LONDON (Alliance News) - Produce Investments PLC said Friday that its full-year revenue fell due to lower prices following the high-priced comparative season while pretax profit rose, leading the company to up its dividend by 25% as it said it remains confident in its prospects.
In its final results for the year to June 28, the parent company of one of the UK's biggest potato producers said revenue declined to GBP191.8 million from GBP206.0 million the previous year. Pretax profit for the period increased, coming in at GBP10.1 million from GBP6.7 million in 2013.
Produce Investments said the revenue decline can be attributed to strong price comparisons on the previous year. "The retail market environment remains fiercely competitive in terms of both price and volumes, and as expected we have experienced an element of inevitable price deflation on the back of the higher prices that were necessary last year to cover the cost of the more expensive crop from the 2012 harvest. The retail fresh potato sector is also experiencing higher than anticipated volume decline," said Non-Executive Chairman Barrie Clapham,
The company said its operating profit also improved, up 46% to GBP11.0 million from GBP7.5 million last year.
Buoyed by its confidence for the group's prospects for the coming year, the company has upped its final dividend to 4.55 pence per share, compared to 3.64 pence last year. Combined with the interim dividend of 2.275 pence per share, up on 1.82 pence in 2013, this results in a total dividend for the year of 6.825 pence per share, compared to the 5.46 pence per share paid in 2013, a 25% increase.
"A return to more normal growing conditions in the UK in 2013, compared to the wet weather experienced in 2012 has been a welcome relief to us all," said the company. Produce Investments had a busy year with the acquisition of The Jersey Royal Co, one of the country's largest producers of the famous Jersey Royal potato, in May.
The company acquired the producer for GBP15 million. Clapham said in a statement Friday that the acquisition has added a number of strategic elements to the company. "The deal strengthens the Group's product offering and also gives the Group greater control and influence over the early season potato market, with Jersey Royals always being the first UK product to market at the start of the season. The acquisition also gives us a fresh packing site in Kent, which supplies a number of retail and foodservice customers with locally sourced Kent potatoes, something which we are keen to exploit."
During the year the company closed its Tern Hill site in Shropshire - the site predominantly packed fresh potatoes for retail and foodservice. "Key strategic capital investments at our other fresh sites have allowed us to increase efficiencies and therefore re-align capacities, facilitating the closure of the site," said the company. Produce Investments now has three fresh packing sites: in Cambridgeshire, the Scottish Borders and Kent through the acquisition of JRCL.
The company's branded fresh potato, GreenVale, continues to gain momentum, both in terms of rate of sale and distribution, said the company. A TV advertising campaign was run during February and March on national TV and had the desired effect of increasing brand awareness, it said. "The brand brings together a unique packaging concept and great tasting variety, which attracts new customers to the category. We remain excited and committed about building the brand credentials and proposition in the years ahead."
Looking ahead the company said that while it is currently only approximately 30% of the way through harvesting, its best estimates for the current year's crop would indicate both reasonable yields and quality, but warned that as a result of this that it expects prices to come under pressure as supply is forecast to be higher than demand.
"The Group's procurement model which fixes an element of crop in advance but also has a proportion of crop linked to the free market enables the Group to take advantage of any such lowering of prices. We would also expect the retail environment to remain fiercely competitive as the market continues to evolve through increased competition from the Discounters, changing consumer shopping habits and more focus on reducing home waste, all of which impact market volume," said Clapham.
By Alice Attwood; aliceattwood@alliancenews.com; @AliceAtAlliance
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