Produce Investments Regulatory News (PIL)

29 January 2015

Produce Investments plc

("Produce", "Company" or the "Group")

Trading Update

Produce Investments plc, a leading operator in the fresh potato and daffodil sectors, is today providing an update on current trading.

In the Company's year-end results which were released on 26 September 2014, the Board highlighted that prices were expected to come under pressure with supply forecast to be higher than demand and that market conditions would continue to be challenging. Following the key Christmas trading period, the start of the daffodil harvest in Cornwall and the commencement of early potato planting in both Cornwall and Jersey, the Company now has more visibility for the remainder of its financial year. Accordingly, the Company now expects the Group's pre-tax profit for the full year to 27 June 2015 to be substantially below current market expectations.

The principle reason for this adjustment is the combination of an exceptional 2014 growing season, which produced a large crop of potatoes across much of northern Europe, combined with a lower consumption in the fresh potato sector.

Both the value and volume of fresh potato sales have been negatively impacted during the last 12 months. In order to compete with the discounters the big four retailers have had to invest significantly in lower retail price points for key staples, potatoes included, and this has led to price pressure down the whole supply chain. 

With an abundance of cheaper crop, all market channels have come under price pressure and demand for secondary crop and factory out-grade material has been low. In response to this, early indications are that area plantings in 2015 will be cut back.

The volume performance has improved during recent weeks but deflationary pressure remains on the value of fresh potato sales. Looking to the future Produce is working with its core retail customers to create a supply chain model that is more aligned to the prevailing market conditions in any given season, therefore reducing the impact of crop variations on the Group's financial performance. 

The Group remains cash generative and is committed to its long term strategy of widening both its product base and customer base, creating a more diverse business model for the future. It also remains committed to the long term development of the GreenVale brand and sales of this product remain in-line with the Company's expectations.

The daffodil harvest is now well underway in Cornwall and early indications are very positive with sales ahead of last year. The planting of early season potatoes in Cornwall is also progressing well which should lead to a target harvest start date of late April, with the associated high crop prices for early production. 

The full benefits of the acquisition of the Jersey Royal Company Ltd last May are yet to be realised with the season ahead providing Produce with its first full Jersey season. Commercial programmes are now finalised and crop planting on Jersey is progressing well and management are confident about the prospects for the 2015 Jersey season.

Produce expects to announce its interim results for the six months to 27 December 2014 on Thursday 26 March 2015.