TOT.L Regulatory News (TOT)

•

Total Revenue up 13.9% to €4.29 billion

•

Adjusted fully diluted EPS up 11.7% to 13.48 cent

•

Adjusted EBITDA up 10.1% to €104.4m

•

Adjusted EBITA up 13.3% to €83.5m

•

Profit before tax up 43.2% to €72.5m

•

Total dividend up 10.0%

Key performance indicators are defined overleaf

TOTAL PRODUCE PLC PRELIMINARY RESULTS FOR THE

YEAR ENDED 31 DECEMBER 2017

2017

€'million

2016

€'million

% change

Total revenue (1)

4,286

3,762

+13.9%

Group revenue

3,674

3,105

+18.3%

Adjusted EBITDA (1)  

104.4

94.8

+10.1%

Adjusted EBITA (1)

83.5

73.7

+13.3%

Operating profit after intangible asset amortisation

78.2

56.2

+39.3%

Adjusted profit before tax (1)

76.7

67.7

+13.3%

Profit before tax

72.5

50.6

+43.2%

Euro cent

Euro cent

% change

Adjusted fully diluted earnings per share (1)  

13.48

12.07

+11.7%

Basic earnings per share

14.80

8.91

+66.1%

Diluted basic earnings per share

14.68

8.80

+66.8%

Total dividend per share

3.3433

3.0393

+10.0%

(1) Key performance indicators defined

Total revenue includes the Group's share of the revenue of its joint ventures and associates.

Adjusted EBITDA is earnings before interest, tax, depreciation, acquisition related intangible asset amortisation charges and costs, fair value movements on contingent consideration and exceptional items. It also excludes the Group's share of these items within joint ventures and associates.

Adjusted EBITA is earnings before interest, tax, acquisition related intangible asset amortisation charges and costs, fair value movements on contingent consideration and exceptional items. It also excludes the Group's share of these items within joint ventures and associates.

Adjusted profit before tax excludes acquisition related intangible asset amortisation charges and costs, fair value movements on contingent consideration and exceptional items. It also excludes the Group's share of these items within joint ventures and associates.

Adjusted fully diluted earnings per share excludes acquisition related intangible asset amortisation charges and costs, fair value movements on contingent consideration, exceptional items and related tax on such items. It also excludes the Group's share of these items within joint ventures and associates.

Overview

Total Produce (the 'Group') has delivered a strong performance in 2017. Total revenue, adjusted EBITA and adjusted fully diluted earnings per share grew by 13.9%, 13.3% and 11.7% respectively. The results benefited from the contribution of acquisitions in the year and a circa 4% like-for-like growth in revenue. The Group continues to be cash generative with adjusted operating cashflows of €53.8m (2016: €44.2m) and free cashflows of €34.3m (2016: €30.4m).

The Board is pleased to announce a 10.0% increase in the final dividend to 2.4527 (2016: 2.2297) cent per share subject to the approval of shareholders at the forthcoming AGM. If approved, the total dividend for 2017 will amount to 3.3433 (2016: 3.0393) cent per share which represents an increase of 10.0% on 2016.

Operating review

Total revenue increased 13.9% to €4.29 billion (2016: €3.76 billion) with adjusted EBITA up 13.3% to €83.5m (2016: €73.7m). The results benefited from the contribution of acquisitions completed in the past twelve months offset in part by currency movements on the translation of the results of foreign currency denominated operations to Euro. The deconsolidation of a subsidiary to a joint venture interest at the beginning of the year had a marginal effect on revenue and adjusted EBITA and no effect on adjusted earnings per share.

Trading conditions overall for the twelve months were satisfactory. On a like-for-like basis, excluding acquisitions, divestments and currency translation, revenue was c. 4% higher due to higher average pricing with volumes unchanged on prior year. In the early part of 2017, unusual weather conditions in Southern Europe led to temporary shortages of certain salad and vegetable lines. However given the Group's diversified business this did not have a material impact. Our North American division experienced relatively less favourable trading conditions in some parts of the business. While overall volumes on a like-for-like basis in this division increased, the result was held back by lower pricing due to surplus product in the market and weather conditions that negatively affected quality.

The table below details a segmental breakdown of the Group's revenue and adjusted EBITA for the year ended 31 December 2017. Each of the operating segments is primarily involved in the procurement, marketing and distribution of hundreds of lines of fresh produce. Both European segments also include businesses involved in the marketing and distribution of healthfoods and consumer products. Segment performance is evaluated based on revenue and adjusted EBITA.

Year ended

 31 December 2017

Year ended

31 December 2016

Total

revenue

€'000

Adjusted

EBITA

€'000

Total

revenue

€'000

Adjusted

EBITA

€'000

Europe - Eurozone

1,737,964

26,990

1,753,328

25,953

Europe - Non-Eurozone

1,542,598

41,716

1,521,936

38,769

International

1,061,927

14,838

543,713

9,020

Inter-segment revenue

(56,258)

-

(56,572)

-

Third party revenue and adjusted EBITA

4,286,231

83,544

3,762,405

73,742

Europe - Eurozone

This segment includes the Group's businesses in France, Ireland, Italy, the Netherlands and Spain. Revenue decreased by 0.9% to €1,738m (2016: €1,753m) with a 4.0% increase in adjusted EBITA to €27.0m (2016: €26.0m). Overall trading conditions were satisfactory despite some volume shortages as highlighted above in the first half of the year and industry wide issues with South African citrus. This was offset by improved trading in other produce categories. The results were also marginally impacted by the effect of a subsidiary being deconsolidated and treated as a joint venture interest. Excluding the effect of acquisitions, revenue on a like-for-like basis was up c. 2% on prior year due to price increases with a marginal drop in volume.

Europe - Non-Eurozone

This segment includes the Group's businesses in the Czech Republic, Poland, Scandinavia and the UK. Revenue increased by 1.4% to €1,543m (2016: €1,522m) with adjusted EBITA increasing by 7.6% to €41.7m (2016: €38.8m) helped by the contribution of recent bolt-on acquisitions and higher average prices. The reported performance was impacted by the translation of the results of foreign currency denominated operations into Euro particularly the weakening of Sterling and Swedish Krona by 8.1% and 1.9% respectively.

On a like-for-like basis excluding acquisitions, divestments and currency translation, revenue was c.3% ahead of prior year primarily due to average price increases with similar volumes.

International

This division includes the Group's businesses in North America, South America and India. Revenue increased by 95% to €1,062m (2016: €544m) with adjusted EBITA increasing 64.5% to €14.8m (2016: €9.0m). The results benefitted from the incremental contribution of acquisitions. On 1 March 2017, the Group acquired a further 30% of the Oppenheimer Group ('Oppy') taking its interest to 65% and from this date it was fully consolidated as a subsidiary. Previously the original 35% was equity accounted as an associate interest. In addition there were two further acquisitions in North America in 2017. While on a like-for-like basis overall volumes have increased from prior year, the overall result was held back by lower pricing and unusual weather conditions which affected product quality particularly in some parts of our tomatoes, berries and potatoes supply. Oppy also incurred start-up losses in a new soft fruit growing partnership.

Financial Review

Revenue and Adjusted EBITA

An analysis of the factors influencing the changes in revenue and adjusted EBITA are discussed in the operating review above.

Share of profits of joint ventures and associates

Share of after tax profits of joint ventures and associates decreased marginally in 2017 to €12.2m (2016: €12.3m) due to Oppy becoming a subsidiary on 1 March 2017 on the acquisition of a further 30% to take the Group's interest to 65%. Prior to this the original 35% shareholding was equity accounted as an associate interest. This was offset by a subsidiary interest being deconsolidated from January 2017 due to a change in nature of the shareholder arrangements and being accounted for as a joint venture interest from that point forward. Also there was a positive contribution to the results in 2017 from joint venture investments completed at end of 2016 and in 2017. Dividends declared from joint ventures and associates in the year amounted to €12.6m (2016: €8.3m) with €8.2m (2016: €8.3m) received in cash.

Intangible asset amortisation

Acquisition related intangible asset amortisation within subsidiaries increased to €10.5m (2016: €7.7m) due to additional charges relating to recent acquisitions. The share of intangible asset amortisation within joint ventures and associates was €2.5m (2016: €2.6m).

Exceptional Items

Exceptional items in the year amounted to a net credit before tax of €8.6m (2016: a charge of €1.4m). A gain of €12.4m arose on the remeasurement to fair value of the Group's original 35% associate investment in the Oppy Group. A settlement credit of €4.1m was recognised as a result of an enhanced transfer value offer to members of a number of the Irish defined benefit schemes and a gain of €1.2m was recognised on disposal of property. Offsetting these was a €9.1m goodwill impairment charge. The charge in 2016 relates to a €5.2m goodwill impairment in a sports nutrition business offset by a €3.8m gain relating to property and leasehold interests. A full analysis of these exceptional items is set out in Note 5 of the accompanying financial information.

Operating profit

Operating profit before exceptional items increased 21.0% to €69.6m (2016: €57.6m). Operating profit after these items increased 39.3% to €78.2m (2016: €56.2m).

Net Financial Expense

Net financial expense in the year increased to €5.8m (2016: €5.5m) with higher average net debt in the period due to acquisition related expenditure and debt assumed on acquisition partly offset by lower cost of funding. The Group's share of the net interest expense of joint ventures and associates in the year was €1.1m (2016: €0.5m). Net interest cover for the year was 14.5 times based on adjusted EBITA.

Profit Before Tax

Excluding exceptional items, acquisition related intangible asset amortisation charges and costs and fair value movements on contingent consideration, the adjusted profit before tax increased by 13.3% to €76.7m (2016: €67.7m). Statutory profit before tax after these items was up 43.2% to €72.5m (2016: €50.6m).

Taxation

The tax charge for the year, including the Group's share of joint ventures and associates tax and before non-trading items, as set out in Note 6 of the accompanying financial information, was €19.4m (2016: €16.7m) representing an underlying tax rate of 25.3% (2016: 24.7%) when applied to the Group's adjusted profit before tax.

Non-Controlling Interests

The non-controlling interests' share of after tax profits in the year was €13.7m (2016: €10.8m). Included in the charge was the non-controlling interests' share of exceptional items, amortisation charges and acquisition related costs which amounted to a credit of €0.3m in 2017 (2016: charge of €1.1m). Excluding these non-trading items, the non-controlling interests' share of adjusted after tax profits was €13.4m (2016: €11.9m) with the increase due to the non-controlling interests incremental share of profits in recent acquisitions and overall good trading conditions in certain non-wholly owned subsidiaries offset in part by the deconsolidation of a subsidiary in January 2017.

Adjusted and Basic Earnings per Share

Adjusted fully diluted earnings per share increased by 11.7% to 13.48 cent per share (2016: 12.07 cent) in the year assisted by the incremental contribution from acquisitions. Management believes that adjusted fully diluted earnings per share, which excludes exceptional items, acquisition related intangible asset amortisation charges and costs, fair value movements on contingent consideration and related tax on these items, provides a fairer reflection of the underlying trading performance of the Group.

Basic earnings per share and diluted earnings per share after these non-trading items amounted to 14.80 cent per share (2016: 8.91 cent) and 14.68 cent per share (2016: 8.80 cent) respectively.

Note 7 of the accompanying financial information provides details of the calculation of the respective earnings per share amounts.

Cash Flow and Net Debt

Net debt at 31 December 2017 was €113.1m compared to €48.4m at 31 December 2016. The increase is due to significant acquisitions in the year (including debt assumed). Net debt relative to adjusted EBITDA at 31 December 2017 was 1.1 times and interest is covered 14.5 times by adjusted EBITA. Average net debt for 2017 was €142.1m (2016: €95.9m). In addition, the Group has non-recourse trade receivables financing at 31 December 2017 of €39.1m (2016: €43.0m).

The Group generated €56.1m (2016: €53.7m) in adjusted operating cash flows before working capital outflows of €2.3m (2016: €9.5m). Cash outflows on routine capital expenditure, net of disposals, were €18.9m (2016: €15.3m). Dividends received from joint ventures and associates in the year were €8.2m (2016: €8.3m) while dividends paid to non-controlling interests increased to €8.8m (2016: €6.8m).

Free cashflow generated by the Group increased to €34.3m (2016: €30.4m). Free cashflow is the funds available after outflows relating to routine capital expenditure and dividends to non-controlling interests but before acquisition related expenditure, development capital expenditure and the payment of dividends to equity shareholders.

Cash outflows on acquisitions amounted to €44.7m (2016: €44.2m) and there was €23.9m net debt (2016: €0.8m net cash) assumed on acquisition. Contingent and deferred consideration payments relating to prior period acquisitions were €9.3m (2016: €4.8m). There was a €6.7m (2016: €0.5m) cash effect following the change in accounting of two investees from subsidiary interests to joint venture interests. The Group received cash of €2.1m (2016: €6.4m) primarily from the disposal of a US sports nutrition business in 2016. Payments for non-routine property and plant additions amounted to €22.6m (2016: €7.8m). The Group distributed €10.1m (2016: €9.1m) in dividends to equity shareholders in the year. There was an exchange rate gain of €13.4m (2016: €0.4m) on the translation of foreign currency debt into Euro at 31 December 2017 with the movement due to the weaker US Dollar, Canadian Dollar, Sterling and Swedish Krona exchange rates at year-end compared to those prevailing at 31 December 2016.

2017

€'million

2016

€'million

Adjusted EBITDA

104.4

94.8

Deduct adjusted EBITDA of joint ventures and associates

(22.6)

(22.1)

Net financial expense and tax paid

(22.6)

(17.3)

Other

(3.1)

(1.7)

Adjusted operating cash flows before working capital movements

56.1

53.7

Working capital movements

(2.3)

(9.5)

Adjusted operating cash flows

53.8

44.2

Routine capital expenditure net of routine disposal proceeds

(18.9)

(15.3)

Dividends received from joint ventures and associates

8.2

8.3

Dividends paid to non-controlling interests

(8.8)

(6.8)

Free cash flow

34.3

30.4

Cashflows from exceptional items

0.5

3.0

Acquisition payments, net 1

(44.7)

(44.2)

Net (debt)/cash assumed on acquisition of subsidiaries

(23.9)

0.8

Contingent and deferred consideration payments

(9.3)

(4.8)

Subsidiary now a joint venture

(6.7)

(0.5)

Disposal of trading assets

2.1

6.4

Non-routine capital expenditure / property additions

(22.6)

(7.8)

Dividends paid to equity shareholders

(10.1)

(9.1)

Buyback of own shares

-

(6.0)

Proceeds from issue of share capital

2.6

1.8

Other

(0.3)

(0.7)

Total net debt movement in year

(78.1)

(30.7)

Net debt at beginning of year

(48.4)

(18.1)

Foreign currency translation

13.4

0.4

Net debt at end of year

(113.1)

(48.4)

Defined Benefit Pension Obligations

The net liability of the Group's defined benefit pension schemes (net of deferred tax) decreased to €13.8m at 31 December 2017 from €31.8m at 31 December 2016. The decrease in the liability is primarily due to the effect of the enhanced transfer value offer made to members of the Irish defined benefit pension schemes and a positive investment return on pension scheme assets. Further details are outlined in Note 8 of the accompanying financial information.

Shareholders' Equity

Shareholders' equity increased by €33.5m at 31 December 2017 to €259.8m (2016: €226.3m). Profit after tax of €47.8m attributable to equity shareholders and remeasurement gains of €4.7m (net of deferred tax) were principally offset by a currency translation loss of €2.7m on the retranslation of the net assets of foreign currency denominated operations to Euro and the payment of dividends of €10.1m to equity shareholders of the Company.

Development Activity

A key part of the Group's strategy is growth by acquisition. In line with this strategy the Group made a number of acquisitions and investments in 2017 with committed investments of €53.4m, including contingent consideration payable of €4.8m on the achievement of future profit targets.

On 1 March 2017, the Group completed the purchase of a further 30% of the Oppenheimer Group ('Oppy') for consideration of €28.2m. Together with the initial 35% acquired in 2013, this brings the Group's shareholding in Oppy to 65% for a total cost of €43.8m. Headquartered in Vancouver, Canada with annual sales of almost CAD$1 billion (€720m), Oppy is a leading provider of fresh produce to its strong base of retail, wholesale and foodservice customers throughout the United States and Canada. In addition to this, long term put and call options are in place for the remaining 35% shareholding, not exercisable before 2020.

In April 2017, Oppy entered strategically-important agreements with New Zealand based T&G Global Limited which will enable both parties to enhance their market positions as co-shareholders in two US produce businesses.

The Group made a number of other investments in 2017 as follows: 

· In February 2017, the Group's Los Angeles headquartered fresh produce business, Progressive Produce LLC, acquired the trade and business assets of Keystone Fruit Marketing Inc.

· In October 2017, the Group acquired a 50% interest in the Californian based fresh produce company, The Fresh Connection LLC.

· The Group made a number of other bolt-on investments in Europe all of which complement the Group's existing activities.

Further details on 2017 development activity including details of consideration paid and assets and liabilities acquired are provided in Note 10 of the accompanying financial information.

The Group continues to actively pursue further investment opportunities in both new and existing markets.

Investment in Dole Food Company and Share Placing

Investment in Dole Food Company ('The Transaction')

On 1 February 2018, the Group announced that it had entered into a binding agreement to acquire a 45% stake in Dole Food Company ('Dole') from Mr. David H. Murdock for a cash consideration of $300 million (the 'First Tranche').

In addition, and at any time after closing of the First Tranche, the Group has the right, but not the obligation, to acquire (in any one or more tranches of 1%) up to an additional 6% of Dole common stock (the "Second Tranche"). The Group has no present intention to exercise its option to acquire the Second Tranche. In the event the Group exercises the right to acquire the additional 6% the total consideration for the 51% stake shall be $312 million.

Following the second anniversary of the First Tranche, the Group has the right, but not the obligation, to acquire the balance of Dole common stock (the 'Third Tranche'), whereby the consideration for the Third Tranche is to be calculated based on 9x the three year average historical Dole Adjusted EBITDA less net debt. However, in no event shall the Third Tranche purchase price be less than $250 million or exceed $450 million (such cap subject to increase after six years). The Third Tranche consideration is payable in cash or, if the parties mutually agree, Total Produce stock.

From the fifth anniversary of completion of the Transaction, in the event the Group has not exercised its right to acquire 100% of Dole, Mr. H. Murdock is permitted to cause a process to market and sell 100% of Dole common stock.

Post-closing of the Transaction, the Group and Mr. David H. Murdock will have balanced governance rights with respect to Dole. The Board of Directors of Dole will comprise six members, three of which are to be appointed by Total Produce and three by Mr. David H. Murdock. Mr. David H. Murdock will remain Chairman of Dole and Carl McCann will be appointed Vice Chairman. Major decisions will require consent of at least one Board Member appointed by each of Total Produce and Mr. David H. Murdock.

The Group has committed acquisition financing in place to secure funding of the Transaction with a balance of equity and bank financing. As detailed below, the Group raised c. $180 million from a Sharing Placing on 1 February 2018 with the balance to be funded through committed bank financing. The conservative funding strategy in relation to the Transaction allows the Group to retain a strong balance sheet post-closing for strategic and financial flexibility going forward.

The investment in Dole and its financial contribution will be treated as a joint venture and accounted for under the equity method in accordance with IFRS in the consolidated Group accounts following completion and until an exercise of the Third Tranche.

The Transaction has been approved by the Board of Directors of Total Produce and is subject to anti-trust review in a limited number of jurisdictions and is expected to close by the middle of 2018. The Transaction is classified as a substantial transaction only in accordance with Rule 12 of the AIM Rules and of the ESM Rules. Accordingly no shareholder approval is required to approve the Transaction.

Share Placing

On 1 February 2018 a total of 63 million new ordinary shares were placed (the 'Placing Shares') in a placing transaction at a price of €2.30 per Placing Share, raising gross proceeds of €145 million or c.$180 million (before expenses). The Placing Shares represented approximately 19% of the Company's issued ordinary share capital (excluding treasury shares) prior to the placing. The Placing Shares were admitted to the Irish Stock Exchange and the London Stock Exchange on the ESM and AIM respectively on 5 February 2018. Following the admission of the Placing Shares, the total number of ordinary shares in issue was 387,829,462 (excluding 22,000,000 treasury shares).

Dividends

The Board is proposing a 10% increase in the final dividend to 2.4527 (2016: 2.2297) cent per share subject to the approval of shareholders at the forthcoming AGM. If approved, this dividend will be paid on 1 June 2018 to shareholders on the register at 4 May 2018 subject to dividend withholding tax. The total dividend for 2017 will amount to 3.3433 (2016: 3.0393) cent per share and represents an increase of 10.0% on 2016. The total dividend represents a pay-out of 24.8% of the adjusted earnings per share.

Post Balance Sheet Events

Other than the Dole transaction and the Share Placing described earlier, there have been no other material events subsequent to 31 December 2017 which would require disclosure in or adjustment to the financial statements.

Summary and Outlook

Total Produce has delivered very positive results in 2017. Total revenue has increased by 13.9% to €4.29 billion with an 11.7% increase in adjusted earnings per share to 13.48 cent.

The Group announced on 1st February 2018 that it had acquired a 45% stake in Dole Food Company for $300m, subject to regulatory approval. It represents a very significant step in the history of Total Produce and a continuation of its successful acquisition and expansion strategy.

Total Produce is targeting continued growth in 2018, on a like-for-like basis.

The Group is also pleased to propose a 10% increase in final dividend to 2.4527 cent per share.

Carl McCann, Chairman

On behalf of the Board

01 March 2018

Total Produce plc

Extract from the Group Income Statement

for the year ended 31 December 2017

Note

Before

exceptional

items

2017

€'000

Exceptional items

 (Note 5)

2017

€'000

Total

2017

€'000

Before

exceptional

items

2016

€'000

Exceptional items

(Note 5)

2016

€'000

Total

2016

€'000

Revenue, including Group share of joint ventures

and associates

3

4,286,231

-

4,286,231

3,762,405

-

3,762,405

Group revenue

3

3,674,294

-

3,674,294

3,105,475

-

3,105,475

Cost of sales

(3,182,507)

-

(3,182,507)

(2,672,585)

-

(2,672,585)

Gross profit

491,787

-

491,787

432,890

-

432,890

Operating expenses (net)

(423,875)

8,610

(415,265)

(379,924)

(1,409)

(381,333)

Share of profit of joint ventures

11,427

-

11,427

7,258

-

7,258

Share of profit of associates

782

-

782

5,012

-

5,012

Operating profit before acquisition related intangible asset amortisation

80,121

8,610

88,731

65,236

(1,409)

63,827

Acquisition related intangible asset amortisation

(10,499)

-

(10,499)

(7,675)

-

(7,675)

Operating profit after acquisition related intangible asset amortisation

69,622

8,610

78,232

57,561

(1,409)

56,152

Financial income

2,046

-

2,046

1,309

-

1,309

Financial expense

(7,800)

-

(7,800)

(6,833)

-

(6,833)

Profit before tax

63,868

8,610

72,478

52,037

(1,409)

50,628

Income tax expense

6

(9,613)

(1,358)

(10,971)

(10,638)

(686)

(11,324)

Profit for the year

54,255

7,252

61,507

41,399

(2,095)

39,304

Attributable to:

Equity holders of the parent

47,826

28,536

Non-controlling interests

13,681

10,768

61,507

39,304

Earnings per ordinary share

Basic

7

14.80

8.91

Fully diluted

7

14.68

8.80

Adjusted fully diluted

7

13.48

12.07

Total Produce plc

Extract from the Group Statement of Comprehensive Income

for the year ended 31 December 2017

2017

€'000

2016

€'000

Profit for the year

61,507

39,304

Other comprehensive income:

Items that may be reclassified subsequently to profit or loss:

Foreign currency translation effects:

- foreign currency net investments - subsidiaries

(13,537)

(12,189)

- foreign currency net investments - joint ventures and associates

(3,866)

629

- foreign currency losses recycled to income statement on disposal of joint ventures and associates

(1,137)

-

- foreign currency borrowings designated as net investment hedges

10,892

3,496

Effective portion of changes in fair value of cash flow hedges

(492)

(43)

Deferred tax on items taken directly to other comprehensive income

124

11

(8,016)

(8,096)

Items that will not be reclassified to profit or loss:

Remeasurement gains/(losses) on post-employment defined benefit schemes

5,708

(23,769)

Remeasurement gains on other post-employment defined benefit schemes

1,604

-

Revaluation gains on property, plant and equipment, net

5,356

1,129

Deferred tax on items taken directly to other comprehensive income

(3,310)

4,679

Share of joint ventures and associates remeasurement gains/(losses) on post-employment benefit schemes (net of tax)

711

(820)

10,069

(18,781)

Other comprehensive income for the year

2,053

(26,877)

Total comprehensive income for the year

63,560

12,427

Attributable to:

Equity holders of the parent

54,193

1,643

Non-controlling interests

9,367

10,784

63,560

12,427

Total Produce plc

Extract from the Group Balance Sheet

as at 31 December 2017

2017

€'000

2016

€'000

Assets

Non-current assets

Property, plant and equipment

167,397

145,184

Investment property

7,203

8,585

Goodwill and intangible assets

281,081

220,490

Investments in joint ventures and associates

106,421

92,910

Other financial assets

719

649

Other receivables

11,063

7,761

Deferred tax assets

13,759

15,458

Total non-current assets

587,643

491,037

Current assets

Inventories

89,665

61,195

Biological assets

4,578

194

Trade and other receivables

365,334

317,530

Corporation tax receivable

4,375

1,472

Derivative financial instruments

6

187

Bank deposits

-

2,500

Cash and cash equivalents

100,247

127,280

Total current assets

564,205

510,358

Total assets

1,151,848

1,001,395

Equity

Share capital

3,468

3,429

Share premium

150,763

148,204

Other reserves

(128,054)

(113,707)

Retained earnings

233,632

188,396

Total equity attributable to equity holders of the parent

259,809

226,322

Non-controlling interests

79,774

72,600

Total equity

339,583

298,922

Liabilities

Non-current liabilities

Interest-bearing loans and borrowings

165,649

130,162

Deferred government grants

386

481

Other payables

568

2,021

Contingent consideration

26,128

36,746

Put option liability

38,961

21,215

Corporation tax payable

6,286

5,836

Deferred tax liabilities

29,415

17,915

Employee benefits

22,000

37,777

Total non-current liabilities

289,393

252,153

Current liabilities

Interest-bearing loans and borrowings

47,724

47,984

Trade and other payables

463,605

389,708

Contingent consideration

8,337

9,629

Derivative financial instruments

719

569

Corporation tax payable

2,487

2,430

Total current liabilities

522,872

450,320

Total liabilities

812,265

702,473

Total liabilities and equity

1,151,848

1,001,395

Total Produce plc

Extract from the Group Statement of Changes in Equity

for the year ended 31 December 2017

Attributable to equity holders of the parent

For the year ended 31 December 2017

Share

capital

€'000

Share

premium

€'000

Undenominated capital

€'000

De-merger

reserve

€'000

Own shares

reserve

€'000

Currency

translation

reserve

€'000

Reval-uation

reserve

€'000

Other equity

reserves*

€'000

Retained

earnings

€'000

Total

€'000

Non-controlling

interests

€'000

Total

equity

€'000

As at 1 January 2017 as presented in the Balance Sheet

3,429

148,204

140

(122,521)

(8,580)

(7,675)

24,088

841

188,396

226,322

72,600

298,922

Adjust for NCI subject to put option transferred for presentation purposes

-

-

-

-

-

-

-

(20,259)

-

(20,259)

20,259

-

Balance as at 1 January

3,429

148,204

140

(122,521)

(8,580)

(7,675)

24,088

(19,418)

188,396

206,063

92,859

298,922

Comprehensive income

Profit for the year

-

-

-

-

-

-

-

-

47,826

47,826

13,681

61,507

Other comprehensive income:

Items that may be reclassified subsequently to profit or loss:

Foreign currency translation effects, net

-

-

-

-

-

(6,493)

-

3,800

-

(2,693)

(4,955)

(7,648)

Effective portion of cash flow hedges, net

-

-

-

-

-

-

-

(342)

-

(342)

(150)

(492)

Deferred tax on items taken directly to other comprehensive income

-

-

-

-

-

-

-

86

-

86

38

124

Items that will not be reclassified subsequently to profit or loss:

Revaluation gains on property, plant and equipment, net

-

-

-

-

-

-

5,061

-

5,061

295

5,356

Remeasurement gains on defined benefit schemes

-

-

-

-

-

-

-

-

5,686

5,686

22

5,708

Remeasurement gains on other post-employment benefit schemes

-

-

-

-

-

-

-

-

1,043

1,043

561

1,604

Deferred tax on revaluation of property, plant and equipment

-

-

-

-

-

-

(1,114)

-

-

(1,114)

(105)

(1,219)

Deferred tax on remeasurement gains on defined benefit pension schemes

-

-

-

-

-

-

-

-

(2,071)

(2,071)

(20)

(2,091)

Share of joint ventures and associates remeasurement gains on post-employment defined benefit schemes

-

-

-

-

-

-

-

-

711

711

-

711

Total other comprehensive income

-

-

-

-

-

(6,493)

3,947

3,544

5,369

6,367

(4,314)

2,053

Total comprehensive income

-

-

-

-

-

(6,493)

3,947

3,544

53,195

54,193

9,367

63,560

Transactions with equity holders of the parent

New shares issued

39

2,559

-

-

-

-

-

(924)

924

2,598

-

2,598

Non-controlling interest arising on acquisition of subsidiaries (Note 10)

-

-

-

-

-

-

-

-

-

-

10,784

10,784

Recognition of put option liability on acquisition (Note 10)

-

-

-

-

-

-

-

(25,072)

-

(25,072)

(25,072)

Remeasurement of put option liability

-

-

-

-

-

-

-

3,526

-

3,526

-

3,526

Disposal of shareholding to non-controlling interests

-

-

-

-

-

-

-

-

1,182

1,182

7,479

8,661

Contribution by non-controlling interests

-

-

-

-

-

-

-

-

-

-

2,473

2,473

Subsidiaries becoming joint ventures (Note 10)

-

-

-

-

-

-

-

-

-

-

(6,699)

(6,699)

Dividends paid (Note 9)

-

-

-

-

-

-

-

-

(10,065)

(10,065)

(9,701)

(19,766)

Share-based payment transactions

-

-

-

-

-

-

-

596

-

596

-

596

Total transactions with equity holders of the parent

39

2,559

-

-

-

-

-

(21,874)

(7,959)

(27,235)

4,336

(22,899)

As at 31 December 2017

3,468

150,763

140

(122,521)

(8,580)

(14,168)

28,035

(37,748)

233,632

233,021

106,562

339,583

Transfer of NCI subject to put option for presentation purposes

-

-

-

-

-

-

-

26,788

-

26,788

(26,788)

-

As at 31 December 2017 as presented in the balance sheet

3,468

150,763

140

(122,521)

(8,580)

(14,168)

28,035

(10,960)

233,632

259,809

79,774

339,583

Total Produce plc

Extract from the Group Statement of Changes in Equity

Attributable to equity holders of the parent

For the year ended 31 December 2016

Share

capital

€'000

Share

premium

€'000

Undenominated capital

€'000

De-merger

reserve

€'000

Own shares

reserve

€'000

Currency

translation

reserve

€'000

Reval-uation

reserve

€'000

Other equity

reserves*

€'000

Retained

earnings

€'000

Total

€'000

Non-controlling

interests

€'000

Total

equity

€'000

As at 1 January 2016

3,446

254,512

99

(122,521)

(8,580)

70

22,178

2,027

87,589

238,820

74,959

313,779

Comprehensive income

Profit for the year

-

-

-

-

-

-

-

-

28,536

28,536

10,768

39,304

Other comprehensive income:

Items that may be reclassified subsequently to profit or loss:

Foreign currency translation effects, net

-

-

-

-

-

(7,745)

-

(514)

-

(8,259)

195

(8,064)

Effective portion of cash flow hedges, net

-

-

-

-

-

-

-

(19)

-

(19)

(24)

(43)

Deferred tax on items taken directly to other comprehensive income

-

-

-

-

-

-

-

4

-

4

7

11

Items that will not be reclassified subsequently to profit or loss:

Revaluation gains/(losses) on property, plant and equipment, net

-

-

-

-

-

-

1,138

-

-

1,138

(9)

1,129

Remeasurement losses on post-employment defined benefit schemes

-

-

-

-

-

-

-

-

(23,584)

(23,584)

(185)

(23,769)

Deferred tax on items taken directly to other comprehensive income

-

-

-

-

-

-

772

-

3,875

4,647

32

4,679

Share of joint ventures and associates remeasurement losses on post-employment defined benefit schemes (net of tax)

-

-

-

-

-

-

-

-

(820)

(820)

-

(820)

Total other comprehensive income

-

-

-

-

-

(7,745)

1,910

(529)

(20,529)

(26,893)

16

(26,877)

Total comprehensive income

-

-

-

-

-

(7,745)

1,910

(529)

8,007

1,643

10,784

12,427

Transactions with equity holders of the parent

New shares issued

24

1,763

-

-

-

-

-

(651)

651

1,787

-

1,787

Own shares acquired and cancelled

(41)

-

41

-

-

-

-

-

(5,973)

(5,973)

-

(5,973)

Capital reduction

-

 (108,071)

-

-

-

-

-

-

107,963

(108)

-

(108)

Non-controlling interest arising on acquisition of subsidiaries

-

-

-

-

-

-

-

-

-

-

15,215

15,215

Recognition of put option liability on acquisition

-

-

-

-

-

-

-

(17,155)

-

(17,155)

-

(17,155)

Put option granted to non-controlling interests

-

-

-

-

-

-

-

(3,367)

-

(3,367)

-

(3,367)

Remeasurement of put option liability

-

-

-

-

-

-

-

(179)

-

(179)

-

(179)

Acquisition of non-controlling interests

-

-

-

-

-

-

-

-

(692)

(692)

(3,796)

(4,488)

Disposal of shareholding to non-controlling interests

-

-

-

-

-

-

-

-

-

-

3,993

3,993

Contribution by non-controlling interests

-

-

-

-

-

-

-

-

-

-

5

5

Share of buyback within associate company

-

-

-

-

-

-

-

-

(73)

(73)

-

(73)

Subsidiary becoming a joint venture

-

-

-

-

-

-

-

-

-

-

(1,503)

(1,503)

Dividends paid

-

-

-

-

-

-

-

-

(9,076)

(9,076)

(6,798)

(15,874)

Share-based payment transactions

-

-

-

-

-

-

-

436

-

436

-

436

Total transactions with equity holders of the parent

(17)

(106,308)

41

-

-

-

-

(20,916)

92,800

(34,400)

7,116

(27,284)

As at 31 December 2016

3,429

148,204

140

(122,521)

(8,580)

(7,675)

24,088

(19,418)

188,396

206,063

92,859

298,922

Transfer of NCI subject to put option for presentation purposes

-

-

-

-

-

-

-

20,259

-

20,259

(20,259)

-

As at 31 December 2016 as presented in the balance sheet

3,429

148,204

140

(122,521)

(8,580)

(7,675)

24,088

841

188,396

226,322

72,600

298,922

Total Produce plc

Extract from the Group Statement of Cash Flows

for the year ended 31 December 2017

2017

€'000

2016

€'000

Net cash flows from operating activities (Note 11)

46,563

44,148

Investing activities

Acquisition of subsidiaries

(36,230)

(32,887)

Cash assumed on acquisition of subsidiaries, net

758

1,940

Acquisition of, and investment in joint ventures and associates

(21,062)

(8,620)

Payments of contingent consideration

(9,269)

(1,976)

Payments of deferred consideration

-

(2,778)

Proceeds from disposal of joint ventures and associates

400

-

Proceeds from disposal of trading assets

2,138

6,419

Cash derecognised on subsidiary becoming a joint venture

(6,689)

(491)

Net debt derecognised on disposal of a subsidiary

2,304

-

Disposal of investment in subsidiary to non-controlling interests

8,661

273

Acquisition of property, plant and equipment

(39,496)

(24,378)

Acquisition of other financial assets

(98)

-

Expenditure on computer software

(2,771)

(1,344)

Brand additions

(462)

-

Development expenditure capitalised

(204)

(253)

Proceeds from disposal of property, plant and equipment - routine

807

2,651

Proceeds from exceptional items - from disposal of property and leasehold interests

7,770

3,030

Dividends received from joint ventures and associates

8,243

8,339

Government grants received

163

-

Net cash flows from investing activities

(85,037)

(50,075)

Financing activities

Drawdown of borrowings

251,820

68,144

Repayment of borrowings

(226,487)

(40,671)

Decrease in bank deposits

2,500

-

Proceeds from the issue of share capital

2,598

1,787

Buyback of own shares

-

(5,973)

Costs of capital reduction

-

(108)

Capital element of finance lease repayments

(869)

(2,175)

Acquisition of non-controlling interests

-

(3,044)

Capital contribution by non-controlling interests

936

5

Dividends paid to non-controlling interests

(8,843)

(6,798)

Dividends paid to equity holders of the parent

(10,065)

(9,076)

Net cash flows from financing activities

11,590

2,091

Net decrease in cash, cash equivalents and bank overdrafts

(26,884)

(3,836)

Net foreign exchange difference

(1,224)

(2,282)

Cash, cash equivalents and bank overdrafts at start of year

117,087

123,205

Cash, cash equivalents and overdrafts at end of year (Note 12)

88,979

117,087

Total Produce plc

Extract from the Summary Group Reconciliation of Net Debt

for the year ended 31 December 2017

2017

€'000

2016

€'000

Net decrease in cash, cash equivalents and bank overdrafts

(26,884)

(3,836)

Drawdown of borrowings

(251,820)

(68,144)

Repayment of borrowings

226,487

40,671

Decrease in bank deposits

(2,500)

-

Interest-bearing loans and borrowings arising on acquisition

(24,492)

(474)

Capital element of finance lease repayments

869

2,175

Other movements on finance leases

(45)

(419)

Finance leases arising on acquisition

(149)

(673)

Finance leases derecognised on disposal of subsidiary

356

-

Foreign exchange movement

13,418

389

Movement in net debt

(64,760)

(30,311)

Net debt at beginning of the year

(48,366)

(18,055)

Net debt at end of the year (Note 12)

(113,126)

(48,366)

Total Produce plc

Selected explanatory notes for the Preliminary Results for the year ended 31 December 2017

1.

Basis of preparation

The financial information included in this preliminary results statement has been extracted from the Group's Financial Statements for the year ended 31 December 2017 and is prepared based on the accounting policies set out therein, which are consistent with those applied in the prior year with the exception of the effect of the new accounting standards listed below. As permitted by European Union (EU) law and in accordance with AIM/ESM rules, the Group Financial Statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) and their interpretations issued by the International Accounting Standards Board (IASB) as adopted by the EU.The financial information prepared in accordance with IFRSs as adopted by the EU included in this report do not comprise "full group accounts" within the meaning of Regulation 40(1) of the European Communities (Companies: Group Accounts) Regulations 1992 of Ireland insofar as such group accounts would have to comply with the disclosure and other requirements of those Regulations.

The information included has been derived from the Group Financial Statements which were approved by the Board of Directors on 28 February 2018. The Financial Statements will be filed with the Irish Registrar of Companies and circulated to shareholders in due course. The financial information is presented in Euro, rounded to the nearest thousand where appropriate.

Changes in accounting policy and disclosures

The accounting policies adopted are consistent with those of the previous year except for the following new and amended IFRS and IFRIC interpretations adopted by the Group and Company in these financial statements.

· Amendments to IAS 7 Disclosure Initiative

· Amendments to IAS 12 Recognition of deferred tax assets for unrealised losses

· Annual improvements to IFRS 2014-2016 Cycle - Amendments to IFRS 12

The above new standards have not had a material impact on the results and financial position of the Group for the year ended 31 December 2017.

New standards and interpretations not applied

IFRS 9 Financial Instruments

IFRS 9 Financial Instruments is effective from 1 January 2018 and replaces IAS 39 Financial Instruments: Recognition and Measurement. The standard includes requirements for the recognition, measurement and derecognition of financial instruments, introduces new hedge accounting rules and a new expected credit loss model for calculating impairment of financial assets.

The Group's evaluation of the effect of the adoption of IFRS 9 is ongoing and the Group's initial findings are as follows:

· The vast majority of the Group's financial assets are held as trade receivables or cash which will continue to be accounted for at amortised cost. On this basis the classification and measurement changes will not have a material impact on the Group's consolidated financial statements.

· IFRS 9 introduces a forward-looking expected credit losses model rather that the current incurred loss model when assessing impairment of financial assets in the scope of IFRS 9. Given historic loss rates and the significant portion of trade and other receivables that are within agreed terms, the change is not expected to have a material impact on the Group's financial statements.

· The new hedging requirements of IFRS 9 will make more hedging relationships eligible for hedge accounting. Current hedging arrangements continue to be appropriate under IFRS with the only difference being a change to the cost of hedging. This change to cost is not material.

Based on analysis to date, the impact of IFRS 9 is not expected to have a material impact on the Group consolidated financial statements. In line with the transition guidance in IFRS 9, the Group will not restate the 2017 prior period on adoption.

IFRS 15 Revenue from Contracts with Customers

IFRS 15 Revenue from Contracts with Customers is effective from 1 January 2018 and replaces IAS 18 Revenue, IAS 11 Construction Contracts and associated interpretations. The standard provides a single model to be applied to all contracts with customers.

The Group's evaluation of the effect of the adoption of IFRS 15 is ongoing and the Group's initial findings are as follows:

The Group's assessment of the existing contracts with suppliers and customers under the principal versus agent assessment may result in the Group transitioning from a principal to an agent relationship or vice versa in the case of certain contracts. Based on an initial analysis throughout the Group, no material changes are expected. The impact, if any will be quantified in the 2018 interim results. Any changes would result in a reduction in revenue and cost of sales in lieu of commission received for certain contracts, with no impact expected to profit or earnings per share.

With the exception of the matter above, the Group has not identified any other material issues arising from the transition of the new standard. In line with the transition guidance in IFRS 15, the Group intends to restate the 2017 prior period on adoption if any material changes are identified on transition.

IFRS 16 Leases

IFRS 16 Leases is effective from 1 January 2019 and replaces IAS 17 Leases. It introduces a single lessee accounting model to be adopted and accordingly the majority of all lease agreements will now result in the recognition of a right-of-use asset and a lease liability in the balance sheet. The income statement charge in relation to all leases will now comprise a depreciation element relating to the right-of-use asset and also a financing charge relating to the lease liability.

Details of leases currently classified as operating leases will be provided in the 2017 Annual Report. The fair values of these leases are currently being evaluated. As a result of the transition to IFRS 16 the fair value of these leases representing the present value of the lease payments over the expected lease contract period will be recognised as a right-of-use asset with a corresponding value recognised as a lease liability. This will increase the Group's recognised assets and liabilities.

The Group is currently performing a detailed assessment of the impact of the adoption of IFRS 16 throughout the group and expects to disclose its transition approach and quantitative information before adoption.

2.

Translation of foreign currencies

The reporting currency of the Group is Euro. Group results are impacted by fluctuations in exchange rates year-on-year versus the Euro. The rates used in the translation of results and balance sheets into Euro were as follows:

Average rate

Closing rate

2017

2016

% change

2017

2016

% change

Brazilian Real

3.7381

3.6919

(1.3%)

3.9729

3.4305

(15.8%)

Canadian Dollar

1.4577

1.4674

0.7%

1.5037

1.4141

(6.3%)

Czech Koruna

26.2301

27.0353

3.0%

25.5350

27.0210

5.5%

Danish Kroner

7.4387

7.4427

0.1%

7.4454

7.4344

(0.1%)

Indian Rupee

73.5033

74.2703

1.0%

76.4059

71.4680

(6.9%)

Polish Zloty

4.2570

4.3621

2.4%

4.1766

4.4051

5.2%

Pound Sterling

0.8756

0.8102

(8.1%)

0.8879

0.8526

(4.1%)

Swedish Krona

9.6438

9.4650

(1.9%)

9.8386

9.5773

(2.7%)

US Dollar

1.1359

1.1081

(2.5%)

1.1980

1.0520

(13.9%)

3.

Revenue and Segmental Analysis

0BRevenue

1B2017

2B€'000

3B2016

4B€'000

Group Revenue

3,674,294

3,105,475

Plus:

Share of revenue of joint ventures

576,017

452,162

Share of revenue of associates

96,863

260,473

Total share of revenue of joint ventures and associates

672,880

712,635

Less:

Elimination of proportionate share of transactions between Group subsidiaries and joint ventures and associates 1

(60,943)

(55,705)

Total Revenue

4,286,231

3,762,405

Segmental Analysis

The table below details a segmental breakdown of the Group's total revenue and adjusted EBITA for the years ended 31 December 2017 and 31 December 2016.

In accordance with IFRS 8, the Group's reportable operating segments based on how performance is currently assessed and resources are allocated are as follows:

-

Europe - Eurozone: This reportable segment is an aggregation of thirteen operating segments principally in France, Ireland, Italy, the Netherlands and Spain primarily involved in the procurement, marketing and distribution of fresh produce and some healthfoods and consumer goods products. These operating segments have been aggregated because they have similar economic characteristics.

-

Europe - Non-Eurozone: This operating segment is an aggregation of six operating segments in Scandinavia, the United Kingdom, Poland and the Czech Republic primarily involved in the procurement, marketing and distribution of fresh produce and some healthfoods and consumer goods products. These operating segments have been aggregated because they have similar economic characteristics.

-

International: This segment is an aggregation of five operating segments in North America, one in South America and one in India primarily involved in the procurement, marketing and distribution of fresh produce. These operating segments have been aggregated because they have similar customer profiles and primarily transact in US Dollar. The North American sports nutrition business ceased trading in April 2016.

Segment performance is evaluated based on revenue and adjusted EBITA. Management believes that adjusted EBITA, while not a defined term under IFRS, gives a fair reflection of the underlying trading performance of the Group. Adjusted EBITA represents earnings before interest, tax, acquisition related intangible asset amortisation charges and costs, fair value movements on contingent consideration and exceptional items. It also excludes the Group's share of these items within joint ventures and associates. Adjusted EBITA is therefore measured differently from operating profit in the Group financial statements as explained and reconciled in full detail in the analysis that follows.

Finance costs, finance income and income taxes are managed on a centralised basis. These items are not allocated between operating segments for the purpose of the information presented to the Chief Operating Decision Maker ('CODM') and are accordingly omitted from the detailed segmental analysis that follows.

Year ended

31 December 2017

Year ended

31 December 2016

Segmental revenue €'000

Third party revenue €'000

Adjusted

EBITA

€'000

Segmental revenue €'000

Third party revenue

€'000

Adjusted

EBITA

€'000

Europe - Eurozone

1,737,964

1,714,915

26,990

1,753,328

1,731,675

25,953

Europe - Non-Eurozone

1,542,598

1,509,389

41,716

1,521,936

1,487,091

38,769

International

1,061,927

1,061,927

14,838

543,713

543,639

9,020

Inter-segment revenue

(56,258)

-

-

(56,572)

-

-

Third party revenue and adjusted EBITA

4,286,231

4,286,231

83,544

3,762,405

3,762,405

73,742

All inter-segment revenue transactions are at arm's length.

Reconciliation of segmental profit to operating profit

Below is a reconciliation of adjusted EBITA per the Group's management reports to operating profit and profit before tax as presented in the Group income statement:

Note

2017

€'000

2016

€'000

Adjusted EBITA per management reporting

83,544

73,742

Acquisition related intangible asset amortisation in subsidiaries

(i)

(10,499)

(7,675)

Share of joint ventures and associates acquisition related intangible asset amortisation

(i)

(2,460)

(2,557)

Fair value movements on contingent consideration

(ii)

4,174

(73)

Acquisition related costs within subsidiaries

(iii)

(897)

(922)

Share of joint ventures and associates net financial expense

(iv)

(1,058)

(481)

Share of joint ventures and associates income tax

(iv)

(3,182)

(4,473)

Operating profit before exceptional items

69,622

57,561

Exceptional items (Note 5)

(v)

8,610

(1,409)

Operating profit after exceptional items

78,232

56,152

Net financial expense

(vi)

(5,754)

(5,524)

Profit before tax

72,478

50,628

(i)

Acquisition related intangible asset amortisation charges are not allocated to operating segments in the Group's management reports.

(ii)

Fair value movements on contingent consideration are not allocated to operating segments in the Group's management reports.

(iii)

Acquisition related costs are transaction costs directly related to the acquisition of subsidiaries and are not allocated to operating segments in the Group's management reports.

(iv)

Under IFRS, included within profit before tax is the Group's share of joint ventures and associates profit after acquisition related intangible amortisation charges and costs, tax and interest. In the Group's management reports these items are excluded from the adjusted EBITA calculation.

(v)

Exceptional items (Note 5) are not allocated to operating segments in the Group's management reports.

(vi)

Financial income and expense is primarily managed at Group level and is therefore not allocated to individual operating segments in the Group's management reports.