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Consolidated Unaudited Interim Report of AS PRFoods for the 4nd quarter and 12 months of 2020/2021 financial year

·9-min read

MANAGEMENT COMMENTARY

The most difficult year in the history of the group is over. We were attacked from three fronts: from one side, corona crises, caused a situation of drastic drop in prices and demand for fish products, causing drop in gross margin and sales. Secondly, we entered the crisis with very high leverage due to recent acquisitions and were forced by banks to reduce aggressively our loan portfolio. Third, our now-ex management in Finnish unit did not want and could not react to market changes, whereby we accumulated problems there with long-term effect. Dealing with all three criseses simulteanously increased significantly our loss, as we were forced to take decisions, that would have not happened under normal circumstances.

As a result of all this group’s sales decreased by 25% to 58,7 million euros ( 78,7 million euros yoy).

As end result we had our first historical EBITDA loss of -1,24 million euros (2,75 million euros yoy) and net loss of -5,1 million euros (-1,9 million euros yoy).

Q4 EBITDA was largely impacted by the fact that raw material prices suddenly increased due to loosening of coroan restrictions, while our Finnish market product end prices were fixed in winter, when raw material prices were significantly lower. This caused a situation in last quarter, where we sold some of our products below COGS. In order to end such practice , we had to terminate our local CEO and notified clients of termination of such contracts.

If to find anything positiive, then group’s cash flow from operations was positiive by 2 million euros and total cashflow over the periood improved by 0.51 million euros. We also reduced our net debt and reduced significantly short term liabilities of the company. Also our fish farming unit posted a better result and was the backbone of our Scandinavian operations. Our biggest problem is that Estonian government is delaying decision to allow sea farming in Estonia, due to which we could not earn significant additional income from last periood.

Our Scottish division was very brave, and even though their sales and net profit decreased by 30%, John Ross Jr still managed to post 1,4 million euros EBITDA. I would also like to thank our Estonian unit, that despite the disappreance of HoReCa, managed to grow each month sales in retail significantly.

The number of employees decreased by ca 10% on annual basis, but obviously the cost base of Finnish unit did not respond to decrease in sales and margins. In summary, we can say that root cause of our problems is Finnish business division.

PRFoodsi action plan to overcome the crisis is:

  1. Decrease overall debt level through positiive EBITDA and strengthening of equity base.

  2. Completely restructure Finnish division, either through disposal or closure of loss-making business units. Eliminate totally all low margin products form Finnish sales.

  3. Increase retail sales in UK, EU markets, including home market Estonia.

  4. Group’strategic focus is on fish farming, as divisjon that has been profitable every year. Target is to reach by 2023 fish farming võlume of 10,000 tons, giving additional 45-50 million euros in sales.

Group’s financial position is not easy. At the same time, we must remember that 11 million euros bonds have been issued solely for refinancing of John Ross Jr. Acquisition and John Ross Jr results have not been impacted so severly, their operational cash flow is very strong and they pay regularly dividends to parent company, therefore we find their leverage to be acceptable. Fish farming requires long term capital for fish feed and this is under works.

Last year we were forced to reduce significantly working capital financing through banks, which put strain on company’s finances. We have reduced significantly working capital needs in operations, also through lower inventory. Most important is to restore profitability in the environment of lower sales and restructure loss-making business units.

Having cut our teeth now for second year in corona crisis, we know that it is not sustainable to rely on outside help and all tough decisions need to be taken sooner than later. For our advantage the fish market has started much stronger this year and is more predictable and demand for our products is growing. The only objective of new financial year is profit and everything that blocks our road to profitabilty must be eliminated.

KEY RATIOS

INCOME STATEMENT

mln EUR

2Q 2021

1Q 2021

4Q 2020

3Q 2020

2Q 2020

1Q 2020

4Q 2019

3Q 2019

Sales

14.7

14.2

17.0

12.7

15.1

18.5

25.4

19.3

Gross profit

0.3

0.9

2.5

1.2

0.7

2.0

4.3

2.6

EBITDA from operations

-1.0

-0.5

0.6

-0.3

-0.4

0.0

2.1

0.7

EBITDA

-0.7

-0.7

0.7

-0.5

-0.4

-0.9

1.4

1.5

EBIT

-1.4

-1.4

0.0

-1.1

-1.0

-1.4

0.7

1.0

EBT

-1.6

-1.8

-0.1

-1.4

-1.2

-1.8

0.6

0.8

Net profit (-loss)

-1.7

-1.8

-0.2

-1.4

-1.3

-1.7

0.5

0.6

Gross margin

2.1%

6.6%

14.9%

9.4%

4.6%

10.8%

17.0%

13.4%

Operational EBITDA margin

-7.0%

-3.5%

3.4%

-2.6%

-2.6%

0.1%

8.4%

3.8%

EBITDA margin

-4.8%

-5.3%

4.1%

-3.8%

-2.6%

-4.6%

5.3%

7.6%

EBIT margin

-9.3%

-9.9%

0.2%

-8.8%

-6.4%

-7.8%

2.9%

5.0%

EBT margin

-10.8%

-12.5%

-0.6%

-11.3%

-8.1%

-9.8%

2.2%

3.9%

Net margin

-11.6%

-12.5%

-1.2%

-11.3%

-8.4%

-9.2%

2.0%

2.9%

Operating expense ratio

15.4%

15.6%

15.6%

18.2%

13.9%

14.3%

12.5%

13.4%

BALANCE SHEET

mln EUR

30.06.2021

31.03.2021

31.12.2020

30.09.2020

30.06.2020

31.03.2020

31.12.2019

Net debt

20.9

21.4

21.9

21.5

20.7

17.0

17.8

Equity

15.8

17.6

18.6

18.5

19.8

21.6

23.3

Working capital

-2.9

-5.0

-3.9

-4.4

-4.0

-2.5

-3.5

Assets

55.3

54.5

57.5

57.4

57.1

56.9

60.5

Liquidity ratio

0.9x

0.8x

0.8x

0.8x

0.8x

0.9x

0.9x

Equity ratio

28.6%

32.4%

32.4%

32.3%

34.7%

37.9%

38.5%

Gearing ratio

56.9%

54.9%

54.0%

53.7%

51.1%

44.0%

43.3%

Debt to total assets

0.7x

0.7x

0.7x

0.7x

0.7x

0.6x

0.6x

Net debt to EBITDA op

-16.9x

-55.3x

160.0x

12.8x

7.5x

5.3x

5.3x

ROE

-28.7%

-23.8%

-21.9%

-7.0%

-9.1%

-5.7%

-3.2%

ROA

-9.1%

-8.4%

-7.8%

-2.4%

-3.2%

-2.1%

-1.2%


Consolidated Statement of Financial Position

Thousand euros

30.06.2021

30.06.2020

ASSETS

Cash and cash equivalents

2,500

2,276

Receivables and prepayments

3,295

3,578

Inventories

5,691

7,884

Biological assets

4,795

4,249

Total current assets

16,281

17,987

Deferred income tax

21

54

Long-term financial investments

302

232

Tangible fixed assets

15,236

16,179

Intangible assets

23,457

22,672

Total non-current assets

39,016

39,137

TOTAL ASSETS

55,297

57,124

EQUITY AND LIABILITIES

Loans and borrowings

6,396

10,611

Payables

12,530

11,132

Government grants

207

211

Total current liabilities

19,133

21,954

Loans and borrowings

16,988

12,368

Payables

723

190

Deferred tax liabilities

1,868

1,920

Government grants

746

873

Total non-current liabilities

20,325

15,351

TOTAL LIABILITIES

39,458

37,305

Share capital

7,737

7,737

Share premium

14,198

14,007

Treasury shares

-390

-390

Statutory capital reserve

51

51

Currency translation reserve

583

-366

Retained profit (-loss)

-6,682

-1,654

Equity attributable to parent

15,497

19,385

Non-controlling interest

342

434

TOTAL EQUITY

15,839

19,819

TOTAL EQUITY AND LIABILITIES

55,297

57,124


Consolidated Statement of Profit or Loss And Other Comprehensive Income

Thousand euros

4Q 2020/2021

4Q 2019/2020

12 months 2020/2021

12 months 2019/2020

Sales

14,740

15,101

58,692

78,292

Cost of goods sold

-14,437

-14,412

-53,717

-68,710

Gross profit

303

689

4,975

9,582

Operating expenses

-2,264

-2,107

-9,468

-10,509

Selling and distribution expenses

-1,499

-1,387

-6,389

-7,060

Administrative expenses

-765

-720

-3,079

-3,449

Other income / expense

146

211

309

519

Fair value adjustment on biological assets

441

239

311

-291

Operating profit (loss)

-1,374

-968

-3,873

-699

Financial income/-expenses

-223

-254

-1,031

-1,062

Profit (loss) before tax

-1,597

-1,222

-4,904

-1,761

Income tax

-110

-47

-216

-134

Net profit (loss) for the period

-1,707

-1,269

-5,120

-1,895

Net profit (loss) attributable to:

Owners of the company

-1,697

-1,254

-5,028

-1,718

Non-controlling interests

-10

-15

-92

-177

Total net profit (loss)

-1,707

-1,269

-5,120

-1,895

Other omprehensive income (loss) that may subsequently be classified to profit or loss:

Foreign currency translation differences

-100

-117

949

-152

Total comprehensive income (expense)

-1,807

-1,386

-4,171

-2,047

Total comprehensive income (expense) attributable to:

Owners of the Company

-1,797

-1,371

-4,079

-1,870

Non-controlling interests

-10

-15

-92

-177

Total comprehensive income (expense) for the period

-1,807

-1,386

-4,171

-2,047

Profit (loss) per share (EUR)

-0.04

-0.03

-0.13

-0.04

Diluted profit (loss) per share (EUR)

-0.04

-0.03

-0.13

-0.04

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

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