TIDMCFGP
RNS Number : 3571M
Continental Farmers Group PLC
17 September 2012
07:00, 17 September 2012
Continental Farmers Group Plc.
Interim report
Continental Farmers Group PLC (AIM: CFGP, ESM: CT3, "CFG" or
"the Group"), the Ukrainian and Polish agricultural crop producer,
announces its results for the six months ended 30 June 2012.
Highlights
-- Pre-tax profit for the six months of EUR3.5m +202%,
-- EBITDA for the six months of EUR5.6m +104%.
-- Equalised earnings per share of 2.1 cents +192%.
-- 26,100 hectares under crop for 2012 harvest, up 42% on 2011
(excluding the 2,982 hectares harvested in the Mykolaiv Joint
Venture with ED&F Man).
-- Trial plantings in Mykolaiv Joint Venture have performed well to date.
-- EUR8.1m capital expenditure invested in support of the expanded operations.
Post 30 June 2012 Update:
-- Wheat and oil seed rape harvest successfully completed in
Ukraine and Poland by 23 August 2012.
-- Winter oil seed rape average net yield 3.2 tonnes per hectare
in Ukraine and 3.9 tonnes in Poland.
-- Winter wheat average net yield 6.2 tonnes per hectare in
Ukraine and 8.1 tonnes in Poland.
-- Spring wheat average net yield 4.6 tonnes per hectare in
Ukraine and 7.6 tonnes in Poland.
-- Strong market prices for cereals. Majority of Ukraine oil
seed rape contracted at an average price of EUR445/ tonne.
-- Autumn plantings of oil seed rape have been completed and
winter wheat planting is underway.
-- Land bank in place to enable planned growth in hectares under harvest for 2013.
Commenting on the interim results Nick Parker, CFG Chairman
stated "While this is the report for the half year to 30 June 2012,
it is also the first anniversary of the Group's listing and we can
look back on 12 months which have seen the delivery of the 2011
results in line with market expectation and a significant growth in
land harvested in line with our plans.
The increased tonnage in our cereal crops grown and harvested is
a testament to the efforts made in planning, agronomy and
execution, supported by substantial capital expenditure. These
efforts have produced crops of high quality and good yields, which
are further benefitting from firm market prices.
Our focus for 2012/13 will be to embed and benefit from the
productivity improvements in agronomy and farming practices and the
capacity increases provided by recent capital expenditure.
Our JV with ED&F Man has started successfully. This model of
partnership working is one which we will seek to extend.
Investment by the capital markets in agriculture has been
growing worldwide and there is a continuing search by investors for
opportunities to invest in primary agriculture. Increasingly, food
security, coupled with land reform and land tenure rights, are
being discussed at governmental and corporate levels. We keep close
contacts with these developments in our markets and are well placed
to participate in the future opportunities which they may
offer.
The cereal harvest has provided a good start to the year.
Subject to no material adverse change, we expect to exceed
management's targets for the year."
Commenting on the interim results Mark Laird, CEO stated, "CFG
has reached another successful milestone in its journey to be one
of the most efficient and profitable large scale food producers in
Central Europe. The successful completion of the cereal harvest,
delivering improved yields under exceptionally difficult climatic
conditions, whilst significantly increasing our hectares under
harvest underlines the Know How Do How capability that exists
within the company. The business continues to hold a significant
percentage of harvested cereals in store whilst the typical
seasonal glut of crops finds its way on to the market. The harvest
of the root crops has got off to a good start and, given the
adverse weather conditions in other parts of Europe, the markets
for these crops look promising.
With the first phase of the autumn plantings completed in both
Poland and Ukraine and the securing of the land required for
further growth in 2013, the company is looking at how best to
maximise earnings potential, given the strong commodity prices and
the longer term prospects for the crops CFG typically grows. A
percentage of the 2013 crop has been forward sold as would be
typical in previous years.
The climatic challenges throughout Europe and indeed across the
World demonstrate the importance of our choice of location and of
our strategy of rotation and diversification. In a year of
difficult growing conditions our farms are delivering strong yields
across our range of crops. This success is vindication of our
business model and provides us with further encouragement as we
expand within our regions of operation. The Joint Venture Model
already in place with ED & F Man is developing in a sustainable
and controlled manner and it is likely that this strategy will be
used with more potential partners in other sectors of CFG's
business.
The focus of management remains on the development of precision
farming and business expertise within the company and whilst at the
same time drilling down on the daily detail of running a large
farming operation. Working closely with the various local
communities, within which the business operates remains core, and
completely aligned, to the overall objective of growing the
business for the longer term."
For further information:
Continental Farmers Group Plc
(http://www.continentalfarmersgroup.com)
Mark Laird, Chief Executive
Alastair Stewart, Chief + 44 (0) 7917 435
Financial Officer 224
Davy
John Frain / Anthony
Farrell +353 1 679 6363
Murray Consultants
Joe Murray + 353 (0) 1 498 0300
+ 353 (0) 1 498 0300
Joe Heron + 353 (0) 87 690 9735
Financial review
Revenues of EUR4.2m relate to the sales of 2011 harvested crops
stored since the end of last harvest. The reduction on prior year
reflects the lower year on year potato pricing in Ukraine.
As in the prior year we are required to record the fair
valuation of our growing crops at 30 June. The assessment of this
is especially complex for certain crops where there is still a
significant time from the date of harvest and there is a limited
market to forward sell these products. We have therefore continued
to take a consistent approach to this valuation, applying risk
discounts to the yields and pricing. This is outlined in more
detail in note 3 to the attached accounts. The year on year
increase in biological assets as driven by a combination of;
significantly increased hectares under harvest especially in
cereals which are near completion at half year, higher yields,
stronger commodity pricing and significantly stronger local
currencies against 30 June 2011.
Cost of Sales totaled EUR3.7m (2011: EUR3.9m) and relate to the
costs associated with the sale of last year's
harvest. Administrative expenses increased to EUR4.3m (2011:
EUR3.3m) reflecting the increased scale of the Ukraine operations
and the costs of operating as a quoted plc.
The taxation charge recorded in the period arose in Ukraine as
the Polish farming operations are not subject to corporation
tax.
Operating cash outflows for the first 6 months of 2012 reflect
the seasonal nature of our business and the substantial investment
in infrastructure. We will continue to invest in the business in
2012/13 and are comfortable with our ability to fund this. As at 30
June 2012 the Group had cash and cash equivalents of EUR5.2m held
on deposit with high credit quality UK banks. The EUR16.2m of
current borrowings comprise short term working capital facilities
in Ukraine and that element of shareholder loans and asset finance
funding repayable within 1 year. These are due to be repaid from
harvest receipts prior to the year end.
Between 31 December 2011 and 30 June 2012, both the Ukrainian
Hryvnia and the Polish Zloty strengthened against the Euro. As a
consequence, the translation of the Ukrainian and Polish balance
sheets on consolidation resulted in a EUR1.8m currency translation
gain through Other Comprehensive Income.
Operational review
CFG's farming operations continue to apply the full, five crop
rotational programme, which provides risk diversification in
cropping, thus reducing the volatility of Group earnings both in
terms of climatic conditions and market prices. The team remain
focused on yield maximisation through the application of the latest
agronomy and environmental practices to complement this rotational
programme. The Group further manages the crop risk through planting
a mix of crops in both its summer and winter planting.
The hectares planted and net yields achieved to date, for those
crops harvested are as follows:
Ukraine - (excl Mykolaiv JV)
Crop Hectares Planted Tonnes per
Hectare
---------------- ------------------- --------------------
2012 2011 2012 2011
---------------- --------- -------- --------- ---------
Potatoes 1,347 1,309 Not yet harvested
---------------- --------- -------- --------------------
Oil Seed Rape
- Winter 8,895 4,715 3.2 2.9
* Spring 745 501 1.6 2.6
---------------- --------- -------- --------- ---------
Wheat - Winter 4,198 3,008 6.2 6.1
* Spring 2,181 1,408 4.6 5.0
---------------- --------- -------- --------- ---------
Maize 1,185 1,905 Not yet harvested
---------------- --------- -------- --------------------
Sugar Beet 4,950 3,002 Not yet harvested
---------------- --------- -------- --------------------
Other 154 78 Not yet harvested
---------------- --------- -------- --------------------
Total 23,655 15,926
---------------- --------- --------
Poland
Crop Hectares Planted Tonnes per
Hectare
---------------- ------------------- --------------------
2012 2011 2012 2011
---------------- --------- -------- --------- ---------
Oil Seed Rape
- Winter 636 569 3.9 2.9
- Spring 22 34 1.8 2.0
---------------- --------- -------- --------- ---------
Wheat - Winter 1,301 1,396 8.1 7.2
- Spring 81 105 7.6 6.0
---------------- --------- -------- --------- ---------
Sugar Beet 405 338 Not yet harvested
---------------- --------- -------- --------------------
Total 2,445 2,442
---------------- --------- --------
Agricultural markets
Weak potato pricing resulting from the 2011 harvest oversupply
position has continued through to early 2012 as these stocks were
sold through the market. Global prices have strengthened over the
last 6 months due to the poor climatic conditions in the USA and
following the difficult autumn and winter conditions in Eastern
Europe. These are especially evident in cereal and oil seed rape
prices.
Storage and logistics
The Group has continued to invest in its infrastructure,
increasing its Ukraine cereal storage capacity by 15,000 tonnes
with further investments being made in potato handling, grading and
bagging equipment. All of these investments are focused on
delivering increased quality and improving our flexibility in
managing inventory and being able to take advantage of peak
seasonal pricing.
Current trading and outlook
Subject to no material adverse change in climate or market
prices we expect to exceed management's targets for the year, and
we are on track with our winter plantings of wheat and oil seed
rape.
We continue to investigate a number of opportunities to deliver
the controlled expansion of our farming operations and available
land under management. We also continue to develop new customers
and markets for our crops both within Ukraine and Poland and for
export. These opportunities will further diversify our income
sources; reduce the effect of localised weather conditions and
mitigate international pricing volatility.
Condensed Consolidated Statement of Comprehensive Income -
Unaudited
For the 6 month period ended 30 June 2012
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2012 2011 2011
EUR'000 EUR'000 EUR'000
Continuing operations
Revenue 4,190 4,372 25,034
Gains arising
from changes in
the value of biological
assets 7,786 4,290 -
Cost of sales (3,661) (3,880) (15,938)
Gross profit 8,315 4,782 9,096
--------------------------- ---------- ---------- -------------
Administrative
expenses (4,279) (3,343) (6,283)
Other operating
income 333 421 1,697
Operating profit 4,369 1,860 4,510
--------------------------- ---------- ---------- -------------
Finance income 32 6 32
Finance costs (921) (713) (1,457)
--------------------------- ---------- ---------- -------------
Profit before
income tax 3,480 1,153 3,085
--------------------------- ---------- ---------- -------------
Earnings from 29 - -
joint venture
operations
Income tax (124) - (17)
--------------------------- ---------- ---------- -------------
Profit for the
period 3,385 1,153 3,068
--------------------------- ---------- ---------- -------------
Other comprehensive
income net of
tax
Currency translation
differences 1,787 (2,162) 3
--------------------------- ---------- ---------- -------------
Total comprehensive
income for the
period 5,172 (1,009) 3,071
--------------------------- ---------- ---------- -------------
Profit for the
period attributable
to:
Equity holders
of the company 3,385 1,153 3,068
Non-controlling - - -
interests
--------------------------- ---------- ---------- -------------
3,385 1,153 3,068
Total comprehensive
income for the
period attributable
to:
Equity holders
of the company 5,172 (1,009) 3,071
Non-controlling - - -
interests
--------------------------- ---------- ---------- -------------
5,172 (1,009) 3,071
Earnings per share
(expressed as
Euro cents per
share)
Basic earnings
per share 2.07 1.39 2.47
Equalised earnings
per share (see
Note 2) 2.07 0.71 1.88
--------------------------- ---------- ---------- -------------
Condensed Consolidated Statement of Financial Position -
Unaudited
As at 30 June 2012
Unaudited Unaudited Audited
30 June 30 June 31 December
2012 2011 2011
EUR'000 EUR'000 EUR'000
Assets
Non-current assets
Property, plant and
equipment 44,681 32,969 37,806
Intangible assets 22,140 22,140 22,140
Investment in joint 1,788 - -
venture
------------------------------ ---------- ---------- -------------
68,609 55,109 59,946
------------------------------ ---------- ---------- -------------
Current assets
Biological assets 31,066 16,207 5,297
Inventories 2,554 1,926 8,791
Trade and other receivables 8,357 4,015 10,035
Cash and cash equivalents 5,160 16,888 10,036
------------------------------ ---------- ---------- -------------
47,137 39,036 34,159
------------------------------ ---------- ---------- -------------
Total assets 115,746 94,145 94,105
------------------------------ ---------- ---------- -------------
Capital and reserves attributable to
the equity holders of the Company
Share capital 1,635 1,635 1,635
Share premium 68,795 68,907 68,795
Retained profits 7,499 2,199 4,114
Foreign exchange
reserve (2,025) (5,977) (3,812)
Total equity attributable
to the equity holders
of the Company 75,904 66,764 70,732
Total equity attributable
to non-controlling
interests 1,596 1,596 1,596
------------------------------ ---------- ---------- -------------
Total equity 77,500 68,360 72,328
------------------------------ ---------- ---------- -------------
Non-current liabilities
Borrowings 10,165 9,821 6,072
------------------------------ ---------- ---------- -------------
10,165 9,821 6,072
------------------------------ ---------- ---------- -------------
Current liabilities
Trade and other payables 10,798 8,717 4,977
Income tax payable 1,073 499 412
Borrowings 16,210 6,748 10,316
28,081 15,964 15,705
------------------------------ ---------- ---------- -------------
Total liabilities 38,246 25,785 21,777
------------------------------ ---------- ---------- -------------
Total liabilities
and shareholders
equity 115,746 94,145 94,105
------------------------------ ---------- ---------- -------------
Condensed Consolidated Statement of Changes in Equity -
Unaudited
For the 6 month period ended 30 June 2012
Total
Equity
Foreign Attributable
Share Share Exchange Retained to Equity Non-controlling Total
Capital Premium Reserve Earnings Holders interest Equity
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Balance
at 31 December
2010 (audited) 829 52,069 (3,815) 1,329 50,412 1,313 51,725
--------------------- --------- --------- ---------- ---------- -------------- ---------------- ---------
Profit for
the period - - - 1,153 1,153 - 1,153
Currency
translation
differences - - (2,162) - (2,162) - (2,162)
Acquisition
of non-controlling
interest - - - (283) (283) 283 -
Conversion
of preference
shares 166 2,627 - - 2,793 - 2,793
Proceeds
from equity
issue 640 16,073 - - 16,713 - 16,713
Costs of
equity issue - (1,862) - - (1,862) - (1,862)
--------------------- --------- --------- ---------- ---------- -------------- ---------------- ---------
Balance
at 30 June
2011 (unaudited) 1,635 68,907 (5,977) 2,199 66,764 1,596 68,360
--------------------- --------- --------- ---------- ---------- -------------- ---------------- ---------
Profit for
the period - - - 1,915 1,915 - 1,915
Currency
translation
differences - - 2,165 - 2,165 - 2,165
Final costs
of equity
issue - (112) - - (112) - (112)
Balance
at 31 December
2011 (audited) 1,635 68,795 (3,812) 4,114 70,732 1,596 72,328
--------------------- --------- --------- ---------- ---------- -------------- ---------------- ---------
Profit for
the period - - - 3,385 3,385 - 3,385
Currency
translation
differences - - 1,787 - 1,787 - 1,787
Balance
at 30 June
2012 (unaudited) 1,635 68,795 (2,025) 7,499 75,904 1,596 77,500
--------------------- --------- --------- ---------- ---------- -------------- ---------------- ---------
Condensed Consolidated Statement of Cash Flows - Unaudited
For the 6 month period ended 30 June 2012
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2012 2011 2011
EUR'000 EUR'000 EUR'000
Cash flows from operating
activities
Profit before tax 3,480 1,153 3,085
Adjusted for:
Depreciation and amortization 1,197 863 2,169
(Gain)/loss on sale of
assets - (80) 281
Earnings from joint venture 29 - -
operations
Fair value adjustment
recognised in the statement
of comprehensive income:
Biological assets (7,786) (4,290) -
Non-operating costs/income
in the statement of comprehensive
income:
Interest income (32) (6) (32)
Interest costs 921 713 1,457
Movements in working
capital:
Decrease/(increase) in
inventories 6,237 5,615 (844)
Decrease/(increase) in
receivables 1,678 148 (5,872)
Increase in payables 6,692 4,980 1,848
Income tax paid (164) - (154)
Net additions to biological
assets (17,982) (9,400) (3,186)
------------------------------------ ---------- ---------- -------------
Net cash used in operations (5,730) (304) (1,248)
------------------------------------ ---------- ---------- -------------
Cash flows from investing
activities
Purchase of property,
plant and equipment (8,074) (2,501) (7,903)
Proceeds from sales of
assets 2 111 114
Purchase of non-controlling
interest (1,788) (114) (119)
Interest received 32 6 32
Net cash used in investing
activities (9,828) (2,498) (7,876)
------------------------------------ ---------- ---------- -------------
Cash flows from financing
activities
Proceeds from issue of
ordinary shares - 16,713 16,713
Costs of issue of ordinary
shares - (1,862) (1,973)
Repayment of shareholder
loans (924) (930) (2,376)
Proceeds of borrowings 10,911 4,313 5,540
Interest paid (1,092) (339) (1,326)
Net cash from financing
activities 8,895 17,895 16,578
------------------------------------ ---------- ---------- -------------
Net (decrease)/increase
in cash and cash equivalents (6,663) 15,093 7,454
------------------------------------ ---------- ---------- -------------
Cash and equivalents
at beginning of period 10,036 2,579 2,579
Effect of foreign exchange
variances 1,787 (784) 3
------------------------------------ ---------- ---------- -------------
Cash and cash equivalents
at end of period 5,160 16,888 10,036
Notes to the consolidated interim financial information -
unaudited
1. Basis of preparation of financial information
This report was approved by the Directors on 14 September
2012.
The auditors' report for the year ended 31 December 2011
financial information was unqualified.
The condensed consolidated interim financial information has
been prepared on the same basis and using the same accounting
policies as were applied in drawing up the Group's statutory
financial information for the year ended 31 December 2011, and
those accounting policies which the Directors anticipate will be
applied for the year ending 31 December 2012.
They have not been prepared in accordance with IAS 34 Interim
Financial Reporting. They do not include all of the information
required for full annual financial information, and should be read
in conjunction with the consolidated financial information for the
year ended 31 December 2011. The financial information is presented
in Euro.
The financial information for the six months ended 30 June 2012
and 30 June 2011 is unaudited.
In the opinion of the Directors the financial information for
this period presents fairly the financial position, results of
operations and cash flows for the period in accordance with the
recognition and measurement principles of the International
Financial Reporting Standards ('IFRS') as adopted by the EU.
2. Earnings per ordinary share
Basic earnings per share have been calculated on the profit or
loss after taxation for the period and the weighted average number
of ordinary shares. The historic equalised earnings per share was
calculated on the profit and loss after taxation for the period and
the number of shares in issue subsequent to the listing of the
company on 28 June 2011. In the opinion of the Directors, these
provide shareholders with more appropriate representation of the
comparative underlying earnings derived from the Group's
businesses.
3. Biological assets
CFG's estimate of the fair value of its biological assets as at
30 June 2012 is EUR31.1m (2011: EUR16.2m). The cost of production
of these assets was EUR23.2m (2011: EUR11.9m), resulting in a gain
of EUR7.8m (2011: EUR4.3m). This gain takes into account the amount
of biological transformation at the reporting date, along with the
Group's estimate of the condition of the crops, and cost, yield,
and sales price expectations.
The following is an outline of the basis of estimation for the
biological asset fair value:
- Yields were estimated by the agronomy team based on the crop
conditions prevailing at 30 June 2012.
- Sales prices have been estimated taking account of any forward
contracted sales or hedging as well as market prices prevailing at
30 June 2012.
- Yields are discounted depending upon the time between half year and the eventual harvest.
- Price estimates are then discounted, the percentage reflecting
the volatility of the market, whether crops have been sold forward
or hedged and the time between half year and the likely date of
sale.
- From this resulting fair value, we deduct the anticipated
remaining costs of harvest, drying and storage as well as the
expected selling and distribution costs. This net figure is then
used as the fair value of the growing crops and any difference
between this, and the actual costs incurred to date in bringing the
crops to their current state, is recognised in the results for the
period.
This information is provided by RNS
The company news service from the London Stock Exchange
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