2017 results
Total Produce revenue up 13.9%

Total Produce has delivered a strong performance in 2017. Total revenue, adjusted EBITA, and adjusted fully diluted earnings per share grew by 13.9%, 13.3% and 11.7% respectively. The results benefited from the contribution of acquisitions in the year and a circa 4% like-for-like growth in revenue. 

The Group continues to be cash generative with adjusted operating cashflows of €53.8m (2016: €44.2m) and free cashflows of €34.3m (2016: €30.4m).

“Total Produce has delivered very positive results in 2017. Total revenue has increased by 13.9% to €4.29 billion with an 11.7% increase in adjusted earnings per share to 13.48 cent," commented Carl McCann, Chairman.

"The Group announced on 1st February 2018 that it had acquired a 45% stake in Dole Food Company for $300m, subject to regulatory approval. It represents a very significant step in the history of Total Produce and a continuation of its successful acquisition and expansion strategy. Total Produce is targeting continued growth in 2018, on a like-for-like basis. The Group is also pleased to propose a 10% increase in final dividend to 2.4527 cent per share”

Operating review

Total revenue increased 13.9% to €4.29 billion (2016: €3.76 billion) with adjusted EBITA up 13.3% to €83.5m (2016: €73.7m). The results benefited from the contribution of acquisitions completed in the past twelve months offset in part by currency movements on the translation of the results of foreign currency denominated operations to Euro. The deconsolidation of a subsidiary to a joint venture interest at the beginning of the year had a marginal effect on revenue and adjusted EBITA and no effect on adjusted earnings per share.

Trading conditions overall for the twelve months were satisfactory. On a like-for-like basis, excluding acquisitions, divestments and currency translation, revenue was c. 4% higher due to higher average pricing with volumes unchanged on prior year.

In the early part of 2017, unusual weather conditions in Southern Europe led to temporary shortages of certain salad and vegetable lines. However given the Group’s diversified business this did not have a material impact. The company's  North American division experienced relatively less favourable trading conditions in some parts of the business. While overall volumes on a like-for-like basis in this division increased, the result was held back by lower pricing due to surplus product in the market and weather conditions that negatively affected quality.

The table below details a segmental breakdown of the Group’s revenue and adjusted EBITA for the year ended 31 December 2017. Each of the operating segments is primarily involved in the procurement, marketing and distribution of hundreds of lines of fresh produce. Both European segments also include businesses involved in the marketing and distribution of health foods and consumer products. Segment performance is evaluated based on revenue and adjusted EBITA.

Europe – Eurozone
This segment includes the Group’s businesses in France, Ireland, Italy, the Netherlands and Spain. Revenue decreased by 0.9% to €1,738m (2016: €1,753m) with a 4.0% increase in adjusted EBITA to €27.0m (2016:€26.0m). Overall trading conditions were satisfactory despite some volume shortages as highlighted above in the first half of the year and industry wide issues with South African citrus. This was offset by improved trading in other produce categories. The results were also marginally impacted by the effect of a subsidiary being deconsolidated and treated as a joint venture interest. Excluding the effect of acquisitions, revenue on a like-for-like basis was up c. 2% on prior year due to price increases with a marginal drop in volume.

Europe – Non-Eurozone
This segment includes the Group’s businesses in the Czech Republic, Poland, Scandinavia and the UK. Revenue increased by 1.4% to €1,543m (2016: €1,522m) with adjusted EBITA increasing by 7.6% to €41.7m (2016: €38.8m) helped by the contribution of recent bolt-on acquisitions and higher average prices. The reported performance was impacted by the translation of the results of foreign currency denominated operations into Euro particularly the weakening of Sterling and Swedish Krona by 8.1% and 1.9% respectively.

On a like-for-like basis excluding acquisitions, divestments and currency translation, revenue was c.3% ahead of prior year primarily due to average price increases with similar volumes.

This division includes the Group’s businesses in North America, South America and India. Revenue increased by 95% to €1,062m (2016: €544m) with adjusted EBITA increasing 64.5% to €14.8m (2016: €9.0m). The results benefitted from the incremental contribution of acquisitions. On 1 March 2017, the Group acquired a further 30% of the Oppenheimer Group (‘Oppy’) taking its interest to 65% and from this date it was fully consolidated as a subsidiary. Previously the original 35% was equity accounted as an associate interest. In addition there were two further acquisitions in North America in 2017. While on a like-for-like basis overall volumes have increased from prior year, the overall result was held back by lower pricing and unusual weather conditions which affected product quality particularly in some parts of our tomatoes, berries and potatoes supply. Oppy also incurred start-up losses in
a new soft fruit growing partnership.

Investment in Dole Food Company
On 1 February 2018, the Group announced that it had entered into a binding agreement to acquire a 45% stake in Dole Food Company (‘Dole’) from Mr. David H. Murdock for a cash consideration of $300 million (the ‘First

In addition, and at any time after closing of the First Tranche, the Group has the right, but not the obligation, to acquire (in any one or more tranches of 1%) up to an additional 6% of Dole common stock (the “Second Tranche”). The Group has no present intention to exercise its option to acquire the Second Tranche. In the event the Group exercises the right to acquire the additional 6% the total consideration for the 51% stake shall be $312 million.

Following the second anniversary of the First Tranche, the Group has the right, but not the obligation, to acquire the balance of Dole common stock (the ‘Third Tranche’), whereby the consideration for the Third Tranche is to be calculated based on 9x the three year average historical Dole Adjusted EBITDA less net debt. However, in no event shall the Third Tranche purchase price be less than $250 million or exceed $450 million (such cap subject to increase after six years). The Third Tranche consideration is payable in cash or, if the parties mutually agree, Total Produce stock.

Publication date: 3/1/2018
Author: Nichola McGregor
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