Greencore Group Plc Interim Statement of Results for the Half Year Ended March 25, 2005.

DUBLIN, Ireland -- Greencore Group plc, the convenience food and ingredients group, today announced its interim statement of results for the half year ended March 25, 2005.

Financial Highlights

--2% like-for-like sales growth, with 8% in the Convenience Food division

--2% like-for-like operating profit growth, with 23% in the Convenience Food division

--Interest charge down 15% to EUR 14.8 million

--Profit before tax* up 8% to EUR 32.6 million

--Headline EPS* up 6% to 14.2 cent

--Net debt down EUR 44.3 million from March 2004

* before exceptional item and goodwill amortization

Business Highlights

--Strong performance from Convenience Food division

--Continued execution of low cost leadership and customer strategies

--Consolidation of sugar processing at one facility commenced

--Two smaller maltings closed, with a third closure announced

--Excellent sugar processing campaign, with record daily throughput achieved

Commenting on the results, Greencore Group Chief Executive, David Dilger, said:

"These results are evidence of the strong strategic, commercial and financial progress which the Group has made in the first six months of the financial year."

Introduction

Greencore has made good strategic, commercial and financial progress in the first six months of this financial year.

The inherent challenges in our industry continue to be more than offset by the quality of our market positions, the strong cash generative nature of our portfolio and successful execution of our key strategic initiatives, most particularly:

- our low cost leadership strategy

- our customer strategy, with a balanced exposure to food retailers and increasing penetration into alternative channels

As a result, our financial performance in the first half was strong across a range of fronts:

- Like-for-like sales growth of 8% was achieved in our Convenience Food division.

- Operating profit grew by 2% on a like-for-like basis, with a strong performance from the Convenience Food division which grew like-for-like profits by 23%.

- Our interest charge declined by a further EUR 2.5 million, or 15%, reflecting continued reductions in the amount and cost of the Group's indebtedness.

- Profit before tax* grew by 8%.

- Headline earnings per share* grew by 6%.

- Net debt at the end of March 2005 was EUR 417 million, EUR 44 million below the level of March 2004.

* before exceptional item and goodwill amortization

Review of Operations

Convenience Food

The Convenience Food division had a successful first half of the year. Like-for-like sales grew by 8% and operating margins increased from 5.7% to 6.6%, resulting in like-for-like operating profit growth of 23%.

Profitability in the comparative period in 2004 was impacted by a lag in recovering raw material inflation which amounted to EUR 4.7 million, which was offset by price increases and therefore did not recur in the first half of this year. Input costs were broadly unchanged in the period, although energy costs were close to EUR 2 million higher than in the comparative period.

This division operates in a competitive marketplace. Customer consolidation is ongoing, price competitiveness is a key measure by which many of our customers seek to differentiate themselves and their quality requirements are continuously increasing. Furthermore, increasing branded promotional activity is noticeable in those categories which have branded alternatives.

Evidence of the impact of these issues on our categories include:

- The customer bases in sandwiches and more particularly pizza, although varied, are underperforming the market overall.

- Retail price points on a standard quiche have again been reduced in the last two months, and are now some 20% below their level of four years ago.

- Product presentation standards in sandwiches have increased markedly in the last twelve months, adversely impacting productivity.

- Leading mineral water brands were on promotion for much of last winter in the UK.

Against this backdrop, our initiatives ensured that the division increased its operating profit by some EUR 5.4 million in the first half of the year.

Top-line growth was assisted by the Group's ongoing strategy of balancing its leading category positions with multiple food retailers by increasing its convenience food sales to other customers. Many of the division's categories - sandwiches, pizza, ambient sauces, frozen desserts and frozen savoury products - launched new ranges in alternative channels, including to airlines, convenience stores, food service operators and fast food outlets.

The two most substantial increases in activity in alternative channels in the period arose in the ambient sauce and sandwich categories. The ambient sauce category substantially increased its sales to international branded food manufacturers, underpinned by a short-term contract to supply one customer which was temporarily unable to produce its own requirements. Sandwiches commenced deliveries in the period to a national convenience store chain and is now supplying in excess of 1,400 of its outlets.

The Group's continued focus on operational excellence and low cost leadership delivered further benefit in the period. Particular initiatives and examples of success in the period included:

- Focusing on products where we have a particular competitive advantage by eliminating low volume, low margin lines: our frozen desserts category discontinued production of 20% of its product lines in the period.

- Simplifying our processes through a reduction in the number of ingredients and suppliers: our sandwich category reduced its number of separate ingredients by 10% and its supplier base by close to 20%.

- Focusing on process improvement, particularly in reducing waste and increasing automation and capacity:

-- Several categories have achieved significant material waste reductions via increased training, additional measurement systems, more collaborative planning with customers and de-listing low selling lines.

-- The performance of the automated line in our sandwich category continues to improve, whilst a third state-of-the-art line has been added at our quiche business.

- Improving purchasing efficiency through increased cross-category purchasing: benefits have been generated both on ingredient spends and on non-resale items.

- Focusing on cost reduction, most particularly a reduction in indirect labor and overheads, with each spend in every category being challenged.

Ingredients & Agribusiness 

The Ingredients and Agribusiness division had a challenging first half. Like-for-like sales declined by 8%, operating margins reduced from 8.3% to 6.9% and operating profit fell from EUR 20.0 million to EUR 15.3 million.

The decline in sales is not an indicator of underperformance in the period: it occurred, principally, because of lower 'C' sugar sales in Greencore Sugar and the closure of uncompetitive capacity in the Group's Malt division. Nonetheless, the market conditions for both these businesses remain challenging.

As indicated in the Preliminary Announcement last November, both businesses have substantial fuel requirements; higher costs of oil and other fuels impacted the division by in excess of EUR 2 million in the period.

In Greencore Sugar, the slowdown in demand from certain industrial customers as their own sales come under pressure has continued. Furthermore, there is an EU-wide oversupply of sugar this year as a result of the European Commission's decision last September not to declassify temporarily any sugar quota, due to its inaccurate forecasting of sugar consumption and stock levels in the EU. This oversupply has contributed to increased price competition in the domestic sugar market, and also to a reduction in export prices. Competition has also increased in advance, and in anticipation, of the impending reform of the European sugar regime as processors attempt to build market share in European markets in which they do not have a presence.

This impending regime reform is the most significant market issue facing Greencore Sugar. The European Commission made indicative proposals for quota and price reductions in July last year and a revised proposal is expected next month. The Council of Ministers is expected to have reached agreement on reform by the end of this year, and it is likely to take effect from July 2006.

In the Group's Malt division, international malt prices have softened considerably, driven in part by new capacity being introduced, most particularly in Russia. In addition, the level of decline in international barley prices has not been reflected in the UK and Ireland.

The long-proven operational and low cost capability of both businesses has helped counter these market conditions. Greencore Sugar closed its Carlow manufacturing facility in the period and is consolidating all sugar manufacturing at its Mallow site. The consolidation is essential to secure the survival of the Irish sugar processing industry in a more deregulated and competitive environment, and, to date, has proceeded to expectation, with agreements having been achieved with both grower and employee representatives which will underpin future competitiveness. An exceptional cost of EUR 65.4 million has been charged in the period to cater for this consolidation.

The Malt division is also consolidating production into its larger, better-invested maltings. It closed two of its smaller maltings in the UK at the start of the period and announced the closure of its smaller Irish maltings at Banagher, which will be implemented by the end of the financial year. These initiatives will enhance the overall competitiveness of the business.

Once again, Greencore Sugar benefited from an excellent processing campaign. Although sugar content was below the exceptional levels of the previous year, both facilities achieved record daily throughput and all processing was completed just before Christmas.

Following the closure of uncompetitive malt capacity, the Group's Malt division has focused on domestic and higher grade export markets and withdrawn from lower contribution export markets. In the first half of 2005, domestic deliveries accounted for 60% of all deliveries compared to 54% in 2004.

Financial Review

Like-for-like sales grew by 2%, with an 8% increase in the Convenience Food division. Overall operating margins remained at last year's level of 6.7% and continuing operating profit increased by 2% to EUR 45.2 million. Share of continuing profits from associates, net of share of interest, declined by EUR 0.3 million, with a decline in profitability at the Group's yeast associate the largest contributor. Discontinued activities (comprising the Group's former UK bakery subsidiary and sugar distribution associate), which had been exited from the Group before the period under review, contributed EUR 0.5 million in the first half of last year.

Net interest declined by EUR 2.5 million from EUR 17.3 million to EUR 14.8 million, reflecting a reduction in the amount and cost of the Group's indebtedness. Profit before tax, exceptional item and goodwill amortization increased by 8%, or EUR 2.5 million, from EUR 30.1 million to EUR 32.6 million.

The tax charge of EUR 4.4 million on ordinary activities compared to EUR 3.9 million in the first half of last year, with the effective rate increasing from 12.9% to 13.5%.

Headline earnings per share (adjusted to eliminate the exceptional item and goodwill amortization) increased by 6% from 13.4 cent to 14.2 cent. An interim dividend of 5.05 cent per share will be paid, which is in line with last year's level. Qualifying shareholders will again be offered the option of receiving dividends in the form of cash or shares.

An exceptional cost of EUR 65.4 million, net of tax, was charged in the period, arising from the consolidation of all of the Group's sugar production at its Mallow site. This arose, principally, from asset write-offs, redundancies and other costs of closing the Carlow processing facility.

Significant capital investment was made in the period. Capital expenditure amounted to EUR 21.0 million, compared to depreciation of EUR 20.9 million. Nonetheless, net debt at the end of the period under review of EUR 417.1 million was more than EUR 44 million below the level at the end of March 2004. Net debt increased by EUR 30 million from the level at the end of September 2004, reflecting the seasonal working capital uplift at Greencore Sugar of EUR 36 million, a consequence of the timing of its annual processing campaign, and the commencement of the spend on redundancies and capital expenditure arising from the consolidation of the Group's sugar processing activities, which amounted to EUR 13 million in the period.

Outlook

Challenging market conditions persist. However, the Board is confident that the Group will continue to make good returns as a result of its leading market positions, the strong cash generative nature of its portfolio and the successful execution of its chosen strategies.

E F Sullivan

Chairman

May 25, 2005

Note

Like-for-like sales and profits are calculated on a constant currency basis from continuing operations.

For tabular information, please contact Taylor Rafferty at [phone]