Overview of the economic activities
Management commentary
The first new financial year has come to the end. We would like to remind you that as we moved to a new financial year, the last full reporting period was 18 months. The current financial year which began on 01.07.2018 lasts for 12 months, as usual, and ends on 30.06.2019. It is important to keep that in mind when comparing the company’s results with previous periods.
The last financial year was ground-breaking for PRFoods. We acquired two companies, one in Finland and the other in Great Britain, which resulted in the Group’s turnover growing more than two times. After balance sheet date we also acquired a majority shareholding in RedStorm OÜ, a company operating in fish farming and processing in Estonia. PRFoods’ focus on raw material remains unchanged and we concentrate on farming and production of salmonoids. Our production portfolio was increased mostly in premium fish and raw fish segments.
During the new financial year, we aim at capitalizing on synergies of the Group via unifying internal processes and increasing efficiency, along with directing additional resources to more aggressive marketing. As a new route, we started fish farming operations in Estonia, in addition to Finland and Sweden. The aim is both to reduce the dependency on raw material as well as to offer better products from local and fresh fish. The company has applied for farming licences of up to 10,000 tonnes of rainbow trout in Estonian seashore. In case we could acquire all the licences, our farming volumes would increase fourfold, significantly influencing stability of deliveries and profitability. We are happy to announce that the first Estonian-farmed 100 tonnes of rainbow trout has been of exceptional quality.
The Group has made investments in order to keep up with customer preferences and the EU legislative norms regarding packaging requirements in food industry and environmental standards. We are to adopt recyclable packages in the Estonian production facilities already in 2019 and during years 2020-2021 in other factories. Our aim is to use 100% recyclable or biodegradable materials. Last year we also implemented solar energy usage in the production facilities in Finland and also made necessary investments in Estonia.
All these activities are important for us – for not only to be one of the most modern and responsible fish processers in Estonia, but also in Finland and Great Britain, securing thereby a long-term trust of consumers and also to increase the value of our products in the eyes of consumers, our employees and partners.
PRFoods pro forma 18-months 2017/2018 annual year closed with total turnover of 154.6 million euros and 7.3 million euros of EBITDA from operations (EBITDA incl. revaluation of biological assets and one-offs from transactions was 5.7 million euros). Net profit amounted to 0.7 million euros.
Consolidated results of the 18 months of 2017/2018 were following:
- Consolidated turnover 118.50 million euros, an increase by +149.8%, i.e. +71.07 million euros.
- Gross margin 12.4%, increase by 3.9 percentage points.
- Negative effect from revaluation of biological assets -0.52 million euros (12 months 2016: positive effect +2.26 million euros).
- Effect of one-offs on the result -1.08 million euros (12 months 2016: negative effect of -0.40 million euros).
- EBITDA from operations +5.80 million euros, an increase by +5.05 million euros.
- EBITDA +4.19 million euros, an increase by +1.58 million euros (EBITDA without the effect of one-offs +5.27 million euros, an increase by +2.26 million euros).
- Operating profit +1.49 million euros, an increase by +0.11 million euros (operating profit without the effect of one-offs +2.57 million euros, an increase by +0.79 million euros).
- Net profit 0.06 million euros, a decrease by -0.66 million euros (net profit without the effect of one-offs +1.14 million euros, an increase +0.02 million euros).
Even though the results are satisfactory and correspond to the expectations of the management, the significant increase in the price of raw material had to be taken into account. The management anticipates the price of salmonoids to hold its level in short- and mid-term as demand substantially exceeds supply. Due to this, we aim to considerably increase fish farming capacity and intend to increase farming volumes by 4 times across the regions.
We also incurred one-off restructuring costs, affecting positively our results only in future periods (relocating Coln Valley production to Aberdeen). Following the growth of the Group, additional personnel was employed in support functions (IT, finances), rearrangements were also made in sales and marketing, where a more centralized structure was applied.
The balance sheet of PRFoods remains strong. Net debt to EBITDA ratio is 3, net debt levels at 18.1 million euros, and equity is 23.3 million euros.
The management is satisfied with the results of 18 months, we thank our customers and partners and hope to remain one of the most inspirational employers in the industry. We look forward to 2019 as it is the first year, when the whole Group operates on the new grounds, one-time costs of restructurings should be lower, and rapid investments into production and equipment should speed up the time of bringing modern products to market. Our own fish farming is to reveal a great perspective.
The management of PRFoods proposes to pay a dividend of 1 euro sent per share from the retained profit.
KEY RATIOS
| Profit & Loss, EUR mln | 18m 2017/2018 | 12m 2016 | 12m 2015 | 12m 2014 | 12m 2013 |
| Sales | 118.5 | 47.4 | 50.3 | 45.9 | 43.4 |
| Gross profit | 14.7 | 4.0 | 6.8 | 5.3 | 4.2 |
| EBITDA from operations | 5.8 | 0.8 | 2.9 | 0.4 | 0.3 |
| EBITDA | 4.2 | 2.6 | 2.0 | 0.5 | 1.3 |
| EBIT | 1.5 | 1.4 | 0.9 | -0.6 | 0.2 |
| EBT | 0.5 | 1.1 | 1.1 | -1.4 | -0.8 |
| Net profit (-loss) | 0.1 | 0.7 | 1.2 | -1.5 | -0.9 |
| Gross margin | 12.4% | 8.5% | 13.5% | 11.5% | 9.6% |
| Operational EBITDA margin | 4.9% | 1.6% | 5.8% | 0.8% | 0.8% |
| EBITDA margin | 3.5% | 5.5% | 4.0% | 1.1% | 3.0% |
| EBIT margin | 1.3% | 2.9% | 1.7% | -1.3% | 0.4% |
| EBT margin | 0.4% | 2.4% | 2.1% | -3.0% | -1.7% |
| Net margin | 0.05% | 1.5% | 2.3% | -3.3% | -2.0% |
| Operating expense ratio | 10.5% | 10.1% | 10.8% | 13.4% | 12.8% |
| | |||||
| Balance Sheet, EUR mln | 30.06.2018 | 31.12.2016 | 31.12.2015 | 31.12.2014 | 31.12.2013 |
| Net debt | 18.1 | 0.3 | -0.6 | -2.6 | 13.2 |
| Equity | 23.3 | 23.8 | 23.2 | 33.7 | 37.3 |
| Working capital | 2.8 | 12.4 | 11.4 | 22.6 | 9.9 |
| Assets | 65.5 | 35.1 | 29.5 | 40.4 | 63.8 |
| Liquidity ratio | 1.1 | 2.4 | 3.7 | 5.6 | 1.6 |
| Equity ratio | 35.6% | 67.9% | 78.8% | 83.3% | 58.4% |
| Gearing ratio | 43.7% | 1.2% | -2.5% | -8.3% | 26.1% |
| Net debt-to-EBITDA from operations | 3.1 | 0.4 | -0.2 | -7.0 | 38.0 |
| ROE | 0.2% | 3.0% | 4.1% | -4.2% | -2.4% |
| ROA | 0.1% | 2.2% | 3.4% | -2.9% | -1.4% |
Consolidated statement of financial position
| EUR '000 | 30.06.2018 | 31.12.2016 |
| ASSETS | ||
| Cash and cash equivalents | 5,960 | 4,374 |
| Receivables and prepayments | 4,706 | 4,056 |
| Inventories | 12,678 | 5,393 |
| Biological assets | 6,498 | 7,584 |
| Total current assets | 29,842 | 21,407 |
| Deferred tax assets | 153 | 230 |
| Long-term financial investments | 134 | 103 |
| Tangible assets | 12,764 | 7,285 |
| Intangible assets | 22,604 | 6,031 |
| Total non-current assets | 35,655 | 13,649 |
| TOTAL ASSETS | 65,497 | 35,056 |
| EQUITY AND LIABILITIES | ||
| Loans and borrowings | 12,562 | 3,716 |
| Accounts payable and prepayments | 14,254 | 5,131 |
| Government grants | 216 | 162 |
| Total current liabilities | 27,032 | 9,009 |
| Loans and borrowings | 11,487 | 940 |
| Deferred tax liabilities | 2,441 | 747 |
| Government grants | 1,226 | 551 |
| Total non-current liabilities | 15,154 | 2,238 |
| TOTAL LIABILITIES | 42,186 | 11,247 |
| Share capital | 7,737 | 7,737 |
| Share premium | 14,007 | 14,007 |
| Treasury shares | -390 | -256 |
| Statutory reserve capital | 48 | 12 |
| Currency translation reserve | 7 | 428 |
| Retained profit (loss) | 1,904 | 1,883 |
| Equity attributable to parent | 23,313 | 23,809 |
| Non-controlling interests | -2 | 0 |
| TOTAL EQUITY | 23,311 | 23,809 |
| TOTAL EQUITY AND LIABILITIES | 65,497 | 35,056 |
Consolidated statement of profit or loss and other comprehensive income
| EUR '000 | 18m 2017/2018 | 12m 2016 |
| Sales | 118,499 | 47,429 |
| Cost of goods sold | -103,811 | -43,410 |
| Gross profit | 14,688 | 4,019 |
| Operating expenses | -12,423 | -4,785 |
| Selling and distribution expenses | -8,841 | -3,346 |
| Administrative expenses | -3,582 | -1,439 |
| Other income | 1,059 | 399 |
| Other expenses | -1,309 | -517 |
| Fair value adjustment on biological assets | -524 | 2,263 |
| Operating profit (-loss) | 1,491 | 1,379 |
| Financial income / expenses | -1,024 | -238 |
| Profit (-loss) before tax | 467 | 1,141 |
| Income tax expenses | -410 | -426 |
| Net profit (-loss) | 57 | 715 |
| Net profit (-loss) attributable to: | ||
| Owners of the company | 59 | 715 |
| Non-controlling interests | -2 | 0 |
| Total net profit (-loss) | 57 | 715 |
| Other comprehensive income (-expense) that might be subsequently classified to profit or loss: | ||
| Foreign currency translation differences | -421 | -43 |
| Total comprehensive income (-expense) | -364 | 672 |
| Total comprehensive income (-expense) attributable to: | ||
| Owners of the parent company | -362 | 672 |
| Non-controlling interests | -2 | 0 |
| Total comprehensive income (-expense) for the period | -364 | 672 |
| Profit (-loss) per share (EUR) | 0.00 | 0.02 |
| Diluted profit (-loss) per share (EUR) | 0.00 | 0.02 |
Indrek Kasela
AS PRFoods
Member of the Management Board
Phone: +372 452 1470
investor@prfoods.ee
www.prfoods.ee
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