TIDMPURE
RNS Number : 5222S
PureCircle Limited
12 March 2019
PureCircle Limited
("PureCircle" or the "Company")
Interim results for the six months ended 31 December 2018
Chicago, Illinois, 11 March 2019 - 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 2018 to 31 December 2018 ("1H FY19").
HIGHLIGHTS
- Sales declined 5.2% to $50.7m in part due to phasing of some
deliveries to customers compared to the prior year. Sales to date
in H2 show an improving trend versus the prior year.
- Sales in H1 include meaningful contribution from next
generation stevia sweeteners based on Reb M both directly extracted
from leaf and via conversion of first generation sweeteners such as
Reb A.
- Sales also show some cannibalisation of base business as
customers reformulate first generation stevia sweeteners to better
tasting Reb M.
- Despite lower sales, gross profit increased by $0.2m to $19.9m
due to favorable product mix and positive impact from lower
material cost.
- Benefits of the restructuring initiative is resulting in lower
SG&A costs and improved operational efficiency leading to
improved adjusted EBITDA*.
- As a result, adjusted EBITDA improved 48.7% to $11.6m, driven
by higher margins coupled with lower general and administration
costs.
- During the period there was a significant inventory write down
to net realisable value of $24.2m primarily relating to by-products
generated from early generations of stevia leaf. Such by-products
will no longer be produced as a result of the switch to next
generation Starleaf stevia variety and is classified as an
exceptional item.
- Net loss of $22.1m, is wholly driven by inventory write down
to net realisable value of $24.2m.
- Net profit for the period excluding exceptional items is
$2.9m, an increase of $6.9m versus the prior year.
- Operating cash inflow before working capital changes was
$10.5m, an increase of $2.8m compared to 1H FY18.
- Net debt increased to $103.5m due to higher working capital.
SUMMARY OF FINANCIALS
Period ended 31 December (USD'm) 1H FY19 1H FY18 Change
Sales 50.7 53.5 -5.2%
-------- -------- -------
Gross Profit 19.9 19.7 1.0%
Gross margin 39.2% 36.8% 2.4%
-------- -------- -------
Operating profit* 11.2 3.1 >100%
-------- -------- -------
Adjusted EBITDA* 11.6 7.8 48.7%
-------- -------- -------
Net profit/(loss) for the period
excl. exceptional items* 2.9 (4.0) >100%
-------- -------- -------
Net loss for the financial period (22.1) (4.0) >100%
-------- -------- -------
Earnings/(Loss) Per Share excl.
exceptional items (US Cents)* 1.7 (2.3) >100%
-------- -------- -------
Loss Per Share (fully diluted)
(US Cents) (12.7) (2.3) >100%
-------- -------- -------
Net assets* 200.0 212.1 -5.7%
-------- -------- -------
Operating cash flow before working
capital changes 10.5 7.7 36.4%
-------- -------- -------
Net cash generated from operating
activities 3.2 0.3 >100%
-------- -------- -------
Net debt* 103.5 98.4 5.2%
-------- -------- -------
* Operating profit, adjusted EBITDA, net profit/(loss) for the
period excluding exceptional items, earnings/(loss) per share
excluding exceptional items and net debt are non-GAAP alternative
performance measures and are laid out on page 22 and 23. The full
profit and loss account is detailed on page 9.
The unaudited financial statements comprising the statement of
comprehensive income and cash flow statements for the six months to
31 December 2018 ("1H FY19") along with the statement of financial
position and statement of equity as at 31 December 2018 are set out
on pages 9 to 13, together with the unaudited financial statements
comparatives of comprehensive income and cash flow statements for
the six months to 31 December 2017 ("1H FY18") along with the
statement of financial position as at 30 June 2018 and statement of
equity as at 31 December 2017.
Commenting on the 1H FY19 trading, the Group CEO Magomet
Malsagov said:
"In H1 we continued to successfully implement our new strategy
of transforming the business to produce and sell superior tasting
natural stevia sweeteners, scaling breakthrough products and
commercialising new technologies. Our results include sale of
meaningful quantities from next generation stevia sweeteners based
on Reb M both directly extracted from leaf and via conversion of
first generation stevia sweeteners such as Reb A as customers are
switching and reformulating to Reb M due to the superior taste
profile. The reformulations have led to some cannibalisation of
base business and the results of the first six months should be
seen in this context. Over and above new business we anticipate
cannibalisation of the base business to continue through calendar
year 2019. We expect margins to strengthen as both reformulations
and new launches will primarily be based on high margin products.
We are pleased with the early wins and positive feedback we are
getting about the great taste profile of our next generation stevia
Reb M sweeteners.
"Our pipeline of projects with new products continues to grow in
both existing and new channels. We are seeking to further
capitalise on the superior taste delivery of our new generation
products through a significantly expanded go-to-market team. We
believe this combination will position PureCircle to successfully
execute its new strategy over the next few years."
Sales: Sales of $50.7m decreased 5.2% over 1H FY18 ($53.5m), in
part due to sales phasing versus the prior year in addition to some
cannibalisation of existing base business where customers are
reformulating to the better tasting Reb M. Solid growth continues
to be achieved in North America and Asia and reflects the continued
positive mix benefit of the growth of Breakthrough products.
Gross margin: Gross profit improved $0.2m to $19.9m. The gross
margin percentage of 39.2% was 2.4 percentage points higher than 1H
FY18 (36.8%). Our continuous innovation resulted in the growth of
our higher margin products such as Breakthrough.
Adjusted EBITDA: Improved by $3.8m versus the prior year.
Net result after tax: The H1 FY19 net result of $22.1m loss was
driven by a $24.2m inventory write-down to net realizable value.
The write down relates mainly to by-products generated from
previous varieties of leaf. With the introduction of better tasting
and yielding Starleaf, the commercial value of these by-products
been impaired due to their limited production in the future. This
one off write down has been classified as an exceptional item. Net
profit excluding exceptional items is $2.9m, an increase of $6.9m
versus the prior year.
Loss per Share (LPS): The Group recorded a 1(st) half loss per
share of 12.67 cents (1H FY18: LPS of 2.3 cents) in 1H FY19, on a
fully diluted basis driven by the write-down of inventories.
Excluding the exceptional write down, Earnings Per Share is 1.7
cents.
Operating cash flow before working capital: The Group generated
$10.5m of operating cash before working capital in 1H FY19, $2.8m
higher than the comparative period in 1H FY18.
Net debt: Net debt of $103.5m (1H FY18: $98.4m) has increased
primarily due to working capital requirements, additional research
& development costs and fixed assets. Gross Debt has reduced by
$8.2m. The Group is highly operationally geared and optimising
working capital is a priority. The Group was compliant with bank
covenants in the period.
BUSINESS DEVELOPMENTS
Powerful Market Trends
Consumers, health experts and governments have become
increasingly concerned about obesity and diabetes, and consumers
have become increasingly health and wellness conscious. 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
accelerating. As of 2018, 27 countries have enacted sugar taxes -
with over 80% of the countries passing these taxes in the last two
years. Several additional major markets are debating a sugar tax
law, or using key nutritional labelling as way to encourage lower
sugar products on to market.
Further, in line with a growing health and wellness agenda,
consumers are increasingly seeking products made with natural,
sustainable ingredients. Driven by consumer demand, as well as
government involvement and levies on sugar, many global food and
beverage companies have committed to reduce sugar quantities in
their products.
Strategy Evolution Resulting from Next Generation Stevia
Sweeteners
Today when we talk about beverages and foods sweetened with our
new generation stevia sweeteners, we are talking about great
tasting products - products which taste as good as their full sugar
counterparts, but without the calories.
The story of stevia has changed significantly in the past few
years. Not long ago, stevia was viewed as a plant-based,
zero-calorie, single-ingredient sweetener which worked well in some
beverage and food applications. That was then. Today we offer a
range of new generation stevia leaf sweetener ingredients,
including Reb M, with sugar-like taste and zero calories. And today
with our new generation stevia sweeteners, there are no taste
trade-offs or compromises.
Recent PureCircle advances enable us to significantly boost
production of high-grade stevia sweeteners - like Reb M and Reb D -
which have the most sugar-like taste. Today we are able to supply
these sought-after stevia leaf ingredients cost effectively for our
beverage and food company customers.
PureCircle through its agronomy program has developed a
proprietary stevia leaf variety which contains over 40 times more
sugar-like glycoside content than conventional 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.
The technologies to produce the products PureCircle sells are
covered by patents, applied for patents and other intellectual
property. PureCircle's broad and strong global array of patents are
the result of its advanced innovation, research and development
work with stevia and its investment therein. As the result of that,
PureCircle has been granted more than 130 stevia-related patents.
These patents - plus more than 250 patents pending and other
valuable intellectual property - are directed to a wide range of
stevia-related products and processes.
PureCircle's patent coverage and other intellectual property
reflect its expertise and innovation with stevia. That expertise
and innovation enables PureCircle to provide unparalleled support
to its customers as they develop zero- and low-calories beverage
and food products and other products using stevia.
PureCircle Agronomy Program
Industry-defining innovation starts from the ground up - with
the cultivation of the stevia plant. In this, no other Company has
invested more. Our PureCircle Stevia Agronomy Program and resultant
proprietary stevia leaf varieties are the source of our many taste
breakthroughs.
We have now moved to commercially scaling the proprietary stevia
leaf varieties that most efficiently produce the best tasting
sweeteners of the leaf, such as Reb M and D.
PureCircle utilizes a wide and expanding global agricultural
network for its stevia supply, sourcing it from an increasing
number of countries around the world. Part of the increase in our
specialty variety this year is the result of our new farming
partnerships in North Carolina, India and Zambia. This further
enables PureCircle to provide global food and beverage companies
with the best-tasting stevia leaf ingredients at a scale and cost
which is effective for us in global brands.
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 compared to sugar 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.
Innovation
Our new generation stevia sweeteners like Reb M and Reb D are
generating excitement among beverage and food companies. And our
R&D with stevia never stops.
Recent PureCircle advances enable us to significantly boost
production of these high-grade stevia sweeteners (Reb M and Reb D)
which have the most sugar-like taste and are highly sought after by
beverage and food companies. This means we can supply stevia
sweeteners in amounts that customers need as they expand use of
stevia ingredients - and we can do it cost effectively for
them.
We are also expanding our offerings of stevia leaf ingredients
to include, not just sweeteners and flavors, but also protein,
fiber and antioxidant ingredients - all from the stevia plant.
This new development will enable PureCircle to utilize much more
of each stevia leaf. As such, the company will be able to make each
leaf "work harder." PureCircle has nearly 400 patents and patents
pending covering its proprietary stevia technology.
We anticipate food and beverage companies will continue to
increase their use of stevia as their go-to, non-GMO, sweetening
solution, as well as using stevia as a functional ingredient. This
will provide consumers a great-tasting, plant-based ingredient they
desire.
Looking forward plans are afoot to commercialise and launch
antioxidants, proteins and fiber all from the same raw material
stevia leaf.
Opportunities
Mintel data shows that in 2018, there were over 4,000 launches
of F&B products containing stevia sweeteners, up +33% versus
prior year. There have been over 20,000 products launched globally
containing stevia since 2008. While beverages continues to be key
area of focus, other categories in food, such as dairy from yogurts
to ice cream, and biscuits/cookies, are gaining strong momentum
across all markets. These launches included well-known global and
regional brands.
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.
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. PureCircle continues to partner with our customers to reduce
the impact the food and beverage industry have on the environment
and global caloric intake. Since 2011, we have provided the
equivalent amount of stevia to eliminate 3.8 trillion calories from
global diets.
Our commitment to corporate social responsibility is embedded in
our corporate practices.
Management
The senior leadership team has fully relocated to PureCircle's
new headquarters in downtown Chicago to facilitate improved
servicing of customers. Reorganisation of the Commercial Business
Unit included hiring a new Chief Commercial Officer and additional
capability to implement our new strategy of next generation stevia
sweeteners.
Board Committee Changes
The Board has reviewed the make-up of its committees ensuring
appropriate independence and considering best practice guidance. As
a result, the following changes will take effect from today.
- Mr. Magomet Malsagov resigns as member of the Nomination Committee.
- Mr. Mitch Adamek and Ms. Ann Marie Scichili have been appointed to the Nomination Committee.
- Ms. Rosemarie Andolino has been appointed to the Remuneration Committee.
As a result of these changes, the membership of these committees
will be as follows:
Nomination Committee Remuneration Committee
Mr. Guy Wollaert (Chair) Mr. Mitch Adamek (Chair)
-------------------------
Mr. John Slosar Mr. John Slosar
-------------------------
Mr. Mitch Adamek Mr. Guy Wollaert
-------------------------
Ms. Ann Marie Scichili Ms. Rosemarie Andolino
-------------------------
Appointment of Designated Non-Executive Director
With effect from today, Mr. Mitch Adamek, Chairman of
Remuneration Committee, has been appointed our Company's designated
non-executive director responsible for workforce engagement in line
with the provisions of the UK Corporate Governance Code. Given his
current role as Chairman of the Remuneration Committee he is
well-placed to engage effectively with the Company's workforce.
Enquiries:
Investors/Analysts
Rakesh Sinha, CFO
Email: Rakesh.Sinha@purecircle.com
Emma Kane (Newgate Communications), Media Relations
Email: media@purecircle.com Phone: +44 (0)20 3757 6888
Webcast and Conference Call Details
A presentation of the results by Chief Executive, Magomet
Malsagov and Chief Financial Officer, Rakesh Sinha will be audio
webcast live at 9.30 (UK time) on Tuesday 12 March 2019. To view
and/or listen to a live audio-cast of the presentation, visit
https://www.investis-live.com/purecircle/5c5172baff46a80a001961ca/pure
. Please note that remote listeners will not be able to ask
questions during the Q&A session.
A webcast replay of the presentation will be available at 2.00
pm of the end of the live broadcast on the link above.
For those unable to view the webcast, there will also be a
teleconference facility for the presentation. Details are given
below:
Dial in details:
United Kingdom (Local): 020 3936 2999
US (Local): 1 845 709 8568
All other locations: +44 20 3936 2999
Participant Access Code: 312832
Participants are requested to dial into the call at least 15
minutes prior to the conference start time.
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 2018
Unaudited
Notes Six months ended
31 December 31 December
2018 2017
USD'000 USD'000
Continuing operations
Revenue 50,742 53,507
Cost of sales (30,835) (33,839)
================================================ ====== ============ ============
Gross profit 19,907 19,668
Other income 4 5,800 1,614
Other expenses 5 (31,727) (581)
Administrative expenses (14,669) (18,872)
Finance income 153 33
Finance costs (4,740) (3,223)
Share of loss in joint venture (78) (406)
================================================ ====== ============ ============
Loss before taxation (25,354) (1,767)
Income tax credit / (expense) 12 3,247 (2,240)
================================================ ====== ============ ============
Loss for the period (22,107) (4,007)
Other comprehensive (loss)/income (net
of tax):
Items that may be reclassified subsequently
to (loss)/profit:
Exchange difference arising on translation
of foreign operations (5,821) 7,554
Fair value loss on derivative financial
instruments(1) 17 (469) -
(6,290) 7,554
================================================ ====== ============ ============
Total comprehensive (loss)/income for
the period (net of tax) (28,397) 3,547
================================================ ====== ============ ============
Loss for the financial period attributable
to:
Owners of the company (22,107) (4,007)
(22,107) (4,007)
================================================ ====== ============ ============
Total comprehensive (loss)/profit attributable
to:
Owners of the company (28,397) 3,547
(28,397) 3,547
================================================ ====== ============ ============
Loss per share (US cents)
Basic 16 (12.67) (2.30)
Diluted 16 (12.67) (2.30)
================================================ ====== ============ ============
(1) Changes in the fair value of derivative instruments at fair
value through other comprehensive income.
Condensed consolidated statement of financial position
as at 31 December 2018
Unaudited Audited
31 December 30 June
Notes 2018 2018
USD'000 USD'000
Assets
Non-current assets
Property, plant and equipment 9 95,996 100,115
Intangible assets 9 63,085 64,132
Prepaid land lease payments 1,838 2,408
Deferred tax assets 14,244 10,223
Other receivables 585 410
175,748 177,288
============================================== ====== ============ =========
Current assets
Inventories 10 112,220 122,538
Trade receivables 37,667 57,496
Other receivables and prepayments 12,863 8,074
Tax recoverable 1,370 253
Restricted cash 51 52
Cash and bank balances 14,601 23,935
178,772 212,348
Total assets 354,520 389,636
============================================== ====== ============ =========
Equity and liabilities
Equity
Share capital 15 17,484 17,428
Share premium 15 227,723 225,504
Foreign exchange translation reserve (19,976) (14,155)
Share option reserve 2,138 2,167
Derivative reserve (469) -
Accumulated losses (26,928) (4,498)
============================================== ====== ============ =========
Equity attributable to owners of the company 199,972 226,446
Total equity 199,972 226,446
============================================== ====== ============ =========
Non-current liabilities
Deferred tax liabilities 2,056 1,365
Long-term borrowings 11 106,448 112,903
Other payables and accruals 480 598
108,984 114,866
============================================== ====== ============ =========
Current liabilities
Trade payables 11 17,046 20,529
Other payables and accruals 15,799 18,171
Derivative liability 469 -
Income tax liabilities 539 435
Short-term borrowings 11 11,711 9,189
45,564 48,324
============================================== ====== ============ =========
Total liabilities 154,548 163,190
Total equity and liabilities 354,520 389,636
Condensed consolidated statement of changes in equity
for the period ended 31 December 2018
Attributable to owners of the Company
Foreign Share
exchange based
Share Share translation payment Derivative Accumulated Total
capital premium reserve reserve reserve losses equity
-------- -------- ------------ -------- ----------- ------------ ---------
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
Balance at 1 July 2018 17,428 225,504 (14,155) 2,167 - (4,498) 226,446
Adjustment on adoption of
IFRS 9 - - - - - (323) (323)
Balance at 1 July 2018
(restated) 17,428 225,504 (14,155) 2,167 - (4,821) 226,123
Loss for the period - - - - - (22,107) (22,107)
Other comprehensive loss - - (5,821) - (469) - (6,290)
-------- ------------ -------- ----------- ------------ ---------
Total comprehensive loss for
the period (net of tax) - - (5,821) - (469) (22,107) (28,397)
-------- ------------ -------- ----------- ------------ ---------
Share award compensation
expense granted during the
period - - - 2,246 - - 2,246
Exercise of share options 56 2,219 - (2,275) - - -
Balance at 31 December 2018 17,484 227,723 (19,976) 2,138 (469) (26,928) 199,972
-------- -------- ------------ -------- ----------- ------------ ---------
Attributable to owners of the Company
Foreign Share
exchange based
Share Share translation payment Derivative Accumulated Total
capital premium reserve reserve reserve losses equity
-------- -------- ------------ -------- ----------- ------------ --------
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
Balance at 1 July 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
-------- -------- ------------ -------- ----------- ------------ --------
Condensed consolidated cash flow statement
for the period ended 31 December 2018
Unaudited
Six months ended
31 December 31 December
2018 2017
USD'000 USD'000
CASH FLOWS FROM OPERATING ACTIVITIES
Loss before taxation (25,354) (1,767)
Adjustments for:-
Amortisation of deferred income (36) (32)
Amortisation of prepaid land lease payments 77 79
Depreciation of property, plant and equipment 3,991 4,632
Interest expense 3,790 3,223
Interest income (153) (33)
(Gain)/Loss on disposal of property, plant and equipment (117) 21
Share based payments 2,246 914
Amortisation of intangible assets 957 797
Inventories written back / (written off) 37 (202)
Write down of inventories to net realizable value 24,170 -
Intangible assets written off 2,500 5
Unrealised exchange loss / (gain) 2,877 (428)
Share of loss in joint venture 78 406
Provision for doubtful debts - 55
Amortisation of borrowing transaction cost 951 -
Compensation of termination on R&D project (5,500) -
------------ ------------
Operating cash flow before working capital changes 10,514 7,670
------------------------------------------------------------- ------------ ------------
Increase in inventories (13,889) (22,192)
Decrease in trade and other receivables 17,909 15,934
(Decrease) / Increase in trade and other payables (6,717) 1,649
NET CASH GENERATED FROM OPERATIONS 7,817 3,061
------------------------------------------------------------- ------------ ------------
Interest received 153 33
Interest paid (3,733) (2,768)
Tax paid (1,021) (72)
Transaction cost paid for loan acquisition (55) -
NET CASH GENERATED FROM OPERATING ACTIVITIES 3,161 254
------------------------------------------------------------- ------------ ------------
CASH FLOWS FOR INVESTING ACTIVITIES
Addition of intangible assets (4,019) (4,774)
Purchase of property, plant and equipment (2,530) (9,291)
Proceeds from disposal of property, plant and equipment 571 -
Increase in investment in joint venture (205) (160)
------------------------------------------------------------- ------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (6,183) (14,225)
------------------------------------------------------------- ------------ ------------
BALANCE CARRIED FORWARD (3,022) (13,971)
------------------------------------------------------------- ------------ ------------
Condensed consolidated cash flow statement
for the period ended 31 December 2018 (continued)
Unaudited
Six months ended
31 December 31 December
2018 2017
USD'000 USD'000
BALANCE BROUGHT FORWARD (3,022) (13,971)
CASH FLOWS FOR FINANCING ACTIVITIES
Drawdown of borrowings - 219,975
Repayment of borrowings (5,000) (214,665)
Increase in restricted cash 1 (2)
NET CASH (USED IN) / GENERATED FROM FINANCING ACTIVITIES (4,999) 5,308
----------------------------------------------------------- ------------ ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (8,021) (8,663)
Effects of foreign exchange rate changes on (1,313) 3,623
cash and cash equivalents
CASH AND CASH EQUIVALENTS
AT BEGINNING OF THE FINANCIAL PERIOD 23,935 32,744
CASH AND CASH EQUIVALENTS AT OF THE
FINANCIAL PERIOD 14,601 27,704
----------------------------------------------------------- ------------ ------------
The cash and bank balances of $14.7m on the face of the balance
sheet includes restricted cash amounting to $51k which is excluded
from the cash flow statement.
The net cash outflow for the purchases of property, plant and
equipment during the financial is as follows:
31 December
2018
USD'000
Additions for the financial period 2,865
Payment made for previous year additions 420
Amount not yet due for payment (755)
==================================================== ============
Total cash payments during the financial period 2,530
==================================================== ============
Reconciliation of bank borrowings arising from financing
activities:
31 December
2018
USD'000
As at 1 July 2018 122,092
Cash impact:
Principal and interest payment (5,000)
Transaction cost (55)
Non-cash impact:
Amortisation 951
Foreign exchange movement 171
======================================= ============
As at 31 December 2018 118,159
======================================= ============
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 11 March 2019.
2. Basis of preparation
The condensed consolidated financial information comprises the
unaudited interim financial information for the six months to 31
December 2018 and 31 December 2017. The condensed consolidated
interim financial statements has been prepared on a going concern
basis in accordance with IAS 34, "Interim Financial reporting" as
issued by International Accounting Standards Board ("IASB") and the
Disclosure and Transparency Rules issued by the Financial Conduct
Authority. The condensed consolidated financial information is
unaudited but has been reviewed by the auditors and their review
report is set out on page 30.
The condensed consolidated interim financial statements should
be read in conjunction with the Group's annual financial statements
for the year ended 30 June 2018 ("FY2018"), which have been
prepared in accordance with International Financial Reporting
Standards ("IFRSs") as issued by IASB. The auditors' report on
those statements was unqualified and did not contain an emphasis of
matter paragraph.
Changes in accounting policy and disclosures
This condensed consolidated information has been prepared under
the historical cost convention and on a basis consistent with the
IFRS accounting policies as set out in the Annual Report for the
year ended 30 June 2018, except that the Group has adopted the
following new standards that are first effective for the current
accounting period of the Group:
a) IFRS 9, "Financial Instruments" (effective from 1 July 2018).
IFRS 9 addresses the recognition, classification, measurement and
derecognition of financial assets and financial liabilities,
introduces new rules for hedge accounting and a new impairment
model for financial assets. The Group has completed its review of
the key areas of IFRS 9 focused principally on classification and
measurement of financial assets and liabilities impairment of
financial assets and hedge accounting. The Group has adopted IFRS 9
retrospectively, but with certain permitted exceptions. As a
result, prior year results are not restated but a cumulative
adjustment has been made to decrease equity at 1 July 2018 by
$0.3m. The effects of the adoption of IFRS 9 are set out in Note
2(a).
b) IFRS 15, "Revenue from Contracts with Customers" (effective
from 1 July 2018). The IASB has issued a new standard for the
recognition of revenue. This replaces IAS 18 which covers contracts
for goods and services and IAS 11 which covers construction
contracts and the related literature. The new standard is based on
the principle that revenue is recognised when control of a good or
service transfers to a customer. The adoption does not have any
impact on the Group's condensed consolidated interim financial
information, as the application of the new standard does not result
in any differences with the existing accounting principles of the
Group, other than certain changes in the disclosure
requirements.
c) Impact of standards issued but not yet applied by the entity
IFRS 16 was issued in January 2016. It will result in almost all
leases being recognised on the balance sheet, as the distinction
between operating and finance leases is removed. Under the new
standard, an asset (the right to use the leased item) and a
financial liability to pay rentals are recognised.
The standard will affect primarily the accounting for the
group's operating leases. As at the reporting date, the group has
non-cancellable operating lease commitments of $5.1m. However, the
group are still working on determined to what extent these
commitments will result in the recognition of an assets and
liability for future payments and how this will affect the group's
profit and classification of cash flows.
The standard is effective for the group as of 1 July 2019. The
group does not intent to adopt the standard before its effective
date.
d) Impact on the financial statements
Note 2(a) - The effects of the adoption of IFRS 9:
In accordance with the transitional provisions in IFRS 9,
comparative figures have not been restated. As a consequence, any
adjustments to carrying amounts of financial assets or liabilities
are recognised at the beginning of the current reporting period,
with the difference recognised in opening retained earnings.
Provisions for impairment have not been restated in the comparative
period, as well.
The accounting policies were changed to comply with IFRS 9. IFRS
9 replaces the provisions of IAS 39 "Financial Instruments" ("IAS
39") that relate to the recognition, classification and measurement
of financial assets and financial liabilities; derecognition of
financial instruments; impairment of financial assets and hedge
accounting. IFRS 9 also significantly amends other standards
dealing with financial instruments such as IFRS 7 "Financial
Instruments - Disclosures".
The total impact on the Group's retained earnings due to
adoption of IFRS 9 as at 1 July 2018 is as follows:
Note US$'000
Closing retained earnings at 30 June 2018
- IAS 39 (4,498)
Adjustment to retained earnings from adoption
of IFRS 9 (i) (323)
=============================================== ====== ========
Opening retained earnings at 1 July 2018
- IFRS 9 (4,821)
======================================================= ========
(i) Classification and measurement
(a) The Group's financial assets classified as loan and
receivables at amortised costs under IAS 39 will continue to be
measured on the same basis under IFRS 9.
(b) There is no impact on the Company's accounting for financial
liabilities, as the new requirement only affects the accounting for
financial liabilities that are designated at fair value through
profit or loss and the Company does not have any such liabilities.
The derecognition rules have been transferred from IAS 39
"Financial Instruments: Recognition and Measurement" and have not
been changed.
Accordingly, the new standard does not affect the classification
and measurement of these financial assets.
(ii) Impairment of financial assets
The Group has the following type of financial assets at
amortised cost subject to IFRS 9's new expected credit loss
model:
-- trade and other receivables (excluding prepayments)
The Group revised its impairment methodology under IFRS 9 by
applying the simplified approach to provide for expected credit
losses prescribed by IFRS 9, which requires the use of the lifetime
expected loss provision for all trade and other receivables
(excluding prepayments). $323k was recognised in retained earnings
as at 1 July 2018 for those trade and other receivables (excluding
prepayments), whose credit risk has been assessed as other than
low.
To measure the expected credit losses, trade receivables have
been grouped based on shared credit risk characteristics and the
days past due. The group has therefore concluded that the expected
loss rates for trade receivables are a reasonable approximation of
the loss rate.
The loss provision for trade receivables as at 30 June 2018
reconciled to the opening loss allowances on 1 July 2018 is as
follows:
Allowance on trade
receivables
US$'000
Closing balance as at 30 June 2018 -
IAS 39 510
Amounts restated through opening retained
earnings 323
========================================== ==================
Opening balance at 1 July 2018 - IFRS
9 833
========================================== ==================
Note 2(b) - Accounting Estimates and Judgments:
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 2018.
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
Six months
to
31 December
2018
(US$'000)
Write down of inventories to net realizable value
(Note 3a) 24,170
Restructuring costs (Note 3b) 824
24,994
============
Exceptional items are one-off and are non-recurring in nature.
No exceptional costs incurred in 1H 18.
Note 3a - During the period there was an inventory write down of
$24.2m mainly related to by-products generated from early
generation of stevia leaf. Such by-products will no longer be
produced as a result of the switch to next generation Starleaf
stevia leaf variety.
Note 3b - During the period, the Group underwent an internal
restructuring to reduce its cost base, unify and simplify its
organization to improve business performance, profitability, cash
flow generation and productivity.
4. Other income
Other income represents net foreign exchange gain, compensation
of termination on R&D project and other miscellaneous
income.
5. Other expenses
Other expenses represent net foreign exchange loss, write down
of inventory value to net realizable value, write off of intangible
assets and other operating expenses.
6. Principal risks and uncertainties
As with any business, we face risks and uncertainties. We
believe that a dynamic and engaging risk management framework will
support the successful delivery of our strategic objectives. The
management of these risks is based on a formal assessment of
impact, likelihood, control effectiveness and the Company's risk
appetite.
As part of our risk process this year, we have established a
network of risk owners and sponsors across the Organisation and we
utilise this network to identify risks faced by our business. We
have also facilitated risk management workshops to explore and
understand how risks are inter-connected and critical risk
dependencies. This allows us to understand risk movement trends and
prioritise on key mitigating controls.
In addition, we have a Risk Committee (comprising of our Chief
Executive Officer, Chief Financial Officer, Chief Commercial
Officer and Chief Supply Chain Officer), who facilitate our Risk
Management Framework, review risks, control and mitigation
strategies at least twice a year. This forms the basis for our
Principal risks and uncertainties, which is challenged and
validated by our Board, and thereafter our Audit Committee.
Our Board of Directors and Risk Committee have reviewed our
principal risks in the context of the first half of FY19. At the
time of writing, given that PureCircle's principal operations are
outside the UK but the group makes sales into the UK and that the
Company is Premium listed on LSE, the risks surrounding Brexit have
been considered by the Board who do not believe that this event
would cause disruption to the business. Our Board of Directors and
Risk Committee believe that there have been no new emerging risks
other than the 12 broad key risk areas outlined in the 2018 Annual
Report; and that identified mitigation actions remain appropriate
to manage these identified risks.
Our principal risks are as follows. However, these are not
intended to be an exhaustive analysis of all risks currently facing
the Group.
i. Working capital funding to support growth plan
PureCircle fully controls the end-to-end process of its entire
supply chain from leaf sourcing to manufacturing; sales;
distribution and customer relationship management.
PureCircle is in a fast growing business which requires product
innovation and investment in technology to stay ahead of the
competition. In view of the Company's growth plans, working capital
requirements has increased. The Company needs to fund its working
capital from leaf purchase to sales receivables and inventory
holdings; and maintain sufficient liquidity to balance operating
requirements with financial obligations and covenants.
Mitigation activities
The Group manages its working capital requirements actively
through balancing supply purchases, inventory holdings and
forecasts cash flows to ensure appropriate gross cash and facility
headroom availability at all times. Cash conversion and debt
reduction remains a high priority for the Group, as well as
managing bank covenants compliance.
ii. Inventory management
Ensuring PureCircle manufactures the "right" inventory is of
paramount importance as failure to do so may result in high stock
holding levels, increased obsolescence and high level of cash being
tied up in the business.
Mitigation activities
The Group mitigates this risk actively through a variety of
policies and procedures to manage inventory, with action plans to
run down/ consume excess inventory. Inventory reduction remains a
continued focus for the Group in FY19.
iii. Agriculture sustainability, including sustainable
sourcing
PureCircle is committed towards corporate social responsibility
("CSR") pro-activeness and vigilance. Post CBP clearance, the
Company has increased its footprint on controlled leaf plantations,
thus increasing the transparency over leaf sourcing
arrangements.
Mitigation activities
The Group manages this risk actively through a combination of
strategy, design, policy and process management. The Group's
strategy is to be in compliance with the relevant Ethical
standards, code of conduct and sustainability assessment
guidelines. We have complete product traceability from leaf
suppliers to end products.
iv. Manufacturing capacity
PureCircle is a fast growing company with a production chain
covering both extraction and refinery activities. It is important
that our capacity needs cater for increasing customer demand. A
catastrophic event at either the extraction or refinery facility
would impact the business.
Mitigation activities
The Group has a 5-year capacity plan in place. The refinery
capacity expansion that was completed in FY17 has the ability to
meet the market demands for the foreseeable future. In order to
mitigate the risk of manufacturing downtime, the Group has
successfully trialed third party toll manufacturing which enables
manufacturing capacity to be available if required, on short
notice.
v. Leaf sourcing/ procurement
Dried leaf is PureCircle's primary raw material and constitutes
a significant proportion of the Company's variable costs of
production. The Company's financial performance can be materially
impacted by rising leaf cost and nature of contractual conditions,
if not managed effectively. A significant majority of PureCircle's
total leaf supply is sourced from China. Over reliance of leaf
supply from China; and inconsistent leaf quality, may pose supply
risk, in the event of supply shortage/ disruption.
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
centered upon our leaf development hubs in US, Africa and South
America. Further, the Group is making progress working with larger
agricultural partners who have the potential to scale supply more
quickly than traditional small holders.
vi. Managing quality
PureCircle is committed towards manufacturing safe products that
meets legal and regulatory compliance. In addition, PureCircle is
committed towards continuous improvement of its quality
objectives.
Mitigation activities
The Group actively manages its quality requirements actively
through clearly defined quality objectives, quality protocols and
standards that are set and monitored regularly by its Quality
Leadership Team. This includes an integrated quality system and
compliance towards high standards expected in the food
manufacturing industry, customer requirements, independent
third-party certification bodies and government agencies. Regular
quality audits are performed to ensure compliance to quality, legal
and regulatory requirements.
vii. Managing environment, health and safety
PureCircle operates in the food grade ingredient industry; and
has a food grade supply chain, including large production
facilities. Health & safety considerations are significant
operating factors for the Business.
Mitigation activities
The Group manages its health and safety requirements actively
through clearly defined employee safety engagement strategies;
safety protocols and standards that are set and monitored regularly
by the Quality, Environmental, Health and Safety Leadership Team.
At the functional level, there is a Safety Committee who oversee
operational matters and execute the Group's overall health and
strategy in each geographical location.
viii. Talent attraction, development and retention
Stevia is a relatively new industry and PureCircle is a high
growth market leader in the industry. Attracting quality talent,
developing and retaining key personnel will be a cornerstone of the
Company's future success. There is a risk that as the organisation
grows and becomes more successful, our talent will be highly sought
after in the growing industry.
Mitigation activities
The Group manages this risk by ongoing investment in senior
management retention programs for all key managers, which includes
the Group's Long Term Incentive Program and appropriate reward
structures.
ix. Cyber security
Information Technology ("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 new IT threats.
Mitigation activities
The Group manages its cyber security threat by deploying a
series of security technologies and solutions to prevent cyber
attacks, monitor & remedy any potential malicious/ unauthorised
activities.
x. Intellectual property and innovation
Innovation is why PureCircle is the market leader in the stevia
industry. PureCircle's continuous investment in research,
development and innovation ("RD&I") must be protected by robust
intellectual property ("IP") strategies, including obtaining
patents and protecting other forms of IP, to help sustain and grow
the company's position in an ever-competitive market.
Mitigation activities
The Group maintains a robust patent filing strategy and
procedures to ensure that patent applications are timely filed and
are aligned with commercially relevant innovations.
In addition, the Group actively utilises non-disclosure and
non-analysis agreements to protect confidentiality and ownership of
innovations.
xi. Competition
As pioneers in the development of the stevia market, PureCircle
is currently believed to have a majority share of the Global stevia
market. As stevia becomes more established as a large volume
mainstream food and beverage ("F&B") ingredient, more
competitors may enter the stevia market with the potential to
reduce the Company's market share.
In addition, the emergence of cheaper alternatives of stevia
(artificial, genetically modified variants) could undermine our
business performance.
Mitigation activities
PureCircle's continued investment in breakthrough best tasting
next generation products, will enable us to develop strong
partnership with existing and new customers.
In addition, research, development and innovation breakthroughs
allows us to sustain first mover advantage against competition.
xii. Continued growth in the stevia market
PureCircle has pioneered the development of the high purity
stevia market and is focused on the further development of the
market in terms of product innovation and investment in
technology.
In addition, PureCircle has an operationally leveraged business
model of which the viability of the business, is sensitive to
volumes. The Company's future profitability is sensitive to the
continued growth of the stevia market.
Mitigation activities
Management mitigates this risk with an active program of new
stevia product innovation to support further adoption of stevia and
to enable future F&B formulation projects. Further, the Group
continues to invest to protect and promote the natural credentials
of stevia. These activities coupled with external evidence,
provides confidence of a sustainable stevia market growth in the
long run.
In conclusion, working capital management and inventory
management remain as key focus areas for the Group in FY19, with
clearly defined targets, periodic on-going and active reviews in
place. In addition, potential exposure from risk of Competition is
expected to be reduced under the direction of the new Sales
leadership team, with clearly defined strategies and action
plans.
7. Going concern
In making the assessment of the Group's ability to manage its
future cash requirements and maintain covenant compliance, the
Directors have considered the Group budgets and the cash flow
forecast for the period to 31 March 2020. The stressed review
included lower revenues, reduced cash flows, lower profitability
margin, several cost reduction initiatives, cutting back on total
leaf volume purchases and discretionary capex investments, so as to
mitigate pressures on liquidity. This resulted in current cash
balances reducing over time but maintaining sufficient liquidity
throughout the period.
After reviewing all the above consideration, the Directors have
a reasonable expectation that management has sufficient flexibility
in adverse circumstances to maintain adequate resources to continue
in operational existence for the foreseeable future. The Directors
therefore continue to adopt the going concern basis of accounting
in preparing the unaudited condensed consolidated financial
statements.
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
2018 2017
USD'000 USD'000
Revenue 50,742 53,507
Cost of sales (30,835) (33,839)
Gross profit 19,907 19,668
================================================================= ============== ==============
Gross margin 39.2% 36.8%
Other income 5,953 470
Administrative expenses (14,669) (17,087)
================================================================= ============== ==============
Operating profit 11,191 3,051
================================================================= ============== ==============
Other expenses (29,951) (2,367)
Foreign exchange (loss)/gain (1,776) 1,178
Finance costs (4,740) (3,223)
Share of loss in joint venture (78) (406)
Taxation 3,247 (2,240)
================================================================= ============== ==============
Loss for the financial period (22,107) (4,007)
================================================================= ============== ==============
Reconciliation of Net loss after tax to Adjusted EBITDA
Net loss after tax (22,107) (4,007)
Depreciation and amortization 5,022 5,429
Finance costs 4,740 3,223
Taxation (3,247) 2,240
Share-based payment expense 2,247 915
Exceptional items 24,994 -
========================================================== ===== ============== ==============
Adjusted EBITDA 11,649 7,800
========================================================== ===== ============== ==============
Gross borrowings 118,159 126,407
Less: Gross cash (14,652) (27,958)
========================================================== ===== ============== ==============
Net debt 103,507 98,449
========================================================== ===== ============== ==============
In the reporting of financial information, the Group uses
certain alternative performance measures that are not required
under IFRS, the generally accepted accounting principles ("GAAP")
under which the Group reports. The Group believes that these
additional measures, which are used internally, are useful to users
of the financial information in helping them to understand the
underlying business performance.
The Group has determined that disaggregation of revenue using
existing segments and timing of the transfer of goods (at a point
in time) is adequate.
The primary performance indicators used by the Group are
revenue, gross margin, gross margin %, adjusted EBITDA, net cash
from operations, net debt and headroom.
The above measures are considered useful by management
because:
- In the Group's high operationally geared business model
profitability is sensitive to revenue and gross margin %
- Adjusted EBITDA is considered the most efficient profit and
loss account indicator of "operating cash flow profitability"
- Adjusted EBITDA is calculated as EBITDA with other expenses
(principally the charge of the Group's LTIP scheme and exceptional
items) added back
- Net cash generated from operations, net debt and headroom are
important measures of cash flow and debt capacity
- Gross margin is calculated as revenue less cost of sales
including sales duty and freight costs
- Gross margin % is calculated as gross margin as a % of revenue
- Operating profit is calculated as gross margin less
administrative expenses plus other income
- Other expenses comprise 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 and restricted
cash
Seasonality
Due to the seasonal nature of the Group operations, higher
revenue and operating profit are usually expected in the second
half of the year than the first six months.
In the financial year ended 30 June 2018, 41% of revenue
accumulated in the first half of the year, with 59% accumulating in
the second half.
Geographical information
Asia Europe Americas Goodwill Total
USD'000 USD'000 USD'000 USD'000 USD'000
31 December 2018
Sales 9,249 15,881 25,612 - 50,742
Non-current assets 151,794 1,633 20,515 1,806 175,748
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
Timing of revenue recognition
31 December 31 December
2018 2017
USD'000 USD'000
Goods transferred at a point in time 50,742 53,507
============ ================
9. Property, plant and equipment and intangible assets
During the period, the Group invested $2.8m in property, plant
and equipment.
The addition of $4.0m to intangible assets is in respect of
capitalisation of product developments, intellectual property and
leaf development during the period, net of amortisation for
products now launched commercially.
The Group had written off intangible assets which amounted to
$2.5m because the joint collaboration partner had terminated the
project. The partner agreed to pay a compensation amount to $5.5m
recorded in other income.
10. Inventories
31 December 30 June
2018 2018
USD'000 USD'000
Raw materials 13,849 19,697
Work-in-progress 78,209 70,849
Finished goods 20,162 31,992
112,220 122,538
================== ============ ========
These were recognised as an expense during the year ended 31
December 2018 and included in cost of sales. There is a write-down
of inventories to net realisable value amounted to $24.2m (30 June
2018: Nil).
11. Financial liabilities
The following tables detail the remaining contractual maturities
at the reporting date of the Group's non-derivative financial
liabilities, which are based on contractual undiscounted cash flows
(including interest payments computed using contractual rates or,
if floating, based on rates current at the reporting date) and the
earliest date the Group can be required to pay and settled
derivative financial instruments for which the contractual
maturities are essential for an understanding of the timing of the
cash flows:
Contractual Total
maturities Less Between Between contractual Carrying
of financial than 6 - 12 1 and 2 and cash Amount
liabilities 6 months months 2 years 5 years flows liabilities
As at 31 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
December
2018
Non-derivatives
Trade payables 17,046 - - - 17,046 17,046
Borrowings 5,000 7,500 56,250 53,750 122,500 118,159
Total
non-derivatives 22,046 7,500 56,250 53,750 139,546 135,205
================= ============= ================ ================= ================= ============= =============
The non-current term loans fall due in between March 2020 to
November 2021.
The due date of the loan facilities:
(a) In relation to Term loan, the date is 48 months after the
date of the signed Agreement; and
(b) In relation to Revolving loan the date that is 36 months
after the date of the signed Agreement.
The following are the covenants relating to the syndicated loan
facility:
(i) Consolidated tangible net worth
(ii) The ratio of Consolidated Total Net Debt to Consolidated EBITDA
(iii) The ratio of cashflow to Consolidated debt service
(iv) The ratio of Consolidated EBITDA to Consolidated Finance Cost
The Group is in full compliance with all covenants as at 31
December 2018.
12. Income taxes
31 December 31 December
2018 2017
USD'000 USD'000
Current tax:
Current tax on profits for the year (538) (136)
Change in provision in respect of prior years 550 -
=================================================== ============ ============
12 (136)
=================================================== ============ ============
Deferred tax:
Origination and reversal of temporary differences 3,235 (2,104)
==================================================== ============ ============
3,247 (2,240)
=================================================== ============ ============
Income tax expense is recognised based on management's best
estimate of the weighted average annual income tax rate expected
for the full financial year. The expected estimated tax rate is
10%.
The Company was granted a tax assurance certificate dated 1
February 2012 under the Exempted Undertakings Tax Protection Act,
1966 pursuant to which it is exempted from any Bermuda taxes (other
than local property taxes) until 31 March 2035.
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 and subject to the Ministry
of Finance's ("MOF") approval, PCSB will be entitled to a
concessionary tax rate of 20% on income derived from qualifying
activities for a further period of 10 years. However, given that
the approval from the MOF is still pending, PCSB adopted the normal
corporate tax rate at 24% on the income derived from the qualifying
activities for the financial year ending.
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.
13. Fair value measurement of financial instruments
This note provides an update on the judgements and estimates
made by the group in determining the fair value of the financial
instruments since the last annual financial report.
(a) Fair value hierarchy
To provide an indication about the reliability of the inputs
used in determining fair value, the group classifies its financial
instruments into the three levels prescribed under the accounting
standards. An explanation of each level follows underneath the
table.
The following table presents the group's financial liabilities
measured and recognised at fair value at 31 December 2018 and 30
June 2018 on a recurring basis:
Level 1 Level 2 Level 3 Total
USD'000 USD'000 USD'000 USD'000
Financial liabilities
Hedging derivatives - interest rate swaps - 469 - 469
Total financial liability - 469 - 469
=========================================== ============== ============= ============= =============
Level 2: The fair value of financial instruments that are not
traded in an active market (for example, over-the-counter
derivatives) is determined using valuation techniques. These
valuation techniques maximise the use of observable market data
where it is available and rely as little as possible on entity
specific estimates. If all significant inputs required to fair
value an instrument are observable, the instrument is included in
level 2.
(b) Valuation techniques used to determine fair values
Specific valuation techniques used to value financial
instruments include:
- The fair value of interest rate swaps is calculated as the
present value of the estimated future cash flows based on
observable yield curves.
All of the resulting fair value estimates are included in level
2 except for unlisted equity securities, a contingent consideration
receivable and certain foreign currency forwards.
14. Investment in joint venture
USD'000
Beginning of the period (165)
Share of loss (78)
Additional investment 204
End of the period (39)
================================ ========
Analysed as follows:
Other payables (non-current) 39
================================ ========
At 31 December 2018 39
================================ ========
On 30 November 2018, the group agreed to voluntarily liquidate
its investment in joint venture, NP Sweet A/S. The management do
not expect any material impact upon the completion of the voluntary
liquidation of the investment in joint venture.
15. Share capital and share premium
Number of shares Ordinary shares Share premium Total
'000 USD'000 USD'000 USD'000
Balance at 1 July 2018 174,246 17,428 225,504 242,932
Exercise of share options 593 56 2,219 2,275
Balance at 31 December 2018 174,839 17,484 227,723 245,207
============================== ================= ================ ============== ========
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
============================== ================= ================ ============== ========
16. 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
2018 2017
Loss attributable to equity holders of the Company (USD'000) (22,107) (4,007)
Weighted average number of ordinary shares in issue ('000) 174,400 174,200
Basic loss per share (US Cents) (12.67) (2.30)
Fully diluted loss per share (US Cents) (12.67) (2.30)
17. Derivative financial instrument
31 December 2018 30 June 2018
Assets Liabilities Assets Liabilities
USD'000 USD'000 USD'000 USD'000
Interest rate swaps - cash flow hedge - 469 - -
Less: non-current portion: - - - -
Interest rate swaps - cash flow hedges - 469 - -
======================================= ======== ============ ======== ============
Trading derivatives are classified as a current asset or
liability. The full fair value of a hedging derivatives is
classified as a non-current asset or liability if the remaining
maturity of the hedged items is more than 12 months, and as a
current asset or liability if the maturity of the hedged item is
less than 12 months.
(a) Interest rate swaps
The Group is exposed to interest rate risk from the Group's
floating rate borrowing. The Group's borrowing bears an interest at
a margin of 2.35% to 2.85% per annum above the USD LIBOR rate. The
Group has entered into an Interest Rate Swap ("IRS") to hedge
$82.5m of the Group's borrowings from the volatility in the cash
flow that is attributable to variability in the floating interest
rate. By entering into the IRS, the Group swapped its floating
interest rate payment to a fixed rate. Hence, the hedged item
designated is the interest cash flows on the borrowings of
$82.5m.
Gains and losses from the interest rate swap contracts were
recognized in the hedging reserve in equity and will be
continuously released to the income statement when the Group pays
the finance cost on a monthly basis, until the full repayment of
the Group's $82.5m borrowings.
The maximum exposure to credit risk at the reporting date is the
fair value of the derivative assets in the balance sheet.
18. Dividends
No dividends were declared or paid by the Company during the
interim period.
19. 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 $0.4m were
approved and contracted for the purchase of land and upgrading of
plant and machinery in Malaysia.
20. Events after the end of the reporting period
There were no significant events after the end of the reporting
period.
21. Material related party transactions
Identities of related parties:
The Group have related party relationships with its joint
venture and the following transactions were carried out by the
Group during the period:
31 December 31 December
2018 2017
USD'000 USD'000
Sales of goods to jointly controlled entity 116 1,641
============ ============
22. Statement of Directors' Responsibility
The Directors confirm that this condensed consolidated interim
financial information has been prepared in accordance with
International Accounting Standard 34, 'Interim Financial
Reporting', as issued by the International Accounting Standards
Board ("IASB"); that the condensed consolidated interim financial
statements gives a true and fair view of the assets, liabilities,
financial position and comprehensive income as required by the
Disclosure Guidance and Transparency Rules ("DTR") sourcebook of
the United Kingdom's Financial Conduct Authority, paragraph DTR
4.2.4; and that the interim management report herein includes a
fair review of the information required by paragraphs DTR 4.2.7 and
DTR 4.2.8, namely:
- an indication of important events that have occurred during
the first six months and their impact on the condensed set of
consolidated financial information;
- a description of the principal risks and uncertainties for the
remaining six months of the financial year; and
- material related party transactions in the first six months
and any material changes in the related party transactions
described in the last Annual Report.
The Directors are responsible for the maintenance and integrity
of the Company's website. UK legislation governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
The Directors of PureCircle Limited are listed in the PureCircle
Limited Annual Report (pages 42 and 43) for the year ended 30 June
2018; the changes to the Board since 30 June 2018 being the
appointment of Rosemarie S. Andolino and Ann Marie Scichili as
Independent Non-Executive Directors in September 2018.
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
11 March 2019
Independent review report to PureCircle Limited
Report on the condensed consolidated interim financial
statements
Our conclusion
We have reviewed PureCircle Limited's condensed consolidated
interim financial statements (the "interim financial statements")
in the interim results of PureCircle Limited for the six month
period ended 31 December 2018. Based on our review, nothing has
come to our attention that causes us to believe that the interim
financial statements are not prepared, in all material respects, in
accordance with International Accounting Standard 34, 'Interim
Financial Reporting', as issued by the International Accounting
Standards Board and the Disclosure Guidance and Transparency Rules
sourcebook 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 2018;
-- 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 interim financial statements.
The interim financial statements included in the interim results
for the six month period ended 31 December 2018 have been prepared
in accordance with International Accounting Standard 34, 'Interim
Financial Reporting', as issued by the International Accounting
Standards Board and the Disclosure Guidance and Transparency Rules
sourcebook 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 interim financial statements and the
review
Our responsibilities and those of the directors
The interim results for the six month period ended 31 December
2018, including the interim financial statements, is the
responsibility of, and has been approved by, the directors. The
directors are responsible for preparing the interim results for the
six month period ended 31 December 2018 in accordance with the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim
financial statements in the interim results for the six month
period ended 31 December 2018 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 Guidance
and Transparency Rules sourcebook of the United Kingdom's 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 interim 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 for the six month period ended 31 December 2018 considered
whether it contains any apparent misstatements or material
inconsistencies with the information in the interim financial
statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
11 March 2019
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.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR SFEESFFUSEID
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