 months and leases of low-value assets as defined in IFRS 16 as
an operating expense in the Consolidated Income Statement on a
straight-line basis over the lease term.
The Group has also elected not to separate non-lease components
from lease components, and instead account for each lease component
and any associated non-lease components as a single lease component
further increasing the lease liability.
The Group adopted IFRS 16 'Leases' using the modified
retrospective approach. Accordingly, the comparative information
has not been restated and continues to be accounted for in
accordance with the Group's previous accounting policy under IAS 17
'Leases'.
Leasing policy applicable before 1 January 2019 (Operating
leases)
Annual rentals payable under operating leases are charged to the
Consolidated Income Statement on a straight-line basis over the
period of the lease.
Critical accounting estimates and judgements - Leasing
The significant judgements made by management in applying the
Group's accounting policies and the key source of estimation
uncertainty were the same as those described in the 2018 Annual
Report, except for the new judgements and estimation uncertainty
described below related to lessee accounting, as this is the first
year of adoption of IFRS 16.
In determining the incremental borrowing rate for lease
contracts/liabilities the Group, where possible, has utilised
external benchmarked information and takes into consideration
credit rating, applicable margin for lease by currency, interest
rate for the lease term and applies a currency premium where
applicable. The Group has applied judgement in determining the
lease term of contracts that include renewal options. If the Group
is reasonably certain of exercising such options this will impact
the lease term and accordingly the amount of lease liabilities and
right-of-use assets recognised. The Group reassesses these
estimates and judgements if a significant event or a significant
change in circumstances occurs.
New standards and interpretations
Certain new and revised accounting standards and new
International Financial Reporting Interpretations Committee
('IFRIC') interpretations have been issued. The Group intends to
adopt the relevant new and revised standards when they become
effective and the Group's assessment of the impact of these
standards and interpretations is set out below:
The following Standards and Interpretations are effective for the Group Effective Date
in 2019 but do not have a material effect on the results or financial
position of the Group:
- IFRS 16 Leases 1 January 2019
IFRS 16, published in January 2016, replaces the
existing standard IAS 17 'Leases'. IFRS 16 eliminates
the classification of leases as either operating
leases or finance leases for lessees. 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 with
certain exceptions and to recognise depreciation
of lease assets separately from interest on lease
liabilities in the income statement.
The Group has adopted IFRS 16 using the modified
retrospective approach, under which the cumulative
effect of initial application of EUR12.1m and a deferred
tax asset of EUR2.7m was recognised in retained earnings
at 1 January 2019. Accordingly, the comparative information
presented for 2018 has not been restated - i.e. it
is presented, as previously reported, under IAS 17
and related interpretations. Right-of-use assets
for property leases were measured on transition as
if the new rules had always been applied, but discounted
at the incremental borrowing rate at 1 January 2019.
All other right-of-use assets were measured at the
amount of the lease liability on adoption.
As at 31 December 2018, the Group had non-cancellable
operating lease commitments of EUR83.1m and finance
lease commitments of EURnil. Of these commitments,
approximately EUR1.0m relate to short-term leases
and EUR0.1m are low-value leases which will be recognised
on a straight-line basis as an expense in the Consolidated
Income Statement. The Group has recognised right-of-use
assets of EUR95.2m and lease liabilities of EUR107.3m
on 1 January 2019, the transition date. The weighted
average incremental borrowing rate applied to lease
liabilities at the date of initial application was
6.7%. The Group has also elected not to separate
non-lease components from lease components, and instead
account for each lease component and any associated
non-lease components as a single lease component
further increasing the lease liability at 1 January
2019. The Group has excluded initial direct costs
incurred in entering into the leases recognised on
transition on 1 January 2019, these costs are included
for leases entered into since this date.
- IAS 19 (Amendments) Employee Benefits - Plan Amendment, Curtailment or 1 January 2019
Settlement
- IFRIC 23 Uncertainty over Income Tax Treatments 1 January 2019
IFRIC 23 'Uncertainty over Income Tax Treatments'
was issued in June 2017 and clarifies how to apply
the recognition and measurement requirements in IAS
12 when there is uncertainty over income tax treatments.
The Group had previously accounted for uncertain
tax positions in line with IFRIC 23 and therefore,
there is no impact to the Group in 2019 in respect
of IFRIC 23.
The Group considers each uncertain tax treatment
separately or together with one or more uncertain
tax treatments based on which approach better predicts
the resolution of the uncertainty. If the Group concludes
that it is not probable that a taxation authority
will accept an uncertain tax treatment, the Group
reflects the effect of the uncertainty in determining
the related taxable profit, tax bases, unused tax
losses, unused tax credits or tax rate. The Group
reflects the effect of uncertainty for each uncertain
tax treatment using an expected value approach or
a most likely approach depending on which method
the Group expects to better predict the resolution
of the uncertainty. The unit of account for recognition
purposes is the income tax/deferred tax assets or
liabilities and the Group does not provide separately
for uncertain tax positions.
The following Standards and Interpretations are not yet effective for Effective Date
the Group and are not expected to have a material effect on the results
or financial position of the Group:
- IFRS 3 (Amendments) Business Combinations 1 January 2020
- IFRS 9, IAS 39 Interest Rate Benchmark Reform 1 January 2020
&
IFRS 7 (Amendments)
- IAS 1 (Amendments) Presentation of Financial Statements 1 January 2020
- IAS 8 (Amendments) Accounting Policies, Changes in Accounting Estimates 1 January 2020
and Errors
- The Conceptual Revised Conceptual Framework for Financial Reporting 1 January 2020
Framework
- IFRS 17 Insurance Contracts 1 January 2021
IFRS 17 published in May 2017 will be effective for
reporting periods beginning on or after 1 January
2021. The Group is currently assessing the potential
impact of the standard on future periods however
it is not expected that it will have a material impact.
2. Analysis of results
The Group has determined it has two reportable segments: Taste
& Nutrition and Consumer Foods. The Taste & Nutrition
segment is the global leader in the development of taste and
nutrition solutions for the food, beverage and pharmaceutical
markets across Ireland, Europe, Americas and APMEA. Our broad
technology foundation, customer-centric business model, and
industry-leading integrated solutions capability make Kerry the
co-creation partner of choice. The Consumer Foods segment is an
industry-leading manufacturer of chilled food products primarily in
Ireland and in the UK.
Group Group
Eliminations Eliminations
Taste & Consumer and Taste Consumer and
Nutrition Foods Unallocated Total & Foods Unallocated Total
2019 2019 2019 2019 Nutrition 2018 2018 2018
2018
EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
External
revenue 5,939.1 1,302.2 - 7,241.3 5,272.4 1,335.2 - 6,607.6
Inter-segment
revenue 78.5 4.4 (82.9) - 78.2 3.8 (82.0) -
_______ _______ _______ _______ _______ _______ _______ _______
Revenue 6,017.6 1,306.6 (82.9) 7,241.3 5,350.6 1,339.0 (82.0) 6,607.6
_______ _______ _______ _______ _______ _______ _______ _______
Trading profit 918.5 98.9 (114.7) 902.7 805.3 100.1 (99.8) 805.6
_______ _______ _______ _______ _______ _______
Intangible asset amortisation (64.3) (53.8)
Non-trading items (110.9) (66.9)
_______ _______
Operating profit 727.5 684.9
Finance income 0.3 0.5
Finance costs (81.9) (67.5)
_______ _______
Profit before taxation 645.9 617.9
Income taxes (79.4) (77.4)
_______ _______
Profit after taxation attributable to owners of the
parent 566.5 540.5
_______ _______
Segment assets and liabilities
Segment assets 6,268.5 925.7 2,310.1 9,504.3 5,492.1 938.1 1,893.5 8,323.7
Segment
liabilities (1,565.7) (311.8) (3,064.6) (4,942.1) (1,201.1) (348.2) (2,740.0) (4,289.3)
_______ _______ _______ _______ _______ _______ _______ _______
Net assets 4,702.8 613.9 (754.5) 4,562.2 4,291.0 589.9 (846.5) 4,034.4
_______ _______ _______ _______ _______ _______ _______ _______
Other segmental information
Property, plant
and equipment
additions 247.2 32.7 0.7 280.6 259.1 23.6 1.0 283.7
Depreciation (net) 164.6 22.7 4.1 191.4 115.0 18.5 0.6 134.1
Intangible asset
additions 1.3 2.0 51.9 55.2 0.3 2.1 28.0 30.4
Intangible asset
amortisation 23.0 6.8 34.5 64.3 17.1 6.6 30.1 53.8
_______ _______ _______ _______ _______ _______ _______ _______
Revenue analysis
Disaggregation of revenue from external customers is analysed by
End Use Market (EUM), which is the primary market in which Kerry's
products are consumed, and primary geographic market. An EUM is
defined as the market in which the end consumer or customer of
Kerry's product operates. The economic factors within the EUMs of
Food, Beverage and Pharma and within the primary geographic markets
which affect the nature, amount, timing and uncertainty of revenue
and cash flows are similar.
Analysis by EUM
Taste Consumer Taste Consumer
& Foods Total & Foods Total
Nutrition 2019 2019 Nutrition 2018 2018
2019 2018
EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
Food 4,161.5 1,302.2 5,463.7 3,617.6 1,335.2 4,952.8
Beverage 1,507.6 - 1,507.6 1,390.8 - 1,390.8
Pharma 270.0 - 270.0 264.0 - 264.0
_______ _______ _______ _______ _______ _______
External revenue 5,939.1 1,302.2 7,241.3 5,272.4 1,335.2 6,607.6
_______ _______ _______ _______ _______ _______
Analysis by primary geographic market
Disaggregation of revenue from external customers
is analysed by geographical split:
Taste Consumer Taste Consumer
& Foods Total & Foods Total
Nutrition 2019 2019 Nutrition 2018 2018
2019 2018
EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
Republic of Ireland 184.9 252.5 437.4 186.1 270.8 456.9
Rest of Europe 1,271.5 1,049.7 2,321.2 1,235.7 1,064.4 2,300.1
Americas 3,197.8 - 3,197.8 2,745.3 - 2,745.3
APMEA* 1,284.9 - 1,284.9 1,105.3 - 1,105.3
_______ _______ _______ _______ _______ _______
External revenue 5,939.1 1,302.2 7,241.3 5,272.4 1,335.2 6,607.6
_______ _______ _______ _______ _______ _______
*Asia Pacific, Middle East and Africa
Information about geographical areas
Europe Americas APMEA* Total Europe Americas APMEA* Total
2019 2019 2019 2019 2018 2018 2018 2018
EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
Segment assets by location 4,858.4 3,502.3 1,143.6 9,504.3 4,173.7 3,160.3 989.7 8,323.7
Property, plant and
equipment
additions 87.9 114.7 78.0 280.6 87.9 142.1 53.7 283.7
Intangible asset additions 54.3 0.9 - 55.2 30.1 0.3 - 30.4
_______ _______ _______ _______ _______ _______ _______ _______
*Asia Pacific, Middle East and Africa
Kerry Group plc is domiciled in the Republic of Ireland and the
revenues from external customers in the Republic of Ireland were
EUR437.4m (2018: EUR456.9m).
Revenues from external customers include EUR1,527.9m (2018:
EUR1,560.8m) in the UK and EUR2,597.5m (2018: EUR2,189.5m) in the
USA.
There are no material dependencies or concentrations on
individual customers which would warrant disclosure under IFRS 8
'Operating Segments'. The accounting policies of the reportable
segments are the same as the Group's accounting policies as
outlined in the Statement of Accounting Policies. Under IFRS 15
'Revenue from Contracts with Customers' revenue is primarily
recognised at a point in time. Revenue recorded over time during
the year was not material to the Group.
3. Non-trading items
Gross Tax Net Net
2019 2019 2019 2018
Notes EUR'm EUR'm EUR'm EUR'm
Taste & Nutrition acquisition related costs:
* acquisition integration and restructuring costs (i) (63.1) 14.9 (48.2) (34.1)
* other transaction costs (i) (17.6) - (17.6) -
_______ _______ _______ _______
(80.7) 14.9 (65.8) (34.1)
Consumer Foods Realignment Programme (ii) (26.7) 4.5 (22.2) (15.1)
Loss on disposal of businesses and assets (iii) (3.5) (0.2) (3.7) (5.9)
_______ _______ _______ _______
2019 Non-trading items (110.9) 19.2 (91.7) (55.1)
_______ _______ _______ _______
2018 Non-trading items (66.9) 11.8 (55.1)
_______ _______ _______ _______
(i) Taste & Nutrition acquisition related costs
During the year, acquisition integration and restructuring costs of EUR63.1m (2018:
EUR44.2m) primarily related to costs of integrating recent 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 acquired businesses
into the existing Kerry operating model. A tax credit of EUR14.9m (2018: EUR10.1m)
arose due to tax deductions available on acquisition integration and restructuring
costs.
Other transaction costs of EUR17.6m related to a material transaction process that
the Group participated in. These costs primarily related to external costs associated
with deal preparation, integration planning and due diligence. The associated tax
credit is EURnil (2018: EURnil).
(ii) Consumer Foods Realignment Programme
During 2019, the Consumer Foods business completed a programme to simplify its
business model in terms of footprint and resources in response to the challenging
marketplace. The charge relating to this in 2019 is EUR26.7m, which reflects redundancies,
relocation of resources and the streamlining of operations. The associated tax
credit is EUR4.5m (2018: EURnil).
In 2018, Consumer Foods completed its Brexit Mitigation Programme whereby certain
sourcing and production activities were relocated and other activities restructured
as a consequence of Brexit in order to reduce the Group's sterling transaction
exposure. The net charge relating to this in 2019 is EURnil (2018: EUR15.1m) and
the associated tax credit is EURnil (2018: EUR2.2m).
(iii) Loss on disposal of businesses and assets
During the year, the Group disposed of property, plant and equipment primarily
in the UK, US and Australia for a consideration of EUR32.8m resulting in a loss
of EUR3.5m for the year ended 31 December 2019. In 2018, the Group disposed of
property, plant and equipment primarily in Italy, Malaysia and the US for a consideration
of EUR10.6m resulting in a loss of EUR1.0m. Also in 2018 the Group disposed of
investments in associates for a combined consideration of EUR1.1m resulting in
a loss of EUR4.4m.
A tax charge of EUR0.2m (2018: EUR0.5m) arose on the disposal of assets and businesses.
There were no impairments of assets held for sale recorded in the financial year.
4. Earnings per A ordinary share
EPS 2019 EPS 2018
cent EUR'm cent EUR'm
Basic earnings per share
Profit after taxation attributable to owners
of the parent 320.4 566.5 305.9 540.5
Diluted earnings per share
Profit after taxation attributable to owners
of the parent 319.9 566.5 305.7 540.5
_______ _______ _______ _______
2019 2018
m's m's
Number of Shares
Basic weighted average number of shares 176.8 176.7
Impact of share options outstanding 0.3 0.1
_______ _______
Diluted weighted average number of shares 177.1 176.8
_______ _______
Actual number of shares in issue as at 31
December 176.5 176.3
_______ _______
5. Dividends
2019 2018
EUR'm EUR'm
Group and Company:
Amounts recognised as distributions to equity shareholders
in the financial year
Final 2018 dividend of 49.20 cent per A ordinary share
paid 10 May 2019
(Final 2017 dividend of 43.90 cent per A ordinary share
paid 18 May 2018) 86.7 77.4
Interim 2019 dividend of 23.50 cent per A ordinary share
paid 15 November 2019
(Interim 2018 dividend of 21.00 cent per A ordinary share
paid 16 November 2018) 41.6 37.0
_______ _______
128.3 114.4
_______ _______
Since the financial year end the Board has proposed a final 2019
dividend of 55.10 cent per A ordinary share which amounts to
EUR97.3m. The payment date for the final dividend will be 15 May
2020 to shareholders registered on the record date as at 17 April
2020. The consolidated financial statements do not reflect this
dividend.
6. Business combinations
During 2019, the Group completed a total of eleven acquisitions,
all of which are 100% owned by the Group unless otherwise
stated.
Total
2019
EUR'm
Recognised amounts of identifiable assets acquired and liabilities
assumed:
Non-current assets
Property, plant and equipment 115.1
Brand related intangibles 237.0
Current assets
Cash at bank and in hand 2.9
Inventories 17.1
Trade and other receivables 11.2
Current liabilities
Trade and other payables (14.8)
Non-current liabilities
Deferred tax liabilities (7.2)
Other non-current liabilities (0.3)
________
Total identifiable assets 361.0
Goodwill 200.7
________
Total consideration 561.7
________
Satisfied by:
Cash 546.9
Deferred payment 14.8
________
561.7
________
Net cash outflow on acquisition:
Total
2019
EUR'm
Cash 546.9
Less: cash and cash equivalents acquired (2.9)
Prepayments in relation to 2020 acquisitions 18.7
________
562.7
________
The acquisition method has been used to account for businesses
acquired in the Group's financial statements. Given that the
valuation of the fair value of assets and liabilities recently
acquired is still in progress, some of the above values are
determined provisionally. The valuation of the fair value of assets
and liabilities will be completed within the measurement period.
For the acquisitions completed in 2018, there have been no material
revisions of the provisional fair value adjustments since the
initial values were established. The Group performs quantitative
and qualitative assessments of each acquisition in order to
determine whether it is material for the purposes of separate
disclosure under IFRS 3 'Business Combinations'. None of the
acquisitions completed during the period were considered material
to warrant separate disclosure.
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 acquisition. EUR194.4m of goodwill
recognised is expected to be deductible for income tax
purposes.
Transaction expenses related to these acquisitions of EUR7.1m
were charged in the Group's Consolidated Income Statement during
the financial year. The fair value of the financial assets includes
trade and other receivables with a fair value of EUR11.2m and a
gross contractual value of EUR11.2m .
From the date of acquisition, the acquired businesses have
contributed EUR140.9m of revenue and EUR10.6m of profit after
taxation attributable to owners of the parent to the Group. If the
acquisition dates had been on the first day of the financial year,
the acquired businesses would have contributed EUR202.9m of revenue
and EUR14.0m of profit after taxation attributable to owners of the
parent to the Group.
The following acquisitions were completed by the Group during
2019:
Acquisition Acquired Principal activity
Southeastern Mills January Southeastern Mills, located in the USA, is a leading
food manufacturer specialising in coating and
seasoning systems.
Ariake U.S.A., Inc. March Ariake is a manufacturer of natural clean label
savoury solutions, based in the USA.
Muskvale Flavours & Fragrances March Muskvale Flavours & Fragrances, based in Australia,
creates and sells flavours and fragrances.
ComeIn Food Systems August ComeIn Food Systems, located in Mexico, produce
seasonings and functional ingredients.
Saporiti Whipping Agents August Saporiti Whipping Agents, based in Brazil, specialises
in whipping agents technology.
Isoage Technologies August Isoage Technologies is a USA based supplier of
fermentation technology and functional ingredients
to the food, dairy and pet industries.
Ensyn Technologies August Ensyn Technologies are experts in Rapid Thermal
Processing technology which forms the base for
many smoke products, based in Canada.
Pevesa Biotech S.A.U. September Pevesa, based in Spain, is a specialist plant
protein isolates and hydrolysates business, serving
key nutrition applications.
Biosecur Lab September Biosecur is a supplier of natural antimicrobials
made from citrus extracts, based in Canada.
Serve Food Solutions September Serve Food Solutions, based in the USA, provides
solutions to manufacturers and foodservice companies.
Diana Food (Georgia, USA) November Diana Food, based in Georgia, USA, is a savoury
taste manufacturer of natural clean label technologies.
7. Events after the balance sheet date
Since the financial year end, the Group has proposed a final dividend of 55.10 cent per A
ordinary share (note 5).
There have been no other significant events, outside the ordinary course of business, affecting
the Group since 31 December 2019.
8. General information
The statutory financial statements of Kerry Group plc for the
financial year ended 31 December 2019 were approved by the Board of
Directors and authorised for issue on 17 February 2020 and will be
filed with the Registrar of Companies following the annual general
meeting. The statutory financial statements of Kerry Group plc for
the financial year ended 31 December 2018, to which an unqualified
audit opinion was received, were annexed to the annual return and
filed with the Registrar of Companies.
SUPPLEMENTARY INFORMATION
FINANCIAL DEFINITIONS
1. Revenue
Volume growth
This represents the sales growth year-on-year, excluding
pass-through pricing on raw material costs, 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. Pricing
therefore impacts like-for-like revenue growth positively or
negatively depending on whether raw material prices move up or
down. A full reconciliation to reported revenue growth is detailed
in the revenue reconciliation below.
Revenue Reconciliation
Volume Transaction Acquisitions/ Translation Reported
growth Price currency Disposals currency revenue
2019 growth
Taste &
Nutrition 4.0% 0.1% - 5.8% 2.6% 12.5%
Consumer
Foods (2.2%) (0.5%) - - 0.3% (2.4%)
________ ________ ________ ________ ________ ________
Group 2.8% - - 4.7% 2.1% 9.6%
2018
Taste &
Nutrition 4.1% (0.5%) (0.1%) 4.2% (4.0%) 3.7%
Consumer
Foods 1.1% (0.4%) (0.3%) 0.8% (0.6%) 0.6%
________ ________ ________ ________ ________ ________
Group 3.5% (0.5%) (0.1%) 3.6% (3.4%) 3.1%
________ ________ ________ ________ ________ ________
2. EBITDA
EBITDA represents profit before finance income and costs, income taxes, depreciation (net of
capital grant amortisation), intangible asset amortisation and non-trading items.
2019 2018
EUR'm EUR'm
Profit after taxation attributable to owners of the parent 566.5 540.5
Finance income (0.3) (0.5)
Finance costs 81.9 67.5
Income taxes 79.4 77.4
Non-trading items 110.9 66.9
Intangible asset amortisation 64.3 53.8
Depreciation (net of capital grant amortisation) 191.4 134.1
_______ _______
EBITDA 1,094.1 939.7
_______ _______
The calculation of EBITDA in 2019 reflects the impact of the adoption
of IFRS 16, prior year comparatives were not restated.
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.
2019 2018
EUR'm EUR'm
Operating profit 727.5 684.9
Intangible asset amortisation 64.3 53.8
Non-trading items 110.9 66.9
_______ _______
Trading profit 902.7 805.6
_______ _______
4. Trading Margin
Trading margin represents trading profit, expressed as a
percentage of revenue.
2019 2018
EUR'm EUR'm
Trading profit 902.7 805.6
Revenue 7,241.3 6,607.6
_______ _______
Trading margin 12.5% 12.2%
_______ _______
5. Operating Profit
Operating profit is profit before income taxes, finance income
and finance costs.
2019 2018
EUR'm EUR'm
Profit before tax 645.9 617.9
Finance income (0.3) (0.5)
Finance costs 81.9 67.5
_______ _______
Operating profit 727.5 684.9
_______ _______
6. Adjusted Earnings Per Share and Growth in Adjusted Earnings
Per Share on a Constant Currency Basis
The growth in adjusted earnings per share on a constant currency
basis is 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. A full reconciliation of
adjusted earnings per share to basic earnings is provided below.
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.
2019 2018
EPS EPS
cent cent
Basic earnings per share 320.4 305.9
Brand related intangible asset amortisation 21.4 16.3
Non-trading items (net of related tax) 51.9 31.2
_______ _______
Adjusted earnings per share 393.7 353.4
Impact of retranslating prior year adjusted earnings per share at current
year average exchange rates - 10.1
_______ _______
Adjusted earnings per share on a constant currency basis 393.7 363.5
_______ _______
Growth in adjusted earnings per share on a constant currency basis 8.3% 8.6%
_______ _______
7. Free Cash Flow
Free cash flow is trading profit plus depreciation, movement in
average working capital, capital expenditure, payment of lease
liabilities, pensions 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 year 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 month's 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'.
2019 2018
EUR'm EUR'm
Net cash from operating activities 763.9 651.0
Difference between movement in monthly average working capital and movement
in the financial year end working capital (25.6) 21.7
Expenditure on acquisition integration and restructuring costs 89.1 59.8
Purchase of assets (315.6) (296.1)
Payment of lease liabilities (35.5) -
Proceeds from the sale of property, plant and equipment 32.8 10.6
Capital grants received 3.0 -
Exchange translation adjustments 2.5 (0.5)
_______ _______
Free cash flow 514.6 446.5
_______ _______
8. Cash Conversion
Cash conversion is defined as free cash flow, expressed as a
percentage of adjusted earnings after tax.
2019 2018
EUR'm EUR'm
Free cash flow 514.6 446.5
Profit after taxation attributable to owners of the parent 566.5 540.5
Brand related intangible asset amortisation 37.8 28.8
Non-trading items (net of related tax) 91.7 55.1
_______ _______
Adjusted earnings after tax 696.0 624.4
_______ _______
Cash Conversion 74% 72%
_______ _______
9. Financial Covenants
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, deferred payments
in relation to acquisitions and lease liabilities. These ratios are
calculated in accordance with lenders' facility agreements and
these agreements specifically require these adjustments in the
calculation.
2019 2018
Covenant Times Times
Net debt: EBITDA Maximum 3.5 1.8 1.7
EBITDA: Net interest Minimum 4.75 13.2 14.7
10. Average Capital Employed
Average capital employed is calculated by taking an average of
the shareholders' equity and net debt over the last three reported
balance sheets plus an additional EUR527.8m relating to goodwill
written off to reserves pre conversion to IFRS.
2019 H1 2019 2018 H1 2018 2017
EUR'm EUR'm EUR'm EUR'm EUR'm
Shareholders' equity 4,562.2 4,186.5 4,034.4 3,773.6 3,573.2
Goodwill amortised (pre conversion to IFRS) 527.8 527.8 527.8 527.8 527.8
_______ _______ _______ _______ _______
Adjusted equity 5,090.0 4,714.3 4,562.2 4,301.4 4,101.0
Net debt 1,862.8 1,918.2 1,623.5 1,403.3 1,341.7
_______ _______ _______ _______ _______
Total 6,952.8 6,632.5 6,185.7 5,704.7 5,442.7
_______ _______ _______ _______ _______
Average capital employed 6,590.3 5,777.7
_______ _______
11. Return on Average Capital Employed (ROACE)
This measure is defined as profit after taxation attributable to
owners of the parent before non-trading items (net of related tax),
brand related intangible asset amortisation and finance income and
costs expressed as a percentage of average capital employed.
2019 2018
EUR'm EUR'm
Profit after taxation attributable to owners of the parent 566.5 540.5
Non-trading items (net of related tax) 91.7 55.1
Brand related intangible asset amortisation 37.8 28.8
Net finance costs 81.6 67.0
_______ _______
Adjusted profit 777.6 691.4
_______ _______
Average capital employed 6,590.3 5,777.7
_______ _______
Return on average capital employed 11.8% 12.0%
_______ _______
12. Total Shareholder Return
Total shareholder return represents the change in the capital
value of Kerry Group plc shares plus dividends in the financial
year.
2019 2018
Share price (1 January) EUR86.50 EUR93.50
Interim dividend (cent) 23.5 21.0
Dividend paid (cent) 49.2 43.9
Share price (31 December) EUR111.10 EUR86.50
_______ _______
Total shareholder return 29.3% (6.8%)
_______ _______
13. Market Capitalisation
Market capitalisation is calculated as the share price times the
number of shares issued.
2019 2018
Share price (31 December) EUR111.10 EUR86.50
Shares in issue ('000) 176,514.9 176,298.4
_______ _______
Market capitalisation (EUR'm) 19,610.8 15,249.8
_______ _______
14. Enterprise Value
Enterprise value is calculated as per external market sources.
It is market capitalisation plus reported borrowings less total
cash and cash equivalents.
15. Net Debt
Net debt comprises borrowings and overdrafts, interest rate
derivative financial instruments and cash at bank and in hand.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR KKOBBBBKBPBD
(END) Dow Jones Newswires
February 18, 2020 02:00 ET (07:00 GMT)
Kerry (LSE:KYGA)
Historical Stock Chart
From Dec 2024 to Jan 2025
Kerry (LSE:KYGA)
Historical Stock Chart
From Jan 2024 to Jan 2025
