TIDMKYGA
RNS Number : 1770P
Kerry Group PLC
16 February 2021
Date 16 February 2021
LEI: 635400TLVVBNXLFHWC59
KERRY GROUP
PRELIMINARY STATEMENT OF RESULTS FOR THE YEARED 31 DECEMBER
2020
Strong recovery in business performance, with volumes returning
to growth in the fourth quarter
Kerry Group, the global taste & nutrition and consumer foods
group, reports business performance for the year ended 31 December
2020.
OVERVIEW
* Group revenue of EUR7.0bn reflecting a volume
reduction of 2.9% (Q4: +2.2%)
* Taste & Nutrition volumes -3.0% (Q4: +0.7%)
* Consumer Foods volumes -2.6% (Q4: +8.8%)
* Pricing +0.3%
* Group trading margin of 11.5% (2019: 12.5%)
* Taste & Nutrition trading margin of 14.2% (2019:
15.3%)
* Consumer Foods trading margin of 7.8% (2019: 7.6%)
* Adjusted EPS reduction of 9.4% on a constant currency
basis to 345.4 cent (-12.3% reported)
* Basic EPS of 313.0 cent (2019: 320.4 cent)
* Final dividend per share of 60.6 cent (total 2020
dividend up 10.1% to 86.5 cent)
* Free cash flow of EUR412m (2019: EUR515m)
* Strategic review of Dairy business
Edmond Scanlon, Chief Executive Officer
"This has been a truly unique year, with the daily lives of
people across the world profoundly impacted by the COVID -- 19
pandemic. I am exceptionally proud of the response of our people,
and how they have supported our customers and local communities
throughout the year, aligned to our Purpose, Inspiring Food,
Nourishing Life.
In the year, there were notable distinctions in business
performance by channel. Sustained strong growth was achieved in the
retail channel, primarily through growth in authentic cooking,
plant-based offerings and health and wellness products. Performance
in our foodservice channel was most significantly impacted in the
second quarter, as the introduction of restrictions affected our
customers' operations. The proactive nature of our business model
has been a key driver of our strong recovery through the year, as
we supported foodservice customers in adapting their operations and
menus to cater for increased consumer demand for takeaway, online
and delivery.
We made very good progress on a number of strategic fronts. We
commenced the strategic development of our Georgia, US facility,
which will have world-leading capabilities. We launched our 2030
sustainability strategy - Beyond the Horizon, which details Kerry's
sustainability targets and will be central to our growth strategy,
as we continue to innovate with our customers and expand our reach
of sustainable nutrition solutions. We completed a number of key
acquisitions aligned to our strategic growth priorities in the
year, and have since announced our intention to acquire Spanish
listed Biosearch Life.
While uncertainty from COVID-19 continues to impact our
customers, consumers and industry, we will continue to co-create
with our customers to meet accelerating consumer demands, and look
forward to a year of strong recovery and good growth."
PRELIMINARY STATEMENT OF RESULTS FOR THE YEARED 31 DECEMBER
2020
The Marketplace
This year has seen major changes in the daily lives of consumers
across the globe, with purchasing and consumption behaviours
significantly disrupted, leading to a much more dynamic
marketplace. At-home consumption has been elevated, as consumers
adapted to changes in daily routines and work practices. The
foodservice channel has been significantly impacted due to
restrictions on operations and consumer mobility, leading to
increased demand for online and delivery. Our foodservice business
was most impacted in the second quarter, as many of our customers
were closed for extended periods, with performance significantly
improving through the year as they adapted their offerings to cater
for the changing marketplace.
The COVID-19 pandemic has served to accelerate key trends that
were on the rise at the beginning of the year, with increased
demand for health and immunity enhancement, plant protein options,
and products addressing a diverse range of sustainability criteria.
Customers are increasingly focusing on sustainability as an enabler
of growth, leading to significant opportunity for Kerry and our
differentiated portfolio of sustainable nutrition solutions. As
customers adapt to this dynamic operating environment, product
portfolios and menu offerings continue to be evaluated, with new
product development strategies focused on these rapidly changing
consumer demands. These dynamics are leading to significant
challenges and opportunities across the industry.
Performance
Group revenue of EUR7.0 billion reflected a reported decrease of
4.0%, with an overall volume reduction of 2.9% in the year. This
performance reflected a strong recovery since April with a return
to volume growth of 2.2% in the fourth quarter. Performance in
Taste & Nutrition continued to improve through the year and
returned to volume growth in the fourth quarter, while performance
in Consumer Foods improved with a very strong finish to the
year.
The Group reported trading profit of EUR797.2m (2019: EUR902.7m)
due to the impact of COVID-19. Group trading margin decreased by
100bps to 11.5% as a result of operating deleverage and COVID --
related costs partially offset by cost mitigation actions, with
significant recovery in business margins across the second half of
the year.
Constant currency adjusted earnings per share decreased by 9.4%
to 345.4 cent (2019 currency adjusted: 381.4 cent). Basic earnings
per share decreased by 2.3% to 313.0 cent (2019: 320.4 cent). The
Board recommends a final dividend of 60.6 cent per share, an
increase of 10.0% on the final 2019 dividend. Together with the
interim dividend of 25.9 cent per share, this brings the total
dividend for the year to 86.5 cent, an increase of 10.1% on
2019.
Net capital expenditure amounted to EUR311m (2019: EUR315m) and
research and development expenditure was EUR282m (2019: EUR291m) as
the Group continued to invest in its strategic priorities for
growth across taste, nutrition, developing markets and foodservice.
Group free cash flow of EUR412m and cash conversion of 67% in the
year (2019: EUR515m / 74%) reflected the impact of COVID-19 and
investments to support the ongoing progression of the Kerryconnect
programme across our sites in North America.
Sustainability
In October, we launched our new sustainability strategy - Beyond
the Horizon. This details Kerry's key sustainability 2030
commitments and targets, while reflecting how innovation and
co-creation will continue to be central to Kerry's growth strategy.
Our aim is to increase our reach to over two billion people with
sustainable nutrition solutions by 2030, which will be achieved by
deploying and enhancing Kerry's solutions across the nutrition
spectrum. Beyond the Horizon reflects our vision to become our
customers' most valued partner, creating a world of sustainable
nutrition.
Business Reviews
Taste & Nutrition
Sustained strong growth in retail, with continued good recovery
in our foodservice business
2020 Performance
=============== ========= ===========
Revenue EUR5,753m -3.0%(1)
Trading margin 14.2% -110bps
=============== ========= ===========
(1) volume performance
> Overall volume reduction of 3.0%, with a return to growth of 0.7% in Q4
> Retail channel delivered strong growth of 3.8%, led by
Beverage and Pharma EUMs, with Food EUM performance driven by
Snacks and Meals
> Foodservice channel volumes declined 19% with continued
recovery through H2 (Q3: -15% | Q4: -8%)
> Trading margin decrease in the year principally driven by
operating deleverage and net COVID -- related costs, with continued
recovery in H2 aligned to the improvement in business volumes
Taste & Nutrition reported revenue was EUR5.8 billion,
reflecting a reported decrease of 4.4%, primarily due to lower
volumes and adverse translation currency, partially offset by
contribution from business acquisitions. Taste & Nutrition
began the year strongly before the global spread of COVID -- 19.
While performance was most impacted in the second quarter, business
volumes recovered well since then and returned to growth in the
fourth quarter. We saw a significant change in the nature of
innovation through the year, as product ideation, collaboration and
co-creation was adapted to cater for virtual engagement through
this period. Kerry's nutrition and wellness technology portfolio
had a very good performance within the retail channel through
customised solutions incorporating our broad protein portfolio,
fermented ingredients, probiotics and immunity enhancing
technologies.
Business volumes in the foodservice channel declined 19% in the
year, with many out -- of -- home food and beverage outlets closed
for an extended period of time. This impact was the primary driver
of overall performance in developing markets, where business
volumes declined by 1.2%.
In the year, we completed a number of key strategic
acquisitions. These included Bio-K Plus International Inc., a
leading biotechnology company with a number of probiotics in
beverage and supplement applications in Canada, and we acquired
Jining Nature Group in China and Tecnispice, S.A. in Guatemala,
both of which are local leaders in savoury taste in their
respective markets within APMEA and LATAM.
Americas Region
> Overall volume reduction of 2.5%, with a return to growth of 0.5% in Q4
> Retail channel delivered strong growth - led by the
Beverage EUM and Meals and Snacks within the Food EUM
> Foodservice performance recovered well across H2
Revenue in the region was EUR3.1 billion, reflecting a reported
decrease of 3.5%, with lower business volumes of 2.5%, positive
pricing of 0.1%, an adverse translation currency impact of 3.0% and
contribution from business acquisitions of 1.9%.
The retail channel in North America achieved strong growth in
the year. This was led by an excellent performance across the
Beverage EUM, where Kerry's immunity enhancing technologies, broad
protein portfolio and natural extracts were deployed in a number of
nutritional, low/no alcohol and plant -- based beverage launches.
Within the Food EUM, Meals achieved very strong growth through
clean label innovations incorporating Kerry's natural stocks and
broths, with a number of plant-based launches also supporting
growth. Overall Meat performance was impacted in the year by
customer product availability on retail shelves, while Snacks
performed well through more at-home consumption and increased
demand for healthier options.
The foodservice channel in North America was impacted
considerably in the second quarter, however performance has seen a
significant improvement since then, led by quick service restaurant
chains, while dine-in restaurants and independent operators were
more challenged. This improvement in performance has been supported
by health and wellness innovations and limited time offerings.
In LATAM, the foodservice channel was impacted later in the
year, but recovered well through the fourth quarter. Brazil
returned to growth led by beverage and ice -- cream, while market
conditions in Mexico and CACAR remained more challenged.
Pharma achieved very strong growth globally, with cell nutrition
performing well and immunity enhancing technologies delivering
excellent growth in the year.
Europe Region
> Overall volume reduction of 5.0%, with business volumes of
-0.4% in Q4 reflecting further recovery
> Retail channel delivered good growth in Beverage EUM and Snacks and Meat within the Food EUM
> Foodservice continued to recover but was impacted by restrictions late in the year
Revenue in the region was EUR1.4 billion, reflecting a reported
decrease of 5.6%, with lower business volumes of 5.0%, an adverse
transaction currency impact of 0.1%, an adverse translation
currency impact of 0.9% and contribution from business acquisitions
of 0.4%.
This was the most impacted region from COVID-related
restrictions in the foodservice channel in the second quarter, but
has recovered well since then with customers reopening and
operating at varying capacities through the second half of the
year. Kerry's improvement in the foodservice channel was supported
by a number of launches incorporating the Radicle(TM) portfolio of
plant-based technologies.
The retail channel performed well, with Beverage achieving good
growth in nutritional and low/no alcohol beverage categories.
Within the Food EUM, Snacks had strong growth through clean label
and healthier innovations in savoury applications with a number of
large customers. Dairy performance was impacted by product
repositioning in the category and supply/demand dynamics in global
dairy markets. Meat performed well in the year, driven by strong
growth and business development in plant -- based alternatives, as
ranges continued to expand within the category. Russia and Eastern
Europe delivered a very good performance in the year, led by Snacks
and Meat within the Food EUM.
APMEA Region
> Overall volume reduction of 1.9%, with growth of 2.8% in Q4
> Retail channel performed well with strong growth in H2
within the Food EUM through Snacks and Dairy
> Foodservice continued strong recovery through Q4
Revenue in the region was EUR1.2 billion, reflecting a reported
decrease of 5.2%, with lower business volumes of 1.9%, an adverse
transaction currency impact of 0.2%, an adverse translation
currency impact of 3.5% and contribution from business acquisitions
of 0.4%.
Overall performance in the region further improved in the fourth
quarter, having returned to growth in the previous quarter. This
growth was led by China and the Middle East, while there remained
variations in performance across the region aligned to local
conditions. The foodservice channel continued to recover through
the year as restrictions on mobility eased. The retail channel
performed well, led by the Food EUM of Snacks, where we saw a lot
of innovation in the category across the region. Demand increased
for indulgent offerings as consumers spent more time at home, while
healthier snacks with nutritional claims also had a strong
performance in the year, benefitting from increasing emphasis on
ingredient label declarations for children in China. Meals was more
challenged, as many consumers opted for more traditional food
offerings during the initial period where restrictions were in
place. Dairy had strong growth from increased demand with regional
leaders for Kerry's clean label solutions, with Meat also
performing well, particularly in the Middle East.
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 the new Technology &
Innovation Centre in Shanghai.
Consumer Foods
Good underlying growth with a very strong finish to the year
across the portfolio
2020 Performance
=============== ========= ===========
Revenue EUR1,279m -2.6%(1)
Trading margin 7.8% +20bps
=============== ========= ===========
(1) volume performance
> Volume performance reflected underlying growth of 2.2%,
more than offset by the ready meals contract exit impact
> Volume growth of 8.8% in Q4 represented strong performances
across the portfolio and some stocking benefits
> Pricing of +1.2% reflective of increases in input costs and market pricing
> Trading margin +20bps as efficiencies partially offset by COVID -- 19 impacts and pricing
The market saw major variations in category performances through
the year, as consumers' purchasing and consumption behaviours
changed significantly as a result of COVID-19. Shopping habits
became more functional and impulse purchases have reduced. At-home
snacking increased, as out-of-home occasions have been curtailed by
restrictions on movement. Many retailers scaled back category
product listings and their freshly prepared over -- the -- counter
operations. Large traditional retailers have benefitted through the
year, with increased average basket sizes and reduced promotional
activity, while demand for online and delivery has increased
dramatically.
Consumer Foods reported revenue was EUR1.3 billion, reflecting a
reported decrease of 2.1%, as lower volumes due to the previously
reported ready meals contract exit and an adverse impact from
translation currency were partially offset by increased
pricing.
The Richmond sausage range achieved very good growth in the
year, with strong growth across Kerry's branded meat-free ranges
driving further market share gains. The Denny brand performed well,
while overall meat sales were impacted by reduced retailer deli
counter operations. Spreadable butter and Dairygold performed well
due to increased at-home consumption.
Chilled meals were impacted by reduced consumer impulse
purchases, while frozen meals benefitted from increased retailer
stocking in the fourth quarter. Plant-based meals had strong growth
across both chilled and frozen ranges through the year, with a
number of successful launches supporting performance.
The snacking range and home delivery meals business achieved
very strong growth in the year. This was led by Fridge Raiders,
which benefitted from increased at-home snacking consumption. The
Strings & Things range, led by Cheestrings also delivered
strong growth with a number of innovations, while Oakhouse Foods
home delivery meals had exceptionally strong growth in the
year.
Financial Review
2020 2019
% Change EUR'm EUR'm
============================================ ========== ======= =======
Revenue (4.0%) 6,953.4 7,241.3
-------------------------------------------- ---------- ------- -------
Trading profit (11.7%) 797.2 902.7
Trading margin 11.5% 12.5%
Computer software amortisation (28.4) (26.5)
Finance costs (net) (72.4) (81.6)
-------------------------------------------- ---------- ------- -------
Adjusted earnings before taxation 696.4 794.6
Income taxes (excluding non-trading
items) (85.1) (98.6)
-------------------------------------------- ---------- ------- -------
Adjusted earnings after taxation (12.2%) 611.3 696.0
Brand related intangible asset amortisation (41.7) (37.8)
Non-trading items (net of related
tax) (15.5) (91.7)
-------------------------------------------- ---------- ------- -------
Profit after taxation 554.1 566.5
-------------------------------------------- ---------- ------- -------
EPS EPS
cent cent
-------------------------------------------- ---------- ------- -------
Basic EPS (2.3%) 313.0 320.4
Brand related intangible asset amortisation 23.6 21.4
Non-trading items (net of related
tax) 8.8 51.9
-------------------------------------------- ---------- ------- -------
Adjusted* EPS (12.3%) 345.4 393.7
Impact of retranslating prior year
adjusted earnings per share at current
year average exchange rates - (12.3)
-------------------------------------------- ---------- ------- -------
Adjusted* EPS in constant currency (9.4%) 345.4 381.4
-------------------------------------------- ---------- ------- -------
* Before brand related intangible asset amortisation and
non-trading items (net of related tax).
Revenue
Group revenue was EUR7.0 billion (2019: EUR7.2 billion)
reflecting a reported decrease of 4.0%. This comprised a volume
decrease of 2.9% primarily due to the impact of COVID-19, positive
pricing of 0.3%, an adverse transaction currency impact of 0.1%, an
adverse translation currency impact of 2.3% and contribution from
business acquisitions of 1.0%.
2019: Group reported revenue +9.6%, volume growth +2.8%, pricing
flat, translation currency +2.1%, contribution from business
acquisitions of +4.7%.
Taste & Nutrition revenue was EUR5.8 billion (2019: EUR6.0
billion) reflecting a reported revenue decrease of 4.4%. This
comprised a volume decrease of 3.0% due to the impact of COVID-19,
positive pricing of 0.1%, an adverse transaction currency impact of
0.1%, an adverse translation currency impact of 2.6% and
contribution from business acquisitions of 1.2%.
2019: Taste & Nutrition reported revenue +12.5%, volume
growth +4.0%, pricing increase +0.1%, translation currency +2.6%,
acquisitions +5.8%.
Consumer Foods revenue was EUR1.28 billion (2019: EUR1.31
billion) reflecting a reported revenue decrease of 2.1%. This
comprised a volume decrease of 2.6%, positive pricing of 1.2% and
an adverse translation currency impact of 0.7%. Excluding the
impact of the ready meals contract exit, volume would have
increased by 2.2%.
2019: Consumer Foods reported revenue (2.4%), volume reduction
(2.2%), pricing (0.5%), translation currency +0.3%.
Trading Profit & Margin
Group trading profit decreased by 11.7% to EUR797.2m (2019:
EUR902.7m) due to the impact of COVID-19. The Group had a trading
margin of 11.5%, a decrease of 100bps, primarily reflecting
operating deleverage from lower volumes in Taste & Nutrition
and COVID -- related costs partially offset by cost mitigation
actions.
Taste & Nutrition had a trading margin of 14.2%, a decrease
of 110bps reflecting significant operating deleverage and COVID --
related costs partially offset by cost mitigation actions.
Consumer Foods had a trading margin of 7.8%, an increase of
20bps, reflecting efficiencies delivered from the 2019 Realignment
Programme and cost mitigation actions partially offset by net COVID
-- related costs and negative net pricing in a challenging
market.
The trading profit reflects an EBITDA of EUR1.0 billion (2019:
EUR1.1 billion) and an EBITDA margin of 14.4% (2019: 15.1%).
Finance Costs (net)
Finance costs (net) for the year decreased by EUR9.2m to
EUR72.4m (2019: EUR81.6m) primarily due to lower interest rates.
The Group's average interest rate for the year was 3.0% (2019:
3.7%).
Taxation
The tax charge for the year before non-trading items was
EUR85.1m (2019: EUR98.6m) representing an effective tax rate of
13.0% (2019: 13.0%) and is reflective of the geographical mix of
earnings.
Acquisitions
During the year, the Group completed three acquisitions at a
total consideration of EUR280.0m. These acquisitions were aligned
to the Group's strategic priorities for growth; enhancing both the
Group's taste and nutrition technologies, expanding its presence in
developing markets and in the foodservice channel.
Non-Trading Items
During the year, the Group incurred a non-trading item charge of
EUR15.5m (2019: EUR91.7m) net of tax. The charge in the year
primarily related to costs associated with the integration of
business acquisitions.
Adjusted EPS in Constant Currency
Adjusted EPS in constant currency decreased by 9.4% to 345.4
cent (2019: +8.3%) due to the impact of COVID -- 19 on business
performance.
Basic EPS
Basic EPS decreased by 2.3% to 313.0 cent (2019: 320.4 cent).
Basic EPS is calculated after accounting for brand related
intangible asset amortisation of 23.6 cent (2019: 21.4 cent) and a
non-trading item charge of 8.8 cent net of related tax (2019: 51.9
cent).
Return on Average Capital Employed
ROACE in the year was 9.8% (2019: 11.8%) reflecting the impact
of COVID -- 19 on current year profits.
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
2020 2019 2020 2019
======================= ======= ====== ======= ======
Australian Dollar 1.66 1.61 1.59 1.60
----------------------- ------- ------ ------- ------
Brazilian Real 5.75 4.44 6.38 4.53
----------------------- ------- ------ ------- ------
British Pound Sterling 0.89 0.88 0.90 0.85
----------------------- ------- ------ ------- ------
Chinese Yuan Renminbi 7.86 7.73 8.03 7.82
----------------------- ------- ------ ------- ------
Malaysian Ringgit 4.77 4.65 4.92 4.60
----------------------- ------- ------ ------- ------
Mexican Peso 24.34 21.59 24.46 21.19
----------------------- ------- ------ ------- ------
Russian Ruble 81.16 72.28 90.68 69.34
----------------------- ------- ------ ------- ------
South African Rand 18.62 16.20 18.02 15.77
----------------------- ------- ------ ------- ------
US Dollar 1.13 1.12 1.23 1.12
----------------------- ------- ------ ------- ------
Balance Sheet
A summary balance sheet as at 31 December is provided below:
2020 2019
EUR'm EUR'm
============================ ======= =======
Property, plant & equipment 1,990.6 2,062.9
Intangible assets 4,687.1 4,589.7
Other non-current assets 170.6 179.5
Current assets 2,594.8 2,672.2
---------------------------- ------- -------
Total assets 9,443.1 9,504.3
---------------------------- ------- -------
Current liabilities 1,696.3 2,014.0
Non-current liabilities 3,091.3 2,928.1
Total liabilities 4,787.6 4,942.1
---------------------------- ------- -------
Net assets 4,655.5 4,562.2
---------------------------- ------- -------
Shareholders' equity 4,655.5 4,562.2
---------------------------- ------- -------
Property, Plant & Equipment
Property, plant and equipment decreased by EUR72.3m to
EUR1,990.6m (2019: EUR2,062.9m) primarily due to the depreciation
charge and the impact of foreign exchange translation partially
offset by additions made in the period. Net capital expenditure in
the year (including computer software) amounted to EUR310.7m (2019:
EUR315.3m). The level of capital investment supports the Group's
growth initiatives and included 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 .
Intangible Assets & Acquisitions
Intangible assets increased by EUR97.4m to EUR4,687.1m (2019:
EUR4,589.7m) due to the acquisitions made in the year partially
offset by the amortisation charge and the impact of foreign
exchange translation.
Current Assets
Current assets decreased by EUR77.4m to EUR2,594.8m (2019:
EUR2,672.2m) due to decreased inventory and trade and other
receivables.
Retirement Benefits
At the balance sheet date, the total net deficit for all defined
benefit schemes (after deferred tax) was EUR43.6m (2019: EUR8.6m).
The increase in the net deficit was driven primarily by lower
discount rates which increased schemes' liabilities. However, this
was partially offset by strong returns on schemes' assets. The net
deficit expressed as a percentage of market capitalisation at 31
December 2020 was 0.2% (2019: 0.04%).
Free Cash Flow
In 2020, the Group achieved free cash flow of EUR412.0m (2019:
EUR514.6m).
2020 2019
Free Cash Flow EUR'm EUR'm
================================================= ======= =======
Trading profit 797.2 902.7
Depreciation (net) 200.7 191.4
Movement in average working capital (102.5) (89.5)
Pension contributions paid less pension expense (23.4) (26.7)
------------------------------------------------- ------- -------
Cash flow from operations 872.0 977.9
------------------------------------------------- ------- -------
Finance costs paid (net) (74.6) (80.8)
Income taxes paid (74.7) (67.2)
Purchase of non-current assets (310.7) (315.3)
------------------------------------------------- ------- -------
Free cash flow 412.0 514.6
------------------------------------------------- ------- -------
Cash conversion(1) 67% 74%
(1) Cash conversion is free cash flow expressed as a percentage
of adjusted earnings after taxation.
Total Net Debt
Total net debt at the end of the year was EUR1,945.1m (2019:
EUR1,972.2m). Lease liabilities are included in total net debt for
2020 and 2019.
Financing
Undrawn committed facilities at the end of the year were
EUR1,100m (2019: EUR1,100m) while undrawn standby facilities were
EUR320.0m (2019: EUR330.0m).
In early 2020, the Group repaid US$208m of maturing private
placement notes. During the second quarter of 2020, the Group
completed a EUR200m tap issuance onto its 2025 Senior Notes and
exercised the first of the two 'plus one year' extension options on
the revolving credit facility to further extend the maturity date
of this facility to June 2025.
Of the cash at bank and in hand at year end, EUR75m was on short
term deposit under a Sustainable Deposits programme.
Key Financial Ratios
The Group's balance sheet is in a strong position with a Net
debt to EBITDA* ratio of 1.9 times. At this ratio the Group has
significant liquidity headroom to support future growth plans. The
Group's debt is not subject to financial covenants, other than
EUR163.0m of US$ Private Placements. Group Treasury monitors
compliance with all financial covenants and at 31 December the key
ratios are as follows:
2020 2019
Covenant Times Times
Net debt: EBITDA* Maximum 3.5 1.9 1.8
EBITDA: Net interest* Minimum 4.0 13.8 13.2
----------------------------------- ------------------- --------- ---------
* Calculated in accordance with lenders' facility agreements which
take account of adjustments as outlined in the financial definitions.
Share Price and Market Capitalisation
The Company's shares traded in the range EUR91.95 to EUR125.60
during the year. The share price at 31 December 2020 was EUR118.50
(2019: EUR111.10) giving a market capitalisation of EUR20.9 billion
(2019: EUR19.6 billion). Total Shareholder Return for 2020 was 7.4%
(2019: 29.3%).
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 on 29 April 2021.
Strategic Review
The Group is conducting a strategic review of its dairy-related
businesses in Ireland and the UK. This business has activities
across both Taste & Nutrition and Consumer Foods businesses. We
note that there is no certainty that this review will lead to a
transaction. Further communication will be made in due course as
appropriate.
Future Prospects
The scale and pace of change seen over the last 12 months has
led to customers fundamentally reassessing their portfolios, ways
of working and business models. This has created an environment
where customers are more open to change and are looking for
partners to help them pivot at pace, to address both short-term
challenges and opportunities, while also allowing them to target
more meaningful, purposeful, step change innovations as they look
out into the future. Sustainability, localisation, speed to market
and innovation process agility have been elevated in importance as
customers strive to win market share. Against this backdrop,
Kerry's proactive approach and co-creation business model is
ideally placed to support customers through these changing market
dynamics.
Looking to the year ahead, within Taste & Nutrition, we see
strong growth prospects in the retail channel, with continued
recovery in foodservice, underpinned by a very good innovation
pipeline and strong customer engagement. The shorter-term impact
from COVID-19 will continue through Q1, where we are expecting flat
to positive volume growth in this quarter, with an overall outlook
for strong recovery and good growth in the full year.
Our Consumer Foods business has a good growth outlook supported
by continued innovation and the strength of our brands.
We will continue to invest for growth and enablement of our
business model, while continuing to pursue M&A opportunities
aligned to our 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 dynamic environment.
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.
CONTACT INFORMATION
=============================================
Media
James Dunny , Director of External
Communications
+353 45 930188 | corpaffairs@kerry.com
Investor Relations
Marguerite Larkin , Chief Financial
Officer
+353 66 7182292 | investorrelations@kerry.ie
William Lynch , Head of Investor
Relations
+353 66 7182292 | investorrelations@kerry.ie
Website
www.kerrygroup.com
RESULTS FOR THE YEARED 31 DECEMBER 2020
Consolidated Income Statement
for the financial year ended 31 December
2020
Before Non- Before Non-
Non-Trading Trading Non-Trading Trading
Items Items Total Items Items Total
2020 2020 2020 2019 2019 2019
Notes EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
Continuing operations
Revenue 2 6,953.4 - 6,953.4 7,241.3 - 7,241.3
_______ _______ _______ _______ _______ _______
Trading profit 2 797.2 - 797.2 902.7 - 902.7
Intangible asset amortisation (70.1) - (70.1) (64.3) - (64.3)
Non-trading items 3 - (19.4) (19.4) - (110.9) (110.9)
_______ _______ _______ _______ _______ _______
Operating profit 727.1 (19.4) 707.7 838.4 (110.9) 727.5
Finance income 0.2 - 0.2 0.3 - 0.3
Finance costs (72.6) - (72.6) (81.9) - (81.9)
_______ _______ _______ _______ _______ _______
Profit before taxation 654.7 (19.4) 635.3 756.8 (110.9) 645.9
Income taxes (85.1) 3.9 (81.2) (98.6) 19.2 (79.4)
_______ _______ _______ _______ _______ _______
Profit after taxation attributable
to owners of the parent 569.6 (15.5) 554.1 658.2 (91.7) 566.5
_______ _______ _______ _______ _______ _______
Earnings per A ordinary share Cent Cent
- basic 4 313.0 320.4
- diluted 4 312.5 319.9
_______ _______
Consolidated Statement of Comprehensive Income
for the financial year ended 31 December 2020
2020 2019
EUR'm EUR'm
Profit after taxation attributable to owners of the parent 554.1 566.5
Other comprehensive income:
Items that are or may be reclassified subsequently to profit or
loss:
Fair value movements on cash flow hedges 7.9 7.2
Cash flow hedges - reclassified to profit or loss
from equity 2.9 0.1
Net change in cost of hedging (0.9) 0.6
Deferred tax effect of fair value movements on cash
flow hedges (2.0) (1.4)
Exchange difference on translation of foreign operations (282.3) 67.0
Fair value movement on revaluation of financial assets held at
fair value through other comprehensive income (1.3) (1.0)
Disposal of financial assets fair value movement reclassified 0.7 -
to profit or loss
Items that will not be reclassified subsequently to profit
or loss:
Re-measurement on retirement benefits obligation (67.0) 14.0
Deferred tax effect of re-measurement on retirement benefits
obligation 11.8 (2.0)
_______ _______
Net (expense)/income recognised directly in total other
comprehensive income (330.2) 84.5
_______ _______
Total comprehensive income 223.9 651.0
_______ _______
Consolidated Balance Sheet 31 December 31 December
as at 31 December 2020 2020 2019
EUR'm EUR'm
Non-current assets
Property, plant and equipment 1,990.6 2,062.9
Intangible assets 4,687.1 4,589.7
Financial asset investments 37.0 41.7
Investment in joint ventures 17.8 16.2
Other non-current financial instruments 82.0 82.7
Deferred tax assets 33.8 38.9
_______ _______
6,848.3 6,832.1
_______ _______
Current assets
Inventories 975.6 993.3
Trade and other receivables 1,042.0 1,066.3
Cash at bank and in hand 563.1 554.9
Other current financial instruments 14.1 57.7
_______ _______
2,594.8 2,672.2
_______ _______
Total assets 9,443.1 9,504.3
_______ _______
Current liabilities
Trade and other payables 1,543.3 1,643.0
Borrowings and overdrafts 2.8 190.8
Other current financial instruments 10.0 12.1
Tax liabilities 132.6 140.7
Provisions 5.2 25.2
Deferred income 2.4 2.2
_______ _______
1,696.3 2,014.0
_______ _______
Non-current liabilities
Borrowings 2,505.8 2,355.3
Other non-current financial instruments 0.5 -
Retirement benefits obligation 54.4 11.9
Other non-current liabilities 144.9 167.9
Deferred tax liabilities 330.2 338.9
Provisions 36.1 33.2
Deferred income 19.4 20.9
_______ _______
3,091.3 2,928.1
_______ _______
Total liabilities 4,787.6 4,942.1
_______ _______
Net assets 4,655.5 4,562.2
_______ _______
Issued capital and reserves attributable to owners of the parent
Share capital 22.1 22.1
Share premium 398.7 398.7
Other reserves (379.5) (119.0)
Retained earnings 4,614.2 4,260.4
_______ _______
Shareholders' equity 4,655.5 4,562.2
_______ _______
Consolidated Statement of Changes in Equity
for the financial year ended 31 December 2020
Share Share Other Retained
Capital Premium Reserves Earnings Total
Note EUR'm EUR'm EUR'm EUR'm EUR'm
Group:
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 taxation 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
Profit after taxation attributable to owners of the
parent - - - 554.1 554.1
Other comprehensive expense - - (273.0) (57.2) (330.2)
_______ _______ _______ _______ ______
Total comprehensive (expense)/income - - (273.0) 496.9 223.9
Shares issued during the financial year - - - - -
Dividends paid 5 - - - (143.1) (143.1)
Share-based payment expense - - 12.5 - 12.5
_______ _______ _______ _______ ______
At 31 December 2020 22.1 398.7 (379.5) 4,614.2 4,655.5
_______ _______ _______ _______ ______
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 2019 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)
Other comprehensive
(expense)/income (0.6) - - - (282.3) 10.8 (0.9) (273.0)
Share-based payment
expense - - - 12.5 - - - 12.5
_______ _______ _______ _______ _______ _______ _______ ______
At 31 December 2020 - 1.7 0.3 90.2 (472.0) 2.6 (2.3) (379.5)
_______ _______ _______ _______ _______ _______ _______ ______
Consolidated Statement of Cash
Flows
for the financial year ended 2020 2019
31 December 2020
Notes EUR'm EUR'm
Operating activities
Trading profit 797.2 902.7
Adjustments for:
Depreciation (net) 200.7 191.4
Change in working capital (108.7) (63.9)
Pension contributions paid less pension
expense (23.4) (26.7)
Payments on non-trading items (39.7) (89.1)
Exchange translation adjustment (4.6) (2.5)
_______ ______
Cash generated from operations 821.5 911.9
Income taxes paid (74.7) (67.2)
Finance income received 0.2 0.5
Finance costs paid (74.8) (81.3)
_______ ______
Net cash from operating activities 672.2 763.9
_______ ______
Investing activities
Purchase of assets (net) (276.2) (315.6)
Proceeds from the sale of assets 7.7 32.8
Capital grants received 0.1 3.0
Purchase of businesses (net
of cash acquired) 6 (251.1) (562.7)
Payments relating to previous
acquisitions (7.5) (5.3)
_______ ______
Net cash used in investing activities (527.0) (847.8)
_______ ______
Financing activities
Dividends paid 5 (143.1) (128.3)
Payment of lease liabilities (37.0) (35.5)
Issue of share capital - 0.1
Repayment of borrowings (net
of swaps) (391.1) (564.4)
Increase in borrowings 462.9 950.0
_______ ______
Net cash movement due to financing activities (108.3) 221.9
_______ ______
Net increase in cash and cash equivalents 36.9 138.0
Cash and cash equivalents at beginning
of the financial year 549.7 403.9
Exchange translation adjustment on cash
and cash equivalents (26.3) 7.8
_______ ______
Cash and cash equivalents at end of the financial year 560.3 549.7
_______ ______
Reconciliation of Net Cash Flow to Movement in Net Debt
Net increase in cash and cash
equivalents 36.9 138.0
Cash flow from debt financing (71.8) (385.6)
_______ ______
Changes in net debt resulting
from cash flows (34.9) (247.6)
Fair value movement on interest rate swaps (net of adjustment to borrowings) 7.6 12.5
Exchange translation adjustment
on net debt 26.5 (4.2)
_______ ______
Movement in net debt in the
financial year (0.8) (239.3)
Net debt at beginning of the
financial year (1,862.8) (1,623.5)
_______ ______
Net debt at end of the financial year - pre lease liabilities (1,863.6) (1,862.8)
Lease liabilities (81.5) (109.4)
_______ ______
Total net debt* at the end of the financial year (1,945.1) (1,972.2)
_______ ______
*Prior year has been re-presented to include lease liabilities in total net debt.
Notes to the Financial Statements
for the financial year ended 31 December 2020
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 2020. 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 2020 or 2019 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 joint ventures are accounted for using the
equity method.
The consolidated 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 including liquidity and access to
financing and position of the Group including the impact of the
current COVID-19 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. This analysis indicated that, notwithstanding the
current global pandemic, it does not affect the Group's ability to
continue as a going concern.
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 Group's accounting policies will be included in the 2020
Annual Report & Accounts, which will be published at the end of
March, and are consistent with those described in the 2019 Annual
Report & Accounts.
Critical accounting estimates and judgements
Preparation of the consolidated 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 particular, information about significant areas of estimation
that have the most significant effect on the amounts recognised in
the consolidated financial statements are described below and in
the respective notes to the consolidated financial statements.
We have considered the impact of the COVID-19 pandemic on our
business and the key impacts up to 31 December 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.
- The Group considered the impact of the global pandemic on its impairment
risk around the carrying value of the goodwill and indefinite life
intangible assets. The long-term outlook for the Group remains positive
and supports our valuations and given there was significant headroom,
no impairment was identified.
- While supporting our customers during this crisis through the carrying
of increased inventory and receivable balances, the Group has assessed
the risks and to date, does not believe there are 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. Third party revenue in our Taste &
Nutrition segment from the foodservice business was EUR1,390.5m (2019:
EUR1,767.6m).
The impact of COVID-19 on the critical accounting estimates and
judgements of business combinations and impairment of goodwill and
intangibles, has also been assessed and is not considered material
in the context of the consolidated financial statements.
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 in Effective Date
2020 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 1 January 2020
Estimates and Errors
- The Conceptual Framework Revised Conceptual Framework for Financial 1 January 2020
Reporting
The following Standards and Interpretations are not yet effective for the Effective Date
Group and are not expected to have a material effect on the results or financial
position of the Group:
- IFRS 16 (Amendment) Leases 1 June 2020
- IFRS 7, IFRS 4 & IFRS 16 Interest Rate Benchmark Reform - Phase 2 1 January 2021
(Amendments)
- IAS 1 (Amendments) Presentation of Financial Statements 1 January 2022
- IFRS 17 Insurance Contracts 1 January 2023
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 taste and nutrition, serving 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 our consumer foods
categories in the chilled cabinet primarily in Ireland and in the
UK.
Group Group
Eliminations Eliminations
Taste Consumer and Taste Consumer and
& Foods Unallocated Total & Foods Unallocated Total
Nutrition 2020 2020 2020 Nutrition 2019 2019 2019
2020 2019
EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
External
revenue 5,678.4 1,275.0 - 6,953.4 5,939.1 1,302.2 - 7,241.3
Inter-segment
revenue 74.8 3.6 (78.4) - 78.5 4.4 (82.9) -
_______ _______ _______ _______ _______ _______ _______ _______
Revenue 5,753.2 1,278.6 (78.4) 6,953.4 6,017.6 1,306.6 (82.9) 7,241.3
_______ _______ _______ _______ _______ _______ _______ _______
Trading profit 814.2 99.2 (116.2) 797.2 918.5 98.9 (114.7) 902.7
_______ _______ _______ _______ _______ _______
Intangible asset
amortisation (70.1) (64.3)
Non-trading items (19.4) (110.9)
_______ _______
Operating profit 707.7 727.5
Finance income 0.2 0.3
Finance costs (72.6) (81.9)
_______ _______
Profit before taxation 635.3 645.9
Income taxes (81.2) (79.4)
_______ _______
Profit after taxation attributable to owners of the
parent 554.1 566.5
_______ _______
Segment assets and liabilities
Segment assets 6,370.1 877.2 2,195.8 9,443.1 6,268.5 925.7 2,310.1 9,504.3
Segment
liabilities (1,295.0) (332.9) (3,159.7) (4,787.6) (1,565.7) (311.8) (3,064.6) (4,942.1)
_______ _______ _______ _______ _______ _______ _______ _______
Net assets 5,075.1 544.3 (963.9) 4,655.5 4,702.8 613.9 (754.5) 4,562.2
_______ _______ _______ _______ _______ _______ _______ _______
Other segmental information
Property, plant
and equipment
additions 225.0 20.7 - 245.7 247.2 32.7 0.7 280.6
Depreciation
(net) 178.5 21.7 0.5 200.7 164.6 22.7 4.1 191.4
Intangible
asset
additions 0.9 1.0 50.2 52.1 1.3 2.0 51.9 55.2
Intangible
asset
amortisation 23.7 6.4 40.0 70.1 23.0 6.8 34.5 64.3
_______ _______ _______ _______ _______ _______ _______ _______
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 2020 2020 Nutrition 2019 2019
2020 2019
EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
Food 3,974.6 1,275.0 5,249.6 4,161.5 1,302.2 5,463.7
Beverage 1,407.1 - 1,407.1 1,507.6 - 1,507.6
Pharma 296.7 - 296.7 270.0 - 270.0
_______ _______ _______ _______ _______ _______
External revenue 5,678.4 1,275.0 6,953.4 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:
Taste Consumer Taste Consumer
& Foods Total & Foods Total
Nutrition 2020 2020 Nutrition 2019 2019
2020 2019
EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
Republic of Ireland 171.1 262.2 433.3 184.9 252.5 437.4
Rest of Europe 1,204.0 1,012.8 2,216.8 1,271.5 1,049.7 2,321.2
Americas 3,085.4 - 3,085.4 3,197.8 - 3,197.8
APMEA 1,217.9 - 1,217.9 1,284.9 - 1,284.9
_______ _______ _______ _______ _______ _______
External revenue 5,678.4 1,275.0 6,953.4 5,939.1 1,302.2 7,241.3
_______ _______ _______ _______ _______ _______
Information about geographical areas
Europe Americas APMEA Total Europe Americas APMEA Total
2020 2020 2020 2020 2019 2019 2019 2019
EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
Segment assets by location 4,986.5 3,362.6 1,094.0 9,443.1 4,858.4 3,502.3 1,143.6 9,504.3
Property, plant and equipment
additions 61.1 130.2 54.4 245.7 87.9 114.7 78.0 280.6
Intangible asset additions 51.6 0.5 - 52.1 54.3 0.9 - 55.2
_______ _______ _______ _______ _______ _______ _______ _______
Kerry Group plc is domiciled in the Republic of Ireland and the
revenues from external customers in the Republic of Ireland were
EUR433.3m (2019: EUR437.4m). The non-current assets located in the
Republic of Ireland are EUR903.1m (EUR930.3m).
Revenues from external customers include EUR1,420.6m (2019:
EUR1,527.9m) in the UK and EUR2,509.8m (2019: EUR2,597.5m) in the
USA. The non-current assets in the UK are EUR692.4m (2019:
EUR737.2m) and in the USA are EUR2,035.6m (2019: EUR2,142.5m).
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. 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
2020 2019
Notes EUR'm EUR'm
Taste & Nutrition acquisition related and other
costs (i) (17.5) (80.7)
Consumer Foods Realignment Programme (ii) - (26.7)
Loss on disposal of businesses and assets (iii) (1.9) (3.5)
_______ _______
(19.4) (110.9)
Tax on above 3.9 19.2
_______ _______
Non-trading items (net of tax) (15.5) (91.7)
_______ _______
(i) Taste & Nutrition acquisition related and other costs
Acquisition integration and restructuring costs of EUR13.1m (2019: EUR80.7m) primarily related
to costs of integrating recent acquisitions into the Group's operations. These costs reflect
the relocation of resources, the restructuring of operations in order to integrate the acquired
businesses into the existing Kerry operating model and external costs associated with deal preparation,
integration planning and due diligence. The Group has commenced a program to evolve and restructure
our global business services model to better enable the business and support further growth,
costs incurred to date are EUR4.4m (2019: EURnil).
A tax credit of EUR3.5m (2019: EUR14.9m) arose due to tax deductions available on acquisition
integration and other costs.
(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 was EUR26.7m, which reflects redundancies, relocation of resources and the streamlining
of operations. The associated tax credit was EUR4.5m.
(iii) Loss on disposal of businesses and assets
During the year, the Group disposed of property, plant and equipment in North America, Europe
and APMEA for a consideration of EUR2.4m resulting in a loss of EUR1.9m for the year ended 31
December 2020. In 2019, 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.
A tax credit of EUR0.4m (2019: a tax charge of EUR0.2m) 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 2020 EPS 2019
cent EUR'm cent EUR'm
Basic earnings per share
Profit after taxation attributable to owners
of the parent 313.0 554.1 320.4 566.5
Diluted earnings per share
Profit after taxation attributable to owners
of the parent 312.5 554.1 319.9 566.5
_______ _______ _______ _______
2020 2019
m's m's
Number of Shares
Basic weighted average number of shares 177.0 176.8
Impact of share options outstanding 0.3 0.3
_______ _______
Diluted weighted average number of shares 177.3 177.1
_______ _______
Actual number of shares in issue as
at 31 December 176.7 176.5
_______ _______
5. Dividends
2020 2019
EUR'm EUR'm
Group and Company:
Amounts recognised as distributions to equity shareholders in the financial year
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
Interim 2020 dividend of 25.90 cent per A ordinary
share paid 13 November 2020
(Interim 2019 dividend of 23.50 cent per A ordinary
share paid 15 November 2019) 45.8 41.6
_______ _______
143.1 128.3
_______ _______
Since the financial year end the Board has proposed a final 2020
dividend of 60.60 cent per A ordinary share which amounts to
EUR107.1m. The payment date for the final dividend will be 14 May
2021 to shareholders registered on the record date as at 16 April
2021. The consolidated financial statements do not reflect this
dividend.
6. Business combinations
During 2020, the Group completed a total of three acquisitions,
all of which are 100% owned by the Group.
Total
2020
EUR'm
Recognised amounts of identifiable assets acquired and liabilities
assumed:
Non-current assets
Property, plant and equipment 21.2
Brand related intangibles 124.1
Current assets
Cash at bank and in hand 1.2
Inventories 11.1
Trade and other receivables 16.8
Current liabilities
Trade and other payables (19.1)
Non-current liabilities
Deferred tax liabilities (23.0)
Other non-current liabilities (1.5)
________
Total identifiable assets 130.8
Goodwill 149.2
________
Total consideration 280.0
________
Satisfied by:
Cash 270.3
Deferred payment 9.7
________
280.0
________
Net cash outflow on acquisition:
Total
2020
EUR'm
Cash 270.3
Less: cash and cash equivalents acquired (1.2)
Less: prepayments made in 2019 in relation to 2020 acquisitions (18.0)
________
251.1
________
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 2019, 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. EUR30.9m of goodwill
recognised is expected to be deductible for income tax
purposes.
Transaction expenses related to these acquisitions of EUR1.4m
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 EUR16.8m and a
gross contractual value of EUR16.8m .
In relation to the EUR18.7m prepayments made in 2019 relating to
future acquisitions, EUR18.0m is attributable to 2020 acquisitions
with the EUR0.7m remaining prepayment for acquisitions yet to be
completed.
From the date of acquisition, the acquired businesses have
contributed EUR23.8m of revenue and EUR1.6m 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 EUR75.0m of revenue
and EUR5.3m of profit after taxation attributable to owners of the
parent to the Group.
The following acquisitions were completed by the Group during
2020:
Acquisition Acquired Principal activity
Tecnispice, Sociedad Anónima April Tecnispice, located in Guatemala, is a leading
savoury taste business serving the meat and snacks
markets incorporating spices, herbs and seasonings.
Global Spice, a sister company of Tecnispice,
based in Costa Rica was also acquired as part
of this transaction.
Bio-K Plus International Inc. October Bio-K+, based in Canada, is a leading biotechnology
company with probiotics in beverage and supplement
applications.
Shandong Tianbo Food Ingredients November Shandong Tianbo (Jining Nature Group) is a leading
Co., Ltd manufacturer of savoury flavours and seasonings
serving the meat, snacks and meals markets, based
in China.
7. Events after the balance sheet date
Since the financial year end, the Group has proposed a final dividend of 60.60 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 2020.
8. General information
The statutory financial statements of Kerry Group plc for the
financial year ended 31 December 2020 were approved by the Board of
Directors and authorised for issue on 15 February 2021 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 2019, to which an unqualified
audit opinion was received, were annexed to the annual return and
filed with the Registrar of Companies.
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
2020 performance Price currency Disposals currency performance
Taste &
Nutrition (3.0%) 0.1% (0.1%) 1.2% (2.6%) (4.4%)
Consumer
Foods (2.6%) 1.2% - - (0.7%) (2.1%)
________ ________ ________ ________ ________ ________
Group (2.9%) 0.3% (0.1%) 1.0% (2.3%) (4.0%)
2019
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%
________ ________ ________ ________ ________ ________
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.
2020 2019
EUR'm EUR'm
Profit after taxation attributable to owners of the parent 554.1 566.5
Finance income (0.2) (0.3)
Finance costs 72.6 81.9
Income taxes 81.2 79.4
Non-trading items 19.4 110.9
Intangible asset amortisation 70.1 64.3
Depreciation (net of capital grant amortisation) 200.7 191.4
_______ _______
EBITDA 997.9 1,094.1
_______ _______
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.
2020 2019
EUR'm EUR'm
Operating profit 707.7 727.5
Intangible asset amortisation 70.1 64.3
Non-trading items 19.4 110.9
_______ _______
Trading profit 797.2 902.7
_______ _______
4. Trading Margin
Trading margin represents trading profit, expressed as a
percentage of revenue.
2020 2019
EUR'm EUR'm
Trading profit 797.2 902.7
Revenue 6,953.4 7,241.3
_______ _______
Trading margin 11.5% 12.5%
_______ _______
5. Operating Profit
Operating profit is profit before income taxes, finance income
and finance costs.
2020 2019
EUR'm EUR'm
Profit before taxation 635.3 645.9
Finance income (0.2) (0.3)
Finance costs 72.6 81.9
_______ _______
Operating profit 707.7 727.5
_______ _______
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 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.
2020 2019
EPS EPS
cent cent
Basic earnings per share 313.0 320.4
Brand related intangible asset amortisation 23.6 21.4
Non-trading items (net of related tax) 8.8 51.9
_______ _______
Adjusted earnings per share 345.4 393.7
Impact of retranslating prior year adjusted earnings per share at current
year average exchange rates - (12.3)
_______ _______
Adjusted earnings per share on a constant currency basis 345.4 381.4
_______ _______
Performance in adjusted earnings per share on a constant currency basis (9.4%) 8.3%
_______ _______
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'.
2020 2019
EUR'm EUR'm
Net cash from operating activities 672.2 763.9
Difference between movement in monthly average working capital and movement
in the financial year end working capital 6.2 (25.6)
Expenditure on acquisition integration and restructuring costs 39.7 89.1
Purchase of assets (276.2) (315.6)
Payment of lease liabilities (37.0) (35.5)
Proceeds from the sale of property, plant and equipment 2.4 32.8
Capital grants received 0.1 3.0
Exchange translation adjustments 4.6 2.5
_______ _______
Free cash flow 412.0 514.6
_______ _______
8. Cash Conversion
Cash conversion is defined as free cash flow, expressed as a
percentage of adjusted earnings after taxation.
2020 2019
EUR'm EUR'm
Free cash flow 412.0 514.6
Profit after taxation attributable to owners of the parent 554.1 566.5
Brand related intangible asset amortisation 41.7 37.8
Non-trading items (net of related tax) 15.5 91.7
_______ _______
Adjusted earnings after taxation 611.3 696.0
_______ _______
Cash Conversion 67% 74%
_______ _______
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 and deferred
payments in relation to acquisitions.
2020 2019
Covenant Times Times
Net debt: EBITDA Maximum 3.5 1.9 1.8
EBITDA: Net interest Minimum 4.0 13.8 13.2
10. Average Capital Employed
Average capital employed is calculated by taking an average of
the shareholders' equity and net debt - pre lease liabilities over
the last three reported balance sheets plus an additional EUR527.8m
relating to goodwill written off to reserves pre conversion to
IFRS.
2020 H1 2020 2019 H1 2019 2018
EUR'm EUR'm EUR'm EUR'm EUR'm
Shareholders' equity 4,655.5 4,508.5 4,562.2 4,186.5 4,034.4
Goodwill amortised (pre conversion to IFRS) 527.8 527.8 527.8 527.8 527.8
_______ ______ _______ _______ _______
Adjusted equity 5,183.3 5,036.3 5,090.0 4,714.3 4,562.2
Net debt - pre lease liabilities 1,863.6 1,996.4 1,862.8 1,918.2 1,623.5
_______ ______ _______ _______ _______
Total 7,046.9 7,032.7 6,952.8 6,632.5 6,185.7
_______ ______ _______ _______ _______
Average capital employed 7,010.8 6,590.3
_______ _______
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.
2020 2019
EUR'm EUR'm
Profit after taxation attributable to owners of the parent 554.1 566.5
Non-trading items (net of related tax) 15.5 91.7
Brand related intangible asset amortisation 41.7 37.8
Net finance costs 72.4 81.6
_______ _______
Adjusted profit 683.7 777.6
_______ _______
Average capital employed 7,010.8 6,590.3
_______ _______
Return on average capital employed 9.8% 11.8%
_______ _______
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.
2020 2019
Share price (1 January) EUR111.10 EUR86.50
Interim dividend (cent) 25.9 23.5
Dividend paid (cent) 55.1 49.2
Share price (31 December) EUR118.50 EUR111.10
_______ _______
Total shareholder return 7.4% 29.3%
_______ _______
13. Market Capitalisation
Market capitalisation is calculated as the share price times the
number of shares issued.
2020 2019
Share price (31 December) EUR118.50 EUR111.10
Shares in issue ('000) 176,700.0 176,514.9
_______ _______
Market capitalisation (EUR'm) 20,939.0 19,610.8
_______ _______
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. Total Net Debt
Total net debt comprises borrowings and overdrafts, interest
rate derivative financial instruments, lease liabilities and cash
at bank and in hand.
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