UK: Efficiencies boost Produce Investments profit
Produce Investments may close packing site
UK potato supplier Produce Investments has returned to profitability in the first six months of its fiscal year, with price increases and a focus on efficiency lifting the bottom line.
In a trading update today (26 March), the group reported operating profit of GBP5.8m (US$9.6m) in the period to 31 December, up from a loss of GBP681,000 last year. The company booked a profit after tax of GBP3.9m, compared to a loss of GBP932,000 a year ago.
The improved profitability came despite lower sales. Revenue dipped 0.1% to GBP89.6m.
Produce Investments has worked to lower its cost base and CEO Angus Armstrong confirmed today it is considering the closure of one of its three main packing facilities, Tern Hill in Shropshire.
"The business continually reviews its core capacities and recent efficiency improvements mean that with slight modifications at its two remaining packing sites at Duns in the Scottish Borders and Floods Ferry in Cambridgeshire an opportunity exists to rationalise the number of sites," he said.
Shore Capital analysts noted the progress Produce Investments has made on improving efficiency. "We believe management continues to make progress in what remains a challenging retail environment. A drive to create an increasingly efficient business remains a key focus and, to that end, the closure of one of the group's packing sites is being considered," the analysts wrote in an investor note.
Produce Investments said discussions to acquire Jersey Royal Company are "ongoing".
It added the development of its brand, GreenVale, is progressing "ahead of expectations".
Produce Investments plc
UNAUDITED INTERIM REPORT
For the 26 weeks ended 28 December 2013
Produce Investments plc (the "Group", AIM: PIL), a leading operator in the fresh potato sector with vertically integrated activities covering seed production, own growing, processing and packing and supply to the major retailers, is pleased to announce its interim results for the 26 weeks to 28 December 2013.
Key highlights are:
Revenue down 0.1 % to £89.60m (2012:£89.67m)
Operating profit of £5.78m (2012: loss of £0.68m)
Interim dividend per share up 25% to 2.275p (2012:1.82p)
Continued focus on driving operational efficiencies
Re-alignment of capacities with announcement of consultation period to close Tern Hill site
New brand - "GreenVale" continues to perform ahead of expectations, with launch of TV campaign
On track to meet market expectations for full year
Commenting on the results, Chief Executive Angus Armstrong said:
"I am pleased to report that the weather and growing conditions during 2013 were significantly better than that of 2012, with an improvement seen in both quality and yield of the potato crop. In 2012 the lowest yielding and poorest quality crop since 1976 resulted in exceptionally high free buy prices for potatoes with additional imported tonnage having to be procured to fulfil UK market requirements. The inevitable time lag in achieving the necessary price increases to mitigate the increased raw material costs impacted last year's results, particularly in the first half year. The growing season for 2013 has seen a return to more favourable and stable growing conditions which has resulted in a necessary improvement in operating profit.
The results for the first half year include Rowe Farming with only 3 months comparable results for last year, as the business was acquired at the beginning of October 2012. I am pleased to report that the business continues to perform ahead of expectations, with integration plans completed ahead of schedule.
I can confirm that the business has announced a consultation period where it is considering the closure of one of its three main packing facilities - Tern Hill in Shropshire. The business continually reviews its core capacities and recent efficiency improvements mean that with slight modifications at its two remaining packing sites at Duns in the Scottish Borders and Floods Ferry in Cambridgeshire an opportunity exists to rationalise the number of sites. The consultation period is expected to be completed in early May. No change to how the company procures potatoes in the West of England is envisaged as a result of this potential capacity re-alignment and therefore growers will not see any adverse change. A significant proportion of potatoes that are currently packed at the Tern Hill site are sourced from Scotland and the East of England, so this fits with the business and customer strategy to reduce "food miles."
In January we announced that we were in discussions over the potential acquisition of the Jersey Royal Company. These discussions are ongoing and we will provide shareholders with a further update in due course.
Given the necessary improved performance relative to last year and the potential re-alignment of operating capacities, the Board is very confident that the Group is well placed to execute both its short and longer term strategic objectives."
Original source: Produce Investments
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