2 Oct 2012 14:21
2 October 2012
Produce Investments plc
Final results for 53 weeks ended 30 June 2012
Produce Investments plc ("Produce Investments" or the "Group") (AIM:PIL), a leading operator in the fresh potato sector with vertically integrated activities covering seed production, own growing, processing and packing and supply to the major retailers, is pleased to announce its results for the 53 weeks ended 30 June 2012.
Financial highlights | 2012 | 2011 |
Revenue | £153.9m | £171.4m |
Operating profit before exceptional costs | £6.9m | £6.4m |
Profit before tax and exceptional costs | £6.0m | £5.3m |
Exceptional costs relating to flotation | - | £2.8m |
Profit before tax | £6.0m | £2.6m |
Basic earnings per share | 24.75p | 8.78p |
Adjusted earnings per share (1) | 24.45p | 21.10p |
Dividend per share | 3.64p | 5.46p |
Net debt | £4.3m | £8.1m |
(1) Before exceptional costs associated with equity raising and listing
Operational Highlights
·; Lower turnover as a consequence of the low priced potato season
·; Improvement in operating margins
·; Launch of own brand - Greenvale Farm Fresh
·; Improvement in earnings per share
Post Reporting Period
·; Acquisition of Rowe Farming Limited
For further information contact:
Produce Investments plc
Brian Macdonald, Finance Director 01890 819503
Shore Capital & Corporate Limited (Nomad)
Stephane Auton/Patrick Castle 0207 408 4062
Hudson Sandler
Nick Lyon 0207 796 4133
Note to Editors
The Group is a vertically integrated company supplying blue chip customers such as Tesco, Sainsbury and Bakkavor with fresh and processed potatoes.
Website: www.produceinvestments.co.uk
CHAIRMAN'S STATEMENT
I am pleased to report to shareholders that the Group has performed well in the year ended 30 June 2012. The sizeable UK crop harvest in 2011, which was in excess of 6 million tonnes, resulted in a relatively low priced year for potatoes for most of the year. The low priced season, coupled with a fiercely competitive retail environment put pressure on selling prices with traded volumes on behalf of our growers particularly affected. As a result total Group turnover reduced by 10.2% but I am pleased to say that despite this reduction in turnover, operating profit margins increased to 4.5% from 3.8%, resulting in a pre-tax profit before exceptional charges of £6.0m (2011: £5.3m).
Looking ahead, the wettest spring and summer in over 100 years is impacting crop production very significantly and is likely to impact the Group's performance in the year ahead. The Group's procurement model which fixes a large element of crop in advance of the season will partly mitigate some of this increase. However, it is likely that trading will be impacted and, therefore, the Directors believe that it is prudent to reduce the level of the final dividend compared to last year to 1.82 pence per share (2011:3.64 pence), which combined with the interim dividend of 1.82 pence per share (2011:1.82 pence) results in a total dividend for the year of 3.64 pence per share (2011:5.46 pence). The final dividend will be paid on 30 October 2012 to ordinary shareholders on the register at close of business on 5 October 2012.
I would also like to express my sincere thanks to all employees of the Group who have helped to contribute to these excellent results for the year.
Also today, 2nd October 2012, the Company announced the acquisition of the share capital of Rowe Farming Limited. The consideration for the acquisition comprises a cash payment of £12.3m and the issue of 1,818,182 new ordinary shares in Produce Investments. The cash consideration is being funded through the Company's existing cash resources and a new bank facility with HSBC.
I am delighted we have been able to purchase such a high quality business. It takes the Company into new sectors and we are both excited and confident about the future earnings potential. This transaction was strongly supported by our major shareholder and we look forward to repaying the faith shown in us as we start to deliver on our long term strategy of growing the business through acquisition and diversifying its earnings profile both in terms of its customer base and its product offering. The Directors will continue to seek similarly attractive acquisitions and remain confident in our ability to grow the business substantially over the next few years.
Barrie Clapham
Non-Executive Chairman
CHIEF EXECUTIVE'S REPORT
In the year ended 30 June 2012, we saw for most of the year a relatively low priced potato season, largely as a result of a large potato crop which was in excess of 6 million tonnes. The Group's procurement model, which is based on sustainable fixed price procurement contracts with its grower base, meant that the Group was not able to take full advantage of the relatively low farm gate prices. The low priced season, along with a very competitive retail environment fuelled by excessive promotional activity, put considerable deflationary pressure on selling prices. Traded volumes sold on behalf of growers direct to third party customers were also negatively impacted. The low priced season also placed pricing pressure on our processing, food service and seed business with turnover and margins impacted.
Largely as a result of the low priced season total Group turnover was £153.9m, a decrease of 10.2% when compared with £171.4m last year. Despite this reduction in turnover, operating profit before exceptional charges increased to £6.9m from £6.4m, an increase of 6.7%, with operating margins improving from 3.8% to 4.5%.
Adjusted earnings per share for the year amounted to 24.45 pence per share, a 15.9% gain on the prior year (21.10 pence). Adjusted diluted earnings per share for the year amounted to 22.80 pence per share, a 14.6% gain on the prior year (19.89 pence).
During the year the Group successfully launched its first branded potato into the retail sector with "Greenvale Farm Fresh". This brings together a unique packaging concept and a great tasting variety, and whilst it is relatively early days, initial feedback and sales are very encouraging with clear evidence of the brand bringing new customers into the category.
The Group continues to be strongly cash generative and at the year end total net debt stands at £4.3m compared with £8.1m last year.
As the Chairman noted, in 2012 the wettest spring and summer in over 100 years is impacting crop production quite significantly. This is likely to result in a lower than average UK yielding crop, which will lead to higher than average prices. The Group's procurement model which fixes a large element of crop in advance of the season will partly mitigate some of this increase but crop failures, yield reduction and high waste will be more prominent than seen in recent years and is expected to impact Group performance in the year ahead.
The Board is very excited by the acquisition of Rowe Farming Limited (RF). RF's business is based in Cornwall, in the South West of England and they operate from a number of sites in the area. RF have built a very successful business model over many years growing and supplying predominantly specialist new and salad potatoes, with a particular focus on the high value "first early" part of the season. In addition to potatoes, RF also grow and supply daffodils and daffodil bulbs for both domestic and export markets, including the multiple retail sector in the UK.
The Board remains confident that Produce Investments is well positioned to both grow organically and to take advantage of any acquisition opportunities.
Angus Armstrong
Chief Executive Officer
CONSOLIDATED INCOME STATEMENT
For the 53 weeks ended 30 June 2012
2012 £'000 | 2011 £'000 | |
CONTINUING OPERATIONS |
Revenue | 153,889 | 171,428 | ||
Cost of sales | (111,067) | (130,102) | ||
Gross profit | 42,822 | 41,326 | ||
Administrative and other operating expenses | (35,961) | (34,893) | ||
Operating profit, being profit before interest and tax | 6,861 | 6,433 | ||
Exceptional costs relating to flotation | - | (2,768) | ||
Finance costs | (936) | (1,123) | ||
Finance income | 15 | 18 | ||
Dividends received from investments | 30 | - | ||
Share of profit of associate | 7 | 7 | ||
Profit before tax | 5,977 | 2,567 | ||
Income tax expense | (995) | (854) | ||
Profit for the 53 weeks | 4,982 | 1,713 | ||
Attributable to: | ||||
Equity holders of the parent | 4,922 | 1,734 | ||
Non- controlling interests | 60 | (21) | ||
4,982 | 1,713 | |||
Earnings per share attributable to owners of the parent during the year: | ||||
Basic earnings per share (pence) | 24.75 | 8.78 | ||
Diluted earnings per share (pence) | 23.08 | 8.27 |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the 53 weeks ended 30 June 2012
2012 £'000 | 2011 £'000 | |||
Profit for the 53 weeks | 4,982 | 1,713 | ||
Other comprehensive income: | ||||
Actuarial (loss) / gain in respect of pension scheme | (2,530) | 2,557 | ||
Deferred tax effect on actuarial gain / (loss) | 475 | (810) | ||
Effect of change in tax rate on historic equity tax postings | (51) | (112) | ||
Current income tax credit recognised through equity | 132 | 145 | ||
Deferred tax assets recognised directly through equity | (42) | 82 | ||
Other comprehensive income for the 53 weeks, net of tax | (2,016) | 1,862 | ||
Total comprehensive income for the 53 weeks, net of tax | 2,966 | 3,575 | ||
Attributable to: | ||||
Equity holders of the parent | 2,906 | 3,596 | ||
Non- controlling interests | 60 | (21) | ||
2,966 | 3,575 | |||
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 30 June 2012
2012 £'000 | 2011 £'000 | |
ASSETS |
Non-current assets: | ||||
Property, plant and equipment | 24,175 | 24,166 | ||
Intangible assets | 10,924 | 11,482 | ||
Investment in associates | 154 | 147 | ||
Other investments | 22 | 22 | ||
Deferred tax assets | 1,949 | 1,719 | ||
37,224 | 37,536 | |||
Current assets: | ||||
Inventories | 6,020 | 5,454 | ||
Biological assets | 5,133 | 4,096 | ||
Trade and other receivables | 16,351 | 18,360 | ||
Prepayments | 959 | 1,022 | ||
Cash and short-term deposits | 6,951 | 5,271 | ||
35,414 | 34,203 | |||
Non current assets classified as held for sale | - | 500 | ||
Total assets | 72,638 | 72,239 | ||
EQUITY AND LIABILITIES | ||||
Equity: | ||||
Issued capital | 199 | 198 | ||
Share premium | 15,592 | 15,536 | ||
Other capital reserves | 3,500 | 3,500 | ||
Retained earnings | 5,871 | 4,032 | ||
Equity attributable to equity holders of the parent | 25,162 | 23,266 | ||
Non-controlling interests | 78 | 18 | ||
Total equity | 25,240 | 23,284 | ||
Non-current liabilities: | ||||
Interest-bearing loans and borrowings | 9,844 | 12,089 | ||
Other non-current financial liabilities | 1,584 | 1,637 | ||
Deferred revenue | 116 | 139 | ||
Pensions and other post employment benefit obligations | 4,420 | 2,535 | ||
Deferred tax liability | 4,540 | 5,193 | ||
20,504 | 21,593 | |||
Current liabilities: | ||||
Trade and other payables | 23,950 | 24,651 | ||
Interest-bearing loans and borrowings | 1,392 | 1,301 | ||
Deferred revenue | 76 | 95 | ||
Income tax payable | 1,476 | 1,299 | ||
Provisions | - | 16 | ||
26,894 | 27,362 | |||
Total liabilities | 47,398 | 48,955 | ||
Total equity and liabilities | 72,638 | 72,239 |
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the 53 weeks ended 30 June 2012
| Issued Capital | Share premium | Other capital reserves | Retained earnings | Total | Non-controlling interest | Total Equity | |
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||
As at 26 June 2010 | - | 70 | 4,121 | (1,183) | 3,008 | 39 | 3,047 | |
Profit for the period | - | - | - | 1,734 | 1,734 | (21) | 1,713 | |
Actuarial gain on post employment benefit obligations | - | - | - | 2,557 | 2,557 | - | 2,557 | |
Deferred tax on actuarial gain | - | - | - | (810) | (810) | - | (810) | |
Tax rate change on balances taken to equity | - | - | - | (112) | (112) | - | (112) | |
Current year tax taken to equity | - | - | - | 145 | 145 | - | 145 | |
Deferred tax taken directly to equity | - | - | - | 82 | 82 | - | 82 | |
Total comprehensive income | - | - | - | 3,596 | 3,596 | (21) | 3,575 | |
Reserves transfer | - | - | (621) | 621 | - | - | - | |
Reserves movements on bonus share issue | 112 | (70) | - | (42) | - | - | - | |
New shares issued during period | 86 | 15,536 | - | - | 15,622 | - | 15,622 | |
Share-based payment transactions | - | - | - | 1,399 | 1,399 | - | 1,399 | |
Equity dividends paid | - | - | - | (359) | (359) | - | (359) | |
As at 25 June 2011 | 198 | 15,536 | 3,500 | 4,032 | 23,266 | 18 | 23,284 | |
Profit for the period | - | - | - | 4,922 | 4,922 | 60 | 4,982 | |
Actuarial loss on post employment benefit obligations | - | - | - | (2,530) | (2,530) | - | (2,530) | |
Deferred tax on actuarial loss | - | - | - | 475 | 475 | - | 475 | |
Tax rate change on balances taken to equity | (51) | (51) | - | (51) | ||||
Current year tax taken to equity | - | - | - | 132 | 132 | - | 132 | |
Deferred tax taken directly to equity | - | - | - | (42) | (42) | - | (42) | |
Total comprehensive income | - | - | - | 2,906 | 2,906 | 60 | 2,966 | |
New shares issued during period | 1 | 56 | - | - | 57 | - | 57 | |
Share-based payment transactions | - | - | - | 18 | 18 | - | 18 | |
Equity dividends paid | - | - | - | (1,085) | (1,085) | - | (1,085) | |
As at 30 June 2012 | 199 | 15,592 | 3,500 | 5,871 | 25,162 | 78 | 25,240 |
CONSOLIDATED CASH FLOW STATEMENT
For the 53 weeks ended 30 June 2012
2012 £'000 | 2011 £'000 | |
OPERATING ACTIVITIES |
Profit before tax from continuing operations | 5,977 | 2,567 | ||
Adjustments to reconcile profit before tax for the year to net cash inflow from operating activities: | ||||
Depreciation and amortisation | 3,894 | 3,732 | ||
Share-based payment transaction expense | 18 | 1,399 | ||
Gain on disposal of property, plant and equipment | (353) | (40) | ||
Finance income | (15) | (18) | ||
Finance costs | 936 | 1,123 | ||
Share of net profit of associate | (7) | (7) | ||
Fair value movement on biological assets | 141 | (108) | ||
Movement in provisions | (16) | (88) | ||
Difference between pension contributions paid and amounts recognised in the income statement
| (552) | (556) | ||
Working capital adjustments: | ||||
Decrease / (Increase) in trade and other receivables and prepayments | 2,072 | (2,986) | ||
(Increase) in inventories and biological assets | (1,744) | (271) | ||
(Decrease) / Increase in trade and other payables | (701) | 3,163 | ||
(Decrease) in deferred revenue | (42) | (5) | ||
Interest received | 15 | 18 | ||
Income tax paid | (1,187) | (1,656) | ||
Net cash flows from operating activities | 8,436 | 6,267 | ||
INVESTING ACTIVITIES | ||||
Proceeds from sale of property, plant and equipment | 853 | 122 | ||
Purchase of property, plant and equipment | (3,309) | (3,225) | ||
Purchase of intangible assets | (36) | (21) | ||
Net cash flows used in investing activities | (2,492) | (3,124) | ||
FINANCING ACTIVITIES | ||||
Payment of finance lease liabilities | (109) | (135) | ||
Long term bank deposits converted to cash | - | 309 | ||
Bank loans repaid during period | (2,045) | (2,332) | ||
Settlement of loan notes | - | (5,162) | ||
Interest paid Dividends paid to equity shareholders of parent Proceeds from share issues | (1,082) (1,085) 57 | (1,264) (359) 15,622 | ||
Net cash flows (used in) / generated from financing activities | (4,264) | 6,679 | ||
Net increase in cash and cash equivalents | 1,680 | 9,822 | ||
Cash and cash equivalents at beginning of 53 week period | 5,271 | (4,551) | ||
Cash and cash equivalents at end of 53 week period | 6,951 | 5,271 |
Notes
1. Statement of compliance
The Group's financial statement have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union as they apply to the financial statements of the Group for the period ended 30 June 2012 and applied in accordance with the Companies Act 2006. The financial information set out above does not constitute the Company's statutory report and accounts for the years ended 30 June 2012 or the year ended 25 June 2011, but is derived from those accounts. Statutory accounts for 2011 have been delivered to the registrar of companies, and those for 2012 will be delivered in due course. The auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006. The annual report and accounts for the year ended 30 June 2012 will be posted to shareholders on 2 October 2012. The results for the year ended 30 June 2012 were approved by the Board of Directors on 2 October 2012 and are audited.
The information contained in this preliminary announcement has been approved by the Board of Directors.
2. Basis of preparation
The financial statements have been prepared on a historical cost basis, except for derivative financial instruments and biological assets, which have both been measured at fair value in line with applicable accounting standards.
3. Earnings Per Share
2012 | 2011 | |
Profit attributable to equity shareholders (£'000) | 4,922 | 1,734 |
Weighted average number of ordinary shares in issue | 19,884,825 | 19,759,583 |
Weighted average number of options with dilutive effect | 1,443,820 | 1,200,409 |
Total number of shares - fully diluted | 21,328,645 | 20,959,992 |
Basic earnings per share - pence | 24.75 | 8.78 |
Diluted earnings per share - pence | 23.08 | 8.27 |
Adjusted earnings per share | ||
Operating profit as per income statement (£'000) | 6,861 | 3,665 |
Add back exceptional costs associated with equity raising (£'000) | - | 1,232 |
Add back exceptional costs arising on share options vesting on listing (£'000) | - | 1,536 |
Operating profit pre exceptional (£'000) | 6,861 | 6,433 |
Finance costs and income (£'000) | (921) | (1,105) |
Income from associate | 7 | 7 |
Adjusted profit before tax (£'000) | 5,947 | 5,335 |
Tax on adjusted profit at underlying effective rate (£'000) | (995) | (1,187) |
Adjusted profit after tax (£'000) | 4,952 | 4,148 |
Adjusted profit attributable to ordinary shareholders (£'000) | 4,862 | 4,169 |
Adjusted basic earnings per share - pence | 24.45 | 21.10 |
Adjusted diluted earnings per share - pence | 22.80 | 19.89 |
Adjusted earnings per share is included to enable earnings to be produced on a directly comparable basis. To achieve this comparison, the operating profit for the 52 weeks to 25 June 2011 is reflected as if the exceptional items had not been included in the income statement. This increased underlying profit by £2,768,000. An underlying effective tax rate of 22% has then been applied to the adjusted profit.
4. Report distribution
Copies of the annual report and financial statements will be sent to shareholders shortly and will be available for a period of one month to the public at the offices of Produce Investments plc, Floods Ferry, Floods Ferry Road, Doddington, March, Cambridge, PE15 OUW, and at the Company's website.