Source - RNS
RNS Number : 7595I
Fyffes PLC
02 September 2016
 

 

 

 

Fyffes reports positive first half result and reconfirms full year targets

 

 

·    Continuation of earnings growth in first half - adjusted EBITDA up 11.3%

·    Reconfirms strong full year target earnings ranges as follows:

o Adjusted EBITDA - €63m - €69m

o Adjusted EBITA - €49m - €55m

o Adjusted EPS - 12.8 cent - 14.5 cent

·    Completion of €99m acquisition of Highline Produce in period

·    10% increase in interim dividend

 

 

 

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

 

"Fyffes is maintaining its strong full year target earnings ranges, which were increased in April 2016 following the Highline acquisition. The result for the first half of the year was satisfactory given the difficult prevailing market conditions, including adverse currency movements as a result of the weakness of Sterling and the euro against the US Dollar.  The Group was very pleased to complete the purchase of Canadian mushroom business, Highline Produce, during the period.  Highline has performed in line with our expectations for the three-month period post acquisition.  The first half results in the Group's other product categories were in line with the same period last year in aggregate, with strong performances in the pineapple and melon categories."

 

 

The financial terms used above are defined below and exclude exceptional items.

 

 

2 September 2016

 

 

Forward looking statement

Any forward looking statements made in this press release have been made in good faith based on the information available as of the date of this press release and are not guarantees of future performance. Actual results or developments may differ materially from the expectations expressed or implied in these statements, and the company undertakes no obligation to update any such statements whether as a result of new information, future events, or otherwise. Fyffes 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.

 

 

For further information, please view the 2016 interims results slide presentation at www.fyffes.com
or contact Brian Bell at Wilson Hartnell PR, Tel: +353-1-6690030.



 

Fyffes plc Interim Results for six months ended 30 June 2016

 

 

Financial highlights

 

 

 

6 months to 30 June 2016

6 months to 30 June 2015

Change

%

 

 

 

 

Total revenue (incl share of joint ventures)

739.3m

644.3m

+14.7%

Group revenue (excl share of joint ventures)

630.5m

540.6m

+16.6%

EBITDA*

44.0m

39.5m

+11.3%

EBITA*

36.6m

34.3m

+6.6%

Diluted earnings per share*

10.01 cent

9.93 cent

+0.8%

Interim dividend per share

0.9032 cent

0.8211 cent

+10%

 

 

 

 

*Key performance measures:

 

·     Adjusted EBITDA is earnings before interest, tax, depreciation and amortisation, excluding the Group's share of Balmoral's result and exceptional items where applicable

·     Adjusted EBITA is adjusted EBITDA less depreciation charges

·     Adjusted diluted earnings per share excludes exceptional items, amortisation charges and related tax charges or credits, and in previous years, the Group's share of Balmoral's result

 

 

 

 

 

Copies of this announcement are available from the Company's registered office, 29 North Anne Street, Dublin 7 and on our website at www.fyffes.com.



 

Financial results and operating review

 

Revenue

 

Total revenue, including the Group's share of its joint ventures, increased by 14.7% in the first half of the year to €739.3m.  Group revenue, excluding Fyffes' share of its joint ventures, amounted to €630.5m in the period, an increase of 16.6%.  The increase in turnover in the period included the first time contribution from Highline, for the three-months post acquisition.  In addition, the Group achieved volume growth in each of its existing product categories in the period, including the first time contribution from the additional melon farming assets acquired at the end of 2015.  There was also some price inflation in each of these product categories.

 

Operating profit

 

Fyffes has delivered another satisfactory performance in the first half, with Adjusted EBITDA in the period €4.5m higher (+11.3%), at €44.0m, and Adjusted EBITA up €2.3m (+6.6%) to €36.6m.  Excluding the first time contribution from the Highline acquisition, Adjusted EBITA in the first half was in line with the same period last year.  This represents a good result for the period with strong performances in the pineapple and melon categories offsetting the impact of the relatively difficult market conditions experienced in the banana category. The calculations of Adjusted EBITA and Adjusted EBITDA are set out in note 3 of the accompanying financial information.

Trading conditions in the banana category were challenging during the first half of 2016, mainly due to the further strengthening of the US Dollar against Sterling and the euro.  In response, Fyffes has secured some price increases to date but this has been insufficient to offset the impact of the adverse exchange rates and the Group therefore continues to pursue further price increases in all markets.  Partly offsetting this, costs have been lower year on year, particularly for fuel.  The Group has also continued to grow its banana business organically, with a satisfactory mid-single digit percentage increase in volumes in the period.

 

Fyffes pineapple operations achieved a strong result in the first six months of the year. As in the banana category, exchange rates were a head wind in the period but, as a lower proportion of the Group's pineapple volumes are sold in the UK market compared to the banana category, the negative movement in the Sterling/US Dollar exchange rate had a somewhat less adverse impact.  The Group also secured price increases in some markets and benefited from lower fuel costs.  The Group's pineapple farms performed well in the period, with higher yields and lower production costs.  Total volumes sold increased by a strong mid-teens in percentage terms in the period.

 

Fyffes US melon business delivered a strong result in the first half.  Volumes increased by more than 20% as a result of the successful integration of the additional farming assets in Guatemala which the Group acquired in late 2015.  Costs were higher as a result of this expansion in business, including the hiring of additional shipping capacity and the impact of wider sales distribution throughout the US market, including the West Coast. 

 

Fyffes was very pleased to complete the acquisition of 100% of the equity of Canadian mushroom business, Highline Produce, in April 2016 for a consideration of c.€99m.  Highline has performed in line with our expectations to date and contributed EBITA of €2.3m in the first three-months post acquisition.

 

Balmoral International Land Holdings plc ("Balmoral"), in which the Group has a 40% shareholding, has not yet reported its 2015 results.  Fyffes share of its net assets therefore remain unchanged at €3.4m and the Group continues to carry its investment in Balmoral €50,000.  Fyffes may revisit this accounting approach if there is evidence of a continued and sustained improvement in Balmoral's performance when it publishes its 2015 results.

 

The total operating profit for the Group, which is Adjusted EBITA less the Group's share of joint ventures interest and tax, amortisation charges and exceptional items, amounted to €36.5m for the first half, 17.1% up on the same period last year, mainly due to the exceptional credit in 2016 compared to an exceptional charge last year (see below).  The Group incurred amortisation charges of €1.3m in the period in respect of the intangible assets recognised on recent acquisitions, including Highline.  There were no amortisation charges in the prior year.

Exceptional items

As further explained below, the Group realised a €3.6m curtailment gain as a result of the agreement reached with the trustees of its UK defined benefit pension scheme to close the scheme to future accrual.  The Group incurred professional and advisory fees amounting to €1.9m in the period arising from financial and commercial due diligence and related work in connection with a number of acquisitions completed in the period, including Highline.  Net exceptional credits in the first half therefore amounted to €1.7m.  A tax charge of €0.7m has been recognised in relation to this net exceptional gain.  The Group recognised a €2.9m exceptional charge in the first half of 2015 in respect of a fine paid by a joint venture business following the conclusion of a long running EU competition investigation relating to a period before Fyffes had invested in that business.

 

Financial expense

 

Net financial expense in the Group's subsidiary companies in the first half amounted to €0.9m, compared to €0.3m in the same period last year, reflecting the increase in net debt following the Highline acquisition.  The Group's share of the net financial expense of its joint ventures in the period was €0.2m, compared to €0.1m in the previous year.

 

Profit before tax

 

Adjusted profit before tax for the first half of the year amounted to €35.5m, 4.5% up on the same period last year.  As set out in note 3 of the accompanying financial information, adjusted profit before tax excludes exceptional items, amortisation charges and the Group's share of the tax charge of its joint ventures, which is reflected in profit before tax under IFRS rules, and, in previous years, the Group's share of Balmoral's result.  Profit before tax, excluding these adjustments, amounted to €35.6m, up 15.4% on first half in 2015.

 

Taxation

 

The underlying tax charge for the first half has been calculated based on the tax rate expected to apply for the full year 2016.  An analysis of the tax charge for the period is set out in note 5 of the accompanying financial information.  The underlying tax charge for the period, including the Group's share of the tax charge of its joint ventures and excluding the tax impact of exceptional items, was €5.3m compared to €4.4m in the same period last year, equivalent to a rate of 15% (2015 first half: 13%), when applied to the Group's adjusted profit before tax.  This underlying rate is used for the purposes of calculating adjusted earnings per share.  The equivalent underlying tax rate for the full year in 2015 was 13.8%.   The increase in the underlying tax rate in 2016 mainly reflects the change in the geographic mix of the Group's profits following the acquisition of Highline.

 

Non-controlling interests

 

The non-controlling interests' share of profit after tax for the year amounted to a credit of €0.2m in the first half of 2016, compared to a credit of €0.3m in the same period last year.

 

Earnings per share

 

Adjusted diluted earnings per share amounted to 10.01 cent in the first half, an increase of 0.8% on the same period last year.  This reflects the 4.5% increase in adjusted profit before tax, less the impact of the higher tax charge and a c.1% increase in the number of shares in issue in the period.  The calculation of adjusted earnings per share is set out in note 6 of the accompanying financial information.  It excludes exceptional items, the amortisation of intangible assets and the related tax impacts and, in previous years, the Group's share of Balmoral's result.  Diluted earnings per share after exceptional items and amortisation charges amounted to €9.94 cent, up 10.8% on the same period last year mainly due to there being a net credit on exceptional items in 2016 compared to an exceptional charge in the prior year.

 



 

Dividends and share buyback

 

The Board is proposing to pay an interim dividend for 2016 of 0.9032 cent per share, an increase of 10% on the previous year, ahead of the increase in earnings per share in the period.  This dividend, which will be subject to Irish withholding tax rules, will be paid on 7 October 2016 to shareholders on the register on 16 September 2016.  In accordance with company law and IFRS, this dividend has not been provided for in the balance sheet at 30 June 2016.  At its AGM in April 2016, shareholders renewed the Group's authority to repurchase up to 10% of the shares in issue.  Subject to this authority and taking into account the Group's financial position and other investment opportunities, the Company may from time to time repurchase further Fyffes plc shares in the market.

 

Balance sheet

 

Net debt

Net debt increased by c.€60m in the first half of 2016 to €99.1m.  The Group invested €92.2m on acquisitions completed in the period, including Highline, net of cash in these businesses.  Cash generated by operations amounted to €38.2m, representing Adjusted EBITDA of €44.0m less the share of joint ventures earnings and after acquisition costs treated as exceptional items.  Regular capital expenditure in the period amounted to a relatively high €14.3m as the Group bought out a significant number of shipping containers which it had previously been leasing.  Other significant outflows in the period included dividend payments of €5.7m, tax payments of €3.6m and deferred acquisition consideration of €1.1m.  There was a €22.8m inflow from working capital in the first half mainly related to the timing of the ending of the US melon import season. As usual, this will reverse in the second half of the year as the Group reinvests in planting new product ahead of the start of the next melon import season which commences towards the end of the year. As a result, net debt at year end will be significantly higher than at the end of the half year. The Group has sufficient committed financial resources available to fund its operations into the future.

 

Pension obligations

During the first half of the year, following agreement with the trustees and members, the Group closed its defined benefit pension scheme in the UK to future accrual.  This gave rise to a €3.6m curtailment gain, which has been included in the income statement as an exceptional item.  The aggregate deficit in the Group's defined benefit pension schemes has now reduced to €21.3m, before deferred tax, at 30 June 2016 from €32.1m at the previous year end.  This reduction in the deficit also reflects an increase in asset values in the period, a positive translation impact and is net of an increase in scheme liabilities arising from the further decrease in international bond rates.  The Group has made significant progress in limiting and reducing its exposure in relation to its pension obligations, having also closed its defined benefit pension scheme in Ireland to future accrual in 2015 and subsequently eliminating the full deficit in that scheme.

 

Shareholders' funds

Shareholders' funds increased by €27.3m (12.8%) in the first half to €241.2m.   This increase included retained profits after tax and non-controlling interests of €30.1m, translation losses on the Group's non-euro denominated net assets of €6.7m, gains of €6.6m on revaluing the Group's outstanding currency and fuel hedging instruments at 30 June 2016 and a €2.5m actuarial gain on the Group's pension schemes, less dividend payments of €5.7m.

 

Outlook

 

The Group is pleased to reconfirm its target full year 2016 earnings ranges, which represent strong increases in respect of each of the following key measures of performance:

           

            Adjusted EBITDA                    €63m-€69m (2015: €56.1m)

            Adjusted EBITA                       €49m-€55m (2015: €45.8m)

            Adjusted EPS                            12.8 cent - 14.5 cent (2015: €12.73 cent)

 

Fyffes continues to pursue increases in selling prices in all markets to offset continuing adverse exchange rates.  The Group remains confident about its future prospects and is well placed to compete strongly in its key markets.

 

 

 

David McCann, Chairman                                                                              2 September 2016

on behalf of the Board



 

Fyffes plc

Condensed Group Income Statement

 


(Unaudited)
6 months to
30 June 2016
€'000

(Unaudited)
6 months to
30 June 2015
€'000

(Audited)
Year ended
31 Dec 2015
€'000





Revenue including share of joint ventures

739,343

644,339

1,222,549





Group revenue

630,512

540,578

985,292





Group operating profit

32,208

33,836

44,156

Share of profit of joint ventures after tax

3,838

199

356

Intangible amortisation

(1,254)

-

-

Share of profit/(loss) of associates after tax (Balmoral)

-

-

-

Exceptional items (incl share of joint ventures)

1,689

(2,875)

(11,978)





Operating profit

36,481

31,160

32,534

Net financial expense - Group

(897)

(318)

(748)





Profit before tax

35,584

30,842

31,786

Income tax expense

(5,638)

(4,193)

(4,246)





Profit for the period

29,946

26,649

27,540





Attributable as follows:




Equity shareholders

30,136

26,917

27,425

Non-controlling interests

(190)

(268)

115






29,946

26,649

27,540





Earnings per share




Basic

10.12

9.13

9.28

Diluted

9.94

8.97

9.10

Adjusted diluted

10.01

9.93

12.73

 



Fyffes plc

Condensed Group Statement of Comprehensive Income

 

 


(Unaudited)
6 months to
30 June 2016
€'000

(Unaudited)
6 months to
30 June 2015
€'000

(Audited)
Year ended
31 Dec 2015
€'000





Profit for the period

29,946

26,649

27,540





Other comprehensive income








Items that may subsequently be classified to profit or loss




Translation of net assets of equity investments

(6,677)

14,116

17,132

Effective portion of cashflow hedges

7,493

36

(10,282)

Deferred tax on effective portion of cashflow hedges

(936)

(4)

1,285





Items that will not be classified to profit or loss




Actuarial gain recognised on defined benefit pension schemes

3,205

2,206

2,521

Deferred tax movements related to pension schemes

(694)

(374)

(922)

Share of actuarial loss on joint ventures pension schemes

(368)

(135)

(356)

Deferred tax movement related to joint ventures pension schemes

11

-

49





Other comprehensive income (net of tax)

2,034

15,845

9,427





Total comprehensive income

31,980

42,494

36,967





Attributable as follows:




Equity shareholders

32,150

42,762

36,852

Non-controlling interests

(170)

(268)

115





Total comprehensive income

31,980

42,494

36,967

 

 


Fyffes plc

Condensed Group Statement of Movement in Equity

 




Half year ended 30 June 2016


Share
capital
€'000


Share
premium
€'000

Other
reserves
(Note 10)
€'000


Retained
earnings
€'000


Shareholders'
 funds
€'000

Non-
controlling
 interests
€'000


Total
equity
€'000









Balance at beginning of period

19,698

100,414

72,287

21,495

213,894

1,675

215,569

Profit for the period

-

-

-

30,136

30,136

(170)

29,966

Translation of net equity investments including joint ventures

-

-

(6,677)

-

(6,677)

-

(6,677)

Effective portion of cash flow hedges net of deferred tax

-

-

6,557

-

6,557

-

6,557

Actuarial gain recognised on defined benefit pension schemes net of deferred tax

-

-

-

2,511

2,511

-

2,511

Share of actuarial loss on joint ventures pension schemes net of deferred tax

-

-

-

(357)

(357)

-

(357)

Non-controlling interests arising on acquisition

-

-

-

-

-

7

7

Share options exercised

74

651

-

-

725

-

725

Share based payments

-

-

110

-

110

-

110

Dividends paid to equity shareholders

-

-

-

(5,730)

(5,730)

-

(5,730)









Total at end of period

19,772

101,065

72,277

48,055

241,169

1,512

242,681

 

 

 




Half year ended 30 June 2015


Share
capital
€'000


Share
premium
€'000

Other
reserves
(Note 10)
€'000


Retained
earnings
€'000


Shareholders'
 funds
€'000

Non-
controlling
 interests
€'000


Total
equity
€'000









Balance at beginning of period

19,546

99,117

64,230

(209)

182,684

1,560

184,244

Profit for the period

-

-

-

26,917

26,917

(268)

26,649

Translation of net equity investments including joint ventures

-

-

14,116

-

14,116

-

14,116

Effective portion of cash flow hedges net of deferred tax

-

-

32

-

32

-

32

Actuarial gain recognised on defined benefit pension schemes net of deferred tax

-

-

-

1,832

1,832

-

1,832

Share of actuarial loss on joint ventures pension schemes net of deferred tax

-

-

-

(135)

(135)

-

(135)

Share options exercised

30

239

-

-

269

-

269

Share based payments

-

-

127

-

127

-

127

Dividends paid to equity shareholders

-

-

-

(4,939)

(4,939)

-

(4,939)









Total at end of period

19,576

99,356

78,505

23,466

220,903

1,292

222,195

 

 

 

 

 

Fyffes plc

Condensed Group Statement of Movement in Equity (continued)

 




Full year ended 31 December 2015


Share
capital
€'000


Share
premium
€'000

Other
reserves
(Note 10)
€'000


Retained
earnings
€'000


Shareholders'
 funds
€'000

Non-
controlling
 interests
€'000


Total
equity
€'000









Balance at beginning of year

19,546

99,117

64,230

(209)

182,684

1,560

184,244

Profit for the period

-

-

-

27,425

27,425

115

27,540

Translation of net equity investments including joint ventures and associates

-

-

17,132

-

17,132

-

17,132

Effective portion of cash flow hedges net of deferred tax

-

-

(8,997)

-

(8,997)

-

(8,997)

Actuarial gain recognised on defined benefit pension schemes net of deferred tax

-

-

-

1,599

1,599

-

1,599

Share of actuarial loss on joint ventures pension schemes net of deferred tax

-

-

-

(307)

(307)

-

(307)

Share options exercised

152

1,297

(351)

351

1,449

-

1,449

Share based payments

-

-

273

-

273

-

273

Dividends paid to equity shareholders

-

-

-

(7,364)

(7,364)

-

(7,364)









Total at end of year

19,698

100,414

72,287

21,495

213,894

1,675

215,569

 

 


Fyffes plc

Condensed Group Balance Sheet

 


(Unaudited)
30 June 2016
€'000

(Unaudited)
30 June 2015
€'000

(Audited)
31 Dec 2015
€'000

Non-current assets




Property, plant and equipment

158,985

106,182

123,099

Investment property

4,850

5,742

5,524

Goodwill and intangible assets

103,729

26,718

39,851

Other receivables

5,925

5,098

-

Investment in joint ventures

38,948

35,229

36,326

Investment in associate - Balmoral

50

50

50

Equity investments

19

16

16

Deferred tax assets

7,226

11,995

11,044

Total non-current assets

319,732

191,030

215,910





Current assets




Inventories

48,118

43,023

60,198

Biological assets

3,684

2,305

21,314

Trade and other receivables

105,179

101,965

119,149

Hedging instruments

6,917

7,348

3,118

Corporation tax recoverable

5,671

2,184

1,222

Cash and cash equivalents

39,573

38,353

22,759

Total current assets

209,142

195,178

227,760





Total assets

528,874

386,208

443,670





Equity




Called-up share capital

19,772

19,576

19,698

Share premium

101,065

99,356

100,414

Other reserves

72,277

78,505

72,287

Retained earnings

48,055

23,466

21,495





Total shareholders' equity

241,169

220,903

213,894

Non-controlling interests

1,512

1,292

1,675





Total equity and non-controlling interests

242,681

222,195

215,569





Non-current liabilities




Interest bearing loans and borrowings

125,804

9,879

1,337

Other payables

3,367

8,390

3,780

Provisions

1,471

1,930

1,864

Employee benefits

21,337

41,785

32,148

Corporation tax payable

9,421

10,330

9,508

Deferred tax liabilities

8,304

4,074

3,922

Total non-current liabilities

169,704

76,388

52,559





Current liabilities




Interest bearing loans and borrowings

12,914

9,842

60,703

Trade and other payables

93,989

70,036

104,611

Corporation tax payable

5,882

3,713

815

Hedging instruments

3,234

1,964

7,786

Provisions

470

2,070

1,627

Total current liabilities

116,489

87,625

175,542





Total liabilities

286,193

164,013

228,101





Total liabilities and equity

528,874

386,208

443,670



Fyffes plc

Condensed Group Cash Flow Statement

 


(Unaudited)
6 months to
30 June 2016
€'000

(Unaudited)
6 months to
30 June 2015
€'000

(Audited)
Year ended
31 Dec 2015
€'000





Cash flows from operating activities (note 9.1)

54,243

39,139

16,509

Cash flows from investing activities (note 9.2)

(107,151)

(3,337)

(36,708)

Cash flows from financing activities (note 9.3)

72,172

(15,371)

24,558





Net movement in cash and cash equivalents

19,264

20,431

4,359

Cash and cash equivalents, including bank overdrafts at start of period

22,134

16,730

16,730

Effect of foreign exchange movements on cash and cash equivalents

(2,279)

1,047

1,045





Cash and cash equivalents, including bank overdrafts at end of period

39,119

38,208

22,134









Reconciliation of total net debt








Increase in cash and cash equivalents

19,264

20,431

4,359

Net (increase)/decrease in debt

(78,000)

10,000

(32,000)

Capital element of finance lease payments

823

701

1,527

New finance leases

(6)

(870)

(1,238)

Foreign exchange movement

(1,945)

89

(210)





Movement in net debt

(59,864)

30,351

(27,562)

Net (debt) at start of period

(39,281)

(11,719)

(11,719)





Net (debt)/funds at the end of period

(99,145)

18,632

(39,281)

 

 



Fyffes plc

Notes supporting 2016 Interim condensed consolidated financial statements

 

1.         Basis of preparation

 

The condensed consolidated interim financial statements of Fyffes plc, its subsidiaries and joint ventures ("the Group") for the half year ended 30 June 2016 are unaudited. These financial statements do not constitute the statutory financial statements that are required by Irish Company law to be annexed to the annual return of the company. The statutory consolidated financial statements for the year ended 31 December 2015 have been annexed to the 2016 annual return and filed with the Registrar of Companies. The audit report on those statutory financial statements was unqualified and did not include a reference to any matters by way of emphasis.

 

During the period, a number of amendments to existing International Financial Reporting Standards (IFRS) as adopted by the EU Commission became effective. These have been considered by the directors and have not had a significant impact on the Group's condensed consolidated interim financial statements. Therefore, the financial information contained in these interim financial statements has been prepared in accordance with the accounting policies set out in the last annual report for the year ended 31 December 2015, prepared in accordance with the recognition and measurement principles of IFRS as adopted by the EU. Fyffes is not required to apply IAS 34 Interim Financial Reporting as adopted by the EU, as it is listed on the secondary AIM and ESM markets in London and Dublin, and has not applied the presentation and disclosure requirements of that standard.

 

The financial information is presented in euro, rounded to the nearest thousand. Given the seasonality of the tropical produce sector, the Group's profits are typically significantly weighted towards the first half of the year.  In addition, the Group's biological asset valuation peaks at its year end date due to the seasonality in the melon category in particular.

 

 

30 June 2016

30 June 2015

31 Dec 2015

Average (euro 1 =)




US Dollar

1.1164

1.1224

1.1100

Pound Sterling

0.7789

0.7272

0.7258





Closing (euro 1 =)




US Dollar

1.1138

1.1149

1.0859

Pound Sterling

0.8389

0.7086

0.7365

 

The condensed consolidated interim financial statements were authorised by the Board on 1 September 2016.

 

2.         Segmental analysis

 

Segment information below is presented in accordance with IFRS 8 Operating Segments. IFRS 8 requires segment information to be presented in the format reviewed by the Chief Operating Decision Maker ("CODM") of the Group. In Fyffes, this function is carried out by the executive director team comprising the Executive Chairman, the Chief Operating Officer and the Finance Director.

 

Fyffes is currently organised into two separate operating divisions - its Produce activities and its Property activities, which comprises its 40% investment in Balmoral International Land Holdings plc ("Balmoral").

 

Fyffes Produce division is a fully integrated distributor of fresh produce, comprising four product categories - bananas, pineapples, melons and mushrooms, with bananas being the largest category both in terms of revenues and profits. The primary activities of this division include the production, procurement, shipping, ripening, distribution and marketing of these products. Bananas, pineapples and melons are produced in broadly the same geographic areas in Central and South America and distributed to the Group's customers in Europe and the US. The Group's new mushroom business is based in Canada with customers in Canada and the US. Fyffes directly farms a significant portion of the produce it distributes, particularly in the mushroom, pineapple and melon categories. The procurement, shipping, distribution and marketing activities for the banana and pineapple categories are managed centrally on a combined basis. As a result, the Group's Produce activities are regarded as a single reporting segment for the purposes of IFRS 8. The CODM reviews the performance of the Produce division based on Adjusted EBITA, which is believed to be the most appropriate measure of underlying performance.

 

Following a number of years of significant losses due to the difficulties in the international property sector, Fyffes wrote down its investment in Balmoral to a nominal value of €50,000 in 2011. Balmoral has not yet reported its 2015 results. Based on its 2014 results, Fyffes share of its net equity value of €3,389,000 remained in excess of the Group's €50,000 carrying value. In recent years, while Fyffes has recognised its share of Balmoral's profit, it has also recognised a matching impairment provision on the basis that there has not yet been a sustained or prolonged recovery in Balmoral's performance and the carrying value of its investment has therefore remained unchanged at €50,000. Fyffes will reconsider the appropriateness of this approach following publication by Balmoral of its 2015 accounts.

 

The only inter-segment transactions between the Group's Produce division and Balmoral arise because Fyffes rents a number of its distribution centres in the UK and Ireland from Balmoral. Fyffes in turn sublets space in its corporate head office to Balmoral.

 

In the analysis below, reconciling items included in Adjusted EBITA represent central costs not allocated to the operating divisions, including the cost of the Board of directors, together with legal and other costs connected with the corporate head office of the Group.

 


(Unaudited)
6 months to
30 June 2016
€'000

(Unaudited)
6 months to
30 June 2015
€'000

(Audited)
Year ended
31 Dec 2015
€'000

Total revenue




Produce

739,343

644,339

1,222,549

Property

-

-

-

Total

739,343

644,339

1,222,549





Adjusted EBITA




Produce

38,673

36,060

51,477

Property

-

-

-

Reconciling items

(2,057)

(1,726)

(5,658)

Total Adjusted EBITA

36,616

34,334

45,819

Share of joint ventures' net interest charge

(246)

(85)

(447)

Share of joint ventures' tax charge

(324)

(214)

(860)

Amortisation of intangible assets

(1,254)

-

-

Exceptional items

1,689

(2,875)

(11,978)

Operating profit

36,481

31,160

32,534

Net interest charge - Group

(897)

(318)

(748)

Profit before tax

35,584

30,842

31,786

Income tax expense

(5,638)

(4,193)

(4,246)





Profit for the financial period

29,946

26,649

27,540





Geographical analysis








Total revenue incl share of joint ventures




Ireland

29,247

26,996

54,921

UK

227,436

202,552

408,047

Eurozone

229,480

221,040

475,054

Other - mainly North America

253,180

193,751

284,527






739,343

644,339

1,222,549

 

 



 

3.         Adjusted profit before tax, EBITA and EBITDA


(Unaudited)
6 months to
30 June 2016
€'000

(Unaudited)
6 months to
30 June 2015
€'000

(Audited)
Year ended
31 Dec 2015
€'000





Profit before tax per Income Statement

35,584

30,842

31,786

Adjustments




Amortisation of intangible assets

1,254

-

-

Exceptional items (note 4 below)

(1,689)

2,875

11,978

Group share of tax charge of joint ventures

324

214

860





Adjusted profit before tax

35,473

33,931

44,624





Exclude




Financial expense - Group

897

318

748

Financial expense - share of joint ventures

246

85

447





Adjusted EBITA

36,616

34,334

45,819





Depreciation

7,393

5,209

10,322





Adjusted EBITDA

44,009

39,543

56,141

 

 

Fyffes believes that Adjusted profit before tax, Adjusted EBITDA, Adjusted EBITA and Adjusted earnings per share (note 6 below) are the appropriate measures of the underlying performance of the Group, excluding exceptional items and amortisation charges, if any.

 

4.         Exceptional items


(Unaudited)
6 months to
30 June 2016
€'000

(Unaudited)
6 months to
30 June 2015
€'000

(Audited)
Year ended
31 Dec 2015
€'000





Gain on closure of UK defined benefit pension scheme to future accrual

3,634

-

-

Professional and advisory fees and other costs related to acquisition activity

(1,945)

-

2,048

Share of fine paid by joint venture in connection with EU Competition case

-

(2,875)

(2,882)

Costs on closure of Irish defined benefit pension scheme

-

-

(11,144)





Total exceptional items

1,689

(2,875)

(11,978)

 

 

During the first half of 2016, the Group implemented a number of changes to its defined benefit pension scheme in the UK including closing it to future accrual. This gave rise to a €3.6m curtailment gain (see note 7 below).

 

The Group incurred €1.9m of professional and advisory fees arising from due diligence carried out in relation to a number of acquisitions it completed during the period, including the purchase of Highline Produce Limited.

 

A net tax charge of €0.7m has been recognised in relation to these exceptional items.

 



 

5.         Taxation


(Unaudited)
6 months to
30 June 2016
€'000

(Unaudited)
6 months to
30 June 2015
€'000

(Audited)
Year ended
31 Dec 2015
€'000





Tax charge per Income Statement

5,638

4,193

4,246

Group share of tax charge of its joint ventures netted in profit before tax

324

214

860





Total tax charge

5,962

4,407

5,106





Adjustments




Tax effect on exceptional items

(654)

-

1,053





Tax charge on underlying activities

5,308

4,407

6,159

 

Including the Group's share of the tax charge of its joint ventures of €0.3m (2015 first half: €0.2m), which is netted in operating profit in accordance with IFRS, the total tax charge for the period amounted to €6.0m (2015 first half: €4.4m). Excluding the tax effect of exceptional items, the underlying tax charge for the period was €5.3m (2015 first half: €4.4m), equivalent to a rate of 15% (2015 first half: 13%) when applied to the Group's Adjusted Profit before Tax.

 

The Group's underlying tax rate for the first half of the year is based on the estimated tax rate that is expected to apply for the full year.  The equivalent underlying charge for the full year in 2015 was a charge of €6.2m, equal to a rate of 13.8%. This increase in the underlying tax rate in 2016 reflects the change in geographic mix of the Group's profit following the acquisition of Canadian mushroom business, Highline Produce Limited, during the period.

 

6.         Earnings per share


(Unaudited)
6 months to
30 June 2016
€'000

(Unaudited)
6 months to
30 June 2015
€'000

(Audited)
Year ended
31 Dec 2015
€'000





Profit attributable to equity shareholders

30,136

26,917

27,425

 

 


No. of shares
'000

No. of shares
'000

No. of shares
'000





Weighted average number of ordinary shares outstanding

328,800

326,045

326,505

Deduct: weighted average own shares held

(31,075)

(31,075)

(31,075)





Weighted average number of shares for calculation of basic earnings per share

297,725

294,970

295,430

Weighted average number of options with dilutive effect

5,525

4,956

5,787





Weighted average number of shares for calculation of diluted earnings per share

303,250

299,926

301,217

 


€ Cent

€ Cent

€ Cent





Basic earnings per share

10.12

9.13

9.28

Diluted earnings per share

9.94

8.97

9.10





 



 

 


€'000

€'000

€'000

Calculation of adjusted earnings per share




Profit attributable to equity shareholders

30,136

26,917

27,425

Adjustments




Exceptional items

(1,689)

2,875

11,978

Amortisation of intangible assets

1,254

-

-

Tax impact of exceptional items

654

-

(1,053)





Earnings for calculation of adjusted diluted earnings per share

30,355

29,792

38,350






€ Cent

€ Cent

€ Cent





Adjusted diluted earnings per share

10.01

9.93

12.73

 

Adjusted diluted earnings per share excludes, where applicable, the Group's share of Balmoral's result and, the impact of exceptional items after tax and non-controlling interests, once-off tax credits and amortisation charges on intangible assets and related deferred tax credits.

 

 

7.         Post employment benefits


(Unaudited)
6 months to
30 June 2016
€'000

(Unaudited)
6 months to
30 June 2015
€'000

(Audited)
Year ended
31 Dec 2015
€'000





Deficit at beginning of period

(32,148)

(41,448)

(41,448)

Current/past service cost less finance income recognised in Income Statement

(1,041)

(2,178)

(3,786)

Actuarial gain/(loss) recognised in Statement of Comprehensive Income

3,205

2,206

2,521

Curtailment gains on closure of schemes to future accrual

3,634

-

2,721

Employer contributions to schemes

1,761

2,619

9,626

Exchange movement

3,252

(2,984)

(1,782)





Deficit at end of period

(21,337)

(41,785)

(32,148)

Related deferred tax asset

4,534

7,680

6,466





Net deficit after deferred tax

(16,803)

(34,105)

(25,682)

 

This table summarises the movements in the net deficit on the Group's various defined benefit pension schemes.  The current service cost is charged in the Income Statement, net of finance income on scheme assets.  The actuarial gain or loss is recognised in the Statement of Comprehensive Income, in accordance with the amendment to IAS 19, Actuarial Gains and Losses, Group Plans and Disclosures. The measurement of the Group's pension obligations is based on a number of assumptions which are determined in consultation with independent actuaries. One key assumption is the appropriate interest rate to use in discounting the estimated future cash flows of the schemes. At 30 June 2016, the Group used a rate of 1.7% (30 June 2015: 2.5%) in respect of its euro denominated scheme and 2.9% (30 June 2014: 3.7%) in respect of its UK scheme.

 

During the second half of 2015, the Group closed its defined benefit pension scheme in Ireland to future accrual and settled the outstanding liabilities in full. During the first half of 2016, the Group closed its UK defined benefit scheme to future accrual. This gave rise to a curtailment gain of €3.6m which has been treated as an exceptional item in the Income Statement (note 4 above).

 

 



 

8.         Dividends paid to equity shareholders


(Unaudited)
6 months to
30 June 2016
€'000

(Unaudited)
6 months to
30 June 2015
€'000

(Audited)
Year ended
31 Dec 2015
€'000

Cash dividends paid on Ordinary €6 cent shares




Final dividend for 2015 of 1.924 cent

5,730

-

-

Interim dividend for 2015 of 0.8211 cent

-

-

2,425

Final dividend for 2014 of 1.673 cent

-

4,939

4,939





Total cash dividends paid in the period

5,730

4,939

7,364

 

 

The final dividend for 2015 of 1.924 cent per share, approved by the shareholders at the Annual General Meeting on 29 April 2016, gave rise to a distribution of €5.7m in the period.

 

The directors have proposed an interim dividend for 2016 of €0.9032 cent per share (2015: €0.8211 cent per share).  This dividend, which will be subject to Irish withholding tax rules, will be paid on 7 October 2016 to shareholders on the register at 16 September 2016.  In accordance with company law and IFRS, this dividend has not been recognised as a liability in the balance sheet at 30 June 2016.

 

At 30 June 2016, the company and subsidiary companies held 31,075,000 Fyffes plc ordinary shares (31 December 2015: 31,075,000).  No dividends are payable on these treasury shares and they are excluded from the calculation of earnings per share.

 

 

9.         Notes supporting cash flow statement

 

9.1       Cash flows from operating activities


(Unaudited)
6 months to
30 June 2016
€'000

(Unaudited)
6 months to
30 June 2015
€'000

(Audited)
Year ended
31 Dec 2015
€'000





Profit for the period

29,946

26,649

27,540

Income tax expense

5,638

4,193

4,246

Tax paid

(3,624)

(2,675)

(4,313)

Depreciation of property, plant and equipment

7,393

5,209

10,322

Amortisation of intangible assets

1,254

-

-

Gain on disposal of investment in joint venture

-

-

(687)

Equity settled compensation

110

127

273

Payments in connection with MNOPF and MNRPF

(251)

(266)

(5,171)

Contributions to defined benefit pension schemes less charge in Income Statement

(4,354)

(441)

(8,561)

Net interest paid less net interest expense in Income Statement

73

20

124

Share of profits of joint ventures (after tax & exceptional items)

(3,838)

(199)

2,526

Exceptional charge in joint venture

-

2,875

-

Movement in working capital incl fair value of biological assets

22,776

3,680

(9,279)

Other

(880)

(33)

(511)





Cash flows from operations

54,243

39,139

16,509

 

 



 

9.2       Cash flows from investing activities


€'000

€'000

€'000





Acquisition of subsidiaries net of cash acquired

(92,221)

-

(26,790)

Joint venture becoming a subsidiary

-

-

5

Proceeds on partial disposal of investment in joint venture

-

-

271

Dividends paid by joint ventures

300

1,589

1,533

Deferred consideration payments

(1,104)

(90)

(92)

Acquisition of property, plant and equipment excluding leased assets

(14,254)

(4,943)

(12,268)

Proceeds on disposal of property, plant and equipment

128

107

633





Cash flows from investing activities

(107,151)

(3,337)

(36,708)

 

 

9.3       Cash flows from financing activities


€'000

€'000

€'000





Proceeds from issue of shares (including premium)

725

269

1,449

Net increase/(reduction) in borrowings

78,000

(10,000)

32,000

Capital element of lease payments

(823)

(701)

(1,527)

Dividends paid to equity shareholders

(5,730)

(4,939)

(7,364)





Cash flows from financing activities

72,172

(15,371)

24,558

 

 

9.4       Analysis of movement in net debt in the period

 

 

 

 

Opening
1 Jan
 2016
€'000


Cash flow
€'000



Acquisitions
€'000


Non-cash
movement
€'000



Translation
€'000

Closing
30 June
 2016
€'000








Bank balances

20,545

13,940

7,367

-

(2,279)

39,573

Call deposits

2,214

(2,214)

-

-

-

-








Cash & cash equivalents per balance sheet

22,759

11,726

7,367

-

(2,279)

39,573

Overdrafts

(625)

171

-

-

-

(454)








Cash & cash equivalents per cash flow statement

22,134

11,897

7,367

-

(2,279)

39,119








Bank loans - current

(58,288)

(3,000)

-

50,000

208

(11,080)

Bank loans - non current

-

(75,000)

-

(50,000)

-

(125,000)

Finance leases

(3,127)

823

-

(6)

126

(2,184)








Total net debt

(39,281)

(65,280)

7,367

(6)

(1,945)

(99,145)

 

 

 

 


10.       Reconciliation of other reserves

 



Capital
Reserves
€'000

Share
Options
Reserve
€'000

Currency
Translation
Reserve
€'000


Revaluation
Reserve
€'000

Treasury
Shares
Reserve
€'000


Hedging
Reserve
€'000

Total
Other
Reserves
€'000









Half year ended 30 June 2016








Balance at beginning of period

74,107

1,706

18,817

2,380

(20,407)

(4,316)

72,287

Total comprehensive income

-

-

(6,677)

-

-

6,557

(120)

Share based payments

-

110

-

-

-

-

110

Total at end of period

74,107

1,816

12,140

2,380

(20,407)

2,241

72,277









Half year ended 30 June 2015








Balance at beginning of period

74,107

1,784

1,737

2,328

(20,407)

4,681

64,230

Total comprehensive income

-

-

14,116

-

-

32

14,148

Share based payments

-

127

-

-

-

-

127

Total at end of period

74,107

1,911

15,853

2,328

(20,407)

4,713

78,505









Full year ended 31 December 2015








Balance at beginning of year

74,107

1,784

1,737

2,328

(20,407)

4,681

64,230

Total comprehensive income

-

-

17,132

-

-

(8,997)

8,135

Currency movements in revaluation reserves

-

-

(52)

52

-

-

-

Share options exercised

-

(351)

-

-

-

-

(351)

Share based payments

-

273

-

-

-

-

273

Total at end of year

74,107

1,706

18,817

2,380

(20,407)

(4,316)

72,287

 


11.       Acquisition of subsidiaries

 

The Group acquired Highline Produce Limited, a Canadian mushroom producer, in April 2016. The Group also completed the acquisition of a number of other smaller businesses towards the end of the first half of 2016.

 

The provisional fair values of the assets acquired and consideration paid and payable in respect of these transactions is summarised in the table below.

 


€'000

Provisional fair value of assets acquired


Property, plant and equipment

34,931

Intangible assets

34,975

Cash and cash equivalents acquired

7,367

Working capital

(2,728)

Deferred tax liability

(5,014)



Total fair value of assets acquired

69,531



Non-controlling interest in acquired net assets

(7)



Consideration


Cash paid

99,588

Consideration recoverable

(339)



Fair value of consideration

99,249



Goodwill arising

29,725

 

 

The post acquisition profit contribution of these businesses were:

 


€'000

EBITDA

3,077

EBITA

2,274

Profit before tax

1,246

Profit after tax

935

 

 



 

12.       Financial instruments

 

The fair values of financial assets and financial liabilities, together with the carrying amounts in the Condensed Group Balance Sheet at 30 June 2016, are as follows:

 


Carrying value
€'000

Fair value
€'000

Assets



Equity investments

19

19

Trade and other receivables

104,770

104,770

Cash and cash equivalents

39,573

39,573

Hedging instruments

6,917

6,917




Total assets

151,279

151,279




Liabilities



Trade and other payables

(97,356)

(97,436)

Interest bearing loans and borrowings

(138,718)

(138,718)

Deferred consideration

(90)

(90)

Hedging instruments

(3,234)

(3,234)




Total liabilities

(239,398)

(239,478)

 

 

Fair value of financial instruments carried at fair value

 

Financial instruments recognised at fair value are analysed between those based on quoted prices in active markets for identical assets or liabilities (Level 1); those involving inputs other than quoted prices that are observable for the assets or liabilities, either directly or indirectly (Level 2); and those involving inputs for the assets or liabilities that are not based on observable market data (Level 3). The following table sets out the fair value of all financial instruments whose carrying value is at fair value at 30 June 2016:

 


Total
€'000

Level 1
€'000

Level 2
€'000

Level 3
€'000

Assets measured at fair value





Designated as hedging instruments





Foreign exchange and fuel forward purchase contracts

6,917

-

6,917

-






Liabilities at fair value





At fair value through profit or loss





Deferred consideration

(90)

-

-

(90)






Designated as hedging instruments





Foreign exchange and fuel forward purchase contracts

(3,234)

-

(3,234)

-

 

 

All derivatives entered into by the Group are included in Level 2 and consist of foreign currency and fuel forward purchase contracts. Where derivatives are traded either on exchanges or liquid over-the-counter markets, the Group uses the closing prices at the reporting date. Normally, the derivatives entered into by the Group are not traded on active markets. The fair values of these contracts are estimated using a valuation technique that maximises the use of observable market inputs, eg market exchange.

 

Deferred consideration is included in Level 3. Details of movements in the period are set out below.

 



 

Additional disclosures for Level 3 fair value measurements

 


2016
€'000

Deferred consideration


At 1 January 2016

1,194

Paid

(1,104)



At 30 June 2016

90

 


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