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RNS
Total Produce Plc  -  TOT   

Final Results

Released 07:00 01-Mar-2018

RNS Number : 3086G
Total Produce Plc
01 March 2018
 

TOTAL PRODUCE PLC
 

2017 PRELIMINARY RESULTS 

 

TOTAL PRODUCE CONTINUES STRONG GROWTH
 

 

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

 

 

Commenting on the results, Carl McCann, Chairman, said:

 

"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"

 

 

 

 

01 March 2018

           

For further information, please contact:
Brian Bell, Wilson Hartnell PR - Tel: +353-1-669-0030, Mobile: +353-87-243-6130

 

 

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.

 

         


Forward-looking statement

Any forward-looking statements made in this press release have been made in good faith based on the information available as of the date of this press release and are not guarantees of future performance. Actual results or developments may differ materially from the expectations expressed or implied in these statements, and the Company undertakes no obligation to update any such statements whether as a result of new information, future events, or otherwise. Total Produce's Annual Report contains and identifies important factors that could cause these developments or the Company's actual results to differ materially from those expressed or implied in these forward-looking statements.
 

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)

1 Includes payments in year on subsidiaries, non-controlling interests, joint ventures and associates and is net of contributions from non-controlling interests, proceeds on disposal of joint ventures and shares to non-controlling interests and net debt derecognised on disposal of subsidiaries.

 

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

                           

*Other equity reserves comprise the share option reserve, the cash flow hedge reserve and the put option reserve.
 

 

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

                                 

 

* Other equity reserves comprise the share option reserve, the cash flow hedge reserve and the put option reserve.

 

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

 

1For calculation of Total Revenue which includes Group's share of joint ventures and associates, the Group eliminates the proportionate share of revenue transactions between Group subsidiaries and joint ventures and associates.

 

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.

 

 

4.

Adjusted profit before tax, adjusted EBITA and adjusted EBITDA

 

For the purpose of assessing the Group's performance, Total Produce management believes that adjusted EBITDA, adjusted EBITA, adjusted profit before tax and adjusted earnings per share (Note 7) are the most appropriate measures of the underlying performance of the Group.

 

 

2017

€'000

2016

€'000

 

 

 

Profit before tax per income statement

72,478

50,628

 

 

 

Adjustments

 

 

Exceptional items (Note 5)

(8,610)

1,409

Fair value movements on contingent consideration

(4,174)

73

Share of joint ventures and associates tax

3,182

4,473

Acquisition related intangible asset amortisation within subsidiaries

10,499

7,675

Share of joint ventures and associates acquisition related intangible asset amortisation 

2,460

2,557

Acquisition related costs within subsidiaries

897

922

Adjusted profit before tax

76,732

67,737

 

 

 

Exclude

 

 

Net financial expense -  subsidiaries

5,754

5,524

Net financial expense - share of joint ventures and associates

1,058

481

Adjusted EBITA

83,544

73,742

 

 

 

Exclude

 

 

Amortisation of software costs

1,443

1,356

Depreciation - subsidiaries

15,764

17,423

Depreciation - share of joint ventures and associates

3,690

2,301

Adjusted EBITDA

104,441

94,822

 

 

5.

Exceptional items

 

2017

€'000

2016

€'000

Fair value uplift on associate investment (a)

12,428

-

Credit from settlement of defined benefit pension arrangements (b)

4,097

-

Gains relating to property, plant and equipment and leasehold interests (c)

1,160

3,774

Impairment of goodwill (d)

(9,075)

(5,183)

Total

8,610

(1,409)

Net tax charge on exceptional items (e)

(1,358)

(686)

Total net of tax

7,252

(2,095)

 

 

 

Attributable as follows:

 

 

Equity holders of the parent

7,116

(2,812)

Non-controlling interests

136

717

 

7,252

(2,095)

 

(a) Fair value uplift on associate investment

As outlined in detail in Note 10, on 1 March 2017 the Group acquired a further 30% shareholding in the Oppenheimer Group ('Oppy') to take its total shareholding to 65%. As a result of this increased shareholding, Oppy became a subsidiary from this date and in accordance with IFRS, the Group's previously held 35% associate interest was re-measured to fair value resulting in a fair value gain of €11.3m. This gain, together with the reclassification of €1.1m of currency translation gains from the currency translation reserve, were recognised in the income statement resulting in an exceptional gain of €12.4m.

 

(b)              Credit arising from settlement of the Group's defined benefit pension arrangements

An Enhanced Transfer Value ('ETV') offer was made to members of the Irish defined benefit pension schemes during the year. As a result of members taking up this ETV offer settlement credits net of associated costs resulted in an exceptional accounting credit of €4.1m which is recognised in the income in statement. See Note 8 for further details.

 

(c) Gains relating to property, plant and equipment and leasehold interests

During the year the Group recorded a profit of €1.2m after associated costs on the disposal of property in Continental Europe. During 2016 the Group received compensation for the exit of a leasehold interest. The compensation of €1.9m net of associated costs was recognised within other operating income. Also during 2016, the Group received compensation for costs arising from a fire in a facility in Europe which caused damage to buildings, plant and machinery, motor vehicles and small amounts of inventory. The facility has been repaired and was fully operational from mid-2016 onwards. The insurance income, net of associated costs and impairment, recognised in 2016 was €1.9m and was disclosed as an exceptional item in the income statement.

 

(d)   Impairment of goodwill

During the year the Group recognised a non-cash impairment charge of €9.1m in relation to a fresh produce business in the Netherlands which had experienced a difficult trading environment resulting in a slower recovery than had been anticipated. In 2016 the Group recognised a non-cash impairment charge of €5.2m in relation to a sports nutrition business in the UK as a result of a reduction in the forecasted profitability due to a more competitive trading environment.

 

(e)   Tax charge on exceptional items

The net tax effect on the above exceptional items and the reassessment of deferred tax on prior year fair value movements on investment property was a net charge of €1.4m (2016: €0.7m).

 

Effect of exceptional items on cash flow statement

The net effect of the items above was a cash inflow of €0.5m (2016: €3.0m).

       

 

 

6.

Income tax

 

2017

€'000

2016

€'000

 

 

 

Income tax expense

10,971

11,324

Group share of tax charge of joint ventures and associates netted in profit before tax

3,182

4,473

Total tax charge

14,153

15,797

 

 

 

Adjustments

 

 

Deferred tax credit on amortisation of intangibles - subsidiaries

           7,267

              971

Share of deferred tax credit on amortisation of intangible assets with joint ventures and associates

              997

              636

Deferred tax charge on fair value movements on contingent consideration

         (1,666)

             -  

Net deferred tax (charge)/credit on fair value movements on investment properties - subsidiaries

            (512)

              182

Tax impact of other exceptional items

            (846)

            (868)

Tax charge on underlying activities

19,393

16,718

 

 

 

The total tax charge for the year amounted to €14.2m (2016: €15.8m), including the Group's share of the tax charge of its joint ventures and associates of €3.2m (2016: €4.5m), which is netted in profit before tax in accordance with IFRS.

 

Excluding the impact of deferred tax related to the amortisation of intangibles and the fair value movements on contingent consideration and the tax effect of exceptional items, the underlying tax charge for the year was €19.4m (2016: €16.7m), equivalent to a rate of 25.3% (2016: 24.7%) when applied to the Group's adjusted profit before tax.

       

 

7.

Earnings per share

 

Basic earnings per share

Basic earnings per share is calculated by dividing the profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year, excluding shares purchased by the company which are held as treasury shares.

 

2017

€'000

 

2016

€'000

 

Profit attributable to equity holders of the parent

47,826

28,536

 

 

 

 

'000

'000

Shares in issue at beginning of year

343,015

344,609

New shares issued (weighted average)

2,148

1,417

Share repurchased by Company (weighted average)

-

(3,891)

Effect of treasury shares held

(22,000)

(22,000)

Weighted average number of shares

323,163

320,135

 

 

 

Basic earnings per share - cent

14.80

8.91

       

  

 

Diluted earnings per share

Diluted earnings per share is calculated by dividing the profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding after adjustment for the effects of all ordinary shares and options with a dilutive effect.

 

2017

€'000

2016

€'000

 

 

 

Profit attributable to equity holders of the parent

47,826

28,536

 

 

 

 

'000

'000

Weighted average number of shares

323,163

320,135

Effect of share options with a dilutive effect

2,598

4,005

Weighted average number of shares (diluted)

325,761

324,140

 

 

 

Diluted earnings per share - cent

14.68

8.80

 

The average market value of the Company's shares for the purpose of calculating the dilutive effect of share options was based on the quoted market prices for the period during which the options were outstanding.

 

 

Adjusted basic earnings per share and adjusted fully diluted earnings per share

Management believes that adjusted profit attributable to equity holders of the parent as set out below provides a fair reflection of the underlying trading performance of the Group after eliminating the impact of acquisition related intangible asset amortisation charges and costs, fair value movements on contingent consideration, property revaluations and exceptional items and the related tax on these items.

 

Adjusted basic earnings per share is calculated by dividing the adjusted profit attributable to ordinary shareholders by the weighted average number ordinary shares outstanding during the year, excluding shares purchased by the company which are held as treasury shares.

 

Adjusted fully diluted earnings per share is calculated by dividing the adjusted profit attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding after adjustment for the effects of all ordinary shares and options with a dilutive effect.

 

 

2017

€'000

2016

€'000

 

 

 

Profit attributable to equity holders of the parent          

47,826

28,536

 

 

 

Adjustments:

 

 

Exceptional items - net of tax (Note 5)

        (7,252)

         2,095

Acquisition related intangible asset amortisation within subsidiaries

10,499

7,675

Share of joint ventures and associates acquisition related intangible asset amortisation

2,460

2,557

Acquisition related costs within subsidiaries

897

922

Fair value movements on contingent consideration

        (4,174)

              73

Tax effect of amortisation charges of goodwill, intangible assets and fair value movements on contingent consideration

        (6,598)

          (1,607)

Non-controlling interests share of the items above

           265

      (1,128)

Adjusted profit attributable to equity holders of the parent

43,923

39,123

 

 

 

 

'000

'000

Weighted average number of shares

323,163

320,135

Weighted average number of shares (diluted)

325,761

324,140

 

 

 

Adjusted basic earnings per share - cent

13.59

12.22

 

 

 

Adjusted fully diluted earnings per share - cent

13.48

12.07

 

8.

Post-employment obligations

 

 

 

 

 

2017

€'000

2016

€'000

 

 

 

Employee defined benefit pension schemes obligations

(16,707)

(37,777)

Other post-employment obligations

(5,293)

-

 

(22,000)

(37,777)

       

 

Employee defined benefit pension schemes

 

 

 

2017

€'000

2016

€'000

 

 

 

Pension assets

175,343

189,008

Pension obligations

(192,050)

(226,785)

Net liability at end of year

(16,707)

(37,777)

Net related deferred tax asset

2,860

5,956

Net liability after tax at end of year

(13,847)

(31,821)

 

 

 

Analysis of movement in the year

 

 

Net liability at beginning of year

(37,777)

(17,174)

Net interest expense and service costs recognised in the income statement

(2,298)

(3,237)

Credit in income statement from ETV offer

6,683

-

Employer contributions to schemes

4,290

5,010

Employer contributions to schemes - ETV

6,303

-

Remeasurement gains/(losses) recognised in other comprehensive income

5,708

(23,769)

Arising on acquisition

(252)

-

Foreign exchange movement

636

1,393

Net liability at end of year

(16,707)

(37,777)

 

The table above summarises the movements in the net liability of the Group's various defined benefit pension schemes in Ireland, the UK, Continental Europe and North America in accordance with IAS 19 Employee Benefits (2011).

 

The Group's balance sheet at 31 December 2017 reflects net pension liabilities of €16.7m (2016: €37.8m) in respect of schemes in deficit, resulting in a net deficit of €13.8m (2016: €31.8m) after deferred tax.

 

The current and past service costs and the net finance expense on the net scheme liabilities are charged to the income statement. Remeasurement gains and losses are recognised in other comprehensive income. In determining the valuation of pension obligations, consultation with independent actuaries is required. The estimation of employee benefit obligations requires the determination of appropriate assumptions such as discount rates, inflations rates and mortality rates.

 

In 2017 the Group initiated an Enhanced Transfer Value ('ETV') program whereby an offer above the minimum statutory transfer value was made to all active and deferred members of the Irish defined benefit pension schemes ("Schemes") to transfer their accumulated accrued benefits from the Schemes, eliminating future accrual of benefits in the Schemes, and receive a transfer value above the statutory minimum amount. The Group transferred €6.3m to the Schemes to fund the ETV and €25.4m was paid from the Schemes assets in a full and final settlement of defined benefit obligations of €32.1m. The ETV program resulted in a net accounting credit of €4.1m in 2017 representing the net settlement of the defined benefit obligations of employees who elected of the ETV option, net of all costs and professional fees incurred. This credit has been disclosed as an exceptional item in the Group's income statement (Note 5).

 

The decrease in the net liability in 2017 was primarily due to the effects of the ETV settlement, as described above, positive returns of 5% on pension scheme assets in the year and an increase in discount rates in the Eurozone. This was offset in part by a reduction in the discount rate for the UK schemes. The discount rate in Ireland and the Eurozone increased to 2.00% (2016: 1.90%) and in the UK decreased to 2.50% - 2.60% (2016: 2.75% - 2.80%).

 

Other post-employment obligations

 

 

 

 2017

€'000

2016

€'000

 

 

 

Net liability at beginning of year

-

-

Arising on acquisition

(6,913)

-

Net expense recognised in the income statement

(536)

-

Remeasurement gains recognised in other comprehensive income

1,604

-

Employee contributions to schemes

(24)

-

Benefits paid

131

-

Translation adjustment

445

-

Net liability at end of year

(5,293)

-

 

 

 

Certain employees in one of the Group's North American subsidiaries hold non-voting shares in the subsidiary. The Company has a contractual arrangement in place to pay holders of these shares an agreed benefit on retirement, based on profit levels in the company, to redeem these shares.

 

In accordance with IAS 19 Employee Benefits (2011), the net liability of the obligation is measured as the net present value of the amounts that are expected to be paid to employees for the shares at retirement. The interest expense, which represents the unwinding of the net present value of the liabilities, is charged to the income statement. Remeasurement gains and losses, representing all other changes to the estimate of the liability, are recognised in other comprehensive income.

 

Determining the valuation of the obligations requires the determination of appropriate assumptions such as projected growth in profits, forfeiture rates and retirement dates. The principal assumptions are the budget for the following financial year plus an annual growth rate of 5% discounted to net present value using a discount rate of 8.5%. Based on past experience a forfeiture rate of zero is assumed.

 

 

 

9.

Dividends

 

2017

€'000

2016

€'000

Dividends paid on Ordinary Euro 1 cent shares

 

 

Final dividend for 2016 of 2.2297 cent per share (2015: 2.027 cent)

7,177

6,482

Interim dividend for 2017 of 0.8906 cent per share (2016: 0.8096 cent)

2,888

2,594

Total dividend paid in the year

10,065

9,076

 

 

 

Total dividend per share paid in the year

3.1203

2.8366

 

The Board is proposing a 10% increase in the final dividend to 2.4527 cent per share (2016: 2.2297 cent), subject to the approval 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% on 2016. In accordance with IFRS, this dividend has not been provided for in the Balance Sheet at 31 December 2017.

         

 

 

 

10.

Businesses acquired and other developments in 2017

 

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 as explained below.  

 

Investments in subsidiaries

During 2017, the Group made a number of acquisitions in the fresh produce sector in North America and in Europe. On 1 March 2017, the Group completed the purchase of a further 30% of Grandview Ventures Limited (known as the 'Oppenheimer Group' or 'Oppy') for consideration of €28.2m. In addition to the initial 35% acquired in 2013, this brings the Group's shareholding in Oppy to 65% for a total consideration 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, exercisable from early 2020.

 

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

 

The table that follows provides details on the total fair value of acquisitions of subsidiaries in 2017. The acquisition of Oppy was deemed to be a substantial transaction and separate disclosure of the fair value of the identifiable assets and liabilities has therefore been made. None of the remaining business combinations completed during the year were considered sufficiently material to warrant separate disclosure of the fair values attributable to those combinations.

 

The initial assignment of fair values to net assets for all investments has been performed on a provisional basis in respect of these acquisitions and can be finalised within twelve months from the acquisition date, as permitted by IFRS 3 (Revised) Business Combinations.

 

 

 

 

2017

Oppy

€'000

2017

Other acquisitions

€'000

 

2017

Total

€'000

 

2016

Total

€'000

Consideration paid and payable

 

 

 

 

Cash consideration

28,211

8,019

36,230

32,887

Contingent consideration

-

2,245

2,245

11,598

Deferred consideration

-

-

-

275

Settlement of pre-existing relationship with acquiree

4,384

-

4,384

-

Contribution by non-controlling interest

-

1,537

1,537

-

Total fair value of consideration

32,595

11,801

44,396

44,760

 

 

 

 

 

Identifiable assets acquired and liabilities assumed

 

 

 

 

Property, plant and equipment

1,614

4,843

6,457

4,307

Intangible assets - Customer relationships

37,531

2,450

39,981

14,066

Intangible assets - Supplier relationships, brand and other

13,854

1,812

15,666

9,214

Investment in joint ventures & associates

1,112

-

1,112

-

Biological assets

2,384

-

2,384

308

Inventories

20,899

2,825

23,724

4,507

Trade and other receivables

69,943

8,109

78,052

23,262

Cash, and cash equivalents

-

1,676

1,676

2,251

Post-employment benefit obligations

(7,165)

-

(7,165)

-

Bank overdrafts

(556)

(362)

(918)

(311)

Interest-bearing borrowings

(23,632)

(860)

(24,492)

(474)

Finance leases

-

(149)

(149)

(673)

Corporation tax

(506)

(252)

(758)

(349)

Trade and other payables

(74,393)

(10,069)

(84,462)

(23,929)

Deferred tax asset

3,656

-

3,656

-

Deferred tax liability

(18,211)

(485)

(18,696)

(1,946)

Fair value of net identifiable assets and liabilities acquired

9,538

36,068

30,233

 

 

 

 

 

Non-controlling interests arising on acquisition

 

 

 

 

Non-controlling interests measured at fair value

-

-

-

15,552

Non-controlling interests measured at share of net  assets

10,834

(50)

10,784

(337)

Total value of non-controlling interests arising on acquisition

 

10,834

 

(50)

 

10,784

 

15,215

 

 

 

 

 

Goodwill calculation

 

 

 

 

Fair value of consideration

32,595

11,801

44,396

44,760

Fair value of pre-existing interest in acquiree

24,684

-

24,684

324

Fair value of net identifiable assets and liabilities  acquired

(26,530)

(9,538)

(36,068)

(30,233)

Non-controlling interests arising  on acquisition

10,834

(50)

10,784

15,215

Goodwill arising        

41,583

2,213

43,796

30,066

 

The principal factor contributing to the recognition of €43.8m of goodwill is the realisation of costs savings and synergies expected to be achieved for integrating the acquired entities, and the value and skills of the assembled workforce in the acquired entities. 

 

Cash flows relating to acquisition of subsidiaries

 

2017

2016

 

€'000

€'000

Cash consideration for acquisition of subsidiary undertakings

(36,230)

(32,887)

Cash, cash equivalents and bank overdrafts acquired

758

1,940

Cash outflow per statement of cash flows

(35,472)

(30,947)

 

The Group incurred acquisition related costs of €0.9m on legal and professional fees and due diligence in respect of completed acquisitions. These costs have been included within operating expenses in the year.

 

Investment in joint ventures and associates and disposal of shareholdings to non-controlling interests

During 2017, the Group invested €23.6m (€21.1m in cash and €2.5m in contingent consideration payable on achievement of certain profit targets) in a number of joint ventures and associates in North America and Europe.  The fair value of contingent consideration recognised at the date of acquisition was calculated using the expected present value technique. The principal acquisitions in 2017 were investments in Delica North America and The Fresh Connection in North America.

 

On 6 April 2017, Oppy entered strategically-important agreements with the New Zealand based T&G Global Limited ('T&G') to enable both parties to enhance their market positions as co-shareholders in two US produce businesses.

 

Oppy acquired from T&G a 50% share of a T&G Californian headquartered US export business known in the market as Delica North America ('Delica NAM') for a cash consideration of €8.1m. Delica NAM is focused on exporting a wide range of fresh produce from the US predominantly to the important Chinese and South East Asian markets. Under the terms of the shareholders agreement, Oppy is considered to have significant influence rather than joint control of this investment and therefore has treated the investment as an associate investment in accordance with IAS 28 Investments in Associates and Joint Ventures (2011).

 

Separately, Oppy sold some shares in its US business to T&G. T&G  through its wholly owned subsidiary Enza Fresh, previously held a 15% shareholding in Oppy's largest subsidiary, the US focussed marketer David Oppenheimer & Company LLC ('DOC') and a US transport company David Oppenheimer Transport ('DOT'). On 6 April 2017, Enza Fresh merged with Grandview Brokerage LLC ('GBLLC') and as part of this agreement obtained a 39.4% shareholding in GBLLC with the right thereafter to match the effective share of GBLLC held by Total Produce. As GBLLC owns 100% of DOC and 15% of DOT, the transaction resulted in T&G increasing its shareholding in DOC from 15% to 39.4% and reducing its interest in DOT from 15% to 6%. The net proceeds received by Oppy for the disposal of the shareholding in GBLLC were €8.6m.

 

In late October 2017, the Group acquired a 50% interest in the Californian based fresh produce company, The Fresh Connection LLC. The Fresh Connection has a network of growers throughout the US, Mexico, South America, South Africa and Australia and exports a wide range of fresh fruits and vegetables (mainly citrus, apples, pears, berries and stone fruits) to customers in more than 35 countries.

 

The initial assignment of fair values to net assets for all investments has been performed on a provisional basis in respect of these acquisitions and can be finalised within twelve months from the acquisition date, as permitted by IFRS 3 (Revised) Business Combinations.

 

Put option liability

Within certain transactions in 2017, non-controlling shareholders have an option to put their shareholding to Total Produce. Up to the point of exercise of these put options, the non-controlling shareholder continues to have a right to dividends and voting rights on the shareholdings that are subject to the put option. Where the holder of the put option retains a present ownership interest in the shares, the Group applies the partial recognition of non-controlling interest method for put options. The non-controlling interest is therefore recognised in the traditional manner but is transferred against the put liability reserve for presentation purposes in the balance sheet.

 

The estimated fair value at date of acquisition for the consideration on exercise of the put options was €25.1m. This put option liability has been recognised in a put option reserve attributable to the equity holders of the parent. The valuation method applied for the purposes of this fair value assessment was the option price formula in the share purchase agreement with the inputs based on the budget plan for 2017 and an application of a steady growth rate, discounted to a net present value with the assumption that the put option would be exercised at the earliest possible date. In accordance with the Group accounting policy for put options (partial recognition of NCI method), and for presentation purposes in the balance sheet, the carrying value of NCI subject to the put option at period end has been transferred to the put option reserve.

 

 

Payment of contingent and deferred consideration

In 2017, the Group paid €9.3m contingent consideration relating to prior period acquisitions. 

 

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

 

 

 

Subsidiary becoming a joint venture

 

In 2017 and 2016, as a result of changes in the nature of shareholder relationships it was determined that the Group no longer held a controlling influence in two investees and that the Group jointly controlled these investees. The following is a summary of the assets and liabilities derecognised in both years:

 

 

 

2017

€'000

2016

€'000

Identifiable assets and liabilities derecognised

 

 

Intangible assets

98

-

Property, plant and equipment

7,155

3,640

Trade investments

3

-

Inventories

1,469

267

Trade and other receivables

12,743

643

Cash and cash equivalents

6,689

491

Deferred government grants

(177)

(717)

Trade and other liabilities

(14,147)

(1,081)

Corporation tax liabilities

(323)

(13)

Deferred tax liabilities

(404)

(223)

Net assets derecognised

13,106

3,007

Non-controlling interest

(6,699)

(1,503)

Net assets derecognised

6,407

1,504

 

 

 

Investment in joint venture

6,407

1,504

 

 

 

The carrying value of the net assets derecognised in relation to these subsidiaries closely approximates to fair value.

       

  

11. Cash Generated From Operations

 

 

 

2017

€'000

2016

€'000

Operating activities

 

 

Profit for the year

61,507

39,304

Non-cash adjustments to reconcile profit to net cash flows:

 

 

Income tax expense

10,971

11,324

Income tax paid

(16,471)

(11,531)

Depreciation of property, plant and equipment

15,764

17,423

Reversal of impairment of property, plant and equipment

(362)

-

Exceptional items (Note 5)

(8,610)

1,409

Exceptional cash flow relating to ETV contributions and costs

(7,254)

-

Fair value movements on contingent consideration

(4,174)

73

Amortisation of intangible assets - acquisition related

10,499

7,675

Amortisation of intangible assets - capitalised development costs

299

407

Amortisation of intangible assets - computer software

1,443

1,356

Amortisation of government grants

(81)

(602)

Defined benefit pension scheme expense

2,298

3,237

Contributions to defined benefit pension schemes

(4,290)

(5,010)

Other employee benefit scheme expense

536

-

Net payments for other employee benefit scheme

(107)

-

Share based payment expense

596

436

Net gain on disposal of property, plant and equipment

(432)

(416)

Financial income

(2,046)

(1,309)

Financial expense

7,800

6,833

Financial income received

1,327

1,349

Financial expense paid

(7,464)

(7,093)

(Gain)/loss on non-hedging derivative financial instruments

(434)

31

Loss on disposal of trading assets

39

943

Gain on disposal of joint ventures

(5)

-

Fair value movements in biological assets

(289)

128

Share of profit of joint ventures

(11,427)

(7,258)

Share of profit of associates

(782)

(5,012)

Net cash flows from operating activities before working capital movements

48,851

53,697

Movements in working capital:

 

 

Movements in inventories

(10,409)

1,695

Movements in biological assets

(2,127)

-

Movements in receivables

(4,253)

(24,537)

Movements in payables

14,501

13,293

Total movements in working capital

(2,288)

(9,549)

Net cash flows from operating activities

46,563

44,148

 

 

12.

Analysis of Net Debt and Cash and Cash Equivalents

 

Net debt is a non-IFRS measure which comprises bank deposits, cash and cash equivalents and current and non-current interest-bearing loans and borrowings. The calculation of net debt at 31 December 2017 and 31 December 2016 is as follows:

 

 

2017

€'000

2016

€'000

Current assets

 

 

Bank deposits

-

2,500

Cash and cash equivalents

89,929

111,261

Call deposits (demand balances)

10,318

16,019

Current liabilities

 

 

Bank overdrafts

(11,268)

(10,193)

Current bank borrowings

(35,861)

(36,276)

Current finance leases

(595)

(1,515)

Non-current liabilities

 

 

Non-current bank borrowing

(164,374)

(128,729)

Non-current finance leases

(1,275)

(1,433)

Net debt at end of year

(113,126)

(48,366)

 

 

 

Average net debt

Average net debt for 2017 was €142.1m (2016: €95.9m).

 

 Trade receivables financing

The Group has a number of sales of receivables arrangements. Under the terms of these agreements, the Group has transferred substantially all of the credit risk of these trade receivables which are subject to these agreements. Accordingly €39.1m (2016: €43.0m) has been derecognised at 31 December 2017.

 

Reconciliation of cash and cash equivalents per balance sheet to cashflow statement

 

 

2017

€'000

2016

€'000

 

 

 

Cash and cash equivalents per balance sheet

100,247

127,280

Bank overdrafts

(11,268)

(10,193)

Cash, cash equivalents and bank overdrafts per cash flow statement

88,979

117,087

 

13.

Post balance sheet events

 

As referred to in detail earlier in this announcement, 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.

 

Also 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 $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).

 

There have been no other material events subsequent to 31 December 2017 which would require disclosure or adjustment in the financial statements.

 

 

14.

Related party transactions

 

There have been no related party transactions or changes to related party transactions other than those described in the 2016 Annual Report that materially affect the financial position or the performance of the Group for the year ended 31 December 2017.

 

15.

Board approval

 

 

This announcement was approved by the Board of Directors of Total Produce plc on 28 February 2018.

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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