August 19, 2008
Greencore Group Plc – Interim Management
DUBLIN, Ireland, Aug. 19 /PRNewswire-FirstCall/ -- Greencore Group plc ("Greencore" or "the Group") today issues the following Interim Management Statement in accordance with the reporting requirements of the Transparency Regulations, 2007.
Operating PerformanceThe underlying sales performance of our Convenience Food division remained solid in the four months ended July 31, 2008 against the backdrop of a notable deterioration in consumer sentiment in the UK since June. While a 17% EUR/GBP translation impact resulted in a 7.5% reduction in turnover to euro 284m, on a like for like* basis assuming constant currency, Convenience Food sales were 7.2% ahead in the period reflecting a 3% increase in volume and 4.2% increase on price. We continue to confront the impact of input price inflation, as outlined in our half year results, and have made good progress in restoring margins at our ambient cooking sauces and pickles business.
Our US business has had a very encouraging start since the acquisition of Home Made Brand Foods Inc. on April 29, 2008. During July 2008 we concluded a ten year US chilled foods license, on an exclusive basis, with WeightWatchers International Inc. Under this agreement we will develop a range of chilled foods in the US under the WeightWatchers brand. Initial products are scheduled for trialing and introduction at selected US retailers in early 2009. This licensing arrangement builds on the existing relationship Greencore has with WeightWatchers in the UK.
All of the Group's Ingredients and Related Property businesses are trading well, reflecting a continuation of the performance seen in the first half. In addition, on June 17, 2008 Carlow County Council rezoned 220 acres of the Group's lands in Carlow for scale mixed use redevelopment which is a significant step forward for our Related Property division.
In the second half the Group will record an exceptional charge of c. euro10m (cash impact of c.euro4m) associated with reducing our ready meals and frozen desserts capacity. The existing output of the two facilities impacted will be consolidated into larger Group facilities with available capacity. Overall the Group will record a net exceptional gain of c.euro8m for FY'08 when these second half initiatives are combined with the euro18.2m exceptional gain (on the finalization of the EU Restructuring Aid receivable) recorded in the first half.
*excluding acquisitions Financial and Internal Control Review
Following the announcement on June 25, 2008 of the deliberate concealment of costs at our Campsie Mineral Water ("Water") business our immediate objectives were to stabilize the Water business and to achieve a very high level of assurance on the financial and internal control environment at the rest of the Group's businesses. The objective of stabilizing the Water business has been achieved with the appointment of a new Water leadership team and the implementation of a number of improvement initiatives.
The Group also appointed KPMG to perform a business by business review of the balance sheets of each business unit in the Group including a comprehensive assessment of the financial and internal control environment at each of our sites. To date 20 sites, comprising c.80% of Group sales, have been reviewed with no material issues identified. In addition, the financial impact of the Water cost concealment issue has now been independently reviewed by KPMG with the aggregate financial impact consistent with our previous announcement. The review program on the remaining sites within the Group is scheduled for completion by September 15, 2008. Based on the work to date our belief has been reinforced that the Water cost concealment issue was an isolated incident.
External Audit Arrangements
Following a review of the Group's external audit arrangements and the completion of a full tender process the Group has appointed KPMG as its auditors with effect from August 18, 2008.
The Group has a strong balance sheet and is well capitalized to meet the operational and development needs of the business. On April 29, 2008 the Group acquired Home Made Brand Foods Inc. for a cash consideration of US$44m funded from existing bank facilities. Additional deferred contingent consideration in respect of this acquisition of up to $10m may become payable in FY'09 depending on performance.
Consumer sentiment in the UK has deteriorated markedly since June and poor weather has also impacted demand. However, notwithstanding these headwinds and the fact that there are a number of seasonally important trading weeks remaining in the current financial year, the Group expects to record overall like for like* Convenience Foods sales growth, assuming constant currency, in the second half. As noted above, the Group's Ingredients and Related Property division continues to trade well. Overall the Group is on track to deliver within the consensus range of market expectations (range of 22.8 cent to 25.0 cent) at the EPS level for FY'08.
*excluding acquisitions Greencore Group -- A leading international producer of convenience food, as well as an established ingredients supplier with operations in Ireland, the UK, the US, The Netherlands and Belgium -- Strong market leadership positions in the UK convenience food market across sandwiches, chilled prepared meals, chilled soups and sauces, ambient sauces & pickles, cakes & desserts, mineral water and Yorkshire puddings -- Extending presence outside the UK with fast-growing convenience food businesses in the US, The Netherlands and Ireland -- The leading malt producer in Ireland, the UK and Belgium -- Significant property assets in Ireland and the UK Contact: Geoff Doherty Chief Financial Officer Greencore Group 011-353-1-605-1018 - or - Brian Rafferty Managing Director Taylor Rafferty 212-889-4350 [email protected]
Greencore Group plc
CONTACT: Geoff Doherty, Chief Financial Officer of Greencore Group,+353-1-605-1018; or Brian Rafferty, Managing Director of Taylor Rafferty,+1-212-889-4350, [email protected]