Overview of the economic activities

Management commentary

We remind you that since we changed our financial year, the last financial year was extended to 18 months. The financial year that began on 01.07.2018 is of standard length and ends 30.06.2019. In the report, the comparable data from the 4th quarter of 2017 and H2 of 2017 is used. Q2 is calendar year Q4, Q3 is calendar year Q1 and Q4 is calendar year Q2.

Q2 results were disappointing due to loss of several private label contracts in Finland. Increased competition in Finland for large volume private label contracts has increased significantly and profitability of these contracts is under pressure. Traditionally this has given us in Q4 both volume and profitability. The management has taken action by starting a cost-cutting program in our Estonian and Finnish operations, where most significant decrease of profitability occurred. We expect annualized savings to amount to over 300,000 euros in Estonia alone once put in effect at the end of Q3. Management will publish more detailed program in our Q3 report.

Q2 results weighted down H1 results for the group. In total, EBITDA from Estonian and Finnish operations was lower by 2.3 million euros. Trio Trading lower results were planned due to change of fresh fish strategy – stopping trading of fish to other fish processing companies. Heimon Kala and Vettel results require a new approach in the management actions. We will be more aggressive in private label sales in H2 while we prepare to compensate these sales with own label sales directly to retail at higher margins, process that is already underway in Estonia. Unfortunately, this process is taking longer than anticipated due to both internal and external reasons. Externally, the retailers are slow to adapt to changing customer requirements. Internally, the speed of change needs improving. We are happy to announce that first retailers have accepted our shop-in-shop concept and we hope our new retail approach to be scaled up significantly in 2019/2020. We have also completed our John Ross Jr brand overhaul and will launch it in Q3.

Our subsidiary in the UK, John Ross Jr sales grew by 5%, but more importantly EBITDA improved by 35% during first 6 months. It is clear that John Ross Jr is on a path of growing sales and substantially increased profitability after we consolidated operations of John Ross Jr and Coln Valley in Aberdeen.

We expect our UK operations to outperform. We have taken necessary steps to continue supply of raw material to our UK factory as Brexit will clearly add some uncertainty. Management will publish additional information regarding our UK operations.

Biomass revaluation was significantly lower compared to the same period last year. There are two main reasons. We started the season with lower biomass volume and the biomass growth in the beginning of the season was slower, but at the same time better weather in Q3 allowed an additional growth and we delayed most of harvesting until November.

We are actively pursuing new farming licenses in Estonia, and 2 of our applications are already under process. We hope to add some farming capacity already for 2019 season in Estonia and believe that more significant amount of new farming capacity will already be allocated for 2020.

6 months consolidated results are as follows:

Quarterly presentation will be published on our website latest at 8th of March.

KEY RATIOS

Income Statement, EUR mln4Q 20183Q 20182Q 20181Q 20184Q 20173Q 2017
Sales26.719.422.122.732.018.0
Gross profit4.73.01.82.46.62.5
EBITDA from operations2.41.1-0.20.74.31.2
EBITDA0.81.10.30.61.62.0
EBIT0.20.6-0.20.11.01.5
EBT0.00.4-0.5-0.20.81.3
Net profit (-loss) 0.20.1-1.1-0.21.21.1
Gross margin 17.7%15.2%7.9%10.6%20.5%13.6%
Operational EBITDA margin9.1%5.4%-1.1%3.1%13.4%6.7%
EBITDA margin2.9%5.8%1.2%2.5%4.9%11.1%
EBIT margin0.9%3.0%-1.1%0.2%3.1%8.5%
EBT margin0.1%1.8%-2.3%-0.9%2.5%7.3%
Net margin 0.8%0.7%-5.1%-1.0%3.9%6.2%
Operating expense ratio11.2%13.5%12.0%10.5%9.3%11.1%


Balance Sheet, EUR mln31.12.201830.09.201830.06.201831.03.201831.12.2017
Net debt20.021.918.116.716.6
Equity24.224.123.324.324.7
Working capital1.02.02.84.65.3
Assets65.564.565.566.468.6
Liquidity ratio1.0x1.1x1.1x1.2x1.2x
Equity ratio 37.0%37.4%35.6%36.6%36.0%
Debt to total assets45.2%47.6%43.7%40.7%40.1%
Gearing ratio0.6x0.6x0.6x0.6x0.6x
Net debt-to-EBITDA5.1x3.8x3.1x2.6x3.1x
ROE-4.0%0.1%0.2%8.6%5.8%
ROA-1.5%0.0%0.1%4.1%2.7%

Consolidated statement of financial position

EUR '00031.12.201831.12.201730.06.2018
ASSETS   
Cash and cash equivalents4,9106,4915,960
Receivables and prepayments6,4708,9824,706
Inventories11,55311,74712,678
Biological assets4,7195,5666,498
Total current assets27,65232,78629,842
    
Deferred income tax49222153
Long-term financial investments134102134
Tangible fixed assets14,56913,22512,764
Intangible assets23,04622,29422,604
Total non-current assets37,79835,84335,655
TOTAL ASSETS65,45068,62965,497
    
EQUITY AND LIABILITIES   
Loans and borrowings14,22410,10512,562
Payables12,18417,11514,254
Government grants241306216
Total current liabilities26,64927,52627,032
    
Loans and borrowings10,70612,95711,487
Payables51900
Deferred tax liabilities2,0942,2672,441
Government grants1,2571,1441,226
Total non-current liabilities14,57616,36815,154
TOTAL LIABILITIES41,22543,89442,186
    
Share capital7,7377,7377,737
Share premium14,00714,00714,007
Treasury shares-390-390-390
Statutory capital reserve514848
Currency translation reserve-701737
Retained profit (-loss)2,1303,0961,904
Equity attributable to parent23,46524,67123,313
Non-controlling interest76064-2
TOTAL EQUITY24,22524,73523,311
TOTAL EQUITY AND LIABILITIES65,45068,62965,497

Consolidated statement of profit or loss and other comprehensive income

EUR '0004Q 20184Q 20172HY 20182HY 2017
Sales26,72931,99246,12249,982
Cost of goods sold-22,011-25,428-38,448-40,967
Gross profit4,7186,5647,6749,015
     
Operating expenses-2,996-2,970-5,619-4,962
  Selling and distribution expenses-2,084-2,131-3,927-3,506
  Administrative expenses-912-839-1,692-1,456
Other income / expense136124303114
Fair value adjustment on biological assets-1,628-2,727-1,555-1,655
Operating profit (-loss)2309918032,512
Financial income152193
Financial expenses-228-204-454-413
Profit (-loss) before tax177893682,102
Income tax205446-4241
Net profit (-loss) for the period2221,2353642,343
     
Net profit (-loss) attributable to:    
Owners of the company1301,1662292,279
Non-controlling interests926913564
Total net profit (-loss)2221,2353642,343
     
Other comprehensive income (-loss) that may subsequently be classified to profit or loss:    
Foreign currency translation differences-101-229-77-305
Total comprehensive income (-expense)1211,0062872,038
     
Total comprehensive income (-expense) attributable to:    
Owners of the Company299371521,974
Non-controlling interests926913564
Total comprehensive income (-expense) for the period1211,0062872,038
     
Profit (-loss) per share (EUR)0,000,020,000,05
     
Diluted profit (-loss) per share (EUR)0,000,020,000,05

Indrek Kasela
AS PRFoods
Member of the Management Board
Phone: +372 452 1470
investor@prfoods.ee
www.prfoods.ee

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