Date: 15 February 2024
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LEI:
635400TLVVBNXLFHWC59
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KERRY GROUP
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PRELIMINARY STATEMENT OF RESULTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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Solid Business Performance In A Challenging
Environment
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FY 2023 Key Highlights
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Group revenue of €8,020m
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Taste & Nutrition volume growth of +1.1% and +0.1% in Q4 (FY
2022: +7.8%) | Group volumes -0.9% (FY 2022: +6.1%)
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Group pricing -0.7% reflecting the deflationary H2 environment (FY
2022: +11.7%)
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EBITDA of €1,165m with organic profit growth more than offset by
the impact of disposals and translation currency
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EBITDA margin increased by 60bps to 14.5% | Taste & Nutrition
EBITDA margin 17.0%
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Adjusted EPS of 430.1 cent - reflecting a 1.2% increase in constant
currency (2022: 440.6 cent)
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Basic EPS of 410.4 cent (2022: 341.9 cent)
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> Free
cash flow of €701m reflecting 92% cash conversion
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> Good
progress on sustainability commitments including increasing
nutritional reach to 1.25 billion consumers
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Final dividend of 80.8 cent per share (total 2023 dividend up 10.1%
to 115.4 cent)
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> Plan
for further share buyback in 2024 - details to be announced post
completion of existing €300m programme
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Edmond Scanlon, Chief Executive
Officer
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"We delivered a solid performance
in 2023 recognising varying market dynamics across our regions.
Overall Taste & Nutrition volume growth represented an
outperformance of our markets. APMEA and Europe achieved good
volume growth led by a strong performance in the foodservice
channel, while volumes in North America were impacted by stocking
dynamics and softer market conditions. Dairy Ireland performance
reflected challenging market conditions across the year. We were
pleased with our good progress in expanding our EBITDA margin and
reporting strong free cash flow generation.
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During the year we continued to
invest capital and develop our business aligned to our strategic
priorities. This included the expansion of our taste capabilities
and footprint across our regions, further development of our
nutrition portfolio, and broadening our emerging markets presence.
This progress builds on our significant recent strategic portfolio
developments and geographical expansion, strongly positioning Kerry
for market outperformance and good margin progression in the coming
years. As we begin 2024, Kerry's innovation pipeline is strong,
though overall consumer market volumes remain relatively muted,
which is reflected in our guidance for the year of 5% to 8%
adjusted earnings per share growth in constant
currency¹."
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¹See Outlook section for detailed guidance
summary
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Markets and Performance
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The overall demand landscape in
the year was characterised by a number of noteworthy market
dynamics including customer destocking, shrinkflation and the
impact of recent broad-based inflation on consumers' spending
habits. Despite these factors, customer innovation activity
remained strong, with a focus on adding new taste profiles,
improving products' nutritional and sustainability characteristics, and providing
more relative value options for consumers.
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Group revenue for the year was
€8,020 million reflecting a decrease of 8.6%, comprising the effect
of disposals of 5.1%, contribution from acquisitions of 1.0%,
unfavourable translation currency of 2.9%, pricing reduction of
0.7% and volume reduction of 0.9%. Taste & Nutrition business
volumes increased by 1.1% while Dairy Ireland volumes decreased by
6.5%.
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Group EBITDA margin increased by
60bps to 14.5% as benefits from our Accelerate Operational
Excellence transformation programme and portfolio developments were
partially offset by the net effect from pricing. Group EBITDA for
the year was €1,165 million (2022: €1,216m) as organic profit
growth was more than offset by the impact of disposals net of
acquisitions and unfavourable translation currency.
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Constant currency adjusted
earnings per share increased by 1.2% to 430.1 cent (2022: +7.3%),
which represented a decrease of 2.4% in reported currency (2022:
+15.7%). Basic earnings per share increased by 20.0% to 410.4 cent
(2022: 341.9 cent) primarily reflecting the profit on disposal of
businesses and assets in 2023 and the Group's exit from Russia and
Belarus in the prior year.
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Research and development
expenditure amounted to €301m (2022: €303m) and net capital
expenditure was €303m (2022: €217m) as the
Group continued to invest to develop its capabilities and global footprint. Free cash flow was
€701m (2022: €640m) representing cash conversion of 92% driven by a
strong improvement in working capital.
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The Board proposes a final
dividend of 80.8 cent per share, an increase of 10.1% on the final
2022 dividend. Together with the interim dividend of 34.6 cent per
share, this brings the total dividend for the year to 115.4 cent,
an increase of 10.1% on 2022. As previously announced, the Board
approved a share buyback programme of up to €300 million of Kerry
Group plc ordinary shares, which commenced in November, with
1,373,261 'A' ordinary
shares purchased at a total cost of €102 million by year end. The
Board plans to announce a further share buyback in 2024, the
details of which will be announced post completion of the existing
€300m programme.
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Good progress was made in the year
against Kerry's Beyond the
Horizon sustainability strategy and commitments, including
increasing Kerry's nutritional reach to 1.25 billion consumers
globally. The Group achieved a 48% reduction in Scope 1 & 2
carbon emissions2, while strong progress was made in
reducing food waste in Kerry's operation by
39%2.
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Strategic Portfolio
Developments
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In the year, the Group continued
to further develop its portfolio including a number of
complementary strategic acquisitions which enhanced Kerry's strong
local emerging markets footprint, and also the divestment of its
Sweet Ingredients Portfolio3.
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In May, the acquisition of
Proexcar3 was completed, which strengthened Kerry's capabilities and
leading position within the Latin American meat market, while also
providing a platform for further strategic growth within the ANDEAN
region. Located in Columbia with c. 120 employees, the company
produces clean-label functional ingredients.
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The acquisition of
Greatang3 in July strongly complemented
Kerry's leading
authentic taste position in China. Headquartered in Shanghai with
c. 120 employees, Greatang's range of innovative taste
solutions expands Kerry's strategic positioning and
capability into new foodservice channels and with local and
international customers in the meals and snacks markets.
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In December, the Group announced
it had entered into a definitive agreement to acquire part of the
global lactase enzyme business of Chr. Hansen and Novozymes on a
carve-out basis3. This is strongly aligned to
Kerry's recent
strategic enhancement of its biotechnology capabilities, while
extending Kerry's
enzyme manufacturing capabilities and footprint to three continents
with its focus on food, beverage and pharma
applications.
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2 Progress vs 2017 baseline
3 In March, Kerry completed the sale of the trade and
assets of its Sweet Ingredients Portfolio for a final consideration
of €475.5m, comprising of an initial cash consideration of €350.5m
(following routine closing adjustments) plus a €125.0m interest
bearing vendor loan note
In May, Kerry acquired 100% of the
share capital of Proexcar S.A.S. ('Proexcar') for an initial
consideration of US$44.0m (€40.4m net of working capital
adjustments and subject to routine closing adjustments) and a
potential additional payment of up to US$18.0m (€16.8m) payable in
2025 based on achieving earn-out conditions. The provisional fair
value of the expected contingent consideration is US$7.6m
(€7.1m)
In July, Kerry acquired 100% of
the share capital of Shanghai Greatang Orchard Food Co., Ltd.
('Greatang') for an initial consideration of RMB720.0m (€91.1m)
subject to routine closing adjustments, with potential additional
payments of up to RMB780.0m (€98.7m) payable based on contractual
arrangements over the period 2025 to 2027 based on achieving
earn-out conditions. The expected fair value of the contingent
consideration is €75.2m
Entered into a definitive
agreement to acquire part of the global lactase enzyme business of
Chr. Hansen Holding A/S ('Chr. Hansen') and Novozymes A/S
('Novozymes') (together the 'Lactase Enzymes Business') on a carve
out basis. The acquisition comprises certain trade and assets of
Chr. Hansen's global lactase enzyme business and 100% of the share
capital of Nuocheng Trillion Food (Tianjin) Co., Ltd, a Chinese
subsidiary of Novozymes. Total consideration is €150.0m subject to
routine closing adjustments, with the acquisition expected to close
by end of April 2024
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Business Performance
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Taste & Nutrition
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Volume growth driven by strong
foodservice performance
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2023
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Performance
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Revenue
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€6,975m
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+1.1%4
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EBITDA margin
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17.0%
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+50bps
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4 volume performance
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Volume growth of 1.1% given strong comparatives
and challenging market conditions (Q4: +0.1%)
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Growth led by Food EUM across Dairy, Snacks and
Meat
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Pricing +1.1% with inflation in H1 turning to
deflation in H2
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EBITDA of €1,186m with margin +50bps due to cost
efficiency initiatives and portfolio developments
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Taste & Nutrition reported
revenue of €6,975m reflected volume growth of 1.1% and positive
pricing of 1.1%, more than offset by unfavourable translation
currency of 3.4% and the effect of disposals net of acquisitions of
4.8%.
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The segment achieved solid overall
volume growth given the backdrop of industry destocking and pricing
dynamics. Foodservice achieved strong volume growth of 9.3%
supported by innovation with quick service restaurants, fast
casuals and coffee chains in particular, while the retail channel
volume reduction of 2.2% reflected customer inventory management
and softer market dynamics.
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From an End Use Market
perspective, Food achieved good growth led by Dairy, Snacks and
Meat. This was supported by strong performances in savoury and
culinary taste solutions, as well as Tastesense™ salt and
sugar-reduction technologies. Business volumes in emerging markets
increased by 4.1% with strong growth in the Middle East.
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Within the global Pharma EUM,
volume growth was led by good performances in cell nutrition and in
Kerry's clinically backed branded botanical extracts, partially
offset by excipients.
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Americas Region
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Overall volumes -1.8% (Q4: -1.9%)
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Retail channel saw softer market conditions while
foodservice performed well
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Within the Food EUM, good volume growth was
achieved in Snacks and Dairy
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LATAM delivered overall growth despite softer H2
market conditions
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Reported revenue in the Americas
region was €3,772m reflecting volume and pricing reductions of 1.8%
and 0.1% respectively, unfavourable translation currency of 2.6%
and the effect from disposals net of acquisitions of
4.9%.
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Performance in the region
reflected strong comparatives, customer inventory reductions and
softer than expected market conditions, which continued to be a
feature through to the end of the year. Performance in the retail
channel was particularly impacted within the Beverage, Bakery and
Meat markets, while growth in foodservice was supported by
continued menu enhancement and back-of-house efficiency solutions.
In North America, Snacks and Dairy achieved good growth driven by
authentic taste-led innovations with global leaders, emerging
brands and private label, while performance in Meat included a
number of successful new launches incorporating Kerry's clean-label
preservation systems.
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LATAM achieved overall volume
growth led by Mexico with good performances in the Snacks and Meat
markets, while Brazil experienced softer market conditions in the
second half of the year.
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Europe Region
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Volumes +2.9% (Q4: +0.8%)
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Dairy, Snacks and Meals performed very
well
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Foodservice delivered strong growth
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Reported revenue in the Europe
region of €1,517m reflected volume growth of 2.9% and positive
pricing of 6.4%, more than offset by an unfavourable translation
currency of 1.4% and the effect from disposals of 10.0%.
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Growth within the region was led
by strong performances in the UK and Ireland. Dairy achieved good
growth led by performances in dairy applications for the
foodservice channel. Snacks delivered strong growth through savoury
taste and Tastesense™ salt reduction technologies, while Meals
performance was supported by nutritional enhancements and authentic
taste solutions in stocks and broths. Beverage also performed well,
with good business development in the low and no alcohol category
with our citrus range, sugar reduction technologies and botanicals
portfolio.
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The region achieved very strong
growth in the foodservice channel driven by menu enhancement
activity, seasonal products and ongoing nutritional profile
improvements. As expected, performance in the retail channel
softened through the year, reflecting constrained market demand
given recent inflation in the region.
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APMEA Region
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Volumes +6.2% (Q4: +3.1%)
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Growth led by Bakery, Meat and Meals
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Foodservice delivered very strong
growth
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Reported revenue in the APMEA
region of €1,647m reflected volume growth of 6.2%, lower pricing of
1.0%, favourable transaction currency of 0.1%, unfavourable
translation currency of 6.6% and the effect from disposals net of
acquisitions of 0.2%.
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Overall growth in the region was
led by a strong performance in the Middle East across the year.
China delivered good growth considering local market dynamics,
while performance in Southeast Asia was impacted by challenging
market conditions through the second half of the year.
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Strong growth was achieved in the
foodservice channel through the year. This was led by the Bakery
with a number of new taste and texture innovations. Meat achieved
strong growth driven by local authentic taste launches with global
and regional leaders, while Meals performed well through culinary
taste systems and Tastesense™
salt reduction technologies. Growth in the retail
channel was supported by strong local authentic taste and probiotic
innovations across the Food end use markets.
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During the year, good progress was
made in enhancing the Group's presence within the region. This
included the expansion of Kerry's footprint in East Africa and the
opening of its new authentic taste facility in Karawang, Indonesia
to further support customers in key end use markets across
Southeast Asia.
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Dairy Ireland
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Performance reflected significant
change in Dairy Market prices
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2023
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Performance
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Revenue
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€1,283m
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-6.5%5
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EBITDA margin
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4.2%
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-40bps
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5Volume
performance
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Volumes -6.5% reflected challenging market
environment and constrained supply conditions (Q4:
-7.5%)
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Pricing of -9.3% with reduced pricing reflective
of dairy markets
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EBITDA of €53m with margin reduction driven by
the significant impact of changes in dairy market prices (2022:
€71m)
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Reported revenue and overall
EBITDA in Dairy Ireland was lower in the year due to constrained
supply conditions as well as elevated input costs impacting market
demand dynamics.
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Within Dairy Ingredients,
performance was impacted by the sharp fall in dairy market sales
prices particularly across the middle part of the year. Dairy
Consumer Products performed well given the market context,
supported by good growth in branded cheese.
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Financial Review
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%
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2023
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2022
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change
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€'m
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€'m
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Revenue
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(8.6%)
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8,020.3
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8,771.9
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EBITDA
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(4.2%)
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1,165.1
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1,216.1
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EBITDA margin
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14.5%
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13.9%
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Depreciation (net)
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(219.6)
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(221.6)
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Computer software
amortisation
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(27.2)
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(31.8)
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Finance costs (net)
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(50.3)
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(66.2)
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Share of joint ventures' results
after taxation
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(1.9)
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(0.4)
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Adjusted earnings before
taxation
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866.1
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896.1
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Income taxes (excluding
non-trading items)
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(103.1)
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(114.5)
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Adjusted earnings after
taxation
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763.0
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781.6
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Brand related intangible asset
amortisation
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(52.3)
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(50.9)
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Non-trading items (net of related
tax)
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17.4
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(124.2)
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Profit after taxation
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728.1
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606.5
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EPS
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EPS
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cent
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cent
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Basic EPS
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20.0%
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410.4
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341.9
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Brand related intangible asset
amortisation
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29.5
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28.7
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Non-trading items (net of related
tax)
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(9.8)
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70.0
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Adjusted* EPS
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(2.4%)
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430.1
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440.6
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Impact of exchange rate
translation
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3.6%
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Adjusted* EPS growth in constant
currency
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1.2%
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* Before brand related intangible
asset amortisation and non-trading items (net of related
tax).
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See Financial Definitions
section for definitions, calculations, and reconciliations of
Alternative Performance Measures.
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