TIDMPURE
RNS Number : 7579G
PureCircle Limited
06 March 2018
PureCircle Limited
("PureCircle" or the "Company")
Interim results for the six months ended 31 December 2017
Chicago, Illinois, 5 March 2018 - 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 month period
from 1 July 2017 to 31 December 2017 ("1H FY18").
HIGHLIGHTS
- The company returned to double-digit growth in H1 with Sales
growth of +13.3% with excellent performance in both US and
Europe.
- Gross profit increased to $19.7m, though margins were
adversely impacted by currency fluctuations, sales mix and the
transition to an improved leaf variety.
- Adjusted EBITDA improved +21.9% to $7.8m
- Net loss of $4m, largely driven by revaluation of deferred tax
assets in the US entity following the US Tax Reform and adverse
currency impact.
- New $200m financing facility in place providing the business
with greater financial stability and flexibility
- Operating cash flow before working capital changes increased $3m to $7.7m
- Net debt increased to $98.4m in line with expectations.
- Launch of PureCircle's Starleaf, a proprietary non-GMO stevia
plant, which will offer superior tasting solutions to our food and
beverage customers.
SUMMARY OF FINANCIALS
Period ended 31 December (USD'm) 1H FY18 1H FY17 Change
------------------------------------ -------- -------- -------
Sales 53.5 47.2 13.3%
------------------------------------ -------- -------- -------
Gross margin 19.7 19.1 3.1%
Gross margin % 36.8% 40.4% -8.9%
------------------------------------ -------- -------- -------
Operating profit** 3.1 5.5 -43.6%
------------------------------------ -------- -------- -------
Adjusted EBITDA** 7.8 6.4 21.9%
------------------------------------ -------- -------- -------
Net loss for the financial
period (4.0) (0.7) >100%
------------------------------------ -------- -------- -------
Loss Per Share (fully diluted) (2.30) (0.39) >100%
------------------------------------ -------- -------- -------
Net assets 212.1 192.5 10.2%
------------------------------------ -------- -------- -------
Operating cash flow before
working capital changes 7.7 4.7 63.8%
------------------------------------ -------- -------- -------
Net cash from Operating activities 0.3 5.4 -94.4%
------------------------------------ -------- -------- -------
Net debt 98.4 80.1 22.8%
------------------------------------ -------- -------- -------
Headroom** 93.0 74.6 24.7%
------------------------------------ -------- -------- -------
** Operating profit, adjusted EBITDA and headroom are non-GAAP
alternative performance measures and are laid out on page 16 and
17. The full profit and loss account is detailed on page 7.
The unaudited financial statements comprising the statement of
comprehensive income and cash flow statements for the six months to
31 December 2017 ("1H FY18") along with the statement of financial
position and statement of equity as at 31 December 2017 are set out
on pages 7 to 11, together with the unaudited financial statements
comparatives of comprehensive income and cash flow statements for
the six months to 31 December 2017 ("1H FY17") along with the
statement of financial position as at 30 June 2017 and statement of
equity as at 31 December 2016.
Sales: Sales of $53.5m increased 13.3% over 1H FY17 ($47.2m).
Sales growth has primarily been driven by Europe and North America
and reflects the continued positive mix benefit of the growth of
Value Added and Breakthrough products. Our innovation continues to
enable new Food and Beverage adoption of stevia and support
continued roll-outs of products already launched.
Gross margin: Gross profit increased $0.6m to $19.7m. The gross
margin percentage of 36.8% was 3.6 percentage points lower than 1H
FY17 (40.4%). This decline is primarily driven by adverse currency
fluctuations, sales mix and the transition to a more expensive leaf
variety which will yield better returns going forward.
Adjusted EBITDA: Improved by $1.4m versus the prior year.
Net result after tax: The 1H FY18 net result of $4.0m loss
represented a $3.3m reduction on 1H FY17, of which $2.2m is
accounted for by adverse deferred tax impact from reduction in the
U.S tax rate.
Loss per Share (LPS): The Group recorded a 1(st) half loss per
share of $2.30 (1H FY17: LPS of $0.39) in 1H FY18, on a fully
diluted basis driven by seasonality and the tax and currency
factors outlined on page 1.
Operating cash flow before working capital: The Group generated
$7.7m of operating cash flow before working capital in 1H FY18, $3m
higher than the comparative period in 1H FY17.
Net debt: Net debt of $98.4m (1H FY17: $80.1m) has increased
primarily due to working capital requirements and investment in
expanding production facilities.
Headroom: The Group closed 1H FY18 with cash and bank facility
headroom of $93m (1H FY17: $74.6m).
BUSINESS DEVELOPMENTS
Powerful Market Trends
The ongoing global fight against obesity and diabetes through
sugar taxes and increased regulation continue to gather pace
driving wider availability. More than 600 million people are now
estimated to be obese and 415 million estimated to have diabetes;
this number is expected to more than double by 2040. Regulatory
action to address these public health issues is increasing and this
is coupled with consumers actively seeking natural sustainable
ingredients instead of using artificial ones.
Strategy Evolution Resulting from Starleaf
Sugar reduction trends are accelerating in the food and beverage
industry, however, the tools available are limited i.e. there are
four major artificial sweeteners and one natural sweetener -
stevia.
Whilst demand for stevia from food and beverage companies has
continued to increase its utilisation has been constrained
primarily through challenges in delivering deeper sugar reduction
whilst maintaining excellent taste and flavor. Early stevia
variants have proved inadequate in this key area which is why
PureCircle has continued to develop better tasting solutions. Our
innovative approach, insight and technical knowhow is protected by
strong IP, creating a leading competitive position for
PureCircle.
The better tasting glycosides are typically small in numbers in
existing stevia variants, but PureCircle through its agronomy
program has developed Starleaf which contains over 20 times more
sugar-like glycoside content than standard stevia leaf varieties.
This is a direct product of the Company's long-term investment of
$100 million in its PureCircle Stevia Agronomy Program which we
announced in 2016.
As a result of this innovation, PureCircle will be able to
deliver improved supply of better tasting glycosides whilst also
delivering better tasting, lower calorie solutions to our food and
beverage customers.
Agronomy
In everything we do, we seek to ensure that our growth is scaled
in a sustainable way. Today we work with thousands of farmers
around the world. By diversifying and expanding our stevia leaf
supply across three continents, PureCircle has reduced geopolitical
and climate risks ensuring it has the flexibility, capacity and
robustness to cope with global market volatility, in whatever form
that takes.
We invest in our supply chain - from leaf to product - to enable
us to bring ever-improving solutions to our clients, across more
food categories.
We have now moved to commercially scaling Starleaf stevia and
are working with farming partners to plant thousands of hectares of
this new generation plant. We believe this program will vastly
increase the amount of Starleaf stevia available to us in 2018 by
over 200%.
Farmers & Communities
PureCircle works with thousands of farmers around the world. Our
stevia crops are one of the most lucrative crops a farmer can grow
- they have multiple harvest cycles per annum, use considerably
less land and water and, because of our vertically integrated
supply chain and the way we work with co-operatives ensures we have
full traceability of our stevia, with respect for farmers and their
communities. For example, we recently announced a new stevia
farming program in the US, which will provide economic
opportunities for tobacco farmers looking for a sustainable crop in
high demand. This past fall, we partnered with North Carolina
farmers to successfully plant and harvest Starleaf stevia for the
next planting season. The trials confirmed stevia grows well in
soil and climate conditions conducive to growing tobacco. With the
declining demand for tobacco, stevia cultivation offers farmers in
North Carolina the opportunity to increase returns and productivity
for their acreage.
Innovation
Stevia has come a long way from the commoditised product of Reb
A. Today the third and fourth generation stevia solutions have
superb taste profiles and go further to help unlock demand to help
moderate calories naturally. This is enabling companies such as The
Coca-Cola Company to recently announce that Coca-Cola with no added
sugar sweetened only with sweetener derived from the stevia leaf
will be rolled out in 2018 in a market outside of the USA. During
the year, our continued focus on innovation unveiled both Starleaf
stevia and our new Sigma tools that greatly facilitate our
customers' work with stevia. We will be expanding our successful
Sigma line of products, which were ingredients optimised by
application without the inclusion of the most sugar-like
glycosides. This expansion will leverage the availability of the
best tasting glycosides through our Starleaf variety and combine it
with our Sigma approach, optimising for specific applications.
These ingredients will significantly simplify the product
development process for our major customers, ensuring optimal taste
with ease of use. Our commitment to continued innovation is what
will ensure we remain industry leaders and provide our strong
diversified customer base with the breadth and depth of
applications they require.
Opportunities
Mintel data shows that in FY2017, there were over 3,000 launches
of F&B products containing stevia sweeteners, up +12% versus
prior year. The activity continues to be focused on beverage, dairy
and snacking categories, with strong momentum across all markets.
These launches included well-known global and regional brands such
as 7up, Lipton, Nestea, Nescafe, Oikos, Activia, Heinz, Sprite,
Fanta and Coca-Cola.
All these elements open up market potential for PureCircle's
innovation pipeline. And the reason why PureCircle will provide the
winning solution globally, is because beverage and food companies
know that they can partner with PureCircle and achieve
uncompromising taste profiles tailored to their individual
markets.
We continue to invest in our people, systems, and
vertically-integrated supply chain in order that we can achieve our
aspirations. The investment in expanding our production facility in
Malaysia is yet to become fully operational due to delays in
commissioning however anticipated to be fully on stream by the
summer.
Sustainability
Stevia is a force for good in the world. Our involvement
throughout the supply chain enables us to be a key leader in
corporate social responsibility. Because the leaf is 250-400 times
sweeter, depending on application, than sugar; a little goes a long
way. That means that one fifth of the land provides the same amount
of sweetness achieved from other sweeteners made from sugar cane or
corn. Less land means less water and less energy. This major impact
is not just on the land but also the communities and co-operatives
we work with.
Our commitment to corporate social responsibility is embedded in
our corporate practices.
Board of Directors
Effective today, Christopher Pratt retires as a Non-Executive
Director of the Company after almost 4 years in the role. He was
the Senior Independent Director; Chairman of the Remuneration
Committee; member of the Nomination Committee and; member of the
Audit Committee of the Company.
John Gibney, a Non-Executive Director of the Company, will
replace Mr Pratt as Senior Independent Director. He is currently
chairman of the Audit Committee. Mitch Adamek, currently a member
of the Remuneration Committee will be appointed as chairman of
Remuneration Committee. Guy Wollaert, currently a member of the
Audit Committee will join the Remuneration committee and the
Nominations Committee of the Company, which he will also chair.
These changes will take effect today.
On the above Board changes, Mr Paul Selway-Swift, Chairman of
PureCircle, said "We are sorry to lose the services of Chris Pratt
as a Director. He has contributed much to our Board's deliberations
and I have particularly appreciated his input as Senior Independent
Director. We are fortunate to have considerable skills and
experience among our non-executive directors which enables us to
fill the Senior Independent Director and Committee roles vacated by
Chris Pratt in a smooth and seamless manner."
PureCircle will continue to monitor the size and composition of
its Board as the Company continues to evolve and intends to appoint
an additional Non-Executive Director at some point in the
future.
Commenting on the 1H FY18 trading, the Group CEO Magomet
Malsagov said:
"After a difficult year in FY17, where access to one third of
our market was denied due to the CBP action, I'm pleased that the
business is back on track and this is reflected in our 1H FY18
results where we have returned to double-digit growth.
I am particularly excited about our launch of Starleaf, a
proprietary non-GMO stevia plant that yields roughly 20 times more
of the newest and best-tasting stevia leaf sweeteners than
conventional stevia varieties. Starleaf is at the heart of our
evolving strategy where over the next 5-years we believe this will
transform both our business and the stevia market by providing
breakthrough solutions.
These naturally sourced stevia sweeteners make it far easier for
our customers to deliver great-tasting, sugar-reduced and
sugar-free products across a wide range of food and beverage
categories."
Enquiries:
Investors/Analysts
Rakesh Sinha, CFO
Email: Rakesh.Sinha@purecircle.com
Emma Kane (Redleaf), Media Relations
Email: media@purecircle.com Phone: +44 (0)20 3757 6888
A presentation for analysts will be held at 9:30 a.m. (UK time)
on the same day in Central London. Please contact ir@purecircle.com
for further details as well as instructions on how to connect to
the meeting via a conference call facility. US and international
dial-in numbers are available.
A recorded audio webcast of the presentation to analysts will be
made available from 2 p.m. today at
http://purecircle.com/investors/ .
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 currently has 72
stevia-related approved patents and 200 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 400
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/
Condensed consolidated statement of comprehensive income
for the period ended 31 December 2017
Unaudited
Notes Six months ended
31 December 31 December
2017 2016
USD'000 USD'000
Continuing operations
Revenue 53,507 47,230
Cost of sales (33,839) (28,131)
============================================= ====== ============ ============
Gross profit 19,668 19,099
Other income 4 1,614 222
Other expenses 5 (581) (2,565)
Administrative expenses (18,872) (16,839)
Finance income 33 43
Finance costs (3,223) (2,341)
Share of (loss) / profit in joint venture (406) 231
============================================= ====== ============ ============
Loss before taxation (1,767) (2,150)
Income tax (expense) / credit 12 (2,240) 1,474
============================================= ====== ============ ============
Loss for the period (4,007) (676)
Other comprehensive income / (loss)
(net of tax):
Items that may be reclassified subsequently
to profit or loss:
Exchange difference arising on translation
of foreign operations 7,554 (11,469)
7,554 (11,469)
============================================= ====== ============ ============
Total comprehensive income / (loss)
for the period (net of tax) 3,547 (12,145)
============================================= ====== ============ ============
Loss for the financial period attributable
to:
Owners of the company (4,007) (676)
(4,007) (676)
============================================= ====== ============ ============
Total comprehensive profit / (loss)
attributable to:
Owners of the company 3,547 (12,145)
3,547 (12,145)
============================================= ====== ============ ============
Loss per share (US cents)
Basic 14 (2.30) (0.39)
Diluted 14 (2.30) (0.39)
============================================= ====== ============ ============
Condensed consolidated statement of financial position
as at 31 December 2017
Unaudited Audited
31 December 30 June
Notes 2017 2017
USD'000 USD'000
Assets
Non-current assets
Property, plant and equipment 9 99,522 90,627
Intangible assets 9 60,864 54,710
Prepaid land lease payments 2,510 2,439
Deferred tax assets 5,092 7,200
Trade receivables 295 279
Other receivables 691 935
168,974 156,190
============================================== ====== ============ =========
Current assets
Inventories 10 128,401 106,007
Trade receivables 37,659 58,019
Other receivables and prepayments 14,808 8,720
Tax recoverable 285 109
Cash and bank balances 27,958 32,996
209,111 205,851
Total assets 378,085 362,041
============================================== ====== ============ =========
Equity and liabilities
Equity
Share capital 13 17,424 17,371
Share premium 13 225,281 222,284
Foreign exchange translation reserve (14,977) (22,531)
Share option reserve 1,584 3,719
Accumulated losses (17,202) (13,195)
============================================== ====== ============ =========
Equity attributable to owners of the company 212,110 207,648
Total equity 212,110 207,648
============================================== ====== ============ =========
Non-current liabilities
Long-term borrowings 11 83,069 39,000
Other payables and accruals 1,103 567
84,172 39,567
============================================== ====== ============ =========
Current liabilities
Trade payables 20,820 11,055
Other payables and accruals 16,987 24,637
Income tax liabilities 658 399
Short-term borrowings 11 43,338 78,735
81,803 114,826
============================================== ====== ============ =========
Total liabilities 165,975 154,393
Total equity and liabilities 378,085 362,041
Condensed consolidated statement of changes in equity
as at 31 December 2017
Attributable to owners of the Company
Foreign Share
exchange based
Share Share translation payment Accumulated Total
capital premium reserve reserve losses equity
-------- -------- ------------ -------- ------------ --------
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
Balance at 1 July 2017 17,371 222,284 (22,531) 3,719 (13,195) 207,648
Loss for the period - - - - (4,007) (4,007)
Other comprehensive income - - 7,554 - - 7,554
-------- -------- ------------ -------- ------------ --------
Total comprehensive income/ (loss) for the
period (net of tax) - - 7,554 - (4,007) 3,547
-------- -------- ------------ -------- ------------ --------
Share award compensation expense granted
during the period - - - 915 - 915
Exercise of share options 53 2,997 - (3,050) - -
Balance at 31 December 2017 17,424 225,281 (14,977) 1,584 (17,202) 212,110
-------- -------- ------------ -------- ------------ --------
Attributable to owners of the Company
Foreign Share
exchange based
Share Share translation payment Accumulated Total
capital premium reserve reserve losses equity
-------- -------- ------------ -------- ------------ ---------
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
Balance at 1 July 2016 17,211 214,723 (17,501) 9,776 (20,419) 203,790
Loss for the period - - - - (676) (676)
Other comprehensive loss - - (11,469) - - (11,469)
-------- -------- ------------ -------- ------------ ---------
Total comprehensive loss for the period (net
of tax) - - (11,469) - (676) (12,145)
-------- -------- ------------ -------- ------------ ---------
Share award compensation expense granted
during the period - - - 816 - 816
Exercise of share options 154 7,196 - (7,350) - -
Balance at 31 December 2016 17,365 221,919 (28,970) 3,242 (21,095) 192,461
-------- -------- ------------ -------- ------------ ---------
Condensed consolidated cash flow statement
for the period ended 31 December 2017
Unaudited
Six months ended
31 December 31 December
2017 2016
USD'000 USD'000
CASH FLOWS FROM OPERATING ACTIVITIES
Loss before taxation (1,767) (2,150)
Adjustments for:-
Amortisation of deferred income (32) (52)
Amortisation of prepaid land lease payments 79 73
Depreciation of property, plant and equipment 4,632 3,083
Interest expense 3,223 2,341
Interest income (33) (43)
Loss on disposal of property, plant and equipment - 100
Share based payments 914 817
Amortisation of intangible assets 797 100
Inventories (written back) / written off (202) 97
Intangible assets written off 5 84
Unrealised exchange (gain) / loss (428) 448
Share of loss / (profit) in joint venture 406 (231)
Provision for doubtful debts 55 -
Property, plant and equipment written off 21 -
============ ============
Operating cash flow before working capital changes 7,670 4,667
---------------------------------------------------------- ------------ ------------
Increase in inventories (22,192) (18,078)
Decrease in trade and other receivables 15,934 11,946
Increase in trade and other payables 1,649 9,948
NET CASH FROM OPERATIONS 3,061 8,483
---------------------------------------------------------- ------------ ------------
Interest received 33 43
Interest paid (2,768) (2,341)
Tax paid (72) (752)
NET CASH FROM OPERATING ACTIVITIES 254 5,433
---------------------------------------------------------- ------------ ------------
CASH FLOWS FOR INVESTING ACTIVITIES
Addition of intangible assets (4,774) (5,140)
Purchase of property, plant and equipment (9,291) (22,772)
Proceeds from disposal of property, plant and equipment - 100
Increase in investment in joint venture (160) (520)
---------------------------------------------------------- ------------ ------------
NET CASH FOR INVESTING ACTIVITIES (14,225) (28,332)
---------------------------------------------------------- ------------ ------------
BALANCE CARRIED FORWARD (13,971) (22,899)
---------------------------------------------------------- ------------ ------------
Condensed consolidated cash flow statement
for the period ended 31 December 2017 (continued)
Unaudited
Six months ended
31 December 31 December
2017 2016
USD'000 USD'000
BALANCE BROUGHT FORWARD (13,971) (22,899)
CASH FLOWS FOR FINANCING ACTIVITIES
Drawdown of borrowings 219,975 54,366
Repayment of borrowings (214,665) (60,753)
(Increase) / Decrease in restricted cash (2) 6
NET CASH FROM / (FOR) FINANCING ACTIVITIES 5,308 (6,381)
NET DECREASE IN CASH AND CASH EQUIVALENTS (8,663) (29,280)
Effects of foreign exchange rate changes on 3,623 (1,419)
cash and cash equivalents
CASH AND CASH EQUIVALENTS
AT BEGINNING OF THE FINANCIAL PERIOD 32,744 60,747
CASH AND CASH EQUIVALENTS AT OF THE
FINANCIAL PERIOD 27,704 30,048
---------------------------------------------- ------------ ------------
The cash and bank balances of $28m on the face of the balance
sheet includes restricted cash amounting to $254k which is excluded
from the cash flow statement.
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 5 March 2018.
2. Basis of preparation
The condensed consolidated financial information comprises the
unaudited interim financial information for the six months to 31
December 2017 and 31 December 2016. The condensed consolidated
interim financial statements has been prepared in accordance with
IAS 34, "Interim Financial reporting" and the Disclosure and
Transparency Rules issued by the Financial Conduct Authority. The
condensed consolidated financial information is unaudited but has
been reviewed by the auditors and their review report is set out on
page 21 - 22.
The condensed consolidated interim financial statements should
be read in conjunction with the Group's annual financial statements
for the year ended 30 June 2017 ("FY2017"), which have been
prepared in accordance with International Financial Reporting
Standards ("IFRSs"). The auditors' report on those statements was
unqualified and did not contain an emphasis of matter
paragraph.
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 2017. IFRS 15 "Revenue" and IFRS 9 "Financial
Instruments" will be effective for the Group from 1 July 2018. The
Group is currently assessing the impact of these new standards on
the financial statements.
The preparation of this condensed consolidated financial
information requires management to make estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities at the
date of this condensed consolidated financial information. Such
estimates and assumptions are based on historical experience and
various other factors that are believed to be reasonable in the
circumstances and constitute management's best judgement at the
date of the condensed consolidated financial information. The key
estimates and assumptions were the same as those applied to the
consolidated financial statements for the year ended 30 June 2017.
In the future actual experience may deviate from these estimates
and assumptions, which could affect these condensed consolidated
financial information as the original estimates and assumptions are
modified, as appropriate, in the period in which the circumstances
change.
3. Exceptional items
No exceptional costs have been incurred in H1 18 (H1 17: $2.2m).
Exceptional costs were recorded in H1 FY17 as a direct consequence
of the Withhold Release Order mainly comprising legal fees and
incremental costs of production and distribution.
4. Other income
Other income represents net foreign exchange gain and other
miscellaneous income.
5. Other expenses
Other expenses represent net foreign exchange loss and other
operating expenses.
6. Principal risks and uncertainties
In the view of the board, the key risks and uncertainties now
affecting the business are those set out below.
Continued growth in the Stevia market
The Group has pioneered the development of the high purity
stevia market and is focused on the further development of the
market. Additionally, the Group has an operationally leveraged
business model in which profitability is sensitive to volumes. This
makes the Group's future profitability sensitive to the continued
growth in the stevia market.
Mitigation activities
Management mitigate this risk with an active programme of new
stevia product innovation to support further consumer adoption of
stevia and to enable future food and beverage formulation projects.
Further the Group invests to protect and promote the natural
credentials of stevia. These activities coupled with external
evidence, such as Mintel data, shows continued strong growth in
F&B product launches using stevia which provides confidence in
there being sustainable stevia market growth over the long
term.
Competition: over time more competitors may enter the stevia
market with the potential to reduce the Group's share of that
market
As pioneers in the development of the stevia market, the Group
currently has a majority share of the Global stevia market. As
stevia becomes more established as a large volume mainstream
F&B ingredient, the current market size will increase with more
competitors entering the market, thus potentially reducing
PureCircle's market share. In addition, the emergence of cheaper
alternatives of stevia could lead to the loss of customers and
undermine our business performance.
Mitigation activities
There is considerable growth potential for the stevia market and
with it scope for the Group to grow revenues significantly even
with reduced market share. PureCircle's continued investment in
breakthrough best tasting next generation products and bringing
them to market mitigates the risk of erosion. Further there is
limited scope for any new technologies to be labelled as naturally
sourced, which is likely to significantly limit their acceptance by
consumers.
Leaf Procurement & Sourcing
Dried leaf from the stevia plant is the Group's primary raw
material and it constitutes a significant proportion of the Group's
variable costs of production. The Group's financial performance can
be materially impacted if the sourcing of leaf - input cost, nature
of contractual conditions is not managed effectively.
Mitigation activities
The Group manages this risk by developing large scale
diversified supply. To achieve this PureCircle continues to lead
the diversification of leaf supply into new geographic regions
centred on our leaf development hubs in Africa, South America and
US. Further the Group is making progress working with larger
commercial agricultural partners who have the potential to scale
supply more quickly than traditional smallholders.
Working capital funding to support large growth plans
PureCircle fully controls the end-to-end process of its entire
supply chain from leaf source to manufacturing; sales; distribution
and customer relationship management. PureCircle is a fast growing
business which requires continued product innovation and investment
in technology to stay ahead of competition.
Mitigation activities
The Group manages its working capital growth risk actively
through a suite of ongoing policies. These include balance between
supply purchases, inventory holdings and forecast sales cash flows;
that maintains appropriate gross cash and facility headroom
availability at all times; and that works actively to build and
maintain bank and equity relationships. The HSBC financing facility
commenced in the period and enables greater flexibility in managing
working capital requirements.
Inventory Management
This is a key are for the business. We are a young industry
where a significant proportion of our products are used in
innovations, hence having available stock is of paramount
importance. This brings with higher stock holding levels and the
risk of obsolescence in addition to high levels of cash being tied
up in inventory.
Mitigation activities
The Group manages this risk actively through a variety of
policies and practices and management works closely with larger
customers to ensure that their inventory holdings are appropriate;
over time, as the industry develops, there will be an easing of
inventory holding.
Talent Development & Retention: As pioneers in the
development of the stevia industry, the Group is reliant upon the
performance of highly skilled personnel including its senior
management team
Stevia is a relatively new industry, in consequence the talent
pool of management with the skills and experience of working in the
stevia market is smaller than that in other more established
industries.
Mitigation activities
The Group manages this risk by ongoing investment in senior
management retention programmes for all key managers, including the
Group's Long Term Incentive Programme (LTIP).
Managing health and safety
The Group operates in the food ingredient industry and operates
a food grade supply chain, including large production facilities.
As a result, health and safety considerations are a significant
operating factor for the Group's business.
Mitigation activities
The Group manages its health and safety requirements actively
through a combination of strategy, design, policy and process
management. The Group's strategy is to be in full compliance with
all health and safety requirements at all times. PureCircle's
manufacturing facilities in China and Malaysia operate using an
integrated quality system and maintains high standards expected in
the food safety management system namely FSSC 22000, FAMI-QS,
SMETA, HACCP and ISO9001.
Managing cyber security
IT security threats are becoming ever more advanced and frequent
with breaches expanding their reach with more sophisticated
methods. The Group being in a new, progressive industry is highly
vigilant to these threats.
Mitigation activities
The Group manages its cyber security threat by deploying a
series of preventive, detective and corrective controls. 3(rd)
party software has been deployed to monitor unauthorised access and
to alert the Organisation of any malicious/unauthorised activity
and provide support for post-incident activities, close any
potential control gap and prevent future occurrence.
Corporate Social Responsibility (CSR)
Allegations of Human Rights violation and Environment abuse
might lead to legal actions against the Group; damage the Group's
reputation and penalties including restrictions on operations.
Mitigation activities
Post CBP clearance, PureCircle is not complacent. The need for
integrity in corporate practices and CSR awareness remain
critically important and are embedded in the way we conduct
ourselves as a business.
Intellectual Property (IP) and Innovation
Innovation is an essential part of the Group's success.
Protecting the results of R&D and Innovation activity is
critical since fast growth of industry, inevitably, attracts new
players seeking to fast-track to a market-leading position using
the latest innovations in this category.
Mitigation activities
The Group maintains a robust patent filing strategy and
procedures to ensure that patent applications are timely filed in
sync with innovations; consistent use of non-disclosure and
non-analysis agreements to protect confidentiality and ownership of
innovations whether patentable or not; fostering a culture of
innovation recognition and protection.
7. Going concern
After reviewing the Group's cash flows for the foreseeable
future covering a period of not less than twelve months from the
date of this report, the directors are satisfied that, at the time
of approving the unaudited condensed consolidated financial
statements, it is appropriate to continue to adopt a going concern
basis of accounting.
8. Segmental 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 flavors.
From a geographical perspective, the Group is a multinational
with operations located on all continents, but managed as one
unified global organization.
Six months to Six months to
31 December 31 December
2017 2016
USD'000 USD'000
Revenue 53,507 47,230
Cost of sales (33,839) (28,131)
Gross margin 19,668 19,099
================================================================= ============== ==============
Gross margin % 36.8% 40.4%
Other income 470 265
Administrative expenses (17,087) (13,907)
Operating profit 3,051 5,457
================================================================= ============== ==============
Other expenses (2,367) (5,115)
================================================================= ============== ==============
Foreign exchange gain / (loss) 1,178 (382)
================================================================= ============== ==============
Finance costs (3,223) (2,341)
================================================================= ============== ==============
Share of (loss) / profit in joint venture (406) 231
================================================================= ============== ==============
Taxation (2,240) 1,474
----------------------------------------------------------------- -------------- --------------
Loss for the financial period (4,007) (676)
----------------------------------------------------------------- -------------- --------------
Reconciliation of Net loss after tax to Adjusted EBITDA
Net loss after tax (4,007) (676)
Depreciation and amortization 5,429 3,191
Finance costs 3,223 2,341
Taxation 2,240 (1,474)
Share-based payment expense 915 816
Exceptional items - 2,185
Adjusted EBITDA 7,800 6,383
---------------------------------------------------------- ----- -------------- --------------
Gross cash 27,958 30,296
Gross debt 126,407 110,379
---------------------------------------------------------- ----- -------------- --------------
Net debt 98,449 80,083
---------------------------------------------------------- ----- -------------- --------------
Gross cash 27,958 30,296
Unutilised facilities 65,000 44,314
---------------------------------------------------------- ----- -------------- --------------
Headroom 92,958 74,610
---------------------------------------------------------- ----- -------------- --------------
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 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"
- Net cash 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
- Adjusted EBITDA is calculated as EBITDA with other expenses
(principally the charge of the Group's LTIP scheme and exceptional
items) added back
- Other expenses comprise discretionary remuneration related
costs including the Group's Long Term Incentive Plan (LTIP) and
bonus
- Net debt is calculated as total bank borrowings (both short
and long term) less gross cash and bank balances
- Headroom is calculated as gross cash and bank balances plus
all unutilised elements of the Group's bank facilities
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 2017, 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 2017
Sales 6,062 22,913 24,532 - 53,507
Non-current assets 153,483 2,084 11,601 1,806 168,974
31 December 2016
Sales 6,250 17,889 23,091 - 47,230
Non-current assets 123,809 1,559 14,213 1,806 141,387
9. Property, plant and equipment and intangible assets
During the period, the Group invested $9.3m in property, plant
and equipment.
The addition of $4.8m 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.
10. Inventories
31 December 30 June
2017 2017
USD'000 USD'000
Raw materials 21,084 8,663
Work-in-progress 72,228 61,127
Finished goods 35,089 36,217
128,401 106,007
================== ============ ========
11. Borrowings
31 December 30 June
2017 2017
USD'000 USD'000
Current 43,338 78,735
43,338 78,735
========= ============ ========
Non-Current 83,069 39,000
83,069 39,000
================== ======== ========
Total borrowings 126,407 117,735
=================== ======== ========
On 30 November 2017, the Group entered into a new syndicated
$200m loan facility, comprising a $100m revolving credit facility
and a $100m term loan.
During the period, the Group used this new facility to repay all
previous bank loans in line with previously disclosed repayment
terms. The Group has drawn down borrowings during the period at a
weighted average effective interest rate of 4.14% per annum.
The non-current term loans fall due in between March 2019 to
November 2021.
12. Income taxes
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 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.
A subsidiary of the Group, 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. Upon the expiry
of the 10-year incentive period, PCSB will be entitled to a
concessionary tax rate of 20% on income derived from qualifying
activities for a further period of 10 years.
Another subsidiary of the Group, 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.
In respect of its PureCircle USA Inc. ("PCUSA") subsidiary,
following the US tax reform which was substantively enacted as at
31 December 2017, the corporate income tax rate has decreased from
35% to 21%. Consequently, the effective corporate tax rate (i.e.
the combined of State tax and Federal tax) has reduced to 25.75%
for FY2018 as compared to 37% in FY2017 and prior years. This has
resulted in a reduction in the Group's deferred tax assets from
$7.2m to $5.1m and a corresponding charge of $2.1m in the results
of the period.
13. Share capital and share premium
Number of shares Ordinary shares Share premium Total
'000 USD'000 USD'000 USD'000
Balance at 1 July 2017 173,699 17,371 222,284 239,655
Exercise of share options 543 53 2,997 3,050
Balance at 31 December 2017 174,242 17,424 225,281 242,705
============================== ================= ================ ============== ========
Balance at 1 July 2016 172,112 17,211 214,723 231,934
Exercise of share options 1,538 154 7,196 7,350
Balance at 31 December 2016 173,650 17,365 221,919 239,284
============================== ================= ================ ============== ========
14. 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
2017 2016
Loss attributable to equity holders of the Company (USD'000) (4,007) (676)
Weighted average number of ordinary shares in issue ('000) 174,200 173,499
Basic loss per share (US Cents) (2.30) (0.39)
Fully diluted loss per share (US Cents) (2.30) (0.39)
15. Dividends
No dividends were declared or paid by the Company during the
interim period.
16. Contingent liabilities and capital commitments
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 $4.1m were
approved and contracted for the purchase of land and upgrading of
plant and machinery in Malaysia.
17. Events after the end of the reporting period
There were no significant events after the end of the reporting
period.
18. Significant related party transactions
(a) Identities of related parties:
The Group and / or the Company have related party relationships
with:
i) its subsidiaries and joint venture; and
ii) the directors who are the key management personnel.
The following transactions were carried out by the Group during
the period:
31 December 31 December
2017 2016
USD'000 USD'000
Sales of goods to jointly controlled entity 1,641 438
------------ ------------
19. Directors' Responsibility Statement
The Directors confirm, that to the best of their knowledge, that
this condensed financial information has been prepared in
accordance with IAS 34 "Interim Financial reporting", and that this
Half-Year Report includes a fair review of the information required
by the Disclosure and Transparency Rules of the Financial Conduct
Authority, paragraphs DTR 4.2.7 and DTR 4.2.8.
The Directors of PureCircle Limited are as listed on pages 42
and 43 in the PureCircle Limited Annual report for the year ended
30 June 2017.
Details of all the current Directors of PureCircle Limited are
maintained at www.purecircle.com
For and on behalf of the Directors:
Magomet Malsagov Rakesh Sinha
CEO CFO
5 March 2018
Independent review report to PureCircle Limited
Report on the condensed consolidated interim financial
statements
Our conclusion
We have reviewed the condensed consolidated interim financial
statements (the "interim financial statements") in the interim
results of PureCircle Limited for the six month period ended 31
December 2017. Based on our review, nothing has come to our
attention that causes us to believe that the condensed consolidated
interim financial statements are not prepared, in all material
respects, in accordance with International Accounting Standard 34
and the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- the condensed consolidated statement of financial position as at 31 December 2017;
-- the condensed consolidated statement of comprehensive income
for the period then ended;
-- the condensed consolidated cash flow statement for the period then ended;
-- the condensed consolidated statement of changes in equity for
the period then ended; and
-- the explanatory notes to the condensed consolidated interim financial statements.
The interim financial statements included in the interim results
have been prepared in accordance with International Accounting
Standard 34, 'Interim Financial Reporting', as issued by the
International Accounting Standards Board and the Disclosure Rules
and Transparency Rules of the United Kingdom's Financial Conduct
Authority.
As disclosed in note 2 to the interim financial statements, the
financial reporting framework that has been applied in the
preparation of the full annual financial statements of the Group is
applicable law and International Financial Reporting Standards
(IFRSs) as issued by the International Accounting Standards
Board.
Responsibilities for the condensed consolidated interim
financial statements and the review
Our responsibilities and those of the directors
The interim results, including the interim financial statements,
is the responsibility of, and has been approved by, the directors.
The directors are responsible for preparing the half-yearly report
in accordance with the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Our responsibility is to express to the company a conclusion on
the condensed consolidated interim financial statements in the
half-yearly report based on our review. This report, including the
conclusion, has been prepared for and only for the company for the
purpose of complying with the Disclosure and Transparency Rules of
the Financial Conduct Authority and for no other purpose. We do
not, in giving this conclusion, accept or assume responsibility for
any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
What a review of condensed consolidated financial statements
involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the interim
results and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
5 March 2018
London
Notes:
(a) The maintenance and integrity of the PureCircle Limited
website is the responsibility of the directors; the work carried
out by the auditors does not involve consideration of these matters
and, accordingly, the auditors accept no responsibility for any
changes that may have occurred to the financial statements since
they were initially presented on the website.
(b) Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
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 2017 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
(Channel Islands) Limited
PO Box 83, Ordnance House,
31 Pier Road St Helier
Jersey JE4 8PW
Channel Islands.
In the UK (Depository Interests)
Computershare Investor Services plc
The Pavillions, Bridgwater Road
Bristol BS13 8AE, United Kingdom.
0081B8/py
This information is provided by RNS
The company news service from the London Stock Exchange
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