Greencore Announces Interim Statement of Results for the Half-Year Ended March 29, 2002.

Business Editors

DUBLIN, Ireland--(BUSINESS WIRE)--May 29, 2002

Greencore Group plc, the food and ingredients group, today announced its interim statement of results for the half year ended March 29, 2002.

Financial Highlights

Half-Year Ended March 29, 2002

- Turnover from continuing operations up 45% to EUR 816m

- Like-for-like sales growth of 5%

- Operating profit from continuing operations(1) up 40% to EUR 50.3m

- Profit before tax from continuing operations(1) up 32% to EUR 22.1m

- Proceeds to date from disposal program of EUR 198m, exceeding target

(1) adjusted for exceptional items and goodwill amortization

Note: the accounts reflect the inclusion of Hazlewood Foods for

six months compared with three months in the prior period.

Greencore has continued to make good progress in the first six months of this financial year. Profits from continuing operations have grown strongly, the total proceeds from the disposal program have exceeded the announced target and the restructuring program initiated following last year's acquisition of Hazlewood Foods is nearing completion. The success of the disposal program, although earnings dilutive in the short term, has sharply improved the strategic direction and focus of the Group going forward.

Results

Sales from continuing operations increased by 45% from EUR 561m to EUR 816m. This principally reflects the inclusion of the results of the retained Hazlewood businesses for six months, compared with three months in the comparative period; in addition, like-for-like sales from continuing operations grew by 5%, reflecting the growth in the markets in which Greencore now operates. Operating profit from continuing operations (before goodwill and exceptional items) also showed strong growth, increasing by 40% from EUR 35.9m to EUR 50.3m.

Adjusted earnings per share were 13.8c (prior period 14.2c), reflecting primarily the dilutive impact of the disposal program. An interim dividend of 4.38c per share is to be paid, which is in line with last year.

Integration of Hazlewood Foods

The successful acquisition of Hazlewood Foods has provided the Group with significant growth prospects, as demonstrated by the financial performance in the first six months of the year. To enable the Group to take advantage of these improved prospects, a substantial disposal and restructuring program was undertaken. In the first six months of the year, five additional businesses were sold, as well as 50% of the flour milling business, Odlums. Total disposal proceeds of EUR 53m were generated in the period, and a further EUR 45m has been realized since the half year end from additional business and property sales. In total, eighteen businesses have now been sold since the acquisition of Hazlewood, with proceeds of some EUR 198m generated, and a further four closed. Following the disposal program, the Group's convenience portfolio is now focused on product categories with significant growth prospects.

As previously reported, three substantial projects were also progressed in the first half of the current year. In the ambient sauces and pickles operation, two smaller facilities in North Wales and Manchester were consolidated on time and on budget into the main factory in Yorkshire, which has been completely refurbished. The Group is already benefiting from this consolidation. In pizza, a new factory, which will ultimately house all of the Group's topped pizza production, was built again, on time and on budget. The commissioning process continues and full operational efficiencies have yet to be achieved. We anticipate that the transfer of production from the Bedford facility will be completed before the end of the current financial year and the new facility fully commissioned by the end of December. Finally, in cakes and desserts, the rationalization of the cost base of the new Hull facility, into which four separate bakeries were consolidated last year, is still being progressed. Operating and cost improvements have resulted, although the facility has still further to go to fulfill its potential.

The diverse spread of businesses and accompanying structures in Hazlewood has been substantially reduced since the acquisition. Businesses exited include paper towels, horticulture, cured meats, vinegar, nappies and fish. Significant savings have been made to the cost base, and the Group is well advanced in achieving the synergies targeted pre-acquisition.

Review of Operations

Chilled and Frozen

Operating profit from continuing activities increased to EUR 19.3m in the period on sales of EUR 362.3m, compared with EUR 8.8m on sales of EUR 179.5m in the prior period, with operating profit margins rising from 4.9% to 5.3%. In sandwiches, the combination of the new state-of-the-art Manton Wood facility, double-digit sales growth in the category, and Hazlewood's clear market leadership delivered improved results. Chilled sauces continued to benefit from both strong category growth and new product introductions with the product base continuing to expand from the core pasta sauce range to include meat sauces and sweet sauces. These same two factors drove growth in quiche and ready meals, which also benefited from the rationalization measures taken in the last financial year. The new pizza facility will benefit the Group's topped pizza business in the same way as the Manton Wood facility has enhanced the sandwich business, whilst the Group's Dutch pizza operation completed on budget a EUR 3m investment in a new production hall, which will provide additional necessary capacity to service continental market growth.

Ingredients

Sales increased from EUR 239.1m to EUR 246m, whilst operating profit was up from EUR 20.1m to EUR 20.4m. As reported at the AGM, Irish Sugar's profitability declined due to an increase in beet prices and the shutdown of the two factories during the related dispute with beet growers. However, the five-year agreement subsequently entered into with the Irish Farmers' Association provides the basis for stability going forward.

In milling, Odlums produced to the capacity of its mills, with profits benefiting accordingly, although a mild winter in the US as well as post-September 11th de-stocking programs inhibited the very strong recent growth record of its McCanns branded oatmeal product. Malt generated a good increase in sales and profits, in particular in the UK, which benefited from excellent cost management.

Ambient Grocery

Operating profit on continuing activities increased from EUR 7.1m last year to EUR 12.1m, with sales from continuing operations up from EUR 138.1m to EUR 209.4m. Much of the increase was due to the inclusion of Hazlewood for the entire period, although operating profit margins also showed good improvement, increasing from 5.1% to 5.8% on continuing activities.

The Scottish mineral water business, Campsie, continues to benefit from the increasing demand for mineral water in the UK, whilst remaining very focused on its cost base. The ambient sauces and pickles business continues to recover volume; although the sector remains very competitive, the rationalization of the two smaller facilities will result in further improvements to the cost base. Results from Rathbones declined significantly versus the same period last year, as the UK bread market remained very competitive. Transfer of production to the new cake and dessert facility in Hull was delayed, resulting in significant underperformance during the peak Christmas cake season.

Agribusiness 

Agribusiness profitability from continuing operations increased from EUR 0.9m to EUR 1.2m on sales of EUR 33m versus EUR 28.6m, with a strong performance in the agrichemical distribution business more than offsetting the impact of a reduction in EU grain import levies immediately post-harvest. The fertilizer business, Grassland, was sold since the half-year, and its results have been included in discontinued activities.

Associates

Share of profit of associates, net of share of interest, declined from EUR 1.9m to EUR 1.5m, due principally to a reduction in profitability at the UK sugar distributor associate.

Financial Review

Net debt in the first six months was reduced by EUR 54.9m from EUR 722.6m to EUR 667.7m. The March 2002 net debt figure is EUR 206m lower than the level at March 2001. Net interest payable increased from EUR 20.4m to EUR 28.4m, reflecting the inclusion for the entire period of the acquisition financing of Hazlewood. Amortization of finance facility costs increased from EUR 0.6m to EUR 1.3m for the same reason. The exceptional cost within operating profit relates principally to start-up inefficiencies at the new pizza and cake facilities, whilst the exceptional loss on disposal of EUR 6.9m relates to the partial disposal of Odlums. Net capital expenditure in the period declined from EUR 32.5m in the same period last year to EUR 25.1m. The tax charge of EUR 1.7m equates to an effective rate of 6%, which reflects the ongoing restructuring of the Group.

Earnings per share (adjusted to eliminate exceptional items, amortization of goodwill and finance facility cost) decreased by 2.8% to 13.8c from 14.2c. Basic earnings per share were 2.1c (2001: 7.2c).

Current Trading and Outlook

The disposal and restructuring program has proceeded in line with our timetable and expectations. As outlined above, performance improvement in the new pizza and cakes facilities is a key priority for the Group in the second half of the year. The Group expects an uplift in performance in these businesses by the end of the current financial year.

In Chilled and Frozen, the market continues to show good growth, in line with consumer demand for fresh prepared food, which is both convenient and of high quality. The Group is confident of continued profit growth in these categories.

In Ingredients, the outlook for malt is for further improvement in the second half, with the Belgian operation benefiting from the commencement of its agreement with Interbrew. Odlums (which, going forward, will be reported as an associate) continues to trade strongly. Irish Sugar will be impacted by the additional costs incurred in the campaign earlier in the year, although it will benefit from sales price increases recently achieved.

In Ambient Grocery, trading continues to be satisfactory in water, sauces and pickles, and dried soups and sauces, but has not yet improved in bread, where much effort is being dedicated to improving Rathbones' performance and the market in which it operates.

A moderate second half is expected from the Group's agribusinesses, which are becoming an increasingly smaller proportion of the Group overall.

A specific focus in the second half of the year will be on continuing to reduce indebtedness, whilst driving improvements at the cakes, pizza and bakery businesses. Although these businesses are unlikely to reach their full potential in the short term, their medium term prospects are bright. The outlook for growth in the second half in continuing operations is favorable, although the results will be impacted by the dilutive effect of the disposal program. The acquisition of Hazlewood has transformed Greencore, and whilst much remains to be done, the Group is already capitalizing on its combination of market leadership positions, excellently invested facilities, and a balanced mix of strong growth and highly cash generative categories.

A. D. Barry,

Chairman. May 29, 2002

Greencore is a leading European convenience food and ingredients group. The Group has operations in Ireland, the United Kingdom, and Continental Europe. Greencore's ordinary shares trade in Dublin and London, and information can be accessed on Bloomberg under the symbols GNC ID and GNC LN respectively and on Reuters under GNC.I and GNC.L. Additional information is available on Greencore's Internet site: www.greencore.ie.

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