Final Results - Replacement

28 September 2017

The Final Results announcement issued on 28/09/17 at 7am under RNS No 0300S has been re-released to correct a change in the dividend record date.

All other details remain unchanged.

The full amended text is shown below.

PRODUCE INVESTMENTS PLC

("Produce," "Company" or the "Group")

FINAL RESULTS

A Year of two halves

Produce Investments plc, (AIM:PIL) ("Produce," "Company" or the "Group"), a leading operator in the fresh potato and daffodil sectors, is pleased to announce its final results for the year ended 1 July 2017.

Key Operational Highlights:

- Revenue increased 8.1% to £200.1m (2016: £185.1m) driven by:

o High priced potato driven by lower yield

o New retail business win during the year

- More robust business model:

o Longer term commitments with key customers

o Improved visibility of volume and margin

- Improving operations:

o Strong performance in Jersey

o Expanded customer base in the Daffodil sector

o Continued recovery at Swancote

Key Financial Points:

- Operating profit before exceptional items for the year decreased 9.1% to £8.4m (2016: £9.2m) in line with the Board's expectation

- Profit before tax is £6.6m, up 88% vs the prior year (2016: £3.5m)

- Increase in full year dividend to 7.466p (2016: 7.32p) reflecting the Board's confidence in the outlook

- Net debt increased to £28.0m (2016: £18.1m) at year end (includes the purchase of Jersey packing facility)

Angus Armstrong, Chief Executive, commented:

"Following a very tough first half year I am pleased to report a significant improvement during the second half as we recovered higher raw material costs in our core potato business. Operating profit was lower by 9.1% from 2016 although the EBITDA* decrease was reduced to 2%. By working with core and new customers to create a more collaborative supply chain model, the core potato business has benefited from a new business win as well as increasing volume with an established customer.

Work to improve operational efficiencies has continued and the benefit from investment in a new ERP system is now being realised. The focus on, and continued investment in, improved systems and processes is ongoing.

The Rowe Farming Daffodil business had a slightly more challenging season with rapid crop development compromising sales opportunities, however new business wins in this sector should see an improvement for next year. The recovery at Swancote continues with an expanded product portfolio helping win new business. Jersey had a good season with favourable growing conditions and excellent demand.

While the market will remain challenging, the Board remains very confident about the company's ability to deal with such pressures. The Board remains confident that Produce Investments is in a strong position to grow and take advantage of any acquisition opportunities which may arrive."

* EBITDA means Group operating profit before exceptional items, depreciation, and amortisation.

A presentation for analysts will be held at 09.00am this morning at Powerscourt's offices, 1 Tudor Street, EC4Y 0AH.

- End -

For further information contact:

Notes to Editors

The Group is a vertically integrated potato and daffodil company supplying blue chip customers including Tesco, Sainsbury, Asda, Coop, Waitrose and Marks & Spencer.

Website: www.produceinvestments.co.uk  

CHAIRMAN'S STATEMENT

The Group ended on a high in a year of two halves.

I am pleased to report a strong performance in the second half of our financial year, confirming the effectiveness of our strategic approach and the success of the diversified business model we have developed in our established produce operations.

Results

As we anticipated in the interim report, the second half saw a much improved trading result as we began to recover higher raw material costs in our core Greenvale potato business, enjoyed a strong season for Jersey Royals, and started to realise the benefits of our new ERP system. This has delivered a Group operating profit before exceptional items for the year of £8.4m (2016: £9.2m), in line with our expectations, and a profit before tax of £6.6m (2016: £3.5m) despite the increased loss before tax of £1.0m (2016: loss £0.2m) reported in the first half.

Dividend

The Board recommends an increased final dividend of 5.026 pence per share (2016: 4.88 pence). Together with the interim dividend of 2.44 pence per share (2016: 2.44 pence) paid in April, this makes a total dividend for the year of 7.466 pence (2016: 7.32 pence), a rise of 2.0%. Subject to the approval of shareholders at the AGM, the final dividend will be paid on 5 December 2017 to ordinary shareholders on the register at the close of business on 3 November 2017.

Board changes

I will be retiring at the AGM on 29 November 2017, as will Non-Executive Director (NED) Sean Christie. Having served two full three year terms Senior independent NED Sir David Naish will also be retiring by rotation. Barrie Clapham will resume the position of Chairman on an interim basis as the Group commences a recruitment process to find a more permanent successor. Liz Kynoch will continue in her role as NED as will Robert Johnston, the principal representative of the Jerry Zucker Revocable Trust, the largest shareholder in the Group, who joined the Board as NED on 9 June 2017. The Board will continue to work in a sustainable way to deliver incremental shareholder value over the longer term.

Strategy

Following the restatement of Strategy at the interims in March the board has decided to revert to the original strategy of growing the business through strategic acquisitions of quality businesses that offer synergies and product or customer diversification. At the same time we will continue to explore and fund the organic growth opportunities of the subsidiary companies.

People

On behalf of the Board, I would like to express sincere thanks to all our employees for their hard work in delivering these results, and for their continuing commitment to ensuring that we provide our customers with products and service of the highest quality. Maintaining and improving these high standards is key to our future success.

Outlook

Looking to the year ahead, harvest is now progressing although with the majority of the potato crop still in the ground, favourable weather is required during October to see the harvest safely secured. Assuming harvest proceeds as it should, an increase in the planted area will see a gross crop yield that will exceed demand and therefore deflate raw material prices. A solid start to the year sees trading in-line with forecast and the new business gains, and new contractual arrangements with established customers, give us much enhanced visibility on both volume and margins in our core retail potato business. We are achieving improved efficiencies in our two fresh potato processing sites, and anticipate further significant efficiency benefits from the implementation of our new ERP system. All this allows us to feel confident in the Group's ability to achieve good progress during the current year.

As a business predominantly growing and selling produce in the UK, our principal concern about Britain's withdrawal from the EU is ensuring the continued availability of high quality seasonal labour. While we have encountered no difficulties in recruitment to date, and return rates of seasonal staff remain high, clear direction from the Government is required to ensure a Brexit agreement that maintains access to this essential resource.

The Group continues to generate cash and we are well placed to continue our well-established and proven strategy of widening both our product range and customer base within our existing produce operations, and to exploit other opportunities for profitable acquisitions as these arise.

Neil Davidson

Chairman

CHIEF EXECUTIVE'S REPORT

Diversification, investment, new business gains and strengthened customer relationships have all helped us to overcome the significant challenges posed by rising raw material costs and continuing intense price competition in the UK retail market place.

Fresh

Our core potato business, accounting for circa 78% of Group revenues during the year (2016: circa 78%), traded successfully through a less stable year, characterised by lower crop yields, resulting in higher raw material costs, and retail price deflation. Although the planted area for UK potatoes increased by just over 4% in the 2016 harvest, below average yields resulted in a 4% reduction in the total crop to 5.22m tonnes (2015 harvest: 5.43m tonnes). With demand outstripping supply throughout the year, input costs remained consistently high. However, Kantar World panel data for the fresh retail potato market showed a decline in market value of 3.5% during the year, on relatively static volumes, reflecting the continuation of intense competition in the supermarket sector.

We have benefited from our strategic approach in this challenging market, securing increased volumes with a major retail customer for a fixed period of three years through the adoption of a more collaborative and transparent approach to supply chain management. This has delivered improved efficiencies for both parties. We are also pleased to announce that we have won a third mainstream retail account, again for an initial fixed period of three years. Sales into the non-retail sectors of foodservice and wholesale also showed good growth during the year, and the launch of Linwood Crops at the start of the year as a subsidiary trading division will support further growth in these sectors.

Following completion of our packing site rationalisation programme in 2015, we now operate two efficient facilities in Scotland and Cambridgeshire, which are very well placed for both the major UK potato growing areas and distribution channels. We have continued to drive productivity through investment in these sites, which accounted for a significant proportion of the Group's operational capital expenditure during the year of £4.8m (Net of the Jersey Peacock farm packing facility) (2016: £3.7m).

We have also continued our investment in IT, following the successful transition in 2015 from in-house servers to a cloud-based external provider, thereby reducing the risk of business disruption and improving our contingency planning and disaster recovery capability. The focus this year has been on the installation of our new ERP system which, as noted in the interim report, resulted in some additional costs during a longer than expected implementation process. The roll-out across both our UK packing sites has now been completed and we are pleased to report that it has bedded in well, and that the expected planning and process efficiencies are starting to be realised.

Our growing arm had a successful year, benefiting from higher raw material prices. The increased order book in our fresh packing business also drove higher demand for seed, delivering a strong performance by our seed division. Our varietal development programme in this division continues apace, and we have a strong pipeline of new potato varieties coming through to market.

Our Cornish business of Rowe has had an average year growing, picking and marketing daffodils in a season that extends from late December to late April. Unfortunately rapid crop development resulted in an early harvest which compromised sales opportunities. Expansion of our production area has given us the opportunity to serve an extended customer base, enabling us to secure a number of new business wins during the year. In addition to daffodils, Rowe Farming also grows and supplies early potatoes from Cornwall, and made a successful start to the 2017 season.

Following a good and uninterrupted planting season, and subsequent favourable growing conditions, Jersey produced an excellent crop of new potatoes in 2017. Strong UK demand from the launch of the crop in late April through into June ensured an equally successful sales season, and the performance of the business was further enhanced by our continued focus on cost control and efficiency gains.

Processing

Our potato processing business has continued its recovery, benefiting from a new management structure and an ongoing focus on improved processes and efficiencies. We have invested in new cooking equipment and detection technology, extended our product range into the raw peel sector, and gained new business as a result. The performance of the business was much improved in the closing months of the year and we are about to install a third production line in the factory to keep pace with growing demand.

Other

Our storage and ripening technology business enjoyed a better year, with recovery in two core markets. In addition, new member state chemical approvals within the EU have enabled Restrain to achieve a significant increase in its territorial reach within the last few months, giving solid grounds for optimism about its prospects in the year ahead.

Finances

The business remains cash generative. An increase in net debt to £28.0m (2016: £18.1m) at the year-end principally reflects our purchase during the year of a packing facility (Land and Buildings) in Jersey for £6.1m (cash), as well as higher stock valuations and increased trade receivables. Following the closure of Greenvale's Kent packing facility in December 2015 we have removed all plant and machinery from the buildings and are confident that the sale of the site is now nearing completion.

Prospects

The indications are that the planted area of potatoes in the UK has increased by approximately 4% for the second successive year. A timely planting season has been followed by variable growing conditions, and current predictions are for a 2017 crop that is of average yield and quality. If this proves to be accurate, it could deliver a gross yield as much as 9% greater than in 2016 at around 5.7m tonnes. This would usually indicate that we will have a season with more moderate raw material pricing compared with the season 2016/2017.

The diversity of our core business has delivered real benefits during the year under review. This proven model, the new retail business we have secured, and the more transparent arrangements we have agreed with established customers, all give us increased confidence in our ability to achieve profitable growth in our established produce operations in the years ahead.

Angus Armstrong

Chief Executive Officer

CONSOLIDATED INCOME STATEMENT

For the 53 weeks ended 1 July 2017

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the 53 weeks ended 1 July 2017

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 1 July 2017

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the 53 weeks ended 1 July 2017

CONSOLIDATED CASH FLOW STATEMENT

For the 53 weeks ended 1 July 2017

Statement of compliance

The financial information set out above does not constitute the Company's statutory report and accounts for the year ended 1 July 2017 or the year ended 25 June 2016, but is derived from those accounts. Statutory accounts for 2016 have been delivered to the registrar of companies, and those for 2017 will be delivered in due course. The auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006. The annual report and accounts for the year ended 1 July 2017 will be posted to shareholders by 27 October 2017. The results for the year ended 1 July 2017 were approved by the Board of Directors on 27 September 2017 and are audited.

The information contained in this preliminary announcement has been approved by the Board of Directors.

Basis of preparation

The Group's consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union as they apply to the financial statements of the Group for the period ended 1 July 2017 and applied in accordance with the Companies Act 2006.

These consolidated financial statements have been prepared on a historical cost basis, except for derivative financial instruments and biological assets, which have both been measured at fair value in line with applicable accounting standards.

Earnings per share

Report distribution

Copies of the annual report and financial statements will be sent to shareholders on or before 27 October 2017 and will be available for a period of one month from that date to the public at the offices of Produce Investments plc, Floods Ferry, Floods Ferry Road, Doddington, March, Cambridge, PE15 OUW, and at the Company's website.