LONDON (Alliance News) - Produce Investments PLC said Wednesday it swung to an operating profit for the half-year and is on track to meet market expectations for the full-year as it continued to focus on boosting efficiency realigning capacities during the period of significantly better weather and growing conditions.
Produce Investments said it it swung to an operating profit of GBP5.78 million for the half-year, up on the GBP0.68 million loss recorded in 2012. Revenue remained relatively flat at GBP89.60 million from GBP89.67 million in the comparable period. Pretax profit for the half-year was GBP5.38 million, up from a GBP1.24 million loss in 2012.
Buoyed by its improved balance sheet, the parent company of one of the UK's biggest potato producers also increased its dividend by 25%, paying 2.275 pence per share, up on the on the 1.82 pence paid for the comparable six months.
Produce Investments said the weather and growing conditions during 2013 were significantly better than in 2012 - the lowest yielding and poorest quality crop since 1976 - with an improvement
seen in both quality and yield of the potato crop. The firm was hit hard by the poor conditions, which resulted in exceptionally high free buy prices for potatoes and the ruling that additional imported tonnage having to be procured to fulfil UK market requirements.
"The inevitable time lag in achieving the necessary price increases to mitigate the increased raw material costs impacted last year's results, particularly in the first half year. The growing season for 2013 has seen a return to more favourable and stable growing conditions which has resulted in a necessary improvement in operating profit," said Chief Executive Angus Armstrong.
The company said better weather and a return to more normal growing conditions resulted in lower priced raw material during the reporting period, in comparison to last year, with less requirement for imports and the need to procure additional more expensive free buy potatoes, resulting in a reduction in raw material prices compared to last year.
In its interim results for the 26 weeks to December 28, 2013, the firm said it has focused on driving operational efficiences and relaigning its capabilities, including commencing a consultation period to close its Tern Hill packing site in Shropshire.
The firm said the decision was made into order to increase its operational efficiency, noting that a significant proportion of potatoes that are currently packed at the Tern Hill site are sourced from Scotland and the East of England, so this fits with the business and customer strategy to reduce "food miles."
Looking ahead, the company said its new brand, GreenVale, has performed ahead of expectations, boosted in part by the launch of a TV campaign, and this is expected to continue.
The firm noted that discussions announced in January regarding the potential acquisition of the Jersey Royal Company are ongoing.
Overall, the firm said it is on track to meet market expectations for full-year. "Given the necessary improved performance relative to last year and the potential re-alignment of operating capacities, the Board is very confident that the Group is well placed to execute both its short and longer term strategic objectives," said Armstrong.
Produce Investments owns Greenvale AP Ltd, which supplies bulk potatoes to major processors like McCain's and Birds Eye which then turn them into products like chips and potato waffles. It also produces seed potatoes for other UK growers, own-brand potatoes for Tesco and Ocado, and cooked potato products.
Shares in Produce Investments were trading up 1.28% at 238.00 pence per share Wednesday.
By Alice Attwood; aliceattwood@alliancenews.com; @AliceAtAlliance
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