TIDMKYGA
RNS Number : 6798U
Kerry Group PLC
31 July 2020
LEI: 635400TLVVBNXLFHWC59
News release
31 July 2020
Kerry Group - Interim Management Report 2020
Unprecedented first half due to COVID-19 impact, with business
recovering well across the second quarter
Kerry Group, the global taste & nutrition and consumer foods
group, reports business performance for the half year ended 30 June
2020.
OVERVIEW
* Strong response to COVID-19 pandemic aligned to key
priorities of our people, customers and communities,
as restrictions on movement impacted performance,
particularly in the foodservice channel
* Group revenue of EUR3.4 billion, reflecting a
business volume reduction of 6.0%
* Group trading margin of 9.3% (H1 2019: 10.7%)
* Adjusted EPS of 132.1 cent (H1 2019: 164.1 cent)
* Basic EPS of 120.4 cent (H1 2019: 135.5 cent)
* Free cash flow of EUR107m (H1 2019: EUR195m)
* I nterim dividend per share of 25.9 cent (Interim
2019: 23.5 cent)
Edmond Scanlon - Chief Executive Officer
"The first half of 2020 has been an unprecedented period due to
the COVID-19 pandemic, and I am immensely proud of the tremendous
efforts of our people in supporting our customers and local
communities throughout this period, aligned to our purpose to
Inspire Food and Nourish Life.
We had a strong start to the year, prior to restrictions on
movement impacting business performance as we moved through the
first quarter. As anticipated, we have seen a significant impact on
our Taste & Nutrition business - particularly our foodservice
channel, where the impact was most pronounced in April, with the
channel recovering well since then. Performance in our retail
channel improved in the second quarter, primarily through increased
consumer demand for authentic cooking, plant-based offerings and
health and wellness products.
In spite of the challenges arising from COVID-19, we continued
to make good progress on a number of fronts aligned to our key
strategic priorities. Our global operations and supply chain
continue to demonstrate resilience and engagement with our
customers has been overwhelmingly positive, which gives us
confidence in the trajectory of business recovery. We will emerge a
stronger organisation, as this period of uncertainty continues to
enhance Kerry's role as our customers' most valued partner."
Contact Information
Media
Catherine Keogh VP Corporate Affairs & +353 66 7182304 corpaffairs@kerry.com
Communications
Investor Relations
Marguerite Larkin +353 66 7182292 investorrelations@kerry.
William Lynch Chief Financial +353 66 7182292 ie
Officer investorrelations@kerry.
Website Head of Investor ie
www.kerrygroup.com Relations
INTERIM MANAGEMENT REPORT
For the half year ended 30 June 2020
The Marketplace
The first half of the year has seen major changes in the daily
lives of consumers across the globe, with purchasing and
consumption behaviours being significantly disrupted. Food and
beverage purchases were impacted by restrictions on movement and
closure of foodservice operators, with online and delivery
experiencing a surge in demand. During the period, a number of key
consumer trends accelerated, with increased demand for health and
immunity enhancement, natural authentic cooking, sustainability and
plant protein, while many consumers reverted to centre-of-store
offerings.
These changes meant customers have had to rapidly adapt to this
new dynamic operating environment, where interpreting demand has
become much more challenging and the strength of supply chains has
been tested. Customers' primary focus was on ensuring the
continuity of supply but has since moved to evaluating their
product portfolios and new product development strategies aligned
to these rapidly changing consumer demands. This has resulted in
significant business development opportunities, as customers seek
partners with full support models to move at pace and navigate this
changing market environment.
COVID-19
Our teams continue to ensure the safety of all employees and to
support customers as they supply food and beverage products across
the globe. Throughout this turbulent time, our actions have been
focussed on three main priorities:
-- Our People: protecting the health and wellbeing of employees
has been prioritised at all times. Measures taken have included
remote working where possible, segregation and zoning, use of
appropriate personal protective equipment and increased
sanitisation and screening measures
-- Our Customers: ensuring continuity of supply to our customers
around the globe despite challenges presented by the pandemic,
sharing COVID-19 quality control and health & safety playbooks,
while supporting customers with insights to adapt their offerings
to address changing consumer demands
-- Our Communities: donating food, personal protective equipment
and sanitiser to front-line staff, producing hand sanitiser in our
facilities when global supply was impacted, and through the
MyCommunity Initiative, pledging 26,000 volunteer days and a EUR1
million fund to support local community initiatives
The restrictions on mobility in the period significantly
impacted demand in the foodservice channel, while the retail
channel experienced increased demand in places. We have worked on a
number of actions to reduce the short-term cost impact of lower
volumes and higher oncosts, including the suspension of all
non-essential and discretionary expenditure and targeted cost
management initiatives in impacted business areas.
Group Performance
The Group reported revenue of EUR3.4 billion decreased by 4.3%
versus the same period last year, reflecting a volume reduction of
6.0%, increased pricing of 0.4%, contribution from acquisitions of
1.2%, and a favourable translation currency impact of 0.1%.
The Group reported trading profit of EUR316 million (H1 2019:
EUR383 million), with trading profit margin decreasing by 140bps to
9.3%, primarily due to the significant operating deleverage impact
resulting from the sharp decline in foodservice orders once
lockdown measures were introduced globally, with additional
COVID-related costs being partially offset by cost mitigation
actions.
Constant currency adjusted earnings per share decreased by 19.8%
to 132.1 cent (H1 2019 currency adjusted: 164.7 cent). Basic
earnings per share decreased by 11.1% to 120.4 cent (H1 2019: 135.5
cent).
In line with our dividend strategy, the interim dividend of 25.9
cent per share (H1 2019: 23.5 cent) reflects an increase from the
prior year interim dividend. The Group achieved free cash flow of
EUR107m in the period (H1 2019: EUR195m).
Business Reviews
Taste & Nutrition
H1 2020 Performance
------------------- ------------- --------------------------
Revenue EUR2,799m -5.6% (1)
Trading margin 11.6% -170bps
------------------- ------------- --------------------------
(1) volume performance
-- Overall volume reduction in H1 driven by Q2 decline of 11.8%
reflecting the impact of COVID-19
-- Q2 retail channel growing by 4.8%, with foodservice channel declining 49%
-- Strong volume growth in the second quarter within the retail
channel across Food (particularly Snacks and Dairy), Beverage and
Pharma EUMs
-- Trading margin decrease principally driven by operating
deleverage, with some additional COVID-related costs partially
offset by cost mitigation actions
Taste & Nutrition began the year strongly before the global
spread of COVID-19. While performance in Q2 was impacted most in
April, business volumes have been recovering well since then.
Kerry's nutrition and wellness technology portfolio had a very good
performance within the retail channel through customised solutions
incorporating Kerry's broad protein portfolio, fermented
ingredients, probiotics and immunity enhancing technologies.
Business volumes in the foodservice channel declined 27% in the
first half of the year, with many out-of-home food and beverage
outlets closed for an extended period of time. The impact from
these closures was a major contributor to overall performance in
developing markets, where business volumes declined by 3.8%.
The Group completed the acquisition of Tecnispice, S.A. in the
period - a leading savoury taste business based in Guatemala. The
Group also announced the strategic development of its Georgia, US
facility, creating a world-leading manufacturing facility to meet
increasing demand for integrated solutions across a variety of
protein applications.
Americas Region
-- -3.9% business volumes as the foodservice channel was considerably impacted in Q2
-- North America recovering well, aligned to lifting of restrictions
-- Good performance in Beverage, Meals and Snacks within the retail channel
Revenue in the region was EUR1,547m, reflecting a reported
decrease of 0.6%, with lower business volumes partially offset by
marginally positive pricing, positive foreign currency translation
and contribution from acquisitions.
The foodservice channel in North America was impacted
considerably in April, but performance has seen a significant
improvement since then, benefitting from a more established
infrastructure to cater for drive-through, curbside pickup and
delivery options.
The North American retail channel achieved excellent growth in
Beverage, particularly in nutritional and plant-based beverages
with a number of innovations incorporating Kerry's immunity
enhancing technologies, broad protein portfolio and natural
extracts. Meals delivered very strong growth through authentic
culinary solutions, with demand for natural stocks and broths
increasing, as consumers turned to more home cooking once lockdown
measures were introduced. Overall Meat category performance was
impacted by customer product availability on retail shelves. Snacks
performed very well with an increase in demand for healthy and
clean label solutions, while Cereals and other centre-of-store
categories experienced a rejuvenation in the period.
In LATAM, the foodservice channel in Brazil was significantly
impacted, along with some impulse driven categories within the
retail channel including ice-cream and confectionery, while
Beverage experienced good growth. Performance in Mexico was better,
due to good growth across a number of key end use markets.
The global Pharma EUM delivered very strong growth, led by
excipients and immunity enhancing technologies.
Europe Region
-- -8.8% business volumes as foodservice channel significantly impacted in Q2
-- Good performance in Beverage, Meat and Snacks within the retail channel
-- Russia and Eastern Europe delivered very good growth in the retail channel
Revenue in the region was EUR657m, reflecting a reported
decrease of 8.4%, with lower business volumes partially offset by
contribution from acquisitions.
The foodservice channel in the region was significantly impacted
in the first half of the year, as most operators were temporarily
closed for an extended period of time, with the UK, Italy and Spain
most affected. As restrictions began to lift in a phased manner
towards the end of the period, the pace of recovery varied from
country to country depending on local conditions.
The retail channel performed well, with Beverage achieving good
growth through a number of launches in low/non-alcoholic and
refreshing beverage categories incorporating Kerry's botanicals,
natural extracts and sugar-reduction technologies. Meat performed
well, driven by strong growth and business development in
plant-based alternatives, while Snacks had good growth in savoury
applications with a number of large customers. Dairy delivered a
solid performance in the period, while international dairy markets
were impacted by global supply/demand dynamics. Meals performance
was softer due to reduced impulse purchases, however cleaner label
and 'better for you' innovations performed well.
APMEA Region
-- -5.9% business volumes as restrictions on movements impacted
performance beyond China from March
-- Strong growth in Meat, Dairy and Snacks within the retail channel
-- Progressing strategic expansion and business development across the region
Revenue in the region was EUR566m, reflecting a reported
decrease of 6.9%, with lower business volumes, adverse impact from
currency transaction and translation, partially offset by
marginally positive pricing and the contribution from
acquisitions.
Performance in the period was most impacted in China,
Sub-Saharan Africa and India, while performance in South East Asia,
the Middle East, Australia and New Zealand was more robust.
After the initial lockdown period, foodservice in China
continued to recover across the second quarter. Foodservice
performance outside of China varied by country depending on the
level of restrictions in place, with India being most impacted.
Retail performance in the region was led by Meat, Dairy and
Snacks through a number of launches with regional leaders, while
Beverage and Meals were more challenged, as consumers opted for
more traditional food and beverage offerings in many geographies
across the region.
The Group continued to make good progress in expanding its
capacity and deploying technology capabilities in China and the
Middle East, while also moving into our new Technology &
Innovation Centre in Shanghai.
Consumer Foods
H1 2020 Performance
------------------ ----------- ----------------------------------------------------
Revenue EUR647m -7.8% (-0.7%) (1)
Trading margin 7.0% 0bps
------------------ ----------- ----------------------------------------------------
(1) volume performance (excluding contract exit)
-- Overall volume performance impacted by ready meals contract exit in the prior year
-- Positive impact from COVID-19 in Q1 was more than offset in Q2
-- Pricing of 1.7% reflective of increases in input costs and market pricing
-- Trading margin maintained as efficiencies offset COVID-19 impacts and pricing
The market was highly volatile across the period due to
COVID-19, with major swings in category performance resulting from
overnight changes in consumers' purchasing and consumption
behaviours. Shopping habits became more functional with
centre-of-store aisles benefitting most. Retailers scaled back many
category product listings and their freshly prepared
over-the-counter operations. The large traditional retailers
benefitted versus the discounters, with increased average basket
sizes and reduced promotional activity, while demand for online and
delivery has increased dramatically.
Revenue in the division was EUR647m, reflecting a reported
decrease of 6.2%, as lower business volumes primarily due to the
impact of the previously reported ready meals contract exit and
transaction currency were partially offset by increased net
pricing.
The Richmond sausage range delivered a strong performance, while
the recently launched meat-free ranges under both Richmond and
Naked Glory brands performed very well in the period. The Denny
brand in Ireland performed well, while meat sales were impacted by
deli counter operations being reduced by retailers. Spreadable
butter and the Dairygold range benefitted from an uplift in
consumer demand during the period.
The chilled meals category was impacted by reduced consumer
impulse purchases, while frozen meals had a good performance across
the range.
The 'Food to go' range experienced variability in sales
performance across the period. Fridge Raiders delivered good growth
in the first quarter but was challenged across the second quarter.
The Strings & Things range, led by Cheestrings delivered
overall good growth, while the Oakhouse Foods range of home
delivery meals delivered exceptionally strong growth across the
second quarter.
Financial Review
As anticipated, the COVID-19 pandemic significantly impacted
business performance in the period, with restrictions on movement
impacting performance particularly in the foodservice channel.
H1 2020 H1 2019
Analysis of Results % Change EUR'm EUR'm
-------------------------------------- --------- -------- --------
Revenue -4.3% 3,414.0 3,568.9
-------- --------
Trading profit -17.5% 315.9 382.9
Trading margin 9.3% 10.7%
Computer software amortisation (13.1) (12.9)
Finance costs (net) (37.3) (38.9)
-------- --------
Adjusted earnings before taxation 265.5 331.1
Income taxes (excluding non-trading
items) (31.8) (41.1)
-------- --------
Adjusted earnings after taxation 233.7 290.0
Brand related intangible asset
amortisation (20.6) (16.4)
Non-trading items (net of related
tax) - (34.2)
-------- --------
Profit after taxation 213.1 239.4
-------- --------
EPS EPS
Cent Cent
Basic EPS -11.1% 120.4 135.5
Brand related intangible asset
amortisation 11.7 9.3
Non-trading items (net of related
tax) - 19.3
-------- --------
Adjusted* EPS -19.5% 132.1 164.1
Impact of retranslating prior period
adjusted EPS at current period
average exchange rates - 0.6
-------- --------
Adjusted* EPS in constant currency -19.8% 132.1 164.7
-------- --------
* Before brand related intangible asset amortisation and
non-trading items (net of related tax)
Analysis of Results
Revenue
On a reported basis, Group revenue decreased by 4.3% to EUR3.4
billion (H1 2019: EUR3.6 billion), including a volume decrease of
6.0%, positive pricing of 0.4%, a positive translation currency
impact of 0.1% and contribution from business acquisitions of
1.2%.
H1 2019: Group reported revenue +10.7%, volume +3.3%, neutral
pricing, translation currency +2.7%, acquisitions +4.7%.
In Taste & Nutrition, reported revenue decreased by 4.0% to
EUR2.8 billion (H1 2019: EUR2.9 billion), including a volume
decrease of 5.6% , positive pricing of 0.1% , a positive
translation currency impact of 0.1% and contribution from business
acquisitions of 1.4% .
H1 2019: Taste & Nutrition reported revenue +13.0%, volume
+3.8%, neutral pricing, translation currency +3.3%, acquisitions
+5.9%.
In Consumer Foods, reported revenue decreased by 6.2% to EUR647m
(H1 2019: EUR689m), including a volume decrease of 7.8%, positive
pricing of 1.7% and an adverse transaction currency impact of 0.1%.
Excluding the impact of the ready meals contract exit, divisional
volumes would have decreased by 0.7%.
H1 2019: Consumer Foods reported revenue +0.6%, volume +0.6%,
pricing (0.3%), translation currency +0.3%.
Trading Profit & Margin
Group trading profit decreased by 17.5% to EUR315.9m (H1 2019:
EUR382.9m).
Group trading profit margin decreased by 140 basis points to
9.3%, reflecting significant operating deleverage and COVID-related
costs partially offset by cost mitigation actions, negative net
pricing and a benefit from net operational efficiencies.
Trading profit margin in Taste & Nutrition decreased by 170
basis points to 11.6%, reflecting significant operating deleverage
and COVID-related costs partially offset by cost mitigation
actions, and a benefit from net operational efficiencies.
Trading profit margin in Consumer Foods was maintained at 7.0%,
as efficiencies delivered from the 2019 Realignment Programme were
offset by net operating deleverage/portfolio mix, net COVID-related
costs partially offset by cost mitigation actions, and negative net
pricing in a challenging market.
Finance Costs (net)
Finance costs (net) for the period decreased to EUR37.3m (H1
2019: EUR38.9m) as cash generation and lower interest rates were
partially offset by acquisition activity.
Taxation
The tax charge for the period before non-trading items was
EUR31.8m (H1 2019: EUR41.1m) which represents an effective tax rate
of 13.0% (H1 2019: 13.0%).
Acquisitions
During the period, the Group completed the acquisition of
Tecnispice, Sociedad Anónima at a cost of EUR52.2m .
Adjusted EPS
Adjusted EPS in constant currency decreased by 19.8% in the
period due to the impact from COVID-19 on business performance (H1
2019: +8.4%). Adjusted EPS in reporting currency decreased by 19.5%
to 132.1 cent (H1 2019: 164.1 cent).
Basic EPS
Basic EPS decreased by 11.1% to 120.4 cent in the period (H1
2019: 135.5 cent).
Free Cash Flow
The Group achieved free cash flow of EUR107.0m (H1 2019:
EUR194.8m), reflecting the impact of COVID-19 on trading profit and
increased investment in working capital as we supported our
customers through this period.
H1 2020 H1 2019
Free Cash Flow EUR'm EUR'm
------------------------------------------------- -------- --------
Trading profit 315.9 382.9
Depreciation (net) 101.2 94.0
Movement in average working capital (116.4) (77.3)
Pension contributions paid less pension expense (3.8) (11.2)
-------- --------
Cash flow from operations 296.9 388.4
Finance costs paid (net) (25.1) (30.4)
Income taxes paid (35.7) (28.7)
Purchase of non-current assets (129.1) (134.5)
-------- --------
Free cash flow 107.0 194.8
-------- --------
Cash conversion(1) 46% 67%
(1) Cash conversion is free cash flow expressed as a percentage
of adjusted earnings after tax
Balance Sheet
A summary balance sheet as at 30 June 2020 is provided
below:
H1 2020 H1 2019 FY 2019
EUR'm EUR'm EUR'm
------------------------------- --------- --------- ---------
Property, plant and equipment 2,017.2 1,928.8 2,062.9
Intangible assets 4,564.1 4,380.0 4,589.7
Other non-current assets 202.2 171.1 179.5
Current assets 2,991.7 2,453.5 2,672.2
--------- --------- ---------
Total assets 9,775.2 8,933.4 9,504.3
--------- --------- ---------
Current liabilities 1,812.5 2,018.9 2,014.0
Non-current liabilities 3,454.2 2,728.0 2,928.1
--------- --------- ---------
Total liabilities 5,266.7 4,746.9 4,942.1
--------- --------- ---------
Net assets 4,508.5 4,186.5 4,562.2
--------- --------- ---------
Shareholders' equity 4,508.5 4,186.5 4,562.2
--------- --------- ---------
Property, Plant and Equipment
Property, plant and equipment decreased by EUR45.7m to
EUR2,017.2m (Dec 2019: EUR2,062.9m, H1 2019: EUR1,928.8m) due to
the depreciation charge and the impact of foreign exchange
translation partially offset by additions made in the period.
Intangible Assets
Intangible assets decreased by EUR25.6m to EUR4,564.1m (Dec
2019: EUR4,589.7m, H1 2019: EUR4,380.0m) due to the amortisation
charge and the impact of foreign exchange translation partially
offset by the acquisition made in the period.
Current Assets
Current assets increased by EUR319.5m to EUR2,991.7m (Dec 2019:
EUR2,672.2m, H1 2019: EUR2,453.5m), mainly due to increases in
cash, inventory and trade and other receivables.
Retirement Benefits
At the balance sheet date, the net deficit for all defined
benefit schemes (after deferred tax) was EUR78.8m (Dec 2019:
EUR8.6m, H1 2019: EUR64.4m). The increase in the net deficit from
year end was driven primarily by a reduction in scheme assets
valuation arising from market reaction to COVID-19 and adverse
movements in discount rates.
Net Debt
At 30 June 2020, net debt was EUR1,996.4m. This increase of
EUR133.6m relative to the December 2019 net debt of EUR1,862.8m
reflected acquisition investment and dividends, partially offset by
cash generated in the period. The Group completed a EUR200m tap
issuance onto its 2025 notes, a drawdown of EUR250m under the
revolving credit facility and exercised the first of the two 'plus
one' extension options on the revolving credit facility to further
enhance the maturity date of this facility to June 2025.
Return on Average Capital Employed (ROACE)
The Group achieved ROACE of 10.5% (H1 2019: 11.9%) reflecting
reduced profits as a result of the impact on business performance
from COVID-19.
Financial Ratios
The Group's balance sheet is in a healthy position. With a Net
debt to EBITDA* ratio of 2.0 times, the organisation has sufficient
headroom to support future growth plans. Other than EUR178.5m of
US$ Private Placements, the Group's debt is not subject to
financial covenants. Treasury monitors compliance with financial
covenants and at 30 June the covenants were as follows:
H1 2020 H1 2019 FY 2019
Covenant Times Times Times
------------- -------- --------
Net debt: EBITDA* Maximum 3.5 2.0 1.9 1.8
EBITDA: Net interest* Minimum 4.0 12.8 14.4 13.2
----------------------- ------------- -------- -------- --------
*Calculated on a pro-forma basis
Related Party Transactions
There were no changes in related party transactions from the
2019 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 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 period
end.
Average Rates Closing Rates
H1 2020 H1 2019 H1 2020 H1 2019
======================== ============== ============== ============== ==============
Australian Dollar 1.68 1.60 1.63 1.63
------------------------ -------------- -------------- -------------- --------------
Brazilian Real 5.15 4.38 5.92 4.37
------------------------ -------------- -------------- -------------- --------------
British Pound Sterling 0.87 0.87 0.90 0.89
------------------------ -------------- -------------- -------------- --------------
Chinese Yuan Renminbi 7.74 7.66 7.93 7.83
------------------------ -------------- -------------- -------------- --------------
Malaysian Ringgit 4.65 4.65 4.80 4.72
------------------------ -------------- -------------- -------------- --------------
Mexican Peso 23.49 21.68 25.40 21.76
------------------------ -------------- -------------- -------------- --------------
South African Rand 17.98 16.16 19.58 16.09
------------------------ -------------- -------------- -------------- --------------
US Dollar 1.10 1.13 1.12 1.14
------------------------ -------------- -------------- -------------- --------------
Principal Risks and Uncertainties
Details of the principal risks and uncertainties facing the
Group can be found in the 2019 Annual Report on pages 76 to 87. The
Group actively manages all risks through its control and risk
management process and these risks include but are not limited to;
portfolio management, Brexit, geopolitical/developing markets,
business acquisition and divestiture, talent management, quality,
food safety & regulatory, health & safety, margin
management, Kerryconnect, information security & cybercrime,
intellectual property management, taxation and treasury.
Within our geopolitical/developing markets strategic risk,
outlined on pages 78 and 79 of the 2019 Annual Report, global
pandemic outbreaks are identified as an area of potential impact.
The risks associated with a pandemic include the health and
wellbeing of our employees, disruption to our customers and supply
chain and, depending on scale, the potential impact on liquidity. A
key focus of the Group over the first half of the year has been
managing the impact of the COVID-19 pandemic which has had
significant consequences across the globe. Given the Group's
position as a leader in the food industry, it has played a role in
providing a safe and continuous food supply for people around the
world and this crisis has heightened the interdependencies between
a number of the Group's principal risks.
The Group's global crisis management team has led the Group's
response and focussed on:
Our People - protecting the health and wellbeing of employees
has been prioritised at all times and the Group has taken all
necessary steps and precautions as advised by global and local
authorities. These measures have included remote working where
possible, segregation and zoning, use of appropriate personal
protective equipment and increased sanitisation and screening
measures
Our Customers and Supply Chain - ensuring continuity of supply
as well as supporting customers on numerous fronts as they navigate
the short-term disruption caused by the crisis
Our Community - the Group has ensured that it has fulfilled its
responsibilities in relation to supporting the communities in which
it operates through its MyCommunity Initiative which has pledged
26,000 volunteer days and a EUR1 million fund to support local
community initiatives
The Group also further strengthened its liquidity position
through this period - by completing a EUR200m tap issuance onto our
2025 notes, a drawdown of EUR250m under the revolving credit
facility and also exercising the first of the two 'plus one'
extension options on our revolving credit facility to further
enhance the maturity date of this facility to June 2025.
In addition to managing the ongoing impact of the COVID-19
crisis in the second half of the year and beyond, the Group will
continue to monitor the impact of ongoing Brexit trade negotiations
as outlined previously. The Group has considered a number of
different scenarios and appropriate mitigation plans have been
developed.
Dividend
In line with our dividend strategy, the Board has declared an
interim dividend of 25.9 cent per share, compared to the prior year
interim dividend of 23.5 cent, payable on 13 November 2020 to
shareholders registered on the record date 16 October 2020.
Future Prospects
Due to the continued uncertainty in relation to the extent and
duration of the COVID-19 pandemic, we are not providing full year
earnings guidance at this time.
Our Taste & Nutrition business is focussed on managing
through the short-term challenges to emerge an even stronger
customer partner. The foodservice channel continues to recover
well, and we are focusing on particular growth areas in the
channel, while continuing to partner with customers on new menu
developments. The retail channel continues to deliver good growth
due to Kerry's co-creation model and leading solutions offering. We
have a good innovation pipeline with strong customer engagement to
meet the demands of the post-COVID consumer. Based on the current
prevailing environment, we see continued good recovery and momentum
in Taste & Nutrition and are currently estimating modestly
lower volumes in the third quarter versus the prior year.
Our Consumer Foods business continues to see short-term changes
in consumer purchasing behaviour with some variability across
categories. The business continues to selectively focus on growth
opportunities.
We will continue to invest for growth and pursue M&A
opportunities aligned to strategic growth priorities. Kerry's
unique business model, broad taste and nutrition portfolio and
industry-leading integrated solutions capabilities are more
critical than ever, as we support our customers through this
changing environment.
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 2020 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 2020, and a description of the principal risks and
uncertainties for the remaining six months; and
-- 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 Marguerite Larkin
Chief Executive Officer Chief Financial Officer
30 July 2020
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 2020
Kerry Group plc
Condensed Consolidated Income Statement
for the half year ended 30 June 2020
Half year Half year Year
ended ended ended
30 June 2020 30 June 2019 31 Dec. 2019
Unaudited Unaudited Audited
Notes EUR'm EUR'm EUR'm
Continuing operations
Revenue 2 3,414.0 3,568.9 7,241.3
_________ _________ _________
Trading profit 2 315.9 382.9 902.7
Intangible asset amortisation (33.7) (29.3) (64.3)
Non-trading items - (42.3) (110.9)
_________ _________ _________
Operating profit 282.2 311.3 727.5
Finance income 3 0.1 0.2 0.3
Finance costs 3 (37.4) (39.1) (81.9)
_________ _________ _________
Profit before taxation 244.9 272.4 645.9
Income taxes (31.8) (33.0) (79.4)
_________ _________ _________
Profit after taxation attributable to owners
of the parent 213.1 239.4 566.5
_________ _________ _________
Earnings per A ordinary
share Cent Cent Cent
- basic 4 120.4 135.5 320.4
- diluted 4 120.3 135.4 319.9
_________ _________ _________
Condensed Consolidated Statement of Comprehensive Income
for the half year ended 30 June 2020
Half year Half year Year
ended ended ended
30 June 2020 30 June 2019 31 Dec. 2019
Unaudited Unaudited Audited
EUR'm EUR'm EUR'm
Profit after taxation attributable to owners of the parent 213.1 239.4 566.5
Other comprehensive income:
Items that are or may be reclassified subsequently to profit or
loss:
Fair value movements on cash flow hedges 18.1 7.6 7.2
Cash flow hedges - reclassified to profit or loss from equity (5.2) 0.1 0.1
Net change in cost of hedging 0.1 1.5 0.6
Deferred tax effect of fair value movements on cash flow hedges (1.7) (1.2) (1.4)
Exchange difference on translation of foreign operations (116.4) 23.6 67.0
Fair value movement on revaluation of financial assets held at
fair value through other comprehensive
income (1.3) - (1.0)
Items that will not be reclassified subsequently to profit or
loss:
Re-measurement on retirement benefits obligation (87.9) (34.7) 14.0
Deferred tax effect of re-measurement on retirement benefits
obligation 17.3 5.1 (2.0)
_________ _________ _________
Net (expense)/income recognised directly in other comprehensive
income (177.0) 2.0 84.5
_________ _________ _________
Total comprehensive income 36.1 241.4 651.0
_________ _________ _________
Condensed Consolidated Balance Sheet
as at 30 June 2020
30 June 2020 30 June 2019 31 Dec. 2019
Unaudited Unaudited Audited
Notes EUR'm EUR'm EUR'm
Non-current assets
Property, plant and equipment 2,017.2 1,928.8 2,062.9
Intangible assets 4,564.1 4,380.0 4,589.7
Financial asset investments 39.8 39.5 41.7
Investment in associates and joint ventures 16.9 15.9 16.2
Other non-current financial instruments 105.9 79.3 82.7
Deferred tax assets 39.6 36.4 38.9
__________ ___________ ___________
6,783.5 6,479.9 6,832.1
__________ __________ ___________
Current assets
Inventories 1,093.4 1,029.8 993.3
Trade and other receivables 1,140.5 1,093.2 1,066.3
Cash at bank and in hand 7 736.1 267.4 554.9
Other current financial instruments 21.7 61.1 57.7
Assets classified as held for sale - 2.0 -
__________ __________ ___________
2,991.7 2,453.5 2,672.2
__________ __________ ___________
Total assets 9,775.2 8,933.4 9,504.3
__________ __________ ___________
Current liabilities
Trade and other payables 1,640.8 1,663.4 1,643.0
Borrowings and overdrafts 7 4.6 201.1 190.8
Other current financial instruments 9.5 5.2 12.1
Tax liabilities 128.7 123.9 140.7
Provisions 26.5 24.9 25.2
Deferred income 2.4 0.4 2.2
__________ __________ ___________
1,812.5 2,018.9 2,014.0
__________ __________ ___________
Non-current liabilities
Borrowings 7 2,833.8 2,107.9 2,355.3
Other non-current financial instruments - 0.2 -
Retirement benefits obligation 6 98.3 77.0 11.9
Other non-current liabilities 147.0 167.3 167.9
Deferred tax liabilities 322.8 324.8 338.9
Provisions 32.6 29.8 33.2
Deferred income 19.7 21.0 20.9
__________ __________ ___________
3,454.2 2,728.0 2,928.1
__________ __________ ___________
Total liabilities 5,266.7 4,746.9 4,942.1
__________ __________ ___________
Net assets 4,508.5 4,186.5 4,562.2
__________ __________ ___________
Issued capital and reserves attributable to owners of the parent
Share capital 8 22.1 22.0 22.1
Share premium 398.7 398.7 398.7
Other reserves (216.2) (167.7) (119.0)
Retained earnings 4,303.9 3,933.5 4,260.4
__________ __________ ___________
Shareholders' equity 4,508.5 4,186.5 4,562.2
__________ __________ ___________
Condensed Consolidated Statement of Changes in
Equity
for the half year ended 30 June 2020
Share Share Other Retained
Capital Premium Reserves Earnings Total
Note EUR'm EUR'm EUR'm EUR'm EUR'm
At 31 December 2018 - audited 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 - - - 239.4 239.4
Other comprehensive income/(expense) - - 32.8 (30.8) 2.0
________ ________ ________ ________ ________
Total comprehensive income - - 32.8 208.6 241.4
Dividends paid 5 - - - (86.7) (86.7)
Share-based payment expense - - 6.8 - 6.8
________ ________ ________ ________ ________
At 30 June 2019 - unaudited 22.0 398.7 (167.7) 3,933.5 4,186.5
Profit after tax attributable to owners
of the parent - - - 327.1 327.1
Other comprehensive income - - 41.1 41.4 82.5
________ ________ ________ ________ ________
Total comprehensive income - - 41.1 368.5 409.6
Shares issued during the period 0.1 - - - 0.1
Dividends paid 5 - - - (41.6) (41.6)
Share-based payment expense - - 7.6 - 7.6
________ ________ ________ ________ ________
At 31 December 2019 - audited 22.1 398.7 (119.0) 4,260.4 4,562.2
Profit after tax attributable to owners
of the parent - - - 213.1 213.1
Other comprehensive expense - - (104.7) (72.3) (177.0)
_______ ________ ________ ________ ________
Total comprehensive (expense)/income - - (104.7) 140.8 36.1
Dividends paid 5 - - - (97.3) (97.3)
Share-based payment expense - - 7.5 - 7.5
_______ _______ ________ ________ ________
At 30 June 2020 - unaudited 22.1 398.7 (216.2) 4,303.9 4,508.5
_______ _______ ________ ________ ________
Other Reserves comprise the
following:
Cost
Capital Other Share-Based 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 2019 1.6 1.7 0.3 63.3 (256.7) (15.5) (2.0) (207.3)
Other comprehensive
income - - - - 23.6 7.7 1.5 32.8
Share-based payment
expense - - - 6.8 - - - 6.8
_______ _______ _______ _______ _______ _______ _______ ______
At 30 June 2019 -
unaudited 1.6 1.7 0.3 70.1 (233.1) (7.8) (0.5) (167.7)
Other comprehensive
(expense)/income (1.0) - - - 43.4 (0.4) (0.9) 41.1
Share-based payment
expense - - - 7.6 - - - 7.6
_______ _______ _______ _______ _______ _______ _______ ______
At 31 December 2019
-
audited 0.6 1.7 0.3 77.7 (189.7) (8.2) (1.4) (119.0)
Other comprehensive
(expense)/income (1.3) - - - (116.4) 12.9 0.1 (104.7)
Share-based payment
expense - - - 7.5 - - - 7.5
_______ _______ _______ _______ _______ _______ _______ ______
At 30 June 2020 -
unaudited (0.7) 1.7 0.3 85.2 (306.1) 4.7 (1.3) (216.2)
_______ _______ _______ _______ _______ _______ _______ ______
Condensed Consolidated Statement of Cash Flows
for the half year ended 30 June 2020
Year
Half year Half year ended
ended ended 31 Dec.
30 June 2020 30 June 2019 2019
Unaudited Unaudited Audited
Notes EUR'm EUR'm EUR'm
Operating activities
Trading profit 315.9 382.9 902.7
Adjustments for:
Depreciation (net) 101.2 94.0 191.4
Change in working capital (197.9) (133.5) (63.9)
Pension contributions paid less pension expense (3.8) (11.2) (26.7)
Payments on non-trading items (25.3) (29.3) (89.1)
Exchange translation adjustment 2.2 (0.5) (2.5)
_________ __________ __________
Cash generated from operations 192.3 302.4 911.9
Income taxes paid (35.7) (28.7) (67.2)
Finance income received 0.1 0.2 0.5
Finance costs paid (25.2) (30.6) (81.3)
_________ __________ __________
Net cash from operating activities 131.5 243.3 763.9
_________ __________ __________
Investing activities
Purchase of assets (net) (111.4) (123.8) (315.6)
Proceeds from the sale of assets - 6.4 32.8
Capital grants received - - 3.0
Purchase of businesses (net of cash acquired) 9 (30.8) (324.0) (562.7)
Payments relating to previous acquisitions (3.8) (5.3) (5.3)
Income received from joint ventures 0.7 0.2 -
_________ __________ __________
Net cash used in investing activities (145.3) (446.5) (847.8)
_________ __________ __________
Financing activities
Dividends paid 5 (97.3) (86.7) (128.3)
Payment of lease liabilities (17.7) (17.1) (35.5)
Issue of share capital 8 - - 0.1
Repayment of borrowings (net of swaps) (141.2) (3.9) (564.4)
Increase in borrowings 463.6 155.5 950.0
_________ __________ __________
Net cash movement due to financing activities 207.4 47.8 221.9
_________ __________ __________
Net increase/(decrease) in cash and cash equivalents 193.6 (155.4) 138.0
Cash and cash equivalents at beginning of period 549.7 403.9 403.9
Exchange translation adjustment on cash and cash
equivalents (11.8) 2.3 7.8
_________ __________ __________
Cash and cash equivalents at end of period 7 731.5 250.8 549.7
_________ __________ __________
Reconciliation of Net Cash Flow to Movement in
Net Debt
Net increase/(decrease) in cash and cash equivalents 193.6 (155.4) 138.0
Cash flow from debt financing (322.4) (145.0) (385.6)
__________ __________ ___________
Changes in net debt resulting from cash flows (128.8) (300.4) (247.6)
Fair value movement on interest rate swaps (net
of adjustment to borrowings) 8.2 7.9 12.5
Exchange translation adjustment on net debt (13.0) (2.2) (4.2)
_________ __________ __________
Movement in net debt in the period (133.6) (294.7) (239.3)
Net debt at beginning of period (1,862.8) (1,623.5) (1,623.5)
_________ __________ __________
Net debt at end of period 7 (1,996.4) (1,918.2) (1,862.8)
_________ __________ __________
Notes to the Condensed Consolidated Interim Financial
Statements
for the half year ended 30 June 2020
1. Accounting policies
These Condensed Consolidated Interim Financial Statements for
the half year ended 30 June 2020 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 2019 Annual Report.
The following Standards and Interpretations are effective for the Group from 1 January 2020 Effective Date
but do not 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 & IFRS 7 (Amendments) Interest Rate Benchmark Reform 1 January 2020
- IAS 1 (Amendments) Presentation of Financial Statements 1 January 2020
- IAS 8 (Amendments) Accounting Policies, Changes in Accounting Estimates and 1 January 2020
Errors
- The Conceptual Framework Revised Conceptual Framework for Financial Reporting 1 January 2020
The following Standard is not yet effective for the Group and is not expected to have a material Effective Date
effect on the results or financial position of the Group:
- IFRS 17 Insurance Contracts 1 January 2021
Going concern
The current unprecedented economic environment has created
uncertainty in relation to the timing of a return to efficient
production in certain categories of the Group's business, future
consumer behaviour and the associated recovery of sales volumes and
trading margins. The timing and shape of recovery is uncertain, and
accordingly, the Group has considered a number of scenarios, taking
account of current levels of trading and the consequential impact
on cash flows, including working capital.
The Group Condensed Consolidated Interim Financial Statements
have been prepared on the going concern basis of accounting. The
Directors have considered the Group's business activities and how
it generates value, together with the main trends and factors
likely to affect future development, business performance and
position of the Group including the impact of the current pandemic.
Due to the uncertainty of the ongoing duration and impact of the
pandemic on mobility restrictions in different countries around the
world, additional stressed scenarios, reflecting different levels
and timing of recovery, have been considered. In these scenarios,
the Group has sufficient resources and liquidity headroom. There
are no material uncertainties that cast a significant doubt on the
Group's ability to continue as a going concern over a period of at
least 12 months.
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.
Critical accounting estimates and judgements
The preparation of the Group Condensed Consolidated Interim
Financial Statements requires management to make certain
estimations, assumptions and judgements that affect the reported
profits, assets and liabilities. Estimates and underlying
assumptions are reviewed on an ongoing basis. Changes in accounting
estimates may be necessary if there are changes in the
circumstances on which the estimate was based or as a result of new
information or more experience. Such changes are recognised in the
period in which the estimate is revised.
In preparing the Group Condensed Consolidated Interim Financial
Statements, the significant judgements made by management in
applying the Group's accounting policies and the key sources of
estimation uncertainty were the same as those applied to the
Consolidated Financial Statements for the year ended 31 December
2019 with the addition of COVID-19 related uncertainty as set out
below.
The COVID-19 pandemic has become a worldwide crisis and at the
date of this report it continues to evolve. We have considered the
impact of this on our business and reassessed our principal risks
and uncertainties.
The key impacts of COVID-19 up to 30 June 2020 include:
- All plants remained open except for a limited number of those that were mandated to close
temporarily in specific jurisdictions. While there were changes to shift patterns and ways
of working to ensure the safety of employees through additional segregation and cleaning routines,
there were no indicators of impairment to property, plant and equipment. There were also no
rationalisations as a result of COVID-19.
- The Group considered the impact of the global pandemic on its impairment risk on the carrying
value of the goodwill and indefinite life intangible assets and given there was significant
headroom, no impairment was identified.
- While supporting our customers during this crisis through the carrying of additional inventory
and receivable balances, the Group has assessed the additional risks and to date, does not
believe there is additional risks around the recovery of these assets.
- The impact of the mobility restrictions globally has impacted the Group's revenue and profitability,
most significantly in the foodservice part of the Group's business; however, this channel
is showing signs of recovery as mobility restrictions are lifted. The foodservice business
represented approximately 30% of the Taste & Nutrition business segment in 2019.
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
industries 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 a
leader in its categories in the chilled cabinet primarily in
Ireland and in the UK.
Half year ended 30 June 2020 - Unaudited Half year ended 30 June 2019 - Unaudited Year ended 31 December 2019 - Audited
Group Group Group
Eliminations Eliminations Eliminations
Taste & Consumer and Taste & Consumer and Taste & Consumer and
Nutrition Foods Unallocated Total Nutrition Foods Unallocated Total Nutrition Foods Unallocated Total
EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
External
revenue 2,770.1 643.9 - 3,414.0 2,882.2 686.7 - 3,568.9 5,939.1 1,302.2 - 7,241.3
Inter-segment
revenue 28.5 2.7 (31.2) - 32.6 2.7 (35.3) - 78.5 4.4 (82.9) -
_______ _______ _______ _______ _______ _______ _______ _______ _______ _______ _______ _______
Revenue 2,798.6 646.6 (31.2) 3,414.0 2,914.8 689.4 (35.3) 3,568.9 6,017.6 1,306.6 (82.9) 7,241.3
_______ _______ _______ _______ _______ _______ _______ _______ _______ _______ _______ _______
Trading profit 324.8 45.1 (54.0) 315.9 388.1 48.0 (53.2) 382.9 918.5 98.9 (114.7) 902.7
_______ _______ _______ _______ _______ _______ _______ _______ _______
Intangible asset
amortisation (33.7) (29.3) (64.3)
Non-trading items - (42.3) (110.9)
_______ _______ _______
Operating
profit 282.2 311.3 727.5
Finance income 0.1 0.2 0.3
Finance costs (37.4) (39.1) (81.9)
_______ _______ _______
Profit before taxation 244.9 272.4 645.9
Income taxes (31.8) (33.0) (79.4)
_______ _______ _______
Profit after taxation attributable to owners of the
parent 213.1 239.4 566.5
_______ _______ _______
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. 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
Half year ended 30 June Half year ended 30 June Year ended 31 December
2020 - Unaudited 2019 - Unaudited 2019 - Audited
Taste & Consumer Taste Consumer Taste Consumer
Nutrition Foods Total & Nutrition Foods Total & Nutrition Foods Total
EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
Food 1,944.0 643.9 2,587.9 2,021.9 686.7 2,708.6 4,161.5 1,302.2 5,463.7
Beverage 680.1 - 680.1 734.0 - 734.0 1,507.6 - 1,507.6
Pharma 146.0 - 146.0 126.3 - 126.3 270.0 - 270.0
_______ _______ _______ _______ _______ _______ _______ _______ _______
External
revenue 2,770.1 643.9 3,414.0 2,882.2 686.7 3,568.9 5,939.1 1,302.2 7,241.3
_______ _______ _______ _______ _______ _______ _______ _______ _______
Analysis by primary geographic market
Disaggregation of revenue from external customers is analysed by
geographical split:
Half year ended 30 June Half year ended 30 June Year ended 31 December
2020 - Unaudited 2019 - Unaudited 2019 - Audited
Taste & Consumer Taste & Consumer Taste Consumer
Nutrition Foods Total Nutrition Foods Total & Nutrition Foods Total
EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
Republic of
Ireland 79.5 142.5 222.0 88.0 144.8 232.8 184.9 252.5 437.4
Rest of
Europe 577.7 501.4 1,079.1 629.7 541.9 1,171.6 1,271.5 1,049.7 2,321.2
Americas 1,546.5 - 1,546.5 1,556.3 - 1,556.3 3,197.8 - 3,197.8
APMEA* 566.4 - 566.4 608.2 - 608.2 1,284.9 - 1,284.9
_______ _______ _______ _______ _______ _______ _______ _______ _______
External
revenue 2,770.1 643.9 3,414.0 2,882.2 686.7 3,568.9 5,939.1 1,302.2 7,241.3
_______ _______ _______ _______ _______ _______ _______ _______ _______
* Asia Pacific, Middle East and Africa
The accounting policies of the reportable segments are the same
as those detailed in the Statement of accounting policies in the
2019 Annual Report. Under IFRS 15 'Revenue from Contracts with
Customers' revenue is primarily recognised at a point in time.
Revenue recorded over time during the period was not material to
the Group.
3. Finance income and costs
Half year Half year Year
ended ended ended
30 June 2020 30 June 2019 31 Dec. 2019
Unaudited Unaudited Audited
EUR'm EUR'm EUR'm
Finance income:
Interest income on deposits 0.1 0.2 0.3
__________ __________ ___________
Finance costs:
Interest payable (36.9) (39.7) (84.0)
Interest rate derivative (0.5) 1.0 2.9
__________ __________ ___________
(37.4) (38.7) (81.1)
Net interest cost on retirement benefits
obligation - (0.4) (0.8)
__________ __________ ___________
Finance costs (37.4) (39.1) (81.9)
__________ __________ ___________
4. Earnings per A ordinary share
Half year Half year Year
ended ended ended
30 June 2020 30 June 2019 31 Dec. 2019
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 120.4 213.1 135.5 239.4 320.4 566.5
______ ______ ______ ______ ______ ______
Diluted earnings per share
Profit after taxation attributable to owners of
the parent 120.3 213.1 135.4 239.4 319.9 566.5
______ ______ ______ ______ ______ ______
30 June 2020 30 June 2019 31 Dec. 2019
Unaudited Unaudited Audited
Number of Shares m's m's m's
Basic weighted average number of shares 176.9 176.7 176.8
Impact of share options outstanding 0.2 0.1 0.3
_______ _______ _______
Diluted weighted average number of shares 177.1 176.8 177.1
_______ _______ _______
5. Dividends
Half year Half year Year
ended ended ended
30 June 2020 30 June 2019 31 Dec. 2019
Unaudited Unaudited Audited
EUR'm EUR'm EUR'm
Amounts recognised as distributions to equity shareholders in
the period
Final 2019 dividend of 55.10 cent per A ordinary share paid 15
May 2020
(Final 2018 dividend of 49.20 cent per A ordinary share paid
10 May 2019) 97.3 86.7 86.7
Interim 2019 dividend of 23.50 cent per A ordinary share paid
15 November 2019 - - 41.6
________ ________ _________
97.3 86.7 128.3
________ ________ _________
Since the end of the period, the Board has proposed an interim
dividend of 25.90 cent per A ordinary share which amounts to
EUR45.8m. The payment date for the interim dividend will be 13
November 2020 to shareholders registered on the record date as at
16 October 2020. These Condensed Consolidated Interim Financial
Statements do not reflect this dividend.
6. 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 2020 30 June 2019 31 Dec. 2019
Unaudited Unaudited Audited
EUR'm EUR'm EUR'm
Net recognised deficit in plans before deferred tax (98.3) (77.0) (11.9)
Net related deferred tax asset 19.5 12.6 3.3
________ ________ _________
Net recognised deficit in plans after deferred tax (78.8) (64.4) (8.6)
________ ________ _________
At 30 June 2020, the net deficit before deferred tax for defined
benefit post-retirement schemes was EUR98.3m (30 June 2019:
EUR77.0m; 31 December 2019: EUR11.9m). This was calculated by
rolling forward the defined benefit post-retirement schemes'
liabilities at 31 December 2019 to reflect material movements in
underlying assumptions over the period while the defined benefit
post-retirement schemes' assets at 30 June 2020 are measured at
market value. The increase in the net deficit before deferred tax
of EUR86.4m was driven by both a reduction in scheme assets arising
from market reactions to the COVID-19 pandemic and adverse
movements in discount rates.
7. Financial instruments
i) The following table outlines the financial assets and
liabilities in relation to net debt held by the Group at the
balance sheet date:
Liabilities
Financial Assets/ at Fair Value Derivatives Assets/
(Liabilities) at through Designated as (Liabilities) at
Amortised Cost Profit or Loss Hedging Instruments FVOCI Total
EUR'm EUR'm EUR'm EUR'm EUR'm
Assets:
Interest rate swaps - - 105.9 - 105.9
Cash at bank and in
hand 736.1 - - - 736.1
__________ __________ __________ __________ __________
736.1 - 105.9 - 842.0
__________ __________ __________ __________ __________
Liabilities:
Bank overdrafts (4.6) - - - (4.6)
Bank loans (250.0) - - - (250.0)
Senior notes (2,544.6) (39.2) - - (2,583.8)
__________ __________ __________ __________ __________
Borrowings and
overdrafts (2,799.2) (39.2) - - (2,838.4)
__________ __________ __________ __________ __________
At 30 June 2020 -
unaudited (2,063.1) (39.2) 105.9 - (1,996.4)
__________ __________ __________ __________ __________
Assets:
Interest rate swaps - - 123.4 - 123.4
Cash at bank and in
hand 267.4 - - - 267.4
___________ ___________ ___________ ___________ __________
267.4 - 123.4 - 390.8
___________ ___________ ___________ ___________ __________
Liabilities:
Bank overdrafts (16.6) - - - (16.6)
Banks loans (499.9) - - - (499.9)
Senior notes (1,763.0) (29.5) - - (1,792.5)
___________ ___________ ___________ ___________ ___________
Borrowings and
overdrafts (2,279.5) (29.5) - - (2,309.0)
___________ ___________ ___________ ___________ ___________
At 30 June 2019 -
unaudited (2,012.1) (29.5) 123.4 - (1,918.2)
___________ ___________ ___________ ___________ ___________
Assets:
Interest rate swaps - - 128.4 - 128.4
Cash at bank and in
hand 554.9 - - - 554.9
___________ ___________ ___________ ___________ ___________
554.9 - 128.4 - 683.3
___________ ___________ ___________ ___________ ___________
Liabilities:
Bank overdrafts (5.2) - - - (5.2)
Bank loans (1.2) - - - (1.2)
Senior notes (2,514.8) (24.9) - - (2,539.7)
___________ ___________ ___________ ___________ __________
Borrowings and
overdrafts (2,521.2) (24.9) - - (2,546.1)
___________ ___________ ___________ ___________ __________
At 31 December 2019 -
audited (1,966.3) (24.9) 128.4 - (1,862.8)
___________ ___________ ___________ ___________ __________
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, US$250m of the 2013 senior notes and US$500m
of the 2010 US$600m senior notes were swapped, using cross currency
swaps, to euro. US$192m of the 2010 senior notes were repaid in
January 2017 and the related swaps matured at that date. In
addition, the Group holds EUR750m of senior notes issued in 2015,
of which EUR175m were swapped, using cross currency swaps, to US
dollar. No interest rate derivatives were entered into for the
September 2019 EUR750m senior notes issuance or on the EUR200m tap
issuance of the 2015 senior notes issued during the period, which
will mature in 2025.
The adjustment to senior notes classified under liabilities at
fair value through profit or loss of EUR39.2m (30 June 2019:
EUR29.5m; 31 December 2019: EUR24.9m) represents the part
adjustment to the carrying value of debt from applying fair value
hedge accounting for interest rate risk. This amount is primarily
offset by the fair value adjustment on the corresponding hedge
items being the underlying cross currency interest rate swaps.
ii) The Group's exposure to interest rates on financial assets
and liabilities are detailed in the table below including the
impact of cross currency swaps (CCS) on the currency profile of net
debt:
Total Pre CCS Impact of CCS Total after CCS
Half year ended Half year ended Half year ended Half year ended Year ended
30 June 2020 30 June 2020 30 June 2020 30 June 2019 31 Dec. 2019
Unaudited Unaudited Unaudited Unaudited Audited
EUR'm EUR'm EUR'm EUR'm EUR'm
Euro (1,427.1) (226.6) (1,653.7) (1,509.0) (1,594.1)
Sterling 74.0 - 74.0 47.0 77.9
US Dollar (717.4) 226.6 (490.8) (498.3) (475.8)
Other 74.1 - 74.1 42.1 129.2
_________ _________ _________ _________ _________
(1,996.4) - (1,996.4) (1,918.2) (1,862.8)
_________ _________ _________ _________ _________
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 736.1 - - - 736.1
Interest rate swaps - 33.2 63.2 9.5 105.9
Bank overdrafts (4.6) - - - (4.6)
Bank loans - - (250.0) - (250.0)
Senior notes - (117.9) (758.5) (1,707.4) (2,583.8)
_________ _________ _________ _________ _________
At 30 June 2020 - unaudited 731.5 (84.7) (945.3) (1,697.9) (1,996.4)
_________ _________ _________ _________ _________
Cash at bank and in hand 267.4 - - - 267.4
Interest rate swaps 44.2 - 44.9 34.3 123.4
Bank overdrafts (16.6) - - - (16.6)
Bank loans - (1.4) (498.5) - (499.9)
Senior notes (184.5) - (775.1) (832.9) (1,792.5)
__________ __________ __________ __________ __________
At 30 June 2019 - unaudited 110.5 (1.4) (1,228.7) (798.6) (1,918.2)
__________ __________ __________ __________ __________
Cash at bank and in hand 554.9 - - - 554.9
Interest rate swaps 45.7 - 52.0 30.7 128.4
Bank overdrafts (5.2) - - - (5.2)
Bank loans - (1.2) - - (1.2)
Senior notes (185.6) - (784.6) (1,569.5) (2,539.7)
__________ __________ __________ __________ __________
At 31 December 2019 - audited 409.8 (1.2) (732.6) (1,538.8) (1,862.8)
__________ __________ __________ __________ __________
Following the renewal of the revolving credit facility in June
2019 and the issuance of EUR750m senior notes in September 2019,
the Group entered 2020 with significant available liquidity. Since
the beginning of 2020, this position was further strengthened by
(a) completing a EUR200m tap issuance onto our 2025 notes and (b)
the exercise of the first of the two 'plus one' extension options
on our revolving credit facility to further enhance the maturity
date of this facility to June 2025.
At 30 June 2020, the Group had cash on hand of EUR736.1m,
including EUR250m of a drawdown under the revolving credit
facility. At the period end, the Group had undrawn committed bank
facilities of EUR850m.
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).
The following table sets out the fair value of financial instruments carried at fair value:
Fair 30 June 2020 30 June 2019 31 Dec. 2019
Value Unaudited Unaudited Audited
Hierarchy EUR'm EUR'm EUR'm
Financial assets
Interest rate swaps: Non-current Level 2 105.9 79.2 82.7
Current Level 2 - 44.2 45.7
Forward foreign exchange
contracts: Non-current Level 2 - 0.1 -
Current Level 2 21.7 16.9 12.0
Fair value through profit or
Financial asset investments: loss Level 1 36.8 34.2 37.4
Fair value through other
comprehensive
income Level 3 3.0 5.3 4.3
Financial liabilities
Forward foreign exchange
contracts: Non-current Level 2 - (0.2) -
Current Level 2 (9.5) (5.2) (12.1)
_________ __________ __________
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 Fair Carrying Fair
Amount Value Amount Value Amount Value
Fair 30 June 2020 30 June 2020 30 June 2019 30 June 2019 31 Dec. 2019 31 Dec. 2019
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 (2,366.1) (2,464.4) (1,404.0) (1,465.6) (2,151.4) (2,217.1)
Senior notes -
Private Level 2 (178.5) (195.1) (359.0) (376.9) (363.4) (372.9)
_________ _________ __________ __________ __________ __________
(2,544.6) (2,659.5) (1,763.0) (1,842.5) (2,514.8) (2,590.0)
_________ _________ __________ __________ __________ __________
c) Valuation principles
The fair value of financial assets and liabilities are
determined as follows:
- assets and liabilities with standard terms and conditions
which are traded on active liquid markets are determined with
reference to quoted market prices. This includes equity
investments;
- 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. This includes interest rate swaps and forward foreign
exchange contracts which are determined by discounting the
estimated future cash flows;
- the fair values of financial instruments that are not based on
observable market data (unobservable inputs) requires entity
specific valuation techniques; 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
Cash at Interest Overdrafts Borrowings Borrowings
bank and Rate due within due with due after Net Lease
in hand Swaps 1 year* 1 year* 1 year* debt liabilities* Total
EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
At 31
December
2018 -
audited 413.8 96.2 (9.9) (3.9) (2,119.7) (1,623.5) - (1,623.5)
Cash flows (148.8) - (6.6) 3.9 (148.9) (300.4) (17.1) (317.5)
Foreign
exchange
adjustments 2.4 - (0.1) - (4.5) (2.2) - (2.2)
Other
non-cash
movements - 27.2 - (184.5) 165.2 7.9 (93.1) (85.2)
_________ _________ _________ _________ _________ _________ _________ _________
At 30 June
2019
- unaudited 267.4 123.4 (16.6) (184.5) (2,107.9) (1,918.2) (110.2) (2,028.4)
_________ _________ _________ _________ _________ _________ _________ _________
Cash flows 281.9 - 11.5 - (240.6) 52.8 (18.4) 34.4
Foreign
exchange
adjustments 5.6 - (0.1) - (7.5) (2.0) - (2.0)
Other
non-cash
movements - 5.0 - (1.1) 0.7 4.6 19.2 23.8
_________ _________ _________ _________ _________ _________ _________ _________
At 31
December
2019 -
audited 554.9 128.4 (5.2) (185.6) (2,355.3) (1,862.8) (109.4) (1,972.2)
_________ _________ _________ _________ _________ _________ _________ _________
Cash flows 193.1 (45.4) 0.5 185.3 (462.3) (128.8) 17.7 (111.1)
Foreign
exchange
adjustments (11.9) - 0.1 - (1.2) (13.0) 2.8 (10.2)
Other
non-cash
movements - 22.9 - 0.3 (15.0) 8.2 0.3 8.5
_________ _________ _________ _________ _________ _________ _________ _________
At 30 June
2020
- unaudited 736.1 105.9 (4.6) - (2,833.8) (1,996.4) (88.6) (2,085.0)
_________ _________ _________ _________ _________ _________ _________ _________
* Liabilities from
financing
activities.
8. Share capital
Half year Half year Year
ended ended ended
30 June 2020 30 June 2019 31 Dec. 2019
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 22.1 22.0 22.0
Shares issued during the financial period - - 0.1
_________ _________ _________
At end of the financial period 22.1 22.0 22.1
_________ _________ _________
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 166,495 A ordinary shares each with
a nominal value of 12.50 cent, were issued at nominal value per
share under the Long Term Incentive Plan and Short Term Incentive
Plan.
The total number of shares in issue at 30 June 2020 was
176,681,437 (30 June 2019: 176,477,146; 31 December 2019:
176,514,942).
9. Business combinations
During the period, the Group completed one acquisition which is
100% owned by the Group.
Acquisition Acquired Principal activity
Tecnispice, Sociedad Anónima April Tecnispice, located in Guatemala, is a leading savoury taste
business servicing the meat and snacks markets incorporating
spices, herbs and seasonings.
The total consideration for this acquisition was EUR52.2m, of
which EUR18.0m was prepaid in December 2019 and EUR3.3m is a
deferred element. The resulting cash outflow in the period, net of
cash acquired of EUR0.1m for this acquisition, was EUR30.8m.
Transaction expenses related to this acquisition were charged
against trading profit in the Group Condensed Consolidated Income
Statement during the period and represented less than one percent
of the total consideration.
The provisional fair value of net assets acquired before
combination were EUR10.6m and the Group recognised goodwill on this
acquisition of EUR41.6m. 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 business
and the synergies expected to arise within the Group after the
acquisition. None of the goodwill recognised is expected to be
deductible for income tax purposes.
The acquisition method of accounting has been used to
consolidate the business acquired in the Group Condensed
Consolidated Interim Financial Statements. Due to the fact that
this acquisition was recently completed, the revenue and results
included in the Group's reported figures are not material. For the
acquisitions completed in 2019, to date, 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'. As a result, the acquisition completed during the
period was not considered material to warrant detailed separate
disclosure in line with IFRS 3 requirements.
10. Events after the Balance Sheet date
Since the period end, the Group has proposed an interim dividend
of 25.90 cent per A ordinary share (see note 5).
There have been no other significant events, outside of the
ordinary course of business, affecting the Group since 30 June
2020.
11. General information
These unaudited Condensed Consolidated Interim Financial
Statements for the half year ended 30 June 2020 are not full
financial statements and were not reviewed by the auditors. These
Condensed Consolidated Interim Financial Statements were approved
by the Board of Directors and authorised for issue on 30 July 2020.
The figures disclosed relating to 31 December 2019 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. This report should be read in
conjunction with the 2019 Annual Report which was prepared in
accordance with International Financial Reporting Standards
('IFRS') and the International Financial Reporting Interpretations
Committee ('IFRIC') and those parts of the Companies Act, 2014
applicable to companies reporting under IFRS. The Group 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 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
refer to IFRS adopted by the EU.
These unaudited Condensed Consolidated Interim Financial
Statements have been prepared on the going concern basis of
accounting as set out in note 1. 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. Due to the impact of the COVID-19
pandemic, the Group's performance was negatively impacted in the
first half of the year. The level of impact in H2 2020 will depend
on the duration of the current COVID-19 mobility restrictions
globally and the pace of recovery, as these restriction measures
are eased.
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 performance
This represents the sales performance year-on-year, excluding
pass-through pricing on raw material costs, currency impacts,
acquisitions (net of disposals) and rationalisation volumes.
Volume performance 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 performance
positively or negatively depending on whether raw material prices
move up or down. A full reconciliation to reported revenue
performance is detailed in the revenue reconciliation below.
Revenue Reconciliation
Reported
Volume Transaction Acquisitions/ Translation revenue
H1 2020 performance Price currency Disposals currency performance
------------------ -------------- -------- ---------------- ---------------- ----------------- --------------
Taste & Nutrition (5.6%) 0.1% - 1.4% 0.1% (4.0%)
Consumer Foods (7.8%) 1.7% (0.1%) - - (6.2%)
-------------- -------- ---------------- ---------------- ----------------- --------------
Group (6.0%) 0.4% - 1.2% 0.1% (4.3%)
H1 2019
------------------ -------------- -------- ---------------- ---------------- ----------------- --------------
Taste & Nutrition 3.8% - - 5.9% 3.3% 13.0%
Consumer Foods 0.6% (0.3%) - - 0.3% 0.6%
-------------- -------- ---------------- ---------------- ----------------- --------------
Group 3.3% - - 4.7% 2.7% 10.7%
------------------- -------------- -------- ---------------- ---------------- ----------------- --------------
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.
H1 2020 H1 2019
EUR'm EUR'm
------------------------------------------------------------ ---------- --------------
Profit after taxation attributable to owners of the parent 213.1 239.4
Finance income (0.1) (0.2)
Finance costs 37.4 39.1
Income taxes 31.8 33.0
Non-trading items - 42.3
Intangible asset amortisation 33.7 29.3
Depreciation (net of capital grant amortisation) 101.2 94.0
EBITDA 417.1 476.9
------------------------------------------------------------ ---------- --------------
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 2020 H1 2019
EUR'm EUR'm
------------------------------- -------- --------
Operating profit 282.2 311.3
Intangible asset amortisation 33.7 29.3
Non-trading items - 42.3
------------------------------- -------- --------
Trading profit 315.9 382.9
------------------------------- -------- --------
4. Trading Margin
Trading margin represents trading profit, expressed as a
percentage of revenue.
H1 2020 H1 2019
EUR'm EUR'm
---------------- -------- --------
Trading profit 315.9 382.9
Revenue 3,414.0 3,568.9
Trading margin 9.3% 10.7%
---------------- -------- --------
5. Operating Profit
Operating profit is profit before income taxes, finance income
and finance costs.
H1 2020 H1 2019
EUR'm EUR'm
------------------------ -------- --------
Profit before taxation 244.9 272.4
Finance income (0.1) (0.2)
Finance costs 37.4 39.1
Operating profit 282.2 311.3
------------------------ -------- --------
6. Adjusted Earnings Per Share and Performance in Adjusted
Earnings Per Share on a Constant Currency Basis
The performance 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 per share is
provided below. Constant currency eliminates the translational
effect that arises from changes in foreign currency year-on-year.
The performance 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 2020 H1 2019
EPS EPS
cent cent
-------------------------------------------------------------------------------------------- -------- --------
Basic earnings per share 120.4 135.5
Brand related intangible asset amortisation 11.7 9.3
Non-trading items (net of related tax) - 19.3
Adjusted earnings per share 132.1 164.1
Impact of retranslating prior period adjusted earnings per share at current period average
exchange rates - 0.6
Adjusted earnings per share on a constant currency basis 132.1 164.7
--------------------------------------------------------------------------------------------
Performance in adjusted earnings per share on a constant currency basis (19.8%) 8.4%
-------------------------------------------------------------------------------------------- -------- --------
7. Free Cash Flow
Free cash flow is trading profit plus depreciation, movement in
average working capital, capital expenditure, payment of lease
liabilities, 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 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'.
H1 2020 H1 2019
EUR'm EUR'm
------------------------------------------------------------------------------------------- -------- --------
Net cash from operating activities 131.5 243.3
Difference between movement in monthly average working capital and movement in the period
end working capital 81.5 56.2
Expenditure on acquisition integration and restructuring costs 25.3 29.3
Purchase of assets (111.4) (123.8)
Payment of lease liabilities (17.7) (17.1)
Proceeds from the sale of property, plant and equipment - 6.4
Capital grants received - -
Exchange translation adjustment (2.2) 0.5
Free cash flow 107.0 194.8
------------------------------------------------------------------------------------------- -------- --------
8. Cash Conversion
Cash conversion is defined as free cash flow, expressed as a
percentage of adjusted earnings after tax.
H1 2020 H1 2019
EUR'm EUR'm
------------------------------------------------------------ -------- --------
Free cash flow 107.0 194.8
Profit after taxation attributable to owners of the parent 213.1 239.4
Brand related intangible asset amortisation 20.6 16.4
Non-trading items (net of related tax) - 34.2
Adjusted earnings after tax 233.7 290.0
------------------------------------------------------------ -------- --------
Cash Conversion 46% 67%
------------------------------------------------------------ -------- --------
9. 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), deferred
payments in relation to acquisitions and lease liabilities. As
outlined on page 185 of the 2019 Annual Report, these ratios are
calculated in accordance with lenders' facility agreements and
these agreements specifically require these adjustments in the
calculation.
H1 2020 H1 2019
Covenant Times Times
---------------------- ------------- -------- --------
Net debt: EBITDA Maximum 3.5 2.0 1.9
EBITDA: Net interest Minimum 4.0 12.8 14.4
---------------------- ------------- -------- --------
10. Net Debt
Net debt comprises of borrowings and overdrafts, interest rate
derivative financial instruments and cash at bank and in hand. See
full reconciliation of net debt in note 7 of these Condensed
Consolidated Interim Financial Statements.
11. 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.
H1 2020 2019 H1 2019 2018 H1 2018
EUR'm EUR'm EUR'm EUR'm EUR'm
--------------------------------------------- -------- -------- -------- -------- --------
Shareholders' equity 4,508.5 4,562.2 4,186.5 4,034.4 3,773.6
Goodwill amortised (pre conversion to IFRS) 527.8 527.8 527.8 527.8 527.8
Adjusted equity 5,036.3 5,090.0 4,714.3 4,562.2 4,301.4
Net debt 1,996.4 1,862.8 1,918.2 1,623.5 1,403.3
Total 7,032.7 6,952.8 6,632.5 6,185.7 5,704.7
Average capital employed 6,872.7 6,590.3 6,174.3
--------------------------------------------- -------- -------- -------- -------- --------
12. 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.
12 months to 12 months to
H1 2020 H1 2019 FY 2019
EUR'm EUR'm EUR'm
------------------------------------------------------------ ------------- ------------- --------
Profit after taxation attributable to owners of the parent 540.2 553.2 566.5
Non-trading items (net of related tax) 57.5 73.9 91.7
Brand related intangible asset amortisation 42.0 32.5 37.8
Net finance costs 80.0 72.1 81.6
Adjusted profit 719.7 731.7 777.6
Average capital employed 6,872.7 6,174.3 6,590.3
Return on average capital employed 10.5% 11.9% 11.8%
-------------------------------------------------------------- ------------- ------------- --------
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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