Consolidated Unaudited Interim Report of AS PRFoods for the 4nd quarter and 12 months of 2020/2021 financial year
MANAGEMENT COMMENTARY
The most difficult year in the history of the group is over. We were attacked from three fronts: from one side, corona crises, caused a situation of drastic drop in prices and demand for fish products, causing drop in gross margin and sales. Secondly, we entered the crisis with very high leverage due to recent acquisitions and were forced by banks to reduce aggressively our loan portfolio. Third, our now-ex management in Finnish unit did not want and could not react to market changes, whereby we accumulated problems there with long-term effect. Dealing with all three criseses simulteanously increased significantly our loss, as we were forced to take decisions, that would have not happened under normal circumstances.
As a result of all this group’s sales decreased by 25% to 58,7 million euros ( 78,7 million euros yoy).
As end result we had our first historical EBITDA loss of -1,24 million euros (2,75 million euros yoy) and net loss of -5,1 million euros (-1,9 million euros yoy).
Q4 EBITDA was largely impacted by the fact that raw material prices suddenly increased due to loosening of coroan restrictions, while our Finnish market product end prices were fixed in winter, when raw material prices were significantly lower. This caused a situation in last quarter, where we sold some of our products below COGS. In order to end such practice , we had to terminate our local CEO and notified clients of termination of such contracts.
If to find anything positiive, then group’s cash flow from operations was positiive by 2 million euros and total cashflow over the periood improved by 0.51 million euros. We also reduced our net debt and reduced significantly short term liabilities of the company. Also our fish farming unit posted a better result and was the backbone of our Scandinavian operations. Our biggest problem is that Estonian government is delaying decision to allow sea farming in Estonia, due to which we could not earn significant additional income from last periood.
Our Scottish division was very brave, and even though their sales and net profit decreased by 30%, John Ross Jr still managed to post 1,4 million euros EBITDA. I would also like to thank our Estonian unit, that despite the disappreance of HoReCa, managed to grow each month sales in retail significantly.
The number of employees decreased by ca 10% on annual basis, but obviously the cost base of Finnish unit did not respond to decrease in sales and margins. In summary, we can say that root cause of our problems is Finnish business division.
PRFoodsi action plan to overcome the crisis is:
- Decrease overall debt level through positiive EBITDA and strengthening of equity base.
- Completely restructure Finnish division, either through disposal or closure of loss-making business units. Eliminate totally all low margin products form Finnish sales.
- Increase retail sales in UK, EU markets, including home market Estonia.
- Group’strategic focus is on fish farming, as divisjon that has been profitable every year. Target is to reach by 2023 fish farming võlume of 10,000 tons, giving additional 45-50 million euros in sales.
Group’s financial position is not easy. At the same time, we must remember that 11 million euros bonds have been issued solely for refinancing of John Ross Jr. Acquisition and John Ross Jr results have not been impacted so severly, their operational cash flow is very strong and they pay regularly dividends to parent company, therefore we find their leverage to be acceptable. Fish farming requires long term capital for fish feed and this is under works.
Last year we were forced to reduce significantly working capital financing through banks, which put strain on company’s finances. We have reduced significantly working capital needs in operations, also through lower inventory. Most important is to restore profitability in the environment of lower sales and restructure loss-making business units.
Having cut our teeth now for second year in corona crisis, we know that it is not sustainable to rely on outside help and all tough decisions need to be taken sooner than later. For our advantage the fish market has started much stronger this year and is more predictable and demand for our products is growing. The only objective of new financial year is profit and everything that blocks our road to profitabilty must be eliminated.
KEY RATIOS
INCOME STATEMENT
| mln EUR | 2Q 2021 | 1Q 2021 | 4Q 2020 | 3Q 2020 | 2Q 2020 | 1Q 2020 | 4Q 2019 | 3Q 2019 |
| Sales | 14.7 | 14.2 | 17.0 | 12.7 | 15.1 | 18.5 | 25.4 | 19.3 |
| Gross profit | 0.3 | 0.9 | 2.5 | 1.2 | 0.7 | 2.0 | 4.3 | 2.6 |
| EBITDA from operations | -1.0 | -0.5 | 0.6 | -0.3 | -0.4 | 0.0 | 2.1 | 0.7 |
| EBITDA | -0.7 | -0.7 | 0.7 | -0.5 | -0.4 | -0.9 | 1.4 | 1.5 |
| EBIT | -1.4 | -1.4 | 0.0 | -1.1 | -1.0 | -1.4 | 0.7 | 1.0 |
| EBT | -1.6 | -1.8 | -0.1 | -1.4 | -1.2 | -1.8 | 0.6 | 0.8 |
| Net profit (-loss) | -1.7 | -1.8 | -0.2 | -1.4 | -1.3 | -1.7 | 0.5 | 0.6 |
| Gross margin | 2.1% | 6.6% | 14.9% | 9.4% | 4.6% | 10.8% | 17.0% | 13.4% |
| Operational EBITDA margin | -7.0% | -3.5% | 3.4% | -2.6% | -2.6% | 0.1% | 8.4% | 3.8% |
| EBITDA margin | -4.8% | -5.3% | 4.1% | -3.8% | -2.6% | -4.6% | 5.3% | 7.6% |
| EBIT margin | -9.3% | -9.9% | 0.2% | -8.8% | -6.4% | -7.8% | 2.9% | 5.0% |
| EBT margin | -10.8% | -12.5% | -0.6% | -11.3% | -8.1% | -9.8% | 2.2% | 3.9% |
| Net margin | -11.6% | -12.5% | -1.2% | -11.3% | -8.4% | -9.2% | 2.0% | 2.9% |
| Operating expense ratio | 15.4% | 15.6% | 15.6% | 18.2% | 13.9% | 14.3% | 12.5% | 13.4% |
BALANCE SHEET
| mln EUR | 30.06.2021 | 31.03.2021 | 31.12.2020 | 30.09.2020 | 30.06.2020 | 31.03.2020 | 31.12.2019 |
| Net debt | 20.9 | 21.4 | 21.9 | 21.5 | 20.7 | 17.0 | 17.8 |
| Equity | 15.8 | 17.6 | 18.6 | 18.5 | 19.8 | 21.6 | 23.3 |
| Working capital | -2.9 | -5.0 | -3.9 | -4.4 | -4.0 | -2.5 | -3.5 |
| Assets | 55.3 | 54.5 | 57.5 | 57.4 | 57.1 | 56.9 | 60.5 |
| Liquidity ratio | 0.9x | 0.8x | 0.8x | 0.8x | 0.8x | 0.9x | 0.9x |
| Equity ratio | 28.6% | 32.4% | 32.4% | 32.3% | 34.7% | 37.9% | 38.5% |
| Gearing ratio | 56.9% | 54.9% | 54.0% | 53.7% | 51.1% | 44.0% | 43.3% |
| Debt to total assets | 0.7x | 0.7x | 0.7x | 0.7x | 0.7x | 0.6x | 0.6x |
| Net debt to EBITDA op | -16.9x | -55.3x | 160.0x | 12.8x | 7.5x | 5.3x | 5.3x |
| ROE | -28.7% | -23.8% | -21.9% | -7.0% | -9.1% | -5.7% | -3.2% |
| ROA | -9.1% | -8.4% | -7.8% | -2.4% | -3.2% | -2.1% | -1.2% |
Consolidated Statement of Financial Position
| Thousand euros | 30.06.2021 | 30.06.2020 |
| ASSETS | ||
| Cash and cash equivalents | 2,500 | 2,276 |
| Receivables and prepayments | 3,295 | 3,578 |
| Inventories | 5,691 | 7,884 |
| Biological assets | 4,795 | 4,249 |
| Total current assets | 16,281 | 17,987 |
| Deferred income tax | 21 | 54 |
| Long-term financial investments | 302 | 232 |
| Tangible fixed assets | 15,236 | 16,179 |
| Intangible assets | 23,457 | 22,672 |
| Total non-current assets | 39,016 | 39,137 |
| TOTAL ASSETS | 55,297 | 57,124 |
| EQUITY AND LIABILITIES | ||
| Loans and borrowings | 6,396 | 10,611 |
| Payables | 12,530 | 11,132 |
| Government grants | 207 | 211 |
| Total current liabilities | 19,133 | 21,954 |
| Loans and borrowings | 16,988 | 12,368 |
| Payables | 723 | 190 |
| Deferred tax liabilities | 1,868 | 1,920 |
| Government grants | 746 | 873 |
| Total non-current liabilities | 20,325 | 15,351 |
| TOTAL LIABILITIES | 39,458 | 37,305 |
| Share capital | 7,737 | 7,737 |
| Share premium | 14,198 | 14,007 |
| Treasury shares | -390 | -390 |
| Statutory capital reserve | 51 | 51 |
| Currency translation reserve | 583 | -366 |
| Retained profit (-loss) | -6,682 | -1,654 |
| Equity attributable to parent | 15,497 | 19,385 |
| Non-controlling interest | 342 | 434 |
| TOTAL EQUITY | 15,839 | 19,819 |
| TOTAL EQUITY AND LIABILITIES | 55,297 | 57,124 |
Consolidated Statement of Profit or Loss And Other Comprehensive Income
| Thousand euros | 4Q 2020/2021 | 4Q 2019/2020 | 12 months 2020/2021 | 12 months 2019/2020 |
| Sales | 14,740 | 15,101 | 58,692 | 78,292 |
| Cost of goods sold | -14,437 | -14,412 | -53,717 | -68,710 |
| Gross profit | 303 | 689 | 4,975 | 9,582 |
| Operating expenses | -2,264 | -2,107 | -9,468 | -10,509 |
| Selling and distribution expenses | -1,499 | -1,387 | -6,389 | -7,060 |
| Administrative expenses | -765 | -720 | -3,079 | -3,449 |
| Other income / expense | 146 | 211 | 309 | 519 |
| Fair value adjustment on biological assets | 441 | 239 | 311 | -291 |
| Operating profit (loss) | -1,374 | -968 | -3,873 | -699 |
| Financial income/-expenses | -223 | -254 | -1,031 | -1,062 |
| Profit (loss) before tax | -1,597 | -1,222 | -4,904 | -1,761 |
| Income tax | -110 | -47 | -216 | -134 |
| Net profit (loss) for the period | -1,707 | -1,269 | -5,120 | -1,895 |
| Net profit (loss) attributable to: | ||||
| Owners of the company | -1,697 | -1,254 | -5,028 | -1,718 |
| Non-controlling interests | -10 | -15 | -92 | -177 |
| Total net profit (loss) | -1,707 | -1,269 | -5,120 | -1,895 |
| Other omprehensive income (loss) that may subsequently be classified to profit or loss: | ||||
| Foreign currency translation differences | -100 | -117 | 949 | -152 |
| Total comprehensive income (expense) | -1,807 | -1,386 | -4,171 | -2,047 |
| Total comprehensive income (expense) attributable to: | ||||
| Owners of the Company | -1,797 | -1,371 | -4,079 | -1,870 |
| Non-controlling interests | -10 | -15 | -92 | -177 |
| Total comprehensive income (expense) for the period | -1,807 | -1,386 | -4,171 | -2,047 |
| Profit (loss) per share (EUR) | -0.04 | -0.03 | -0.13 | -0.04 |
| Diluted profit (loss) per share (EUR) | -0.04 | -0.03 | -0.13 | -0.04 |
Indrek Kasela
AS PRFoods
Member of the Management Board
Phone: +372 452 1470
investor@prfoods.ee
www.prfoods.ee
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