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Total Produce Plc   -  TOT   

Total Produce continues strong growth in 2019

Released 07:00 05-Mar-2020

RNS Number : 0556F
Total Produce Plc
05 March 2020
 

TOTAL PRODUCE PLC
 

2019 PRELIMINARY RESULTS 

 

Total Produce continues strong growth in 2019

 

 

Total Revenue up 22.4% to €6.2 billion 

Adjusted EBITDA up 52.1% to €202.8m

Adjusted EBITA up 53.1% to €150.1m

Adjusted profit before tax up 27.9% to €98.3m

Adjusted fully diluted EPS (pre-IFRS 16 Leases) up 41.4% to 14.86 cent

Adjusted fully diluted EPS (post-IFRS 16 Leases) up 34.3% to 14.12 cent

Final dividend up 2.5%

 

 

 

Key performance measures are defined on pages 33 to 37

 

 

 

 

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

 

 

"We are pleased that the Group has delivered a strong performance in 2019 with a 41.4% increase in adjusted fully diluted earnings per share. This is the first year to include twelve months contribution from Dole Food Company, Inc.  The Group acquired 45% of Dole for $300m on 31 July 2018.

 

 The Group is monitoring Covid-19 and, while it is too early to form a definitive view, any disruption is not expected to be material.

 

Trading in early 2020 has been satisfactory and the Group is targeting continued growth.

 

The Group is also pleased to report a 2.5% increase in the final dividend to 2.5770 cent per share"

 

 

 

 

 

 

 

5 March 2020

 

               

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 2019

 

 

2019

€'million

2018

€'million

 

change

 

 

 

 

Total Revenue(1)

6,173

5,043

+22.4%

 

 

 

 

Group Revenue

3,729

3,728

0.0%

 

 

 

 

Adjusted EBITDA(1) (after add back of right of use asset depreciation)

251.2

133.3

+88.4%

 

 

 

 

Adjusted EBITDA(1)

202.8

133.3

+52.1%

 

 

 

 

Adjusted EBITA(1)

150.1

98.0

+53.1%

 

 

 

 

Operating profit after intangible asset amortisation

87.5

77.9

+12.4%

 

 

 

 

Adjusted profit before tax(1)

98.3

76.9

+27.9%

 

 

 

 

Profit before tax

76.5

69.8

+9.6%

 

 

 

 

 

 

 

€'cent

 

€'cent

 

 

 

 

 

Adjusted fully diluted earnings per share (pre-IFRS 16 Leases)(1)

14.86

10.51

+41.4%

 

 

 

 

Adjusted fully diluted earnings per share (post-IFRS 16 Leases) (1)

14.12

10.51

+34.3%

 

 

 

 

Basic earnings per share

13.72

9.37

+46.4%

 

 

 

 

Diluted basic earnings per share

13.69

9.34

+46.6%

 

 

 

 

Final dividend per share

2.5770

2.5140

+2.5%

 

 

 

 

Total dividend per share

3.4899

3.4269

+1.8%

 

 

(1)    Alternative Performance Measures

The Group uses a number of alternative performance measures ('APMs'), which are non-IFRS measures to monitor financial performance. These measures are referred to throughout the discussion of our reported operating performance and financial position and are measures which are regularly reviewed by Group management in assessing Group performance. The APMs are defined together with calculations in pages 33 to 37 of this statement.

 

 

 

 

 

 

 

 

 

 

 

Forward-looking statement

Any forward-looking statements made in this announcement have been made in good faith based on the information available as of the date of this announcement 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 good performance in 2019. The results for the year include the Group's 45% share of Dole Food Company ('Dole') for the full year. The comparative 2018 period included the Group's share of the results of Dole for five months from the date of completion of the transaction on 31 July 2018 after receiving regulatory approval.

 

Total revenue in the year grew 22.4% to €6,173m (2018: €5,043m), adjusted EBITDA increased by 52.1% to €202.8m (2018: €133.3m) with adjusted EBITA increasing 53.1% to €150.1m (2018: €98.0m). The increase was due to the incremental benefit of the acquisition of Dole, the improvement of the Fresh Vegetable Division in Dole, good trading in the International division offset in part by competitive conditions in certain markets in the Eurozone.

 

Adjusted fully diluted earnings per share pre the effect of the new lease accounting standard (IFRS 16 Leases) was 14.86 cent, an increase of 41.4%. The increase is due to the incremental impact of the acquisition of Dole for the full year in 2019 when compared to 2018. The 2018 results for Dole were included for five months from 31 July 2018. Including the effect of IFRS 16 Leases, adjusted fully diluted earnings per share grew 34.3% to 14.12 cent (2018: 10.51 cent).

 

The Group is cash-generative with adjusted operating cash flows of €59.4m (2018: €52.9m) and free cashflow increasing to €35.0m (2018: €31.2m).   

 

The Board is pleased to announce a 2.5% increase in the final dividend to 2.5770 (2018: 2.5140) cent per share subject to the approval of shareholders at the forthcoming AGM. If approved, the total dividend for 2019 will amount to 3.4899 (2018: 3.4269) cent per share which represents an increase of 1.8% on 2018.

 

 

 

Operating Review

 

 

 

The table below details a segmental breakdown of the Group's total revenue and adjusted EBITA for the year ended 31 December 2019. The European and International operating segments are primarily involved in the procurement, marketing and distribution of hundreds of lines of fresh fruit and vegetables. The Group's 45% share of the results of Dole is included as a separate operating segment. Dole is one of the world's leading fresh producers, marketers and distributors of fresh fruit and vegetables which they sell and distribute through a wide network in North America, Europe, Latin America, the Middle East and Africa. Segment performance is evaluated based on total revenue and adjusted EBITA.

 

 

 

Year-ended

 31 December 2019

Year-ended

31 December 2018

 

 

 

Total

revenue

€'000

Adjusted

EBITA

€'000

Total

revenue

€'000

Adjusted

EBITA

€'000

 

Europe - Non-Eurozone

1,502,653

40,610

1,511,780

41,593

 

Europe - Eurozone

1,638,341

21,780

1,716,584

27,252

 

International 

1,271,566

22,284

1,175,297

18,880

 

Dole (Group share)*

1,821,400

65,440

692,239

10,297

 

Inter-segment revenue

(60,765)

-

(52,410)

-

 

Total Group

6,173,195

150,114

5,043,490

98,022

 

 

 

*Dole's financial calendar consists of thirteen 4 weekly periods. The results for 2019 are for the 52-week period ended 28 December 2019. The Group's share of the adjusted EBITA of Dole above is after the deduction of the Group's share of the non-controlling interests charge within Dole and an allocation of a corporate overhead.

 

Total revenue increased 22.4% to €6,173m (2018: €5,043m) with adjusted EBITA increasing by 53.1% to €150.1m (2018: €98.0m) due to the incremental impact of the acquisition of Dole, the improvement of the Fresh Vegetable division in Dole and good trading in the International division offset in part by the competitive conditions in certain markets in the Eurozone. On a like-for-like basis, excluding acquisitions, divestments and currency translation, revenues were 2% behind the prior year with a small decrease in volume partially offset by price increases.

 

Fresh produce markets in 2019 were particularly competitive in certain parts of Europe. The International division performed strongly in the year helped by good pricing and margins in some key categories. This was offset in part by the poor weather in California in April to June which led to less optimal growing conditions and weaker trading in the strawberry growing operation. The uncertainty surrounding international trade led to a small reduction of exported goods from the US to India and China due to higher tariffs.

 

 

 

Europe - Non-Eurozone

 

This segment includes the Group's businesses in the Czech Republic, Poland, Scandinavia and the UK. Revenue decreased by 0.6% to €1,503m (2018: €1,512m). This was due in particular to the adverse impact of the translation of the results of foreign currency denominated operations into Euro, the cessation of a small distribution business in the second half of 2018, offset in part by the incremental contribution of bolt-on acquisitions. On a like-for-like basis excluding divestments, acquisitions and disposals, revenue decreased by circa 0.5% with a small decrease in volumes offset in part by marginal average price increases. Adjusted EBITA decreased 2.4% to €40.6m (2018: €41.6m) due to currency translation and reduced earnings in some joint ventures and associates.

 

 

 

Europe - Eurozone

 

This segment includes the Group's businesses in France, Ireland, Italy, the Netherlands and Spain. Revenue decreased by 4.6% to €1,638m (2018: €1,717m) with a 20.1% decrease in adjusted EBITA to €21.8m (2018: €27.3m). Trading conditions were challenging, particularly in the Netherlands in the vegetable and salad categories where the market remains very competitive. Trading was satisfactory in southern Europe but lower compared to a particularly strong year in 2018. Excluding the effect of acquisitions and divestments, revenue on a like-for-like basis was circa 5% behind prior year due to volume decreases partially offset by marginal price increases.

 

 

 

International

 

This division includes the Group's businesses in North America, South America and India. Revenue increased by 8.2% to €1,272m (2018: €1,175m) with the benefit on translation of the results to Euro from the stronger US and Canadian Dollar which strengthened by 5.2% and 2.8% respectively. On a like-for-like basis excluding effects of currency, revenue increased circa 3% due to higher average pricing with volumes similar to prior year. Domestic US volumes have marginally increased offset by a small drop in US export volumes to India and China due to increased tariffs.  Adjusted EBITA increased 18.0% to €22.3m (2018: €18.9m) with a particularly good performance in the second half of the year with favourable trading conditions, pricing and margins in many product categories. The reported result also benefitted from the stronger US and Canadian Dollars which benefitted the results on translation to Euro. This was partially offset by the effect of the poor weather in California in April to June which led to weakness in the results of a strawberry growing operation.

 

 

 

Dole

 

This segment includes the Group's share of the results of Dole. As noted earlier, the Group completed the acquisition of the initial tranche of 45% of Dole on 31 July 2018 and is equity accounting for its 45% share of the results of Dole on an IFRS basis with effect from 1 August 2018. The 2019 financial year is therefore the first full year to reflect this transaction with the comparative 2018 year reflecting the results of Dole for 5 months from 1 August 2018 to 29 December 2018.

 

Dole's financial calendar consists of thirteen periods of four weeks, and the 2019 results reflected the 52-week period ended 28 December 2019. Dole's overall business is seasonal, with the greater share of adjusted EBITA earned in the first half of the financial year. As Dole is vertically integrated its operations are sensitive to a number of factors including weather related phenomena and the effects on industry volumes, prices, produce quality and growing costs.

 

On an IFRS basis, Dole has recorded revenues of $4,566m (€4,048m) for the year ended 28 December 2019. Adjusted EBITDA was $245.0m (€217.2m) with adjusted EBITA of $173.8m (€154.0m). For the five-month period ended 29 December 2018, Dole recorded revenues of $1,767m (€1,538m), adjusted EBITDA of $59.5m (€51.8m) and adjusted EBITA of $27.3m (€23.7m).

 

Trading for the year ended 28 December 2019 has been strong with a good recovery in adjusted EBITDA.  Revenues on a like-for-like basis, excluding the disposal of the salad business in Sweden, was 1.5% ahead of the prior year. Adjusted EBITDA and adjusted EBITA increased, led by a recovery in the Fresh Vegetable division which was impacted by two industry-wide safety notices in 2018, not directly linked to Dole, which affected romaine lettuce. The Fresh Fruit division remained strong in 2019. 

 

For the full year 2019, the Group's 45% share of revenue and adjusted EBITA was €1,821m and €65.4m respectively. For the five-month period ending 29 December 2018, the Group's 45% share of revenue and adjusted EBITA was €692m and €10.3m respectively with the net result reflecting that earnings are weighted towards  the first half of the year and the impact of the industry wide safety notices in the second half of 2018.

 

Further details on the acquisition of Dole and its financial performance and position for the year ended 28 December 2019 are outlined in Note 7 of the accompanying financial information.

 

 

Financial Review

 

Impact of IFRS 16 Leases

As explained in detail in Note 1 of the accompanying financial information, the Group has adopted IFRS 16 Leases (IFRS 16) with effect from 1 January 2019.

 

As a result of initially applying IFRS 16 in relation to leases that were previously classified as operating leases, the Group recognised €111.2m of right of use assets and €118.6m of lease liabilities at 31 December 2019.

 

The incremental impact of adoption of IFRS 16 in the income statement in the year is a reduction in operating expenses of €1,201,000 and an increase in the net financial expense of €2,957,000. Profit after tax of joint ventures and associates, which includes the Group's 45% share of the results of Dole has decreased by €1,940,000. The incremental impact of IFRS 16 on the Group's diluted and adjusted fully diluted earnings per share for the year was a reduction of 0.74 cent per share.

 

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

The Group's share of after-tax profits of Dole for the year amounted to €19.3m before exceptional items. Post exceptional items the Group's share of after-tax profits was €26.4m. Further details of the performance of Dole and its financial position at the end of the year is outlined in Note 7 of the accompanying financial information.

 

Excluding the contribution from Dole the share of after-tax profits of joint ventures and associates increased in the period to €11.3m (2018: €10.8m). Dividends declared from joint ventures and associates in the year amounted to €11.1m (2018: €11.2m) with €10.7m (2018: €10.9m) received in cash reflecting the Group's continued focus on the cash contributions from these investments.

 

Intangible asset amortisation

Acquisition related intangible asset amortisation within subsidiaries amounted to €10.3m (2018: €10.3m) in the year with additional amortisation charges due to recent acquisitions offset by other assets becoming fully amortised. The share of intangible asset amortisation within joint ventures and associates was €2.7m (2018: €2.7m).

 

Exceptional items

Exceptional items in the year amounted to a net gain after tax of €5.2m (2018: €3.7m gain). The net gain in 2019 primarily relates to the Group's share of €7.0m of the net gains within Dole. A full analysis of exceptional items for both 2019 and 2018 are set out in Note 5 of the accompanying financial information and have been excluded from the calculation of the adjusted numbers.

 

Operating profit

Operating profit before exceptional items increased 14.2% to €82.3m (2018: €72.1m) due primarily to the incremental impact from the Dole acquisition offset by reduced profits in some subsidiaries in the Eurozone. Including exceptional items operating profits increased by 12.4% to €87.5m (2018: €77.9m).

             

 

Net financial expense

Net financial expense (before exceptional items) in the year increased to €11.0m (2018: €7.4m). The first-time application of IFRS 16 Leases from 1 January 2019 accounted for €3.0m of this increase along with the effect of higher average net debt in the year due to the acquisition of Dole. This was partly offset by the lower cost of funding. The Group's share of the net interest expense of joint ventures and associates in the year was €40.8m (2018: €13.8m) due to the incremental impact of Dole.

 

Profit before tax

Excluding acquisition related intangible asset amortisation charges and costs, fair value movements on contingent consideration and share of joint venture interest and tax which is netted in profit before tax in the statutory income statement,  the adjusted profit before tax increased by 27.9% in the year to €98.3m (2018: €76.9m) due primarily to the increased contribution from  Dole partly offset by a reduction in profits in some entities in the Eurozone and higher interest charges as referred to above. Statutory profit before tax after these items increased 9.6% to €76.5m (2018: €69.8m)  

 

Taxation

The adjusted tax charge for the year, including the Group's share of joint ventures and associates tax and before non-trading items, as set out on page 35 of the accompanying financial information, was €27.5m (2018: €18.6m) representing an underlying tax rate of 28.0% (2018: 24.2%) when applied to the Group's adjusted profit before tax. The increase is primarily due to the inclusion of the higher underlying tax rate in Dole.  

 

Non-controlling interests

 

The non-controlling interest's share of after-tax profits in the year was €12.9m (2018: €18.0m). Included in this was the non-controlling interests' share of the net charge on exceptional items, amortisation charges and acquisition related costs (net of tax) of €2.9m (2018: €nil). Excluding these non-trading items, the non-controlling interests' share of adjusted after tax profits was decreased by €2.2m to €15.8m (2018: €18.0m) with the decrease due to the non-controlling interests share of earnings in certain non-wholly owned companies in Europe.

 

 

 

Adjusted and basic earnings per share

 

Adjusted fully diluted earnings per share (pre-IFRS 16 Leases) was 14.86 cent, an increase of 41.4% due to the benefit of the Dole acquisition offset in part by higher interest charges to fund the Dole transaction and challenging conditions is some markets in the Eurozone. Including the effect of IFRS 16, adjusted fully diluted earnings per share increased by 34.3% to 14.12 cent per share (2018: 10.51 cent).

 

Management believes that adjusted fully diluted earnings per share, which excludes acquisition related intangible asset amortisation charges and costs, fair value movements on contingent consideration, unrealised gains or losses on derivative financial instruments, gains and losses on foreign currency denominated intercompany borrowings, exceptional items and the 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 13.72 cent per share (2018: 9.37 cent) and 13.69 cent per share (2018: 9.34 cent) respectively.

 

Note 6 of the accompanying financial information provide details of the calculation of the respective earnings per share amounts.

 

 

Cash flow and net debt

Net debt (which excludes lease liabilities) at 31 December 2019 of €221.2m (2018: €219.7) marginally increased in the year. Average net debt for the year was €284.0m compared to €217.1m in 2018 with the increase due to the incremental impact of financing the acquisition of the initial 45% interest in Dole on 31 July 2018. In addition, the Group has non-recourse trade receivables financing of €46.4m at 31 December 2019 (2018: €30.0m).

 

The Group generated €52.8m (2018: €68.1m) in adjusted operating cash flows before working capital outflows with the decrease due to lower earnings in subsidiaries and higher finance costs due to the funding of the Dole acquisition. The working capital inflow in 2019 was €6.6m (2018: €15.2m outflow) assisted by the incremental increase in non-recourse trade receivables financing. After working capital movements, adjusted operating cash flows were €59.4m (2018: €52.9m). Cash outflows on routine capital expenditure, net of disposals, were €19.0m (2018: €22.1m). Dividends received from joint ventures and associates in the year were €10.7m (2018: €10.9m) representing the Group's continued focus on cash returns from these investments. Dividends paid to non-controlling interests increased to €16.1m (2018: €10.5m) which reflects dividends on increased prior year profits and the non-controlling interests' share of prior year exceptional items.

 

Free cashflow generated by the Group increased to €35.0m (2018: €31.2m) with the benefit of the higher working capital inflows offset in part by higher dividends to non-controlling interests. Free cashflow is the measure of the funds available after outflows relating to routine capital expenditure, 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 and investments amounted to €14.5m (2018: €259.6m) with the payments in 2019 due to investments in bolt-on acquisitions and the final payment of the Dole transaction costs.  Contingent and deferred consideration payments relating to prior period acquisitions were €11.1m (2018: €7.0m). Payments for non-routine property and plant additions amounted to €4.5m (2018: €7.4m). The Group distributed €13.3m (2018: €13.1m) in dividends to equity shareholders in the year representing payment of final 2018 dividend and the 2019 interim dividend. Proceeds from share issue were €0.1m in the year (2018: €141.4m) of which €141.0m in 2018 related to the proceeds of the share placing in February 2018 to fund the 45% investment in Dole. At 31 December 2019, there was a €2.7m loss (2018: €1.7m gain) on the translation of foreign currency denominated net debt to Euro due primarily to the stronger US Dollar and Sterling partly offset by a weaker Swedish Krona.

 

 

 

2019

€'million

2018

€'million

 

 

 

Adjusted EBITDA(1)

202.8

133.3

Deduct adjusted EBITDA of joint ventures and associates

(121.1)

(44.5)

Net financial expense and tax paid

(26.3)

(20.5)

Other

(2.6)

(0.2)

Adjusted operating cash flows before working capital movements

52.8

68.1

Working capital movements

6.6

(15.2)

Adjusted operating cash flows(1)

59.4

52.9

Routine capital expenditure net of routine disposal proceeds

(19.0)

(22.1)

Dividends received from joint ventures and associates

10.7

10.9

Dividends paid to non-controlling interests

(16.1)

(10.5)

Free cash flow(1)

35.0

31.2

Cashflows from exceptional items

5.8

3.0

Acquisition payments, net(1)

(14.5)

(259.6)

Net cash assumed/disposed on acquisition/disposal of subsidiaries

2.1

3.8

Contingent and deferred consideration payments

(11.1)

(7.0)

Non-routine capital expenditure

(4.5)

(7.4)

Dividends paid to equity shareholders

(13.3)

(13.1)

Proceeds from issue of share capital

0.1

141.4

Other

-

(0.6)

Total net debt movement in year

(0.4)

(108.3)

Net debt1 at beginning of year

(219.7)

(113.1)

Finance leases reclassified to lease liabilities

1.6

-

Foreign currency translation

(2.7)

1.7

Net debt1 at end of year

(221.2)

(219.7)

 

(1)  Key metrics including net debt are defined on pages 33 to 37.

 

Defined benefit pension obligations

The net liability of the Group's defined benefit pension schemes (net of deferred tax) was €9.3m at 31 December 2019 (2018: €9.1m). There was an 11% average return on pension scheme assets in 2019 offset by the impact of a reduction in the discount rates for the Irish and UK schemes which result in an increase in the net present value of the schemes obligations. Other post-employment benefit obligations increased to €5.9m (2018: €5.0m). Further details are outlined in Note 8 of the accompanying financial information.

 

Shareholders' equity

Shareholders' equity increased by €18.0m to €451.1m (2018: €433.1m). On adoption of IFRS 16 Leases, the net impact to Shareholders' equity at 1 January 2019 was a reduction of €6.8m. The increase was due to profit after tax of €53.3m attributable to equity shareholders and the currency translation gain of €3.9m on the retranslation of the net assets of foreign currency denominated operations into Euro. This was offset by remeasurement losses of €5.7m (net of deferred tax) on post-employment benefit schemes, effective portions of cashflow hedges movements (net of deferred tax) of €4.6m, a €10.3m movement in the put option reserve and the payment of dividends of €13.3m to equity shareholders of the Company.

 

Development Activity

The Group made some bolt-on acquisitions in 2019 in the fresh produce sector in Europe as well as investments in existing joint ventures. The total committed investment was €10.m including €1.6m of deferred and contingent consideration payable on the achievement of future profit targets.

 

Dividends

The Board is proposing a 2.5% increase in the final dividend to 2.5770 (2018: 2.5140) cent per share subject to the approval of shareholders at the forthcoming AGM. If approved, this dividend will be paid on 20 May 2020 to shareholders on the register at 14 April 2020 subject to dividend withholding tax. The total dividend for 2019 will amount to 3.4899 (2018: 3.4269) cent per share and represents an increase of 1.8% on 2018. The total dividend represents a pay-out of almost 25% of the adjusted earnings per share.

 

Post Balance Sheet Events

There have been no material events subsequent to 31 December 2019 which would require disclosure or adjustment in the financial statements.

 

Environmental, Social and Governance (ESG)

As sustainability becomes increasingly important to all of us, we continue to recognise, as a global Group, our responsibilities in relation to environmental & social issues. Sustainability has always been central to our Group's strategy and business model with Sustainable Business Practices, The People Behind our Produce and Responsible Fiscal Oversight being three of our core strategic priorities. We are committed to building a better business in a responsible and sustainable way for all of our stakeholders.

 

It is very encouraging to report upon the work undertaken by our Sustainability Steering and Working Group ('SSWG') and our local operations during 2019 on ESG matters. We operate in an industry known for its health benefits and the low environmental impact of its products. We have therefore chosen the UN Sustainable Development Goal 3 "Good Health and Well-Being" as our pillar goal, with our aim being to increase the consumption of healthy fruit and vegetables. The introduction of new formalised structures includes a panel who will meet regularly to share ideas and adopt new policies and practices which will be established by the committee and approved by the Board. The SSWG have developed their sustainability agenda for 2020 and the Board will be updated on their progress at each scheduled meeting.

 

 

 

Brexit and International Trade

 

The result of the UK's exit from the European Union ('Brexit') on 31 January 2020 and its impact in terms of the exit deal including tariffs and trade agreements remain unclear. Brexit committees, set up in relevant areas of the business continue to assess and prepare for the risks and opportunities that may arise.

 

 

With continuing uncertainty surrounding global trade, the impact of any tariffs on international trade will continue to be monitored by the Group.

 

 

 

COVID-19 Outbreak

 

The Group is monitoring COVID-19. With a broad spread of sources and operations, the Group does not expect any disruption to be material.

 

 

 

Going Concern

The Directors are satisfied that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they have adopted the going concern basis in preparing the financial statements.

 

Board Changes

As part of a planned transition to provide orderly board refreshment and succession and as previously announced, Imelda Hurley, CEO of Coillte and former Director and CFO of Origin Enterprises plc and Helen Nolan, former Company Secretary of Bank of Ireland have joined the Board. Frank Gernon, Executive Director, and Jerome Kennedy, Non-Executive Director have advised the Board that they will retire as Directors on 31 March 2020. From this date the Board will comprise six independent Non-Executive Directors and three Executive Directors.

 

Commenting on these Board changes, Total Produce's Chairman Carl McCann said;

 

"Frank has been an integral part of our Group for over 45 years and has served as an Executive Director of Total Produce since 2007. His outstanding service, dedication and accomplishments have been invaluable. During his tenure he has played a key role in the stewardship and development of the Group.

 

Jerome has served as a Non-executive Director on the Board and its Committees since the formation of Total Produce Plc. The Group has benefitted greatly from his business acumen, professionalism and wise counsel over the years.

 

I join the Board in extending to Frank and Jerome our sincerest appreciation for their dedication and commitment. Their valuable contributions have added greatly to the success of Total Produce. We wish them the very best for the future".

 

Summary and Outlook

We are pleased that the Group has delivered a strong performance in 2019 with a 41.4% increase in adjusted fully diluted earnings per share. This is the first year to include twelve months contribution from Dole Food Company, Inc.  The Group acquired 45% of Dole for $300m on 31 July 2018.

 

The Group is monitoring Covid-19 and, while it is too early to form a definitive view, any disruption is not expected to be material.

 

Trading in early 2020 has been satisfactory and the Group is targeting continued growth.

 

The Group is also pleased to report a 2.5% increase in the final dividend to 2.5770 cent per share.

 

Carl McCann, Chairman

On behalf of the Board

5 March 2020

 

 

Total Produce plc

Extract from the Group Income Statement

for the year ended 31 December 2019

 

 

Note

Before

exceptional

items

2019

€'000

Exceptional items

 (Note 5)

2019

€'000

Total

2019

€'000

Before

exceptional

items

2018

€'000

Exceptional items

(Note 5)

2018

€'000

Total

2018

€'000

Revenue, including Group share of joint ventures

and associates

 

3

 

6,173,195

 

-

 

6,173,195

 

5,043,490

 

-

 

5,043,490

 

 

 

 

 

 

 

 

Group revenue

3

3,729,346

-

3,729,346

3,727,591

-

3,727,591

Cost of sales

 

(3,212,057)

-

(3,212,057)

(3,220,805)

-

(3,220,805)

Gross profit

 

517,289

-

517,289

506,786

-

506,786

Operating expenses (net)

 

(455,371)

(1,816)

(457,187)

(432,618)

9,450

(423,168)

Share of profit/(loss) of joint ventures - Dole

7

19,327

7,048

26,375

(2,697)

(3,658)

(6,355)

Share of profit of joint ventures - Other

 

10,658

-

10,658

8,685

-

8,685

Share of profit of associates

 

666

-

666

2,183

-

2,183

Operating profit before acquisition related intangible asset amortisation

 

 

92,569

 

5,232

 

97,801

 

82,339

 

5,792

 

88,131

Acquisition related intangible asset amortisation

 

(10,301)

-

(10,301)

(10,281)

-

(10,281)

Operating profit after acquisition related intangible asset amortisation

 

82,268

5,232

87,500

72,058

5,792

77,850

Net financial expense

 

(10,967)

-

(10,967)

(7,365)

(667)

(8,032)

Profit before tax

 

71,301

5,232

76,533

64,693

5,125

69,818

Income tax expense

 

(10,282)

(47)

(10,329)

(14,619)

(1,395)

(16,014)

Profit for the year

 

61,019

5,185

66,204

50,074

3,730

53,804

 

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

 

 

Equity holders of the parent

 

 

 

53,302

 

 

35,793

Non-controlling interests

 

 

 

12,902

 

 

18,011

 

 

 

 

66,204

 

 

53,804

Earnings per ordinary share

 

 

 

 

 

 

 

Basic

6

 

 

13.72

 

 

9.37

Fully diluted

6

 

 

13.69

 

 

9.34

 

 

 

 

 

 

 

 

                 

 

Total Produce plc

Extract from the Group Statement of Comprehensive Income

for the year ended 31 December 2019

 

 

2019

€'000

2018

€'000

 

 

 

Profit for the year

66,204

53,804

 

 

 

Other comprehensive income:

 

 

 

 

 

Items that may be reclassified subsequently to profit or loss:

 

 

Foreign currency translation effects:

 

 

-  foreign currency net investments - subsidiaries

5,664

(6,416)

-  foreign currency net investments - joint ventures and associates

3,274

3,236

-  foreign currency recycled to income statement on joint venture/associate becoming a subsidiary

 

---

 

90

-  foreign currency borrowings designated as net investment hedges

(3,397)

(4,387)

 

 

 

Effective portion of changes in fair value of cash flow hedges, net

(149)

340

Changes in fair value of cost of hedging, net of recycling

137

23

Deferred tax on items above

(9)

(97)

Share of joint ventures and associates effective portion of cash flow hedges

(5,101)

51

Share of joint ventures and associates deferred tax on items above

497

696

 

916

(6,464)

 

 

 

Items that will not be reclassified to profit or loss:

 

 

Remeasurement (loss)/gain on employee benefit schemes

(3,009)

6,677

Revaluation gain on property, plant and equipment, net

2,095

475

Deferred tax on items above

(966)

(1,172)

Share of joint venture gain on revaluation of property, plant and equipment

1,369

-

Share of joint ventures loss on employee benefit schemes

(2,601)

(1,867)

Share of joint ventures deferred tax on items above

(75)

854

 

(3,187)

4,967

Other comprehensive (expense)/income for the year

(2,271)

(1,497)

 

 

 

Total comprehensive income for the year

63,933

52,307

 

 

 

Attributable to:

 

 

Equity holders of the parent

49,417

33,071

Non-controlling interests

14,516

19,236

 

63,933

52,307

 

 

 

Total Produce plc

Extract from the Group Balance Sheet

As at 31 December 2019

 

 

Assets

2019

€'000

2018

€'000

Non-current

 

 

Property, plant and equipment

175,485

175,825

Right of use assets

113,032

-

Investment property

11,843

7,344

Goodwill and intangible assets

268,462

266,950

Investments in joint ventures and associates - Dole

264,893

245,881

Investments in joint ventures and associates - Other

104,050

105,172

Other investments

2,743

3,465

Other receivables

19,796

18,724

Deferred tax assets

13,497

12,393

Total non-current assets

973,801

835,754

 

 

 

Current

 

 

Inventories

98,031

90,295

Biological assets

3,965

5,066

Trade and other receivables

380,791

392,786

Other investments

2,306

6,612

Corporation tax receivables

2,439

4,523

Derivative financial instruments

4,489

4,388

Cash and cash equivalents

115,529

102,299

Total current assets

607,550

605,969

Total assets

1,581,351

1,441,723

 

 

 

Equity

 

 

Share capital 

4,105

4,104

Share premium

295,487

295,421

Other reserves

(131,309)

(123,057)

Retained earnings

282,816

256,654

Total equity attributable to equity holders of the parent

451,099

433,122

Non-controlling interests

98,768

82,483

Total equity

549,867

515,605

 

 

 

Liabilities

 

 

Non-current

 

 

Interest-bearing loans and borrowings

250,572

263,356

Lease liabilities

99,770

-

Other payables

2,904

 1,611

Contingent consideration and other provisions

7,957

 12,931

Put option liability

23,083

34,975

Corporation tax payable

6,541

 6,676

Deferred tax liabilities

27,731

 31,140

Employee benefits

16,736

 15,964

Total non-current liabilities

435,294

366,653

 

 

 

Current

 

 

Interest-bearing loans and borrowings

86,150

 58,686

Lease liabilities

20,306

-

Trade and other payables

475,202

 482,934

Contingent consideration and other provisions

8,534

 14,333

Put option liability

3,529

-

Derivative financial instruments

305

 296

Corporation tax payable

2,164

 3,216

Total current liabilities

596,190

559,465

Total liabilities

1,031,484

926,118

Total liabilities and equity

1,581,351

1,441,723

 

Total Produce plc

Extract from the Group Statement of Changes in Equity

for the year ended 31 December 2019

 

Attributable to equity holders of the parent

 

 

 

 

       

Share

capital

€'000

 

Share

premium

€'000

Undenom-inated

capital

€'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 2019 as presented in the Balance Sheet

4,104

295,421

140

(8,580)

(22,721)

28,336

(120,232)

256,654

433,122

82,483

515,605

Adjust for impact of transition to IFRS 16 net of tax

-

-

-

-

159

-

-

(6,937)

(6,778)

(1,337)

(8,115)

Balance at 1 January 2019 as presented in the Balance Sheet

4,104

295,421

140

(8,580)

(22,562)

28,336

(120,232)

249,717

426,344

81,146

507,490

Adjust for NCI subject to put option transferred for presentation purposes

-

-

-

-

-

-

(34,673)

-

(34,673)

34,673

-

As at 1 January 2019

4,104

295,421

140

(8,580)

(22,562)

28,336

(154,905)

249,717

391,671

115,819

507,490

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

Profit for the year

-

-

-

-

-

-

-

    53,302

53,302

12,902

66,204

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

Items that may be reclassified subsequently to profit or loss:

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation effects, net

-

-

-

-

3,863

-

33

-

3,896

1,645

5,541

Effective portion of cash flow hedges, net of recycling

-

-

-

-

-

-

(148)

-

(148)

(1)

(149)

Changes in fair value of cost of hedging, net of recycling

-

-

-

-

-

-

155

-

155

(18)

137

Deferred tax on items above

-

-

-

-

-

-

-

-

-

(9)

(9)

Share of joint ventures & associates effective portion of cashflow hedges

-

-

-

-

-

-

(5,101)

-

(5,101)

-

(5,101)

Share of joint ventures & associates deferred tax on cashflow hedges

-

-

-

-

-

-

497

-

497

-

497

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

 

 

 

 

 

 

 

 

 

 

 

Revaluation gain on property, plant and equipment, net

-

-

-

-

-

1,624

-

-

1,624

471

2,095

Remeasurement loss on employee benefit schemes

-

-

-

-

-

-

-

(2,955)

(2,955)

          (54)

(3,009)

Deferred tax on items above

-

-

-

-

-

(520)

-

(26)

(546)

(420)

(966)

Share of joint ventures remeasurement loss on employee pension schemes

-

-

-

-

-

-

-

(2,601)

(2,601)

-

(2,601)

Share of joint ventures revaluation gains on property, plant and equipment

-

-

-

-

-

1,369

-

-

1,369

-

1,369

Share of joint ventures deferred tax on items above

-

-

-

-

-

-

-

(75)

(75)

-

(75)

Total other comprehensive income

-

-

-

-

3,863

2,473

(4,564)

(5,657)

(3,885)

1,614

(2,271)

Total comprehensive income

-

-

-

-

3,863

2,473

(4,564)

47,645

49,417

14,516

63,933

 

 

 

 

 

 

 

 

 

 

 

 

Transactions with equity holders of the parent

 

 

 

 

 

 

 

 

 

 

 

New shares issued

1

66

-

-

-

-

(20)

20

67

-

67

Non-controlling interest arising on acquisition of subsidiaries

-

-

-

-

-

-

-

-

-

959

959

Put option liability extinguished

-

-

-

-

-

-

11,657

-

11,657

-

11,657

Fair value movement on put option liability

-

-

-

-

-

-

(3,294)

-

(3,294)

-

(3,294)

Acquisition of non-controlling interests

-

-

-

-

-

-

-

(1,102)

(1,102)

(554)

(1,656)

Acquisition of non-controlling interests by a joint venture

-

-

-

-

-

-

-

(151)

(151)

-

(151)

Disposal of subsidiary

-

-

-

-

-

-

-

-

-

121

121

Dividends paid

-

-

-

-

-

-

-

(13,313)

(13,313)

(16,055)

(29,368)

Share-based payment transactions

-

-

-

-

-

-

109

-

109

-

109

Total transactions with equity holders of the parent

1

66

-

-

-

-

8,452

(14,546)

(6,027)

(15,529)

(21,556)

 

 

 

 

 

 

 

 

 

 

 

 

As at 31 December 2019

4,105

295,487

140

(8,580)

(18,699)

30,809

(151,017)

282,816

435,061

114,806

549,867

Transfer of NCI subject to put option for presentation purposes

-

-

-

-

-

-

16,038

-

16,038

(16,038)

-

As at 31 December 2019

4,105

295,487

140

(8,580)

(18,699)

30,809

(134,979)

282,816

451,099

98,768

549,867

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

 

 

Total Produce plc

Extract from the Group Statement of Changes in Equity

for the year ended 31 December 2019

 

                                               Attributable to equity holders of the parent

 

 

 

 

 

 

 

 

 

Share

capital

€'000

 

Share

premium

€'000

Undenom-inated

capital

€'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 2018 as presented in the Balance Sheet

3,468

150,763

140

(8,580)

(14,168)

28,035

(133,481)

233,632

259,809

79,774

339,583

 

Adjust for NCI subject to put option transferred for presentation purposes

-

-

-

-

-

-

(26,788)

-

(26,788)

26,788

-

 

As at 1 January 2018

3,468

150,763

140

(8,580)

(14,168)

28,035

(160,269)

233,632

233,021

106,562

339,583

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

Profit for the year

-

-

-

-

-

-

-

35,793

35,793

18,011

53,804

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

Items that may be reclassified subsequently to profit or loss:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation effects, net

-

-

-

-

(8,553)

-

154

-

(8,399)

922

(7,477)

 

Effective portion of cash flow hedges, net

-

-

-

-

-

-

248

-

248

92

340

 

Changes in fair value of cost of hedging, net

-

-

-

-

-

-

(14)

-

(14)

37

23

 

Deferred tax on items above

-

-

-

-

-

-

(63)

-

(63)

(34)

(97)

 

Share of joint ventures & associates effective portion of cashflow hedges

-

-

-

-

-

-

51

-

51

-

51

 

Share of joint ventures & associates deferred tax on cashflow hedges

-

-

-

-

-

-

696

-

696

-

696

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

Revaluation gain on property, plant and equipment, net

-

-

-

-

-

409

-

-

409

66

475

 

Remeasurement gain on employee benefit schemes

-

-

-

-

-

-

-

6,536

6,536

141

6,677

 

Deferred tax on items above

-

-

-

-

-

(108)

-

(1,065)

(1,173)

1

  (1,172)

 

Share of joint ventures remeasurement loss on employee benefit schemes

-

-

-

-

-

-

-

(1,867)

(1,867)

-

(1,867)

 

Share of joint ventures and associates deferred tax on items above

-

-

-

-

-

-

-

854

854

-

854

 

Total other comprehensive income

-

-

-

-

(8,553)

301

1,072

4,458

(2,722)

1,225

(1,497)

 

Total comprehensive income

-

-

-

-

(8,553)

301

1,072

40,251

33,071

19,236

52,307

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transactions with equity holders of the parent

 

 

 

 

 

 

 

 

 

 

 

 

New shares issued

636

144,658

-

-

-

-

(97)

(3,790)

141,407

-

141,407

 

Non-controlling interest arising on acquisition of subsidiaries

-

-

-

-

-

-

-

-

-

2,314

2,314

 

Recognition of put option liability on acquisition 

-

-

-

-

-

-

(896)

-

(896)

-

(896)

 

Fair value movement on put option liability

-

-

-

-

-

-

4,728

-

4,728

-

4,728

 

Acquisition of non-controlling interests

-

-

-

-

-

-

-

(388)

(388)

(723)

(1,111)

 

Disposal of shareholding to non-controlling interest

-

-

-

-

-

-

-

11

11

275

286

 

Contribution by non-controlling interest

-

-

-

-

-

-

-

-

-

130

130

 

Dividends paid

-

-

-

-

-

-

-

(13,062)

(13,062)

(10,638)

(23,700)

 

Share-based payment transactions

-

-

-

-

-

-

557

-

557

-

557

 

Total transactions with equity holders of the parent

636

144,658

-

-

-

-

4,292

(17,229)

132,357

(8,642)

123,715

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at 31 December 2018

4,104

295,421

140

(8,580)

(22,721)

28,336

(154,905)

256,654

398,449

117,156

515,605

 

Transfer of NCI subject to put option for presentation purposes

-

-

-

-

-

-

34,673

-

34,673

(34,673)

-

 

As at 31 December 2018 as presented in the Balance Sheet

4,104

295,421

140

(8,580)

(22,721)

28,336

(120,232)

256,654

433,122

82,483

515,605

 

 

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

 

Total Produce plc

 

Extract from the Group Statement of Cash Flows

 

for the year ended 31 December 2019

 

 

 

 

2019

€'000

2018

€'000

Net cash flows from operating activities before working capital movements

67,249

65,208

Movements in working capital

6,527

(20,265)

Net cash flows from operating activities (Note 11)

73,776

44,943

 

 

 

  Investing activities

 

 

Acquisition of subsidiaries

(6,683)

(2,496)

Cash assumed on acquisition of subsidiaries, net

2,308

3,833

Acquisition of, and investment in joint ventures and associates

(7,145)

(251,949)

Payments of contingent consideration

(11,103)

(7,009)

Acquisition of equity investments

(150)

-

Proceeds from disposal of joint ventures and associates

48

-

Proceeds from disposal of investments for resale

1,043

-

Cash derecognised on subsidiary becoming a joint venture

(191)

-

Disposal of investment in subsidiary to non-controlling interests

-

286

Acquisition of property, plant and equipment

(19,518)

(25,942)

Expenditure on computer software

(4,621)

(4,352)

Acquisition of intangible assets - brands

-

(19)

Development expenditure capitalised

(62)

(121)

Proceeds from disposal of property, plant and equipment and software - routine

678

797

Proceeds from disposal of investments and property - exceptional item

9,307

5,876

Dividends received from joint ventures and associates

10,652

10,908

Government grants received

106

11

 Net cash flows from investing activities

(25,331)

(270,177)

 

 

 

 Financing activities

 

 

Drawdown of borrowings

345,764

436,319

Repayment of borrowings

(333,211)

(329,766)

Lease payments

(17,902)

-

Proceeds from the issue of share capital, net

67

141,408

Capital element of finance lease repayments

-

(681)

Acquisition of non-controlling interests

(1,656)

(490)

Capital contribution by non-controlling interests

-

130

Dividends paid to non-controlling interests

(16,055)

(10,535)

Dividends paid to equity holders of the parent

(13,313)

(13,062)

 Net cash flows from financing activities

(36,306)

223,323

 

 

 

Net decrease in cash, cash equivalents and bank overdrafts

12,139

(1,911)

Net foreign exchange movement

1,149

5,671

Cash, cash equivalents and bank overdrafts at 1 January

92,739

88,979

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

106,027

92,739

       
 

 

 

Total Produce plc

Extract from the Summary Group Reconciliation of Net Debt

for the year ended 31 December 2019

 

2019

€'000

2018

€'000

 

 

 

 

 

Net decrease in cash, cash equivalents and bank overdrafts

12,139

(1,911)

 

Drawdown of borrowings

(345,764)

(436,319)

 

Repayment of borrowings

333,211

329,766

 

Capital element of finance lease repayments

-

681

 

Other movements on finance leases

-

(500)

 

Foreign exchange movement

(2,672)

1,666

 

Movement in net debt

(3,086)

(106,617)

 

Finance lease reclassified from net debt on adoption of IFRS 16*

1,636

-

 

Net debt at beginning of the year

(219,743)

(113,126)

 

Net debt at end of the period

(221,193)

(219,743)

 

 

Net debt is a non-IFRS measure which comprises bank deposits, cash and cash equivalents and current and non-current borrowings. For 2019 it excludes lease liabilities. The calculation is outlined on Note 12.

 

*As described in accounting policy and disclosures changes on pages 16 to 18, the Group has adopted IFRS 16 Leases with effect from 1 January 2019.

 

 

 

Total Produce plc

Selected explanatory notes for the Preliminary Results for the year ended 31 December 2019

 

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 2019 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 does not include all the information and disclosures required in the full statutory financial statements. The Group Financial Statements will be filed with the Company's annual return in the Companies Registration Office and circulated to shareholders in due course.

 

The information included has been derived from the Group Financial Statements which were approved by the Board of Directors on 4 March 2020. The auditors have reported on the financial statements for the year ended 31 December 2019 and their report was unqualified and did not contain any matters to which attention was drawn by way of emphasis. The financial information for the year ended 31 December 2018 represents an abbreviated version of the Group's statutory financial statements on which an unqualified audit report was issued and which have been filed with the Companies Registration Office. The financial information is presented in Euro, rounded to the nearest thousand where applicable.

 

 

Changes in accounting policy and disclosures

 

IFRS 16 Leases

The Group has initially adopted IFRS 16 Leases with effect from 1 January 2019.

 

IFRS 16 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 on the balance sheet. This will increase the Group's recognised assets and liabilities. 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. Lessor accounting remains similar to previous accounting policies. The Group has applied IFRS 16 using the modified retrospective approach on transition, under which the cumulative effect of initial application is recognised in equity as an adjustment to the opening balance of retained earnings, non-controlling interest and currency translation reserve at 1 January 2019. The comparative information for prior periods has not been re-stated. It is presented as previously reported under IAS 17 and related interpretations. The details of the changes in accounting policies are disclosed below:

 

Definition of a lease

Under IFRS 16 a contract is, or contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. On transition to IFRS 16, the Group used the practical expedient to grandfather the assessment of which contracts were leases and therefore applied IFRS 16 on transition only to those contracts that had previously been identified as leases.

 

Changes as a lessee

As a lessee, the Group previously classified leases as operating or finance leases based on whether the lease transferred substantially all of the risks and rewards of ownership. Under IFRS 16, the Group recognises right of use assets and lease liabilities for most leases on its balance sheet. However, the Group has elected not to recognise right of use assets and lease liabilities for some short-term leases and leases of low-value assets. The Group recognises the lease payments for these leases as an expense on a straight-line basis over the lease term.

 

Accounting policies applied in respect of leases

The Group recognises a right of use asset and a lease liability at the lease commencement date.

 

The right of use asset is initially measured at cost and subsequently at cost less accumulated depreciation and impairments and adjusted for certain remeasurements of the lease liability. The cost of the right of use asset includes the lease liability recognised, any initial direct costs, restoration costs and payments made on or before the lease commencement date less any lease incentives received. The right of use asset is depreciated on a straight line basis over the lower of the lease term and the useful life of the asset. Where the lease contains a purchase option and the lessee is reasonably certain to exercise the purchase option the asset is depreciated over the useful life of the asset. Right of use assets are subject to impairment testing.

 

The lease liability is initially measured as the present value of the lease payments to be made over the term of the lease, discounted using the rate implicit in the lease or, where this is not available, the Group's incremental borrowing rate. Lease payments include fixed and variable lease payments and amounts expected to be paid under residual value guarantees. Lease payments also include the exercise price of a purchase option where the Group is reasonably certain that they will exercise the option and also any termination costs associated with a lease where the lease term reflects the termination of the lease.

 

The lease liability is subsequently increased by the interest cost of the lease liability and decreased by lease payments made. The lease liability is remeasured when there is a change in future lease payments as a result of a change in an index or rate, a change in the amount expected to be paid under a residual value guarantee, or a change in the assessment of whether a purchase or termination option is reasonably expected to be exercised or not exercised. The Group has availed of the practical expedient not to separate lease components from any associated non-lease components for leases of plant and equipment and motor vehicles.

 

The Group has applied judgement in determining the lease term for leases where it is the lessee and the lease contract contains renewal and/or termination options. The assessment of whether the Group is reasonably certain to exercise such options impacts the lease term which in turn impacts the right of use asset and lease liability to be recognised.

 

Transition

At transition, for leases previously classified as operating leases under IAS 17, lease liabilities were measured as the present value of the remaining lease payments, discounted at the incremental borrowing rate at 1 January 2019. Right of use assets were measured at either:

·      their carrying amount if IFRS 16 had been applied since the commencement date, discounted using the incremental borrowing rate at 1 January 2019. The Group applied this approach for certain property leases; or

·      an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments. The Group applied this approach to all other leases.

 

The Group used the following practical expedients when applying IFRS 16 to leases previously classified as operating leases under IAS 17:

·      Applied the exemption not to recognise right of use assets and lease liabilities for leases with less than 12 months of a lease term.

·      Excluded initial direct costs from measuring the right of use asset at the date of initial application.

·      Used hindsight when determining the lease term if the contract contained options to extend or terminate the lease.

 

At transition, for leases previously classified as finance leases under IAS 17, the carrying amount of the right of use asset and lease liability at 1 January 2019 were determined at the carrying amount of the lease asset and lease liability under IAS 17 immediately before that date.

 

Impact on the financial statements

 

Impact on transition

On transition to IFRS 16, the Group recognised additional right of use assets, lease liabilities and restoration provisions with the difference being recognised in reserves. The impact on transition is summarised below:

                                                                                                                                                                                 1 January 2019

                                                                                                                                                                                                  €'000

Right of use assets                                                                                                                                                               115,336

Lease liabilities                                                                                                                                                                  (121,101)

Restoration provisions                                                                                                                                                              (905)

Investment in joint ventures and associates - Dole                                                                                                                (3,326)

Prepayments/accruals (net)                                                                                                                                                       1,513

Deferred tax asset                                                                                                                                                                        368

Retained earnings                                                                                                                                                                     6,937

Non-controlling interests                                                                                                                                                          1,337

Currency translation reserve                                                                                                                                                     (159)

 

When measuring lease liabilities for leases that were classified as operating leases, the Group discounted lease payments using its incremental borrowing rate at 1 January 2019. The weighted average rate applied was 2.6%.

 

The lease liabilities recognised at 1 January 2019 can be reconciled to the operating lease commitments as at 31 December 2018 as follows:

 

€'000

 

Operating lease commitment at 31 December 2018

86,583

 

Extension options reasonably certain to be exercised

59,416

 

Non-lease components

3,360

 

Commitments relating to low value and short-term leases

(997)

 

Lease contracts not commenced at 1 January 2019

(5,635)

 

Effect of discounting

(21,626)

 

Finance lease liabilities recognised at 31 December 2018

1,636

 

Lease liabilities at 1 January 2019

122,737

 

 

Impact on the income statement in 2019

For subsidiaries in relation to those leases previously classified as operating leases, under IFRS 16, the Group has recognised depreciation and interest costs instead of an operating lease expense. During the year to 31 December 2019 the Group recognised €18,576,000 of depreciation costs and €2,957,000 of interest costs from these leases. Under IAS 17 the operating lease cost associated with these leases would have been €19,777,000.

 

The Group's share of depreciation costs and of interest costs of joint ventures and associates from leases that would previously have been classified as operating leases amounted to €28,843,000 and €7,847,000 respectively. Under IAS 17 the Group's share of the operating lease cost associated with these leases would have been €34,482,000.

 

The net incremental impact on Group's profit after tax and non-controlling interests in the year was a decrease of €2,911,000.

 

The incremental impact of IFRS 16 on fully diluted and adjusted fully diluted earnings per share for 2019 was a decrease of €0.74 cent.

 

 

Impact on the balance sheet in 2019

As a result of initially applying IFRS 16, in relation to leases that were previously classified as operating leases, the Group recognised €111.2m of right of use assets and €118.6m of lease liabilities at 31 December 2019.

 

The carrying amount of right of use assets are as follows;

 

 Land and

 Plant and

 Motor

 

 

 buildings

 equipment

 vehicles

 Total

 

2019

2019

2019

2019

 

 €'000

 €'000

 €'000

 €'000

 

Carrying value at 1 January 2019

-

-

-

-

 

Arising on adoption of IFRS 16

105,372

5,920

4,044

115,336

 

Reclassification from PPE on adoption of IFRS 16

-

379

1,521

1,900

 

Arising on acquisition of subsidiaries

3,256

245

63

3,564

 

Arising on disposal of a business

(645)

-

-

(645)

 

Additions

8,095

1,070

2,925

12,090

 

Disposals

(427)

-

(370)

(797)

 

Depreciation

(15,003)

(1,822)

(2,428)

(19,253)

 

Exchange adjustment

826

(43)

54

837

 

Carrying value at 31 December 2019

101,474

5,749

5,809

113,032

 

 

 

The carrying amount of lease liabilities are as follows:

 

2019

€'000

 

 

Reclassification of finance leases on adoption of IFRS 16

1,636

Arising on adoption of IFRS 16

121,101

New leases arising in year

12,090

Arising on acquisition of a business

3,553

Arising on business disposals

(654)

Leases terminated

(610)

Lease payments

(20,897)

Interest

2,995

Foreign exchange movement

862

Balance at 31 December 2019

120,076

 

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

 

2019

2018

% change

2019

2018

% change

 

 

 

 

 

 

 

Brazilian Real

4.4996

4.4162

(1.9%)

4.5157

4.4440

(1.6%)

Canadian Dollar

1.4864

1.5288

2.8%

1.4599

1.5601

6.4%

Czech Koruna

25.6150

25.7000

0.3%

25.4080

25.7240

1.2%

Danish Kroner

7.4647

7.4530

(0.2%)

7.4717

7.4668

(0.1%)

Indian Rupee

78.7716

80.6220

2.3%

79.9301

79.5453

(0.5%)

Polish Zloty

4.2969

4.2601

(0.9%)

4.2551

4.2973

1.0%

Pound Sterling

0.8743

0.8849

1.2%

0.8506

0.8986

5.3%

Swedish Krona

10.5858

10.2695

(3.1%)

10.4778

10.2188

(2.5%)

US Dollar*

1.1173

1.1784

5.2%

1.1216

1.1445

2.0%

 

  *The average rate used in translating the results of Dole to Euro in 2019 was 1.1282.
 

 

3.

Revenue

 

Revenue

 

 

 

2019

€'000

2018

€'000

Group Revenue

     3,729,346

     3,727,591

Plus:

 

 

Share of revenue of joint ventures - Dole

1,821,400

692,239

Share of revenue of joint ventures - Other

632,934

622,295

Share of revenue of associates

75,687

74,447

Total share of revenue of joint ventures and associates

2,530,021

1,388,981

 

 

 

Less:

 

 

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

 

(86,172)

 

(73,082)

Total Revenue

6,173,195

5,043,490

 

1For calculation of Total Revenue which includes the 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.

 

4.          Segmental Analysis

 

 

The table below details a segmental breakdown of the Group's total revenue and adjusted EBITA for the years ended 31 December 2019 and 31 December 2018.

 

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 the Czech Republic, Poland, Scandinavia and the United Kingdom primarily involved in the procurement, marketing and distribution of fresh produce. Up to the middle of 2019 it also included a small healthfoods business that has been discontinued. 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.

 

-

Dole: This operating segment represents the Group's 45% interest in Dole. Dole is one of the world's leading producers, marketers and distributors of fresh fruit and vegetables. It has an iconic brand and leading market positions. It is one of the world's largest producers of bananas and pineapples and a leader in other fresh fruits, value added and fresh-packed vegetables and berries. In terms of market share they hold the number one and three positions respectively for bananas in North American and Europe and are number two and three respectively for pineapples in North America and Europe. They sell and distribute throughout a wide network in North America, Europe, Latin America, the Middle East and Africa.

 

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, unrealised gains or losses on derivative financial instruments, gains and losses on foreign currency denominated intercompany borrowings 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 2019

Year ended

31 December 2018

 

 

Segmental revenue €'000

Third party revenue

€'000

Adjusted

EBITA

€'000

 

Segmental revenue €'000

Third party revenue

€'000

Adjusted

EBITA

€'000

 

 

 

 

 

 

 

Europe - Non-Eurozone

1,502,653

1,477,276

40,610

1,511,780

1,482,600

41,593

Europe - Eurozone

1,638,341

1,614,081

21,780

1,716,584

1,695,773

27,252

International 

1,271,566

1,271,566

22,284

1,175,297

1,175,297

18,880

Dole(1)

1,821,400

1,810,272

65,440

692,239

689,820

10,297

Inter-segment revenue

(60,765)

-

-

(52,410)

-

-

Total Group

6,173,195

6,173,195

150,114

5,043,490

5,043,490

98,022

                                                                                                                                                 

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

(1) The Group's share of the adjusted EBITA of Dole above is after the deduction of the Group's share of the non-controlling interests charge within Dole and an allocation of corporate overhead.

 

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

2019

€'000

2018

€'000

Adjusted EBITA per management reporting

 

150,114

98,022

 

 

 

 

Acquisition related intangible asset amortisation in subsidiaries

(i)

(10,301)

(10,281)

Share of joint ventures and associates acquisition related intangible asset amortisation

 

(i)

 

(2,696)

 

(2,684)

Fair value movements on contingent consideration

(ii)

204

4,043

Acquisition related costs within subsidiaries

(iii)

(177)

(105)

Share of joint ventures and associates net financial expense

(iv)

(40,817)

(13,784)

Share of joint ventures and associates tax (before tax on exceptional items)

(iv)

(14,059)

(3,153)

Operating profit before exceptional items

 

82,268

72,058

Net financial expense before exceptional items

(v)

(10,967)

(7,365)

Profit before tax before exceptional items

 

71,301

64,693

Exceptional items (Note 5)

(vi)

5,232

5,125

Profit before tax

 

76,533

69,818

         

 

(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)

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.

(vi)

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

  

 

5.

Exceptional items

 

2019

€'000

2018

€'000

 

 

 

(Loss)/gain on disposal of investment (a)

(670)

14,728

Restructuring costs and costs associated with termination of a business (b)

(1,146)

(4,891)

Share of exceptional items within joint ventures & associates - Dole (c)

5,523

(4,580)

Foreign currency gains arising on foreign currency denominated intercompany borrowings relating to proceeds from share placing (d)

-

12,535

Impairment of goodwill (e)

-

(9,060)

Costs associated with the Dole transactions, net (f)

-

(3,225)

Charge on employee defined benefit obligations (g)

-

(1,304)

Total exceptional items (before share of joint ventures and associates' tax)

3,707

4,203

Share of joint ventures and associates' tax on exceptional items - Dole (c)

1,525

922

Exceptional items within profit before tax*

5,232

5,125

Net tax charge on exceptional items (h)

(47)

(1,395)

Total net of tax

5,185

3,730

 

 

 

Attributable as follows:

 

 

Equity holders of the parent

5,246

560

Non-controlling interests

(61)

3,170

 

5,185

3,730

       

 

*Of the €5.2m net exceptional credit in 2019, €1.8m has been recognised as net operating expense and €7.0m a net exceptional gain has been recognised within profits of joint ventures and associates. Of the €5.1m net exceptional gain in 2018, €9.5m has been recognised as net operating income, €3.7m has been recognised as a loss within joint ventures and associates and €0.7m recognised as an exceptional financial expense.

 

 

 

(a)     (Loss)/gain on disposal of equity/farming investment

 

In 2018 a subsidiary of the Group disposed of an interest in a farming entity for consideration of shares in an equity investment which was to be realised over a period of two to three years and could vary depending on certain circumstances. The exceptional loss of €0.7m in 2019 represents the gain on the equity investments sold in the year less the fair value movement on the remaining equity investment and any associated costs. The exceptional gain of €14.7m in 2018 represented the gain on the disposal of the investments that were received at that date, the fair value movement on the investment held in escrow at 31 December 2018 and net of all associated costs.

 

 

 

(b)    Restructuring costs and costs associated with termination and disposal of businesses

 

In the second half of 2019, the Group incurred losses of €0.6m on the disposal of and termination of two small businesses in the Non-Eurozone Division. Restructuring charges of €0.5m were incurred in the year on ongoing restructuring programs in the Eurozone Division.

 

In the second half of 2018, the Group ceased operations in a non-performing sports supplements business in the UK. The total costs associated with the termination of this business were €2.3m including the write off of fixed assets, intangible assets, other assets and redundancies. The Group implemented restructuring programmes in a number of entities primarily within the Eurozone Division in late 2018 with the €2.6m of costs associated with these programmes being recorded as an exceptional cost in the income statement.

 

 

 

(c)     Share of exceptional items within joint ventures and associates - Dole

The Group's share of the exceptional items in Dole in 2019 was a net gain of €5.5m (5 month period ended 29 December 2018 was a loss of €4.6m). The share of the associated tax credit was €1.5m (2018: €0.9m).

 

Included in these exceptional items are net gains of €11.8m (2018: €nil) on disposals of businesses/assets, net gains of €0.1m (2018: €nil) on mark to market of derivative financial instruments and foreign currency gains/losses on long term foreign currency denominated intercompany borrowings, net restructuring charges of €4.1m (2018: €2.5m), transaction costs of €0.6m (2018: €0.6m) and costs of €1.7m (2018: €1.5m) associated with industry wide product recalls.

 

 

 

(d)    Foreign currency gains on foreign currency intercompany borrowings relating to proceeds from share placing

In February 2018 the Group issued 63 million new ordinary shares, raising proceeds of €141m (net of associated costs) to finance the Dole transaction. The net proceeds from this share placing were used, via an intercompany loan, to purchase US Dollars in February. The strengthening of the US Dollar from the date of purchase to when the intercompany loan was converted to equity in August 2018 following the completion of the acquisition of Dole resulted in a foreign currency gain of €12.5m.

 

 

 

(e)     Impairment of goodwill

In December 2018 the Group recognised a non-cash impairment charge of €9.1m in relation to its fresh produce business in the Netherlands which have experienced a difficult trading environment resulting in a slower recovery than had been anticipated.

 

 

(f)     Costs associated with the Dole transactions, net

 

Costs associated with the committed financing and other transaction costs associated with Dole net of interest income on the proceeds of share placing were €0.9m in the period to 30 June 2018 and totalled €3.2m in the year ended 31 December 2018.

 

 

 

(g)     Charge on employee benefit obligations

In December 2018, a charge of €1.3m relating to the UK defined benefit pension schemes was recognised in the income statement as a result of the UK High Court ruling that pension benefits must be equalised in respect of Guaranteed Minimum Pensions (GMPs) accrued between 17 May 1990 and 5 April 1997.

 

 

(h)    Tax credit / (charge) on exceptional items

The net tax effect on the exceptional items above was a net charge of less than €0.1m (2018: a charge of €1.4m).  

Effect of exceptional items on cash flow statement

The net effect of the items above was a net cash inflow of €5.8m in the year (2018: €3.0m) including cashflows relating to prior period exceptional items.

 

 

 

6.

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.

 

2019

€'000

2018

€'000

Profit attributable to equity holders of the parent

53,302

35,793

 

 

 

 

'000

'000

Shares in issue at beginning of year

410,429

346,829

New shares issued from exercise of share options (weighted average)

51

275

New shares issued from share placing (weighted average)

-

56,786

Shares repurchased by company (weighted average)

(2)

-

Effect of treasury shares held

(22,000)

(22,000)

Weighted average number of shares

388,478

381,890

 

 

 

Basic earnings per share - cent

13.72

9.37

         

 

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.

 

2019

€'000

2018

€'000

Profit attributable to equity holders of the parent

53,302

35,793

 

 

 

 

'000

'000

Weighted average number of shares

388,478

381,890

Effect of share options with a dilutive effect

817

1,257

Weighted average number of shares (diluted)

389,295

383,147

 

 

 

Diluted earnings per share - cent

13.69

9.34

 

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 believe that adjusted fully diluted earnings per share as set out below provides a fairer reflection of the underlying trading performance of the Group after eliminating the effect of acquisition related intangible asset amortisation charges and costs, fair value movements on contingent consideration, unrealised gains or losses on derivative financial instruments, gains and losses on foreign currency denominated intercompany borrowings 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 of 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.

 

 

2019

€'000

2018

€'000

Profit attributable to equity holders of the parent                                

53,302

35,793

 

 

 

Adjustments:

 

 

Exceptional items - net of tax (Note 5)

(5,185)

(3,730)

Acquisition related intangible asset amortisation within subsidiaries

10,301

10,281

Share of joint ventures and associates acquisition related intangible asset amortisation

2,696

2,684

Acquisition related costs within subsidiaries

177

105

Fair value movements on contingent consideration

(204)

(4,043)

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

 

(3,188)

 

(805)

Non-controlling interests share of the items above

(2,915)

1

Adjusted profit attributable to equity holders of the parent

54,984

40,286

 

 

 

 

'000

'000

Weighted average number of shares

388,478

381,890

Weighted average number of shares (diluted)

389,295

383,147

 

 

 

Adjusted basic earnings per share - cent

14.15

10.55

Adjusted fully diluted earnings per share - cent

14.12

10.51

Adjusted fully diluted earnings per share (pre-IFRS 16 leases) - cent (calculation presented

on page 35)

 

14.86

 

10.51

 

 

 

Memo item for 2018

 

 

Adjusted fully diluted earnings per share - cent (excluding the effect of the Dole acquisition and related share placing

 

n/a

 

13.50

 

 

 

*The calculation presented here is the adjusted fully diluted earnings per share calculating excluding the impact of the Dole acquisition and the related 63 million related share placing in early February 2018.
 

7.

Investment in Dole

 

As disclosed previously, on 31 July 2018 the Group completed the transaction to acquire a 45% stake in Dole Food Company ('Dole') for $300m. 

 

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'). 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 closing 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 nine times the preceding 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 acquisition of the First Tranche, in the event the Group has not exercised its right to acquire 100% of Dole, Mr. David H. Murdock is permitted to cause a process to market and sell 100% of Dole common stock.

 

On completion of the acquisition of the First Tranche on 31 July 2018, the Group and Mr. David H. Murdock have balanced governance rights with respect to Dole. The Board of Directors of Dole comprises of six members, three of which are appointed by Total Produce and three by Mr. David H. Murdock. Mr. David H. Murdock remains Chairman of Dole and Mr. Carl McCann was appointed Vice Chairman. Major decisions require consent of at least one Board Member appointed by each of Total Produce and Mr. David H. Murdock.

 

The investment in Dole and its financial contribution is being treated as a joint venture and accounted for under the equity method in accordance with IFRS in the consolidated Group accounts following completion of the acquisition of the First Tranche on 31 July 2018 and until an exercise of the Third Tranche.

 

Total Produce is therefore equity accounting for its 45% share of the results of Dole with effect from 1 August 2018. The overall business is seasonal with the greater share of EBITDA in the first half of the financial year. The 2019 financial year is therefore the first full year reflecting this transaction.

 

The table below summarises the consideration paid and fair value of the net identifiable assets of Dole on acquisition as prepared in accordance with IFRS.  The initial assignment of fair values to net assets for this investment was performed on a provisional basis in respect of this acquisition given the timing of completion of the transaction and could be finalised within twelve months from the acquisition date. A number of adjustments were identified and are presented in the table below. There was no income statement impact from these adjustments in the period from date of acquisition to 31 December 2018. Given that the adjustments are all equity accounted for within investment in joint ventures and associates on the Balance Sheet, no adjustment was required in the Total Produce Group Balance Sheet. 

 

 

Updated within 12-month period

 

Provisional acquisition accounting

 

 

2018

2018

 

2018

2018

Consideration paid

US$'000

€'000

 

US$'000

€'000

Cash consideration

300,000

256,208

 

300,000

256,208

Acquisition fees (net of contribution from Dole) (a)

1,605

1,370

 

1,605

1,370

Fair value of Second Tranche Option (b)

(4,940)

(4,218)

 

(4,940)

(4,218)

Total cost of acquisition

296,665

253,360

 

296,665

253,360

Fair value of indemnification assets on acquisition(c)

(4,106)

(3,507)

 

(4,106)

(3,507)

Total deemed cost of acquisition

292,559

249,853

 

292,559

249,853

 

 

 

 

 

 

Fair value identifiable assets and liabilities on acquisition

 

 

 

 

 

Intangible assets - Brand

287,033

245,135

 

287,033

245,135

Property, plant and equipment

1,007,623

860,539

 

1,007,623

860,539

Assets held for sale / Actively marketed property

185,178

158,148

 

185,178

158,148

Other non-current assets

104,541

89,281

 

104,541

89,281

Other current assets

868,558

741,774

 

868,558

741,774

Net debt

(1,342,601)

(1,146,621)

 

(1,342,601)

(1,146,621)

Employee benefit obligations

(183,532)

(156,742)

 

(183,532)

(156,742)

Other current liabilities

(599,132)

(511,676)

 

(599,132)

(511,676)

Other non-current liabilities

(282,197)

(241,005)

 

(286,085)

(244,325)

Non-controlling interests

(7,978)

(6,813)

 

(7,978)

(6,813)

Fair value of identifiable assets and liabilities on acquisition

37,493

32,020

 

33,605

28,700

 

 

 

 

 

 

 Group 45% share of identifiable assets & liabilities on acquisition

16,872

14,409

 

15,122

12,915

Goodwill arising

275,687

235,444

 

277,437

236,938

             

 

 

(a) As part of the Securities Purchase Agreement, Dole agreed to contribute $15m to cover professional and advisory fees relating to the transaction.

 

 

(b) As part of the provisions of acquisition accounting, a fair value was determined for the Second Tranche Option which is recognised as a current derivative financial asset in the Total Produce Group balance sheet and correspondingly reduces the deemed cost of the acquisition of the First Tranche. The fair value of the Third Tranche Option was not deemed material at the date of acquisition.

 

 

(c) As part of the Securities Purchase Agreement, the seller provided indemnities against certain liabilities outstanding at the date of acquisition. The fair value of these indemnities was recognised as a long-term asset in the Total Produce Group balance sheet with a corresponding reduction in the deemed cost of the acquisition.

 

 

 

Summary of financial information for year ended 28 December 2019

 

 

 

 

 

The following is the summarised financial information of Dole for the year ended 28 December 2019 and the 5-month period ended 29 December 2018 based on consolidated financial statements prepared under IFRS, modified for fair value adjustments on acquisition and differences in the Group's accounting policies.

 

 

 

 

 

Summary income statement for year ended 28 December 2019 (in USD'000)

 

 

 

 

 

 

 

 

 

Year ended 28 December 2019

 

5 months ended 29 December 2018

 

 

 

 

 

 

 

 

 

US$'000

US$'000

US$'000

 

US$'000

US$'000

US$'000

 

Pre-exceptional

Exceptional

Items

 

Total

 

Pre-exceptional

Exceptional

Items

 

Total

 

 

 

 

 

 

 

 

 Revenue

4,566,354

-

4,566,354

 

1,766,625

-

1,766,625

 

 

 

 

 

 

 

 

 Operating profit

173,790

13,846

187,636

 

27,252

(11,689)

15,563

 Net finance expense

(78,369)

-

(78,369)

 

(32,349)

-

(32,349)

 Leasing interest -IFRS 16

(19,284)

-

(19,284)

 

-

-

-

 Profit/(loss) before tax

76,137

13,846

89,983

 

(5,097)

(11,689)

(16,786)

 Income tax

(25,477)

3,823

(21,654)

 

(812)

2,352

1,540

 Profit/(loss) for period

50,660

17,669

68,329

 

(5,909)

(9,337)

(15,246)

 Non-controlling interests

(2,205)

-

(2,205)

 

(974)

-

(974)

Profit/(loss) for period attributable to equity shareholders

 

48,455

 

17,669

 

66,124

 

 

(6,883)

 

(9,337)

 

(16,220)

 

 

 

 

 

 

 

 

Groups' 45% share of profit/(loss) attributable to equity shareholders

21,805

7,951

29,756

 

(3,097)

(4,202)

(7,299)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Summary of other comprehensive income statement for the for year ended 28 December 2019 (in USD'000)

 

 

 

 

 

 

2019

 

 

 

 

 

 

US$'000

 

 

 

US$'000

 

 

Effective portion of cashflow hedges, net of recycling

       (12,753)

 

 

 

239

 

 

Remeasurement loss on employee benefit schemes

         (6,459)

 

 

 

(4,764)

 

 

Revaluation gain on property, plant and equipment

            3,411

 

 

 

-

 

 

Deferred tax on items above

1,048

 

 

 

3,927

 

 

Foreign currency translation effects

(8,015)

 

 

 

(7,908)

 

 

Remeasurement loss on employee benefit schemes

(22,768)

 

 

 

(8,506)

 

 

 Non-controlling interests share

-

 

 

 

-

 

 

Attributable to equity shareholders

(22,768)

 

 

 

(8,506)

 

 

 

 

 

 

 

 

 

 

 

 

Group's 45% share of other comprehensive expense attributable to equity shareholders

(10,246)

 

 

 

(3,828)

 

                               

 

 

 

 

 

 

 

 

 

 

 

 

 

Summary income statement for year ended 28 December 2019 (in €'000)

 

 

 

 

 

12 months ended 28 December 2019

 

5 months ended 29 December 2018

 

 

 

 

 

 

 

 

 

€'000

€'000

€'000

 

€'000

€'000

€'000

 

Pre-exceptional

Exceptional

Items

 

Total

 

Pre-exceptional

Exceptional

items

 

Total

 

 

 

 

 

 

 

 

 Revenue

4,047,555

-

4,047,555

 

1,538,309

-

1,538,309

 

 

 

 

 

 

 

 

 Operating profit

154,044

12,274

166,318

 

23,730

(10,178)

13,552

 Net finance expense

(69,465)

-

(69,465)

 

(28,168)

-

(28,168)

 IFRS 16 leasing interest

(17,093)

-

(17,093)

 

-

-

-

 Profit/(loss) before tax

67,486

12,274

79,760

 

(4,438)

(10,178)

(14,616)

 Income tax

(22,582)

3,388

(19,194)

 

(707)

2,048

1,341

 Profit/(loss) for period

44,904

15,662

60,566

 

(5,145)

(8,130)

(13,275)

 Non-controlling interests

(1,954)

-

(1,954)

 

(848)

-

(848)

Profit/(loss) for period attributable to  equity shareholders

 

42,950

 

15,662

 

58,612

 

 

(5,993)

 

(8,130)

 

(14,123)

 

 

 

 

 

 

 

 

Groups' 45% share of profit/(loss)  attributable to equity shareholders

19,327

7,048

26,375

 

(2,697)

(3,658)

(6,355)

 

 

Summary of other comprehensive income statement for year ended 28 December 2019 (in €'000)

 

 

 

 

 

 

 

 

 

 

 

2019

 

 

 

2018

 

 

 

 

€'000

 

 

 

€'000

 

 

 

 

 

 

 

 

Effective portion of cashflow hedges, net of recycling

(11,414)

 

 

 

208

 

Remeasurement loss on employee benefit schemes

(5,781)

 

 

 

(4,148)

 

Revaluation gain on property, plant and equipment

3,041

 

 

 

-

 

Deferred tax on items above

938

 

 

 

3,419

 

Foreign currency translation effects

  (7,174)

 

 

 

(6,885)

 

Effective portion of cashflow hedges, net of recycling

(20,389)

 

 

 

(7,406)

 

Non-controlling interests share

-

 

 

 

-

 

Attributable to equity shareholders

(20,390)

 

 

 

(7,406)

 

 

 

 

 

 

 

 

 

 

Group's 45% share of other comprehensive expense attributable to equity shareholders

(9,175)

 

 

 

(3,333)

 

 

 

Key performance indicators for the year ended 28 December 2019

 

 

 

 

 

 

 

 

Year-ended  

28 December

5 months ended

29 December

 

Year-ended   

28 December

5 months ended

29 December

 

 

2019

2018

2019

2018

 

 

US$'000

US'000

€'000

€'000

 

 

 

 

 

 

 

Adjusted EBITDA (adding back depreciation of right of use assets)

307,724

n/a

272,762

n/a

 

Adjusted EBITDA

245,013

59,449

217,176

51,675

 

Adjusted EBITA

173,790

27,252

154,045

23,730

 

                     

  

 

Impact of IFRS 16 on Dole

 

Impact on transition

As explained in Note 1, the Group has adopted IFRS 16 Leases using the modified retrospective approach, with the date of initial application of 1 January 2019. On transition to IFRS 16, the Group recognised additional right of use assets, lease liabilities and restoration provisions with the difference being recognised in reserves. The impact on transition in Dole is summarised as follows:

 

 

 

 

2019

 

 

US$'m

 

Right of use assets

315

 

Lease liabilities

(325)

 

Prepaid/deferred rent (net)

(1)

 

Deferred tax asset

3

 

Retained earnings

8

 

 

 

 

Impact for the period ended 28 December 2019

 

 

As a result of applying IFRS 16 to leases that were previously classified as operating leases, the Group has recognised depreciation and interest costs instead of an operating lease expense. During the year ended 28 December 2019, Dole recognised US$63m of depreciation costs and US$18m of interest costs from these leases. Under IAS 17 the operating lease costs associated with these leases would have been US$76m.

 

Right of use assets

 

The following is a reconciliation of the total right of use lease assets in the year in Dole;

 

 

 

2019

 

 

 

US$'m

 

 

Opening balance at 29 December 2018

-

 

 

Reclassification of assets held under finance leases from property, plant and equipment on adoption

  of IFRS 16

 

21

 

 

Arising on adoption of IFRS 16

315

 

 

Additions, disposals, foreign exchange (net)

14

 

 

Depreciation charge to income statement

(62)

 

 

Depreciation capitalised as crop growing costs

(9)

 

 

Closing value at 28 December 2019

279

 

 

 

Lease liabilities

 

 

The following is a reconciliation of the total right of use liabilities in the year in Dole.

 

 

2019

 

 

US$'m

 

Opening balance at 29 December 2018

-

 

Reclassification of finance leases on adoption of IFRS 16

22

 

Arising on adoption of IFRS 16

325

 

Payments during period

(90)

 

Interest charge to income statement

20

 

Interest expense capitalised as crop growing costs

3

 

Additions, disposals, foreign currency (net)

14

 

Closing value at 28 December 2019

294

 

 

 

 

Summary Balance Sheet of Dole at 28 December 2019

 

 

 

 

 

 

 

 

 

 

2019

2018*

 

2019

2018*

 

 

US$'000

US$'000

 

€'000

€'000

 

 

 

 

 

 

 

 

Intangible assets - Brand

285,540

286,299

 

254,592

250,155

 

Property, plant and equipment

1,069,546

1,045,465

 

953,622

913,477

 

Right of use assets

279,068

-

 

248,821

-

 

Assets held for sale / Actively marketed property

64,760

102,730

 

57,741

89,760

 

Other non-current assets

107,753

113,058

 

96,074

98,784

 

Other current assets

862,588

863,439

 

769,096

754,431

 

Net debt

(1,287,328)

(1,349,976)

 

(1,147,800)

(1,179,545)

 

Lease liabilities

(294,034)

-

 

(262,165)

-

 

Employee benefit obligations

(175,059)

(185,734)

 

(156,085)

(162,286)

 

Other non-current liabilities

(238,636)

(261,258)

 

(212,771)

(228,275)

 

Other current liabilities

(617,365)

(592,726)

 

(550,452)

(517,892)

 

Non-controlling interests

(9,170)

(8,531)

 

(8,176)

(7,454)

 

Fair value of net assets attributable to equity shareholders

47,663

12,766

 

42,497

11,155

 

 

 

 

 

 

 

 

Group 45% share of net assets

21,448

5,745

 

19,124

5,020

 

Goodwill

275,687

275,687

 

245,769

240,861

 

Total carrying amount of 45% interest in Dole

297,135

281,432

 

264,893

245,881

 

 

 

 

 

 

*As explained on page 24, the fair value of the net identifiable assets on Dole were revised and finalised with twelve months from the acquisition date.

 

 

 

 

 

Reconciliation of Group's carrying value of investment in Dole

 

 

                 

 

 

2019

2018

 

2019

2018

 

US$'000

US$'000

 

€'000

€'000

 

 

 

 

 

 

Opening carrying value of 45% interest in Dole at start of year

281,432

-

 

245,881

-

Retained earnings adjustment on transition to IFRS 16

(3,807)

-

 

(3,326)

-

Arising on acquisition

-

292,559

 

-

249,853

Group share of profit for period attributable to equity shareholders

29,756

(7,299)

 

26,375

(6,355)

Group share of other comprehensive expense for period attributable to equity shareholders

 

(10,246)

 

(3,828)

 

 

(9,175)

 

(3,333)

Foreign exchange movement

-

-

 

5,138

5,716

Total carrying value of 45% interest in Dole at end of year

297,135

281,432

 

264,893

245,881

 

 

8.

Employee benefit obligations

 

 

 

 

 

2019

€'000

2018

€'000

Employee defined benefit pension schemes obligations

(10,828)

(10,941)

Other post-employment obligations

(5,908)

(5,023)

 

(16,736)

(15,964)

       

 

Employee defined benefit pension schemes

 

 

 

2019

€'000

2018

€'000

Pension assets

192,227

168,766

Pension obligations

(203,055)

(179,707)

Net liability at end of year

(10,828)

(10,941)

Net related deferred tax asset

1,479

1,889

Net liability after tax at end of year

(9,349)

(9,052)

 

 

 

Analysis of movement in the year

 

 

Net liability at beginning of year

(10,941)

(16,707)

Net interest expense and service costs recognised in the income statement

(1,677)

(2,035)

Exceptional charge in the income statement

-

(1,304)

Employer contributions to schemes - normal

4,866

2,693

Remeasurement gains recognised in other comprehensive income

(2,683)

6,323

Translation adjustment

(393)

89

Net liability at end of year before deferred tax

(10,828)

(10,941)

 

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 2019 reflects net pension liabilities of €10.8m (2018: €10.9m) in respect of schemes in deficit, resulting in a net deficit of €9.3m (2018: €9.1m) 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.

 

On 26 October 2018, the UK High Court ruled (in a landmark case relating to the Lloyds Banking Group's pension schemes) that pension benefits must be equalised in respect of Guaranteed Minimum Pensions (GMPs) accrued between 17 May 1990 and 5 April 1997. The calculation of the GMP equalisation adjustment required is complex with each pension having to be equalised. In 2018, the Group engaged the services of an actuary to perform a preliminary estimate of the impact of GMP, and the estimated charge of €1.3m was recognised as a past service cost in the 2018 income statement and classified as an exceptional item.

 

The pension deficit of €10.8m at 31 December 2019 was a marginal reduction on the deficit of €10.9m at 31 December 2018. There was an 11% average return on pension scheme assets in the year and a reduction in both the Irish and UK inflation assumptions which decreases the net present value of the scheme's obligations. This was offset by the impact of a reduction in the discount rates for the Irish and UK schemes which results in an increase in the net present value of the schemes' obligations.  The discount rate in Ireland and the Eurozone decreased to 1.4% (2018: 2.1%) and in the UK decreased to 2.0% (2018: 2.9% - 3.0%). The inflation assumption for Ireland and the Eurozone decreased to 1.4% (2018: 1.60%) and in the UK decreased to 2.7% (2018: 3.2%).

 

9.

Dividends

 

2019

€'000

2018

€'000

Dividends paid on Ordinary Euro 1 cent shares

 

 

Final dividend for 2018 of 2.5140 cent (2017: 2.4527 cent)

9,767

9,517

Interim dividend for 2019 of 0.9129 cent per share (2018: 0.9129 cent)

3,546

3,545

Total dividend paid in the year

13,313

13,062

 

 

 

Total dividend per share paid in the year

3.4269

3.3656

 

The Board is proposing a 2.5% increase in the final dividend to 2.5770 cent per share (2018: 2.5140 cent), subject to approval at the forthcoming AGM. If approved, this dividend will be paid on 20 May 2020 to shareholders on the register at 14 April 2020 subject to dividend withholding tax. The total dividend for 2019 will amount to 3.4899 (2018: 3.4269) cent per share and represents an increase of 1.8% on 2018. In accordance with IFRS, this dividend has not been provided for in the Balance Sheet at 31 December 2019.

 

During the year dividends of €16,055,000 (2018: €10,535,000) were paid to non-controlling interests.

       

  

10.

Businesses acquired and other developments in 2019

 

Investments in subsidiaries

A key part of the Group's strategy is to grow by acquisition. During the year, the Group made a number of bolt-on acquisitions and investments in the fresh produce sector in Europe with committed investment of €8.3m including €1.5m of contingent consideration payable on the achievement of future profit targets and deferred consideration of €0.1m. Goodwill arising on these acquisitions amounts to €3.6m. The principal factor contributing to the recognition of the 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. 

 

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

 

2019

€'000

2018

€'000

 

Consideration paid and payable

 

 

 

Cash consideration

6,683

2,496

 

Contingent consideration

1,461

1,126

 

Deferred consideration

114

-

 

Total fair value of consideration

8,258

3,622

 

 

 

 

 

Identifiable assets acquired and liabilities assumed

 

 

 

Property, plant and equipment

1,054

2,422

 

Right of use assets

3,564

-

 

Investment property

-

223

 

Intangible assets  

3,015

904

 

Inventories

590

945

 

Trade and other receivables

9,859

9,794

 

Cash, and cash equivalents

2,308

3,833

 

Lease liabilities

(3,553)

-

 

Corporation tax

58

(92)

 

Trade and other payables

(10,921)

(11,007)

 

Deferred tax asset

74

55

 

Deferred tax liability

(398)

(130)

 

Fair value of net identifiable assets and liabilities acquired

5,650

                   6,947

 

 

 

 

 

Non-controlling interests arising on acquisition

 

 

 

Non-controlling interests measured at fair value

-

157

 

Non-controlling interests measured at share of net assets

959

2,157

 

Total value of non-controlling interests arising on acquisition

959

                       2,314

 

 

 

 

 

Goodwill calculation

 

 

 

Fair value of consideration

8,258

3,622

 

Fair value of pre-existing interest in acquiree

-

2,760

 

Fair value of net identifiable assets and liabilities acquired

(5,650)

(6,947)

 

Non-controlling interest arising on acquisition

959

2,314

 

Goodwill arising

3,567

1,749

 

 

 

 

 

Cash flows relating to acquisition of subsidiaries

 

 

 

 

2019

2018

 

 

€'000

€'000

 

Cash consideration for acquisition of subsidiary undertakings

(6,683)

(2,496)

 

Cash, cash equivalents and bank overdrafts acquired

2,308

3,833

 

Cash (outflow)/inflow per statement of cash flows

(4,375)

1,337

 

 

 

 

 

The Group incurred acquisition related costs of €177,000 on legal and professional fees and due diligence in respect of completed acquisitions. These costs have been included within operating expenses in the year.

 

Payment of contingent and deferred consideration

In 2019, the Group paid €11.1m contingent consideration relating to prior period acquisitions. 

 

Investments in joint ventures and associates

In 2019, the Group invested €1.7m in existing joint ventures and associates.

         

  

11.        Cash generated from operations

 

 

 

2019

€'000

2018

€'000

Operating activities

 

 

Profit for the year

66,204

53,804

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

 

 

Income tax expense

10,329

16,014

Income tax paid

(15,154)

(13,349)

Depreciation of property, plant and equipment

17,773

17,194

  Depreciation of right of use assets

19,253

-

  Exceptional items

1,816

(9,450)

  Exceptional cash flow

(3,489)

(2,884)

  Fair value movements on contingent consideration

(204)

(4,043)

  Amortisation of intangible assets - acquisition related

10,301

10,281

Amortisation of intangible assets - development costs capitalised

238

267

Amortisation of intangible assets - computer software

2,046

1,397

Amortisation of government grants

(63)

(75)

Defined benefit pension scheme expense - normal

1,677

2,035

Contributions to defined benefit pension schemes - normal

(4,866)

(2,693)

Other post-employment benefit scheme expense

451

442

Contributions - other employee benefit schemes

(249)

(168)

Share-based payment expense

109

557

Net gain on disposal of property, plant and equipment

(313)

(492)

Currency recycled to income statement on joint venture becoming subsidiary

-

90

Movement in provisions

(489)

-

Fair value gain on investments

(854)

-

Financial income

(2,754)

(3,704)

Financial expense

13,721

11,736

Financial income received excluding exceptional items

2,005

2,245

Financial expense paid excluding exceptional items

(13,149)

(9,418)

Gain on non-hedging derivative financial instruments

(115)

(59)

Loss on termination of IFRS 16 leased assets

146

-

Gain on disposal of joint venture

(88)

-

Fair value movements on biological assets

666

(6)

Share of profit of joint ventures

(37,033)

(2,330)

Share of profit of associates

(666)

(2,183)

Net cash flows from operating activities before working capital movements

67,249

65,208

Movements in working capital:

 

 

Movements in inventories

(6,091)

1,179

Movements in biological assets

530

(851)

Movements in trade and other receivables

27,342

(23,571)

Movements in trade and other payables

(15,254)

2,978

Total movements in working capital

6,527

(20,265)

Net cash flows from operating activities

73,776

44,943

 

 

12.

Analysis of Net Debt and Cash and Cash Equivalents

 

 

Net debt is a non-IFRS measure which comprises cash and cash equivalents and current and non-current interest-bearing loans and borrowings. For 2019 it excludes leases liabilities. For 2018 it includes finance lease liabilities. The calculation of net debt at 31 December 2019 and 31 December 2018 is as follows:

 

 

 

 

2019

€'000

2018

€'000

Current assets

 

 

Cash and cash equivalents

99,445

91,099

Call deposits (demand balances)

16,084

11,200

Current liabilities

 

 

Bank overdrafts

(9,502)

(9,560)

Current bank borrowings

(76,648)

(48,658)

Current finance leases

-

(468)

Non-current liabilities

 

 

Non-current bank borrowing

(250,572)

(262,188)

Non-current finance leases

-

(1,168)

Net debt at end of year

(221,193)

(219,743)

 

 

 

Average net debt

Average net debt for 2019 was €284,019,000 (2018: €217,114,000).

 

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 €46,409,000 (2018: €29,967,000) has been derecognised at 31 December 2019.

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

 

 

 

 

2019

€'000

2018

€'000

 

 

 

 

 

Cash and cash equivalents per balance sheet

115,529

102,299

 

Bank overdrafts

(9,502)

(9,560)

 

Cash, cash equivalents and bank overdrafts per cash flow statement

106,027

92,739

 

           

 

 

 

13.

Post balance sheet events

 

 

There have been no other material events subsequent to 31 December 2019 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 2018 Annual Report that materially affect the financial position or the performance of the Group for the year ended 31 December 2019.

 

 

 

 

15.

   Board approval

 

 

 

 

This announcement was approved by the Board of Directors of Total Produce plc on 4 March 2020.

 

       

 

 

Alternative Performance Measures (APM's)

 

The Group uses a number of alternative performance measures ('APMs') that are not required under International Financial Reporting Standards ('IFRS') which represent the generally accepted accounting principles ('GAAP') under which the Group reports. These measures are referred to throughout the discussion of our reported operating performance and financial position and are measures which are regularly reviewed by Group management. The Group believes that the presentation of these APM's provide useful supplementary information which, when viewed with the IFRS financial information provides investors with a more meaningful understanding of the underlying financial and operating performance of the Group. 

 

These APM's may not be uniformly defined by all companies and accordingly they may not be directly comparable with similarly titled measures and disclosures by other companies. These APM's should not be viewed in isolation or as an alternative to the equivalent GAAP measures.

 

The principal APM's used by the Groups together with the reconciliation where the non-GAAP measures are not readily identifiable from the financial statements are as follows;

 

Total revenue

Definition

Total revenue includes the Group's share of the revenue of its joint ventures and associates. The calculation is presented in Note 3 of the accompanying financial information.

 

Adjusted EBITDA

Definition

Earnings before interest, tax, depreciation on property, plant and equipment, acquisition related intangible asset amortisation charges and costs, fair value movements on contingent consideration, unrealised gains or losses on derivative financial instruments, gains and losses on foreign currency denominated intercompany borrowings and exceptional items. It also excludes the Group's share of these items within joint ventures and associates. The calculation is presented in the table below.

 

Adjusted EBITDA (after add back of right of use asset depreciation)

Definition

Earnings before interest, tax, depreciation on property, plant and equipment, depreciation on right of use assets, acquisition related intangible asset amortisation charges and costs, fair value movements on contingent consideration, unrealised gains or losses on derivative financial instruments, gains and losses on foreign currency denominated intercompany borrowings and exceptional items. It also excludes the Group's share of these items within joint ventures and associates. The calculation is presented in the table below.

 

Adjusted EBITA

Definition

Earnings before interest, tax, acquisition related intangible asset amortisation charges and costs, fair value movements on contingent consideration, unrealised gains or losses on derivative financial instruments, gains and losses on foreign currency denominated intercompany borrowings and exceptional items. It also excludes the Group's share of these items within joint ventures and associates. The calculation is presented in the table below.

                                                                                       

Adjusted profit before tax

Definition

Excludes acquisition related intangible asset amortisation charges and costs, fair value movements on contingent consideration, unrealised gains or losses on derivative financial instruments, gains and losses on foreign currency denominated intercompany borrowings and exceptional items. It also excludes the Group's share of these items within joint ventures and associates. The calculation is presented in the table below.

     

   

  

Alternative Performance Measures (APM's) (continued)

 

 

 

Calculation

Reference in Preliminary FS

2019

2018

 

€'000

€'000

Profit before tax per income statement

Income Statement

76,533

69,818

 

 

 

 

Adjustments

 

 

 

Exceptional items

Note 5

(5,232)

(5,125)

Fair value movements on contingent consideration

Note 4

(204)

(4,043)

Share of joint ventures and associates' tax (before tax on exceptional items)

Note 4

14,059

3,153

Acquisition related intangible asset amortisation within subsidiaries

Note 4

10,301

10,281

Share of joint ventures and associates acquisition related intangible asset amortisation 

Note 4

2,696

2,684

Acquisition related costs within subsidiaries

Income Statement

177

105

Adjusted profit before tax

 

98,330

76,873

 

 

 

 

Exclude

 

 

 

Net financial expense - subsidiaries before exceptional items

Income Statement

10,967

7,365

Net financial expense - share of joint ventures and associates

Note 4

40,817

13,784

Adjusted EBITA

 

150,114

98,022

 

 

 

 

Exclude

 

 

 

Amortisation of software costs

 

2,046

1,397

Depreciation of property, plant and equipment   - subsidiaries

 

17,773

17,194

Depreciation of property, plant and equipment - share of joint ventures and associates

 

32,870

16,679

Adjusted EBITDA

 

202,803

133,292

 

 

 

 

Exclude

 

 

 

Depreciation of right of use assets - subsidiaries

 

19,253

-

Depreciation of right of use assets - share of joint ventures and associates

 

29,115

-

Adjusted EBITDA (before depreciation on right of use assets)

 

251,171

133,292

 

Adjusted fully diluted earnings per share

Definition

Excludes acquisition related intangible asset amortisation charges and costs, fair value movements on contingent consideration, unrealised gains or losses on derivative financial instruments, gains and losses on foreign currency denominated intercompany borrowings, exceptional items and related tax on such items. It also excludes the Group's share of these items within joint ventures and associates. The calculation is outlined in Note 6.

      

  

Alternative Performance Measures (APM's) (continued)

 

Adjusted fully diluted earnings per share (pre-IFRS 16 Leases)

Definition

As noted in changes in accounting policies on pages 16 to 18, the Group adopted IFRS 16 Leases with effect from 1 January 2019.

 

The Group has applied IFRS 16 using the modified retrospective approach on transition, under which the cumulative effect of initial application is recognised in equity as an adjustment to the opening balance of retained earnings, non-controlling interest and currency translation reserve at 1 January 2019. The comparative information for prior periods has not been re-stated. It is presented as previously reported under IAS 17 and related interpretations. Therefore, for ensure comparability, the Group presents below the calculation of adjusted fully diluted earnings per share, as if IFRS 16 had not been applied for the current year.

 

 

Calculation

Reference in Preliminary FS

2019

2018

 

€'000

€'000

Adjusted profit attributable to equity holders of the parent

Note 6

54,984

40,286

Effect of IFRS 16 Leases on adjusted profits on equity holders of the parent

Note (a)

2,882

-

Adjusted profit attributable to equity holders of the parent (pre-IFRS 16 Leases)

 

57,866

40,286

 

 

 

 

Weighted average number of shares (diluted)

Note 6

389,295

383,147

Adjusted profit attributable to equity holders of the parent (pre-IFRS 16 Leases)

 

14.86

10.51

 

(a)  See change in accounting policies on pages 16 and 18 for quantification of impact of application of IFRS 16 on the reported results in 2019.

 

 

Effective tax rate calculation

Definition

The Group's effective tax rate expresses the Group's income tax expense (including the share of joint ventures and associates) before tax impact of exceptional items and goodwill and intangible asset amortisation as a percentage of the Group's adjusted profit before tax.

 

 

Calculation

Reference in Preliminary FS

2019

2018

 

€'000

€'000

Income tax expense

Income Statement

10,329

16,014

Group share of tax charge of joint ventures and associates

 

12,534

2,231

Total tax charge

 

22,863

18,245

 

 

 

 

Adjustments

 

 

 

Deferred tax credit on amortisation of intangible assets - subsidiaries

 

2,623

(1,190)

Deferred tax credit on amortisation of intangible assets - share of joint ventures and associates

 

565

460

Deferred tax charge on fair value movements on contingent consideration

 

-

1,535

Tax charge on exceptional items in subsidiaries

Note 5

(47)

(1,395)

Group share of tax charge on exceptional items within joint ventures and associates

Note 5

1,525

922

Tax charge on underlying activities

 

      27,529 

18,577 

 

Adjusted profit before tax 

See above

      98,330 

76,873

 

 

 

 

Effective tax on underlying activities

 

28.0%

24.2%

 

Net debt

Definition

Net debt is a non-IFRS measure which comprises bank deposits, cash and cash equivalents and current and non-current borrowings. For 2019 it excludes lease liabilities. For 2018 it also includes finance leases liabilities. The calculation is outlined in Note 12.

 

  

Alternative Performance Measures (APM's) (continued)

 

Routine capital expenditure and non-routine capital expenditure

Definition

Routine capital expenditure is cash spend on property, plant, and equipment and software (which under IFRS is classified within intangible assets) less proceeds on disposal of property, plant and equipment and any expenditure classified as non-routine or development capital expenditure

 

Calculation

Reference in

Preliminary FS

2019

2018

 

€'000

Acquisition of property, plant and equipment

Cashflow statement

19,518

25,942

Acquisition of intangible assets - computer software

Cashflow statement

4,621

4,352

Proceeds on disposal of property, plant and equipment - routine

Cashflow statement

(678)

(797)

Non-routine (development capital expenditure)

Note (a)

(4,470)

(7,376)

Routine capital expenditure

 

      18,991 

22,121

 

(a)  Non-routine capital expenditure is expenditure on projects to grow the business and generally relate to fit out of new facilities or extending the capacity of existing facilities.

 

 

Adjusted operating cashflow

Definition

Adjusted operating cashflow is the operating cashflow generated from operations as reported in the Group Cashflow Statement before cash outflows associated with exceptional items less lease liability payments and development loans provided to joint ventures and associates.

 

Calculation

Reference in

Preliminary FS

2019

2018

 

€'000

€'000

Net cashflow from operating activities per cashflow statement

Cashflow Statement

73,776

44,943

Cash impact of exceptional items in operating cashflows

Note 11

 3,489

2,884

Loans to joint ventures and associates

Note (a)

-

5,111

Less lease liability payments

Cashflow Statement

(17,902)

-

Adjusted operating cashflow

 

      59,363  

52,938

 

Note (a) - in 2018, the Group provided a loan of €5,111,000 to a joint venture of the Group to fund a development project. In the statutory cashflow statement this was recorded as a trade and other receivables outflow.

 

 

Free Cash Flow

Definition

Free Cash flow is defined by the Group as the funds available after outflows relating to routine capital expenditure, dividends paid to non-controlling interests but before acquisition related expenditure (including loans advanced to joint ventures an associates), development capital expenditure and the payment of dividends to equity shareholders.

 

Calculation

Reference in

Preliminary FS

2019

2018

 

€'000

€'000

Net cashflow from operating activities per cashflow statement

Cashflow Statement

73,776

  44,943

Cash impact of exceptional items in operating cashflows

Note 11

 3,489

2,884

Loans to joint ventures and associates

See previous note

-

5,111

Less lease liability payments

Cashflow Statement

(17,902)

-

Dividends received from joint ventures and associates

Cashflow Statement

10,652

10,908

Dividends paid to non-controlling interests

Cashflow Statement

(16,055)

(10,535)

Routine capital expenditure

Cashflow Statement

(18,991)

(22,121)

Free Cashflow

 

34,969

31,190

         

 

 

Alternative Performance Measures (APM's) (continued)

 

Acquisition related expenditure, net

Definition

Acquisition related expenditure is cash outflows in respect of acquisition and investment in subsidiaries, joint ventures and associates, non-controlling interests and is net of contributions from non-controlling interests and proceeds on disposal of shares to non-controlling interests.

 

Calculation

Reference in Preliminary FS

2019

2018

 

€'000

€'000

Cash outflow relating to investment in joint ventures and associates

Cashflow Statement

7,145

  251,949

Investment in subsidiaries

Note 10

6,683

      2,496

Proceeds from disposal of joint venture

Cashflow Statement

(48)

-

Loans to joint ventures and associates

Note (a)

-

5,111

Disposal of investment in subsidiary to non-controlling interest

Cashflow Statement

-

(286)

Acquisition of non-controlling interests

Cashflow Statement

1,656

490

Capital contribution by non-controlling interests

Cashflow Statement

-

(130)

Proceeds on disposal of equity investments

Cashflow Statement

(1,043)

-

Acquisition of equity investments

Cashflow Statement

150

-

Acquisition related expenditure

 

    14,543  

259,630

 

Note (a) - in 2018, the Group provided a loan of €5,111,000 to a joint venture of the Group to fund a development project. In the statutory cashflow statement this was recorded as a trade and other receivables outflow.

 

 

 


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Total Produce continues strong growth in 2019 - RNS