TIDMKYGA
RNS Number : 1687U
Kerry Group PLC
29 July 2022
LEI: 635400TLVVBNXLFHWC59
Date: 29 July 2022
KERRY GROUP
INTERIM MANAGEMENT REPORT 2022
Strong growth across a dynamic marketplace
OVERVIEW
======================================================================================================================
* Group revenue of EUR4.1bn representing 15.2%* organic
growth
* Group volumes +6.8% (Q2: +8.0%)
* Taste & Nutrition +8.6% (Q2: +10.3%)
* Dairy Ireland +1.2% (Q2: +1.9%)
* Group pricing +8.3% (Q2: +10.4%)
* Group EBITDA of EUR518m with margin % maintained
* Adjusted EPS of 176.4 cent; +9.0% on a constant
currency basis (16.1% reported currency growth)
* Basic EPS of 128.4 cent (H1 2021: 128.2 cent)
* Free cash flow of EUR226m reflecting 72% cash
conversion
* Interim dividend per share of 31.4 cent (H1 2021:
28.5 cent)
* Divestment of Russian subsidiary completed post the
period end
* Full year EPS guidance reaffirmed
(*) Comprises volume growth of 6.8%, positive pricing of 8.3% and a favourable transaction
currency impact of 0.1%.
======================================================================================================================
Edmond Scanlon, Chief Executive Officer
"We are pleased with our overall performance and business momentum across the first half of
the year despite inflationary challenges and geopolitical volatility in places, in what remains
a highly dynamic marketplace.
Volume growth was very strong in both retail and foodservice channels, driven by an increased
level of innovation activity. This growth was broad-based across our regions, led by excellent
performances in Beverage, Meat and Bakery end use markets in particular.
We continued to make good progress in actively managing the unprecedented inflationary environment
in conjunction with our customers, as we support them in developing their offerings to meet
the rapidly evolving marketplace. We also made good strategic progress by expanding our footprint
and completing a number of strategic acquisitions in the period.
While recognising the marketplace is facing into a period of heightened uncertainty and volatility,
this also presents significant opportunities. We remain confident in our outlook and are reaffirming
our full year earnings guidance."
Performance
Group reported revenue in the period increased by 13.3% to EUR4.1 billion, reflecting a volume
increase of 6.8%, increased pricing of 8.3%, a favourable transaction currency impact of 0.1%,
a favourable translation currency impact of 5.8% and contribution from acquisitions of 4.7%,
partially offset by the dilutive impact of the disposal of the Consumer Foods Meats and Meals
business of 12.4%.
Group EBITDA increased by 13.1% to EUR518 million with EBITDA margin maintained at 12.8%,
primarily driven by the benefits from operating leverage, mix, efficiencies and portfolio
development, offset by the impact of passing through raw material cost inflation.
Constant currency adjusted earnings per share increased by 9.0% to 176.4 cent (H1 2021: +24.1%),
which represented an increase of 16.1% in reported currency (H1 2021: +15.1%). Basic earnings
per share of 128.4 cent (H1 2021: 128.2 cent) reflects the growth in the period offset by
the impairment of the Group's Russia and Belarus assets and the charges related to the previously
announced Accelerate Operational Excellence programme.
Free cash flow was EUR226m (H1 2021: EUR222m) representing cash conversion of 72%, with an
increased investment in working capital in the period partially offset by lower net capital
expenditure due to the timing of projects.
The interim dividend of 31.4 cent per share reflects an increase of 10.2% from the prior year
interim dividend.
Markets
The overall demand environment was positive through the period. As preferences continue to
evolve with heightened demand for new food and beverage experiences, the importance of value
options has increased for consumers, while sustainability remains an important consideration.
The resilience of supply chains remains a key focus across the industry due to geopolitical
volatility and inflationary pressures. Despite these challenges, the level of customer innovation
remains strong, and the level of innovation support needs continues to expand, with customers
continuing to evaluate the relevance and uniqueness of their product ranges, and their readiness
to adapt to further changes in the consumer landscape.
Business Reviews
Taste & Nutrition
Strong business volume growth across regions, channels and end use markets
H1 2022 Performance(1)
Revenue EUR3,445m +8.6%(2)
EBITDA EUR515m +24.9%
EBITDA margin 15.0% -30bps
================================= ================================================== ===============================
(1) performance of re-presented segmental structure | (2) volume growth
* Overall volume growth of 8.6% with an excellent Q2
performance of 10.3%
* Growth was led by Beverage and Food EUMs of Meat and
Bakery
* Retail channel achieved excellent growth with
continued strong double-digit growth in foodservice
* Pricing of 5.9% reflective of raw material cost
inflation
* Margin development from operating leverage, mix,
efficiencies and portfolio evolution more than offset
by the impact of passing through raw material cost
inflation
Taste & Nutrition reported revenue increased by 27.5% to EUR3,445m in the period driven by
volume growth, positive pricing, favourable foreign currency impacts and a positive contribution
from acquisitions net of disposals.
Strong business volume development was achieved through the period, with growth led by the
Beverage, Meat and Bakery markets in particular. The retail channel achieved excellent growth
due to customers' increased requirements for innovation support. The foodservice channel delivered
strong double-digit growth across all regions, supported by increased seasonal menu offerings,
innovations to reduce operational complexity and solutions designed to improve their overall
sustainability impact.
Overall growth across the Group's key growth platforms was strong, led by increased demand
for Kerry's range of food waste solutions, with good growth across authentic taste and plant-based,
while health and bio-pharma performed in line with expectations. The recently acquired Niacet(3)
business continued to deliver strong growth and business development.
Business volumes in emerging markets increased by 10.7% in the period, as very strong growth
in the Middle East, Southeast Asia and LATAM were partially offset by challenging conditions
in China due to localised restrictions in place, and in Russia and Eastern Europe due to the
ongoing war in the region.
Since the end of the period, the divestment of 100% of the share capital of Kerry's subsidiary
in Russia to local management was completed and agreement has been reached for the sale of
Kerry's subsidiary in Belarus to a third party.
Americas Region
* Volume growth of 9.1% with Q2 performance of 11.4%
* Growth was led by Beverage, Meat and Bakery EUMs
* Excellent growth achieved across both retail and
foodservice channels
* LATAM delivered strong growth led by Brazil and
Mexico
Reported revenue in the Americas region increased by 29.1% to EUR1,934m in the period driven
by volume growth, positive pricing, favourable foreign currency impacts and contribution from
acquisitions.
Growth in North America continued its strong momentum through the period, with high levels
of activity across both the retail and foodservice channels. This was led by the Beverage
EUM, which delivered particularly strong growth through innovations across refreshing beverages,
functional beverages and the tea and coffee categories incorporating Kerry's authentic natural
taste, Tastesense(TM) sugar reduction and proactive nutrition technologies. Performance in
Meat and Meat Alternatives was strong across food preservation, culinary taste and texture
coating systems, supported by the Group's expanded manufacturing facility in Rome, Georgia.
Bakery delivered strong growth with customer launches in food protection and preservation
and through increased LTO activity within the foodservice channel.
Within LATAM, Brazil and Mexico delivered strong growth. Volume growth in Brazil was driven
by performance in Meals and Meat, while volumes in Mexico were led by growth in Beverage and
Snacks with regional leaders.
Within the global Pharma EUM, good volume growth was achieved driven by strong performance
in cell nutrition.
Europe Region
* Volume growth of 7.1% with Q2 performance of 5.9%
* Growth driven by foodservice which saw increased
consumption and innovation activity
* Beverage, Dairy and Snacks markets delivered
strongest growth
Reported revenue in the Europe region increased by 27.5% to EUR729m in the period driven by
volume growth, positive pricing, favourable foreign currency impacts and a positive contribution
from acquisitions net of disposals.
Europe achieved strong overall growth in the foodservice channel through the period. This
was driven by strong menu development activity, an increased level of seasonal products and
softer prior year comparatives.
Growth in Beverage was led by refreshing beverage, tea and coffee, and low/no alcohol with
launches featuring Kerry's natural extracts, Tastesense(TM) sugar reduction technologies and
enzymes. Dairy delivered strong growth with new innovations across dairy alternatives, ice
cream and desserts within the foodservice channel. Good growth was achieved in Snacks driven
by increased customer focus on enhancing their products' nutritional profiles in light of
the evolving regulatory requirements within the region. This resulted in a number of launches
incorporating Kerry's Tastesense(TM) salt reduction, taste modulation and bio-processing technologies.
Growth in the Europe region was led by Central and Southern Europe driven by a particularly
strong performance in the foodservice channel, while performance in Russia and Eastern Europe
was impacted by the ongoing war in the region.
In the period, the Group completed the acquisition of c-LEcta(3), which is a leading biotechnology
innovation company based in Leipzig, Germany.
APMEA Region
* Volume growth of 9.1% with Q2 performance of 12.1%
* Growth was led by Meat, Snacks and Bakery EUMs
* Foodservice achieved strong overall growth and retail
performed very well
Reported revenue in the APMEA region increased by 26.1% to EUR768m in the period driven by
volume growth, positive pricing, favourable foreign currency impacts and contribution from
acquisitions.
Growth in the region was primarily driven by excellent performances in the Middle East and
across Southeast Asia, partially offset by challenges resulting from the localised restrictions
in China. The strong growth achieved in the second quarter reflected good business development
across both the foodservice and retail channels.
Growth in Meat and Meat Alternatives was driven by increased demand across global, regional
and local leaders for Kerry's range of local authentic taste and texture systems. Snacks achieved
excellent growth in savoury applications across the Middle East and Southeast Asia in particular,
while Bakery delivered a strong performance through new launch activity and increased demand
for functional systems across the region.
The Group continued to enhance its local presence in APMEA through the acquisition of Almer(3),
and its continued footprint expansion in the Middle East, which has become an important contributor
to growth in the region.
(3) In September 2021 Kerry acquired 100% of the issued share capital of Hare Topco, Inc.
(trading as Niacet Corp.) - 'Niacet'.
In March 2022 Kerry acquired 93% of the issued share capital of the company c-LEcta GmbH
- 'c-LEcta'.
In March 2022 Kerry acquired 100% of the issued share capital of the company Almer Malaysia
Sdn. Bhd. - 'Almer'.
Dairy Ireland
Solid growth as business saw significant price inflation across the period
H1 2022 Pro-forma(4) Reported
Revenue EUR695m +2.2%(5) +1.2%(5)
EBITDA EUR38m +4.6%(6) -52.0%
EBITDA margin 5.5% -140bps -280bps
* Overall volume growth of 2.2% with Q2 performance of
3.3%
* Growth driven by the Dairy Ingredients business
* Pricing of 27.8% reflected significant increases
across dairy prices and other raw material costs
* Margin reduction driven by the impact of passing
through raw material cost inflation
Dairy Ireland delivered solid overall volume growth through the period, while managing the
heightened inflationary cost environment, which resulted in significant price increases across
the business.
Within Dairy Consumer Products, most categories saw significant price increases, which led
to overall volumes being more challenged. Within the spreads category, good performance was
achieved across our customer-branded ranges. Volumes in the period in cheese snacking were
impacted by reduced promotional activity and operational issues, while a new plant-based range
of Dairygold products was launched at the end of the period.
Dairy Ingredients achieved good volume growth, while prices were significantly higher as a
result of constrained global supply dynamics.
Performance of re-presented segmental structure on a pro-forma basis excluding the Consumer
Foods Meat and Meals business disposal.
Volume growth.
Comparable H1 2021 pro-forma EBITDA was EUR36.7m.
Financial Review
H1 2022 H1 2021
Growth % EUR'm EUR'm
Revenue +13.3% 4,057.8 3,582.1
EBITDA +13.1% 517.7 457.9
EBITDA margin 12.8% 12.8%
Trading profit 409.6 357.1
Computer software amortisation (18.9) (16.8)
Finance costs (net) (34.1) (34.2)
Share of joint ventures profit after 1.1 -
taxation
Adjusted earnings before taxation +16.9% 357.7 306.1
Income taxes (excluding non-trading items) (44.9) (36.9)
------------------------------------------------- --------------------------- --------------------
Adjusted earnings after taxation 312.8 269.2
Brand related intangible asset
amortisation (23.1) (22.4)
Non-trading items (net of related
tax) (62.1) (19.8)
----------------------------------- ------------ --------------------------- --------------------
Profit after taxation 227.6 227.0
=================================== ============ =========================== ====================
EPS EPS
cent cent
Basic EPS +0.2% 128.4 128.2
Brand related intangible asset amortisation 13.0 12.6
Non-trading items (net of related
tax) 35.0 11.2
----------------------------------- ------------ --------------------------- --------------------
Adjusted* EPS +16.1% 176.4 152.0
Impact of exchange rate
translation (7.1%)
----------------------------------- ------------ --------------------------- --------------------
Adjusted* EPS growth in constant
currency +9.0% +24.1%
----------------------------------- ------------ --------------------------- --------------------
*Before brand related intangible asset amortisation and non-trading items
(net of related tax).
See Financial Definitions section for definitions, calculations and reconciliations
of Alternative Performance Measures.
Revenue
The table below provides the revenue growth components for the updated
business segments effective 1 January 2022, reflecting the new Dairy
Ireland business post the disposal of the Consumer Foods Meats and Meals
business. The H1 2021 table is also provided for comparable purposes.
Acquisitions
Revenue Growth Transaction Translation / Reported
Components Volume Price currency currency Disposals Growth H1 2022
--------------- -------- -------- ------------ ------------ ------------- --------- ---------
Taste &
Nutrition 8.6% 5.9% 0.2% 7.0% 5.8% 27.5% EUR3.4bn
--------------- -------- -------- ------------ ------------ ------------- --------- ---------
Dairy
Ireland(1) 2.2% 27.8% 0.2% 1.0% - 31.2% EUR0.7bn
--------------- -------- -------- ------------ ------------ ------------- --------- ---------
Group(1) 7.8% 9.3% 0.2% 6.1% 5.3% 28.7%
=============== ======== ======== ============ ============ ============= ========= =========
Meats and
Meals
business(2) - - - - (46.1%) (46.1%)
=============== ======== ======== ============ ============ ============= ========= =========
Group
(Reported) 6.8% 8.3% 0.1% 5.8% (7.7%) 13.3% EUR4.1bn
=============== ======== ======== ============ ============ ============= ========= =========
(1) Pro-forma growth excludes the sale of the Consumer Foods Meats
and Meals business.
(2) The disposal of Kerry's Consumer Foods Meats and Meals business
was completed in September 2021.
Acquisitions
Revenue Growth Transaction Translation / Reported
Components Volume Price currency currency Disposals Growth H1 2021
--------------- -------- -------- ------------ ------------ ------------- --------- ---------
Taste &
Nutrition 10.7% 0.3% (0.1%) (6.9%) 1.2% 5.2% EUR2.7bn
--------------- -------- -------- ------------ ------------ ------------- --------- ---------
Dairy
Ireland(1) 1.0% 1.6% - (0.4%) - 2.2% EUR0.5bn
--------------- -------- -------- ------------ ------------ ------------- --------- ---------
Group(1) 8.9% 0.6% - (6.0%) 1.0% 4.5%
=============== ======== ======== ============ ============ ============= ========= =========
Meats and
Meals
business(2) 9.4% (0.3%) (0.2%) (0.8%) - 8.1% EUR0.4bn
Group
(Reported) 9.0% 0.5% (0.1%) (5.4%) 0.9% 4.9% EUR3.6bn
=============== ======== ======== ============ ============ ============= ========= =========
EBITDA & Margin
Group EBITDA increased by 13.1% to EUR517.7m (H1 2021: EUR457.9m). EBITDA
margin percentage was maintained at 12.8%, primarily driven by the benefits
from operating leverage, mix, efficiencies and portfolio development,
offset by the impact of passing through raw material cost inflation.
The EBITDA margin by business segment was 15.0% in Taste & Nutrition
and 5.5% in Dairy Ireland in the period.
Finance Costs (net)
Finance costs (net) were EUR34.1m similar to the prior period (H1 2021:
EUR34.2m).
Taxation
The tax charge for the period before non-trading items was EUR44.9m (H1
2021: EUR36.9m) which represents an effective tax rate of 13.4% (H1 2021:
13.0%).
Acquisitions
During the period, the Group completed the acquisition of Almer Malaysia
Sdn. Bhd., c-LEcta GmbH and Natreon, Inc. for a total consideration of
EUR267.4m .
Non-Trading Items
The Group incurred a non-trading item charge of EUR62.1m (H1 2021: EUR19.8m)
net of tax in the period. This primarily related to the impairment of
the Group's Russia and Belarus assets and the previously announced Accelerate
Operational Excellence programme.
Adjusted EPS in Constant Currency
Adjusted EPS in constant currency increased by 9.0% to 176.4 cent in
the period (H1 2021: 24.1%), which represented an increase of 16.1% in
reported currency (H1 2021: +15.1%).
Basic EPS
Basic EPS increased by 0.2% to 128.4 cent in the period (H1 2021: 128.2
cent) and reflects the growth in the period offset by the impairment
of the Group's Russia and Belarus assets and the charges related to the
operational excellence programme.
Free Cash Flow
Group free cash flow was EUR226.0m in the period (H1 2021: EUR222.3m)
reflecting 72% cash conversion, with an increased investment in working
capital in the period partially offset by lower net capital expenditure
due to the timing of projects.
H1 2022 H1 2021
Free Cash Flow EUR'm EUR'm
EBITDA 517.7 457.9
Movement in average working
capital (164.2) (27.5)
Pension contributions paid less pension expense (7.0) (6.0)
Finance costs paid (net) (14.6) (21.5)
Income taxes paid (31.9) (32.1)
Purchase of non-current assets (74.0) (148.5)
Free cash flow 226.0 222.3
=================================== ========================================= ====================
Cash conversion(1) 72% 83%
(1) Cash conversion represents free cash flow expressed as a percentage
of adjusted earnings after taxation.
Balance Sheet
A summary balance sheet as at 30 June 2022 is provided below:
H1 2022 H1 2021 FY 2021
EUR'm EUR'm EUR'm
--------------------------------------------------- --------- ------------------------- ---------------
Property, plant and equipment 2,161.1 1,918.8 2,091.3
Intangible assets 5,968.9 4,443.8 5,580.7
Other non-current assets 372.4 213.7 264.5
Current assets 3,855.7 3,227.0 3,458.9
Total assets 12,358.1 9,803.3 11,395.4
Current liabilities 3,049.1 1,918.7 1,995.4
Non-current liabilities 3,218.6 2,921.5 3,798.8
Total liabilities 6,267.7 4,840.2 5,794.2
Net assets 6,090.4 4,963.1 5,601.2
Total equity 6,090.4 4,963.1 5,601.2
Property, Plant and Equipment
Property, plant and equipment increased since year end by EUR69.8m to
EUR2,161.1m (Dec 2021: EUR2,091.3m, H1 2021: EUR1,918.8m) predominantly
due to depreciation charge partially offset by foreign exchange translation
and additions.
Intangible Assets
Intangible assets increased by EUR388.2m since year end to EUR5,968.9m
(Dec 2021: EUR5,580.7m, H1 2021: EUR4,443.8m) predominantly due to acquisitions
and the impact of foreign exchange translation, partially offset by the
amortisation and impairment charges.
Current Assets
Current assets increased by EUR396.8m since year end to EUR3,855.7m (Dec
2021: EUR3,458.9m, H1 2021: EUR3,227.0m) primarily due to the impact
of foreign exchange translation on the assets, acquisitions and working
capital investment.
Retirement Benefits
At the balance sheet date, the net surplus for all defined benefit schemes
(after deferred tax) was EUR164.1m (Dec 2021: EUR56.3m net surplus, H1
2021: EUR43.2m net surplus), see note 8 for details. The improvement
in the funding position before deferred tax of EUR135.6m was driven predominantly
by favourable movements in actuarial assumptions, primarily higher discount
rates, which were partially offset by reduced asset values.
Net Debt
At 30 June 2022, net debt was EUR2,456.3m. This increase of EUR332.2m
relative to the December 2021 net debt of EUR2,124.1m reflected acquisition
investment and dividends, partially offset by net cash generated in the
period.
Return on Average Capital Employed (ROACE)
Group ROACE at period end was 10.2% (Dec 2021: 10.5%, H1 2021: 10.7%)
reflective of recent portfolio developments.
Liquidity Analysis
The Group's balance sheet is in a healthy position. With a Net debt
to EBITDA* ratio of 2.1 times, the organisation has sufficient headroom
to support future growth plans. The Group has no financial arrangements
that carry financial covenants.
H1 2022 H1 2021 FY 2021
Times Times Times
=================================== ============== ========= ========================= =============
Net debt: EBITDA* 2.1 1.9 2.0
EBITDA: Net interest* 16.0 14.6 14.9
*Calculated on a pro-forma basis as outlined in the Financial Definitions
section.
Related Party Transactions
There were no changes in related party transactions from the 2021 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 the period end.
Average Rates Closing Rates
H1 2022 H1 2021 H1 2022 H1 2021 FY 2021
Australian Dollar 1.52 1.56 1.52 1.58 1.56
----------------------------------- -------------- --------- -------- --------------- ---------------
Brazilian Real 5.55 6.51 5.41 5.91 6.32
----------------------------------- -------------- --------- -------- --------------- ---------------
British Pound Sterling 0.84 0.87 0.86 0.86 0.84
----------------------------------- -------------- --------- -------- --------------- ---------------
Chinese Yu an Renminbi 7.11 7.85 7.06 7.72 7.22
----------------------------------- -------------- --------- -------- --------------- ---------------
Malaysian Ringgit 4.69 4.94 4.64 4.97 4.73
----------------------------------- -------------- --------- -------- --------------- ---------------
Mexican Peso 22.30 24.31 21.09 24.17 23.30
----------------------------------- -------------- --------- -------- --------------- ---------------
South African Rand 16.89 17.60 16.85 16.98 18.06
----------------------------------- -------------- --------- -------- --------------- ---------------
US Dollar 1.10 1.21 1.05 1.19 1.13
----------------------------------- -------------- --------- -------- --------------- ---------------
Principal Risks and Uncertainties
Details of the principal risks and uncertainties facing the Group can
be found in the 2021 Annual Report on pages 78 to 84 and continue to
be the principal risks and uncertainties facing the Group for the remaining
six months of the financial year. These risks include but are not limited
to; portfolio management, geopolitical/emerging markets, business acquisition
and divestiture, climate change and environmental, people, business ethics
and social responsibility, food safety, quality and regulatory, health
& safety, margin management, information systems and cybersecurity, operational
and supply chain continuity, intellectual property, taxation and treasury.
The Group continues to manage the interdependency of these risks, some
of which has been heightened by the war in Ukraine, global supply chain
challenges and the continued inflationary environment. The Group actively
manages all risks through its control and risk management process.
Dividend
In line with our dividend strategy, the Board has declared an interim
dividend of 31.4 cent per share, compared to the prior year interim dividend
of 28.5 cent, payable on 11 November 2022 to shareholders registered
on the record date 14 October 2022.
Future Prospects
Kerry remains strongly positioned for growth in a highly dynamic marketplace
with a good innovation pipeline. The Group is confident in its ability
to continue to manage through the current inflationary cycle with its
well-established pricing model and cost initiatives. Kerry will continue
to strategically evolve its portfolio and invest capital aligned to its
strategic priorities and key growth platforms. While overall market conditions
remain uncertain, the Group expects to achieve adjusted earnings per
share growth* in 2022 of 5% to 9% on a constant currency basis.
*Earnings guidance includes estimated net dilution from portfolio changes
of c. 2.5% in the full year comprising the previously announced portfolio
changes of c. 1.5% and the impact of the divestiture of the Russia and
Belarus businesses of c. 1%.
Note: Based on prevailing exchange rates, foreign currency is expected
to be a tailwind of 8% to adjusted earnings per share.
Responsibility Statement
The Directors are responsible for preparing the Half Yearly Financial Report in accordance
with the Transparency (Directive 2004/109/EC) Regulations 2007 as amended ('the Regulations'),
the Central Bank (Investment Market Conduct) Rules 2019, the Disclosure Guidance and Transparency
Rules of the UK's Financial Conduct Authority 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 2022 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
2022, 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
28 July 2022
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
=============================================
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
Media
Catherine Keogh , Chief Corporate
Affairs & Brand Officer
+353 45 930188 | corpaffairs@kerry.com
Website
www.kerry.com
RESULTS FOR THE HALF YEARED 30 JUNE 2022
Kerry Group plc
Condensed Consolidated Income Statement
for the half year ended 30 June 2022
Before Year
Non-Trading Non-Trading Half year Half year ended
Items Items ended ended 31 Dec.
30 June 30 June 30 June 30 June 2021
2022 2022 2022 2021
Unaudited Unaudited Unaudited Unaudited Audited
Notes EUR'm EUR'm EUR'm EUR'm EUR'm
Continuing operations
Revenue 2 4,057.8 - 4,057.8 3,582.1 7,350.6
Earnings before interest, tax,
depreciation and amortisation 2 517.7 - 517.7 457.9 1,077.0
Depreciation and intangible asset
amortisation 2 (150.1) - (150.1) (140.0) (282.3)
Non-trading items 3 - (69.5) (69.5) (20.8) 91.5
Operating profit 367.6 (69.5) 298.1 297.1 886.2
Finance income 4 0.8 - 0.8 0.1 0.3
Finance costs 4 (34.9) - (34.9) (34.3) (70.2)
Share of joint ventures profit
after taxation 1.1 - 1.1 - -
Profit before taxation 334.6 (69.5) 265.1 262.9 816.3
Income taxes (44.9) 7.4 (37.5) (35.9) (53.3)
Profit after taxation 289.7 (62.1) 227.6 227.0 763.0
Attributable to:
Equity holders of the parent 227.6 227.0 763.0
Non-controlling interests - - -
227.6 227.0 763.0
--------------------------- ------- ------ ------ ------ ------ ------ ------ ------ ------- ------ ---------
Earnings per A ordinary share Cent Cent Cent
- basic 5 128.4 128.2 430.6
- diluted 5 128.2 128.0 429.9
Condensed Consolidated Statement of Comprehensive Income
for the half year ended 30 June 2022
Half year Half year Year
ended ended ended
30 June 30 June 31 Dec.
2022 2021 2021
Unaudited Unaudited Audited
EUR'm EUR'm EUR'm
Profit after taxation 227.6 227.0 763.0
Other comprehensive income:
Items that are or may be reclassified subsequently
to profit or loss:
Fair value movements on cash flow hedges (0.3) (0.7) (0.3)
Cash flow hedges - reclassified to profit or
loss from equity (1.4) (1.1) (0.9)
Net change in cost of hedging 0.2 0.3 -
Deferred tax effect of fair value movements
on cash flow hedges - - 0.1
Exchange difference on translation of foreign
operations 265.3 98.7 217.7
Cumulative exchange difference on translation
recycled on disposal - - 16.2
Items that will not be reclassified subsequently
to profit or loss:
Re-measurement on retirement benefits obligation 130.3 101.6 110.2
Deferred tax effect of re-measurement on retirement
benefits obligation (27.7) (19.1) (20.0)
Net income recognised directly in total other
comprehensive income 366.4 179.7 323.0
Total comprehensive income 594.0 406.7 1,086.0
Attributable to:
Equity holders of the parent 594.0 406.7 1,086.0
Non-controlling interests - - -
594.0 406.7 1,086.0
Condensed Consolidated Balance Sheet
as at 30 June 2022
30 June 2022 30 June 31 Dec.
2021 2021
Unaudited Unaudited Audited
Notes EUR'm EUR'm EUR'm
Non-current assets
Property, plant and equipment 2,161.1 1,918.8 2,091.3
Intangible assets 5,968.9 4,443.8 5,580.7
Financial asset investments 53.1 45.9 49.9
Investment in joint ventures 22.9 18.6 21.7
Other non-current financial instruments 2.7 37.6 34.8
Retirement benefits asset 8 221.6 75.8 90.3
Deferred tax assets 72.1 35.8 67.8
8,502.4 6,576.3 7,936.5
Current assets
Inventories 1,496.1 1,117.6 1,204.2
Trade and other receivables 1,471.7 1,182.8 1,181.7
Cash at bank and in hand 9 757.2 395.0 1,039.1
Other current financial instruments 108.3 8.2 15.2
Assets classified as held for sale 7 22.4 523.4 18.7
3,855.7 3,227.0 3,458.9
Total assets 12,358.1 9,803.3 11,395.4
Current liabilities
Trade and other payables 2,047.9 1,731.9 1,791.5
Borrowings and overdrafts 9 724.2 3.3 5.6
Other current financial instruments 108.6 17.8 40.1
Tax liabilities 148.5 133.6 141.6
Provisions 16.6 7.7 13.6
Deferred income 3.3 2.2 3.0
Liabilities directly associated with assets
classified as held for sale 7 - 22.2 -
3,049.1 1,918.7 1,995.4
Non-current liabilities
Borrowings 9 2,441.7 2,342.3 3,118.0
Other non-current financial instruments 16.8 - 0.5
Retirement benefits obligation 8 19.8 24.5 24.1
Other non-current liabilities 148.3 128.4 153.9
Deferred tax liabilities 533.1 360.6 447.3
Provisions 42.2 47.0 37.1
Deferred income 16.7 18.7 17.9
3,218.6 2,921.5 3,798.8
Total liabilities 6,267.7 4,840.2 5,794.2
Net assets 6,090.4 4,963.1 5,601.2
Equity
Share capital 11 22.1 22.1 22.1
Share premium 398.7 398.7 398.7
Other reserves 145.7 (274.3) (129.6)
Retained earnings 5,522.2 4,816.6 5,310.0
---------------------------------------------- ------ ------------- ---------- ---------
Equity attributable to equity holders of the
parent 6,088.7 4,963.1 5,601.2
Non-controlling interests 1.7 - -
Total equity 6,090.4 4,963.1 5,601.2
Condensed Consolidated Statement of Changes in Equity
for the half year ended 30 June 2022
Attributable to equity holders
of the parent
===================================================================
Non-
Share Share Other Retained controlling Total
Capital Premium Reserves Earnings Total interests equity
Note EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
At 1 January 2021 22.1 398.7 (379.5) 4,614.2 4,655.5 - 4,655.5
Profit after taxation - - - 227.0 227.0 - 227.0
Other comprehensive income - - 97.2 82.5 179.7 - 179.7
Total comprehensive income - - 97.2 309.5 406.7 - 406.7
Dividends paid 6 - - - (107.1) (107.1) - (107.1)
Share-based payment expense - - 8.0 - 8.0 - 8.0
At 30 June 2021 - unaudited 22.1 398.7 (274.3) 4,816.6 4,963.1 - 4,963.1
Profit after taxation - - - 536.0 536.0 - 536.0
Other comprehensive income - - 135.5 7.8 143.3 - 143.3
Total comprehensive income - - 135.5 543.8 679.3 - 679.3
Dividends paid 6 - - - (50.4) (50.4) - (50.4)
Share-based payment expense - - 9.2 - 9.2 - 9.2
At 31 December 2021 - audited 22.1 398.7 (129.6) 5,310.0 5,601.2 - 5,601.2
Profit after taxation - - - 227.6 227.6 - 227.6
Other comprehensive income - - 263.8 102.6 366.4 - 366.4
Total comprehensive income - - 263.8 330.2 594.0 - 594.0
Dividends paid 6 - - - (118.0) (118.0) - (118.0)
Share-based payment expense - - 11.5 - 11.5 - 11.5
Non-controlling interests
arising on acquisition - - - - - 1.7 1.7
At 30 June 2022 - unaudited 22.1 398.7 145.7 5,522.2 6,088.7 1.7 6,090.4
Other Reserves comprise the following:
Cost
Capital Other Share-Based of
Redemption Undenominated Payment Translation Hedging Hedging
Reserve Capital Reserve Reserve Reserve Reserve Total
EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
At 1 January 2021 1.7 0.3 90.2 (472.0) 2.6 (2.3) (379.5)
Other comprehensive
income/(expense) - - - 98.7 (1.8) 0.3 97.2
Share-based payment
expense - - 8.0 - - - 8.0
At 30 June 2021 - unaudited 1.7 0.3 98.2 (373.3) 0.8 (2.0) (274.3)
Other comprehensive
income/(expense) - - - 135.2 0.6 (0.3) 135.5
Share-based payment
expense - - 9.2 - - - 9.2
At 31 December 2021
- audited 1.7 0.3 107.4 (238.1) 1.4 (2.3) (129.6)
Other comprehensive
income/(expense) - - - 265.3 (1.7) 0.2 263.8
Share-based payment
expense - - 11.5 - - - 11.5
At 30 June 2022 -
unaudited 1.7 0.3 118.9 27.2 (0.3) (2.1) 145.7
Condensed Consolidated Statement of Cash Flows
for the half year ended 30 June 2022
Half year Half year Year
ended ended ended
30 June 30 June 31 Dec.
2022 2021 2021
Unaudited Unaudited Audited
Notes EUR'm EUR'm EUR'm
Cash flows from operating activities
Profit before taxation 265.1 262.9 816.3
Adjustments for:
Depreciation (net) 108.1 100.8 201.5
Intangible asset amortisation 42.0 39.2 80.8
Share of profit from joint ventures (1.1) (0.7) (3.9)
Non-trading items income statement charge/(income) 3 69.5 20.8 (91.5)
Finance costs (net) 4 34.1 34.2 69.9
Change in working capital (278.0) (142.9) (184.3)
Pension contributions paid less pension expense (7.0) (6.0) (14.7)
Payments on non-trading items (36.1) (7.2) (76.1)
Exchange translation adjustment (17.9) 0.4 (0.7)
Cash generated from operations 178.7 301.5 797.3
Income taxes paid (31.9) (32.1) (72.0)
Finance income received 0.8 0.1 0.4
Finance costs paid (15.4) (21.6) (71.7)
Net cash from operating activities 132.2 247.9 654.0
Investing activities
Purchase of assets (net) (61.3) (136.3) (300.4)
Proceeds from the sale of assets (net of disposal
expenses) 3.2 3.6 4.0
Capital grants received - - 0.7
Purchase of businesses (net of cash acquired) 10 (244.6) (24.6) (1,084.9)
Receipts/(payments) relating to previous acquisitions 1.7 (10.8) (18.9)
Purchase of investments (4.8) (4.2) (4.4)
Disposal of businesses (net of disposal expenses) - - 775.2
Net cash used in investing activities (305.8) (172.3) (628.7)
Financing activities
Dividends paid 6 (118.0) (107.1) (157.5)
Payment of lease liabilities (15.9) (15.8) (34.9)
Issue of share capital 11 - - -
Repayment of borrowings (net of swaps) - (134.4) (1,093.3)
Increase in borrowings 0.1 - 1,705.0
Net cash movement due to financing activities (133.8) (257.3) 419.3
Net (decrease)/increase in cash and cash equivalents (307.4) (181.7) 444.6
Cash and cash equivalents at beginning of the
period 1,033.8 560.3 560.3
Exchange translation adjustment on cash and
cash equivalents 17.8 13.1 28.9
Cash and cash equivalents at end of the period 9 744.2 391.7 1,033.8
Reconciliation of Net Cash Flow to Movement in Net
Debt
Net (decrease)/increase in cash and cash equivalents (307.4) (181.7) 444.6
Cash flow from debt financing (0.1) 134.4 (611.7)
Changes in net debt resulting from cash flows (307.5) (47.3) (167.1)
Fair value movement on interest rate swaps (net of
adjustment to borrowings) (2.3) 0.9 (0.1)
Exchange translation adjustment on net debt (28.4) (3.0) (19.1)
Movement in the period (338.2) (49.4) (186.3)
At beginning of the period (2,049.9) (1,863.6) (1,863.6)
Net debt at end of the period - pre lease
liabilities (2,388.1) (1,913.0) (2,049.9)
Lease liabilities (68.2) (67.6) (74.2)
Net debt at end of the period 9 (2,456.3) (1,980.6) (2,124.1)
Prior period, 30 June 2021, has been re-presented to align with current presentation.
Notes to the Condensed Consolidated Interim Financial Statements
for the half year ended 30 June 2022
1. Accounting policies
These Condensed Consolidated Interim Financial Statements for the half year ended
30 June 2022 have been prepared in accordance with International Financial Reporting
Standards ('IFRS'), the International Financial Reporting Interpretations Committee
('IFRIC') and in accordance with IAS 34 'Interim Financial Reporting'. 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. The accounting policies applied by the Group
in these Condensed Consolidated Interim Financial Statements are the same as those
detailed in the 2021 Annual Report except for changes in accounting policies in
respect of a new non-controlling interests policy and an updated segmental analysis
policy as outlined below for the half year ended 30 June 2022.
From 1 January 2022, the Group has moved from trading profit to earnings before
interest, tax, depreciation and amortisation (EBITDA) as the key measure utilised
in assessing the performance of the Group. This has been reflected in the presentation
of the Group's Condensed Consolidated Income Statement and note 2 'Analysis of
results', as permitted under IAS 1 'Presentation of Financial Statements'. In
these Condensed Consolidated Interim Financial Statements for the half year ended
30 June 2022, the Group has re-presented corresponding 2021 balances to align
with current year presentation in the Condensed Consolidated Income Statement,
Condensed Consolidated Statement of Cash Flows, note 2 'Analysis of results' and
note 4 'Finance income and costs'.
Non-controlling interests
Non-controlling interests represent the portion of the equity of a subsidiary
not attributable either directly or indirectly to the Parent Company and are presented
separately in the Condensed Consolidated Income Statement and within equity in
the Condensed Consolidated Balance Sheet, distinguished from Parent Company shareholders'
equity. Where not all of the equity of a subsidiary is acquired the non-controlling
interests are recognised at the non-controlling interest's share of the acquiree's
net identifiable assets.
Segmental analysis
Operating segments are reported in a manner consistent with the internal management
structure of the Group and the internal financial information provided to the
Group's Chief Operating Decision Maker (the Executive Directors) who is responsible
for making strategic decisions, allocating resources, monitoring and assessing
the performance of each segment. EBITDA as reported internally by segment is the
key measure utilised in assessing the performance of operating segments within
the Group. Other Corporate activities, such as the cost of corporate stewardship,
are reported along with the elimination of inter-group activities under the heading
'Group Eliminations and Unallocated'. Depreciation, intangible asset amortisation,
non-trading items, net finance costs, share of joint ventures profit after taxation
and income taxes are managed on a centralised basis and therefore, these items
are not allocated between operating segments and are not reported per segment
in note 2.
The Group has determined it has two reportable segments: Taste & Nutrition and
Dairy Ireland. The Taste & Nutrition segment is a world leading taste and nutrition
partner for the food, beverage and pharmaceutical markets. Kerry innovates with
its customers to create great tasting products, with improved nutrition and functionality,
whilst ensuring better impact for the planet. The Taste & Nutrition segment supplies
industries across Ireland, Europe, Americas and APMEA (Asia Pacific, Middle East
and Africa). The Dairy Ireland segment is a leading Irish provider of value-add
dairy ingredients and consumer products.
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 2021 except
for the new judgement in respect of 'Russian and associated markets costs' for
the half year ended 30 June 2022 outlined below.
Russian and associated markets costs
As previously announced on 4 April 2022, the Group is sspending its operations
in Russia and Belarus. This suspension is being managed in an orderly manner,
during which the Group is continuing to pay employees and fulfil our legal obligations
and a decision has been made to classify these businesses as held for sale. The
assets of these businesses have been impaired to their fair value less costs to
sell resulting in a charge of EUR37.9m to the Condensed Consolidated Income Statement
(see notes 3 and 7 to the Condensed Consolidated Interim Financial Statements).
On 7 July 2022, the Group reached agreement to sell 100% of the share capital
of Unitary Manufacturing Enterprise "Vitella", a Taste & Nutrition entity based
in Belarus. On 22 July 2022, the Group reached agreement to divest 100% of the
share capital of Kerry Limited Liability Company, its subsidiary in Russia, to
local management.
Going concern
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 regarding Russian and associated markets divestment. The Group performed
an impairment assessment of the impacted businesses regarding the Russian and
associated markets which has led to the assets of the businesses in Russia, Belarus
and Ukraine being impaired to their fair value less costs to sell resulting in
a charge of EUR41.2m being recognised in the Condensed Consolidated Income Statement
during the period. The viability of the Group was also assessed by considering
the potential impact of climate related risks on profitability and liquidity,
accelerating inflationary cost pressures, disruption of global supply chains and
the challenges presented in China with localised restrictions during the period.
Following these assessments the Directors have concluded 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 from the date of these
financial statements.
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
forecast for a period not less than 12 months, the medium term plan and its cashflow
implications have been taken into account including proposed capital expenditure,
and compared these with the Group's committed borrowing facilities and projected
gearing ratios.
The following Standards and Interpretations are effective for the Group Effective
from 1 January 2022 but do not have a material effect on the results Date
or financial position of the Group:
- IAS 16 (Amendments) Property, Plant and Equipment 1 January
2022
- IAS 37 (Amendments) Provisions, Contingent Liabilities and Contingent 1 January
Assets 2022
- IFRS 9 (Amendments) Financial Instruments 1 January
2022
- IFRS 3 (Amendments) Business Combinations 1 January
2022
- IAS 41 (Amendments) Agriculture 1 January
2022
The following Standards and Interpretations are not yet effective for Effective
the Group and are not expected to have a material effect on the results Date
or financial position of the Group:
- IAS 1 (Amendments) Presentation of Financial Statements 1 January
2023
- IFRS 17 Insurance Contracts 1 January
2023
- IAS 8 (Amendments) Accounting Policies, Changes in Accounting Estimates 1 January
and Errors 2023
- IAS 12 (Amendments) Income Taxes 1 January
2023
2. Analysis of results
The Group has determined it has two reportable segments: Taste & Nutrition
and Dairy Ireland. The Taste & Nutrition segment is a world leading taste
and nutrition partner for the food, beverage and pharmaceutical markets.
Kerry innovates with its customers to create great tasting products,
with improved nutrition and functionality, whilst ensuring better impact
for the planet. The Taste & Nutrition segment supplies industries across
Ireland, Europe, Americas and APMEA (Asia Pacific, Middle East and Africa).
The Dairy Ireland segment is a leading Irish provider of value-add dairy
ingredients and consumer products.
Half year ended 30 Half year ended 30 Year ended 31 December
June 2022 - Unaudited June 2021 - Unaudited 2021 - Audited
Group Group Group
Eliminations Eliminations Eliminations
Taste Dairy and Taste Dairy and Taste Dairy and
& & &
Nutrition Ireland Unallocated Total Nutrition Ireland Unallocated Total Nutrition Ireland 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 3,431.2 626.6 - 4,057.8 2,679.0 903.1 - 3,582.1 5,689.3 1,661.3 - 7,350.6
Inter-segment
revenue 13.7 68.8 (82.5) - 23.4 56.7 (80.1) - 40.1 116.3 (156.4) -
Revenue 3,444.9 695.4 (82.5) 4,057.8 2,702.4 959.8 (80.1) 3,582.1 5,729.4 1,777.6 (156.4) 7,350.6
EBITDA* 515.4 38.4 (36.1) 517.7 412.7 80.1 (34.9) 457.9 1,013.5 136.0 (72.5) 1,077.0
Depreciation (108.1) (100.8) (201.5)
Intangible asset amortisation (42.0) (39.2) (80.8)
Non-trading items (69.5) (20.8) 91.5
Operating profit 298.1 297.1 886.2
Finance income 0.8 0.1 0.3
Finance costs (34.9) (34.3) (70.2)
Share of joint ventures profit 1.1 - -
after taxation
Profit before taxation 265.1 262.9 816.3
Income taxes (37.5) (35.9) (53.3)
Profit after taxation 227.6 227.0 763.0
Attributable to:
Equity holders of the parent 227.6 227.0 763.0
Non-controlling interests - - -
227.6 227.0 763.0
*EBITDA represents profit before finance income and costs, income taxes,
depreciation (net of capital grant amortisation), intangible asset amortisation,
non-trading items and share of joint ventures profit after taxation.
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
Half year ended 30 June Half year ended 30 June Year ended 31 December
2022 2021 2021
- Unaudited - Unaudited - Audited
Taste Dairy Taste Dairy Taste Dairy
& & &
Nutrition Ireland Total Nutrition Ireland Total Nutrition Ireland Total
EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
Food 2,271.0 578.0 2,849.0 1,814.7 866.1 2,680.8 3,837.5 1,587.4 5,424.9
Beverage 920.5 48.6 969.1 720.1 37.0 757.1 1,515.2 73.9 1,589.1
Pharma 239.7 - 239.7 144.2 - 144.2 336.6 - 336.6
External
revenue 3,431.2 626.6 4,057.8 2,679.0 903.1 3,582.1 5,689.3 1,661.3 7,350.6
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
2022 2021 2021
- Unaudited - Unaudited - Audited
Taste Dairy Taste Dairy Taste Dairy
& & &
Nutrition Ireland Total Nutrition Ireland Total Nutrition Ireland Total
EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
Republic of
Ireland 40.6 241.6 282.2 31.2 212.6 243.8 64.1 394.6 458.7
Rest of Europe 688.6 303.3 991.9 540.9 609.5 1,150.4 1,168.7 1,089.6 2,258.3
Americas 1,933.8 46.8 1,980.6 1,497.5 44.5 1,542.0 3,137.5 97.7 3,235.2
APMEA 768.2 34.9 803.1 609.4 36.5 645.9 1,319.0 79.4 1,398.4
External
revenue 3,431.2 626.6 4,057.8 2,679.0 903.1 3,582.1 5,689.3 1,661.3 7,350.6
The accounting policies of the reportable segments are the same as those detailed
in the Statement of accounting policies in the 2021 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.
Prior periods 30 June 2021 and 31 December 2021 have been re-presented to reflect
the changes in our reporting segments as at 1 January 2022. Within Taste & Nutrition,
the dairy processing activities in Ireland have been realigned with the dairy
activities in the Consumer Foods business, comprising the new Group reporting
segment of Dairy Ireland. Included within the Dairy Ireland 30 June 2021 and 31
December 2021 comparatives are the results of the Consumer Foods Meats and Meals
business which was disposed by the Group on 27 September 2021.
3. Non-trading items
Half year Half year Year
ended ended ended
30 June 30 June 2021 31 Dec. 2021
2022
Unaudited Unaudited Audited
Notes EUR'm EUR'm EUR'm
Acquisition integration costs (i) (1.7) (5.5) (54.9)
Global Business Services expansion (ii) (7.3) (13.0) (33.3)
(Loss)/profit on disposal of
businesses and assets (iii) (1.7) (2.3) 179.7
Accelerate Operational Excellence (iv) (17.6) - -
Russian and associated markets (v) (41.2) - -
costs
(69.5) (20.8) 91.5
Tax on above 7.4 1.0 26.3
Tax on inter-group transfer (vi) - - 16.6
Non-trading items (net of tax) (62.1) (19.8) 134.4
(i) Acquisition integration costs
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. A tax credit of EURnil (30 June
2021: EUR0.1m; 31 December 2021: EUR12.4m) arose due to tax deductions
available on acquisition related costs.
(ii) Global Business Services expansion
In 2020, the Group commenced a programme to evolve, migrate and expand
its Global Business Services model to better enable the business and
support further growth. For the period ended 30 June 2022, these costs
reflect relocation of resources, advisory fees, redundancies and the
streamlining of operations. The associated tax credit was EUR1.4m (30
June 2021: EUR0.4m; 31 December 2021: EUR1.2m).
(iii) (Loss)/profit on disposal of businesses and assets
During the period, the Group disposed of property, plant and equipment
primarily in North America and Europe for a consideration of EUR3.2m
resulting in a loss of EUR1.7m for the period ended 30 June 2022. During
2021, the Group disposed of its Meats and Meals business operating in
Ireland and the UK from the Consumer Foods (now Dairy Ireland) division
and during the year also disposed of a small operation in Taste & Nutrition
Europe for a consideration of EUR813.6m resulting in a gain of EUR230.9m.
In addition, the Group disposed of property, plant and equipment and
computer software in North America, Europe and APMEA for a combined consideration
of EUR19.4m resulting in a loss of EUR2.6m for the year ended 31 December
2021. A tax credit of EUR0.1m (30 June 2021: EUR0.5m; 31 December 2021:
EUR0.5m) arose on the disposal of businesses and assets. In 2021, assets
classified as held for sale of property, plant and equipment based in
the USA and Europe were impaired to their value less costs to sell by
EUR48.6m, the related tax credit was EUR12.2m.
(iv) Accelerate Operational Excellence
These one-off costs predominantly reflect consultancy fees and project
management costs incurred in the period relating to our Accelerate Operational
Excellence programme. A tax credit of EUR4.9m (30 June 2021: EURnil;
31 December 2021: EURnil) arose due to tax deductions available on accelerated
operational excellence costs.
(v) Russian and associated markets costs
As previously announced on 4 April 2022, the Group is suspending its
operations in Russia and Belarus. This suspension is being managed in
an orderly manner, during which the Group is continuing to pay employees
and fulfil our legal obligations and a decision has been made to classify
these businesses as held for sale (see note 7). The assets of these businesses
have been impaired to their fair value less costs to sell resulting in
a charge of EUR37.9m (30 June 2021: EURnil; 31 December 2021: EURnil)
to the Condensed Consolidated Income Statement for the impairment of
goodwill, brand-related intangibles, fixed assets, right-of-use assets
and working capital. The fair value of these assets less costs to sell
were based on management estimates of the fair value of these businesses,
the residual fair value of these assets is EURnil. The associated non-cash
cumulative foreign exchange losses on expected disposal of these businesses
is currently estimated at EUR13.5m. On 7 July 2022, the Group reached
agreement to sell 100% of the share capital of Unitary Manufacturing
Enterprise "Vitella", a Taste & Nutrition entity based in Belarus. On
22 July 2022, the Group reached agreement to divest 100% of the share
capital of Kerry Limited Liability Company, its subsidiary in Russia,
to local management.
During the period, the Group also impaired business assets held in Ukraine
amounting to EUR3.3m, which included property, plant and equipment, right-of-use
assets and working capital. These impairments have been recorded in the
Condensed Consolidated Income Statement as part of non-trading items.
A tax credit EUR1.0m (30 June 2021: EURnil; 31 December 2021: EURnil)
arose due to tax deductions available on the impairment of assets held
for sale.
(vi) Tax on inter-group transfer
During 2021, a net tax credit of EUR16.6m arose as a result of the transfer
of intangible assets between two wholly owned subsidiaries based in two
different tax jurisdictions.
4. Finance income and costs
Half year Half year Year
ended ended ended
30 June 2022 30 June 2021 31 Dec. 2021
Unaudited Unaudited Audited
EUR'm EUR'm EUR'm
Finance income:
Interest income on deposits 0.8 0.1 0.3
Finance costs:
Interest payable (33.7) (32.8) (66.7)
Interest on lease liabilities (1.9) (2.4) (4.4)
Interest rate derivative 0.1 1.3 1.6
(35.5) (33.9) (69.5)
Net interest income/(cost) on retirement benefits obligation 0.6 (0.4) (0.7)
Finance costs (34.9) (34.3) (70.2)
5. Earnings per A ordinary share
Half year Half year Year
ended ended ended
30 June 2022 30 June 2021 31 Dec. 2021
Unaudited Unaudited Audited
EPS EPS EPS
cent EUR'm cent EUR'm cent EUR'm
Basic earnings per share
Profit after taxation attributable to equity holders of the parent 128.4 227.6 128.2 227.0 430.6 763.0
Diluted earnings per share
Profit after taxation attributable to equity holders of the parent 128.2 227.6 128.0 227.0 429.9 763.0
30 June 2022 30 June 2021 31 Dec. 2021
Unaudited Unaudited Audited
Number of Shares m's m's m's
Basic weighted average number of shares 177.3 177.1 177.2
Impact of share options outstanding 0.2 0.3 0.3
Diluted weighted average number of shares 177.5 177.4 177.5
6. Dividends
Half year Half year Year
ended ended ended
30 June 2022 30 June 2021 31 Dec. 2021
Unaudited Unaudited Audited
EUR'm EUR'm EUR'm
Amounts recognised as distributions to equity shareholders in the period
Final 2021 dividend of 66.70 cent per A ordinary share paid 6 May 2022 118.0 107.1 107.1
(Final 2020 dividend of 60.60 cent per A ordinary share paid 14 May 2021)
Interim 2021 dividend of 28.50 cent per A ordinary share paid 12 November
2021 - - 50.4
118.0 - 157.5
Since the end of the period, the Board has declared an
interim dividend
of 31.40 cent per A ordinary share which amounts to
EUR55.6m. The payment
date for the interim dividend will be 11 November 2022
to shareholders
registered on the record date as at 14 October 2022.
These Condensed
Consolidated Interim Financial Statements do not
reflect this dividend.
7. Assets classified as held
for sale
At 30 June 2022 and 31 December 2021, the Group held
certain property,
plant and equipment classified as held for sale in the
Taste & Nutrition
segment in Europe and North America. In addition, the
Group classified
the Taste & Nutrition businesses located in Russia and
Belarus as assets
held for sale during the period, the residual fair
value of these assets
on the Condensed Consolidated Balance Sheet is EURnil.
At 30 June 2021, the Group had net assets classified as
held for sale
of EUR501.2m. On 27 September 2021, the Group disposed
of its Meats
and Meals business operating in Ireland and the UK from
the Consumer
Foods (now Dairy Ireland) division and during 2021 also
disposed of
a small operation in Taste & Nutrition Europe for a
consideration of
EUR813.6m resulting in a gain of EUR230.9m. The
consideration of EUR813.6m
comprises of the EUR819.0m as previously announced for
the sale of the
Meats and Meals business net of working capital and
debt adjustments
and EUR2.9m for a small operation disposed of in Taste
& Nutrition Europe.
These businesses were not deemed to be discontinued
operations and goodwill
was allocated to these disposed businesses using an
appropriate allocation
methodology aligned with IAS 36 'Impairment of Assets'.
The major classes of assets and liabilities comprising
the operations
classified as held for sale are outlined in the table
below:
Half year Half year Year
ended ended ended
30 June 30 June 2021 31 Dec. 2021
2022
Unaudited Unaudited Audited
EUR'm EUR'm EUR'm
Property, plant and equipment 22.4 127.2 18.7
Intangible assets - 312.6 -
Inventories - 46.4 -
Trade and other receivables - 37.2 -
Total assets classified as
held for
sale 22.4 523.4 18.7
Trade and other payables - (22.2) -
Total liabilities directly - (22.2) -
associated
with assets classified as
held for sale
Net assets classified as held
for sale* 22.4 501.2 18.7
*The analysis in the table above excludes any transaction and other
attributable costs.
8. Retirement benefits obligation
The net surplus/(deficit) recognised in the Condensed Consolidated Balance Sheet for the Group's
defined benefit post-retirement schemes was as follows:
Schemes Schemes
in Surplus in Deficit Total
Half year Half year Half year
ended ended ended
30 June 2022 30 June 2022 30 June 2022
Unaudited Unaudited Unaudited
EUR'm EUR'm EUR'm
Net recognised surplus/(deficit) in plans before deferred tax 221.6 (19.8) 201.8
Net related deferred tax (liability)/asset (42.8) 5.1 (37.7)
Net recognised surplus/(deficit) in plans after deferred tax 178.8 (14.7) 164.1
At 30 June 2022, the net surplus before deferred tax for defined benefit post-retirement schemes
was EUR201.8m (30 June 2021: EUR51.3m; 31 December 2021: EUR66.2m). This was calculated by
rolling forward the defined benefit post-retirement schemes' liabilities at 31 December 2021
to reflect material movements in underlying assumptions over the period while the defined
benefit post-retirement schemes' assets at 30 June 2022 are measured at market value. The
improvement in the funding position before deferred tax of EUR135.6m was driven by favourable
movements in actuarial assumptions, primarily higher discount rates, which were partially
offset by reduced asset values.
The surplus at 30 June 2022 relates to the Irish and UK schemes and has been recognised in
accordance with IFRIC 14 'The Limit on a Defined Benefit Asset, Minimum Funding Requirements
and their Interaction' as it has been determined that the Group has an unconditional right
to a refund of the surplus.
Schemes Schemes
in Surplus in Deficit Total
Half year Half year Half year
ended ended ended
30 June 2021 30 June 2021 30 June 2021
Unaudited Unaudited Unaudited
EUR'm EUR'm EUR'm
Net recognised surplus/(deficit) in plans before deferred tax 75.8 (24.5) 51.3
Net related deferred tax (liability)/asset (13.0) 4.9 (8.1)
Net recognised surplus/(deficit) in plans after deferred tax 62.8 (19.6) 43.2
Schemes Schemes
in Surplus in Deficit Total
Year Year Year
ended ended ended
31 Dec. 2021 31 Dec. 2021 31 Dec. 2021
Audited Audited Audited
EUR'm EUR'm EUR'm
Net recognised surplus/(deficit) in plans before deferred tax 90.3 (24.1) 66.2
Net related deferred tax (liability)/asset (14.8) 4.9 (9.9)
Net recognised surplus/(deficit) in plans after deferred tax 75.5 (19.2) 56.3
9. 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 Derivatives
Financial at Fair Value Designated as Assets/
Assets/(Liabilities) through Profit Hedging (Liabilities) at
at Amortised Cost or Loss Instruments FVOCI Total
EUR'm EUR'm EUR'm EUR'm EUR'm
Assets:
Interest rate swaps - - 38.0 - 38.0
Cash at bank and in hand 757.2 - - - 757.2
757.2 - 38.0 - 795.2
Liabilities:
Interest rate swaps - - (17.4) - (17.4)
Bank overdrafts (13.0) - - - (13.0)
Bank loans (2.7) - - - (2.7)
Senior notes (3,154.6) 4.4 - - (3,150.2)
Borrowings and overdrafts (3,170.3) 4.4 - - (3,165.9)
Net debt - pre lease liabilities (2,413.1) 4.4 20.6 - (2,388.1)
Lease liabilities (68.2) - - - (68.2)
Net debt at 30 June 2022 - unaudited (2,481.3) 4.4 20.6 - (2,456.3)
Assets:
Interest rate swaps - - 37.6 - 37.6
Cash at bank and in hand 395.0 - - - 395.0
395.0 - 37.6 - 432.6
Liabilities:
Interest rate swaps - - - - -
Bank overdrafts (3.3) - - - (3.3)
Bank loans - - - - -
Senior notes (2,326.5) (15.8) - - (2,342.3)
Borrowings and overdrafts (2,329.8) (15.8) - - (2,345.6)
Net debt - pre lease liabilities (1,934.8) (15.8) 37.6 - (1,913.0)
Lease liabilities (67.6) - - - (67.6)
Net debt at 30 June 2021 - unaudited (2,002.4) (15.8) 37.6 - (1,980.6)
Assets:
Interest rate swaps - - 34.6 - 34.6
Cash at bank and in hand 1,039.1 - - - 1,039.1
1,039.1 - 34.6 - 1,073.7
Liabilities:
Interest rate swaps - - - - -
Bank overdrafts (5.3) - - - (5.3)
Bank loans (2.9) - - - (2.9)
Senior notes (3,104.5) (10.9) - - (3,115.4)
Borrowings and overdrafts (3,112.7) (10.9) - - (3,123.6)
Net debt - pre lease liabilities (2,073.6) (10.9) 34.6 - (2,049.9)
Lease liabilities (74.2) - - - (74.2)
Net debt at 31 December 2021 -
audited (2,147.8) (10.9) 34.6 - (2,124.1)
All Group borrowings and overdrafts and interest rate swaps are guaranteed by Kerry Group
plc. No assets of the Group have been pledged to secure these items.
As at 30 June 2022, the Group's debt portfolio included:
- US$750m of senior notes issued in 2013, maturing in 2023 (the 2023 senior notes). At the
time of issuance, US$250m were swapped, using cross currency swaps, to euro;
- EUR750m of senior notes issued in 2015 and EUR200m issued in April 2020 as a tap onto the
original issuance (the 2025 senior notes). EUR175m of the issuance in 2015 were swapped, using
cross currency swaps, to US dollar;
- EUR750m of senior notes issued in 2019 (the 2029 senior notes); and
- EUR750m of euro sustainability-linked bond notes issued in 2021 (the 2031 SLB senior notes).
No interest rate derivatives were entered into for the 2029 senior notes and 2031 SLB senior
notes issuances.
The adjustment to senior notes classified under liabilities at fair value through profit or
loss of EUR4.4m debit (30 June 2021: EUR15.8m credit; 31 December 2021: EUR10.9m credit) 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 Year
Half year ended Half year ended Half year ended ended ended
30 June 2022 30 June 2022 30 June 2022 30 June 2021 31 Dec. 2021
Unaudited Unaudited Unaudited Unaudited Audited
EUR'm EUR'm EUR'm EUR'm EUR'm
Euro (2,308.9) (62.6) (2,371.5) (1,683.0) (1,860.4)
Sterling 65.8 - 65.8 109.3 74.5
US Dollar (316.7) 62.6 (254.1) (466.2) (460.5)
Other 103.5 - 103.5 59.3 122.3
(2,456.3) - (2,456.3) (1,980.6) (2,124.1)
iii) The following table details the maturity profile of the Group's net debt:
On demand & Up to 2 - 5
up to 1 year 2 years years > 5 years Total
EUR'm EUR'm EUR'm EUR'm EUR'm
Cash at bank and in hand 757.2 - - - 757.2
Interest rate swaps 36.3 - (15.7) - 20.6
Bank overdrafts (13.0) - - - (13.0)
Bank loans (0.1) (2.6) - - (2.7)
Senior notes (711.1) - (952.8) (1,486.3) (3,150.2)
Net debt - pre lease liabilities 69.3 (2.6) (968.5) (1,486.3) (2,388.1)
Lease liabilities (discounted) (25.7) (18.3) (19.7) (4.5) (68.2)
At 30 June 2022 - unaudited 43.6 (20.9) (988.2) (1,490.8) (2,456.3)
Cash at bank and in hand 395.0 - - - 395.0
Interest rate swaps - 19.8 17.8 - 37.6
Bank overdrafts (3.3) - - - (3.3)
Bank loans - - - - -
Senior notes - (634.7) (967.1) (740.5) (2,342.3)
Net debt - pre lease liabilities 391.7 (614.9) (949.3) (740.5) (1,913.0)
Lease liabilities (discounted) (28.9) (14.8) (18.5) (5.4) (67.6)
At 30 June 2021 - unaudited 362.8 (629.7) (967.8) (745.9) (1,980.6)
Cash at bank and in hand 1,039.1 - - - 1,039.1
Interest rate swaps - 27.6 7.0 - 34.6
Bank overdrafts (5.6) - - - (5.6)
Bank loans - - - - -
Senior notes - (669.0) (963.5) (1,485.5) (3,118.0)
Net debt - pre lease liabilities 1,033.5 (641.4) (956.5) (1,485.5) (2,049.9)
Lease liabilities (discounted) (28.0) (19.7) (20.9) (5.6) (74.2)
At 31 December 2021 - audited 1,005.5 (661.1) (977.4) (1,491.1) (2,124.1)
At 30 June 2022, the Group had cash on hand of EUR757.2m. At the period end, the Group had
undrawn committed Syndicate revolving credit facility of EUR1,100m. Cash at bank and in hand
includes an amount of EUR199.8m held on short-term deposit of which EUR104.7m was held under
a Sustainable Deposits programme. The amount of cash and cash equivalent balances that are
not available for use by the Group is EUR0.3m due to the Russian and associated markets divestment.
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 30 June 31 Dec.
Value 2022 2021 2021
Hierarchy Unaudited Unaudited Audited
EUR'm EUR'm EUR'm
Financial assets
Level
Interest rate swaps: Non-current 2 - 37.6 34.6
Level
Current 2 38.0 - -
Forward foreign
exchange Level
contracts: Non-current 2 2.7 - 0.2
Level
Current 2 70.3 8.2 15.2
Fair value
Financial asset through profit Level
investments: or loss 1 43.1 41.7 45.5
Fair value
through other
comprehensive Level
income 3 9.3 4.2 4.4
Financial
liabilities
Level
Interest rate swaps: Non-current 2 (15.7) - -
Level
Current 2 (1.7) - -
Forward foreign
exchange Level
contracts: Non-current 2 (1.1) - (0.5)
Level
Current 2 (106.9) (17.8) (40.1)
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
30 June 30 June 30 June 30 June 31 Dec. 31 Dec.
Fair
Value 2022 2022 2021 2021 2021 2021
Hierarchy Unaudited Unaudited Unaudited Unaudited Audited Audited
EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
Financial liabilities
Level
Senior notes - Public 2 (3,154.6) (2,829.5) (2,326.5) (2,431.9) (3,104.5) (3,174.7)
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 Net Debt
bank Interest Overdrafts Borrowings Borrowings - pre
and Rate due within due within due after lease Lease Net
in hand Swaps 1 year* 1 year* 1 year* liabilities liabilities* Debt
EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
At 31 December 2020
- audited 563.1 81.9 (2.8) - (2,505.8) (1,863.6) (81.5) (1,945.1)
Cash flows (181.2) (39.3) (0.5) - 173.7 (47.3) 15.8 (31.5)
Foreign exchange
adjustments 13.1 3.4 - - (19.5) (3.0) (2.4) (5.4)
Other non-cash
movements - (8.4) - - 9.3 0.9 0.5 1.4
At 30 June 2021 -
unaudited 395.0 37.6 (3.3) - (2,342.3) (1,913.0) (67.6) (1,980.6)
Cash flows 628.2 - (1.9) (0.3) (745.8) (119.8) 19.1 (100.7)
Foreign exchange
adjustments 15.9 4.4 (0.1) - (36.3) (16.1) (2.7) (18.8)
Other non-cash
movements - (7.4) - - 6.4 (1.0) (23.0) (24.0)
At 31 December 2021
- audited 1,039.1 34.6 (5.3) (0.3) (3,118.0) (2,049.9) (74.2) (2,124.1)
Cash flows (300.0) - (7.4) (0.1) - (307.5) 15.9 (291.6)
Foreign exchange
adjustments 18.1 4.4 (0.3) (50.2) (0.4) (28.4) (4.1) (32.5)
Other non-cash
movements - (18.4) - (660.6) 676.7 (2.3) (5.8) (8.1)
At 30 June 2022 -
unaudited 757.2 20.6 (13.0) (711.2) (2,441.7) (2,388.1) (68.2) (2,456.3)
*Liabilities from financing activities.
10. Business combinations
The following acquisitions were completed by the Group during the period
to 30 June 2022:
Completion Percentage Principal
Acquisition Type date acquired Segment activity Strategic rationale
Almer Malaysia Equity March 100% share Taste A producer Further supports
Sdn. Bhd. 2022 acquisition & of quality the Group's growth
Nutrition spray dried initiatives in authentic
ingredients taste and emerging
servicing markets.
the Snacks
and Dairy
EUMs based
in Malaysia.
c-LEcta GmbH* Equity March 93% share Taste A leading Brought leading innovation
2022 acquisition & biotechnology capabilities in enzyme
Nutrition innovation engineering, fermentation
company and bio-processing
based in to further enhance
Germany Kerry's key growth
specialising platform development.
in precision
fermentation,
optimised
bio-processing
and bio-transformation
for the
creation
of high-value
targeted
enzymes
and ingredients.
Natreon, Equity March 100% share Taste A leader Brings a portfolio
Inc. 2022 acquisition & in Ayurvedic of clinically backed
Nutrition and botanical branded ingredients
ingredients, across the need states
with strong of cognition and
research healthy ageing.
capabilities
and facilities
in the USA
and India.
*The Group has a 93% equity shareholding in c-LEcta GmbH. It is consolidated
in the Group financial statements as a 93% owned subsidiary on the basis
of contractual arrangements with the remaining portion recognised as non-controlling
interests.
The table below provides details of the identifiable net assets, including
adjustments to provisional fair values, in respect of the acquisitions
completed during the period to 30 June 2022:
Half
year
ended
30 June
2022
Unaudited
EUR'm
Recognised amounts of identifiable assets acquired and liabilities assumed:
Non-current assets
Property, plant and equipment 17.5
Brand related intangibles 101.5
Current assets
Cash at bank and in hand 24.8
Inventories 13.3
Trade and other receivables 10.7
Current liabilities
Trade and other payables (15.2)
Non-current liabilities
Deferred tax liabilities (28.3)
Other non-current liabilities (2.0)
Total identifiable assets 122.3
Non-controlling interests (1.7)
Goodwill 146.8
Total consideration 267.4
Satisfied by:
Cash 267.4
Deferred payment -
267.4
Net cash outflow on acquisition:
Half
year
ended
30 June
2022
Unaudited
EUR'm
Cash 267.4
Less: cash and cash equivalents acquired (24.8)
Plus: debt acquired (included in other non-current liabilities above) 2.0
244.6
The acquisition method of accounting has been used to consolidate the
businesses acquired in the Group's Condensed Consolidated Interim Financial
Statements. Given that the valuation of the fair value of assets and liabilities
recently acquired is still in progress, some of the values in the previous
table are determined provisionally. For the acquisitions completed in
2021, 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 acquisitions
completed during the period were not considered material to warrant detailed
separate disclosure in line with IFRS 3 requirements.
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.
None of the goodwill recognised is expected to be deductible for income
tax purposes.
Transaction expenses related to these acquisitions of EUR1.7m were charged
in the Group's Condensed Consolidated Income Statement during the financial
period. The fair value of the financial assets includes trade and other
receivables with a fair value of EUR10.7m and a gross contractual value
of EUR10.8m.
Non-controlling interests represent the portion of the equity of a subsidiary
not attributable either directly or indirectly to the Parent Company and
are presented separately in the Condensed Consolidated Income Statement
and within equity in the Condensed Consolidated Balance Sheet, distinguished
from Parent Company shareholders' equity. Where not all of the equity
of a subsidiary is acquired the non-controlling interests are recognised
at the non-controlling interest's share of the acquiree's net identifiable
assets.
The revenue and profit after taxation attributable to owners of the parent
to the Group contributed from date of acquisition for all business combinations
effected during the period is as follows:
Half
year
ended
30 June
2022
Unaudited
EUR'm
Revenue 26.5
Profit after taxation attributable to equity holders of the parent 2.5
The revenue and profit after taxation attributable to equity holders of
the parent to the Group determined in accordance with IFRS as though the
acquisition date for all business combinations effected during the period
had been the beginning of that period would be as follows:
Kerry Group Consolidated
excluding Group
2022 2022 including
acquisitions acquisitions acquisitions
Unaudited Unaudited Unaudited
EUR'm EUR'm EUR'm
Revenue 41.0 4,031.3 4,072.3
Profit after taxation attributable to equity holders of the parent 3.7 225.1 228.8
11. Share capital
Half Half Year
year year
ended ended ended
30 June 30 June 31 Dec. 2021
2022 2021
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 22.1 22.1
Shares issued during the financial period - - -
At end of the financial period 22.1 22.1 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 93,313 A ordinary shares, each with a nominal
value of 12.50 cent, were issued at nominal value per share under the
Long-Term and Short-Term Incentive Plans.
The total number of shares in issue at 30 June 2022 was 176,941,764 (30
June 2021: 176,817,328; 31 December 2021: 176,848,451).
12. Events after the balance sheet date
Since the period end, the Group has:
- declared an interim dividend of 31.40 cent per A ordinary share (see note 6);
- reached agreement to sell 100% of the share capital of Unitary Manufacturing Enterprise "Vitella",
a Taste & Nutrition subsidiary based in Belarus; and
- reached agreement to divest 100% of the share capital of its Russian subsidiary, Kerry Limited
Liability Company, to local management.
There have been no other significant events, outside of the ordinary course of business, affecting
the Group since 30 June 2022.
13. General information
These unaudited Condensed Consolidated Interim Financial Statements for the half year ended
30 June 2022 are not full financial statements and were not reviewed or audited by the Group's
auditors, PricewaterhouseCoopers (PwC). These Condensed Consolidated Interim Financial Statements
were approved by the Board of Directors and authorised for issue on 28 July 2022. The figures
disclosed relating to 31 December 2021 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 2021 Annual Report which
was 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. The accounting policies applied by the Group in these Condensed
Consolidated Interim Financial Statements are the same as those detailed in the 2021 Annual
Report except for changes in accounting policies in respect of a new non-controlling interests
policy and an updated segmental analysis policy as outlined in note 1 'Accounting policies'.
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 five year medium
term 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.
Intangible assets increased by EUR388.2m to EUR5,968.9m (31 December 2021: EUR5,580.7m; 30
June 2021: EUR4,443.8m) predominantly due to acquisitions during the period and the impact
of foreign exchange translation, partially offset by the amortisation charge.
In relation to seasonality, EBITDA is lower in the first half of the year due to the nature
of the food business and stronger trading in the fourth quarter. While revenue is relatively
evenly spread, margin has traditionally been higher in the second half of the year due to
product mix and the timing of promotional activity. There is also a material change to the
levels of working capital between December and June mainly due to the seasonal nature of the
dairy and crop-based businesses.
As permitted by the Transparency (Directive 2004/109/EC) Regulations 2007 this Interim Report
is available on www.kerry.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 period-on-period, 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 2022 performance Price currency Disposals currency performance
Taste & Nutrition 8.6% 5.9% 0.2% 5.8% 7.0% 27.5%
Dairy Ireland 1.2% 15.4% 0.1% (46.1%) 1.9% (27.5%)
Group 6.8% 8.3% 0.1% (7.7%) 5.8% 13.3%
H1 2021
Taste & Nutrition 10.7% 0.3% (0.1%) 1.2% (6.9%) 5.2%
Dairy Ireland* 4.6% 0.8% (0.1%) - (0.5%) 4.8%
Group 9.0% 0.5% (0.1%) 0.9% (5.4%) 4.9%
*Prior period, 30 June 2021 has been re-presented to reflect the changes in our reporting
segments from 1 January 2022. Within Taste & Nutrition, the dairy processing activities in
Ireland have been realigned with the dairy activities in the Consumer Foods business, comprising
the new Group reporting segment of Dairy Ireland.
Like-for-like(1) Revenue Reconciliation
Like-for-like
Volume Transaction Acquisitions/ Translation revenue
H1 2022 performance Price currency Disposals currency performance
Taste & Nutrition 8.6% 5.9% 0.2% 5.8% 7.0% 27.5%
Dairy Ireland 2.2% 27.8% 0.2% - 1.0% 31.2%
Group 7.8% 9.3% 0.2% 5.3% 6.1% 28.7%
H1 2021
Taste & Nutrition 10.7% 0.3% (0.1%) 1.2% (6.9%) 5.2%
Dairy Ireland 1.0% 1.6% - - (0.4%) 2.2%
Group 8.9% 0.6% - 1.0% (6.0%) 4.5%
(1) Like-for-like (LFL) growth rates reflect the exclusion of the Consumer Foods Meats and
Meals contribution from 2021 comparative calculations, being EUR0.4bn of revenue in the H1
2021 comparatives.
2. EBITDA
EBITDA represents profit before finance income and costs, income taxes, depreciation (net
of capital grant amortisation), intangible asset amortisation, non-trading items and share
of joint ventures profit after taxation. EBITDA 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 period-on-period or with other
businesses.
H1 2022 H1 2021
EUR'm EUR'm
Profit after taxation attributable to equity holders of the parent 227.6 227.0
Share of joint ventures profit after taxation (1.1) -
Finance income (0.8) (0.1)
Finance costs 34.9 34.3
Income taxes 37.5 35.9
Non-trading items 69.5 20.8
Intangible asset amortisation 42.0 39.2
Depreciation (net of capital grant amortisation) 108.1 100.8
EBITDA 517.7 457.9
3. EBITDA Margin
EBITDA margin represents EBITDA expressed as a percentage of revenue.
H1 2022 H1 2021
EUR'm EUR'm
EBITDA 517.7 457.9
Revenue 4,057.8 3,582.1
EBITDA margin 12.8% 12.8%
4. Trading Profit
Trading profit refers to EBITDA less depreciation (net of capital grant amortisation). 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 period-on-period or with other businesses.
H1 2022 H1 2021
EUR'm EUR'm
EBITDA 517.7 457.9
Depreciation (net of capital grant amortisation) (108.1) (100.8)
Trading profit 409.6 357.1
5. Operating Profit
Operating profit is profit before income taxes, finance income, finance costs and share of
joint ventures profit after taxation.
H1 2022 H1 2021
EUR'm EUR'm
Profit before taxation 265.1 262.9
Finance income (0.8) (0.1)
Finance costs 34.9 34.3
Share of joint ventures profit after taxation (1.1) -
Operating profit 298.1 297.1
6. Adjusted Earnings Per Share and Growth in Adjusted Earnings Per Share on a Constant Currency
Basis
The growth in adjusted earnings per share on a constant currency basis is provided as it is
considered more reflective of the Group's underlying trading performance. Adjusted earnings
is profit after taxation attributable to equity holders 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 period-on-period. The
growth in adjusted earnings per share on a constant currency basis is calculated by comparing
current period adjusted earnings per share to the prior period adjusted earnings per share
retranslated at current period average exchange rates.
H1 2022 H1 2021
EPS Growth EPS Growth
cent % cent %
Basic earnings per share 128.4 0.2% 128.2 6.5%
Brand related intangible asset amortisation 13.0 - 12.6 -
Non-trading items (net of related tax) 35.0 - 11.2 -
Adjusted earnings per share 176.4 16.1% 152.0 15.1%
Impact of retranslating prior period adjusted earnings per share at
current period average
exchange rates* (7.1%) 9.0%
Growth in adjusted earnings per share on a constant currency basis 9.0% 24.1%
*Impact of H1 2022 translation was (10.8)/152.0 cent = (7.1%) (H1 2021: 9.0%).
7. Free Cash Flow
Free cash flow is EBITDA plus 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 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 adjusted for the impact
of acquisitions and disposals over 12 months. Below is a reconciliation of free cash flow
to the nearest IFRS measure, which is 'Net cash from operating activities'.
H1 2022 H1 2021
EUR'm EUR'm
Net cash from operating activities 132.2 247.9
Difference between movement in monthly average working capital and movement in the period
end working capital 113.8 115.4
Share of joint ventures profit after taxation - 0.7
Payments on non-trading items 36.1 7.2
Purchase of assets (net) (61.3) (136.3)
Payment of lease liabilities (15.9) (15.8)
Proceeds from the sale of property, plant and equipment 3.2 3.6
Capital grants received - -
Exchange translation adjustment 17.9 (0.4)
Free cash flow 226.0 222.3
8. Cash Conversion
Cash conversion is defined as free cash flow, expressed as a percentage of adjusted earnings
after taxation.
H1 2022 H1 2021
EUR'm EUR'm
Free cash flow 226.0 222.3
Profit after taxation attributable to equity holders of the parent 227.6 227.0
Brand related intangible asset amortisation 23.1 22.4
Non-trading items (net of related tax) 62.1 19.8
Adjusted earnings after taxation 312.8 269.2
Cash conversion 72% 83%
9. Liquidity Analysis
The Net debt: EBITDA and EBITDA: Net interest ratios disclosed are calculated 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.
H1 2022 H1 2021
Times Times
Net debt: EBITDA 2.1 1.9
EBITDA: Net interest 16.0 14.6
10. Average Capital Employed
Average capital employed is calculated by taking an average of the equity attributable to
equity holders of the parent and net debt over the last three reported balance sheets.
H1 2022 2021 H1 2021 2020 H1 2020
EUR'm EUR'm EUR'm EUR'm EUR'm
Equity attributable to equity holders of the parent 6,088.7 5,601.2 4,963.1 4,655.5 4,508.5
Net debt 2,456.3 2,124.1 1,980.6 1,945.1 2,085.0
Total capital employed 8,545.0 7,725.3 6,943.7 6,600.6 6,593.5
Average capital employed 7,738.0 7,089.9 6,712.6
Total capital employed definition has been updated to reflect lease liabilities in 'Net debt'
and 'Equity attributable to equity holders of the parent' as reported on the Condensed Consolidated
Balance Sheet. The calculation no longer adds back 'Goodwill amortised (pre conversion to
IFRS)' to 'Equity attributable to equity holders of the parent'.
11. Return on Average Capital Employed (ROACE)
This measure is defined as profit after taxation attributable to equity holders 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 2022 H1 2021 FY 2021
EUR'm EUR'm EUR'm
Profit after taxation attributable to equity holders of the parent 763.6 568.0 763.0
Non-trading items (net of related tax) (92.1) 35.3 (134.4)
Brand related intangible asset amortisation 46.9 43.5 46.2
Net finance costs 69.8 69.3 69.9
Adjusted profit 788.2 716.1 744.7
Average capital employed 7,738.0 6,712.6 7,089.9
Return on average capital employed 10.2% 10.7% 10.5%
Prior periods have been re-presented to align with the updated definition of 'Total capital
employed'.
12. Net Debt
Net debt comprises borrowings and overdrafts, interest rate derivative financial instruments,
lease liabilities and cash at bank and in hand. See full reconciliation of net debt in note
9 of these Condensed Consolidated Interim Financial Statements.
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END
IR FZGZNRRRGZZM
(END) Dow Jones Newswires
July 29, 2022 02:00 ET (06:00 GMT)
Grafico Azioni Kerry (LSE:KYGA)
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