TIDMPURE
RNS Number : 4065J
PureCircle Limited
09 April 2020
Date: 9 April 2020
PURECIRCLE LIMITED ("PureCircle" or "the Company" or "the
Group")
Unaudited Interim Results and Trading Update
PureCircle (LSE: PURE), the world's leading producer and
innovator of great-tasting stevia sweeteners for the global
beverage and food industry, today announces its unaudited interim
results for the six-months ended 31 December 2019 ("1H FY20"),
together with a trading update for the 2 months period to 29
February 2020.
Unaudited Interim Results
The unaudited interim results 1H FY20 have been prepared using
revenue cut-off procedures and costing methodology that are
consistent with the Company's full year 2019 audited financial
results published recently.
The comparative prior period's 1H FY19 results have been
restated to reflect the adjustments made in the Company's full year
2019 audited financial results.
INTERIM RESULTS HIGHLIGHTS
- Sales declined 6.0% to $46.8 million (1H FY19 : $49.7m) in
part due to discontinuation of a distribution agreement. These were
partly offset with the sales from breakthrough products and
blends.
- 1H FY20 sales of our new proprietary stevia leaf sweetener,
PCS-3028, which increases stevia solubility by 10x compared to
earlier generation stevia sweeteners, has resulted in the shift
from Basic Ingredients to Breakthrough products.
- Gross margin during the period was 22.9% (1H FY19 : 26.6% -
this comparative excludes the $24.2 million write down of inventory
to net realisable value in cost of sales).
- Adjusted EBITDA during the period was negative $3.1 million
(1H FY19 : $1.9 million - this comparative excludes the $24.2
million write down of inventory to net realisable value in cost of
sales) .
- Net loss for H1 FY20 of $13.8 million (1H FY19: net loss $
28.8 million) was mainly due to lower margin during the period
along with higher G&A costs as well as lower tax credit
recognised.
- Operating cash flow before working capital changes of negative
$1.8 million (1H FY19: positive $3.8 million), was mainly due to
lower than expected sales and higher operating expenses.
- Net debt of $82.6 million (1H FY19: $103.5 million) has
decreased primarily due to repayment made to term loan .
SUMMARY OF FINANCIALS
Period ended 31 December (USD'm) 1H FY20 1H FY19
(Restated*)
-------- ------------
Sales 46.8 49.7
-------- ------------
Gross profit / (loss) 10.7 (11.0)
-------- ------------
Gross margin 22.9% (22.1)%
-------- ------------
Operating loss* (8.8) (21.9)
-------- ------------
Adjusted EBITDA* (3.1) (22.3)
-------- ------------
Net loss for the financial period (13.8) (28.8)
-------- ------------
Loss Per Share (fully diluted) (US Cents) (7.48) (16.52)
-------- ------------
Net assets 146.1 177.3
-------- ------------
Operating cash flow before working capital
changes (1.8) 3.8
-------- ------------
Net cash (used in) / generated from operating
activities (12.0) 2.9
-------- ------------
Net debt* (82.6) (103.5)
-------- ------------
* Operating loss, adjusted EBITDA and net debt are non-GAAP
alternative performance measures and are laid out in Note 8.
The 1H FY20 results comprising the statement of comprehensive
income; cash flow statements; statement of financial position; and
statement of equity; together with prior period comparatives are
also set out on Appendix 1.
Sales: Sales of $46.8 million decreased 6.0% over 1H FY19 ($49.7
million), in part due to discontinuation of a distribution
agreement. These were partly offset with the sales from
breakthrough products and blends.
During the period, the Company exited a long standing but
limiting exclusivity contract. The Company can now regain its
unique ability to offer these widely used ingredients, NSF 02
flavour solution and Glycosylated Steviol Glycosides (GSG)
sweetener, directly to its customers.
Solid growth continues to be achieved in Asia and reflects the
continued positive mix benefit of the growth of Breakthrough
products.
Gross margin: Higher production costs incurred due to change in
production mix on certain products led to a gross margin of 22.9%
(1H FY19: 26.6% - this comparative excludes the $24.2 million write
down of inventory to net realisable value in cost of sales).
Adjusted EBITDA: Current period adjusted EBITDA was negative
$3.1 million (1H FY19: $1.9 million - this comparative excludes the
$24.2 million write down of inventory to net realisable value in
cost of sales).
Net loss for the period : The 1H FY20 net loss of $13.8 million
was mainly due to lower margin during the period along with higher
G&A costs as well as lower tax credit recognised.
Loss per Share (LPS): The Group recorded a 1H FY20 loss per
share of 7.48 cents (1H FY19: LPS of 16.52 cents), on a fully
diluted basis driven by the write-down of inventory.
Operating cash flow before working capital: The Group recorded
an outflow of $1.8 million on operating cash before working capital
in 1H FY20 (1H FY19: inflow $3.8 million). The negative swing of
$5.6 million in operating cash flow before working capital during
1H 2020 compared to 1H FY19 was essentially due to higher operating
costs.
Net debt: Net debt of $82.6 million (1H FY19: $103.5 million)
has decreased primarily due to repayment made to term loan.
Commenting on the 1H FY20 interim results, the Group CEO Peter
Lai said:
"In the 1H FY20, the underlying business fundamentals remain
stable even though the sales for the 6-month period decreased by 6%
over the same period the year prior. PureCircle continues to be the
global leader in stevia ingredient innovation and production. The
Company has continued to execute its four key growth strategies -
implementing a customer-centric structure and culture, diversifying
the customer base, shifting the product mix to next generation
ingredients, and expanding sales into additional priority consumer
product categories. These efforts have shown meaningful
results.
"The stevia ingredients business has become more competitive in
recent years. That has impacted both the pricing for Reb A and the
Company's margins. PureCircle anticipated this trend and in order
to safeguard the business from this price erosion, the Company
began aggressively shifting the product portfolio, including
flavour solutions and blends, to taste-advantaged, exclusive
ingredients based on Reb M. In addition, the Company exclusively
developed a new stevia variety making this product more scalable,
efficient and cost effective for customers. These advances continue
to be protected by the Company's expansive patent portfolio and
intellectual property library.
"In executing its existing plans, the Group anticipates
headwinds from the slowdown in the global economy as a result of
COVID-19. Our refinery in Malaysia restarted production in early
April 2020 after obtaining an approval from the Malaysian
authorities to recommence operations following the government's
country wide movement control order requirements in relation to the
COVID-19 pandemic, which began on 18 March 2020. Production at our
China extraction plant is running as usual. The Group continues to
have sufficient inventories at hand that should mitigate any
further disruptions. The Group is mindful of the volatile outlook
and economic uncertainties arising from the COVID-19 pandemic and
has been monitoring the situation closely.
"Recognising that our profitability has come under pressure
partly due to its high overheads, fixed cost base and G&A
expenses, the Group will carry out a series of measures over the
next 12 months to improve cost efficiency in all its functions
across the Group. In meeting its liquidity needs as well as
improving the health of the Group's balance sheet, the Company
intends to refinance its banking facilities through various options
including equity infusion."
BUSINESS DEVELOPMENTS
In the last six months, the Group made a number of strategic
decisions to strengthen PureCircle and its prospects for long-term
growth. The Group restructured its senior management and Board of
Directors to strengthen its corporate governance and financial
oversight.
PureCircle enhanced future business prospects by exiting a long
standing but limiting exclusivity contract. The Company can now
regain its unique ability to offer these widely used ingredients,
NSF 02 flavour solution and Glycosylated Steviol Glycosides (GSG)
sweetener, directly to its customers.
PureCircle holds comprehensive patent and intellectual property
protection over NSF 02 which is a proprietary product.
Market Opportunities
The global stevia market continues to grow. PureCircle is
positioning itself to deliver the best-tasting, zero-calorie,
natural sweeteners and flavours to food and beverage companies to
meet consumers' demands.
PureCircle has expanded and strengthened its Commercial team to
enhance our ability to fully capture the market opportunity,
focused on setting and implementing a set of key strategies aimed
at delivering the next chapter of growth for PureCircle.
These new strategies involve transforming the business to scale,
produce and sell breakthrough superior-tasting, natural stevia
ingredients and commercialise new technologies. Our commitment to
next generation ingredients and improving taste and consumer
experience has, as expected, led to slower immediate short term
sales growth. Our focus is on product development, which has a long
sell cycle, and we believe this is an important long-term
investment, both in consumers' adoption of stevia and longer term
sales. Customers are now switching and reformulating to next
generation stevia leaf ingredients due to the superior taste
profile, improved sweetness quality and enhanced mouthfeel
experience.
The reformulations using our new generation stevia ingredients
have led to some cannibalisation of the base business and the
results should be read in this context. We are getting positive
feedback about the great taste of our next generation stevia leaf
sweeteners and flavours in customers' products.
Market conditions continue to be favourable for usage of stevia
to expand, as beverage and food companies seeks to lower sugar and
calorie levels with a natural sweetener and flavor modifiers.
PureCircle will continue to capitalize on that with its range of
plant-based stevia leaf solutions. In addition, globally, the
regulatory climate for use of our stevia sweeteners continues to
improve.
In addition to sweeteners and flavours, we provide our customers
with tailored and category specific blends of our robust portfolio
of stevia leaf ingredients. Our industry-leading formulation
expertise allows us to maximize taste with the most cost-efficient
use of stevia ingredients. With our next generation stevia
solutions, we work in partnership with our customers to achieve the
taste profile they require for their products in their different
markets around the globe.
Strategy evolution as a result of innovation
We are exploring new areas including using our stevia flavours
for sodium reduction and masking undesirable flavour
characteristics of other ingredients in various food and beverage
categories. This will provide consumers a great-tasting,
plant-based ingredient.
We are also planning to expand our offerings of stevia leaf
ingredients to include, not just sweeteners and flavours, but also
protein, fibre and antioxidant ingredients - all from the stevia
plant.
This will enable PureCircle to utilize much more of each stevia
leaf. As such, the Company will be able to make each leaf "work
harder".
The technologies to produce the products PureCircle sells are
covered by patents, applied for patents and other intellectual
property rights. PureCircle's broad and strong global array of
patents are the result of its advanced innovation, research and
development work with stevia and its investment therein. To date,
PureCircle has been granted more than 200 stevia-related patents,
with more than 300 patents pending covering a wide range of stevia
related products and processes.
PureCircle's patent coverage and other intellectual property
reflect its expertise and innovation with stevia. That expertise
and innovation enables PureCircle to provide unparalleled support
to its customers as they develop zero- and low-sugar food and
beverage products and other products using stevia.
Management and Board Changes
The Board comprises a Non-Executive Chairman (who was
independent on appointment), two Executive Directors; a Senior
Independent Director; three Independent Non-Executive Directors and
a Non-Independent Non-Executive Director.
Changes to the Board during the 6-months period to 31 December
2019 and up to the publication of the 1H FY20 financial results
have already been included in our public disclosures.
Trading Update to February 2020
Revenue Update
Revenue in January and February 2020 totalled $17.0 million.
However, the performance of the Group to end of February has been
unexpectedly sluggish with overall sales declination of
approximately 4.6% compared to the 2018 prior period, in part due
to overall market competition.
While customers continue to place new sales orders, management
foresee that revenue will be depressed across all regions as a
result of the COVID-19 outbreak.
Balance Sheet and Liquidity
Net debt as at 29 February 2019 was $93.4 million.
There could be further drawdown on the revolving credit
facility, subject to the prior approval of the bank syndicate and
the Group is expected to continue to service loan amortisation as
scheduled.
The Company intends to refinance its banking facilities to
ensure the Group can meet its liquidity needs. The Group will
endeavour to conserve its cash flow by proactively managing its
capital expenditure and working capital as well as implementing
cost efficiency measures that will not impact the long-term
viability of the Group.
Outlook
We expect the business to generate positive cash flows, however,
we may face difficulty in sustaining profit margins in the short
term. There is also a risk, particularly in relation to COVID-19,
that the Group may not have sufficient liquidity up until the bank
facility is required to be repaid in November 2020.
Our refinery in Malaysia restarted production in early April
2020 after obtaining an approval from the Malaysian authorities to
commence operations following the government's country wide
movement control order requirements in relation to the COVID-19
pandemic, which began on 18 March 2020. Production at our China
extraction plant is running as usual. The Group continues to have
sufficient inventories at hand that should mitigate any further
disruptions.
Whilst our supply chain remains robust, we are taking steps to
mitigate our risks. We are actively monitoring and managing our
inventory level and liquidity positions in this unprecedented
uncertain period. In addition, the Group will be identifying
opportunities for cost savings to a more appropriate cost base to
ensure it remains competitive in the market that it operates
in.
Given the level of uncertainty in our markets and economic
uncertainties arising from the COVID-19 pandemic, the outlook for
the full year is now more cautious than before.
Enquiries:
Investors/Analysts
Jimmy Lim, CFO
Email: Jimmy.Lim@purecircle.com
Phone: +6012 326 2908
Newgate Communications, Media Relations
Elisabeth Cowell
Giles Croot
Email: purecircle@newgatecomms.com
Phone: +44 (0) 20 3757 6880
Webcast and Conference Call Details
There will be no analyst presentation for the unaudited H1 FY20
financial results.
Notes to Editors
About PureCircle
-- PureCircle is the only company that combines advanced R&D
with full vertical integration from farm to high-quality,
great-tasting innovative stevia sweeteners.
-- The Company collaborates with farmers who grow the stevia
plants and with food and beverage companies which seek to improve
their low- and no-calorie formulations using a sweetener from
plants.
-- PureCircle will continue to: lead in research, development
and innovation; produce a growing supply of multiple varieties of
stevia sweeteners with sugar-like taste, using all necessary and
appropriate methods of production; and be a resource and innovation
partner for food and beverage companies.
-- PureCircle stevia flavor modifiers work in synergy with
sweeteners to improve the taste, mouthfeel and calorie profile, and
enhance the cost effectiveness, of beverage and food products.
-- Founded in 2002, PureCircle is continually investing in
breakthrough research and development and it has been granted over
214 stevia-related patents with more than 300 applied for patents
pending.
-- PureCircle has offices around the world with the global headquarters in Chicago, Illinois.
-- To meet growing demand for stevia sweeteners, PureCircle is
rapidly ramping up its supply capability. It completed expansion of
its Malaysian stevia extract facility in March 2017, increasing its
capacity to rapidly supply the newer and great-tasting specialty
stevia sweeteners and helping provide ever-increasing value to its
customers.
-- PureCircle's shares are listed on the main market of the London Stock Exchange.
-- For more information, visit: www.purecircle.com
About stevia
-- Given the growing global concerns about obesity and diabetes,
beverage and food companies are working responsibly to reduce sugar
and calories in their products, responding to both consumers and
health and wellness advocates. Sweeteners from the stevia plant
offer sugar-like taste and are becoming an increasingly important
tool for these companies.
-- Like sugar, stevia sweeteners are from plants. But unlike
sugar, they enable low-calorie and zero-calorie formulations of
beverages and foods.
-- Stevia leaf extract is a natural-based, zero calorie,
high-intensity sweetener, used by global food and beverage
companies as a great-tasting zero-calorie alternative to sugar and
artificial sweeteners.
-- Stevia is a naturally sweet plant native to South America;
today, it is grown around the world, notably in Kenya, China and
the US.
-- The sweet-tasting parts of the stevia leaf are up to 350
times sweeter than sugar: stevia's high-intensity sweetness means
it requires far less water and land than sugar.
-- Research has shown that the molecules of the stevia leaf are
present and unchanged in the dried stevia leaf, through the
commercial extraction and purification process, and in the final
stevia leaf extract product. All major global regulatory
organisations, across 65 countries, have approved the use of
high-purity stevia leaf extracts in food and beverages.
-- For more information on the science of stevia, please visit
https://www.purecirclesteviainstitute.com/
APPIX 1
Condensed consolidated statement of comprehensive income
for the period ended 31 December 2019
Unaudited
Notes Six months ended
31 December 31 December
2019 2018
(Restated*)
USD'000 USD'000
Continuing operations
Revenue 46,810 49,675
Cost of sales (36,074) (60,650)
============================================= ====== ============ ============
Gross profit / (loss) 10,736 (10,975)
Other income 4 154 5,800
Other expenses 5 (410) (5,310)
Administrative expenses (19,713) (16,916)
Finance income 56 153
Finance costs (4,137) (4,740)
Share of gain/(loss) in joint venture 4 (78)
============================================= ====== ============ ============
Loss before taxation (13,310) (32,066)
Income tax (expense) / credit 13 (485) 3,247
============================================= ====== ============ ============
Loss for the period (13,795) (28,819)
Other comprehensive income / (loss)
(net of tax):
Items that may be reclassified subsequently
to (loss)/profit:
Exchange difference arising on translation
of foreign operations 136 (5,517)
Fair value loss on derivative financial
instruments (1) - (469)
136 (5,986)
============================================= ====== ============ ============
Total comprehensive loss for the period
(net of tax) (13,659) (34,805)
============================================= ====== ============ ============
Loss for the financial period attributable
to:
Owners of the Company (13,795) (28,819)
(13,795) (28,819)
============================================= ====== ============ ============
Total comprehensive loss attributable
to:
Owners of the Company (13,659) (34,805)
(13,659) (34,805)
============================================= ====== ============ ============
Loss per share (US cents)
Basic 15 (7.48) (16.52)
Diluted 15 (7.48) (16.52)
============================================= ====== ============ ============
*Refer to Note 20.
(1) Changes in the fair value of derivative instruments at fair
value through other comprehensive income.
Condensed consolidated statement of financial position
as at 31 December 2019
Unaudited Audited
31 December 30 June
Notes 2019 2019
USD'000 USD'000
Assets
Non-current assets
Property, plant and equipment 9 93,305 95,294
Intangible assets 9 48,074 47,564
Prepaid land lease payments 1,700 1,794
Deferred tax assets 2,570 2,221
Right-of-use 9 4,880 -
150,529 146,873
======================================================= ====== ============ ==========
Current assets
Inventories 10 100,373 89,242
Trade receivables 23,009 40,266
Other receivables and prepayments 6,790 6,893
Tax recoverable 1,408 1,512
Restricted cash 51 215
Cash and bank balances 5,102 25,460
Financial assets at fair value through profit or loss - 1,748
136,733 165,336
Total assets 287,262 312,209
======================================================= ====== ============ ==========
Equity and liabilities
Equity
Share capital 14 18,445 18,436
Share premium 14 260,265 259,999
Foreign exchange translation reserve (19,999) (20,135)
Share option reserve 2,061 2,099
Accumulated losses (114,717) (100,922)
======================================================= ====== ============ ==========
Equity attributable to owners of the Company 146,055 159,477
Total equity 146,055 159,477
======================================================= ====== ============ ==========
Non-current liabilities
Deferred tax liabilities 668 3
Other payables and accruals 11 346 403
Lease liabilities 4,067 -
Derivative financial instruments 12 1,157 1,446
6,238 1,852
======================================================= ====== ============ ==========
Current liabilities
Trade payables 11 27,047 33,190
Other payables and accruals 19,106 23,285
Lease liabilities 931 -
Income tax liabilities 132 134
Short-term borrowings 11 87,753 94,271
134,969 150,880
======================================================= ====== ============ ==========
Total liabilities 141,207 152,732
Total equity and liabilities 287,262 312,209
======================================================= ====== ============ ==========
Condensed consolidated statement of changes in equity
for the period ended 31 December 2019
Attributable to owners of the Company
Foreign Share
exchange based
Share Share translation payment Derivative Accumulated Total
capital premium reserve reserve reserve losses equity
-------- -------- ------------ -------- ----------- ------------ ---------
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
Balance at 1 July 2019 18,436 259,999 (20,135) 2,099 - (100,922) 159,477
Loss for the period - - - - - (13,795) (13,795)
Other comprehensive income - - 136 - - - 136
-------- ------------ -------- ----------- ------------ ---------
Total comprehensive income/(loss)
for the period (net of tax) - - 136 - - (13,795) (13,659)
-------- ------------ -------- ----------- ------------ ---------
Share award compensation expense - - - - - - -
granted during the period
Exercise of share options 9 266 - (38) - - 237
Balance at 31 December 2019 18,445 260,265 (19,999) 2,061 - (114,717) 146,055
-------- -------- ------------ -------- ----------- ------------ ---------
Attributable to owners of the Company
Foreign Share
exchange based
Share Share translation payment Derivative Accumulated Total
capital premium reserve reserve reserve losses equity
---- -------- -------- ------------ -------- ----------- ------------ ---------
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
Balance at 1 July 2018 17,428 225,504 (14,155) 2,167 - (4,498) 226,446
Impact of correction, net of tax - - 149 - - (16,428) (16,279)
Balance at 1 July 2018 (Restated*) 17,428 225,504 (14,006) 2,167 - (20,926) 210,167
Adjustment on adoption of IFRS 9 - - - - - (323) (323)
-------- ------------ -------- ----------- ------------ ---------
Balance at 1 July 2018 (Restated*) 17,428 225,504 (14,006) 2,167 - (21,249) 209,844
-------- ------------ -------- ----------- ------------ ---------
Loss for the period - - - - - (28,819) (28,819)
Other comprehensive loss - - (5,517) - (469) - (5,986)
-------- ------------ -------- ----------- ------------ ---------
Total comprehensive loss for the
period (net of tax) - - (5,517) - (469) (28,819) (34,805)
-------- ------------ -------- ----------- ------------ ---------
Share award compensation - - - - - - -
expense granted during the
period
Exercise of share options 56 2,219 - (29) - - 2,246
Balance at 31 December 2018
(Restated*) 17,484 227,723 (19,523) 2,138 (469) (50,068) 177,285
-------- -------- ------------ -------- ----------- ------------ ---------
*Refer to Note 20.
Condensed consolidated cash flow statement
for the period ended 31 December 2019
Unaudited
Six months ended
31 December 31 December
2019 2018
(Restated*)
USD'000 USD'000
CASH FLOWS FROM OPERATING ACTIVITIES
Loss before taxation (13,310) (32,066)
Adjustments for:-
Amortisation of deferred income (78) (36)
Amortisation of intangible assets 1,092 957
Amortisation of prepaid land lease payments 69 77
Depreciation of property, plant and equipment 3,894 3,991
Depreciation on right-of-use 574 -
Amortisation of borrowing transaction cost 1,075 951
Interest expense 3,172 3,790
Interest income (57) (153)
Finance lease on right-of-use 179 -
Fair value gain on interest rate swaps (289) -
Loss/(Gain) on disposal of property, plant and equipment 41 (118)
Share based payments 237 2,246
Inventories written back 1 38
Write down of inventories to net realisable value - 24,170
Intangible assets written off - 2,500
Unrealised foreign exchange loss 1,985 2,877
Share of (gain)/loss in joint venture (4) 78
Bad debts written off 11 -
Write back of expected credit loss on trade receivables (560) -
Expected credit loss on other receivables 155 -
Compensation of termination on R&D project - (5,500)
------------ ------------
Operating cash flow before working capital changes (1,813) 3,802
------------------------------------------------------------- ------------ ------------
Increase in inventories (11,133) (8,495)
Decrease in trade and other receivables 17,201 19,007
Decrease in trade and other payables (13,038) (6,807)
NET CASH (USED IN) / GENERATED FROM OPERATIONS (8,783) 7,507
------------------------------------------------------------- ------------ ------------
Interest received 57 153
Interest paid (2,940) (3,733)
Tax paid (539) (1,021)
Tax refund 289 -
Transaction cost paid for loan acquisition (93) (55)
NET CASH (USED IN) / GENERATED FROM OPERATING ACTIVITIES (12,009) 2,851
------------------------------------------------------------- ------------ ------------
Condensed consolidated cash flow statement
for the period ended 31 December 2019 (continued)
Unaudited
Six months ended
31 December 31 December
2019 2018
(Restated*)
USD'000 USD'000
BALANCE BROUGHT FORWARD (12,009) 2,851
CASH FLOWS FOR INVESTING ACTIVITIES
Addition of intangible assets (1,648) (4,019)
Purchase of property, plant and equipment (1,436) (2,530)
Proceeds from disposal of property, plant and equipment 23 571
Increase in investment in a joint venture - (205)
Proceeds from sales of financial assets at fair value through
profit or loss 1,748 -
Proceeds from liquidation of a joint venture 123 -
NET CASH USED IN INVESTING ACTIVITIES (1,190) (6,183)
CASH FLOWS FOR FINANCING ACTIVITIES
Repayment of borrowings (7,500) (5,000)
Increase in restricted cash 163 1
NET CASH USED IN FINANCING ACTIVITIES (7,337) (4,999)
---------------------------------------------------------------- ------------ ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (20,536) (8,331)
Effects of foreign exchange rate changes on 178 (1,003)
cash and cash equivalents
CASH AND CASH EQUIVALENTS
AT BEGINNING OF THE FINANCIAL PERIOD 25,460 23,935
CASH AND CASH EQUIVALENTS AT OF THE
FINANCIAL PERIOD 5,102 14,601
---------------------------------------------------------------- ------------ ------------
*Refer to Note 20.
The cash and bank balances of $5.1million on the face of the
balance sheet includes restricted cash amounting to $51,000 which
is excluded from the cash flow statement.
The net cash outflow for the purchases of property, plant and
equipment during the financial is as follows:
31 December 31 December
2019 2018
USD'000 USD'000
Additions for the financial period 1,961 2,865
Payment made for previous year additions 371 420
Amount not yet due for payment (896) (755)
================================================== ============ ============
Total cash payments during the financial period 1,436 2,530
================================================== ============ ============
Reconciliation of bank borrowings arising from financing
activities:
31 December 31 December
2019 2018
USD'000 USD'000
As at 1 July 94,271 122,092
Cash impact:
Principal and interest payment (7,500) (5,000)
Transaction cost (93) (55)
Non-cash impact:
Amortisation 1,075 951
Foreign exchange movement - 171
===================================== ============ ============
As at 31 December 87,753 118,159
===================================== ============ ============
*Refer to Note 20.
===================================== ============ ============
Notes to interim financial statements
1. General information
The Company was incorporated and registered as a private limited
company in Bermuda, under the Companies (Bermuda) Law 1981. The
Company is listed on the Main Market of the London Stock
Exchange.
The Company is engaged principally in the business of investment
holding whilst the principal activities of the rest of the Group
are the production, marketing and distribution of speciality
natural ingredients based upon high purity stevia.
The unaudited condensed consolidated interim financial
statements have been authorised for issue by the Board of Directors
on 8 April 2020.
The prior period financial position and comprehensive income
have been restated to correct errors with respect of revenue,
inventory and cost of goods sold. Although there was no impact to
our actual cash generation, the Group has restated the statement of
cash flows to reflect the impact of these changes on profit and
other relevant financial statement line items. Please refer to Note
20 for additional details.
2. Basis of preparation
The condensed consolidated financial information comprises the
unaudited interim financial information for the six months to 31
December 2019 and 31 December 2018. The condensed consolidated
interim financial statements has been prepared on a going concern
basis in accordance with IAS 34, "Interim Financial reporting" as
issued by International Accounting Standards Board ("IASB") and the
Disclosure and Transparency Rules issued by the Financial Conduct
Authority.
The condensed consolidated interim financial statement does not
include all the notes of the type normally included in an annual
financial report. Accordingly, the condensed consolidated interim
financial statements should be read in conjunction with the annual
report for the year ended 30 June 2019 and any public announcements
made by PureCircle Limited during the interim reporting period.
Changes in accounting policy and disclosures
This condensed consolidated information has been prepared under
the historical cost convention and on a basis consistent with the
IFRS accounting policies as set out in the Annual Report for the
year ended 30 June 2019, except that the Group has adopted the
following new standard that are first effective for the current
accounting period of the Group:
a) IFRS 16, "Leases" (effective from 1 July 2019) supersedes IAS
17 "Leases" and the related interpretations. IFRS 16 eliminates the
classification of leases by the lessee as either finance leases or
operating leases. IFRS 16 introduces a single accounting model,
requiring the lessee to recognise the "right-of-use" of the
underlying asset and the lease liability reflecting future lease
payment liabilities in the statement of financial position. The
right-of-use asset is depreciated in accordance with the principles
in IFRS 116 "Property, Plant and Equipment" and the lease liability
is accreted over time with interest expense recognised in the
statement of comprehensive income.
The Group will adopt IFRS 16 retrospectively from 1 July 2019,
via the simplified transition approach and will therefore not
restate the comparatives for the 2018 reporting period, as
permitted under the specific transitional provisions in the
standard. The reclassifications and the adjustments arising from
the new leasing rules will therefore be recognised in the opening
consolidated statement of financial position on 1 July 2019.
Key judgements and estimates made in calculating the initial
impact of adoption include assessing whether arrangements contain a
lease, determining the lease term, and calculating the discount
rate. The lessee's incremental borrowing rate applied to the lease
liabilities on 1 July 2019 will be a range of 4.0% to 12.1%.
On adoption of IFRS 16, the Group will recognise lease
liabilities in relation to leases which had previously been
classified as "operating leases" under the principles of IAS 17.
These liabilities are measured at the present value of the
remaining lease payments.
On a lease-by-lease basis, the Group measures the associated
right-of-use asset on a retrospective basis either at its carrying
amount as if the new rules had always been applied or at the amount
equal to the lease liability, adjusted by the amount of any prepaid
or accrued lease payments relating to that lease recognised in the
statement of financial position as at 30 June 2019.
In applying IFRS 16 for the first time, the Group will apply the
following practical expedients:
- The use of a single discount rate to a portfolio of leases
with reasonably similar characteristics;
- Reliance on previous assessments on whether leases are onerous;
- The accounting for operating leases with remaining lease terms
of less than 12 months as short term leases as at the date of
initial application;
- The exclusion of initial direct costs for the measurement of
the right-of-use assets at the date of initial application; and
- The use of hindsight in determining the lease terms where the
contracts contain options to extend or terminate the leases. The
Group has also elected not to reassess whether a contract is, or
contains a lease at the date of initial application. Instead, for
contracts entered into before the transition date, the Group relied
on its assessment made by applying IFRS 117 and IFRIC 4
"Determining whether an Arrangement contains a Lease".
The Group will recognise new assets and liabilities for its
operating leases of warehouses, offices, apartments, gas tanks,
laptops, and photocopiers. The Group recognise lease liabilities
equal to the right-of-use assets of USD 5,408,138 upon initial
adoption as follows:
USD'000
Operating lease commitments disclosed as at 30 June
2019 5,534
Less: Discounted using the lessee's incremental
borrowing rate of at the
date of initial application (1,429)
Less: Short-term leases recognised on a straight-line
basis as expense (43)
Add: Adjustments as a result of a different treatment
of extension
options 1,346
-------------
Lease liabilities recognised as at 1 July 2019 5,408
=============
In light of the impairment recorded during the year, the Group
has considered the recoverable amount of the CGU that retains
the right of use ("ROU") assets and has concluded that there
is no impairment required on the ROU assets.
Of which are:
Current lease liabilities 1,325
Non-current lease liabilities 4,083
-------------
Lease liabilities recognised as at 1 July 2019 5,408
=============
Upon the adoption of IFRS 16, there will be an immaterial
benefit to operating profit and a corresponding increase in finance
expense from the presentation of a portion of lease costs as
interest costs. Profit before tax and earnings per share are not
expected to be significantly impacted. The adoption of IFRS 16 will
have no impact on the Group's cash flows except to present cash
outflows as financing, instead of operating.
There are no other standards that are not yet effective and that
would be expected to have a material impact on the entity in the
current or future reporting periods and on foreseeable future
transactions .
3. E xceptional items
Six months Six months
to to
31 December 31 December
2019 2018
(Restated*)
(US$'000) (US$'000)
Professional fee 418 -
*Refer to Note 20.
Exceptional items are one-off and are non-recurring in nature.
No exceptional costs incurred in 1H FY19.
During the period there are professional costs of $418,000 in
relation to the provision of legal and advisory services from
professionals arising from the review of the Group's inventory
costs allocation methodology and debt covenants.
4. Other income
Other income represents interest income and government grant
income. In prior period, the Group recognised $5.5 million on the
termination of the joint collaboration R&D project.
5. Other expenses
Other expenses represent net foreign exchange loss, and other
operating expenses. In prior period, the Group recognized $2.5
million on the termination of the joint collaboration R&D
project.
6. Principal risks and uncertainties
Our Board of Directors and Risk Committee have reviewed our
principal risks in the context of the first half of FY2020. The
level of risk arising from Long Term Funding, Working Capital and
Inventory Management increased significantly following breach of
debt covenants, inventory costing and valuation issues, which has
impacted the Company's financial position and reputation.
At the time of writing, in view of the current COVID-19 outbreak
and given the rapidly evolving nature of the pandemic, the Group
has done a detailed assessment on the existing production plan and
sales channel condition. The Group is also mindful that current
sales target assumptions may be adjusted during this uncertain
period as sales may not be achieved in accordance with planned
sales target schedule and fall short of actual target achievement.
In addition, cash collections may not be in accordance with planned
collection schedule and fall short of actual collection.
The Group has also considered the impact of COVID-19 on
customers, suppliers and staff. The Group is cautiously optimistic
that the customers will continue to place sales orders but it may
not be according to usual sales plan schedule in the coming months.
We could face difficulties in maintaining supplier relationships
due to closure of manufacturing businesses during COVID-19
outbreak. We are monitoring closely these relationships in the
coming months to ensure smooth production and delivery.
Our Board of Directors and Risk Committee believe that there
have been no new emerging risks other than the broad key risk areas
outlined below; and that identified mitigation actions remain
appropriate to manage these identified risks.
Our principal risks are as follows. However, these are not
intended to be an exhaustive analysis of all risks c urrently
facing the Group.
i. Long-term funding
PureCircle is reliant on funding from a consortium of banks to
fund the ongoing operations of the business and to enable ongoing
product innovation and investment in technology. The current
funding arrangements are subject to bank covenants. The debt is due
to mature in November 2020 and is subject to compliance with
certain bank covenants. The Group needs to maintain sufficient
liquidity to balance operating requirements with financial
obligations and covenants.
The Group's debt covenants were re-set multiple times during the
year, there was a default at the last financial year end.
Subsequent to FY2019, the Group experienced severe cash flow
constraints in meeting its working capital requirements and needed
additional funding. In addition, the Group renegotiated and secured
approval for the full waiver of non-compliance of bank
covenants.
Going forward, the Group's liquidity will be tight with very
little covenant headroom. The Group intends to refinance its
existing term loan before it matures in November 2020.
ii. Working capital funding to support operations
PureCircle fully controls the end-to-end process of its entire
supply chain from leaf sourcing to manufacturing; sales;
distribution and customer relationship management. The Company
needs to fund its working capital from leaf purchases to sales and
receivables. Working capital requirement at PureCircle is
particularly influenced by its inventory levels.
During the year, the Group experienced severe cash flow
constraints in meeting its working capital requirements and needed
additional funding to meet its payment obligations. There will be
an urgency to secure additional funding in the event of a failure
by our business to generate sufficient operating cash flows or if
there is a restricted access to funding or if existing bank
facilities are longer available for drawdown. This will impact our
financial performance and liquidity.
iii. Inventory management
Inventory management is a key area of the Business. Ensuring
PureCircle manufactures the appropriate mix of finished goods
inventory is of paramount importance as failure to do so may result
in high level of cash being tied up in the business.
In 2019, it was noted that PureCircle maintained high inventory
balances, in relation to by-products, some of which have been
subsequently found to be obsolete and in excess of market
requirements, despite efforts to sell in the market.
Fluctuations in the market demand for PureCircle products can
cause inventory levels to rise. In addition, changes in the market
or viable uses of by-products may potentially cause inventory
obsolescence and write-offs.
iv. Competition
As the stevia industry continues to evolve, larger food and
beverage ingredient suppliers may enter the market and erode the
Group's current market share. Failure to anticipate movements in
the market/ accurately forecast customer demand and industry trends
could undermine PureCircle's business performance.
The Group needs to adequately price its products to remain
competitive.
v. Leaf sourcing/ procurement
Dried leaf is PureCircle's primary raw material and constitutes
a significant proportion of the Company's variable costs of
production. The Company's financial performance can be materially
impacted by rising leaf cost and nature of contractual conditions,
if not managed effectively.
A significant majority of PureCircle's total leaf supply is
sourced from China. The Group adopts a logical purchasing plan
differentiated by province and purchase timing. This mitigates any
potential risk of supply disruption within China.
Going forward, the Group's leaf sourcing strategy will comprise
of combination of different leaf varieties, and the gradual phase
in of new leaf cultivation, with better extract yields. This will
drive improvements in terms of lower overall extract cost per
metric tonne of processed leaf.
vi. Intellectual property
Innovation is why PureCircle is the market leader in the stevia
industry. PureCircle's continuous investment in research,
development and innovation (RD&I) must be protected by robust
intellectual property (IP) strategies, including obtaining patents
and protecting other forms of IP, to help sustain and grow the
Company's position in an ever-competitive market.
vii. Manufacturing capacity
PureCircle is a potentially fast growing company with production
chain covering both extraction and refinery activities. It is
imperative that our capacity keeps up with increasing customer
demand.
In addition, the Group needs to maintain reasonably accurate
sales forecast to facilitate the planning for manufacturing
capacity, purchasing needs and inventory holding levels.
The ability to manufacture however, is subject to available
capacity and raw material extract to produce the required product
according to customer's requirements at specified volumes.
Our manufacturing capacity is dependent on process and product,
and was built in anticipation of growth and increased market
demand. Our refinery utilisation is currently running at 75%
capacity post restarting operations after securing approval from
authorities in view of Malaysian government's movement control
order and expected to run at full capacity when normalcy returns.
In addition, we are also purchasing certain products externally, on
an exceptional approval basis, to close off any potential supply
gaps.
Management will continue to monitor the situation and adjust its
production plan, in order to achieve better efficiency in capacity
usage and to produce intermediary/ end-products that will yield
better margins and cash flow.
In conclusion, long term funding, working capital funding to
support operations and inventory management remain as key focus
areas for the Group for the remaining half of FY2020.
7. Going concern
The Directors have considered the risks associated with upcoming
repayment obligations for the Group's senior debt facility. The
facility will mature on 30 November 2020. The Directors intend to
carry out a refinancing of its debt obligations to raise cash to
fund the business and operations. Bearing in mind that in the
absence of any committed external funds over the next 7 months,
there is a risk that that Group may not be able to repay the
facility at maturity.
There are therefore risks that the Group will not be able to
maintain access to its lending facility and otherwise meet its
obligations as they fall due. Together, these matters indicate the
existence of a material uncertainty with which may cast significant
doubt about the Group's ability to continue as a going concern.
8. Segment information
Management determines the Group's operating segments based on
the criteria used by the Chief Operating Decision Maker who has
been identified as the Chief Executive Officer ("CEO") for making
strategic decisions. Management considers the Group to be a single
operating segment whose activities are the production, marketing
and distribution of natural sweeteners and flavours.
From a geographical perspective, the Group is a multinational
with operations located on all continents but managed as one
unified global organisation.
Six months to Six months to
31 December 31 December
2019 2018
(Restated*)
USD'000 USD'000
Revenue 46,810 49,675
Cost of sales (36,074) (60,650)
---------------------------------------------------------- -------------- --------------
Gross profit 10,736 (10,975)
---------------------------------------------------------- -------------- --------------
Gross margin 22.9% (22.1)%
Other income 210 5,953
Administrative expenses (19,713) (16,916)
---------------------------------------------------------- -------------- --------------
Operating loss (8,767) (21,938)
---------------------------------------------------------- -------------- --------------
Other expenses (397) (3,534)
Foreign exchange loss (13) (1,776)
Finance costs (4,137) (4,740)
Share of gain/(loss) in joint venture 4 (78)
Taxation (485) 3,247
---------------------------------------------------------- -------------- --------------
Loss for the financial period (13,795) (28,819)
---------------------------------------------------------- -------------- --------------
Reconciliation of Net loss after tax to Adjusted EBITDA
Net loss after tax (13,795) (28,819)
Depreciation and amortization 5,630 5,022
Finance costs 4,137 4,740
Taxation 485 (3,247)
Share-based payment expense - -
Exceptional items 418 -
========================================================= ============== ==============
Adjusted EBITDA (3,125) (22,304)
========================================================== ============== ==============
Gross borrowings 87,753 118,159
Less: Gross cash (5,153) (14,652)
========================================================== ============== ==============
Net debt 82,600 103,507
========================================================== ============== ==============
*Refer to Note 20.
In the reporting of financial information, the Group uses
certain alternative performance measures that are not required
under IFRS, the generally accepted accounting principles ("GAAP")
under which the Group reports. The Group believes that these
additional measures, which are used internally, are useful to users
of the financial information in helping them to understand the
underlying business performance.
The Group has determined that disaggregation of revenue using
existing segments and timing of the transfer of goods (at a point
in time) is adequate.
The primary performance indicators used by the Group are
revenue, gross margin, gross margin %, adjusted EBITDA, net cash
from operations, net debt and headroom.
The above measures are considered useful by management
because:
- In the Group's high operationally geared business model
profitability is sensitive to revenue and gross margin %
- Adjusted EBITDA is considered the most efficient profit and
loss account indicator of "operating cash flow profitability"
- Adjusted EBITDA is calculated as EBITDA with other expenses
(principally the charge of the exceptional items) added back
- Net cash generated from operations, net debt and headroom are
important measures of cash flow and debt capacity
- Gross margin is calculated as revenue less cost of sales
including sales duty and freight costs
- Gross margin % is calculated as gross margin as a % of revenue
- Operating profit is calculated as gross margin less
administrative expenses plus other income
- Other expenses comprise one-off professional costs incurred
and specific and general provisions on receivables.
- Net debt is calculated as total bank borrowings (both short
and long-term) less gross cash and bank balances and restricted
cash
Seasonality
Due to the seasonal nature of the Group operations, higher
revenue and operating profit are usually expected in the second
half of the year than the first six months.
In the financial year ended 30 June 2019, 40% of revenue
accumulated in the first half of the year, with 60% accumulating in
the second half.
Geographical information
Asia Europe Americas Goodwill Total
USD'000 USD'000 USD'000 USD'000 USD'000
31 December 2019
Sales 14,379 13,887 18,544 - 46,810
Non-current assets 133,715 2,211 12,797 1,806 150,529
Current assets 102,192 13,094 21,447 - 136,733
31 December 2018
Sales 9,259 16,523 23,893 - 49,675
Non-current assets 151,794 1,633 20,515 1,806 175,748
Current assets 116,258 16,947 22,851 - 156,056
9. Property, plant and equipment and intangible assets
During the period, the Group invested $2.0 million in property,
plant and equipment.
The addition of $1.6million to intangible assets is in respect
of capitalisation of product developments, intellectual property
and leaf development during the period, net of amortisation for
products now launched commercially.
The Group recognised right-of-use assets of $5.4 million on
adopting IFRS16.
10. Inventories
31 December 30 June
2019 2019
USD'000 USD'000
Raw materials 15,564 12,755
Work-in-progress 73,204 69,991
Finished goods 46,080 40,971
------------------------------------------- ------------ ---------
Gross 134,848 123,717
------------------------------------------- ------------ ---------
Less: Provision on Net Realisable Value
Raw materials (5,320) (5,320)
Work-in-progress (10,938) (10,938)
Finished goods (3,410) (3,410)
------------------------------------------- ------------ ---------
(19,668) (19,668)
------------------------------------------ ------------ ---------
Less: Provision on slow-moving inventory
Work-in-progress (10,453) (10,453)
Finished goods (4,354) (4,354)
------------------------------------------- ------------ ---------
(14,807) (14,807)
------------------------------------------ ------------ ---------
Raw materials 10,244 7,435
Work-in-progress 51,813 48,600
Finished goods 38,316 33,207
------------------------------------------- ------------ ---------
Net carrying value 100,373 89,242
------------------------------------------- ------------ ---------
No further provision on slow moving inventory as well as net
realisable value in the current period other than as disclosed as
at 30 June 2019.
11. Financial liabilities
The following tables detail the remaining contractual maturities
at the reporting date of the Group's non-derivative financial
liabilities, which are based on contractual undiscounted cash flows
(including interest payments computed using contractual rates or,
if floating, based on rates current at the reporting date) and the
earliest date the Group can be required to pay and settled
derivative financial instruments for which the contractual
maturities are essential for an understanding of the timing of the
cash flows:
Contractual Total
maturities Less Between Between contractual Carrying
of financial than 6 - 12 1 and 2 and undiscounted Amount
liabilities 6 months months 2 years 5 years cash flows liabilities
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
As at 31
December
2019
Non-derivatives
Trade payables 27,047 - - - 27,047 27,047
Borrowings 87,753 - - - 87,753 87,753
Total
non-derivatives 114,800 - - - 114,800 114,800
================= =========== ================ ================= ================= =============== =============
As at 30 Jun
2019
Non-derivatives
Trade payables 33,190 - - - 33,190 33,190
Borrowings 94,271 - - - 94,271 94,271
================= =========== ================ ================= ================= =============== =============
Total
non-derivatives 127,461 - - - 127,461 127,461
================= =========== ================ ================= ================= =============== =============
Owing to the breach in covenants in both FY19 and FY18, the term
loan and the revolving credit facility have been reclassified as
current debt as in accordance with terms in the facility
agreement.
On 18 February 2020, the Group secured an approval from its
lenders for Waivers and Amendments to its Senior Facility Agreement
("Waivers and Amendments") that provides a waiver for all past
breaches of covenants up to and including 31 December 2019. In
addition, all lenders have also agreed to amend the covenants for
the periods to 31 March 2020 and 30 June 2020 respectively.
12. Derivative financial instruments
31 December 30 June 2019
2019
Assets Liabilities Assets Liabilities
USD'000 USD'000 USD'000 USD'000
Non-current liabilities:
Interest rate
swaps - 1,157 - 1,446
13. Income taxes
31 December 31 December
2019 2018
USD'000 USD'000
Current tax:
Current tax on profits for the year (162) (538)
Change in provision in respect of prior years - 550
==================================================== ============ ============
(162) 12
=================================================== ============ ============
Deferred tax:
Origination and reversal of temporary differences (323) 3,235
==================================================== ============ ============
(485) 3,247
=================================================== ============ ============
Income tax expense is recognised based on management's best
estimate of the weighted average annual income tax rate expected
for the full financial year. The expected estimated tax rate is
10%.
The Company was granted a tax assurance certificate dated 1
February 2012 under the Exempted Undertakings Tax Protection Act,
1966 pursuant to which it is exempted from any Bermuda taxes (other
than local property taxes) until 31 March 2035.
The subsidiary, PureCircle Sdn. Bhd. ("PCSB"), has been granted
the Bio-Nexus Status by the Malaysian Biotechnology Corporation
Sdn. Bhd. in which PCSB is entitled to a 100% income tax exemption
for a period of 10 years on its first statutory income commencing
in year of assessment (YA) 2008. The 10-year incentive period
expired in (YA) 2017. Subject to the Ministry of Finances (MOF)
approval, PCSB will be entitled to a concessionary tax rate of 20%
on income derived from qualifying activities for a further period
of 10 years from (YA) 2018. However, given that the approval from
the MOF is still pending, PCSB adopted the normal corporate tax
rate at 24% (2018: 24%) on the income derived from the qualifying
activities for the financial year end 30 June 2019.
Another subsidiary, PureCircle Trading Sdn. Bhd. ("PCT") has
been granted the Principal Hub Status by the Malaysian Investment
Development Authority in which PCT is entitled to a 100% income tax
exemption for a period of 10 years on its statutory income
commencing from YA 2017.
Another subsidiary of the Group, PureCircle (Jiangxi) Co. Ltd.
("PCJX"), has also been granted a 10% exemption on corporate tax
from 1 January 2013 to 31 December 2020 by Ganzhou State Tax
Revenue Department under the Western Ganzhou State Development
program.
14. S hare capital and share premium
Number of shares Ordinary shares Share premium Total
'000 USD'000 USD'000 USD'000
Balance at 1 July 2019 184,356 18,436 259,999 278,435
Exercise of share options 99 9 266 275
Balance at 31 December 2019 184,455 18,445 260,265 278,710
============================== ================= ================ ============== ========
Balance at 1 July 2018 174,246 17,428 225,504 242,932
Exercise of share options 593 56 2,219 2,275
Balance at 31 December 2018 174,839 17,484 227,723 245,207
============================== ================= ================ ============== ========
15. Loss per share
The basic loss per share is calculated by dividing the loss
attributable to owners of the Company by the weighted average
number of ordinary shares in issue during the period.
Six months ended
31 December 31 December
2019 2018
(Restated*)
Loss attributable to equity holders of the Company (USD'000) (13,795) (28,819)
Weighted average number of ordinary shares in issue ('000) 184,455 174,400
Basic loss per share (US Cents) (7.48) (16.52)
Fully diluted loss per share (US Cents) (7.48) (16.52)
*Refer to Note 20.
16. Dividends
No dividends were declared or paid by the Company during the
interim period.
17. Contingent liabilities and capital commitments
(a) On 19 December 2019, the Department of Homeland Security
U.S. Customs and Border Protection's ("CBP") issued the Group with
twenty (20) Notices of Penalty or Liquidated Damages Incurred and
Demand for Payment seeking payment of USD 8,377,920.00 in penalties
for shipments from December 4, 2014 to February 4, 2016, that CBP
asserts may have included Stevia that derived from convict or
forced labor from the Baoanzhao region of China. As at the date of
releasing of the unaudited interim results, management is of the
view that the contingent liability of USD8,377,920 is very unlikely
to be a liability as CBP has not provided any proof of its claims.
No provision should be made as at 31 December 2019.
(b) On 23 December 2019, one of the Group's subsidiary,
PureCircle Sendirian Berhad ("PCSB") received a letter of
notification from the Royal Malaysian Customs Department of
Selangor ("Customs") claiming back-payment of import duties of
USD8,800,000 on the import of ethanol between March 2017 and April
2019 because imported ethanol purity levels did not agree with the
approved exemption letter from the Malaysian Investment Development
Authority ("MIDA"). On 31 January 2020, PCSB subsequently obtained
a new exemption letter from MIDA on the import of ethanol without
specification of the purity level for import from January 2020 to
December 2020. An appeal letter has been issued to MIDA to obtain
waiver on the import duties of the past transactions. As at the
date of releasing the unaudited interim results, the Directors are
unable to reliably estimate the cost to settle any potential claim
with respect to this matter as no demand has yet to be received.
Accordingly, no provision has been made as at 31 December 2019.
As disclosed above, at the end of the period, there are no
material contingent liabilities which, upon becoming enforceable,
may have a material impact on the financial position of the
Group.
Capital commitments amounting to approximately $1.0million were
approved and contracted for the upgrading of plant and machinery in
China and Malaysia.
18. Events after the end of the reporting period
Events after the end of the reporting period has been included
in the FY19 full year RNS announced on 31 March 2020.
19. Material related party transactions
Identities of related parties:
The Group have related party relationships with its joint
venture and the following transactions were carried out by the
Group during the period:
31 December 31 December
2019 2018
USD'000 USD'000
Sales of goods to jointly controlled entity - 116
Rental expense * 113 -
============== ============
* Rent is payable to a significant shareholder that is
controlled by a Director.
20. Prior period adjustments
During the year ended 30 June 2019, it was identified that the
Group's revenue was not appropriately recorded in the prior period
due to cut off errors. As a result, historical revenue was
overstated.
During the financial year ended 30 June 2019, it was identified
that the Group's costing methodology was not appropriately
allocating the full cost of inventory sold to comprehensive income,
but instead, certain costs remained capitalised in inventory. As
such, historical inventory was overstated and historical cost of
sales was understated. In addition, the Group reclassified its
provision of net realisable value on inventory from other expenses
to cost of sales for the financial year ended 31 December 2018 to
be consistent with the classification made in the audited profit or
loss for the financial year ended 30 June 2019. The Group has also
reclassified its long-term incentive plan ("LTIP) expenses from
other expenses to administrative expenses to be consistent with the
classification made in the audited profit of loss for the financial
year ended 30 June 2019.
As a result of the above restatements to prior year revenue and
cost of sales, the Group did not comply with certain of their debt
covenants as at 30 June 2018 and therefore debt was reclassified to
current for this period.
Revenue, receivables, inventory, and cost of sales for the
financial year then ended 30 June 2018 as well as the opening
balance in retained earnings as at 1 July 2017 was restated and the
related tax impact was considered. Additionally, as a result of
covenant breaches in FY18 and FY19, borrowings have been
reclassified to current from non-current.
Accordingly, the comparative financial information has now been
restated as follows:
Prior period adjustments
As Net
previously Realisable As
reported Revenue Inventory Value LTIP restated
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
(a) Impact on the statement of comprehensive income:
For the interim financial period ended 3 1 December 2018
Revenue 50,742 (1,067) - - - 49,675
Cost of sales (30,835) 540 (6,185) (24,170) - (60,650)
Administrative
expenses (14,669) - - - (2,247) (16,916)
Other expenses (31,727) - - 24,170 2,247 (5,310)
Loss before
taxation (25,354) (527) (6,185) - - (32,066)
Loss for the
financial
period (22,107) (527) (6,185) - - (28,819)
As
previously Prior period adjustments As
reported Revenue Inventory IFRS9 restated
USD'000 USD'000 USD'000 USD'000 USD'000
( b ) Impact on the statement of changes
in equity:
For the interim financial period ended 3 1 December 2018
As at 1 July
2018
Equity:
Foreign
exchange
translation
reserve (14,155) 149 - - (14,006)
Accumulated
losses (4,498) (5,009) (11,419) (323) (21,249)
As at 31 December 2018
Equity:
Foreign
exchange
translation
reserve (19,976) 453 - - (19,523)
Accumulated
losses (26,928) (5,536) (17,281) (323) (50,068)
As
previously Prior period adjustments As
reported Revenue Inventory restated
USD'000 USD'000 USD'000 USD'000
( c ) Impact on the statement of cash flows:
For the interim financial period ended 3
1 December 2018
Loss before taxation (25,354) (527) (6,185) (32,066)
Operating cash flow before
working capital changes 10,514 (527) (6,185) 3,802
Increase in inventories (13,889) (5,045) 10,439 (8,495)
Decrease in trade and other
receivables 17,909 1,098 - 19,007
Net cash from operations 7,817 (310) - 7,507
Net cash generated from operating
activities 3,161 (310) - 2,851
Net decrease in cash and
cash equivalents (8,021) (310) - (8,331)
Effects of foreign exchange
rate (1,313) 310 - (1,003)
*The adjustment relates to application of IFRS 9's impairment
requirements at 1 July 2018 results in an additional allowance for
impairment.
Given that the Group's key performance indicators include
non-GAAP measures, a schedule below is included to provide detail
on the impact to earnings per share (EPS), gross margins, and
earnings before profit, taxes, depreciation and amortisation
(EBITDA).
As previously Prior year As restated
Key Financial Metric reported adjustment
Interim financial period ended
31 December 2018
Loss per share (US cents)
- Basic (12.67) (3.85) (16.52)
- Diluted (12.67) (3.85) (16.52)
Gross Margin % 39.2% (61.3%) (22.1%)
Exceptional items (USD'000) 24,994 (24,994) -
Adjusted EBITDA (USD'000) 11,649 (33,953) (22,304)
============== ============ ============
21. Statement of Directors' Responsibility
The Directors confirm that this condensed consolidated interim
financial information has been prepared in accordance with
International Accounting Standard 34, 'Interim Financial
Reporting', as issued by the International Accounting Standards
Board ("IASB"); that the condensed consolidated interim financial
statements gives a true and fair view of the assets, liabilities,
financial position and comprehensive income as required by the
Disclosure Guidance and Transparency Rules ("DTR") sourcebook of
the United Kingdom's Financial Conduct Authority, paragraph DTR
4.2.4; and that the interim management report herein includes a
fair review of the information required by paragraphs DTR 4.2.7 and
DTR 4.2.8, namely:
- an indication of important events that have occurred during
the first six months and their impact on the condensed set of
consolidated financial information;
- a description of the principal risks and uncertainties for the
remaining six months of the financial year; and
- material related party transactions in the first six months
and any material changes in the related party transactions
described in the last Annual Report.
The Directors are responsible for the maintenance and integrity
of the Company's website. UK legislation governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
Details of all the current Directors of PureCircle Limited are
maintained at www.purecircle.com
For and on behalf of the Directors:
Lai Hock Meng Lim Kian Thong
CEO CFO
9 April 2020
Shareholder Information
Internet
Investors and corporate stakeholders
www.purecircle.com
Health professionals, customers, policy makers, consumers
www.globalsteviainstitute.com
Investors Relations
Requests for copies of the annual reports published in 2019 and
previous years or other investor relations matters should be
addressed to PureCircle office: ir@purecircle.com
Share Registrar
In Jersey (Shares)
Computershare Investor Services (Jersey) Limited
Queensway House
Hilgrove Street
St Helier
Jersey JE1 1ES
Channel Islands
In the UK (Depositary Interests)
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS99 6ZY
0081B8/py
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR KKCBQBBKDAQK
(END) Dow Jones Newswires
April 09, 2020 08:56 ET (12:56 GMT)
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