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PRFoods
Annual Report • Oct 31, 2023
2223_10-k-afs_2023-10-31_67e924d3-5907-4e9c-8394-8658192f7c7c.pdf
Annual Report
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AS PRFoods Consolidated Audited Annual Report 2022/2023 (translation from the Estonian original)
2022/2023 ANNUAL REPORT
| Business name | AS PRFoods |
|---|---|
| Commercial register number | 1150713 |
| Address | Kärsa, Suure-Rootsi, Saaremaa parish, Saare county, 94129, Estonia |
| Phone | +372 452 1470 |
| Website | prfoods.ee |
| Main activities | Production and sale of fish products Fish farming |
| Reporting period | 1 July 2022 – 30 June 2023 |
| Auditor | KPMG Baltics OÜ |
| CORPORATE PROFILE 3 | ||
|---|---|---|
| MANAGEMENT REPORT 7 | ||
| OVERVIEW OF ECONOMIC ACTIVITIES 7 | ||
| MANAGEMENT AND SUPERVISORY BOARDS 17 | ||
| SHARE AND SHAREHOLDERS 18 | ||
| BOND AND BONDHOLDERS 21 | ||
| SOCIAL RESPONSIBILITY 23 | ||
| ENVIRONMENTAL RESPONSIBILITY 23 | ||
| REPORT ON CORPORATE GOVERNANCE 24 | ||
| REMUNERATION REPORT 30 | ||
| CONSOLIDATED STATEMENT OF FINANCIAL POSITION 32 | ||
| CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 33 | ||
| CONSOLIDATED STATEMENTS OF CASH FLOWS 34 | ||
| CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 35 | ||
| NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 36 | ||
| NOTE 1. | GENERAL INFORMATION 36 | |
| NOTE 2. | BASES FOR PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS 36 | |
| NOTE 3. | FINANCIAL RISKS 50 | |
| NOTE 4. | MANAGEMENT JUDGEMENTS AND ESTIMATES 55 | |
| NOTE 5. | CASH AND CASH EQUIVALENTS0 56 | |
| NOTE 6. | TRADE AND OTHER RECEIVABLES 56 | |
| NOTE 7. | PREPAYMENTS 57 | |
| NOTE 8. | INVENTORIES 57 | |
| NOTE 9. | BIOLOGICAL ASSETS 57 | |
| NOTE 10. | SUBSIDIARIES 58 | |
| NOTE 11. | DEFERRED TAX 60 | |
| NOTE 12. | TANGIBLE ASSETS 61 | |
| NOTE 13. | INTANGIBLE ASSETS 62 | |
| NOTE 14. | LEASES 63 | |
| NOTE 15. | INTEREST-BEARING LIABILITIES 64 | |
| NOTE 16. | PAYABLES AND PREPAYMENTS 67 | |
| NOTE 17. | GOVERNMENT GRANTS 67 | |
| NOTE 18. | EQUITY 68 | |
| NOTE 19. | SEGMENT REPORTING 69 | |
| NOTE 20. | COST OF GOODS SOLD 71 | |
| NOTE 21. | SALES AND MARKETING EXPENSES 71 | |
| NOTE 22. NOTE 23. |
GENERAL AND ADMINISTRATIVE EXPENSES 72 STAFF COSTS 72 |
|
| NOTE 24. | OTHER OPERATING INCOME AND EXPENSES 73 | |
| NOTE 25. | FINANCIAL INCOME AND EXPENSE 73 | |
| NOTE 26. | INCOME TAX EXPENSES 73 | |
| NOTE 27. | TRANSACTIONS WITH RELATED PARTIES 73 | |
| NOTE 28. | ASSOCIATES 75 | |
| NOTE 29. | GOING CONCERN 75 | |
| NOTE 30. | EVENTS AFTER BALANCE SHEET DATE 75 | |
| NOTE 31. | THE PARENT COMPANY PRIMARY'S FINANCIAL STATEMENTS 76 | |
| MANAGEMENT BOARD'S CONFIRMATION TO THE ANNUAL REPORT 80 | ||
| INDEPENDENT AUDITOR'S REPORT 81 | ||
| PROPOSAL FOR PROFIT DISTRIBUTION 86 |
CORPORATE PROFILE
AS PRFoods ("Group") is a company engaged in fish farming, processing and sales. The Group's shares are listed on the main list of NASDAQ OMX Tallinn Stock Exchange since 5 May 2010 and its bonds are listed on the NASDAQ Tallinn bond list since 6 April 2020.
On 20.09.2022 AS PRFoods subsidiary Saaremere Kala AS signed an agreement for the sale of 100% shares of Överumans Fisk AB to Vattudalens Fisk AB. The transaction has been completed. AS PRFoods takes the future direction of the development of fish farming in Estonia, with the aim of becoming the largest fish farmer in the region.
Since the acquisition of John Ross Jr. and Coln Valley Smokery in the summer of 2017, the Group has sales experience to 37 countries in Europe, North and South America, and Asia.
Main activities of the Group are fish farming and manufacturing of fish products. The main products are salmon and rainbow trout products. Approximately 2/3 of the raw fish used in the Group's rainbow trout production comes from the from coastal waters of Saaremaa in Estonia, assuring the highest quality and reliable deliveries. The rest of raw fish is purchased mainly from Norway and Denmark. Fish products are manufactured in two modern factories in Saaremaa (Estonia) and in Aberdeen (Great Britain).
Products of the Group are sold as leading brands in their respective operating market and the primary focus is on higher valueadded premium products, increasing thereby the profitability of the company.
AS PRFoods plans to introduce a new brand this year, which emphasizes our Saaremaa origin. We process mostly rainbow trout and salmon in our factories, in smaller quantities also whitefish, perch, pikeperch, vendace, Atlantic and Baltic herrings. We always keep the fish in a place of honour – both when farming and processing it – that is why we raise most of our red fish ourselves and smoke it with alder chips in the traditional way. As our product range is quite wide, a favourite product can be found for the whole family – lightly salted trout slices that have won the title of the Best Fish Product in Estonia, children's favourite trout cutlets or trout roe for a more festive occasion.
The Group is actively involved in developing new products for expanding also to new export markets.
3 Consolidated Audited Annual Report of 2022/2023 Financial Year Fish farming Estonia Purchase of raw fish Norway Denmark Production Estonia Great Britain Sales Great Britain Estonia
THE GEOGRAPHY OF PRODUCTION AND SALES
Company's consolidatedfinancialstatementsin pdf-formatwithoutEuropeanSingleElectronicFormat(ESEF) markups. The originaldocumentissubmittedin machine-readable.xhtmlformattotheNasdaqTallinn StockExchange and digitallysigned(Link: https://nasdaqbaltic.com/)
MISSION
PRFoods produces a variety of tasty, healthy and innovative fish products. With our high-quality products, we are a reliable partner for both end users and stores. PRFoods is caring and innovative, socially responsible and modern. Environmental friendliness is very important to us, and we are trying to minimize our environmental footprint with innovative packaging lines and materials and renewable energy solutions.
VISION
We wish to be the best and well-known dealer and producer of delicious eco-friendly fish and fish products in the British and Baltic markets and the seller of high value premium fish products worldwide.
STRATEGIC OBJECTIVES
- To be among the three leading brands in our operating markets and a recognized premium seafood brand globally.
- To achieve operating EBITDA margin at least 7%.
- To distribute up to 30% of the annual net profit as dividends.
STRENGTHS
- Determined objective-driven organisational development and competent employees.
- Well-known -leading brands in the Scandinavian, Baltic markets and in the Great Britain.
- History and competence well-established products on the Finnish and Great Britain market for more than 30 years.
- Sustainability -geographically suitable scope and diversified product portfolio ensure sustainable development.
RISKS
● High volatility of raw material prices.
GROUP STRUCTURE AS AT 30.06.2023
1)The Group does not consolidate Avamere Kalakasvatus OÜ as it holds neither dominant nor significant control over the company
2) 64% of Coln Valley Smokery Ltd shares owned by JRJ & PRF Ltd and 36% by John Ross Jr (Aberdeen) Ltd
In addition, PRfoods holds a 20% share of AS Toidu- ja Fermentatsioonitehnoloogia Arenduskeskus (Competence Center of Food and Fermentation Technology).
The most significant trademarks of the Group are "PRFoods" and "John Ross Jr Aberdeen".
Company's consolidatedfinancialstatementsin pdf-formatwithoutEuropeanSingleElectronicFormat(ESEF) markups. The originaldocumentissubmittedin machine-readable.xhtmlformattotheNasdaqTallinn StockExchange and digitallysigned(Link: https://nasdaqbaltic.com/)
MANAGEMENT REPORT
MANAGEMENT REPORT
OVERVIEW OF ECONOMIC ACTIVITIES
MANAGEMENT COMMENTARY
2022/2023 financial year was first when PRFoods regained its profitability after COVID. This was achieved as a result of major restructuring of the group operations: Finland, our previous biggest operations, was sold off; Swedish fish farms and new licences had to be sold to deleverage the company. As a result, our sales were 19.6 million Euros last year compared to 42.1 year before. EBITDA from operations rose to 0.3 million Euros compared -1.7 million loss the year before. Net profit amounted to 0.3 million Euros, compared to 8.1 million Euros year before.
Net debt was reduced from 24.7 to 16.7 million. Majority of group's debt is on fixed interest rates; hence we have not been so severely affected by rise of interest rates. Nevertheless, the net debt level remains too high and in order to reduce it, group has undertaken several steps: massive costs reduction and disposal of further fish farming assets. While fish farming is very attractive future business line, the capital requirements to fully expand these activities are not realistic for PRFoods in short term. We continue to develop further fish farming licences for future potential.
High inflationary environment and volatile fish prices have affected significantly both domestic demand and export in 2022 and 2023. On very positive note, since the non-compete in Finland ends in 2024, we have already orders from Finland exceeding the total revenues of Estonian business from 2022-2023. In 2024 we will see also Estonian processing business turning to long waited profit. Fish prices have come down significantly during H2 2023 and this has already boosted demand for fish products.
As we stated before the instability of markets is new norm, but the business has shown capacity to adapt to various challenges. Our high leverage has been debilitating factor to develop the business in recent years, but slowly but surely the ship has turned and is on much better footing. We are particularly proud of our team's persistence and professionalismtheir efforts have been simply remarkable.
2023-2024 financial year will be year of fish processing and expanding to Finland and other markets. John Ross Jr continues to be one of the industry's most profitable salmon smoker and Saare Kala has doubled its local sales under new management during last year and will see minimum 3x growth in sales in 2024 calendar year. Our cashflow is much more robust now thanks to further deleverage of the company. On behalf of myself, I wish the group and its management all the best in taking the business to new heights.
Sincerely,
Indrek Kasela /signed/
| Company's | consolidatedfinancialstatementsin | pdf-formatwithoutEuropeanSingleElectronicFormat(ESEF) | markups. | The | ||
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| originaldocumentissubmittedin | machine-readable.xhtmlformattotheNasdaqTallinn | StockExchange | and | digitallysigned(Link: | ||
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KEY RATIOS OF THE GROUP
KEY RATIOS*
| INCOME STATEMENT mln EUR (unless stated otherwise) |
Formula / Comment | 2022/2023 | 2021/2022 | 2020/2021 | 2019/2020 | 2018/2019 |
|---|---|---|---|---|---|---|
| Sales | Sales | 19,6 | 42,1 | 58,7 | 78,3 | 85,7 |
| Gross profit | Net sales – Cost of goods sold |
3,6 | 3,1 | 5,0 | 9,6 | 11,9 |
| EBITDA from operations |
Profit before one-offs and fair value adjustment on biological assets |
0,3 | -1,7 | -1,2 | 2,8 | 4,0 |
| EBITDA | Profit (Loss) before financial income and costs, tax, depreciation and amortisation |
0,3 | -1,9 | -1,3 | 1,9 | 1,7 |
| EBIT | Operating profit (loss) | -1,0 | -4,2 | -3,9 | -0,7 | -0,5 |
| EBT | Profit (loss) before tax | 0,4 | -8,2 | -5,0 | -1,8 | -1,2 |
| Net profit (-loss) | 0,3 | -8,1 | -5,2 | -1,9 | -1,5 | |
| Gross margin | Gross profit / Net sales | 18,3% | 7,4% | 8,5% | 12,2% | 13,9% |
| Operational EBITDA margin |
EBITDA from operations/Net sales |
1,5% | -4,1% | -2,1% | 3,5% | 4,7% |
| EBITDA margin | EBITDA /Net sales | 1,5% | -5,1% | -2,1% | 2,4% | 2,0% |
| EBIT margin | EBIT / Net sales | -5,1% | -9,9% | -6,6% | -0,9% | -0,5% |
| EBT margin | EBT / Net sales | 2,0% | -19,5% | -8,5% | -2,2% | -1,4% |
| Net margin | Net profit (loss) / Net sales | 1,5% | -19,4% | -8,8% | -2,4% | -1,7% |
| Operating expense ratio | Operating expenses / Net sales |
24,0% | 17,1% | 16,1% | 13,4% | 12,5% |
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| BALANCE SHEET mln EUR (unless stated otherwise) |
Formula / Comment | 30.06.2023 | 30.06.2022 | 30.06.2021 | 30.06.2020 | 30.06.2019 |
|---|---|---|---|---|---|---|
| Net debt | Short- and long-term loans and borrowings – Cash |
16,7 | 24,7 | 22,4 | 20,7 | 20,5 |
| Equity | 8,3 | 8,1 | 15,8 | 19,8 | 21,9 | |
| Working capital | Current assets – Current liabilities |
0,0 | -3,2 | -3,2 | -4,0 | -3,1 |
| Assets | 30,2 | 38,9 | 55,6 | 57,1 | 62,5 | |
| Liquidity ratio | Current assets / Current liabilities |
1,0x | 0,7x | 0,8x | 0,8x | 0,9x |
| Equity ratio | Equity / Total assets | 27,4% | 20,7% | 28,4% | 34,7% | 35,0% |
| Gearing ratio | Net debt / (Equity + Net debt) | 66,9% | 75,4% | 58,7% | 51,1% | 48,3% |
| Debt to Asset | Total debt/Total assets | 0,7x | 0,8x | 0,7x | 0,7x | 0,7x |
| Net debt-to-EBITDA from operations |
Net debt / EBITDA from operations |
55,8x | -14,5x | -17,9x | 7,5x | 5,1x |
| ROE | Net profit (loss) / Average equity |
4,1% | -68,5% | -29,0% | -9,1% | -6,5% |
| ROA | Net profit (loss) / Average assets |
1,0% | -17,3% | -9,2% | -3,2% | -2,3% |
* Consolidating unit is a holding company and forms insignificant part of operations of the Group, thus the consolidating unit's ratios are not presented
** before one-offs and fair value adjustment of biological assets
REVENUE
The Group's revenue in the financial year 2022/20223 totalled 19,6 million euros, down by 22,5 million euros, i.e. 53,4% compared to the previous financial year. The decrease in turnover is due to the sale of the Finnish unit last year and the sale of the Swedish unit in the current financial year.
Since the acquisition of fish companies in Great Britain in 2017, it has now become the largest market after the sale of Finnish unit in 2022. Great Britain sales accounted for 67,3% of the Group's sales revenue. The second largest market is Estonia, where sales accounted for 31,6% of the Group's sales revenue.
GEOGRAPHIC SEGMENTS
| mln EUR | 2022/2023 | Share, % | 2021/2022 | Share, % | Change, mln EUR |
Change, % |
Imp. |
|---|---|---|---|---|---|---|---|
| Finland | 0 | 0% | 20,7 | 49.2% | -20,7 | -100% | ▼ |
| United Kingdom | 13,2 | 67,3% | 14,9 | 35.4% | -1,7 | -11,4% | ▼ |
| Estonia | 6,2 | 31,6% | 5,3 | 12.6% | 0,9 | 17% | ▲ |
| Other | 0,2 | 1,1% | 1,2 | 2.8% | -1 | -83,3% | ▼ |
| Total | 19,6 | 100,0% | 42,1 | 100,0% | -22,5 | -53,4% | ▼ |
Great Britain's revenue in the financial year was 13,2 million euros, up by 11,4% compared to 14,9 million euros in the previous financial year. The market formed 67,3% of total revenue (2021/2022: 35,4% of total revenue).
Estonia's revenue in the last financial year was 6,2 million euros, up by 17% compared to 5,3 million euros in the previous financial year. The market formed 31,6% of total revenue (2021/2022: 12,6% of total revenue).
Sales to other countries amounted to 0,2 million euros in the financial year accounting for 1,1% of total revenue (2021/2022: 1,2 million euros, share 2,8% of total revenue).
The main product segments of the group are hot and cold smoked products and fresh fish and fish fillets, which make up the majority of sales, sales of other fish products are less than 15%. Over 50% of customer segments are retail chains, followed by wholesale, HoReCa and others.
COSTS
| 2022/2023 | 2021/2022 | Change | 2022/2023 | 2021/2022 | Change | |||
|---|---|---|---|---|---|---|---|---|
| mln EUR | mln EUR | mln EUR | Imp. | As % of sales |
AS % of sales |
%-point | Imp. | |
| Sales | 19,6 | 42,12 | -22,52 | ▼ | 100,00% | 100,00% | ||
| Cost of goods sold | -16,0 | -38,99 | 22,99 | ▲ | 81,63% | 92,57% | -10,94% | ▲ |
| materials in production & cost of goods purchased for resale |
-11,0 | -28,24 | 17,24 | ▲ | 56,12% | 67,05% | -10,93% | ▲ |
| labour costs | -2,6 | -5,82 | 3,22 | ▲ | 13,27% | 13,82% | -0,55% | ▲ |
| depreciation | -1,0 | -1,56 | 0,56 | ▲ | 5,1% | 3,70% | 1,4% | ▼ |
| other cost of goods sold | -1,4 | -3,37 | 1.97 | ▲ | 7,14% | 8,00% | -0,86% | ▲ |
| Operating expenses | -4,69 | -7,21 | 2,52 | ▲ | 23,92% | 17,12% | 6,8% | ▼ |
| labour costs | -1,3 | -2,74 | 1,44 | ▲ | 6,63% | 6,51% | 0,12% | ▼ |
| transport & logistics services | -1,68 | -2,63 | 0,95 | ▲ | 8,57% | 6,24% | 2,33% | ▼ |
| depreciation | -0,33 | -0.39 | 0,06 | ▲ | 1,68% | 0,93% | 0,75% | ▼ |
| Marketing & R&D | -0,37 | -0,22 | -0,15 | ▼ | 1,89% | 0,52% | 1,37% | ▼ |
| other operating expenses | -1,01 | -1,23 | 0,22 | ▲ | 5,15% | 2,92% | 2,23% | ▼ |
| Other income/expenses | 0,15 | 0,31 | -0,16 | ▼ | 0,77% | 0,74% | 0,03% | ▲ |
| Financial income / expense | 1,4 | -4,0 | 5,4 | ▲ | 7,1% | 9,5% | N/A | ▲ |
Company's consolidatedfinancialstatementsin pdf-formatwithoutEuropeanSingleElectronicFormat(ESEF) markups. The originaldocumentissubmittedin machine-readable.xhtmlformattotheNasdaqTallinn StockExchange and digitallysigned(Link: https://nasdaqbaltic.com/)
COST OF GOODS SOLD (COGS)
COGS was 16,0 million euros and it accounted for 81,63% of the total sales of the 2022/2023 financial year (2021/2022: 38,99 million euros, 92,57% of sales). COGS decreased compared to the previous financial year by 22,99 million euros.
Purchase cost of raw fish continues to account for the majority (ca 75%) of the largest COGS item "materials in production and cost of goods purchase for resale" that amounted to 11,0 million euros (2021/2022: 28,24 million euros). Remaining costs are mainly attributable to packaging materials and fish feed.
Labour cost of personnel employed in production and fish farms totalled 2,6 million euros and formed 13,27% of total sales (2021/2022: 5,82 million euros, 13,82% of sales).
Other cost of goods sold amounted to 1,4 million euros and formed 7,14% of total sales (2021/2022: 3,37 million euros, 8% of sales). The cost item includes costs on heating, electricity, rent and utilities, and costs incurred in relation to fish farming and auxiliary activities in production.
OPERATING EXPENSES
Operating expenses amounted to 4,69 million euros and accounted for 23,92% of the total sales (2021/2022: 7,21 million euros, 17,12% of sales), down by 2,52 million euros compared to the previous financial year.
The majority of operating costs are costs on transport & logistics 1,68 million euros (2021/2022: 2,63 million euros) and on labour 1,3 million euros (2021/2022: 2,74 million euros).
PROFITABILITY
The Group's gross profit of 2022/2023 financial year was 3,6 million euros, i.e. 0,5 million euros more than in the previous financial year (2021/2022: 3,1 million euros). EBITDA from operations before one-offs and fair value adjustments was 0,3 million euros i.e. 2,0 million euros more compared to the previous financial year (2021/2022: -1,7 million euros). EBITDA of the financial year was 0,3 million euros i.e. 2,4 million euros more than in the previous financial year (2021/2022: -2,1 million euros).
Effect from revaluation of biological assets to EBITDA in the past financial year was 0,0 million euros (2021/2022: -0,4 million euros).
Operating loss in 2022/2023 was 0,9 million euros (2021/2022: 4,2 million euros) and net profit was 0,3 million euros (2021/2022: net loss 8,2 million euros).
Operating margin in the financial year was -5,0% (2021/2022: -10%) and net margin was 1,7% (2021/2022: -19,4%).
STATEMENT OF FINANCIAL POSITION
As at 30.06.2023 consolidated total assets of the Group stood at 30,2 million euros. The year before i.e. as at 30.06.2022 the balance sheet totalled 38,9 million euros.
The Group`s current assets stood at 5,1 million euros as at 30.06.2023 (30.06.2022: 7,9 million euros). Non-current assets totalled 25,1 million euros (30.06.2022: 31,0 million euros).
Current liabilities totalled 5,1 million euros as at 30.06.2023 (30.06.2022: 11,1 million euros). Non-current liabilities totalled 16,8 million euros (30.06.2022: 19,8 million euros). Equity of PRFoods was 8,3 million euros (30.06.2022: 8,1 million euros).
As at the end of the financial year, the Group's cash and cash equivalents amounted to 0,4 million euros, i.e. 1,3% of the balance sheet total (30.06.2022: 0,1 million euros, 0,3% of the balance sheet total).
Receivables and prepayments amounted to 2,1 million euros as at 30.06.2023 compared to 30.06.2022, when receivables and prepayments amounted to 2,6 million euros.
As at the end of the financial year, inventories amounted to 1,9 million euros, down by 0,3 million euros compared to the end of the previous financial year i.e. from 2,2 million euros.
Biological assets stood at 0,8 million euros as at 30.06.2023 (30.06.2022: 3,0 million euros), down by 2,2 million euros compared to the end of the previous financial year. Biomass volume as at 30.06.2023 was 161 tonnes (30.06.2022: 441 tonnes), down by 280 tonnes compared to the end of the previous financial year.
Tangible assets of the Group were as at the end of the financial year 6,6 million euros (30.06.2022: 8,9 million euros) and intangible assets were 18,2 million euros (30.06.2022: 21,8 million euros), down by 2,3 million and 3,6 million euros, respectively, compared to the end of the previous financial year.
Current loans and borrowings of the Group were as at 30.06.2023 2,1 million euros (30.06.2022: 7,1 million euros), down by 5,0 million euros over a year.
Payables amounted to 3,0 million euros as at 30.06.2023 (30.06.2022: 4,0 million euros), down by 1,0 million euros compared to the end of the previous financial year.
Non-current interest-bearing liabilities stood at 15,0 million euros as at the end of the financial year (30.06.2022: 17,7 million euros) down by 2,7 million euros compared to the end of the previous financial year.
The registered share capital of the Group was 7,7 million euros as at 30.06.2023 (30.06.2022: 7,7 million euros).
CASH FLOWS
PRFoods' cash and cash equivalents totalled 0,1 million euros at the beginning of the financial year of 2022/2023 and 0,4 million euros at the end of the financial year, the period's cash flow amounted to 0,3 million euros. At the same period of previous financial year cash flow amounted to -2,2 million euros.
Cash flow from operations was -0,5 million euros for the 2022/2023 financial year and +0,9 million euros in the previous financial year. Cash flow from investment activities was in the financial year +6,9 million euros and -2,9 million euros the previous financial year. Cash flow from financing activities totalled -5,9 million euros during the financial year compared to -0,3 million euros in the previous financial year.
CHANGE IN CASH FLOWS 2022/2023 VS 2021/2022
PERSONNEL
There were on average 190 employees in the Group during the financial year compared to the average number of employees of 245 in the previous financial year. The Group's labour costs decreased from 8,5 million euros in the 2021/2022 financial year to 3,9 million euros in 2022/2023. Average monthly labour costs per employee was 1,71 thousand euros and decreased by 40,6% compared to the previous financial year.
| 2022/2023 | 2021/2022 | 2020/2021 | 2019/2020 | 2018/2019 | |
|---|---|---|---|---|---|
| Average number of employees | 190 | 245 | 281 | 318 | 361 |
| Finland | 0 | 54 | 79 | 81 | 92 |
| Estonia | 67 | 80 | 86 | 106 | 127 |
| Great Britain | 111 | 100 | 100 | 113 | 121 |
| Sweden | 12 | 11 | 16 | 18 | 21 |
| Payroll expense, th EUR | 3 899 | 8 459 | 9 266 | 10 589 | 10 857 |
| Monthly average payroll expense per employee, th EUR |
1,71 | 2,88 | 2,75 | 2,77 | 2,50 |
FISH FARMING
The competitive advantage of the Group is its vertical integration – fish farming, production and sales. About two thirds of the raw trout used in the Group's production is harvested from the Group's own fish farms in coastal area of Saaremaa, Estonia, ensuring that customers receive fast and high-quality deliveries.
Vertical integration enables the Group to reduce costs in certain phases of fish farming and to also enhance control foremost over fish processing and marketing. In the fish business, as fish are livestock, the quality assurance in the technological process has keenly to be maintained throughout the entire product lifecycle. In addition to improved cost control, the vertical integration enables to reduce risks in fish farming, for instance due to poor quality of feed or base materials, and to secure the volume required for processing as well as price stability of raw material.
MARKET PRICE OF FISH
The fish production industry is extremely dependent on availability and the price of raw fish. Large producers make their production plans for three years in advance as it is difficult and expensive in shorter perspective to adapt a fish farm's production cycle to market needs. Therefore, the world market fish supply is relatively rigid in the short-term, while demand is somewhat shifting depending on the season. This imbalance in fish supply and demand results in constantly fluctuating price of raw fish. Moreover, the far-reaching change in supply chains during the past month in connection with the spread of the virus has increased the amplitude and unpredictability of prices. The Group counters the impact of external environment and volatility of fish price through the changes of the Group's production and sales strategy.
MARKET PRICE OF FISH AT THE END OF PERIOD
The Group monitors market prices for salmon and rainbow trout: salmon prices from the Nasdaq trading environment and rainbow trout prices from Akvafakta (Norwegian fish industry association) summaries.
As at the end of the reporting period the price of salmon has decreased by 20,76% and the price of rainbow trout by 24,51% compared to the prices a year ago. Over the two-year period, the price of salmon has increased by 32,86% and the rainbow trout by 32,79%. The price of salmon has increased by 40,87% and of rainbow trout by 68,12% compared to the prices three years ago.
| EUR/kg | 30.06.2023 | 30.06.2022 | 30.06.23 vs 30.06.22 |
30.06.2021 | 30.06.23 vs 30.06.21 |
30.06.2020 | 30.06.23 vs 30.06.20 |
|---|---|---|---|---|---|---|---|
| Salmon | 7,48 | 9,44 | -20,76% | 5,63 | 32,86% | 5,31 | 40,87% |
| Rainbow trout | 7,33 | 9,71 | -24,51% | 5,52 | 32,79% | 4,36 | 68,12% |
The graphs below illustrate weekly average prices of salmon and rainbow trout since 2017/2018.
EXPORT PRICE OF THE SALMON
EXPORT PRICE OF THE RAINBOW TROUT
AVERAGE MARKET PRICE OF FISH OF THE PERIOD
| EUR/kg | 2022/2023 | 2021/2022 | 2022/2023 vs 2021/2022 |
2020/2021 | 2022/2023 vs 2020/2021 |
2019/2020 | 2022/2023 vs 2019/2020 |
|---|---|---|---|---|---|---|---|
| Salmon | 7,73 | 6,95 | 11,22% | 4,79 | 61,38% | 5,57 | 38,78% |
| Rainbow trout | 8,39 | 6,75 | 24,30% | 4,72 | 77,75% | 5,14 | 63,23% |
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Both the average salmon price and the average trout price have increased in the reporting period by 11,22% and 24,3%, respectively, compared to the same period of the previous financial year. Compared to the average prices in the same period two years ago, the average prices of salmon and trout have increased by 61,38% and 77,75%, respectively, and compared to the prices three years ago, they have increased by 38,78% and 63,23%, respectively.
BIOLOGICAL ASSETS
Biological assets in PRFoods' fish farms are rainbow trout (Oncorhynchus mykiss) fish stock accounted for in live weight.
The Group uses the Norwegian export statistics to assess the value of rainbow trout's stock. When the price of raw fish increases or decreases, so does the value of fish harvested in fish farms of the Group, having either a positive or a negative impact on the Group's financial results.
As at 30.06.2023 there were only Juveniles, which were carried in the statement of financial position at cost.
CHANGE IN BIOLOGICAL ASSETS, TONNES
| 2022/2023 | 2021/2022 | Change, tonnes 2022/2023 vs 2021/2022 |
Change, % 2022/2023 vs 2021/2022 |
|
|---|---|---|---|---|
| Biomass at the beginning of the period | 441 | 846 | -405 | -47,9% |
| Biomass at the end of the period | 161 | 441 | -280 | -63,5% |
| Harvested fish (in live weight) | 326 | 1 427 | -1 101 | -77,2% |
As of 30.06.2023, the company had 161 tons of biological assets. Compared to the same period last year, biological assets decreased in quantity by 280 tons or 63,5%. The decrease in biomass is related to the sale of the Swedish unit of the Group in 2022.
BIOMASS VOLUME AND AVERAGE PRICE, EUR/KG
| 2022/2023 | 2021/2022 | Change, mln EUR 2022/2023 vs 2021/2022 |
Change, % 2022/2023 vs 2021/2022 |
|
|---|---|---|---|---|
| Biological assets, mln EUR | 0,8 | 3,0 | -2,2 | -73% |
| Biomass volume, tonnes | 161 | 441 | -280 | -63,5% |
| Average price, EUR/kg | 7,33 | 6,81 | 0,52 | 7,6% |
| Fair value adjustment of biological assets, mln EUR | 0,0 | -0,4 | 0,4 | 100% |
Biological assets at cost were 0,8 million euros as of 30.06.2023 compared to 3,0 million euros as of 30.06.2022. The average price of biomass was 7,33 euros per kilo compared to 6,81 euros per kilo during the comparable period.
MANAGEMENT AND SUPERVISORY BOARDS
The Management Board of AS PRFoods is composed of one member – Indrek Kasela – who as per the supervisory board's decision serves as the sole member of the management board since 02.02.2015. The management board is independent in its day-to-day management of the business, protects the best interests of all shareholders and thereby ensures the company's sustainable development in accordance with the set objectives and strategy. It is also responsible for the internal control and risk management processes in the company.
The Supervisory Board of AS PRFoods appoints management board members for a three-year term. The articles of association prescribe the management board to consist of one to four members. Indrek Kasela (born 1971), holds LL.M (Master of Laws) degree from the New York University (1996), BA degree in law from the University of Tartu (1994).
In addition to the management board member position of AS PRFoods, Mr Kasela serves as a member of management board in almost all the Group entities and also in non-Group entities (such as Lindermann, Birnbaum & Kasela OÜ, ManageTrade OÜ ja NBLJK OÜ, etc). He serves as a supervisory board member of AS Toode, ELKE Grupi AS, EPhaG AS, Salva Kindlustuse AS, Ridge Capital AS, AS Ekspress Grupp, Elering AS, SA Avatud Eesti Fond, Tulundusühistu Tuleva, Eesti Avamere Vesiviljelejate Ühistu. Furthermore, he is involved in companies and NPOs, incl. domiciled abroad.
The Supervisory Board of AS PRFoods is currently comprised of five members. The board is chaired by Lauri Kustaa Äimä, members of the supervisory board are Aavo Kokk, Harvey Sawikin, Vesa Jaakko Karo and Kuldar Leis.
The highest governing body of a public limited company is a general meeting of shareholders. According to law, the general meetings of shareholders are either ordinary or extraordinary.
Pursuant to law, a supervisory board of a public limited company is a supervisory body responsible for planning the activities of a company, organising its management and supervising the activities of its management board. According to the Articles of Association of AS PRFoods, the supervisory board has three to seven members elected by the general meeting of shareholders for the term of three years.
Lauri Kustaa Äimä (born 1971) holds a Master's degree in Economics from the University of Helsinki. He has been a member of the supervisory board of the company since its foundation. Lauri Kustaa Äimä is the managing director and founding shareholder of KJK Capital Oy. He serves as a board member of Saaremere Kala AS, AS Baltika, AS Toode, ManageTrade OÜ, AB Baltic Mill, UAB Malsena Plius, and also in several investment companies and funds domiciled in Finland, England, Slovenia and Luxembourg, incl. KJK Management SA, KJK Fund SICAV-SIF, KJK Fund II SICAV-SIF and KJK Fund III, Elan d.o.o. and Kaima Capital Capital Oy, Amber Trust Management SA, Amber Trust II Management SA, Kaima Capital Eesti OÜ.
Aavo Kokk (born 1964) graduated from Tartu University in 1990, with specialization in journalism, and Stockholm University in 1992, with specialization in banking and finance and has been a member of the supervisory board of the company since May 2009. Aavo Kokk is a member of boards in several companies, US Real Estate OÜ, OÜ Synd&Katts, Raldon Kinnisvarahalduse OÜ, AS Audentes, AS Lemeks, Crowdestate AS and Creative Union AS to name a few.
Harvey Sawikin (born 1960) holds degrees from the Columbia University and Harvard Law School and has been a member of the supervisory board of the company since May 2009. In 1994 Harvey Sawikin co-established a fond Company's consolidatedfinancialstatementsin pdf-formatwithoutEuropeanSingleElectronicFormat(ESEF) markups. The originaldocumentissubmittedin machine-readable.xhtmlformattotheNasdaqTallinn StockExchange and digitallysigned(Link: https://nasdaqbaltic.com/)
management company Firebird Management LLC, in which he holds a leading position also today. Harvey Sawikin holds management position in the following companies / funds: Firebird Fund, Firebird New Russia Fund, Firebird Mongolia GP LLC, Firebird Republics Fund and Firebird Avrora Fund and Amber Trust funds. He is a member of the New York State Bar.
Vesa Jaakko Karo (born 1962) graduated from the Helsinki School of Economics in 1986 with M.Sc. in finance and international marketing and received a Licentiate (Econ) degree in economics in 1996. He has been a member of the supervisory board of the company since August 2009. He is a member of supervisory board KJK Capital Oy.
Kuldar Leis (born 1968) graduated from the University of Tartu in 1993, specializing in credit and finance. He also holds a diploma in dairy technology. Kuldar Leis was the chairman of the management board of the company since its foundation until 15 May 2013. Since 29 May 2013, he is a member of the supervisory board of PRFoods. He is a member of supervisory boards of Saaremere Kala AS, AS Linda Nektar, AS Bercman Technologies and Competence Center of Food and Fermentation Technology. He is also a member of management boards of Rododendron OÜ, Solarhouse OÜ, MTÜ Põlva Tenniseklubi and MTÜ Põlva Käsipalliklubi.
Information on the education and careers of the members of the supervisory board as well as their management positions in other companies is available on AS PRFoods' website www.prfoods.ee.
PRFOODS' SHARES HELD BY THE MEMBERS OF THE MANAGEMENT AND SUPERVISORY BOARDS AND THE PERSONS/COMPANIES RELATED TO THEM AS AT 30.06.2023:
| Shareholder | number of shares | ownership interest |
|---|---|---|
| Member of the management board – Indrek Kasela | 1 613 617 | 4,17% |
| Member of the supervisory board – Kuldar Leis | 1 126 056 | 2,92% |
| Member of the supervisory board – Lauri Kustaa Äimä | 125 000 | 0,32% |
| Member of the supervisory board – Vesa Jaakko Karo | 90 000 | 0,23% |
| Member of the supervisory board – Arko Kadajane | 8 928 | 0,02% |
| Member of the supervisory board – Harvey Sawikin | - | - |
| Member of the supervisory board – Aavo Kokk | - | - |
| Total number of shares owned by the members of the supervisory and management boards | 2 963 601 | 7,66% |
SHARE AND SHAREHOLDERS
The registered share capital of AS PRFoods is 7 736 572 euros which is divided to 38 682 860 ordinary shares without nominal value. All shares are freely transferable and of the same kind, i.e. have equal voting and dividend rights.
| ISIN | EE3100101031 | Issued shares | 38 682 860 |
|---|---|---|---|
| Ticker | PRF1T | Listed shares | 38 682 860 |
| Market | BALTIC MAIN LIST | Listing date | 5.05.2010 |
| Nominal | 0 EUR | Minimum quantity of tradable securities | 1 share |
AS PRFoods shares are listed on the main list of Nasdaq Tallinn Stock Exchange since 05.05.2010. There is no official market maker for the shares. AS PRFoods share is a component in OMX Tallinn General Index and in OMX Baltic General Index.
AS PRFoods has twice reduced the nominal value of shares with making payments to shareholders: in 2012 by 10 euro cents per share and in 2015 by 30 euro cents per share. The general meeting of shareholders from 26.05.2016 resolved to adopt shares without nominal value and on 30.06.2016 the commercial registry registered the shares without nominal value. The accountable nominal value of a share is 0,20 euro (nominal value of a share was 10,0 Estonian kroons until 13.04.2011, 0,60 euro till 03.09.2012, and 0.50 euro till 02.10.2015).
SHARE PRICE, INDICES AND TRADING ACTIVITY
The Tallinn Stock Exchange All-Share index increased by 5,5% over one year, and PRFoods share price decreased by 35,07%.
| Index / Share | Ticker | 30.06.2023 | 30.06.2022 | Change | |
|---|---|---|---|---|---|
| ● | PRF1T, EUR | PRF1T | 0,224 | 0,345 | -35,07% |
| ● | OMX Tallinn GI | OMXTGI | 1 888,25 | 1 789,65 | 5,5% |
TRADING STATISTICS
| Trading Statistics, EUR (unless stated otherwise) |
12m 2022/2023 | 12m 2021/2022 | 12m 2020/2021 | 12m 2019/2020 | 12m 2018/2019 |
|---|---|---|---|---|---|
| Open | 0,348 | 0,425 | 0,418 | 0,502 | 0,740 |
| High | 0,350 | 0,435 | 0,428 | 0,534 | 0,780 |
| Low | 0,21 | 0,300 | 0,344 | 0,361 | 0,490 |
| Last | 0,224 | 0,345 | 0,425 | 0,418 | 0,534 |
| Traded volume, mln pc | 0,96 | 1,94 | 2,08 | 1,34 | 2,20 |
| No of trades | 5 445 | 5 514 | 6 737 | 2 313 | 1 762 |
| Average trade volume, shares | 176 | 351 | 309 | 579 | 1 248 |
| Turnover, mln | 0,26 | 1,05 | 0,80 | 0,60 | 1,43 |
| Market capitalisation, mln | 8,66 | 13,34 | 16,44 | 16,17 | 20,66 |
A total of 5 445 trades were conducted with AS PRFoods' shares during the financial year of 2022/2023 (12 months 2021/2022: 5 514 trades). During the period a total of 0,96 million shares changed hands (12 months 2021/2022: 1,9 million shares) forming 2,5% of the company's shares. The average trade volume was 149 shares (12 months 2021/2022: 225 shares).
Company's consolidatedfinancialstatementsin pdf-formatwithoutEuropeanSingleElectronicFormat(ESEF) markups. The originaldocumentissubmittedin machine-readable.xhtmlformattotheNasdaqTallinn StockExchange and digitallysigned(Link: https://nasdaqbaltic.com/)
Turnover of share trading amounted to 0,26 million euros in the financial year of 2022/2023 compared to 1,05 million euros in the previous 12-months period. The highest share price during the financial year of 2022/2023 was 0,35 euros and the lowest was 0,21 euros; a year ago in the comparable period, the highest and the lowest price were 0,435 euros and 0,3 euros, respectively.
The closing price of the share was 0,224 euro as at 30.06.2023 and the company's market capitalisation was 8,66 million euros. As at 30.06.2022 the closing price of the share was 0,345 euro and the company's market capitalisation was 13,34 million euros.
THE DYNAMICS OF THE SHARE PRICE AND INDICES FROM 5TH MAY 2010 TO 30TH OF JUNE 2023:
| Index / Share | Ticker / index | 30.06.2023 | 05.05.2010 | Muutus | |
|---|---|---|---|---|---|
| ● | PRFoods share. EUR | PRF1T | 0,224 | 0,890 | -74,83% |
| ● | OMX Tallinn GI | OMXTGI | 1 888,25 | 594,56 | 217,6% |
MARKET RATIOS
| Ratios | Formula | 30.06.2023 | 30.06.2022 | 30.06.2021 | 30.06.2020 | 30.06.2019 |
|---|---|---|---|---|---|---|
| EV/Sales | (Market Cap + Net Debt) / Sales |
1,3 | 0,90 | 0,66 | 0,47 | 0,48 |
| EV/EBITDA from operations |
(Market Cap + Net Debt) / EBITDA from operations |
84,9 | neg | neg | 13,39 | 10,30 |
| EV/EBITDA | (Market Cap + Net Debt) / EBITDA |
36,4 | neg | neg | 19,58 | 23,59 |
| Price/EBITDA from operations |
Market Cap / EBITDA from operations |
28,9 | neg | neg | 5,87 | 5,18 |
| Price/EBITDA | Market Cap / EBITDA | 12,4 | neg | neg | 8,59 | 11,85 |
| Price-to-Earnings | Market Cap / Net Earnings |
12,4 | neg | neg | neg | neg |
| Price-to-Book | Market Cap / Equity | 1,03 | 1,55 | 1,04 | 0,82 | 0,94 |
Market Capitalisation (Market Cap), Net Debt and Equity as at June 30. Sales, EBITDA and Net Profit/Loss for the trailing 12 months.
SHAREHOLDER STRUCTURE
SHAREHOLDERS OF AS PRFOODS
| Number of shares 30.06.2023 |
% of total 30.06.2023 |
Number of shares 30.06.2022 |
% of total 30.06.2022 |
Change | |
|---|---|---|---|---|---|
| ING Luxembourg S.A. (Nominee account) | 24 258 366 | 62,71% | 24 258 366 | 62,71% | - |
| Lindermann. Birnbaum & Kasela OÜ | 1 613 617 | 4,17% | 1 613 617 | 4,17% | |
| Ambient Sound Investments OÜ | 1 385 267 | 3,58% | 1 385 267 | 3,58% | |
| Firebird Republics Fund Ltd | 1 277 729 | 3,30% | 1 277 729 | 3,30% | |
| OÜ Rododendron | 1 159 776 | 3,00% | 1 219 589 | 3,15% | -59 813 |
| Compensa Life Vienna Insurance Group SE | 770 470 | 2,00% | 750 470 | 1,94% | -20 000 |
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|---|---|---|---|---|---|
| Firebird Avrora Fund, Ltd. | 730 678 | 1,89% | 730 678 | 1,89% | |
| OÜ Iskra Investeeringud | 279 318 | 0,72% | 279 318 | 0,72% | |
| Total of biggest shareholders | 31 475 221 | 81,37% | 31 525 034 | 81,47% | |
| Other shareholders | 6 207 639 | 16,04% | 6 167 826 | 15,94% | 79 813 |
| Treasury shares | 1 000 000 | 2,59% | 1 000 000 | 2,59% | |
| Total | 38 682 860 | 100,00% | 38 682 860 | 100,00% |
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STRUCTURE OF SHAREHOLDERS ACCORDING TO NUMBER OF SHARES, 30.06.2023
| Number of shares | Number of shareholders | % of shareholders | Number of shares | % of shares |
|---|---|---|---|---|
| 1 … 1 000 | 1 742 | 68,4% | 453 638 | 1,2% |
| 1 001 … 10 000 | 689 | 27,1% | 2 170 656 | 5,6% |
| 10 001 … 50 000 | 87 | 3,4% | 1 876 818 | 4,9% |
| 50 001 … 100 000 | 12 | 0,5% | 891 909 | 2,3% |
| 100 001 … | 17 | 0,6% | 33 289 839 | 86,0% |
| Total | 2 547 | 100,0% | 38 682 860 | 100,0% |
BOND AND BONDHOLDERS
PRFoods issued in the 2019/2020 financial year a total of 90 096 bonds in a private placement and 9,904 bonds in a public offering, with nominal value of 100 euros per bond, the interest rate of 6,25% p.a., and with maturity on 22.01.2025. According the terms of the bonds, the interest on the bonds is paid semi-annually (July and January). At the end of bond subscription period, PRFoods owned 4 926 bonds.
Following the completion of the public offering of the bonds, the bonds were listed on Tallinn Stock Exchange. Trading on Nasdaq Tallinn bond list started on 6 April 2020.
As of 30.06.2023, the number of bonds owned by PRFoods is 535 with a nominal value of 53,5 thousand euros.
In the 2020/2021 financial year, PRFoods issued 237 subordinated convertible bonds, with a total nominal value of up to 2,37 million euros, with a nominal value of 10 000 euros per subordinated convertible bond, with an interest rate of 7% per calendar year and a maturity date of 01.10.2025.
In addition, PRFoods announced an additional issue of secured bonds with up to 10 000 bonds with a nominal value of 100 euros per bond, maturity date of 22.01.2025 and 6,25% per calendar year. The additional issue was a targeted placement of PRFoods shareholder Amber Trust II S.C.A.
In addition, PRFoods announced an additional issue of secured bonds (issued in accordance with the terms of issue of PRFoods on 14.01.2020) in the amount of up to 1,0 million euros, with up to 10 000 bonds with a nominal value of 100 euros per bond, maturity date of 22.01.2025 and 6,25% per calendar year. The additional issue was a targeted placement of PRFoods shareholder Amber Trust II S.C.A to refinance the investment loan granted to PRFoods by the said shareholder in connection with the maturity of the loan.
As of 30.06.2023, PRFoods has issued 110 237 bonds, of which 110,000 are secured bonds with a nominal value of 100 euro per secured bond, with a total value of 11,0 million euros, and 237 are subordinated convertible bonds with a nominal value of 10,000 euro per subordinated convertible bond, with a total value of 2,37 million euros.
BONDHOLDER STRUCTURE
SIX LARGEST BONDHOLDERS OF AS PRFOODS
| Value of bonds 30.06.2023 |
% of total 30.06.2023 |
Value of bonds 30.06.2022 |
% of total 30.06.2022 |
Change | |
|---|---|---|---|---|---|
| Swedbank Pensionifond K60 | 3 940 000 | 29,5% | 3 940 000 | 29,5% | - |
| ING Luxembourg S.A. AIF esindajakonto | 3 070 000 | 23,0% | 3 070 000 | 23,0% | - |
| Swedbank Pensionifond K30 | 800 000 | 6,0% | 800 000 | 6,0% | - |
| Clearstream Banking AG | 750 000 | 5,6% | 750 000 | 5,6% | - |
| Compensa Life Vienna Insurance Group SE | 671 500 | 5% | 475 800 | 3,6% | 195700 |
| Spring Capital Growth Fund 1 | 504 300 | 3,8% | 505 300 | 3,7% | -1 000 |
| AS SEB Bankas | 479 900 | 3,6% | 502 700 | 3,8% | -22 800 |
| Total largest bondholders | 10 215 700 | 76,5% | 10 043 800 | 75,0% | -172 800 |
| Other minority bondholders | 3 100 800 | 23,1% | 3 272 700 | 24,6% | 172 800 |
| Treasury bonds | 53 500 | 0,4% | 53 500 | 0,4% | - |
BONDHOLDERS BY VALUE OF BONDS, 30.06.2023
| Value of bonds | Number of bondholders | % of bondholders | Value of bonds | % of bond value |
|---|---|---|---|---|
| 1 … 1 000 | 167 | 46,0% | 79 000 | 0,5% |
| 1 001 … 10 000 | 111 | 30,58% | 468 700 | 3,5% |
| 10 001 … 50 000 | 64 | 17,63% | 1 433 000 | 10,7% |
| 50 001 … 100 000 | 10 | 2,76% | 746 500 | 5,7% |
| 100 001 … | 11 | 3,03% | 10 642 800 | 79,6% |
| Total | 363 | 100,0% | 13 370 000 | 100,0% |
SOCIAL RESPONSIBILITY
We believe that a responsible company does not focus on financial indicators only. Therefore, the environmental and social impact, i.e. the footprint that a company leaves with its existence, is also important to us. Being a part of the environment, we care about our employees, the community, our partners, society and nature.
We will make effort to develop Estonia as a sailing and maritime country and to restore maritime traditions. We are long-term supporters of the Muhu Väina (Moonsund) regatta, and we also supported the Ice Sailing World Championship in 2019. We have also participated in the Muhu Väina regatta with our team on Reval Cafe Elisa Sailing yacht in the amateur league. Ice hockey is undoubtedly the number one sport for Finns, and for local businesses it is an honor to support their hometown club.
We also consider the development of the local economic environment and cultural space important - in Estonia, Finland and Scotland, i.e. in all PRFoods' operating countries and home markets. Since 2018, we have
helped the NPO Visit Saaremaa, also contributed to the NPO Estonian Culture Chamber, supported the Hanaholmen Business Forum in Finland, the Glasgow Culture Week in Scotland and the opening of the Arvo Pärt Center.
Our future is children and young athletes. We have supported the activities of these target groups in Estonia through the long-term support of Simple Session, in addition we helped to organize the Sumo European Championships in Tallinn. In cooperation with Postimees Group, we have supported the project initiated by them in 2018 and 2019: Successful people help deprived children (MTÜ Koos Laste Heaks). Through the Good Deed Impact Fund, we have also brought six very important initiatives to life in 2017-2020, which will solve acute problems in Estonian society – from education, social inequality, public health to the environment.
PRFoods' greatest asset is our people, we will continue to support the culture and economic life of our employees in our neighbourhood, to sponsor sports events and help deprived children.
ENVIRONMENTAL RESPONSIBILITY
As fish farmers and processors, we follow the principles of sustainable operations throughout the production chain. That is why it is very important for us to have an environmentally friendly feed so that it has a minimal impact on the environment. We also grow shellfish in our Saaremaa farm, which purify and filter water, reducing the environmental impact of fish farming. Our goal is to use environmentally friendly materials in product packaging - the film and plastic have either been replaced with cardboard and wood pulp in some products or a partially recyclable film has been used. Investing in modern packaging machines and the use of solar energy will help us achieve all this.
The Group owns fish farms in Estonia, as well as fish production facilities in Estonia and Great Britain. These facilities have an impact on the environment. As a company operating sustainably, we are aware of our global responsibility for preservation of natural resources and unharmed environment, which is why we attempt to keep the environmental impact of our activities at a minimum level and further reduce our ecological footprint by employing as cost-efficient resources as possible.
According to the Environmental Impact Assessment and Environmental Management System Act, fishing industry is an activity with a significant environmental impact. A possible impact of fish farms on nature is related to the emission of wastewater generated in farms and pollutants contained therein (mainly nitrogen and phosphorus) into seawater and lake water and, as a result, deterioration of water quality. Deterioration of water quality in turn may damage habitats or the living environment of birds and animals. Concentration and distribution of pollutants depends on the production technology used, on the quantity of fish feed and on sea currents, wind directions and other environmental factors.
Fish farming requires a water abstraction permit as an operating permit that is issued for a period of 7 to 10 years. We actively mitigate our environmental impact under the strict supervision of environmental authorities. We ensure adherence to all necessary measures for maximum reduction of the negative environmental impact in all main stages of fish production and processing in our sites. In addition, we contribute by deploying ecological technologies in our fish farms and production facilities. In our investments, we observe the principles of the corresponding BAT (Best Available Technique) method.
The Group has developed a new fish feed recipe that results in a 13,5% reduction in nitrogen emissions and a 30,3% reduction in phosphorus in the water. The work continues in this area with the next year's aim to reduce the phosphorus release to 47,7% compared to standard feeds as phosphorus is limiting the formation of cyanobacteria. The new fish feed was tested in Saaremaa and Sweden in the summer of 2019 and the results are positive.
We have installed shellfish farming lines in Saaremaa at a cost of about 40 thousand euros and are currently gaining experience in industrial shellfish farming in Estonian coastal waters. According to calculations, shellfish farming should compensate 20% of the nitrogen and phosphorus emissions of fish farming.
All of our farms are equipped with state-of-the-art water quality monitoring sensors and the results of the water monitoring of all breeding sites are continuously visible through the cloud service.
We are actively involved in various innovation and environmental projects such as UKIPOLIS in Finland (design of sediment separation cushion in the Baltic Sea), Sustainable cage farming in Denmark and in the Joint Baltic Sea Fisheries Working Group.
In Sweden, we have conducted a number of large-scale environmental surveys in the past financial year with independent parties (continuous monitoring of terrestrial farm outlet water, bottom sediment survey in and near cage breeding) to effectively demonstrate the low environmental impact of modern fish farming. So far, the results of the analysis have proven that the environmental impact is minimal, and our previously presented estimates have tended to be conservative.
As a packager of fishery products, the Group has been active in ensuring that the Group's packaging materials are friendly to the environment. Among other things, the Group is committed to improving sustainability and reducing food waste in combination with better product packaging on retail shelves.
Previous financial year, an innovative packaging solution was introduced, which, in addition to reducing the footprint by 70% when following the principles of recycling, further reduces the CO2 footprint by approximately 25% and the share of plastic in packaging by about 20%.
The use of plastic has been reduced in the group both in final product and in the production:
- The film packaging of the final product has been replaced by thinner ones.
- Production processes have been reorganized so that intermediate packaging of semi-finished products is not required, so the total volume of film packaging used has decreased.
The plastics are still used by the Group in packaging primarily due to a combination of its positive properties such as versatility, strength, lightness, stability, impermeability and maintaining products sterile. The light weight of plastic simplifies handling products throughout the production chain until it reaches an end client resulting in less transport emissions.
The Group 's choice of packaging manufacturers is also based on matching values, thus being guided by environmental aspects and sustainability.
As an international fish producer, the Group continues to focus its activities on moving towards environment friendly solutions throughout its production processes also in the coming years.
REPORT ON CORPORATE GOVERNANCE
AS PRFoods organises its business activities on the basis of its articles of association and national legal norms, and as a public enterprise on the requirements of the Tallinn Stock Exchange, Corporate Governance Recommendations (CGR) compiled jointly by Tallinn Stock Exchange and the Estonian Financial Supervision Authority in 2005 and the principles of equal treatment of shareholders and investors. The companies listed on the NASDAQ Tallinn Stock Exchange are obligated to publish a corporate governance report as a part of their annual report describing if and how CGR principles are followed and if not, then point out what specifically accompanied by an explanation for such a deviation.
The Group's report on Good Corporate Governance is available on the Group's homepage www.prfoods.ee in the Governance subsection (http://prfoods.ee/about/governance/corporate-governance-reports).
EXERCISE OF SHAREHOLDERS RIGHTS
Every shareholder shall be ensured the right to participate in the general meeting, to speak in the general meeting on themes presented in the agenda, and to present reasoned questions and make proposals. The general meeting shall be conducted at the location of the issuer and at a reasonable time and place, ensuring that a majority of shareholders have the possibility to participate in the general meeting. In the notice calling the general meeting the issuer shall include the address to which the shareholders can send agenda questions related to the agenda. The circumstances on which the issuer withholds information and how a shareholder can file a dispute it shall also be brought out in the notice. In conformity with the principle of treating all shareholders equally a controlling stakeholder shall refrain from harming the rights of other shareholders.
EQUAL RIGHTS OF SHAREHOLDERS IN THE ARTICLES OF ASSOCIATION
The articles of association of the issuer do not grant different types of shares with rights resulting in unequal treatment of shareholders in voting.
AGREEMENTS BETWEEN SHAREHOLDERS
In case the issuer has information on agreements between shareholders on concerted exercise of shareholders rights, the information shall be available on the issuer's homepage. The issuer has no information on such agreements being concluded.
PARTICIPATION IN A GENERAL MEETING IN PERSON OR BY PROXY
Issuers shall facilitate the personal participation of shareholders at the general meeting but shall not make it difficult for representatives to participate in and vote at the general meeting. The issuer shall notify shareholders as precisely as possible regarding the date, time and address of the general meeting. If an issuer itself or by his employees/representatives organizes the representation of a shareholder at a general meeting, it shall do so in such a manner that the orders given by the shareholder with regard to voting are executed. The representative of the issuer shall participate in the general meeting and shall be accessible to the shareholders during the holding of the general meeting.
CALLING OF A GENERAL MEETING AND INFORMATION TO BE PUBLISHED
Notice calling the general meeting is available on the issuer's homepage including the essential information to be published for passing a resolution regarding a topic on the agenda at the general meeting to shareholders, including a proposition on profit distribution, draft articles of association with remarks on the proposed amendments; essential conditions and agreements or draft contracts for issuance of securities or other transactions connected with the company (e.g., merger, sale of property etc.), information regarding candidates for supervisory board members or auditors etc., and supervisory board's propositions on topics on the agenda. On supervisory board member candidates, the information on the candidate's positions in boards or other management bodies of other companies shall be provided.
The notice calling the general meeting and the documents pertaining it are published on the homepage of the company both in Estonian and English languages. The minutes and recording of the general meeting are published on the homepage of the company in the language the meeting was conducted.
If shareholders make substantive proposals or proposals diverging from those of the supervisory board it will be recorded in the minutes.
CONDUCT OF THE GENERAL MEETING INCLUDING ADOPTION OF RESOLUTIONS OF THE GENERAL MEETING WITHOUT CONVENING THE MEETING
The extraordinary general meeting on 19.09.2022 was held without convening a meeting pursuant to § 2991 of the Commercial Code. Voting took place by submitting ballot papers, where according to the Commercial Code, in case of non-voting, the shareholder is deemed to have voted against the resolution.
The company made all the information available on the possible PRFoods website www.prfoods.ee, where the shareholders could get acquainted with the materials of the general meeting, draft resolutions and other documents of the general meeting. The shareholder was able to send questions about the draft resolutions by e-mail. The shareholder was able to cast his/her vote either by sending a ballot paper filled in and digitally signed or signed and scanned on paper by the voting shareholder or his/her authorized representative by e-mail to [email protected] during the voting period or by submitting a ballot paper by sending or sending to the office of AS PRFoods at Pärnu mnt 141, 11314 Tallinn, Estonia.
The resolutions adopted by the extraordinary general meeting of shareholders were published as a stock exchange announcement on the website of PRFoods.
RESPONSIBILITY AREAS OF MANAGEMENT BOARD MEMBERS
The responsibility areas of the management board members are approved by the management or supervisory board. The chairman of the supervisory board has concluded a contract of service with a member of the management board. The company's management board has one member who performs the duties of the managing director and is responsible for the functioning of the company's strategic areas, including integration of internal control and management processes with the company's accounting procedures, both daily and periodical. The member of the management board shall not be at the same time a member of more than two management boards of an issuer and shall not be the chairman of the supervisory board of another issuer (unless the issuer is a group company). The AS PRFoods', a holding structure void of everyday operational business activities, management consists of one member most efficiently corresponding to the needs of managing the company. Management bodies of subsidiaries active in fish farming, processing and sales have up to four members matching the business specifics and needs of the subsidiaries.
REMUNERATION PRINCIPLES OF MANAGEMENT BOARD MEMBERS
Basic wages, performance pay, severance packages, other payable benefits and bonus schemes of a management board member as well as the essential features of these shall be published in clear and unambiguous form on the homepage of the issuer and in the CGR report. Information published shall be deemed clear and unambiguous if it directly expresses the amount of expense to the issuer or the amount of foreseeable expense as of the day of disclosure. The chairman of the management board receives remuneration in accordance with the contract of the management board member. The remuneration and its principles are revisited once a year. The amount of the remuneration of the chairman of the management board is established with the contract of the management board member and is not to be disclosed as agreed by the parties. There are no bonus systems, i.e. no options, no retirement programmes, etc. in place for remuneration of the member of the management board. The management board member is entitled to receive a severance fee of up to 6 months remuneration.
SIGNIFICANT TRANSACTION OF A MANAGEMENT BOARD MEMBER WITH THE ISSUER
The supervisory board shall approve the transactions, which are significant to the issuer and concluded between the issuer and a member of its management board or another person connected/close to them and shall determine the terms of such transactions. The transactions approved by the supervisory board concluded between the issuer and a member of the management board or another person connected/close to them are published in the CGR report. No such transactions have taken place during the past financial year.
CONTROL EXECUTED BY THE SUPERVISORY BOARD OVER THE MANAGEMENT AND THE ISSUER
The supervisory board shall regularly assess the activities of the management board and its implementation of the issuer's strategy, financial condition, risk management system, the lawfulness of the management board activities and whether essential information concerning the issuer has been communicated to the supervisory board and the public as required. Upon the establishment of committees by the supervisory board, the issuer shall publish on its website their existence, duties, membership and position in the organization. Upon change of the committee structures, the issuer shall publish the content of such changes and the period during which the procedures are in effect.
DISCLOSURE OF REMUNERATION TO MEMBERS OF SUPERVISORY BOARD
The amount of remuneration of a member of the supervisory board shall be published in the CGR report, indicating separately basic and additional payment (incl. compensation for termination of contract and other payable benefits). The general meeting of shareholders of AS PRFoods is competent to elect and approve the composition of the supervisory board and their term of office. According to the articles of association of AS PRFoods, the supervisory board consist of three to seven members who are elected by the general meeting for a term of three years. No remuneration fee is to be paid to the member of the supervisory board.
ATTENDANCE AT SUPERVISORY BOARD MEETINGS BY THE MEMBERS OF SUPERVISORY BOARD
If a member of the supervisory board has attended less than half of the meetings of the supervisory board, this shall be indicated separately in the CGR report.
CONFLICT OF INTERESTS SITUATIONS
Members of the supervisory board shall promptly inform the chairman of the supervisory board and management board regarding any business offer related to the business activity of the issuer made to him, a person close to him or a person connected with him. All conflicts of interests that have arisen in preceding year shall be indicated in the CGR report along with their resolutions. Members of the supervisory board refrain from conflicts of interests and adhere to the prohibition of competition. The supervisory board and the management board cooperate closely in accordance with the articles of association and in the interests of the business undertakings and its shareholders. There were no such conflicts of interest in 2022/2023.
INFORMATION ON THE ISSUER'S HOMEPAGE
On the issuer's homepage, among others the general strategy directions of the issuer as approved by the supervisory board are disclosed. General directions and significant issues are provided in the Management Report.
THE ISSUER'S MEETINGS WITH JOURNALISTS AND ANALYSTS
The issuer shall disclose the dates and places of meetings with analysts and presentations and press conferences organized for analysts, investors or institutional investors on its website. The issuer enables shareholders to participate at such events and makes presentations available on its website. The issuer shall not arrange meetings with analysts and presentations organized for investors directly before dates of publishing a financial report. The issuer shall treat all shareholders equally. Compulsory, significant and price-sensitive information is first disclosed via the information system of the Tallinn Stock Exchange and then on the websites of the Estonian Financial Supervision Authority and the Group. In addition, every shareholder is entitled to request additional information from the Group and set up meetings. The Group's management board does not consider it important to keep a logbook on timetable and agenda of meetings with various shareholders as these meetings are limited to information that is already disclosed. This rule applies on all meetings, including the ones held shortly before disclosing financial reports.
AUDITOR OF THE ISSUER
The general meeting of shareholders of AS PRFoods held on 5 December 2022 appointed KPMG Baltics OÜ as the Group's auditor for the financial year 2022/2023.
Pursuant to the contract with the auditor, the auditing company's service entails auditing procedures of consolidated annual report (incl. annual reports of subsidiaries).
The remuneration of the auditor is determined by the agreement. Pursuant to the Auditing Act, the sworn auditor representing the external audit company is to be changed at least once in every seven years.
GOVERNANCE PRINCIPLES AND ADDITIONAL INFORMATION
AS PRFoods is a public limited company and its governing bodies are the shareholders' general meeting, the supervisory and the management board.
GENERAL MEETING
The general meeting of shareholders is the Group's highest governing body competent to amend and approve new articles of association, change the amount of share capital, recall members of the supervisory board and resolve on dissolution of the company, decide on division, merger or restructuring of the company, provided least 2/3 of the votes represented by shareholders at the general meeting are in favour. General meetings are ordinary (OGM) and extraordinary (EGM) meetings. An OGM shall be convened by the management board once a year not later than within six months after the end of the financial year. The management board shall convene an EGM if the Group's net assets fall below the limit allowed by law or if the meeting is requested by the supervisory board, auditor or shareholders whose shares represent at least 1/10 of the share capital. A general meeting has quorum when more than half of the votes determined by shares are present. The list of persons entitled to participate at the general meeting is determined 7 days before the meeting.
The 2022/2023 annual general meeting of shareholders of PRFoods was held on 5th December 2022. At the meeting, shareholders or their authorized representatives voted, whose shares represented 28 883 649 votes, which accounted for 74,67% of the total number of votes. The meeting was therefore competent to take decisions on matters on the agenda. The management board of AS PRFoods participated in the meeting. The agenda of the annual general meeting was to approve of the annual report for 2021/2022, decision on covering the loss and approval of the auditor for the following financial year, incl. determination of the auditor's fee, determining the number of members in supervisory board and electing members of the supervisory board.
The 2022/2023 extraordinary general meeting of shareholders of PRFoods was held on 19.09.2022 without convening a meeting. The management board of PRFoods participated in the meeting and the agenda of the extraordinary meeting included the transfer of shares of Överumans Fisk AB by Saaremere Kala AS to Vattudalens Fisk AB and the issuance of a first claim guarantee by AS PRFoods to Vattudalens Fisk AB to secure the obligations of Saaremere Kala AS arising from the sale agreement of shares of Överumans Fisk AB. Decisions were adopted with a 97,41% majority.
The meeting adopted the resolutions on all issues on the agenda of the general meeting according to the proposals made by the supervisory board. Information on the adoption and content of the decisions was disclosed after the meeting through the information system of the NASDAQ Tallinn Stock Exchange and on the company's website www.prfoods.ee.
SUPERVISORY BOARD
Pursuant to law, a supervisory board of a public limited company is a supervisory body responsible for planning the activities of a company, organizing its management and supervising the activities of the management board. According to the articles of association of AS PRFoods, the supervisory board has three to seven members elected by the general meeting of shareholders for the term of three years. Members of the supervisory board elect a chairman from among themselves. Chairman of the supervisory board is responsible for organizing the work of supervisory board and has a casting vote in case of tied vote.
As of the date of the report, the supervisory board of AS PRFoods is comprised of the following members: Lauri Kustaa Äimä (since incorporation), Kuldar Leis (elected on 29 May 2013), Aavo Kokk (elected on 5 May 2009), Harvey Sawikin (elected on 5 May 2009) and Vesa Jaakko Karo (elected on 17 August 2009). The terms of office of all the current members of the supervisory board will end on 11 December 2025. The supervisory board of AS PRFoods includes three independent members — Aavo Kokk, Vesa Jaakko Karo and Kuldar Leis. The chairman of the supervisory board is Lauri Kustaa Äimä and the vice-chairman of the supervisory board is Kuldar Leis.
The meetings of the supervisory board are held when necessary but no less frequently than once per quarter. During the financial year there were six supervisory board meetings. The meeting of the supervisory board has a quorum when more than half of the members participate.
In addition to the meetings, the supervisory board adopted resolutions without convening a meeting if it was necessary. The management board informed the supervisory board on a regular basis of the operations and financial status of AS PRFoods and the supervisory board provided the management board with necessary directions and support in conducting the everyday business activities of the company. In case a contract of service with a member of the supervisory board expires or is terminated prematurely, the Group will not incur a higher liability to pay a benefit than prescribed by the law. As at the end of the financial year, the Group's supervisory board members owned directly and indirectly 3,74% of the Group's shares (30.06.2022: 3,74%).
MANAGEMENT BOARD
The management board is the management body of the company that represents and manages the company according to the law and provisions of the articles of association. The management board is required to act in the most financially appropriate manner. According to the articles of association, the management board of AS PRFoods consists of one to four members. The members of the management board shall be elected by the supervisory board for three years. The competence of the supervisory board includes the election of the chairman of the management board, on the latter's proposal, appointment and recalling of members of the management board. A member of the management board may represent the company in all legal transactions. The Management Board of AS PRFoods consists of one member. According to the supervisory board, from 2 February 2015 the only member of the management board is Indrek Kasela. In its day-to-day management, the company's management board is independent and acts in the best interests of all shareholders, ensuring thereby the company's sustainable development in line with the set objectives and strategy. Moreover, the company's management board is responsible for ensuring functioning internal control and risk management procedures in the company.
The competence and powers of the management board are regulated by the Commercial Code and by the company's articles of association with no deviating exceptions or agreements made or entered into. The chairman of the management board receives remuneration according to the contract of service and is additionally entitled to receive severance benefit for up to 6 months' remuneration. Nor a member neither the chairman of the management board has any pension-related rights. The chairman is responsible for organising business operations on the Group level and also fulfils the tasks of a managing director. In subsidiaries, the local management ensures adherence to business practices. As at the end of the financial year, the Group's management board member owned via direct and indirect holdings a total of 4,17% of the Group's shares (30.06.2022: 4,17%). More detailed information about the education, career, membership in management bodies of business undertakings and shareholdings in AS PRFoods of members of the supervisory board and management board are provided on the Group's homepage.
SUPERVISORY AND MANAGEMENT BOARDS OF SUBSIDIARIES
Below is a list of supervisory boards and management boards of subsidiaries that are 100% owned by AS PRFoods as at 30 June 2023.
| Company | Management Board | Supervisory Board |
|---|---|---|
| Saaremere Kala AS | Indrek Kasela | Kuldar Leis, Lauri Kustaa Äimä, Kristjan Kotkas |
| Saare Kala Tootmine OÜ | Indrek Kasela, Timo Pärn, Raivo Polding | |
| JRJ & PRF Ltd | Indrek Kasela, Vesa Jaakko Karo, Christopher Charles Leigh, Louise Victoria Leigh-Pearson |
|
| John Ross Jr. (Aberdeen) Ltd |
Indrek Kasela, Christopher Charles Leigh, Victoria Louise Leigh-Pearson |
|
| Coln Valley Smokery Ltd | Indrek Kasela, Christopher Charles Leigh, Victoria Louise Leigh-Pearson |
|
| OÜ Redstorm | Margus Rebane |
ADDITIONAL MANAGEMENT BODIES AND SPECIAL COMMITTEES
The Group has regulated necessary procedures with guidelines and there has been no practical need to set up additional management/governing bodies. In 2010, the Group's supervisory board set up an auditing committee to monitor and analyse processing the financial information, efficiency of risk management and internal controls, the process of auditing of consolidated annual financial statements, the independence of the auditor representing the auditing company under the law, and to submit to the supervisory board proposals and recommendations in issues prescribed by the law. Since November 2017, the committee is chaired by Aleksander Zaporožtsev, the members of committee are since 2010 Aavo Kokk and Mairi Paiste. As of 01.12.2022, AS PRFoods Council has decided to continue with the two-member audit committee in connection with the resignation of Mairi Paiste. The powers of the current members of the audit committee, Aleksander Zaporozhtsev and Aavo Kokk, are valid until 15.11.2023.
IMPLEMENTING DIVERCITY POLICY
The management of AS PRFoods considers a well-functioning working environment on all levels of the Group important. To achieve and maintain it the Group employs people of different gender, national background and experiences.
INFORMATION MANAGEMENT
As a listed company, AS PRFoods adheres to the principles of openness and equal treatment of investors. The information required within the stock exchange rules and regulations is published regularly in accordance to the set terms, whereas the Group employs the principle of not publishing forward-looking statements. It publishes and comments factual information only. For timely notification of investors and the public, the Group operates a website that contains all stock exchange announcements and financial reports.
REMUNERATION REPORT
This remuneration report has been prepared in accordance with the Group's remuneration policy, which is primarily based on the Group's long-term goals, taking into account the company's financial results and the legitimate interests of investors and creditors.
The purpose of the remuneration report is to provide a clear overview of the remuneration paid to managers. The remuneration report reflects information about paid salaries and other remunerations to the members of board during the financial year 2022/2023.
BOARD REMUNERATION
In financial year 2022/2023 the Executive Board of the Group had one member.
The duties and salary of the board member Indrek Kasela are specified in more detail in the employment contract signed with him, in which the group was represented by the chairman of the board. The term of contract of Indrek Kasela was extended on December 7, 2020, and his mandate will expire on December 7, 2023. No performance fee was paid in 2022/2023.
No stock options or other benefits were provided to the board in 2022/2023.
| EUR '000 | 2022/2023 | 2021/2022 | 2020/2021 | 2019/2020 | 2018/2019 |
|---|---|---|---|---|---|
| Total Remuneration of Indrek Kasela | 24,0 | 31,8 | 84,3 | 107,5 | 117,7 |
| Incl basic remuneration | 24,0 | 31,8 | 79,1 | 107,5 | 117,7 |
| Incl performance pay | 0 | 0 | 5,2 | 0 | 0 |
| Monthly average payroll expense per employee, th EUR |
1,71 | 2,88 | 2,75 | 2,77 | 2,50 |
| Average number of employees | 190 | 245 | 281 | 318 | 361 |
| Payroll expense, th EUR | 3 899 | 8 459 | 9 266 | 10 589 | 10 857 |
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
| EUR '000 | Note | 30.06.2023 | 30.06.2022 |
|---|---|---|---|
| ASSETS | |||
| Cash and cash equivalents | 5 | 394 | 110 |
| Trade and other receivables | 6 | 1 815 | 2 154 |
| Prepayments | 7 | 304 | 413 |
| Inventories | 8 | 1 860 | 2 196 |
| Biological assets | 9 | 772 | 3 003 |
| Total current assets | 5 145 | 7 876 | |
| Deferred tax assets | 11 | 0 | 93 |
| Long-term financial investments | 381 | 229 | |
| Tangible assets | 12 | 6 563 | 8 882 |
| Intangible assets | 13 | 18 157 | 21 837 |
| Total non-current assets | 25 101 | 31 041 | |
| TOTAL ASSETS | 30 246 | 38 917 | |
| EQUITY AND LIABILITIES | |||
| Interest-bearing liabilities | 15 | 2 111 | 7 094 |
| Trade and other payables | 16 | 3 035 | 3 978 |
| Total current liabilities | 5 146 | 11 072 | |
| Interest-bearing liabilities | 15 | 15 024 | 17 725 |
| Trade and other payables | 16 | 0 | 204 |
| Deferred tax liabilities | 11 | 1 466 | 1 599 |
| Government grants | 17 | 317 | 265 |
| Total non-current liabilities | 16 807 | 19 792 | |
| TOTAL LIABILITIES | 21 953 | 30 865 | |
| Share capital | 18 | 7 737 | 7 737 |
| Share premium | 14 007 | 14 007 | |
| Treasury shares | -390 | -390 | |
| Statutory capital reserve | 51 | 51 | |
| Currency translation differences | 609 | 839 | |
| Retained profit (loss) | -13 981 | -14 391 | |
| Equity attributable to parent | 8 033 | 7 853 | |
| Non-controlling interest | 260 | 199 | |
| TOTAL EQUITY | 8 293 | 8 052 | |
| TOTAL EQUITY AND LIABILITIES | 30 246 | 38 917 |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
| EUR '000 | Note | 2022/2023 | 2021/2022 |
|---|---|---|---|
| Revenue | 19 | 19 578 | 42 128 |
| Cost of goods sold | 20 | -16 004 | -38 992 |
| Gross profit | 3 574 | 3 136 | |
| Operating expenses | -4 693 | -7 207 | |
| Selling and distribution expenses | 21 | -2 691 | -4 843 |
| Administrative expenses | 22 | -2 002 | -2 364 |
| Other income / expense | 24 | 150 | 307 |
| Fair value adjustment on biological assets | 9 | 0 | -420 |
| Operating profit (loss) | -970 | -4 184 | |
| Financial income / expenses | 25 | -1 210 | -1 734 |
| Share of result of associates and joint ventures | 28 | 153 | 0 |
| Profit (loss) from the sale of the subsidiary | 10 | 2 423 | -2 305 |
| Profit (Loss) before tax | 396 | -8 223 | |
| Income tax | 26 | -65 | 63 |
| Net profit (loss) for the period | 331 | -8 160 | |
| Net profit (loss) attributable to: | |||
| Owners of the Parent Company | 303 | -8 143 | |
| Non-controlling interests | 28 | -17 | |
| Total net profit (loss) for the period | 331 | -8 160 | |
| Other comprehensive income (loss) that may subsequently be | |||
| Foreign currency translation differences | -231 | 280 | |
| Total comprehensive income (expense) | 101 | -7 880 | |
| Total comprehensive income (expense) attributable to: | |||
| Owners of the Parent Company | 73 | -7 863 | |
| Non-controlling interests | 28 | -17 | |
| Total comprehensive income (expense) for the period | 101 | -7 880 | |
| Profit (Loss) per share (EUR) | 18 | 0,01 | -0,21 |
| Diluted profit (loss) per share (EUR) | 18 | 0,01 | -0,17 |
CONSOLIDATED STATEMENTS OF CASH FLOWS
| EUR '000 | Note | 2022/2023 | 2021/2022 |
|---|---|---|---|
| Cash flow from operating activities | |||
| Net profit (loss) | 331 | -8 160 | |
| Adjustments: | |||
| Depreciation | 12, 13 | 1 270 | 2 055 |
| Profit from sale and write-offs of fixed assets | -2 422 | -13 | |
| Other non-cash items | 1 650 | 3 768 | |
| Changes in receivables and prepayments | 6,7 | -403 | -1 091 |
| Changes in inventories | 8 | -7 | 1 526 |
| Changes in biological assets | 9 | -1 076 | 1 792 |
| Changes in payables and prepayments | 16 | 189 | 1 199 |
| Corporate income tax paid | 11 | 0 | -147 |
| Net cash inflow (outflow) from operating activities | -468 | 929 | |
| Cash flow from investing activities | |||
| Sale of tangible and intangible fixed assets | 12, 13 | 66 | 13 |
| Purchase of tangible and intangible fixed assets | 12, 13 | -248 | -682 |
| Government grants for acquisition of assets | 17 | 67 | 58 |
| Purchases and sales of other financial investments | 0 | -30 | |
| Acquisition of subsidiaries, net cash received | 10 | 7 015 | -2 245 |
| Repayments of given loans | 0 | 5 | |
| Interests received | 1 | 14 | |
| Net cash inflow (outflow) from investing activities | 6 901 | -2 867 | |
| Cash flow from financing activities | |||
| Change in overdraft | 15 | -4 544 | -930 |
| Repayments of loans received | 15 | -1 275 | -325 |
| Change in factoring | 15 | -60 | 0 |
| Proceeds from borrowings | 15 | 2 089 | 2 833 |
| Repayments of lease liabilities | 14 | -945 | -663 |
| Interests paid | 15 | -1 213 | -1 246 |
| Net cash inflow (outflow) from financing activities | -5 948 | -331 | |
| Net increase (decrease) in cash and cash | 485 | -2 269 | |
| Cash and cash equivalents at beginning of the period | 5 | 110 | 2 500 |
| Change in cash and cash equivalents | 485 | -2 269 | |
| Effect of sale of subsidiary to Cash and cash | -201 | -121 | |
| Cash and cash equivalents at the end of the period | 5 | 394 | 110 |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
| EUR '000 | Share capital |
Share premium |
Treasury shares |
Statutory capital reserve |
Unrea lised currency differ. |
Retained earnings (- loss) |
Total | Non contr. interests |
Total equity |
|---|---|---|---|---|---|---|---|---|---|
| Balance at 30.06.2021 | 7 737 | 14 007 | -390 | 51 | 559 | -6 723 | 15 241 | 533 | 15 774 |
| Net profit (loss) for the year |
0 | 0 | 0 | 0 | 0 | -8 143 | -8 143 | -17 | -8 160 |
| Other comprehensive income (expense) |
0 | 0 | 0 | 0 | 280 | 0 | 280 | 0 | 280 |
| Total comprehensive income (expense) for the period |
0 | 0 | 0 | 0 | 280 | -8 143 | -7 863 | -17 | -7 880 |
| Other movement | 0 | 0 | 0 | 0 | 0 | 477 | 477 | -317 | 160 |
| Balance at 30.06.2022 | 7 737 | 14 007 | -390 | 51 | 839 | -14 391 | 7 853 | 199 | 8 052 |
| Net profit (loss) for the year |
0 | 0 | 0 | 0 | 0 | 303 | 303 | 28 | 331 |
| Other comprehensive income (expense) |
0 | 0 | 0 | 0 | -230 | 0 | -230 | 0 | -230 |
| Total comprehensive income (expense) for the period |
0 | 0 | 0 | 0 | -230 | 303 | 73 | 28 | 101 |
| Other movement | 0 | 0 | 0 | 0 | 0 | 107 | 107 | 33 | 140 |
| Balance at 30.06.2023 | 7 737 | 14 007 | -390 | 51 | 609 | -13 981 | 8 033 | 260 | 8 293 |
Additional information in Note 18.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. GENERAL INFORMATION
AS PRFoods ("Parent company") and its subsidiaries (together "Group") are companies operating in farming, production and sales of fish and fish products. AS PRFoods was incorporated in the Estonian Republic on 23 December 2008. The shares and bonds of AS PRFoods are listed on NASDAQ Tallinn Stock Exchange. The largest shareholder of AS PRFoods is Amber Trust II S.C.A (see note 17). This consolidated report is signed by the management to be published on 31 October 2023. Pursuant to Commercial Code of the Republic of Estonia the annual report is to be approved by the supervisory board and the general meeting of shareholders.
NOTE 2. BASES FOR PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements of AS PRFoods for the 2022/2023 have been prepared in accordance with International Financial Reporting Standards, as adopted by the European Union (IFRS).
The consolidated financial statements have been prepared under the historical cost convention, except for biological assets which are reflected at historical cost convention as at 30.06.2023 and in fair value and historical cost convention for previous year.
The functional currency of AS PRFoods and presentation currency of the consolidated financial statements is euro (EUR). All amounts presented in the financial statements have been rounded to the nearest thousand, unless stated otherwise.
The consolidated financial statements have been prepared using the accounting policies below which have consistently been applied to all periods presented in the financial statements, unless stated otherwise.
The preparation of financial statements in compliance with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 4.
ADOPTION OF NEW OR REVISED STANDARDS AND INTERPRETATIONS
The Group applied the following amendments to standards initially on 1 July 2021.
Amendments to IFRS 16 – COVID-19 Related Rent Concessions beyond 30 June 2021
The amendments extends by one year the application period of the optional practical expedient that simplifies how a lessee accounts for rent concessions that are a direct consequence of COVID-19. The original expedient was issued in May 2020.
A lessee applies the amendments retrospectively and recognises the cumulative effect of initially applying them in the opening retained earnings of the reporting period in which they are first applied.
The Group does not expect the amendments to have a material impact on its financial statements when initially applied
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 – Interest Rate Benchmark Reform (IBOR) (Phase two)
The amendments address issues that might affect financial reporting as a result of the interest rate benchmark reform, including the effects of changes to contractual cash flows or hedging relationships arising from the replacement of an interest rate benchmark with an alternative benchmark rate. The amendments provide practical relief from certain requirements in IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 relating to:
- changes in the basis for determining the contractual cash flows of financial assets, financial liabilities and lease liabilities; and
- hedge accounting.
Change in the basis for determining cash flows:
The amendments will require the Group to account for a change in the basis for determining the contractual cash flows of a financial asset or financial liability that is required by the interest rate benchmark reform by updating the effective interest rate of the financial asset or financial liability.
Hedge accounting:
The amendments provide exceptions to the hedge accounting requirements in the following areas.
- Allow amendment of the designation of a hedging relationship to reflect changes that are required by the reform. This amendment will not result in a discontinuation of the hedge or designation of a new hedging relationship.
- When a hedged item in a cash flow hedge is amended to reflect the changes that are required by the reform, the amount accumulated in the cash flow hedge reserve will be deemed to be based on the alternative benchmark rate on which the hedged future cash flows are determined.
- When a group of items is designated as a hedged item and an item in the group is amended to reflect the changes that are required by the reform, the hedged items are allocated to sub-groups based on the benchmark rates being hedged.
- If an entity reasonably expects that an alternative benchmark rate will be separately identifiable within a period of 24 months, it can designate the rate as a non-contractually specified risk component if it is not separately identifiable at the designation date.
Disclosure
The amendments will require the Group to disclose additional information to enable users to understand the effect of the interest rate benchmark reform on the Group's financial instruments, including information about the Group's exposure to risks arising from the interest rate benchmark reform and related risk management activities.
The Group does not expect the amendments to have a material impact on its financial statements when initially applied.
Amendments to IFRS 3 Business Combinations
The amendments to IFRS 3 update a reference in IFRS 3 to the 2018 Conceptual Framework for Financial Reporting instead of the 1989 Framework. At the same time, the amendments add a new paragraph to IFRS 3 to clarify that contingent assets do not qualify for recognition at the acquisition date.
The Group does not expect the amendments to have a material impact on its financial statements when initially applied.
Amendments to IAS 16 Property, Plant and Equipment
The amendments to IAS 16 require that the proceeds from selling items produced while bringing an item of property, plant and equipment to the location and condition necessary for it to be capable of operating in the manner intended must be recognised, together with the cost of those items, in profit or loss and that the entity must measure the cost of those items applying the measurement requirements of IAS 2.
The amendments must be applied retrospectively, but only to items of property, plant and equipment that are brought to the location and condition necessary for them to be capable of operating in the manner intended on or after the beginning of the earliest period presented in the financial statements in which the entity first applies the amendments. The cumulative effect of initially applying the amendments will be recognised as an adjustment to the opening balance of retained earnings (or other component of equity, as appropriate) at the beginning of that earliest period presented (if necessary).
The Group does not expect the amendments to have a material impact on its financial statements when initially applied.
Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets
In determining the costs of fulfilling a contract, the amendments require an entity to include all costs that relate directly to a contract. The amendments clarify that the cost of fulfilling a contract comprises both:
- the incremental costs of fulfilling that contract and
- an allocation of other costs that relate directly to fulfilling contracts.
An entity must apply those amendments to contracts for which it has not yet fulfilled all its obligations at the beginning of the annual reporting period in which it first applies the amendments (the date of initial application). The entity will not restate comparative information. Instead, the entity will recognise the cumulative effect of initially applying the amendments as an adjustment to the opening balance of retained earnings or other component of equity, as appropriate, at the date of initial application.
The Group does not expect the amendments to have a material impact on its financial statements when initially applied.
STANDARDS, INTERPRETATIONS AND AMENDMENTS TO PUBLISHED STANDARDS THAT ARE NOT YET EFFECTIVE
The following new standards, interpretations and amendments are not yet effective for the reporting period ended 30 June 2023 and have not been applied in preparing these consolidated financial statements. The Group plans to adopt these pronouncements when they become effective.
Amendments to IAS 1 Presentation of Financial Statements
Effective for annual periods beginning on or after 1 January 2023, to be applied retrospectively. Early application is permitted. These amendments are not yet endorsed by the EU.
The amendments clarify that the classification of liabilities as current or non-current is based solely on the entity's right to defer settlement at the end of the reporting period. The entity's right to defer settlement for at least 12 months from the reporting date need not be unconditional but must have substance. The classification is not affected by management's intentions or expectations about whether and when the entity will exercise its right. The amendments also clarify the situations that are considered settlement of a liability.
The Group does not expect the amendments to have a material impact on its financial statements when initially applied.
Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality Judgements
Effective for annual periods beginning on or after 1 January 2023. Early application is permitted.
The amendments to IAS 1 aim to help entities provide accounting policy disclosures that are more useful by:
- Requiring companies to disclose their material accounting policies rather than their significant accounting policies;
- Clarifying that accounting policies related to immaterial transactions, other events or conditions are themselves immaterial and as such need not be disclosed; and
- Clarifying that not all accounting policies that relate to material transactions, other events or conditions are themselves material to a company's financial statements.
The Board also amended IFRS Practice Statement 2 to include guidance and two additional examples on the application of materiality to accounting policy disclosures.
The amendments are consistent with the refined definition of material:
"Accounting policy information is material if, when considered together with other information included in an entity's financial statements, it can reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements".
The Group does not expect the amendments to have an impact on its financial statements when initially applied.
Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
Effective for annual periods beginning on or after 1 January 2023; to be applied prospectively. Early application is permitted.
The amendments introduce a new definition for accounting estimates: clarifying that they are monetary amounts in the financial statements that are subject to measurement uncertainty. The amendments also clarify the relationship between accounting policies and accounting estimates by specifying that a company develops an accounting estimate to achieve the objective set out by an accounting policy.
The Group does not expect the amendments to have an impact on its financial statements when initially applied.
Amendments to IAS 12 Income Taxes
Effective for annual periods beginning on or after 1 January 2023. Early application is permitted.
The amendments clarify the accounting for deferred tax on transactions that involve recognising both an asset and a liability with a single tax treatment related to both. The amendments narrow the scope of the initial recognition exemption (IRE) so that it does not apply to transactions that give rise to equal and offsetting temporary differences. As a result, companies will need to recognise a deferred tax asset and a deferred tax liability for temporary differences arising on initial recognition of a lease and a decommissioning provision.
The Group does not expect the amendments to have a material impact on its financial statements when initially applied.
Amendments to IAS 1 " Classification of liabilities as short-term or long-term, postponement of the effective date"
Effective for annual periods beginning on or after 1 January 2023. These amendments are not yet endorsed by the EU.
Amendments to IAS 1 regarding the classification of liabilities as short-term and long-term were issued in January 2020. The initial effective date was January 1st 2022. However, in response to the COVID-19 pandemic, the effective date was pushed back by one year to give entities more time to implement the changes.
The Group does not expect the amendments to have a material impact on its financial statements when initially applied.
Other changes
Other new standards, amendments to standards and interpretations that are not yet effective are not expected to have a significant impact on the Group's financial statements.
FOREIGN CURRENCY TRANSLATION
Functional and presentation currency
The financial statements of the Group's each entity have been prepared using the currency of the primary economic environment in which the entity operates (functional currency), i.e. the local currency. The functional currency of the Parent Company and its subsidiaries registered in Estonia is euro. The consolidated financial statements have been prepared in euros.
Accounting for foreign currency transactions
All currencies other than the functional currency (the functional currency of the Parent Company as well as its Estonian and Finnish subsidiaries is the euro) are considered as foreign currencies. Foreign currency transactions are translated into the functional currency using the exchange rates of the European Central Bank or a central bank of the respective country as at the transaction dates. Monetary assets and liabilities denominated in a foreign currency (receivables and loans payable in cash) are translated into the functional currency based on the foreign currency exchange rate of the central bank as at the balance sheet date. Foreign exchange gains and losses resulting from translation are recorded in the income statement of the reporting period. Non-monetary assets and liabilities denominated in a foreign currency that are measured at fair value (at fair value are measured biological assets; short- and long-term financial investments in shares and other equity instruments whose fair value can be determined reliably) are translated into the functional currency using the official exchange rates of the central bank as at the date of determining the fair value. Non-monetary assets and liabilities denominated in a foreign currency that are not measured at fair value (e.g. prepayments, inventories accounted for using the cost method; property, plant and equipment as well as intangible assets) are not translated at the balance sheet date but continue to be reported using the official exchange rate of the central bank as at the transaction date.
Financial statements of foreign business units
The following principles apply to the translation into the presentation currency of the financial statements of foreign subsidiaries:
- The assets and liabilities of all foreign subsidiaries are translated at the exchange rate of the European Central Bank at the balance sheet date;
- Subsidiaries' income and expenses are translated at the weighted average exchange rates for the year (unless this average cannot be considered a reasonable approximation of the cumulative effects of the interest rates prevailing at the dates of the transactions, in which case they are translated at the dates of the transaction).
- Conversion differences arising on translation are included in other comprehensive income and accumulated in equity under "Unrealized exchange differences".
Goodwill and changes in fair value arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the balance sheet date.
If a foreign subsidiary is disposed of, in whole or in part, as a result of a disposal, liquidation, repayment or abandonment of its equity, unrealized exchange differences recognized in equity are recognized in the income statement.
(a) Subsidiaries
Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group and are de-consolidated from the date that control ceases. The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary comprises the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquiree on an acquisition-by acquisition basis, either at fair value or at the non-controlling interest's proportionate share of the recognised amounts of acquiree's identifiable net assets.
Acquisition-related costs are expensed as incurred.
If the business combination is achieved in stages, the acquisition date carrying value of the acquirer's previously held equity interest in the acquiree is remeasured to fair value at the acquisition date; any gains or losses arising from such remeasurement are recognised in profit or loss.
Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not remeasured, and its subsequent settlement is accounted for within equity. Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-controlling interest over the net identifiable assets acquired and liabilities assumed. If the consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognized in profit or loss.
In preparation of consolidated financial statements, the financial statements of the Parent Company and its subsidiaries are consolidated on a line-by-line basis. In preparation of consolidated financial statements, inter-company transactions, balances and unrealised gains on transactions between the Group companies are eliminated. Unrealised losses are also eliminated. When necessary, amounts reported by subsidiaries have been adjusted to conform to the Group's accounting policies.
In the Parent Company's separate financial statements the investments in subsidiaries are accounted for at cost less impairment. Cost is adjusted to reflect changes in consideration arising from contingent consideration amendments.
(b) Changes in ownership interests in subsidiaries without cease of control
Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains and losses on disposals to non-controlling interests are also recorded in equity.
(c) Disposal of subsidiaries
When the Group ceases to have control any retained interest in the entity is remeasured to its fair value at the date when the control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets and liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.
(d) Associates
Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost, and the carrying amount is increased or decreased to recognise the investor's share of the profit or loss of the investee after the date of acquisition. The Group's investment in associates includes goodwill identified on acquisition.
If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income is reclassified to profit or loss as appropriate.
The Group's share of its associates' post-acquisition profits or losses is recognised in the income statement and its share of post-acquisition movements in the associates' other comprehensive income is recognised directly in other comprehensive income with a corresponding adjustment to the carrying amount of the investment. When the Group's share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise any further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate.
The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount adjacent to "Share of other profit/loss of the associates" in the income statement.
Profits and losses resulting from upstream and downstream transactions between the Group and its associate are recognised in the Group's financial statements only to the extent of unrelated investor's interests in the associates. Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group.
INFORMATION ABOUT PARENT COMPANY'S SEPARATE PRIMARY FINANCIAL STATEMENTS
According to the Accounting Act of Estonia, the notes to the consolidated financial statements shall include disclosures on the separate primary financial statements of the consolidating entity (Parent Company). The primary financial statements of the Parent Company, which are disclosed in note 30, have been prepared using the same accounting policies and measurement bases as used in preparing the consolidated financial statements. Investments in subsidiaries and associates are carried at cost in the separate primary financial statements. Under the cost method, the investment is initially recognised at cost, i.e. at the fair value of the consideration paid at acquisition and it is subsequently adjusted to account for impairment losses.
CASH AND CASH EQUIVALENTS
For the purposes of the statement of financial position and the cash flow statement, cash and cash equivalents include cash on hand, bank account balances (other than overdraft) and term deposits with maturities of 3 months or less. Overdraft is included within short-term interest-bearing liabilities in the statement of financial position.
FINANCIAL ASSETS
Classification
The Group classifies financial assets into the following measurement categories:
- those at fair value (either through other comprehensive income or through profit or loss);
- those carried at amortised cost.
The classification depends on the Group's business model for managing its financial assets and the contractual terms of the cash flows.
Registration and derecognition
Purchases and sales of financial assets under normal market conditions are recognized on the trade date, the date on which the Group commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the asset have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership.
Measurement
Financial assets (unless they are receivables from a buyer that does not have a significant financing component and are initially measured at transaction price) are initially measured at fair value and in the case of assets do not measure at fair value through profit or loss, related acquisition costs of assets are added to the initial value.
Debt instruments
Subsequent recognition of debt instruments depends on the Group's business model for managing its financial assets and the contractual cash flows of the financial assets. Assets held for the purpose of collecting contractual cash flows that have only cash flows and interest payable are recognised at amortised cost using the effective interest rate method. Impairment losses are deducted from the adjusted acquisition cost. Interest income, foreign exchange gains and losses and impairment losses are recognised in the income statement. Gains or losses on derecognition are recognised in the income statement under "Other operating income / expense". As of 1 July 2022 and 30 June 2023 and during 2022/2023, financial assets of the Group were classified either as at amortised cost or at fair value through profit and loss.
Impairment of financial assets
The impairment loss model is applied to financial assets at amortized cost. Financial assets carried at amortized cost consist of trade receivables, cash and cash equivalents.
Expected credit losses are probability-weighted estimated credit losses. Credit loss is the difference between the contractual cash flows of the Group and the expected cash flows of the Group, discounted at the original effective interest rate.
Measurement of expected credit loss takes into account: (i) an unbiased and probabilistic amount that estimates a number of different outcomes, (ii) the time value of money and (iii) reasonable and reasonable information available at the end of the reporting period conditions and forecasts of future economic conditions.
The Group measures impairment as follows:
- trade receivables amounting to expected credit losses over their lifetime;
- cash and cash equivalents at low credit risk (senior management considers a low credit risk assessment of at least one of the major credit rating agencies) to be equivalent to expected credit losses within 12 months;
- for all other financial assets, the amount of credit losses expected to be incurred over a 12-month period, unless the credit risk (i.e. the expected life of the financial asset in default) has increased significantly after initial recognition; if the risk is significantly increased, the credit loss is measured at an amount equal to the expected credit loss over a lifetime.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are initially recognised at their fair value plus transaction costs. After initial recognition, loans and receivables are carried at amortised cost using the effective interest rate method. This method is used to calculate interest income on the receivable in subsequent periods. Financial assets are adjusted for impairment losses.
Impairment is based on expected credit loss. The principle of expected credit loss is to show the overall trend in the deterioration or improvement in the credit quality of a financial asset. Impairment losses on financial assets classified at amortised cost are recognised as a provision for impairment.
Expected credit losses are probability-weighted estimated credit losses that, at the reporting date, consider all relevant information, including information about past events, current conditions, reasonable and reasonable future events, and forecasts of economic conditions. At the end of each reporting period, the Group conducts an expert review to determine whether there has been a material increase in risk compared to the last estimate. Indicators of increased credit risk include, but are not limited to, overdue payments over 30 days, significant financial difficulties of the debtor, possible bankruptcy or restructuring of the debtor. Impairment charges are recognised in the income statement under "Other operating expenses". If receivables are uncollectible, they are written off together with a provision for impairment.
Receivables are generally recognised as current assets when they are due to be settled within 12 months after the balance sheet date. Receivables that are due later than 12 months after the balance sheet date are recognised as non-current assets. Financial assets that do not include SPPI cash flows are recognised at fair value through profit or loss.
FACTORING
Factoring is the transfer (sale) of receivables, whereby depending on the type of the factoring contract the buyer has the right to sell the transferred receivable back to the seller within a certain time period (recourse factoring) or there is no right of resale back to the seller and all the risks and benefits associated with the receivable are transferred from seller to purchaser (non-recourse factoring). Factoring with regress are recognized at amortized cost.
If the seller of the receivable retains the repurchase obligation, the transaction is recognised as a financing transaction (i.e. as a loan with the receivable as a collateral) and not as a sale. The receivable is not considered as sold as a result of factoring, but it remains in the balance sheet until the receivable is collected or the recourse right has expired. The related liability is recorded similarly to other interest-bearing liabilities.
If there is no repurchase obligation and the control over the receivable and the related risks and rewards of the ownership are transferred to the buyer, the transaction is recognised as a sale of the receivable. In the statement of financial position, these receivables are recognized at fair value through profit and loss. The related expense is recognised as a finance cost (similarly to interest expense) or as an impairment loss of receivables, depending on whether the purpose of the transaction was to manage the cash flows or to manage credit risk.
INVENTORIES
Inventories are initially recognised at their cost, which consists of the purchase costs, direct and indirect production costs, transportation and other costs incurred in bringing the inventories to their present location and condition.
Purchase costs include in addition to the purchase price also the customs duties and other non-refundable taxes and direct transportation costs related to the purchase, less discounts and subsidies. The production costs of inventories include costs directly related to the production (such as direct materials and packing material costs, unavoidable storage costs related to work in progress, direct labour), and also a systematic allocation of fixed and variable production overheads (such as depreciation and maintenance of production buildings and equipment, overhaul costs, and production units' management remunerations).
The weighted average method is used to account for the cost of inventories. Inventories are measured in the statement of financial position at the lower of acquisition/production cost or net realisable value. The net realisable value is the estimated selling price of inventories in the ordinary course of business less applicable variable selling expenses.
TANGIBLE ASSETS
Tangible assets are assets used by the Group in its economic activities with a useful life of over one year. An item of property, plant and equipment is initially recognized at its acquisition cost, consisting of the purchase price (including duties and other non-refundable taxes) and directly attributable acquisition costs necessary to bring the asset to its operating condition and location.
Tangible assets are carried in the statement of financial position at its cost less any accumulated depreciation and any accumulated impairment losses. Tangible assets acquired under lease are accounted for in the same way as purchased tangible assets. Subsequent expenditures on an item of tangible assets are recognized as non-current assets when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. Other maintenance and repair costs are expensed as incurred.
Amortization is calculated using the straight-line method. The depreciation rate is determined for each item of tangible assets depending on its useful life. For assets with a significant residual value, only the depreciable amount between the cost and the residual value is depreciated over the useful life.
If an item of tangible assets consists of identifiable components with different useful lives, these components are accounted for as separate assets and are subject to separate depreciation rates based on their useful lives.
The following useful lives are assigned to items of tangible assets:
| ● | Buildings | 5-50 years |
|---|---|---|
| ● | Machinery and equipment | 2-20 years |
| ● | Motor vehicles | 4-13 years |
| ● | Fixtures, fittings and tools | |
| - Fittings and tools |
2-12 years | |
| - IT equipment and software |
3-5 years | |
| - Other fixtures |
5 years |
● Items with unlimited useful lives (land) are not depreciated.
Depreciation of an asset begins when the asset is available for use for the purpose intended by management and is ceased when the residual value exceeds the carrying amount, when the asset is permanently withdrawn from use or is reclassified as held for sale. At each balance sheet date, the validity of applied depreciation rates, the depreciation method and the residual values applicable to assets are assessed.
Where an asset's recoverable amount (higher of an asset's fair value less costs to sell and value in use) is less than its carrying amount, it is written down immediately to its recoverable amount. The impairment loss is recognized in the income statement under "Other operating expenses". Impairment losses recognized in prior periods are reversed if there has been a change in the estimates used to determine recoverable amount.
Borrowing costs (interest) attributable to the construction of property, plant and equipment are added to the cost of the assets during the period that is required to complete and prepare the asset for its intended use.
Items of property, plant and equipment that are expected to be sold within the next 12 months are reclassified as noncurrent assets held for sale. Gains and losses on the disposal of non-current assets that are measured as the difference between the proceeds from the sale and the carrying amount of the asset are recognized in the income statement within "Other operating income and expenses".
INTANGIBLE ASSETS
Intangible assets (trademarks, connection fees, licences, software) are recognised in the statement of financial accounting when the asset is controlled by the Group, future economic benefits attributable to the asset will be collected by the Group and the cost of the asset can be measured reliably. An acquired intangible asset is initially recognised at cost, comprising its purchase price and any expenditure directly attributable to the acquisition. Intangible assets are subsequently measured at cost less any accumulated amortisation and any accumulated impairment losses. Goodwill is carried at its acquisition cost less any impairment losses.
Intangible assets are divided into assets with finite useful lives and assets with indefinite useful lives
Intangible assets with finite useful lives are amortised using the straight-line method, over the asset's estimated useful life. The appropriateness of the amortisation periods and method is assessed at each balance sheet date.
The following useful lives have been assigned for intangible assets:
| ● | Trademarks | 20 - 50 years |
|---|---|---|
| ● | Licenses and connection fees | 3 - 50 years |
| ● | Software licenses | 5 years |
The useful lives of brands are determined based on management's estimate of the expected length of the cash-generating period of these assets. Licenses (fish farming and killing permits) and connection fees and the useful lives of software licenses are based on the duration of the right to use the assets.
For assets with a finite useful life, an asset is assessed for impairment whenever there is an indication that the asset may be impaired.
Intangible assets with indefinite useful lives (goodwill) are not amortized, but are tested for impairment annually (or more frequently if any event or change in circumstances indicates that the goodwill may be impaired) and tested for impairment and their carrying amount is less than their carrying amount. , the asset is written down to its recoverable amount. For the purpose of calculating recoverable amount, goodwill is allocated to the cash-generating units.
IMPAIRMENT OF FIXED ASSETS
Intangible assets with indefinite useful lives (goodwill) are tested for impairment annually by comparing the carrying amount of the asset with its recoverable amount.
In the case of property, plant and equipment with indefinite useful lives (land) and depreciable assets, there is an indication that the asset may be impaired. In such circumstances, the recoverable amount of the asset is estimated and compared with its carrying amount.
For the purposes of assessing impairment, the recoverable amount is estimated for each individual asset or smallest group of assets for which a cash-generating unit is available. The goodwill test is always performed with the cash-generating unit to which the goodwill belongs. The recoverable amount of an asset is the higher of its fair value less costs to sell and its value in use. An impairment loss is recognized for the amount by which the asset's carrying amount exceeds its recoverable amount. Impairment losses on assets are recognized as an expense in the period.
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For assets that are written down at each subsequent balance sheet date, it is assessed whether it is probable that the recoverable amount of the asset may have increased in the interim. If, as a result of a value test, it is found that the recoverable amount of an asset or group of assets (cash-generating unit) has increased above its carrying amount, the earlier write-down is reversed and the carrying amount of the asset is increased to the amount that would have occurred. A reversal of a write-down is recognized in the income statement for the financial year as a reduction of the write-down of a fixed asset. Goodwill impairment is not reversed.
BIOLOGICAL ASSETS
Biological assets are recognised in the statement of financial position when the asset is controlled by the Group, it is expected that future economic benefits associated with the asset will be collected by the Group and the fair value of the asset or its cost can be determined reliably.
Biological assets i.e. fish stock of rainbow trout (Oncorhynchus mykiss) is on the separate line "Biological assets" in the statement of financial position.
Biological assets are classified based on their stage of completion, which are relevant for formation of market prices. Accounting policies for each class of biological assets have been determined as follows:
● Fries (fertilised roe and fries up to 250 g)
Fries are carried at fair value. Fair value is determined on the basis of the biomass volume of fry and its weighted average market price at the balance sheet date.
● Juveniles (250 g fries up to fish suitable for harvesting)
The fair value of juveniles cannot be determined reliably due to the absence of an active market, and they are carried in the statement of financial position at cost. The direct expenditures incurred in breeding the juveniles to fish suitable for harvesting is capitalised as part of the cost.
At each balance sheet date, the cost is compared with the net realisable value of the juveniles. The net realisable value is the estimated fair value of fish suitable for harvesting at the time the juveniles are expected to become suitable for harvesting, less estimated costs on breeding the juveniles to make them suitable for harvesting, and on subsequent sale. When it is probable that the cash flows from future sales cover both the cost as well as the additional expenditure related to breeding and sale, juveniles are recognised at cost. Otherwise, juveniles are written down to their net realisable value. Impairment losses are recognised in profit or loss.
● Fish suitable for harvesting (reclassification from juveniles to fish suitable for harvesting based on the weight)
On initial recognition (at acquisition or reclassification from juveniles) and at each balance sheet date, the fish suitable for harvesting are measured at their fair value less estimated costs to sell. The basis for determination of fair value is the estimated biomass of fish suitable for harvesting, less the weight loss occurring at disposal, and the weighted average market price at the balance sheet date, i.e. the latest market price for similar assets sold by independent parties, adjusted for the effect of existing differences, assuming no major changes have occurred in the economic environment between the transaction date and the balance sheet date. In the areas where external market prices are unavailable, the estimate is based on internal market prices. The quality class (higher or regular) is also taken into account in the determination of prices.
Costs to sell include fees to intermediaries, levies and non-refundable taxes. Costs to sell do not include transportation and other costs necessary to get an asset to a market, however, such expenditures are taken into account when determining fair value.
Expenditures directly related to bringing the immature biological assets up to the point they are suitable for harvesting are capitalised as part of the cost of biological assets. The cost is adjusted periodically by the re-measurement of the biological assets at fair value.
Gains and losses arising from fair value adjustments of biological assets are recognised in the separate line "Fair value adjustment on biological assets" in the statement of comprehensive income. Agricultural produce is recognised at fair value less estimated costs to sell.
As at 30.06.2023 there were only Juveniles, which were carried in the statement of financial position at cost.
LEASES
In accordance with IFRS 16, the Group recognizes most of the leases as an asset and lease liability, ie these leases are reconginzed in the Group's balance sheet.
As a lessee, the Group leases a number of assets, including machinery and equipment, land and water, as well as buildings.
Upon concluding the agreement, the Group assesses whether the agreement is a lease agreement or whether the agreement includes a lease. A contract is a lease (or includes a lease) if it gives the right to inspect and use the specified property for a specified period of time for a consideration. The Group uses the definition of a lease in IFRS 16 to assess whether an arrangement gives it the right to control and use an asset.
When measuring the lease obligations of leases classified as operating leases, the Group discounted the lease payments using an alternative borrowing rate. The lessee's alternative weighted average interest rate is 2%.
The group as a tenant
The Group recognizes the right to use the asset and the lease obligation at the inception of the lease. The right-of-use asset is initially measured at cost, which comprises the original amount of the lease obligation. The initial amount of the lease liability is adjusted by the prepayments made, the direct costs incurred and the restoration costs (arising from the dismantling and restoration of the asset). The rental benefits received have been deducted from the amount received.
The right-of-use assets are depreciated on a straight-line basis from the inception of the lease until the end of the lease term, unless the lease transfers ownership of the underlying asset to the Group at the end of the lease term or the residual value of the right indicates that the Group intends to exercise the option. In this case, the right to use the asset is depreciated over the useful life of the underlying asset, which is determined on the same basis as for the respective property, plant and equipment held by the Group. In addition, the right of use is reduced in the event of impairment losses. The right of use and the lease obligation are also adjusted for certain revaluations.
The lease liability is initially measured at the present value of the lease payments outstanding at the inception of the lease, using the effective interest rate method of the lease or, if that rate cannot be determined, the alternative borrowing rate. The Group generally uses an alternative borrowing rate as the discount rate.
The Group finds an alternative loan interest rate using various sources of financing. The inputs received are adjusted to take account of the terms of the lease and the type of leased asset in order to arrive at an alternative borrowing rate appropriate for the leased asset.
The lease payments included in the lease obligation include the following components:
- fixed lease payments;
- variable lease payments, if they change according to some basic index (for example, inflation, EURIBOR);
- payments associated with the exercise of options to repurchase, extend or terminate the lease (if management has assessed the exercise of the option sufficiently and the exercise of these options has been taken into account in calculating the lease term);
- guaranteed residual value (expected value of the amount to be paid).
The lease liability is measured at amortized cost. The lease liability is recalculated when there is a change in future lease payments due to an index or rate, a change in the estimate of the guaranteed residual value or a change in the Group's assessment of whether to repurchase, extend or terminate the lease. The lease liability is also remeasured when the fixed payments change.
If the lease liability is revalued for the reasons listed above, an adjustment is made to the carrying amount of the right-ofuse asset. The effect of the change in the lease liability is recognized in the income statement when the carrying amount of the right to use the asset is reduced to zero.
The Group has decided not to recognize usufruct assets and lease obligations for low value leases and short-term leases. The Group recognizes lease payments related to these leases as an expense on a straight-line basis over the lease term.
FINANCIAL LIABILITIES
All financial liabilities (trade payables, other short and long-term liabilities, borrowings, listed bonds, forward, put and call options) are initially recognised at their fair value, less any transaction costs. They are subsequently recognised at amortised cost, using the effective interest rate method.
The amortised cost of the current financial liabilities generally equals their nominal value; therefore current financial liabilities are stated in the statement of financial position at redemption value. To calculate the amortised cost of noncurrent financial liabilities, they are initially recognised at fair value of the proceeds received (net of transaction costs incurred) and an interest expense is calculated on the liability in subsequent periods using the effective interest rate method.
A financial liability is classified as current when it is due to be settled within 12 months after the balance sheet date or the Group does not have an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date. Interest-bearing liabilities that are due within 12 months after the balance sheet date, but which are refinanced after the balance sheet date as long-term, are recognised as short-term interest-bearing liabilities. Also, borrowings are classified as short-term if the lender had at the balance sheet date the contractual right to demand immediate payment of the borrowing due to the breach of conditions set forth in the agreement.
Borrowing costs (interest) to finance the construction of assets are capitalised during the period that is required to complete and prepare the asset for its intended use. Other borrowing costs are expensed at the time they are incurred.
PROVISIONS AND CONTINGENT LIABILITIES
Provisions are recognized in the statement of financial position when the Group has a present obligation (legal or contractual) arising from an event that occurred before the balance sheet date; it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; but the exact amount of the liability or the due date is not known.
Provisions are recognized in the statement of financial position based on management's estimate of the amount that is expected to be required to settle the provision and the time at which the provision is realized. A provision is recognized in the statement of financial position at the amount the management estimates it will have at the balance sheet date to settle the obligation or transfer it to a third party. Provisions are recognized at the discounted value (amount of the present value of the payments related to the provision) unless the effect of discounting is immaterial. The cost of the provision is recognized in the statement of comprehensive income for the period. Future operating losses are not recognized as a provision.
Other liabilities, the realization of which is unlikely or the amount of which cannot be estimated with sufficient reliability, but which in certain circumstances may become liabilities in the future, are disclosed as contingent liabilities in the notes to the financial statements (note 29).
INCOME TAX AND DEFERRED INCOME TAX
Deferred income tax
Deferred income tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.
According to the laws of the Republic of Estonia, the company's profit for the financial year is not taxed in Estonia. The corporate income tax liability arises on the distribution of profit and is recognized as an expense (profit or loss for the period) when dividends are declared. Due to the nature of the taxation system, a company registered in Estonia does not incur deferred income tax assets or liabilities, except for a possible deferred income tax liability from the company's investments in subsidiaries, associates and joint ventures and branches.
The Group's deferred income tax liability arises for companies located in countries where the profit for the financial year is taxed.
The Group's deferred income tax liability also arises from investments in Estonian subsidiaries, associates and joint ventures and branches, unless the Group can control the timing of the reversal of taxable temporary differences and their reversal is unlikely in the foreseeable future. Examples of reversals of taxable temporary differences are the payment of dividends, the sale or liquidation of an investment and other transactions.
By controlling the subsidiary's dividend policy, i.e the Group can block profit distribution decisions, the Group controls the timing of the reversal of temporary differences associated with that investment. If the parent has decided not to distribute the profit of the subsidiary in the foreseeable future, it does not recognize a deferred income tax liability. If the parent estimates that the dividend will be paid in the foreseeable future, the deferred income tax liability is measured to the extent of the planned dividend payment, provided that there are sufficient funds and equity to pay the dividend at the reporting date.
As the Group does not control the associate's dividend policy, it does not control the timing of the reversal of taxable temporary differences.
Estonian entities of the Group
According to the applicable laws of the Republic of Estonia, the Estonian entities do not pay income tax on their profits. Corporate income tax is paid on dividends, fringe benefits, gifts, donations, costs of entertaining guests, non-business related disbursements and on adjustments of the transfer price. The effective tax rate is 20/80 (2022: 20/80) of the amount paid out as net dividends. From 2019, tax rate of 14/86 can be applied to dividend payments. The more beneficial tax rate can be used for dividend payments in the amount of up to the average dividend payment during the three preceding years that were taxed with the tax rate of 20/80. When calculating the average dividend payment of three preceding years, 2019 will be the first year to be taken into account. As it is the dividends and not the profit that is subject to income tax, no temporary differences between the taxable values and the carrying amounts of assets and liabilities arise, which could give rise to deferred income tax assets and liabilities.
Income tax payable on dividends is recognised as an income tax expense in the statement of comprehensive income and as a liability in the statement of financial position at the time dividends are declared, regardless of the actual payment date or the period for which dividends are paid.
Foreign entities of the Group
In Sweden and Great Britain corporate profits are taxable with income tax. For identification of the taxable income, the pretax profit is adjusted for temporary or permanent income and expense additions as required by local income tax laws.
For foreign subsidiaries, deferred income tax assets or liabilities are determined for all temporary differences between the tax bases of assets and liabilities and their carrying amounts at the balance sheet date. Deferred income tax is determined using tax rates (and laws) that have been enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled. Deferred tax assets are recognised in the statement of financial position only when it is probable that future taxable profit will be available against which the deductions can be made.
Income tax rate in the Great Britain 25% (2022: 19%).
REVENUE RECOGNITION
Revenue is the income generated by the ordinary activities of the Group. Revenue is recognized at the transaction price. The transaction price is the total consideration the Company is entitled to receive for the delivery of the promised goods or services to the customer, less any amounts collected on behalf of third parties. The Group recognizes revenue when control of a good or service is transferred to a customer.
Wholesale
Sales are recognized when control over the products has been transferred, meaning that the products have been delivered to a reseller, the reseller can decide on the marketing and pricing of the products, and there are no outstanding obligations that could affect the reseller's acceptance of the products. Products are delivered to an agreed location, risks of product damage and loss have passed to the reseller, and the reseller has accepted the products in accordance with the sales agreement, the acceptance requirement has expired, or the Group has objective evidence that all acceptance requirements are met. The Group's wholesale business includes the sale of fish and fishery products. As with food, the shelf life is short and there is no obligation to repurchase the goods, nor is the product long-term guaranteed. This is largely a flat fee sale. In the case of a variable component, such as a volume-related bonus, the sales price adjustment is recognized in the same period as the sales revenue.
The Group recognizes a receivable when the goods are delivered, because at that point in time an unconditional right to payment arises, the payment of which is dependent only on the passage of time.
Financing component
The Group has no agreements where the period between delivery of the promised goods or services to the customer and receipt of payment from the customer is longer than one year. Consequently, the Group does not adjust the transaction price for the time value of money.
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Interest income and dividend income
Interest income is recognized when it is probable that the economic benefits associated with the transaction will flow to the enterprise and the amount of the revenue can be measured reliably. Interest income is recognized using the effective interest rate of the asset. Dividend income is recognized when the right to receive payment is established.
SEGMENT REPORTING
Reportable business segments are identified based on regular reporting to internal senior decision-makers. The chief operating decision maker in the Group, who is responsible for allocating resources and evaluating the performance of the business segments, is the Board of the parent company, which makes strategic decisions.
Segment result includes revenue and expenses that are directly attributable to the segment and a significant portion of the revenue / expense that can be attributed to a particular segment, either externally or internally. Segment assets and liabilities include operating assets and liabilities that are directly attributable to a segment or that can be allocated to a particular segment. See also note 19.
SHARE CAPITAL
Ordinary shares are included within equity. The expenditures related to the issue of ordinary shares are recognised as a reduction of equity. Treasury shares repurchased by the parent company are recognised as a reduction of equity (in the line item "Treasury shares"). Disbursements and contributions related to treasury shares are recognised in equity.
STATUTORY RESERVE CAPITAL
Reserve capital is formed to comply with the requirements of the Commercial Code of the Republic of Estonia. During each financial year, at least 5% of the net profit shall be transferred to reserve capital until reserve capital reaches one-tenth of share capital. Reserve capital may be used to cover a loss or to increase share capital. Payments shall not be made to shareholders from reserve capital.
EARNINGS PER SHARE
Basic earnings per share are determined by dividing the net profit for the financial year by the period's weighted average number of shares issued. Treasury shares are not included in the weighted average number of shares. Diluted earnings per share are calculated by adjusting the net profit and the weighted average number of shares outstanding for the effects of dilutive potential ordinary shares.
PAYABLES TO EMPLOYEES
Payables to employees include the performance pay payable to employees on the basis of employment contracts which are calculated by reference to the Group's financial results and fulfilment of the employees' individual performance objectives. Performance pay is recognised as an expense and a payable to employees if the disbursement takes place during the next reporting period. In addition to performance pay, this accrual also includes expenses on social security tax and unemployment insurance tax calculated on the performance pay. Payables to employees include the accrued vacation pay calculated according to employment contracts and employment laws effective in Estonia.
The Group makes contributions to several mandatory funded pension funds, which are recognised as expenses in the statement of comprehensive income (this expense is included within the social security tax for the parent company and the subsidiaries located in Estonia). The Group has neither a legal nor a factual obligation to make other pension or similar payments in addition to those mentioned above.
GOVERNMENT GRANTS
Government grants are recognised at their fair value when there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions. Government grants are recognised as income over the periods necessary to match them with the related costs which they are intended to compensate. Government grants for non-current assets are included within non-current liabilities and are credited to income in the income statement over the useful life of the acquired asset.
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NOTE 3. FINANCIAL RISKS
The Group's risk management policy is based on the requirements established by regulatory bodies, generally accepted practices and the Group's internal rules. The Group is guided by the principle to manage risks in a manner that ensures an optimal risk to reward ratio. As part of the Group's risk management, all potential risks, their measurement and control are defined, and an action plan is prepared to reduce risks while ensuring the attainment of the company's financial and other strategic objectives.
The management board of the Parent Company has the main role in managing risks. The supervisory board of the Parent Company exercises supervision over the measures taken by the management board in managing risks. The Group assesses and limits risks through systematic risk management. For managing financial risks, the Group has involved its financial unit that finances the Parent Company as well as its subsidiaries and, directly as a result of that, also manages liquidity risk and interest rate risk.
Financial instruments by category
FINANCIAL ASSETS AT 30.06.2023
| EUR '000 | Note | At adjusted acquisition cost |
Fair value through profit or loss |
Total | ||
|---|---|---|---|---|---|---|
| Cash and bank | 5 | 394 | 0 | 394 | ||
| Trade receivables | 6 | 1 392 | 0 | 1 392 | ||
| Other receivables | 6 | 726 | 0 | 726 | ||
| Total | 2 512 | 0 | 2 512 |
FINANCIAL LIABILITIES AT 30.06.2023
| EUR '000 | Note | At adjusted acquisition cost |
At fair value through profit or loss |
Total |
|---|---|---|---|---|
| Interest-bearing liabilities | 15 | 12 839 | 0 | 12 839 |
| Lease liabilities | 14 | 359 | 0 | 359 |
| Trade payables | 16 | 1 282 | 0 | 1 282 |
| Liabilities to related parties | 27 | 4 044 | 0 | 4 044 |
| Other liabilities | 16 | 1 646 | 0 | 1 646 |
| Total | 20 170 | 0 | 20 170 |
FINANCIAL ASSETS AT 30.06.2022
| EUR '000 | Note | At adjusted acquisition cost |
Fair value through profit or loss |
Total |
|---|---|---|---|---|
| Cash and bank | 5 | 110 | 0 | 110 |
| Trade receivables | 6 | 2 115 | 0 | 2 115 |
| Other receivables | 6 | 38 | 0 | 38 |
| Total | 2 263 | 0 | 2 263 |
FINANCIAL LIABILITIES AT 30.06.2022
| EUR '000 | Note | At adjusted acquisition cost |
At fair value through profit or loss |
Total |
|---|---|---|---|---|
| Interest-bearing liabilities | 15 | 18 904 | 0 | 18 904 |
| Lease liabilities | 14 | 1 483 | 0 | 1 483 |
| Trade payables | 16 | 2 082 | 0 | 2 082 |
| Liabilities to related parties | 27 | 4 433 | 0 | 4 433 |
| Other liabilities | 16 | 1 271 | 0 | 1 271 |
| Total | 28 173 | 0 | 28 173 |
Financial risk management is an important and integral part of the management of the Group's business processes. Management's ability to identify, measure and control various risks has a significant impact on the Group's profitability. Risk is defined by the Group's management as a possible negative deviation from expected financial performance.
The Group's activities involve a number of financial risks, the most important of which are the credit risk, liquidity risk and market risk, incl. exchange rate risk, interest rate risk, fair value risk and fair value interest rate risk.
CREDIT RISK
Credit risk expresses the potential loss that customers incur if their contractual obligations are not met. Customers' payment discipline is constantly monitored to reduce credit risk.
In order to minimize credit risk, the solvency of a potential future contract partner is assessed based on information available from the Krediidiinfo, Commercial Register, the Tax Board or other public sources. Purchase and sales contracts are made with all contractual partners and payment terms are only granted to trusted partners.
In determining whether the credit risk of a financial asset has increased significantly from the date of initial recognition till measuring its credit losses, the Group considers reasonable and supportive information that is relevant and available without excessive expense or effort. It includes both quantitative and qualitative information and analysis based on the Group's historical experience and credit assessment information, and includes forward-looking information (including growth forecast, market interest rate forecast). The Group views the credit risk of financial assets increasing notably if more than 90 days have passed the due date and there is no activity confirming the receipt by the customer.
The Group accepts banks and financial institutions with a credit rating of at least "A" as long-term partners in the Baltic States, United Kingdom and Scandinavia.
As at 30.06.2023, free funds were held in the following credit institutions: AS SEB Bank (SEB), Bank of Scotland Plc, Danske Bank A/S (Swedish branch) and Swedbank AB group banks (Swedbank). According to Moody's Investor Service, these credit institutions or their parent companies were rated at least "A" at the time of writing.
LIQUIDITY RISK
Liquidity risk is the risk that the Group is unable to fulfil its financial obligations due to insufficient cash funds or inflows. This risk realizes when the Group does not have enough funds to serve its loans, to fulfil its working capital needs, to invest and/or to make declared dividend payments.
The objective of the Group is to keep the Group's financing needs and financing opportunities in balance. Cash flow planning is used as a liquidity risk management tool. To manage the Group's cash flows as efficiently as possible, the parent company and the Estonian subsidiaries' bank accounts form a single group account, which enables group account members to use the Group's cash within the limits set by the parent company.
To manage the liquidity risk, the Group uses various sources of financing, such as bank loans, overdrafts, issuing bonds, customer debts factoring and continuous monitoring of trade receivables and delivery contracts.
An overdraft is used to finance working capital. Long-term bank loans or lease agreements are used to invest in fixed assets. Management considers it important to monitor the liquidity risk, if needed the additional capital requirement can be arranged by overdraft or refinancing the loan portfolio. At the balance sheet date, overdraft in use was in amount of 0 thousand euros (30.06.2022: 4 544 thousand euros) (note 15).
Analysis of non-discounted financial liabilities by maturity
FINANCIAL LIABILITIES AT 30.06.2023
| EUR '000 | less than 3 months |
3 to 12 months |
1 to 5 years | Over 5 years | Total |
|---|---|---|---|---|---|
| Interest-bearing liabilities | 1 193 | 818 | 14 765 | 0 | 16 776 |
| Lease liabilities | 25 | 75 | 259 | 0 | 359 |
| Trade and other payables | 3 035 | 0 | 0 | 0 | 3 035 |
| Total liabilities | 4 253 | 893 | 15 024 | 0 | 20 170 |
FINANCIAL LIABILITIES AT 30.06.2022
| EUR '000 | less than 3 months |
3 to 12 months |
1 to 5 years | Over 5 years | Total |
|---|---|---|---|---|---|
| Interest-bearing liabilities | 4 544 | 2 128 | 16 664 | 0 | 23 336 |
| Lease liabilities | 105 | 316 | 1 061 | 0 | 1 483 |
| Trade and other payables | 3 980 | 0 | 2 067 | 0 | 6 047 |
| Total liabilities | 8 629 | 2 444 | 19 792 | 0 | 30 865 |
The calculation of interest cash flows is based on the interest rates prevailing at the balance sheet date.
CURRENCY RISK
Foreign exchange risk arises when business transactions and assets and liabilities are denominated in a currency that is not the entity's functional currency. The Group operates in Estonia (currency EUR) and until 28.02.2022 in Finland (EUR), United Kingdom (GBP) and until 20.09.2022 Sweden (SEK). All significant foreign contracts of the Group are denominated in euros to hedge currency risks. The Group does not have any significant foreign currency denominated long-term receivables and payables. All existing long-term leases are denominated in euro and are therefore treated as foreign currency risk-free liabilities.
Breakdown of financial instruments as at 30.06.2023 by underlying currency
| EUR '000 | Note | EUR | GBP | Total |
|---|---|---|---|---|
| Cash and bank | 5 | 141 | 253 | 394 |
| Trade receivables | 6 | 276 | 1 116 | 1392 |
| Other receivables | 6 | 488 | 236 | 724 |
| Total financial assets | 905 | 1605 | 2 510 | |
| Interest-bearing liabilities | 15 | -14 905 | -1 871 | -16776 |
| Lease liabilities | 14 | -351 | -8 | -359 |
| Trade payables | 16 | -663 | -726 | -1389 |
| Other liabilities | 16 | -977 | -669 | -1646 |
| Total financial liabilities | -16 896 | -3 274 | -20 170 | |
| Net currency position | -15 991 | -1 669 | -17 660 |
Breakdown of financial instruments as at 30.06.2022 by underlying currency
| EUR '000 | Note | EUR | SEK | GBP | Total |
|---|---|---|---|---|---|
| Cash and bank | 5 | 17 | 87 | 6 | 110 |
| Trade receivables | 6 | 855 | 0 | 1 260 | 2 115 |
| Other receivables | 6 | 341 | 6 | 191 | 538 |
| Total financial assets | 1 213 | 93 | 1 457 | 2 763 | |
| Interest-bearing liabilities | 15 | -19 434 | 0 | -2 558 | -21 992 |
| Lease liabilities | 14 | -1 311 | -126 | -46 | -1 483 |
| Trade payables | 16 | -684 | -255 | -1 143 | -2 082 |
| Other liabilities | 16 | -1 178 | -1 345 | -93 | -2 616 |
| Total financial liabilities | -22 607 | -1 726 | -3 840 | -28 173 | |
| Net currency position | -21 394 | -1 633 | -2 383 | -25 410 |
The Group monitors the amount of net currency positions on an ongoing basis to assess the extent of changes in foreign exchange rates. Considering the relative stability of the Group 's main currency – the euro – and other currencies, the share of non-euro currencies as well as the Group' s net operations in Sweden and the United Kingdom, the corresponding net currency positions are insignificant.
The possible developments in Great Britain are due to the Brexit unknown and the Group is open to risk. The Group uses financial instruments to mitigate the exchange rate risk arising from the pound, where appropriate. For other currencies, the management is of the opinion that the Group is not exposed to a significant amount of Swedish krona foreign exchange risks and has therefore not used financial instruments to hedge its currency risks arising from future transactions and assets.
Foreign exchange gains and losses are disclosed in notes 24 and 25.
INTEREST RISK
The Group uses interest rates based on the EURIBOR base rate for long- and short-term loans. In managing interest rate risks, potential losses from changes in interest rates are regularly compared to the cost of hedging them.
If on 30.06.2023 the interest rate of the interest-bearing liabilities with floating interest rate would be 0,1 percentage points lower or higher, the interest expense would be 6 thousand euros (30.06.2022: 6 thousand euros) lower or higher. Floating rate loans are, depending on the instrument, linked to 6- to 12-month EURIBOR or the UK central bank base rate.
Below is a summary of the Group's exposure to interest rate risk as at 30.06.2023 and 30.06.2022
AS AT 30.06.2023
| EUR '000 | Note | less than 1 year | from 1 to 5 years | Over 5 years | Total |
|---|---|---|---|---|---|
| Fixed interest rate | |||||
| Interest bearing liabilities | 2 012 | 14 765 | 0 | 16 777 | |
| Floating interest rate | 0 | ||||
| Interest bearing liabilities | 100 | 259 | 0 | 359 | |
| Total position | 15 | 2 112 | 15 024 | 0 | 17 136 |
AS AT 30.06.2022
| EUR '000 | Note | less than 1 year | from 1 to 5 years | Over 5 years | Total |
|---|---|---|---|---|---|
| Fixed interest rate | |||||
| Interest bearing liabilities | 2 129 | 16 664 | 0 | 18 793 | |
| Floating interest rate | |||||
| Interest bearing liabilities | 4 965 | 1 061 | 0 | 6 026 | |
| Total position | 15 | 7 094 | 17 725 | 0 | 24 819 |
CAPITAL MANAGEMENT
The Group counts loan capital and total equity as capital. As at 30.06.2023, the shareholders' equity totalled 8 440 thousand euros (30.06.2022: 8 052 thousand euros). The Group's policy is to maintain a strong equity base with the aim of maintaining credibility in the eyes of shareholders, creditors and the market and ensuring the Group's sustainable development. In the long term, the Group aims to increase shareholder income and ensure its ability to pay dividends.
To maintain or improve its capital structure, the Group may regulate the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
The Group considers it important to ensure an optimal equity structure. Therefore, it is monitored that the Group's equity to assets ratio is at least 35% (30.06.2023: 27,5%, 30.06.2022: 20,7%) and the ratio of interest-bearing liabilities to assets does not exceed 25% (30.06.2023: 56,2%, 30.06.2022: 63,8%). The ratio of interest-bearing liabilities to assets has been temporarily exceeded due to loans for the acquisition of subsidiaries and bond issues. The bond issues have significantly improved the capital structure, but due to the effects of COVID-19 on the economic environment and including the Group's business operations, the Group ended the last financial year with a loss.
The overdraft and investment loan agreement with AS SEB Pank sets out the conditions that the financial results of the Group must meet. During the reporting period, the terms of the overdraft limit in use, minimum EBITDA and debt coverage ratio (DSCR) were in breach of the agreement. The overdraft liability in the amount of 4 544 thousand euros has been recorded as short-term as of 30.06.2022 (Note 15), and the entire amount of the overdraft was paid in October 2022 after the sale of the subsidiary Överumans Fisk AB.
The terms and conditions of the listing of the covered bonds stipulate the conditions (net debt to EBITDA ratio and debt solvency ratio (DSCR)) that the Group's financial results must meet until the bonds are redeemed.
The slower-than-expected decline in the COVID-19 pandemic and the continuing effects of the pandemic have had a negative impact on PRFoods financial years 2021/2022 in addition to PRFoods financial year 2020/2021, which in turn affects PRFoods ability to meet the financial results set out in the terms in the current 2022/2023 financial year. PRFoods confirms that the above temporary adverse effects will not affect PRFoods ability to meet its financial obligations under the Terms, including the ability to make future payments on the Notes.
The bondholders confirmed at the bondholders meeting held on 20.09.2022 that they agreed to waive the requirement to comply with the terms and conditions of the bond issue on 14.01.2020 (changed on 25 February 2020 and 25 February 2022) and agreed that non-compliance with the terms and conditions in the financial year 2021/2022 would not be considered a breach.
In line with industry practice, the Group uses a debt-to-equity ratio to monitor its capital. This ratio is calculated by dividing the net debt by total capital. Net debt is calculated by deducting cash and cash equivalents from gross debt (the sum of current and non-current loans recognized in the consolidated statement of financial position).
| Note | 30.06.2023 | 30.06.2022 |
|---|---|---|
| 15 | 17 136 | 24 819 |
| 5 | 394 | 110 |
| 16 742 | 24 709 | |
| 8 293 | 8 052 | |
| 25 442 | 32 761 | |
| 66% | 75% | |
FAIR VALUE OF FINANCIAL INSTRUMENTS (NOTES 5,6,10,14,15,16)
The Group's management estimates that the carrying amounts of financial assets and liabilities carried at amortised cost are not significantly different from their fair values at 30.06.2023 and 30.06.2022. Cash and bank balances, trade receivables, other receivables, trade payables and other payables are expected to be settled within 12 months or are recognised immediately before the balance sheet date and therefore their fair value is not significantly different from their carrying amount. The Group's long-term interest-bearing liabilities (mainly listed bonds) bear a fixed interest rate, so the fair value of long-term financial liabilities is equal to their book value.
NOTE 4. MANAGEMENT JUDGEMENTS AND ESTIMATES
The preparation of financial statements in compliance with IFRSs requires the use of accounting estimates. It also requires management to make judgements in the process of application of the accounting policies. Estimates and judgments are reviewed on an ongoing basis, and they are based on historical experience and other factors, including projections of future events which are believed to be reasonable under the circumstances. The management makes certain judgements (in addition to judgments related to estimates) in the process of application of the accounting policies. The estimates that have a significant impact on the information presented in these financial statements and assumptions which may cause material adjustments to the carrying amounts of assets and liabilities within the next reporting period include: assessment of quantities and fair value of biological assets (note 9), assessment of net realisable value of assets (note 8), assessment of impairment of goodwill and useful lives of intangible assets (note 13) and useful life of tangible assets (note 12).
ASSESSMENT OF QUANTITIES AND FAIR VALUE OF BIOLOGICAL ASSETS (NOTE 9)
Assessment of the fair value of biological assets always involves consideration of certain estimates, although the Group has internal experts to assess these factors. The quantity of the biomass is an estimated figure that is based on juvenile fish let to a lake or sea, their expected growth and death rates, based on the death rate coefficient identified during the period. The quantity is adjusted by descaling losses. The Group tests the biomass by conducting the actual test weighing of fish inventories at least once a year. The group performed the weighing of fish inventory during May in Estonia and during May and June in Sweden. As before, it is not possible to weigh biomass as at balance sheet date due to too high water temperatures in the end of June and as weighing would result increase in death rate. In order to estimate the biomass, calculative method was used. The results of the usage of model have not materially differed from real weighing during previous periods. Due to the weather conditions and the amount of time required for the process, physical inventory cannot be taken at the balance sheet date.
The following model is used to determine the biomass of fish:
final biomass = initial biomass + feed given to fish / feed coefficient – perished fish
The Group uses special computer programmes and a web-based programme (Finnish marine farms) developed by the Group for calculating the biomass volume. The Group makes its estimates according to its best knowledge, relying on its previous experience. The results of inventory checks in the spring are influenced by losses incurred over the winter period (mortality of fish) which during recent years has been up to 8.4% and which is taken into account in the valuation of fish inventories at the end of financial year.
Biological assets in fair value were 0,8 million euros as at the balance sheet date (30.06.2022: 3,0 million euros). The negative change in fair value of biological assets was 0,0 million euros (2021/2022: -0,4 million euros).
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ESTIMATING NET REALISABLE VALUE OF INVENTORIES (NOTE 8)
The management assesses the value of inventories on the basis of available information, taking into account historical experience, general background information and possible assumptions and conditions of future events. For finished goods, write down of inventories is determined on the basis of their sales potential and net realisable value. Raw materials are assessed on the basis of their potential to be used for preparation of finished goods and generating revenue. Work-inprogress is assessed on the basis of stage of completion that can be reliably measured.
The Group incurred loss in 2022/2023 in the amount of 33 thousand euros (2021/2022: 57 thousand euros) from the writeoff of inventories.
ASSESSMENT OF IMPAIRMENT OF GOODWILL AND USEFUL LIVES OF INTANGIBLE ASSETS (NOTE 13)
The Parent Company has carried out an impairment test for goodwill in the one segment (Great Britain) as at 30.06.2023 using market-based comparable valuation multiples. Under the market-based method, an entity is compared with a similar entity in the same sector whose shares are traded on a market, or which has recently been sold, and for which there is sufficient information available about the transaction price. In this case, the European manufacturers of food products, fish farms and fish product manufacturers are treated as the sector, and the price levels and various ratios of these companies have been compared.
The choice of valuations multiples has considered sales, which shows the size and volume of the company's market share and EBITDA, which is the ability to generate free cash flow. Based on the above, the company has assigned weightings of 50/50 to the ratios, where the management considers it important to restore and maintain market share and volume, and taking into account the fact that there are no comparable companies with similar market capitalization, such use reduces the impact of the benchmark.
As at 30.06.2023, the carrying amount of the goodwill of the Great Britain segment was 8 097 thousand euros. The value of goodwill was not depreciated after the test results of goodwill value neither for the period of 2022/2023 nor for the 2021/2022.
ASSESSMENT OF USEFUL LIVES OF TANGIBLE ASSETS (NOTE 12)
The management has assessed the useful lives of tangible assets relying on the volume and conditions of production, past experience and future projections.
NOTE 5. CASH AND CASH EQUIVALENTS0
| EUR '000 | Note | 30.06.2023 | 30.06.2022 |
|---|---|---|---|
| Cash on hand | 1 | 1 | |
| Bank accounts | 393 | 109 | |
| Total cash and cash equivalents | 5 | 394 | 110 |
NOTE 6. TRADE AND OTHER RECEIVABLES
| EUR '000 | 30.06.2023 | 30.06.2022 |
|---|---|---|
| Trade receivables | 1 392 | 2 115 |
| Other receivables | 423 | 39 |
| Total receivables and prepayments | 1 815 | 2 154 |
Since receivables and other receivables are of a short-term nature, their carrying amount is considered to be equal to fair value. A commercial pledge set as collateral for overdraft and listed bond covers also receivables, see note 15.
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NOTE 7. PREPAYMENTS
| EUR '000 | 30.06.2023 | 30.06.2022 |
|---|---|---|
| Prepaid expenses | 261 | 233 |
| Prepaid taxes | 43 | 180 |
| Total receivables and prepayments | 304 | 413 |
NOTE 8. INVENTORIES
| EUR '000 | 30.06.2023 | 30.06.2022 |
|---|---|---|
| Raw materials and materials | 575 | 907 |
| Work-in-progress | 417 | 454 |
| Finished goods | 532 | 534 |
| Goods purchased for sale | 336 | 301 |
| Total inventories | 1 860 | 2 196 |
During the financial year of 2022/2023 the Group earned a loss of 33 thousand euros from the write-off of inventories. During the financial year of 2021/2022 the corresponding loss was 57 thousand euros. The commercial pledge secured by the loan also covers inventories (note 15).
NOTE 9. BIOLOGICAL ASSETS
| EUR '000 | 30.06.2023 | 30.06.2022 |
|---|---|---|
| Fry | 0 | 401 |
| Juveniles | 772 | 1 448 |
| Fish suitable for harvesting | 0 | 1 154 |
| Total biological assets | 772 | 3 003 |
As at 30.06.2023, biological assets totalled 161 (30.06.2022: 441) tonnes having a balance sheet value of 772 thousand euros (30.06.2022: 3 003 thousand euros). During the financial year 326 tonnes (2021/2022: 1 427 tonnes) fish was harvested.
The Group farms rainbow trout (Oncorhynchus mykiss) in its fish farms in Estonia. The group uses Norwegian export statistics for rainbow trout to estimate rainbow trout stocks / Source: http://www.akvafakta.no/.
The line "Additions" reflects capitalized costs incurred in raising juvenile fish to be eligible for fishing and therefore only a gain / loss on the change in the fair value of biological assets is recognized as a separate line in the income statement.
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CHANGE IN BIOLOGICAL ASSETS
| EUR '000 | 2022/2023 | 2021/2022 |
|---|---|---|
| Biological assets at beginning of the period | 3 003 | 4 795 |
| Purchased | 500 | 496 |
| Additions | 870 | 3 842 |
| Fair value adjustments | 0 | -420 |
| Harvested | -1 180 | -4 900 |
| Fry and live fish sold | 0 | -728 |
| Adjustments due to the sale of subsidiary | -2 421 | 0 |
| Exchange rate differences | 0 | -82 |
| Biological assets at end of the period | 772 | 3 003 |
The Group measures biological assets at fair value or cost if fair value cannot be measured reliably.
The fair value of juvenile fish cannot be reliably estimated due to the absence of an active market. Therefore, juveniles are recognized at cost. At each balance sheet date, the cost is compared with the net realizable value of juvenile fish. As of 30.06.2023, management estimates that the net realizable value of juvenile fish is not significantly lower than its acquisition cost. Therefore, as at 30.06.2023 and 30.06.2022, juvenile fish were recorded at cost.
NOTE 10. SUBSIDIARIES
| Subsidiary | Domicile | Ownership interest 30.06.2023 |
Ownership interest 30.06.2023 |
Area of activity | Owner |
|---|---|---|---|---|---|
| Saaremere Kala AS | Estonia | 100% | 100% | Fish group holding company | AS PRFoods |
| Saare Kala Tootmine OÜ |
Estonia | 100% | 100% | Production of fish products | Saaremere Kala AS |
| Överumans Fisk AB1 | Sweden | 0% | 100% | Fish farming | Heimon Kala OY |
| JRJ & PRF Limited | Scotland | 100% | 100% | Fish group holding company | Saaremere Kala AS |
| John Ross Jr. (Aberdeen) Limited |
Scotland | 100% | 100% | Production and sale of fish products |
JRJ & PRF Limited |
| Coln Valley Smokery Limited |
Great Britain | 100% | 100% | Production and sale of fish products |
64% JRJ & PRF Limited 36% John Ross Jr. (Aberdeen) Limited |
| Redstorm OÜ | Estonia | 51% | 51% | Fish farming | Saaremere Kala AS |
1 Subsidiary sold in September 2022
The ownership percentage of subsidiaries' equity equals the voting rights. The shares of subsidiaries are not listed.
Non-controlling interests in JRJ & PRF Ltd
In 2017, Saaremere Kala AS entered into an agreement to acquire the 15% non-controlling interest in JRJ & PRF Ltd including a call and a put option, and the terms of which according to the management make it in essence a forward contract to acquire non-controlling interests. Therefore, at the time of the business combination, non-controlling interests was not recognized, and the management estimated that 100% control of the acquired companies was achieved. The exercise price of the forward contract was not fixed but depended on the financial performance of the acquired companies. The 15% non-controlling interest was bought out in 2021/2022 and 2 246 thousand euros were paid for it, which was 460 thousand euros less than the forward liability. The difference between the amount paid and the forward liability was recorded in the income statement as Other financial income.
Överumans Fisk AB
As of 20.09.2022, AS PRFoods transferred 100% of the shares of the subsidiary Saaremere Kala AS to Överumans Fisk AB to Vattudalens Fisk AB. The assets and liabilities of Överumans Fisk AB have been eliminated from the consolidated financial statement as of 30.09.2022.
Sale price and terms of payment, difference between acquisition and sales price
The sale price of Överumans Fisk AB was 7 870 thousand euro.
The sales price was agreed upon based on Överumans Fisk AB's financial results, net working capital and net debt as of 30.06.2022.
The effect of the sale on the group's financial position
| EUR'000 | Note | 2022/2023 |
|---|---|---|
| Price of the shares | 7 870 | |
| Net assets of the subsidiary at the sales moment | -2 423 | |
| Write-off of immaterial and materials assets from consolidated financial statements of parent company |
-3 024 | |
| Profit from sales of subsidiary | 2 423 |
NOTE 11. DEFERRED TAX
DEFERRED TAX ASSETS
| EUR '000 | Tax losses | Other | Total |
|---|---|---|---|
| Deferred tax assets as at 31.12.2021 | 0 | 38 | 38 |
| Impact on income statement | 55 | 0 | 55 |
| Deferred tax assets as at 30.06.2022 | 55 | 38 | 93 |
| Impact on income statement | -55 | -38 | -93 |
| Deferred tax assets as at 30.06.2023 | 0 | 0 | 0 |
DEFERRED TAX LIABILITY
| EUR '000 | Fair value adjustment |
Other | Total |
|---|---|---|---|
| Deferred tax liability as at 31.12.2021 | 355 | 1 506 | 1 861 |
| Impact on income statement | 0 | -110 | -110 |
| Impact on other comprehensive income | 0 | -152 | -152 |
| Deferred tax liability as at 30.06.2022 | 355 | 1 244 | 1 599 |
| Impact of sales of subsidiary | 0 | -36 | -36 |
| Impact on other comprehensive income | -97 | 0 | -97 |
| Deferred tax liability as at 30.06.2023 | 258 | 1208 | 1466 |
NOTE 12. TANGIBLE ASSETS
| EUR '000 | Land and buildings |
Machinery and equipment |
Other tangible assets |
Construction in progress, prepayments |
Total |
|---|---|---|---|---|---|
| Cost at 30.06.2021 | 15 043 | 19 024 | 834 | 422 | 35 323 |
| Acquired during the period | 0 | 258 | 0 | 253 | 511 |
| Reclassification | 3 | 165 | 0 | -168 | 0 |
| Assets sold and written off | -281 | -718 | -1 | 0 | -1 000 |
| Effect of sales of subsidiary | -5 223 | -6 186 | -361 | -291 | -12 061 |
| Unrealised currency effect | 11 | -58 | 0 | 0 | -47 |
| Cost at 30.06.2022 | 9 553 | 12 485 | 472 | 216 | 22 726 |
| Acquired during the period | 67 | 9 | 7 | 59 | 143 |
| Reclassification | 0 | 76 | 0 | -76 | 0 |
| Assets sold and written off | 0 | -518 | -21 | 0 | -539 |
| Effect of sales of subsidiary | -1 158 | -3 963 | -82 | -104 | -5 307 |
| Unrealised currency effect | -15 | 13 | 0 | -1 | -3 |
| Cost at 30.06.2023 | 8 447 | 8 102 | 376 | 94 | 17 019 |
| Accumulated depreciation at 30.06.2021 |
-7 116 | -12 288 | -619 | 0 | -20 023 |
| Depreciation of the period | -559 | -1 149 | -41 | 0 | -1 749 |
| Assets sold and written off | 0 | 633 | 1 | 0 | 634 |
| Effect of sales of subsidiary | 2 628 | 4 472 | 298 | 0 | 7 398 |
| Unrealised currency effect | -23 | -81 | 0 | 0 | -104 |
| Accumulated depreciation at 30.06.2022 |
-5 069 | -8 413 | -361 | 0 | -13 843 |
| Depreciation of the period | - 314 |
-674 | - 24 |
0 | -1 011 |
| Reclassification | 12 | 0 | - | 0 | 12 |
| Assets sold and written off | - | 463 | 19 | 0 | 482 |
| Effect of sales of subsidiary | 754 | 3 073 | 28 | 0 | 3 854 |
| Unrealised currency effect | 2 | 48 | - | 0 | 50 |
| Accumulated depreciation at 30.06.2023 |
-4 615 | -5 503 | -338 | 0 | -10 456 |
| Carrying amount at 30.06.2021 | 7 927 | 6 736 | 215 | 422 | 15 300 |
| Carrying amount at 30.06.2022 | 4 484 | 4 072 | 111 | 216 | 8 883 |
| Carrying amount at 30.06.2023 | 3 832 | 2 599 | 38 | 94 | 6 563 |
The distribution of rental assets by types of fixed assets is presented in note 14. As at 30.06.2023 and 30.06.2022, the companies of the PRFoods group did not have binding obligations for the acquisition of tangible fixed assets.
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NOTE 13. INTANGIBLE ASSETS
| EUR '000 | Goodwill | Trademarks and Patents |
Immaterial rights & licences |
Prepayments | Total |
|---|---|---|---|---|---|
| Cost at 30.06.2021 | 14 518 | 8 797 | 2 329 | 181 | 25 825 |
| Acquired during the period | 0 | 1 | 32 | 138 | 171 |
| Reclassification | 0 | 0 | 1 | -1 | 0 |
| Assets sold and written off | 0 | -4 | 0 | 0 | -4 |
| Effect of sales of subsidiary | -1 242 | -1 076 | -530 | -43 | -2 891 |
| Cost at 30.06.2022 | 13 276 | 7 718 | 1 832 | 275 | 23 101 |
| Acquired during the period | 0 | 0 | 0 | 105 | 105 |
| Assets sold and written off | 0 | 0 | 0 | -21 | -21 |
| Effect of sales of subsidiary | -3 024 | 0 | -499 | -57 | -3 580 |
| Unrealised currency effect | -3 | -2 | -8 | -1 | -14 |
| Cost at 30.06.2023 | 10 249 | 7 716 | 1 325 | 300 | 19 590 |
| Accumulated depreciation at 30.06.2021 | 0 | -1 401 | -964 | 0 | -2 365 |
| Depreciation of the period | 0 | -157 | -149 | 0 | -306 |
| Assets sold and written off | 0 | 4 | 0 | 0 | 4 |
| Effect of sales of subsidiary | 0 | 973 | 430 | 0 | 1 403 |
| Accumulated depreciation at 30.06.2022 | 0 | -581 | -683 | 0 | -1 264 |
| Depreciation of the period | 0 | -157 | -102 | 0 | -259 |
| Unrealised currency effect | 0 | 0 | 1 | 0 | 1 |
| Effect of sales of subsidiary | 0 | 0 | 89 | 0 | 89 |
| Accumulated depreciation at 30.06.2023 | 0 | -738 | -695 | 0 | -1 433 |
| Carrying amount at 30.06.2021 | 14 518 | 7 396 | 1 275 | 181 | 23 370 |
| Carrying amount at 30.06.2022 | 13 276 | 7 137 | 1 149 | 275 | 21 837 |
| Carrying amount at 30.06.2023 | 10 249 | 6 978 | 630 | 300 | 18 157 |
The Parent Company has carried out an impairment test for goodwill in the one segment (Great Britain) as at 30.06.2023 using market-based comparable valuation multiples. Under the market-based method, an entity is compared with a similar entity in the same sector whose shares are traded on a market or which has recently been sold, and for which there is sufficient information available about the transaction price. In this case, the European manufacturers of food products, fish farms and fish product manufacturers are treated as the sector, and the price levels and various ratios of these companies have been compared.
The carrying amount of goodwill in the Great Britain segment as at 30.06.2023 was 8 097 thousand euros. The value of goodwill was not depreciated after the test results of goodwill value neither for the period of 2022/2023 nor for the period of 2021/2022.
To determine the fair value, average valuation multiples of the industry have been applied to the actual financial indicators of subsidiaries. The multiples used to assess the Great Britain segment 2022/2023 were EV/Sales1 1,83 and EV/EBITDA2 11,0. The shares of the subsidiary are not listed on the stock exchange and are classified as level 3 of the fair value hierarchy. In management's opinion, the fair value does not differ materially from its carrying value.
When choosing the valuation multiples, sales, which show the size and volume of the company's market share, and EBITDA, which expresses the ability to generate free cash flow, have been taken into account. Based on the above, the company has assigned 50/50 shares to the valuation multiples, where the management considers it important to restore and maintain the market share and volume, and taking into account the fact that there are no comparable companies with a similar market capitalization to the group in the comparison base, such use of the valuation multiples reduces the impact resulting from the difference in the size of the comparison group. The segment's multiple based market value was 17,7 million euros (2021/2022: 16,9 million euros). The balance sheet value of the segment was 17,3 million euros (2020/2021: 16,8 million euros)
1 Enterprise Value / Sales
2 Enterprise Value / EBITDA
The carrying value of the goodwill related to the Swedish and Estonian segment as of 30.06.2022 was a total of 5 178 thousand euros. Due to the sale of the Swedish subsidiary, the goodwill decreased by 3 024 thousand euros in the reporting period, and as of 30.06.2023, the balance sheet reflected the goodwill related to the Estonian segment in the amount of 2 154 thousand euros.
Management tested the recoverable amount of the Estonian segment's goodwill by comparing the assets' book value with the Estonian subsidiary's fair value. As a result of the test, no indications of impairment of the recoverable amount were detected. More detailed information on the sale of the subsidiary and the sale price, which expresses the fair value of the subsidiary, is presented in Note 30 of the report. According to the board, the sale of the subsidiary provides the most reliable information about the fair value of the segment's assets and the recoverability of goodwill.
NOTE 14. LEASES
As a lessee, the Group leases a number of assets, including machinery and equipment, land and water, as well as buildings. See note 12.
The Group leases, among other things, assets that are considered to be of low value (assets with a new value of less than EUR 5,000). The Group has decided not to recognize the use rights and lease obligations for these leases. The Group has also not recognized the right of use assets and lease obligations in the case of short-term lease agreements (less than 12 months).
Below is information on the lease agreements for which the Group is the lessee.
RIGHT-OF-USE ASSETS
| EUR '000 | Land and buildings | Machinery and equipment |
Total |
|---|---|---|---|
| Balance as at 30.06.2021 | 1 052 | 1 791 | 2 843 |
| Depreciation of the right-of-use asset during the period | -94 | -323 | -417 |
| Derecognition of the right-of-use assets | -521 | -31 | -552 |
| Balance as at 30.06.2022 | 437 | 1 437 | 1 874 |
| Depreciation of the right-of-use asset during the period | -31 | -7 | -38 |
| Derecognition of the right-of-use assets | -133 | -1 423 | -1 556 |
| Balance as at 30.06.2023 | 273 | 7 | 280 |
AMOUNTS RECOGNIZED IN THE INCOME STATEMENT
| EUR '000 | Total |
|---|---|
| 2022/2023 - all leases according to IFRS 16 accounting principles | |
| Interest on lease obligations | 12 |
| 2021/2022 - all leases according to IFRS 16 accounting principles | |
| Interest on lease obligations | 26 |
Possibilities for renewal of lease agreements
Many leases of machinery and equipment and water areas include renewal options that the Group can use before the end of the lease term. For most contracts, the Group must give notice of the exercise of the renewal option at least one year before the end of the contract period. For certain contracts, the lease term is automatically extended before the end of the contract period. Extension options can only be used by the Group, the lessor does not have the right to do so. The Group assesses at the inception of the lease whether it is probable that the Group will exercise the option to extend it.
Lease liabilities
| EUR '000 | 2022/2023 |
|---|---|
| Lease liabilities 30.06.2022 | 1 482 |
| Interrupted of the period | -170 |
| Principal payments | -953 |
| Lease liabilities 30.06.2023 | 359 |
| Up to 1 year | 100 |
| 1-5 years | 259 |
NOTE 15. INTEREST-BEARING LIABILITIES
| EUR '000 | Note | 30.06.2023 | 30.06.2022 |
|---|---|---|---|
| Lease liabilities | 14 | 100 | 421 |
| Overdraft | 0 | 4 544 | |
| Investment loans | 1 090 | 1 418 | |
| Other loans | 921 | 711 | |
| Total short-term interest-bearing liabilities | 2 111 | 7 094 | |
| Finance lease liabilities | 14 | 259 | 1 061 |
| Listed bonds | 13 073 | 12 960 | |
| Investment loans | 1 692 | 3 704 | |
| Total long-term interest-bearing liabilities | 15 024 | 17 725 | |
| incl. payable within 1-5 years | 15 024 | 17 725 | |
| incl. payable in more than 5 years | 0 | 0 |
| EUR '000 | Note | 2022/2023 | 2021/2022 |
|---|---|---|---|
| Interest-bearing liabilities at the beginning of period | 24 819 | 24 886 | |
| Loans | 1 976 | 2 783 | |
| Change in overdraft | -4 544 | -930 | |
| Listed bonds | 113 | 108 | |
| Lease liabilities | 14 | -28 | -663 |
| Change of factoring liability | -60 | -68 | |
| Change in value due to the exchange rates | -8 | 125 | |
| Repayments of loans | -2 219 | -150 | |
| Reclassifications | -41 | 0 | |
| Decrease in liabilities related to sales of subsidiary | -2 872 | -1 272 | |
| Interest-bearing liabilities at the end of period | 17 136 | 24 819 |
| EUR '000 | Note | 2022/2023 | 2021/2022 |
|---|---|---|---|
| Interest liability at the beginning of the period | 596 | 344 | |
| Calculated interests | 1 211 | 1 498 | |
| Interests paid | -1 213 | -1 246 | |
| Interest liability at the end of the period | 15 | 594 | 596 |
Overdraft
AS Saaremere Kala has entered into an overdraft agreement with AS SEB Pank. The amount of the overdraft at the beginning of the reporting period was 4,5 million euros, which was reduced by 0 million euros during the reporting period.
As of 01.09.2021,the interest rate is 6-month EURIBOR + 6,0%. Overdraft was repaid in October 2022.
Investment loans
On 01 July 2021, John Ross Jr. (Aberdeen) Ltd entered into an agreement with Santander UK plc an investment loan of 1,5 million GBP (1,7 million euros) to finance the purchase of 15% non-controlling interests of JRJ&PRF Limited from Christopher Leigh and Victoria Leigh-Pearson to Saaremere Kala AS. The loan term is 01.07.2025. The loan interest rate is 3,5%. The principal balance of the loan as of 30.06.2023 was 0,97 million euros. The loan is secured by a mortgage on a property of John Ross Jr (Aberdeen) Ltd.
On 22.10.2020, Saare Kala Tootmine OÜ concluded a loan agreement with the Maaelu Arendamise Sihtasutus as part of the measure "Covid-19 loan for organic and rural economy entrepreneurs" for the automation of a factory in Saaremaa. The amount of the investment loan is 1,0 million euros with a term of 6 years, the final term of the loan is 30.09.2026. The loan interest rate is 4,5%. The balance of the principal of the loan as at 30.06.2023 is 594 thousand euros (30.06.2022 852 thousand euros). The loan is secured by a mortgage and commercial pledge on the assets of Saare Kala Tootmine OÜ and a 100% guarantee by AS PRFoods.
On 04.01.2021, the fish farming company Redstorm OÜ entered into an investment and working capital loan with Maaelu Arendamise Sihtasutus (the Rural Development Foundation) within the framework of the measure "COVID-19 loan for bioand rural economy entrepreneurs". The amount of the investment loan is 193 thousand euros and the amount of the working capital financing loan is 610 thousand euros, the maturity of the loans is 31.12.2026. The interest rate of the loan is 4,75%. The balance of the loan principal as of 30.06.2023 is 636 thousand euros (30.06.2022: 753 thousand euros). The loan is secured by a mortgage and a commercial pledge on the assets of OÜ Redstorm and a guarantee from AS PRFoods in the amount of 0,5 million euros.
On 01.07.2021, Redstorm OÜ signed a short-term investment loan with the majority shareholder Lindermann, Birnbaum, Kasela OÜ in the amount of 0,44 million euros with an interest rate of 6,25% per calendar year. The balance of the loan on 30.06.2023 was 0,44 million euros.
On 07.01.2022, Överumans Fisk AB concluded a short-term investment loan with the majority shareholder Amber Trust II S.C.A. in the amount of 0,5 million euros with an interest rate of 6,25% per calendar year. The balance of the loan on 30.06.2022 was 0,5 million euros. The loan was repaid in October 2022.
Överumans Fisk AB signed a short-term investment loan on 01.01.2022 with the majority shareholder Lindermann, Birnbaum, Kasela OÜ in the amount of 0,35 million euros with an interest rate of 6,25% per calendar year. The balance of the loan on 30.06.202. was 0,35 million euros. The loan was repaid in October 2022.
Bonds
In the 2019/2020 financial year, PRFoods issued 90 096 bonds in the framework of a directed offer and 9 904 bonds in the framework of a public offering, a bond with a nominal value of 100 euros, with an interest rate of 6,25% per calendar year and a redemption date of 22.01.2025. According to the terms of the covered bond, the interest on the bond is paid semiannually (July and January). At the end of the covered bond subscription period, PRFoods owned 4 926 bonds.
Following the completion of the public offering of the bonds, the company listed the bonds on the Tallinn Stock Exchange. Trading on the Nasdaq Tallinn bond list began on April 6, 2020.
As of 30.06.2023, the number of bonds owned by PRFoods is 535 (30.06.2022: 535 bonds) with a nominal value of 54 thousand euros (30.06.2022: 54 thousand euros).
The listing conditions of the secured bonds set out the conditions (net debt to EBITDA ratio and solvency of loans (DSCR)) that the Group's financial results must meet until the bonds are redeemed. The bondholders confirmed at the bondholders meeting held on 20.09.2022 that they agreed to waive the requirement to comply with the terms and conditions of the bond issue on 14.01.2020 (amended on 25th February 2020 and 25th February 2022) and agreed that non-compliance with the terms and conditions in the financial year 2021/2022 would not be considered a breach. At the same time, PRFoods confirms that the temporary negative effects do not affect PRFoods' ability to fulfill the financial obligations arising from the conditions, including the ability to make future payments related to the bonds. Additional information can be found in Note 3.
On 07.05.2021, PRFoods announced that it plans to issue subordinated convertible bonds to improve its capital structure to ensure a smoother and faster overcoming of the negative effects caused by COVID-19 in the financial year 2021/2022. The issue was confirmed with the following terms and conditions: PRFoods will issue up to 350 subordinated convertible bonds with a maximum total nominal value of up to 3,5 million euros, a nominal value of 10 000 euro per subordinated convertible bond, with an interest rate of 7% per calendar year and a maturity date of 01.10.2025.
As part of the private placement, investors subscribed for a total of 237 subordinated convertible bonds with a total nominal value of 2,37 million euros. Among other investors, PRFoods shareholders also submitted subscription applications, subscribing for a total of 217 convertible bonds with a total nominal value of 2,170 million euros, of which 171 convertible bonds with a total nominal value of 1,71 million euros were distributed to the shareholder Amber Trust II SCA. By offsetting the claim arising from the loan agreement in the amount of 1,0 million euros and also the claim arising from the loan agreement in the amount of 1,5 million euros entered into on 14.07.2017.
In accordance with the decision of the supervisory board of PRFoods at 14.05.2021, a private placement offer of secured bonds was made to the shareholder Amber Trust II S.C.A., as a result of which Amber Trust II S.C.A. subscribed to all of the 10,000 secured bonds offered under the targete prvate placement with a nominal value of 100 euros per secured bonds, with a maturity date of 22.01.2025, early redemption right and a fixed interest rate of 6,25% per calendar year. The subscription price for the secured bons – designated to be 100,25 euro per secured bond by the management of PRFoods – will be fully paid by Amber Trust II S.C.A. prior to the issue of the secured bonds by way of setting-off the respective issue price against the claim of outstanding principal and part of the interest under the 1,5 million euros loan agreement entered into with PRFoods on 14.07.2017.
The secured bonds and subordinated convertible bonds subscribed by Amber Trust II S.C.A were set-off as follows:
▪ The issue price of the secured bonds in the amount of 1 002,5 thousand euros was off-set against the principal of the investment loan entered on 14.07.2017 (1,5 million euros), which means that the Amber Trust II S.C.A claim of 711,0 thousand euros is excluded from the investment loan, of which 497,5 thousand euros is the principal of the loan and 213,5 thousand euros is interest.
▪ The issue price of convertible bonds in the amount of 1,710 million euros was set-off against the principal of the bridge loan entered on 01.03.2021 in the amount of 1,0 million euros and accrued interest in the amount of 21 thousand euros and the loan receivable 711,0 thousand euros. As a result of the set-off, Amber Trust II S.C.A will have an interest claim against PRFoods in the amount of 22,5 thousand euros arising from the loan agreement on 14.07.2017, which PRFoods paid to Amber Trust II S.C.A by bank transfer.
The interest liability on secured bonds and convertible bonds as of 30.06.2023 was 569 thousand euros (30.06.2022: 417 thousand euros).
Detailed information on the terms and conditions of the bond issue is published in stock exchange announcements, including the bond issue prospectus.
NOTE 16. PAYABLES AND PREPAYMENTS
| EUR '000 | Note | 30.06.2023 | 30.06.2022 |
|---|---|---|---|
| Trade payables | 3 | 1 389 | 2 082 |
| Payables to employees | 150 | 252 | |
| Other short-term liabilities | 87 | 0 | |
| Interest payables | 15 | 594 | 596 |
| Other payables | 398 | 675 | |
| Tax liabilities, incl.: | 416 | 373 | |
| Social security tax | 83 | 100 | |
| VAT | 27 | 42 | |
| Personal income tax | 34 | 116 | |
| Corporate income tax | 227 | 63 | |
| Other taxes | 45 | 52 | |
| Total short-term payables and prepayments | 3 035 | 3 978 | |
| Other long-term liabilities | 0 | 204 | |
| Total long-term payables and prepayments | 0 | 204 |
NOTE 17. GOVERNMENT GRANTS
| EUR '000 | Note | 2022/2023 | 2021/2022 |
|---|---|---|---|
| Deferred income from government grants at the beginning of period | 265 | 932 | |
| Government grants received and repaid during the period, net | 230 | 55 | |
| Change in value due to the exchange rates | -2 | 0 | |
| Effect from sales of subsidiary | -14 | -144 | |
| Recognized as income for investments during the period | 24 | -162 | -578 |
| Deferred income from government grants at the end of period | 317 | 265 |
The government grants have been granted for investments in the Group's fish farming and fish processing in Sweden, as well as for fish production facilities in Great Britain and Estonia. Government grants recognized in income during the reporting period 162 thousand euros (2021/2022: 578 thousand euros).
NOTE 18. EQUITY
As at 30.06.2023 the Group had 38 682 860 shares (30.06.2022: 38 682 860), including 1 000 000 treasury shares (30.06.2023: 1 000 000 treasury shares).
Treasury shares
As of 01.07.2014, the Group initiated a buy-back programme of its own shares in accordance with the resolution of the general meeting of shareholders held on 29.05.2014, according to which up to 500 000 own shares were to be bought back until 31.05.2017. The initial buy-back programme was completed on 18.05.2016. The ordinary general meeting of shareholders held on 26.05.2016 adopted a resolution to expand the existing buy-back programme, according to which up to additional 500,000 own shares were to be bought back until 29.05.2019. On 14 June 2016, the Management Board of AS PRFoods entered into a service agreement with AS SEB Pank to continue the implementation of the buy-back programme of own shares. As at 30.06.2023 AS SEB Pank had acquired 1 000 000 shares of AS PRFoods in the name and on the account of the Group with average price of 0,4915 euros per share.
The buy-back programme was implemented in compliance with the resolutions of the general meetings of shareholders held on 29.05.2014 and 26.05.2016, and the Commission Regulation (EU) No. 2016/1052 of 8 March 2016 supplementing Regulation (EU) No 596/2014 of the European Parliament and of the Council with regard to regulatory technical standards for the conditions applicable to buy-back programmes and stabilisation measures.
Reduction of share capital
Based on the decisions of the general meeting of shareholders held on 26.05.2016 the introduction of shares without par value instead of nominal value shares of AS PRFoods was entered in the Commercial Register on 30.06.2016. The registered share capital of the company is 7 736 572 euros divided into 38 682 860 ordinary shares without a nominal value of 0,20 euros each. In addition, a new version of the Articles of Association of the company came into force, according to which the minimum share capital is 7 000 000 euros and the maximum share capital is 28 000 000 euros.
24.05.2021 the resolution of the shareholders amended the clause of the articles of association where the supervisory board has the right to increase the share capital of the public limited company on 14.05.2021 within three years from the entry into force of the amendment to the articles of association. to the extent necessary for the conversion of convertible bonds issued pursuant to this Decision. The supervisory board may not increase the share capital by more than 3 500 000 euros. The supervisory board may decide to increase the share capital by contributions in kind. The Articles of Association are available on the homepage of AS PRFoods www.prfoods.ee.
List of shareholders with more than 5% holding at the balance sheet date
| EUR '000 | Number of shares 30.06.2023 |
Ownership interest 30.06.2023 |
Number of shares 30.06.2022 |
Ownership interest 30.06.2022 |
|---|---|---|---|---|
| Amber Trust II S.C.A | 14 813 540 | 38,3% | 14 813 540 | 38,3% |
| Amber Trust S.C.A | 5 381 370 | 13,9% | 5 381 370 | 13,9% |
| KJK Fund SICAV-SIF | 4 063 456 | 10,5% | 4 063 456 | 10,5% |
| Total | 24 258 366 | 62,7% | 24 258 366 | 62,7% |
ING LUXEMBOURG S.A., CUSTODIAN FOR THE FOLLOWING SHAREHOLDERS
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Earnings per share
Earnings per share are calculated as the ratio of the net profit attributable to equity holders of the parent to the weighted average number of shares outstanding during the period.
| 2022/2023 | 2021/2022 | |
|---|---|---|
| Net profit (loss) attributable to equity holders of the company, EUR '000 | 128 | -7 863 |
| Average number of shares, thousand | 38 683 | 38 683 |
| Earnings (Loss) per share, EUR | 0,00 | -0,21 |
| Basic earnings (loss) per share, EUR | 0,01 | -0,21 |
| Diluted earnings (loss) per share, EUR | 0,01 | -0,17 |
Capital reserve
The Estonian Commercial Code requires companies to create a capital reserve. Each year at least 1/20 of profit for the year must be transferred to the capital reserve until the reserve amounts to 1/10 of share capital. The capital reserve may be used for covering losses and increasing the share capital but not for making distributions to shareholders.
Dividends
During 2022/2023 there were no dividend payments. Due to the difficult economic situation, the management board proposes to the general meeting of Shareholders not to pay dividends for the past financial year.
Non-controlling interest
As non-controlling interest OÜ Fodiator's 49% holding in OÜ Redstorm is recognized. See also note 10.
NOTE 19. SEGMENT REPORTING
The Group's segments are determined based on the reports monitored and analysed by the management board of the Parent Company. The management board of the Parent Company monitors financial performance by business areas and geographical areas. Reports by geographical areas include information of more significant importance for the management of the Group for monitoring financial performance and allocating resources. Therefore, this division is used to define business segments. Two business segments – the fish segment and other segments - are presented together since the proportion of other segments in business operations is marginal. The proportion of other segments was 0.1% in the accounting period.
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Starting from the financial year of 2017/2018 the Group monitors two geographical segments: i) the Finland, Sweden and Estonia segment and ii) the United Kingdom segment.
| 2022/2023 | 2021/2022 | |||||
|---|---|---|---|---|---|---|
| EUR '000 | Sweden, Estonia |
Great Britain | Total | Finland, Sweden, Estonia |
Great Britain | Total |
| External revenue | 6 364 | 13 214 | 19 578 | 27 253 | 14 876 | 42 128 |
| Inter-segment revenue | 0 | 0 | 0 | 0 | 0 | 0 |
| Total revenue | 6 364 | 13 214 | 19 578 | 27 253 | 14 876 | 42 128 |
| Fair value adjustment of biological assets |
0 | 0 | 0 | -420 | 0 | -420 |
| EBITDA* | -711 | 1 012 | 301 | -2 521 | 438 | -2 083 |
| EBITDA from business operations** |
-711 | 1 012 | 301 | -2 101 | 438 | -1 663 |
| Depreciation and amortisation | -892 | -397 | -1 289 | -1 818 | -237 | -2 055 |
| Operating profit / loss | -1 586 | 616 | -969 | -4 385 | 201 | -4 184 |
| Financial income and expenses | 1 587 | -222 | 1 365 | -3 411 | -128 | -3 539 |
| Income tax | 0 | -65 | -65 | 82 | -19 | 63 |
| Net profit (-loss) | 1 | 330 | 331 | -8 213 | 53 | -8 160 |
| Segment assets | 10 397 | 20 256 | 30 653 | 21 199 | 17 718 | 38 917 |
| incl. current assets | 1 787 | 3 766 | 5 553 | 7 055 | 821 | 7 876 |
| incl. biological assets | 772 | 0 | 772 | 3 003 | 0 | 3 003 |
| incl. non-current assets | 8 611 | 16 490 | 25 101 | 14 145 | 16 896 | 31 041 |
| Segment liabilities | 14 046 | 8 166 | 22 212 | 25 121 | 5 744 | 30 865 |
| Segment investments in tangible and intangible assets |
248 | 0 | 248 | 675 | 7 | 682 |
* EBITDA – operating profit adjusted with depreciation and impairement cost
** before fair value adjustment of bioassets and one-offs
SALES BY GEOGRAPHICAL REGIONS
| EUR '000 | 2022/2023 | 2021/2022 |
|---|---|---|
| Finland | 0 | 20 726 |
| United Kingdom | 13 214 | 14 876 |
| Estonia | 6 216 | 5 312 |
| Other | 148 | 1 214 |
| Total | 19 578 | 42 128 |
Company's consolidatedfinancialstatementsin pdf-formatwithoutEuropeanSingleElectronicFormat(ESEF) markups. The originaldocumentissubmittedin machine-readable.xhtmlformattotheNasdaqTallinn StockExchange and digitallysigned(Link: https://nasdaqbaltic.com/)
NON-CURRENT ASSETS BY LOCATION
| EUR '000 | 2022/2023 | 2021/2022 |
|---|---|---|
| Great Britain | 16 491 | 16 896 |
| Estonia | 8 229 | 9 321 |
| Sweden | 0 | 4 824 |
| Total | 24 720 | 31 041 |
The table shows non-current assets excl. financial assets and investments in associates.
NOTE 20. COST OF GOODS SOLD
| EUR '000 | Note | 2022/2023 | 2021/2022 |
|---|---|---|---|
| Materials in production & cost of goods purchased for resale | -11 032 | -28 244 | |
| Staff costs | 23 | -2 601 | -5 722 |
| Depreciation and amortisation | -964 | -1 557 | |
| Other costs of goods sold* | -1 407 | -3 470 | |
| Total cost of goods sold | -16 004 | -38 993 |
* Other costs of goods sold includes expenses related to production and fish farming assets (rent, maintenance, insurance, utilities, etc.), staff-related costs and other expenses and subcontracted services.
NOTE 21. SALES AND MARKETING EXPENSES
| EUR '000 | Note | 2022/2023 | 2021/2022 |
|---|---|---|---|
| Advertising, marketing and product development | -82 | -222 | |
| Transportation and logistics services | -880 | -1 692 | |
| Staff costs | 23 | -435 | -1 366 |
| Warehouse service | -796 | -876 | |
| Depreciation and amortisation | -205 | -251 | |
| Short-term lease expenses | 0 | -169 | |
| Other sales and marketing expenses* | -293 | -268 | |
| Total sales and marketing expenses | -2 691 | -4 844 |
* Other sales and marketing expenses include costs related to real estate (lease, maintenance, insurance, utilities etc.), staff related costs and other services.
NOTE 22. GENERAL AND ADMINISTRATIVE EXPENSES
| EUR '000 | Note | 2022/2023 | 2021/2022 |
|---|---|---|---|
| Staff costs | 23 | -864 | -1 371 |
| Depreciation and amortisation | -119 | -135 | |
| Consulting and advisory services | -97 | -161 | |
| Information and communication services | -25 | -41 | |
| Legal services | -129 | -33 | |
| Transportation expenses | -3 | -63 | |
| Business trips and costs of entertaining guests | 0 | -50 | |
| Other general and administrative expenses* | -765 | -510 | |
| Total general and administrative expenses | -2 002 | -2 364 |
* Other general and administrative expenses include subcontracted services, bank fees, office related expenses, insurance costs, staffrelated costs and other expenses.
NOTE 23. STAFF COSTS
| EUR '000 | Note | 2022/2023 | 2021/2022 |
|---|---|---|---|
| Wages and salaries | -3 329 | -6 899 | |
| Social security tax and other labour taxes | -570 | -1 560 | |
| Total staff costs | 20, 21, 22 | -3 899 | -8 459 |
| Number of employees at end of the period | 181 | 176 | |
| Average number of employees during the year | 190 | 245 |
Staff costs are included in the lines of the statement of comprehensive income "Cost of goods sold", "General and administrative expenses" and "Sales and marketing expenses".
| EUR '000 | Note | 2022/2023 | 2021/2022 |
|---|---|---|---|
| Staff costs of employees working under employment contract | -3 875 | -8 400 | |
| Staff costs of members of management or control board | 27 | -24 | -59 |
| Total staff costs | -3 899 | -8 459 | |
| Average number of employees working under employment contract | 189 | 244 | |
| Average number of members of management or control board | 1 | 1 | |
| Average number of employees during the year | 190 | 245 |
Company's consolidatedfinancialstatementsin pdf-formatwithoutEuropeanSingleElectronicFormat(ESEF) markups. The originaldocumentissubmittedin machine-readable.xhtmlformattotheNasdaqTallinn StockExchange and digitallysigned(Link: https://nasdaqbaltic.com/)
NOTE 24. OTHER OPERATING INCOME AND EXPENSES
| EUR '000 | Note | 2022/2023 | 2021/2022 |
|---|---|---|---|
| Gain on disposal and write-off of non-current assets | 12,13 | 0 | 0 |
| Income from government grants | 17 | 162 | 108 |
| Foreign exchange income/expense | -2 | 417 | |
| Other operating income/expense | -10 | -218 | |
| Total other operating expenses | 150 | 307 |
NOTE 25. FINANCIAL INCOME AND EXPENSE
| EUR '000 | Note | 2022/2023 | 2021/2022 |
|---|---|---|---|
| Interest income | 1 | 14 | |
| Other financial income | 0 | 1 | |
| Foreign exchange income/expense | 0 | 0 | |
| Interest expense | -1 211 | -1 523 | |
| Other financial expenses | 0 | -226 | |
| Total | -1 210 | -1 734 |
NOTE 26. INCOME TAX EXPENSES
| EUR '000 | Note | 2022/2023 | 2021/2022 |
|---|---|---|---|
| Profit (Loss) before tax (consolidated) | 805 | -7 723 | |
| Income tax expense /-income | 28 | -144 | |
| Deferred income tax expense / income | 11 | -93 | -207 |
| Effect on income statement | -65 | 63 |
NOTE 27. TRANSACTIONS WITH RELATED PARTIES
The Group considers parties to be related when one party has control over the other party or has significant influence over the business decision of the other party.
Related parties include:
- shareholders with significant influence (the largest shareholder of PRFoods is the international investment fund Amber Trust II S.C.A.);
- members of the supervisory board and members of all supervisory and management boards of group entities;
- close family members of the persons mentioned above and the companies related to them.
During the reporting period group entities have performed purchase and sales transactions with related parties as follows:
| Party EUR '000 |
Type of transaction | 2022/2023 Purchase |
2022/2023 Sale |
2021/2022 Purchase |
2021/2022 Sale |
|---|---|---|---|---|---|
| Companies related to members of the Management and Supervisory Boards |
Services | 413 | 0 | 0 | 0 |
| Total | 413 | 0 | 0 | 0 |
Management estimates that all related party transactions have been concluded at market prices and at market conditions.
At the balance sheet date, there were no receivables from related parties. No write-downs on receivables from related parties have been recognised.
| Party | Creditor | Type of transaction | Payables as at 30.06.2023 |
Payables as at 30.06.2022 |
|---|---|---|---|---|
| EUR '000 | EUR '000 | |||
| Amber Trust II S.C.A. | Shareholder AS PRFoods | Investment loan | 0 | 500 |
| Lindermann, Birnbaum & Kasela OÜ |
Shareholder AS PRFoods | Investment loan | 465 | 1 115 |
| Indrek Kasela | Board member | Loan note | 0 | 40 |
| Amber Trust II S.C.A. | Shareholder AS PRFoods | Bond and interest of bond | 3 351 | 2 680 |
| Lindermann, Birnbaum & Kasela OÜ |
Shareholder AS PRFoods | Bond and interest of bond | 112 | 98 |
| Lindermann, Birnbaum & Kasela OÜ |
Shareholder AS PRFoods | Payable | 90 | 0 |
| Fodiator OÜ | Related party | Loan note | 9 | 0 |
| Fodiator OÜ | Related party | Payable | 14 | 0 |
| Rebane Consulting | Related party | Payable | 3 | 0 |
| Total | 4 044 | 4 433 |
Benefits including employment taxes to members of the management boards and supervisory boards of AS PRFoods and its subsidiaries and other key members of management were as follows:
| EUR '000 | Note | 2022/2023 | 2021/2022 |
|---|---|---|---|
| Short-term benefits | 23 | 24 | 44 |
| Total | 24 | 44 |
The members of the management and supervisory boards AS PRFoods are not entitled to any pension-related rights from the company. The members of the management boards are entitled to termination benefits. AS PRFoods' maximum expense related to payment of termination benefits including taxes totals 73 thousand euros (30.06.2022: 83 thousand euros).
NOTE 28. ASSOCIATES
Avamere Kalakasvatus OÜ (50% share)
On 18.01.2019 Avamere Kalakasvatus OÜ, an associate of Saaremere Kala AS, was registered in the Estonian Commercial Register. In reporting period, the associate company submitted an application for a building permit for the fish farming in Paldiski Bay, Estonia to the Technical Surveillance Authority. The building permit applies for permission to build a rainbow trout farming complex in offshore cages.
AS Toidu- ja Fermentatsioonitehnoloogia Arenduskeskus (20% share)
AS PRFoods holds a 20% share of AS Toidu- ja Fermentatsioonitehnoloogia Arenduskeskus (Competence Center of Food and Fermentation Technology). As at 30.06.2023 the book value of AS Toidu- ja Fermentatsioonitehnoloogia Arenduskeskus was 370 thousand euros (30.06.2022: 218 thousand euros).
NOTE 29. GOING CONCERN
The corona effect and the measures taken to prevent it have had a significant negative impact on the fishing industry as well as on the Group's operations, liquidity position and financial results. At the same time, the economic environment has clearly improved in the second half of 2022 and we have been able to raise production prices.
To improve our financial results and financial position, we have:
- raised production prices
- reduced the range of products and abandoned unprofitable products
- reduced operating costs
In addition, it is planned:
- if necessary, transfer other assets and rights, the ownership of which is not directly necessary for the operation of the business
- if necessary, propose to creditors to extend payment deadlines and reduce amounts
In October 2022, the Swedish unit Överumans Fisk AB was sold and in the future the Group may realise further business units and cover debt obligations from the proceeds generated from their disposal.
Due to the sale of the subsidiaries, the activity will continue at smaller volumes in the following financial year and, consequently, the Group's turnover and volume of assets will decrease. In the opinion of the management board, the Group is a going concern and there is no significant doubt as to the entity's ability to continue as a going concern. These consolidated financial statements have been prepared on a going concern basis, based on the management board's assessment of the Group's ability to continue as a going concern for at least 12 months after the date of approval.
NOTE 30. EVENTS AFTER BALANCE SHEET DATE
Saaremere Kala AS signed a letter of intent on 25.09.2023 to transfer 51% of the shares of Redstorm OÜ. The price of the share is 313 thousand euros to which is added 51% of the 2023 income from the sale of the biological assets. In addition, the buyer pays Redstorm's intra-group debts in the amount of 560 thousand euros. It was also agreed on the transfer of fishing permits and a building permit at a price of 2 500 thousand euros. In connection with the transfer of permits, the balance sheet of the group does not change, as the permits have been issued to the subsidiary after the balance sheet date.
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NOTE 31. THE PARENT COMPANY PRIMARY'S FINANCIAL STATEMENTS
Pursuant to the Accounting Act of the Republic of Estonia, the separate (primary) financial statements of the consolidating entity (Parent Company) have to be disclosed in the notes to the consolidated financial statements. In preparing the separate primary financial statements of the Parent Company, the same accounting policies have been applied as in preparing the consolidated financial statements. The accounting policy for reporting subsidiaries has been amended in the separate primary financial statements disclosed as supplementary information in the Annual Report in conjunction with lAS 27 "Consolidated and Separate financial Statements".
In the Parent Company's financial statements, which are disclosed in the notes to these financial statements (supplementary information about the Parent Company of the Group), investments in the shares of subsidiaries are measured at cost, less any impairment losses.
STATEMENT OF FINANCIAL POSITION
| EUR '000 | 30.06.2023 | 30.06.2022 |
|---|---|---|
| ASSETS | ||
| Cash | 3 | 0 |
| Short-term financial investments | 17 220 | 8 376 |
| Receivables and prepayments | 497 | 550 |
| Total current assets | 17 720 | 8 926 |
| Investments in subsidiaries | 10 378 | 10 378 |
| Long-term financial investments | 370 | 9 218 |
| Tangible fixed assets | 0 | 3 |
| Intangible assets | 338 | 316 |
| Total non-current assets | 11 086 | 19 915 |
| TOTAL ASSETS | 28 806 | 28 841 |
| EQUITY AND LIABILITIES | ||
| Payables and prepayments | 711 | 600 |
| Total current liabilities | 711 | 600 |
| Loans and borrowings | 13 073 | 12 960 |
| Total non-current liabilities | 13 073 | 12 960 |
| Total liabilities | 13 784 | 13 560 |
| Share capital | 7 737 | 7 737 |
| Share premium | 14 007 | 14 007 |
| Statutory capital reserve | 51 | 51 |
| Treasury shares | -390 | -390 |
| Unrealized exchange differences | -2 | 0 |
| Retained loss | -6 381 | -6 124 |
| Total equity | 15 022 | 15 281 |
| TOTAL EQUITY AND LIABILITIES | 28 806 | 28 841 |
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STATEMENT OF COMPREHENSIVE INCOME
| EUR '000 | 2022/2023 | 2021/2022 |
|---|---|---|
| Revenue | 0 | 146 |
| Gross profit | 0 | 146 |
| Operating expenses | ||
| Sales and marketing expenses | 0 | -5 |
| Administrative and general expenses | -283 | -239 |
| Other income/expenses | -17 | -7 |
| Operating loss | -300 | -105 |
| Financial income/expenses | 43 | -69 |
| Profit (Loss) before tax | -257 | -174 |
| Net profit (loss) | -257 | -174 |
| Total comprehensive income (loss) | -257 | -174 |
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CASH FLOW STATEMENT
| EUR '000 | 2022/2023 | 2021/2022 |
|---|---|---|
| Cash flow from operating activities | ||
| Net profit (loss) | -257 | -174 |
| Adjustments: | ||
| Depreciation | 59 | 57 |
| Other non-cash items | 1 662 | 176 |
| Changes in receivables and prepayments | 53 | 1 235 |
| Changes in payables and prepayments | 111 | 187 |
| Net cash inflow (outflow) from operating activities | 1 628 | 1 481 |
| Cash flow from investing activities | ||
| Purchase of tangible and intangible fixed assets | -78 | -60 |
| Loans granted | -697 | -5 776 |
| Repayments of loans granted | 0 | 3 360 |
| Interests received | 0 | 894 |
| Net cash inflow (outflow) from investing activities | -775 | -1 582 |
| Cash flow from financing activities | ||
| Interest paid | -850 | -963 |
| Net cash inflow (outflow) from financing activities | -850 | -963 |
| Net increase (decrease) in cash and cash equivalents | 3 | -1 064 |
| Cash and cash equivalents at beginning of year | 0 | 1 064 |
| Change in cash and cash equivalents | 3 | -1 064 |
| Cash and cash equivalents at the end of the period | 3 | 0 |
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STATEMENT OF CHANGES IN EQUITY
| EUR '000 | Share capital |
Share premium |
Treasury shares |
Statutory capital reserve |
Retained earnings (loss) |
Total equity |
|---|---|---|---|---|---|---|
| Balance at 30.06.2021 | 7 737 | 14 007 | -390 | 51 | -5 950 | 15 455 |
| Carrying amount of interests under control and significant influence |
-10 378 | |||||
| Value of interests under control and significant influence under the equity method |
10 164 | |||||
| Adjusted unconsolidated equity at 30.06.2021 | 15 241 | |||||
| Comprehensive expense for reporting period | 0 | 0 | 0 | 0 | -174 | -174 |
| Total change | 0 | 0 | 0 | 0 | -174 | -174 |
| Balance at 30.06.2022 | 7 737 | 14 007 | -390 | 51 | -6 124 | 15 281 |
| Carrying amount of interests under control and significant influence |
-10 378 | |||||
| Value of interests under control and significant influence accounted for using the equity method |
2 950 | |||||
| Adjusted unconsolidated equity at 30.06.2022 | 7 853 | |||||
| Comprehensive expense for reporting period | 0 | 0 | 0 | 0 | -257 | -257 |
| Total change | 0 | 0 | 0 | 0 | -257 | -257 |
| Balance at 30.06.2023 | 7 737 | 14 007 | -390 | 51 | -6 381 | 15 022 |
| Carrying amount of interests under control and significant influence |
-10 378 | |||||
| Value of interests under control and significant influence accounted for using the equity method |
2 712 | |||||
| Adjusted unconsolidated equity at 30.06.2023 | 7 356 |
Adjusted unconsolidated equity is used as the basis for determining distributable equity in accordance with the Accounting Act of Estonia.
MANAGEMENT BOARD'S CONFIRMATION TO THE ANNUAL REPORT
The Management Board confirms the correctness and completeness of AS PRFoods and its subsidiaries (together "the Group") consolidated financial statements for the 2022/2023 financial year on pages 8-79 and confirms to the best of its knowledge that:
- The management report of the consolidated report gives a true and fair view of the development and results of the Group's operations and financial position and includes a description of the principal risks and uncertainties.
- The principles applied in preparing the consolidated financial statements are in line with International Financial Reporting Standard (IFRS) as adopted by the European Union.
- The consolidated financial statements give a true and fair view of the Group's assets, liabilities, financial position, financial performance and cash flows.
- AS PRFoods and its subsidiaries are going concerns.
/signed/
Indrek Kasela
Member of the Management Board
31 October 2023
Independent auditors' report
(Translation of the Estonian original)
To the Shareholders of AS PRFoods
Report on the Audit of the Consolidated Financial Statements
Opinion
We have audited the consolidated financial statements of AS PRFoods and its subsidiaries (the Group), which comprise the consolidated statement of financial position as at 30 June 2023, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes, comprising significant accounting policies and other explanatory information.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at 30 June 2023, and its consolidated financial performance and its consolidated cash flows for the year then ended (1 July 2022 – 30 June 2023) in accordance with International Financial Reporting Standards as adopted by the European Union.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (Estonia). Our responsibilities under those standards are further described in the Auditors' Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the International Code of Ethics for Professional Accountants (Estonia) (including International Independence Standards), and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matter
A key audit matter is a matter that, in our professional judgment, was of most significance in our audit of the consolidated financial statements of the current period. This matter was addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on this matter.
| Measurement of goodwill | ||||
|---|---|---|---|---|
| Additional information in notes 4 and 13 of the consolidated financial statements. | ||||
| The key audit matter | How the matter was addressed in our audit | |||
| The Group's consolidated statement of financial position as at 30 June 2023 includes goodwill in the amount of EUR 10,249 thousand, further discussed in note 13. Relevant financial reporting standards require that goodwill be tested for impairment at least annually. |
In this area, we conducted, among others, the following audit procedures: • We evaluated whether the impairment tests on goodwill had been performed in accordance with the requirements of IAS 36 Impairment of Assets. |
This version of our auditors' report is a copy from the original, which was prepared in xhtml format and presented to Nasdaq Tallinn together with the original version of the consolidated financial statements. All possible care has been taken to ensure that the copy is an accurate representation of the original, excluding xbrl tagging. However, in all matters of interpretation of information, views or opinions, the original version of our report takes precedence over this copy.
The Group's management tests goodwill related to the Great Britain segment (in the amount of EUR 8,097 thousand) for impairment by reference to market multiples which involves the use of estimates both in the compilation of a reference group of comparable companies and in the interpretation of the data for the reference group. Even small changes in the inputs may have a significant impact on the estimate of the recoverable amount of goodwill and, thus, also on the Group's financial results.
Because Goodwill related to the Great Britain segment accounted for 27% of the Group's assets as at the reporting date and the recoverable amount of goodwill has been determined based on management's estimates, we have considered the measurement of goodwill to be a key audit matter.
- Assisted by our own valuation specialist, we checked the accuracy of the inputs, the assumptions and the methodologies applied as well as the reasonableness and appropriateness of the conclusions drawn.
- We checked the calculation of the recoverable amount of goodwill prepared by management.
- We assessed the adequacy of the disclosures related to goodwill in the consolidated financial statements.
Other Information
Management is responsible for the other information. The other information comprises the management report, the report on corporate governance and the remuneration report, but does not include the consolidated financial statements and our auditor's report thereon.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. In addition, our responsibility is to state whether the information presented in the management report has been prepared in accordance with the applicable legal and regulatory requirements. With respect to the remuneration report, our responsibility also includes considering whether the remuneration report has been prepared in accordance with section 1353 of the Securities Market Act.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard and we state that the information presented in the management report is materially consistent with the consolidated financial statements and in accordance with the applicable legal and regulatory requirements.
In our opinion, the remuneration report has been prepared in accordance with section 1353 of the Securities Market Act.
Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards as adopted by the European Union, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group's financial reporting process.
Auditors' Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with International Standards on Auditing (Estonia) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with International Standards on Auditing (Estonia), we exercise professional judgement and maintain professional scepticism throughout the audit. We also:
- Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations or the override of internal control.
- Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.
- Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
- Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, then we are required to draw attention in our auditors' report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Group to cease to continue as a going concern.
- Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
- Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence and where applicable, actions taken to eliminate threats or safeguards applied.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors' report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
Report on Compliance with the Requirements for iXBRL tagging of Consolidated Financial Statements included within the European Single Electronic Format Regulatory Technical Standard (ESEF RTS)
We have undertaken a reasonable assurance engagement on the iXBRL tagging of the consolidated financial statements included in the digital files 529900B52V1TUMW7FS54-2022-06-30-et.zip prepared by AS PRFoods.
Responsibilities of Management for the Digital Files Prepared in Compliance with the ESEF RTS
Management is responsible for preparing digital files that comply with the ESEF RTS. This responsibility includes:
- the selection and application of appropriate iXBRL tags using judgement where necessary;
- ensuring consistency between digitised information and the consolidated financial statements presented in human-readable format; and
- the design, implementation and maintenance of internal control relevant to the application of the ESEF RTS.
Auditors' Responsibilities
Our responsibility is to express an opinion on whether the electronic tagging of the consolidated financial statements complies in all material respects with the ESEF RTS based on the evidence we have obtained.
We apply the provisions of the International Standard on Quality Control (Estonia) 1 and accordingly maintain a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.
We are independent of the Group in accordance with the International Code of Ethics for Professional Accountants (Estonia) (including International Independence Standards), and we have fulfilled our other ethical responsibilities in accordance with these requirements.
We conducted our reasonable assurance engagement in accordance with International Standard on Assurance Engagements 3000 (Revised), Assurance Engagements Other than Audits or Reviews of Historical Financial Information (ISAE 3000) issued by the International Auditing and Assurance Standards Board.
A reasonable assurance engagement in accordance with ISAE 3000 involves performing procedures to obtain evidence about compliance with the ESEF RTS. The nature, timing and extent of procedures selected depend on the practitioner's judgment, including the assessment of the risks of material departures from the requirements set out in the ESEF RTS, whether due to fraud or error. A reasonable assurance engagement includes:
- obtaining an understanding of the tagging and the ESEF RTS, including of internal control over the tagging process relevant to the engagement;
- reconciling the tagged data with the audited consolidated financial statements of the Group dated 30 June 2023;
evaluating the completeness of the tagging of the consolidated financial statements;
- evaluating the appropriateness of the Group's use of iXBRL elements selected from the ESEF taxonomy and the creation of extension elements where no suitable element in the ESEF taxonomy has been identified;
- evaluating the use of anchoring in relation to the extension elements.
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
In our opinion, the consolidated financial statements included in the annual report of AS PRFoods identified as 529900B52V1TUMW7FS54-2022-12-31-et.zip for the year ended 30 June 2023 are tagged, in all material respects, in compliance with the ESEF RTS.
Other Requirements of the Auditors' Report in Accordance with Regulation (EU) No 537/2014 of the European Parliament and of the Council
We were appointed by those charged with governance on 19 December 2019 to audit the consolidated financial statements of AS PRFoods for the period ended 30 June 2020 and 30 June 2021. Our total uninterrupted period of engagement has lasted for four years, covering the periods ended 30 June 2020 to 30 June 2023.
We confirm that:
- our audit opinion is consistent with the additional report presented to the Audit Committee of the Group;
- we have not provided to the Group the prohibited non-audit services (NASs) referred to in Article 5(1) of EU Regulation (EU) No 537/2014. We also remained independent of the audited entity in conducting the audit.
Tallinn, 31 October 2023
/signed digitally/
/signed digitally/
Mari-Leen Sandre
Indrek Alliksaar
Certified Public Accountant, Licence No 446
Certified Public Accountant, Licence No 701
KPMG Baltics OÜ Licence no 17
KPMG Baltics OÜ
Narva mnt 5 Tallinn 10117
Estonia Tel +372 626 8700 www.kpmg.ee
This version of our auditors' report is a copy from the original, which was prepared in xhtml format and presented to Nasdaq Tallinn together with the original version of the consolidated financial statements. All possible care has been taken to ensure that the copy is an accurate representation of the original, excluding xbrl tagging. However, in all matters of interpretation of information, views or opinions, the original version of our report takes precedence over this copy.
PROPOSAL FOR PROFIT DISTRIBUTION
The Management Board of AS PRFoods proposes to the General Meeting of Shareholders to leave the net profit of 331 thousand euros undistributed.
/signed/
Indrek Kasela
Member of the Management Board
31 October 2023