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FirstFarms Interim / Quarterly Report 2019

Aug 27, 2019

3433_rns_2019-08-27_0e2ccd2e-7a63-414c-9301-b5cda54eb35d.pdf

Interim / Quarterly Report

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FirstFarms

Company announcement no. 11/2019

27 August 2019

Interim financial report for 1 January – 30 June 2019 for FirstFarms A/S

Summary

The Board of Directors and Management of FirstFarms A/S have today reviewed and adopted the un-audited interim financial accounts for the period 1 January – 30 June 2019.

FirstFarms increases turnover and result concurrently with upward adjustment of the expectations for the result of the year

  • FirstFarms has in the accounting period realised a turnover of DKK 108.5 million compared to DKK 85.3 million in the same period in 2018, an EBITDA of DKK 47.2 million and an EBIT of DKK 22.9 million. EBIT is improved with DKK 10.8 million compared to same period last year.
  • The price on piglets and slaughter pigs has been below budget in Q1, 2019 but significantly above in Q2, 2019. This has together with increased production efficiency contributed to a satisfactory result for the first half year. Higher pig prices in the rest of 2019 are expected.
  • The yields for the winter crops have only been marginally under budget despite a dry autumn. Yields for the spring crops are expected on par with the budget.
  • In the first half year, the milk price has been marginal lower than budget. A milk price is expected on the same level for second half year. The milk production has been on par with the budget in the first half year.
  • The take-over, according to company announcement no. 10/2019, of the company Hospoda Invest A/S will not have effect before second half year of 2019. The company owns and operates 1,500 hectares and has 2,300 sows with production of piglets and slaughter pigs.
  • FirstFarms adjust upwards the announced expectations to an EBITDA of DKK 80-85 million and an EBIT of DKK 33-38 million, compared to previously DKK 75-80 million and DKK 30-35 million. In 2018, an EBITDA of DKK 57 million and an EBIT of DKK 26 million was realised.

Anders H. Nørgaard from FirstFarms A/S says: "It is going well in FirstFarms. Our three operation branches milk, pigs and crops have all made progress in first half year. We expect a good result for 2019 and thus adjust upwards our expectations. We now see the effect of our ambitious and sustainable growth strategy."

Best regards,

FirstFarms A/S

For further information:

Please visit our website www.firstfarms.com or contact CEO Anders H. Nørgaard on telephone +45 75 86 87 87.

About FirstFarms:

FirstFarms is a Danish stock exchange listed company, which purchases and operates agriculture in Eastern Europe. We develop the individual farms to modern and sustainable businesses that deliver milk, meat and grains of the highest quality to the consumer's dinner table.

Company announcement no. 11/2019 for FirstFarms A/S

FirstFarms A/S

Majemarken 1 – 7190 Billund – Danmark – Tel.: +45 7586 8787

www.firstfarms.dk – www.firstfarms.com – [email protected]

CVR no.: 28312504 – Registered office: Billund


FirstFarms

Main and key ratios

The Group Q1+Q2 The Group Q1+Q2 The Group Q2 The Group Q2 The Group
DKK 1,000 2019 2018 2019 2018 2018

Main figures

Turnover 108,480 85,317 52,915 49,903 248,876
Gross profit/loss 31,939 15,577 4,127 2,881 36,664
Result before depreciations (EBITDA) 47,223 24,932 23,838 12,396 41,211
Profit/loss of primary operations (EBIT) 22,922 12,063 11,012 3,131 25,863
Net financial items -7,097 -6,429 -4,104 -3,773 -14,344
Pre-tax result 15,825 5,634 6,908 -642 11,519
Net profit 12,759 5,655 5,469 433 8,131
Non-current assets 635,520 590,725 635,520 590,725 596,488
--- --- --- --- --- ---
Current assets 228,324 195,214 228,324 195,214 178,044
Total assets 863,844 785,939 863,844 785,939 774,532
Share capital 61,594 55,419 61,594 55,419 61,594
Equity 377,737 337,840 377,737 337,840 370,118
Non-current liabilities 305,492 260,270 305,492 260,270 289,870
Current liabilities 180,615 187,829 180,615 187,829 114,544
Cash flow from primary operations 19,028 5,634 23,795 8,115 24,307
--- --- --- --- --- ---
Cash flow from operations 12,895 1,712 12,993 2,627 9,269
Cash flow for investment, net -11,791 -26,829 -7,638 -21,034 -40,158
Of which for investment in tangible assets -29,303 -10,498 -18,883 -4,806 -42,458
Cash flow from financing 9,042 27,825 5,923 32,672 28,360
Total cash flow 10,146 2,708 11,278 14,265 -2,529

Key figures

Gross margin 29.4 18.3 7.8 5.8 14.7
EBITDA margin 43.5 29.2 45.0 24.8 16.6
Operating margin 21.1 14.1 20.8 6.3 10.4
Solvency ratio 44 43 44 43 48
Earnings per share, DKK 2.07 1.20 0.89 0.09 1.32
Diluted earnings per share, DKK 1.86 1.02 0.83 0.08 1.32
Return on shareholders' equity 6.8 2.2 5.8 -2.8 2.4
Average number of employees 284 271 284 275 279
--- --- --- --- --- ---

EBITDA = EBIT added depreciations of the period.

Company announcement no. 11/2019 for FirstFarms A/S

FirstFarms A/S

Majsmarken 1 – 7190 Billund – Danmark – Tel.: +45 7586 8787

www.firstfarms.dk – www.firstfarms.com – [email protected]

CVR no.: 28312504 – Registered office: Billund


FirstFarms

Management report for the period 1 January – 30 June 2019

FirstFarms has in the accounting period realised a turnover of DKK 108.5 million compared to DKK 85.3 million in the same period in 2018, an EBITDA of DKK 47.2 million and an EBIT of DKK 22.9 million. EBIT is improved with DKK 10.8 million compared to same period last year.

In the first half year, the equity is increased with DKK 7,6 million, in consequence of a result of DKK 12.8 million, an exchange rate adjustment of DKK -1.9 million and payment of dividend of DKK 3.3 million.

The price on piglets and slaughter pigs has been below budget in Q1, 2019 but signification above in Q2, 2019. This has together with increased production efficiency contributed to a satisfactory result for the first half year. Higher pig prices in the rest of 2019 are expected.

The yields for the winter crops have only been marginally under budget despite a dry autumn. Yields for the spring crops are expected on par with the budget.

In the first half year, the milk price has been marginal lower than budget. A milk price is expected on the same level for second half year. The milk production has been on par with the budget in the first half year.

The take-over, according to company announcement no. 10/2019, of the company Hospoda Invest A/S will not have effect before second half year of 2019. The company owns and operates 1,500 hectares and has 2,300 sows with production of piglets and slaughter pigs.

Risk assessment

FirstFarms has in the annual report for 2018 described the most essential risks for the company, and it is the management's opinion that this description is still adequate. The annual report and the risk assessment can be found on the company's website www.firstfarms.com.

Accounting policies

The interim financial report is prepared in accordance with IAS 34 "Presentation of interim financial reports" as adopted by the EU and Danish disclosure requirements for listed companies.

Accounting policies are, except for the below mentioned, unchanged compared to the consolidated financial statement and annual report for 2018, to which is referred.

FirstFarms A/S has implemented the standards and interpretations, which become effective for 2019. IFRS 16 has had a significant impact for the interim financial report for 2019. The new regulation entails, that values of rent contracts and operational leasing shall be recognised.

A leasing asset and a leasing liability is recognised in the balance sheet, when the Group according to an entered leasing contract, regarding a specific identified asset, gets the leasing assets available in a leasing period, and when the Group obtains right to almost all the economic advantages from use of the identified asset and the right to decide on the use of the identified asset.

Company announcement no. 11/2019 for FirstFarms A/S
Page 3 of 13

FirstFarms A/S
Majsmarken 1 – 7190 Billund – Danmark – Tel.: +45 7586 8787
www.firstfarms.dk – www.firstfarms.com – [email protected]
CVR no.: 28312504 – Registered office: Billund


FirstFarms

The leasing asset is at initial recognition measured at cost price, which corresponds to the value of the leasing liability.

Subsequently, the asset is measured at cost price deducted accumulated depreciations. The leasing asset is depreciated over the shortest of the leasing period and the leasing life. The depreciations are recognised on a straight-line basis in the income statement.

At initial recognition, the lease liability is measured at the present value of the future lease payments discounted by an alternative loan rate. The following lease payments are recognised as part of the lease liability:

  • Fixed payments
  • Payments covered by an extension option, which the Group most likely expects to utilise

The lease liability is measured at amortised cost price under the effective interest method. The lease liability is recalculated, if the Group changes its assessment of whether an extension or termination option is reasonably expected to be utilised.

The Group presents the leasing asset under the respective types of assets and the lease liability under debt to credit institutions.

Significant accounting estimates, assumptions and assessments

The lease period

The lease period contains the leasing contract's non-terminable period, periods covered by an extension option, which the Group reasonably expects to utilise, and period covered by a termination option, which the Group reasonably expects not to exercise.

A large part of the Group's land contracts in Slovakia can be terminated by both FirstFarms and the lessor once a year. It is the company's assessment, that due to the special circumstances that arise from the landlords' perspective, there are significant financial barriers to terminate the agreements. Based on the company's experience, that a significant part of the leases is prolonged, the management has assessed, that a lease period of 5 years for these lease contracts is more likely.

FirstFarms has chosen the simple model of recognition.

The consequence for assets and liabilities and the income statement are shown in the table below:

DKK 1,000 01.01.2019 30.06.2019
Land 27,536 23,821
Company announcement no. 11/2019 for FirstFarms A/S Page 4 of 13

FirstFarms A/S
Majsmarken 1 – 7190 Billund – Danmark – Tel.: +45 7586 8787
www.firstfarms.dk – www.firstfarms.com – [email protected]
CVR no.: 28312504 – Registered office: Billund


FirstFarms

Machines 6,896 4,689
Short term debt to credit institutions 11,341 11,341
Long term debt to credit institutions 23,091 17,420
EBITDA (depreciations increased) 5,924
EBIT 406
Pre-tax result -252
DKK 1,000
Operational leasing liabilities 31 December 2018 30,198
Discounted value incl. assumed prolongation of contracts 4,235
Financial leasing liabilities 31 December 2018 28,437
Leasing liabilities 1 January 2019 62,870
Current liabilities 20,482
Non-current liabilities 42,388

The consolidated financial statement and annual report for 2018 contains, except the abovementioned, the full description of accounting policies.

Company announcement no. 11/2019 for FirstFarms A/S

FirstFarms A/S

Majsmarken 1 – 7190 Billund – Danmark – Tel.: +45 7586 8787

www.firstfarms.dk – www.firstfarms.com – [email protected]

CVR no.: 28312504 – Registered office: Billund


FirstFarms

Expectations for 2019

FirstFarms adjust upwards the announced expectations to an EBITDA of DKK 80-85 million and an EBIT of DKK 33-38 million, compared to previously DKK 75-80 million and DKK 30-35 million. In 2018, an EBITDA of DKK 57 million and an EBIT of DKK 26 million was realised.

Financial calendar for 2019

26 November 2019 Interim financial report 1 January – 30 September 2019

Company announcement no. 11/2019 for FirstFarms A/S

FirstFarms A/S

Majsmarken 1 – 7190 Billund – Danmark – Tel.: +45 7586 8787

www.firstfarms.dk – www.firstfarms.com – [email protected]

CVR no.: 28312504 – Registered office: Billund


FirstFarms

Management statement

The Management and Board of Directors of FirstFarms have today discussed and approved the interim financial report of FirstFarms A/S for the period 1 January – 30 June 2019.

The interim financial accounts, which has not been audited or reviewed by the independent auditors of the Company, has been prepared in accordance with IAS 34 – “Interim Financial Reporting” as adopted by the EU and additional Danish disclosure requirements for interim reports of listed companies.

In our opinion the interim financial accounts give a true and fair view of the Group’s assets, liabilities and financial position at 30 June 2019 and of the results of the Group’s operations and cash flows for the period 1 January – 30 June 2019.

Further, in our opinion the Management’s review gives a true and fair overview of the development in the Group’s operations and financial matters, the results of the Group’s operations and the Group’s financial position as a whole.

Billund, 27 August 2019

Management

Anders H. Nørgaard
CEO

Board of directors

Henrik Hougaard
Chairman

Asbjørn Børsting
Vice Chairman

Jens Bolding Jensen

Bent Juul Jensen

Company announcement no. 11/2019 for FirstFarms A/S

FirstFarms A/S
Majsmarken 1 – 7190 Billund – Danmark – Tel.: +45 7586 8787
www.firstfarms.dk – www.firstfarms.com – [email protected]
CVR no.: 28312504 – Registered office: Billund


FirstFarms

Income statement

| DKK 1,000 | The Group
Q1+Q2 2019 | The Group
Q1+Q2 2018) | The Group
Q2 2019 | The Group
Q2 2018
) | The Group
2018*) |
| --- | --- | --- | --- | --- | --- |
| Turnover | 108,480 | 85,317 | 52,915 | 49,903 | 248,876 |
| Value adjustment of biological assets | 15,078 | 26,108 | 4,127 | 8,257 | 9,676 |
| Production costs | -113,955 | -117,723 | -52,690 | -66,080 | -271,345 |
| Grants | 22,336 | 21,875 | 11,143 | 10,801 | 49,457 |
| Gross profit/loss | 31,939 | 15,577 | 15,495 | 2,881 | 36,664 |
| Other operating income | 2,064 | 5,324 | 1,053 | 5,263 | 6,502 |
| Administration costs | -11,081 | -8,838 | -5,570 | -5,020 | -16,817 |
| Other operating costs | 0 | 0 | 34 | 7 | -486 |
| EBIT result | 22,922 | 12,063 | 11,012 | 3,131 | 25,863 |
| Financial income | 1,711 | 73 | 438 | 39 | 490 |
| Financial costs | -8,808 | -6,502 | -4,542 | -3,812 | -14,834 |
| Pre-tax result | 15,825 | 5,634 | 6,908 | -642 | 11,519 |
| Tax on net profit | -3,066 | 21 | -1,439 | 1,075 | -3,388 |
| Net profit | 12,759 | 5,655 | 5,469 | 433 | 8,131 |
| Earnings per share, DKK | 2.07 | 1.02 | 0.89 | 0.08 | 1.32 |
| Diluted earnings per share, DKK | 1.86 | 1.02 | 0.89 | 0.08 | 1.32 |

Total income statement

| DKK 1,000 | The Group
Q1+Q2 2019 | The Group
Q1+Q2 2018) | The Group
Q2 2019 | The Group
Q2 2018
) | The Group
2018*) |
| --- | --- | --- | --- | --- | --- |
| Net profit | 12,759 | 5,655 | 5,469 | 433 | 8,131 |
| Other total income | | | | | |
| Items, which can be re-classified to the income statement: | | | | | |
| - Exchange rate adjustments by conversion of foreign units | -1,876 | -3,104 | -1,222 | -2,450 | - |
| - Tax of other total income | 0 | 0 | 0 | 0 | 0 |
| Other total income after tax | -1,876 | -3,104 | -1,222 | -2,450 | 0 |
| Total income | 10,883 | 2,551 | 4,247 | -2,017 | 8,131 |

*) Without correction for IFRS 16.

Company announcement no. 11/2019 for FirstFarms A/S
Page 8 of 13

FirstFarms A/S
Majsmarken 1 – 7190 Billund – Danmark – Tel.: +45 7586 8787
www.firstfarms.dk – www.firstfarms.com – [email protected]
CVR no.: 28312504 – Registered office: Billund


FirstFarms

Balance

The Group The Group The Group
DKK 1,000 Q1+Q2 2019 Q1+Q2 2018*) 2018*)
ASSETS
Non-current assets
Intangible assets
Goodwill 16,070 16,046 16,078
Land lease contracts 0 1,818 1,245
Total intangible assets 16,070 17,864 17,323
Tangible assets
Land 266,945 233,613 240,971
Buildings 192,639 197,165 193,069
Plant and machinery 101,539 82,494 87,897
Fixtures and fittings, tools and equipment 4,345 4,278 3,879
Fixed assets under construction 11,489 13,385 11,108
Total tangible assets 576,957 530,935 536,924
Biological assets
Basic herd 33,307 31,810 33,053
Total biological assets 33,307 31,810 33,053
Other non-current assets
Deferred tax asset 9,186 10,116 9,188
Total other non-current assets 9,186 10,116 9,188
Total non-currents assets 635,520 590,725 596,488
Current assets
Inventories 28,435 26,579 60,652
Biological assets - breeding and crops 128,576 107,815 62,093
Receivables 18,191 18,046 22,632
Other receivables 30,047 33,289 23,967
Accruals and deferred expenses 9,300 3,980 5,072
Cash at bank and in hand 13,775 5,505 3,628
Total current assets 228,324 195,214 178,044
TOTAL ASSETS 863,844 785,939 774,532

*) Without correction for IFRS 16.

Company announcement no. 11/2019 for FirstFarms A/S

FirstFarms A/S

Majsmarken 1 – 7190 Billund – Danmark – Tel.: +45 7586 8787

www.firstfarms.dk – www.firstfarms.com – [email protected]

CVR no.: 28312504 – Registered office: Billund


FirstFarms

The Group The Group The Group
DKK 1,000 Q1+Q2 2019 Q1+Q2 2018*) 2018*)
EQUITY AND LIABILITIES
Equity
Share capital 61,594 55,419 61,594
Reserve for exchange rate adjustment -27,389 -28,617 -25,513
Transferred result 343,532 311,038 330,773
Proposed dividend 0 0 3,264
Total equity 377,737 337,840 370,118
Liabilities
Non-current liabilities
Deferred tax 19,636 16,393 16,645
Credit institutions 155,976 112,998 143,490
Convertible bonds 129,880 130,879 129,735
Other non-current debt 0 0 0
Total non-current assets 305,492 260,270 289,870
Current liabilities
Credit institutions 109,829 87,217 68,356
Convertible bonds 0 27 0
Trade payables and other payables 60,368 62,253 35,319
Corporation tax 0 0 42
Accruals and deferred income 10,418 11,194 10,827
Total current liabilities 180,615 187,829 114,544
Total liabilities 486,107 448,099 404,414
TOTAL EQUITY AND LIABILITIES 863,844 785,939 774,532

*) Without correction for IFRS 16.

Company announcement no. 11/2019 for FirstFarms A/S

FirstFarms A/S

Majsmarken 1 – 7190 Billund – Danmark – Tel.: +45 7586 8787

www.firstfarms.dk – www.firstfarms.com – [email protected]

CVR no.: 28312504 – Registered office: Billund


FirstFarms

Equity statement (Condensed)

DKK 1,000 The Group The Group
Q1+Q2 2019 Q1+Q2 2018
EQUITY STATEMENT
Equity 1 January 370,118 315,073
Result of the period 12,759 5,655
Other total income -1,876 -3,104
Issuance of shares 0 20,216
Dividend -3,264 0
Total income for the period 7,619 22,767
Equity 30 June 377,737 337,840

Cash flow statement (Condensed)

DKK 1,000 The Group The Group
Q1+Q2 2019 Q1+Q2 2018
Pre-tax result 15,825 5,634
Cash generated from operating activities before changes in working capital 26,527 20,112
Cash flow from primary activities 19,028 8,881
Cash flow from operating activities 12,895 1,712
Cash flow from investing activities -11,791 -26,829
- Hereof purchase of Tjekkiet Invest 1) - -
Cash flow from financing activities 9,042 27,825
Total cash flow 10,146 2,708
Available, at the beginning 3,628 2,793
Exchange rate adjustment of available 1 4
Available at closing 13,775 5,505

1) In connection with the purchase of Tjekkiet Invest A/S, only a net of DKK 17.5 million was paid in first half year of 2018, as the remaining DKK 2.5 million is paid later on. There has also been issued convertible bonds for DKK 19.9 million and issued share for DKK 20.2 million.

Company announcement no. 11/2019 for FirstFarms A/S

FirstFarms A/S

Majsmarken 1 – 7190 Billund – Danmark – Tel.: +45 7586 8787

www.firstfarms.dk – www.firstfarms.com – [email protected]

CVR no.: 28312504 – Registered office: Billund


FirstFarms

Segment information

| Q1+Q2 2019
DKK 1,000 | Romanian activities | Slovakian activities | Hungarian activities | Czech activities | Total report compulsory segments |
| --- | --- | --- | --- | --- | --- |
| Total segment turnover | 8,315 | 40,805 | 21,594 | 37,765 | 108,479 |
| Grants | 8,030 | 11,419 | 1,974 | 912 | 22,335 |
| Value adjustment of biological assets | 0 | 8,011 | 2,927 | 4,140 | 15,078 |
| Financial income | 62 | 0 | 7 | 0 | 69 |
| Financial costs | -4,071 | 1,795 | -636 | -851 | -3,763 |
| Depreciations | 8,530 | 11,803 | 1,521 | 2424 | 24,278 |
| Segment result before tax | -556 | 5,695 | 6,775 | 6,846 | 18,760 |
| Segment assets | 248,925 | 372,508 | 92,825 | 149,863 | 864,121 |
| Plant investments *) | 14,554 | 10,847 | 2,507 | 1395 | 29,303 |
| Segment liabilities | 202,114 | 251,535 | 73,260 | 69,175 | 596,084 |

*) Plant investments are investments in machinery, land and buildings.

| Q1+Q2 2018)
DKK 1,000 | Romanian activities | Slovakian activities | Hungarian activities | Czech activities | Total report compulsory segments |
| --- | --- | --- | --- | --- | --- |
| Total segment turnover | 12,887 | 44,285 | 21,331 | 6,814 | 85,317 |
| Grants | 7,493 | 11,987 | 2,244 | 151 | 21,875 |
| Value adjustment of biological assets | 0 | 7,547 | 17,346 | 1,215 | 26,108 |
| Financial income | 54 | 0 | 16 | 3 | 73 |
| Financial costs | -1,012 | -2,191 | -874 | -131 | -4,208 |
| Depreciations | 3,403 | 7,248 | 1,812 | 383 | 12,846 |
| Segment result before tax | -618 | 5,802 | 1,591 | 5,905 | 12,680 |
| Segment assets | 219,105 | 336,742 | 88,503 | 140,131 | 784,481 |
| Plant investments
*) | 14,428 | 8,620 | 2,280 | 0 | 25,328 |
| Segment liabilities | 175,357 | 221,268 | 72,886 | 74,533 | 544,044 |

) Without correction for IFRS 16.
*) Plant investments are investments in machinery, land and buildings.

The result for Czech Republic covers only June, and negative goodwill of DKK 4.9 million is recognised from the opening balance.

Company announcement no. 11/2019 for FirstFarms A/S
Page 12 of 13

FirstFarms A/S
Majsmarken 1 – 7190 Billund – Danmark – Tel.: +45 7586 8787
www.firstfarms.dk – www.firstfarms.com – [email protected]
CVR no.: 28312504 – Registered office: Billund


FirstFarms

Reconciliation of report compulsory segments result

DKK 1,000 Q1+Q2 Q1+Q2
2019 2018
Segment result before tax for report compulsory segments 18,760 12,680
Non-allocated result, Group function -2,935 -7,046
Result of continued operations before tax, cp. income statement 15,825 5,634

Turnover

DKK 1,000 Q1+Q2 Q1+Q2
2019 2018
Sale of milk 30,285 30,173
Sale of cows and calves 2,298 4,279
Sales of piglets and slaughter pigs 58,622 25,799
Sale of corn etc. 15,552 21,266
Other turnover 1,723 3,800
Total 108,480 85,317

Company take-over after balance sheet date

FirstFarms has, cf. company announcement no. 10 of 17 July 2019, purchased a larger agriculture in Slovakia, Hospoda Invest A/S, who owns 100 percent of the Slovakia company, JK Gabcikovo s.r.o., which includes crop and pig production in Slovakia.

There are 2,300 sows with a yearly production of 75,000 pigs, of which 40-45,000 are sold as piglets and 30- 35,000 as slaughter pigs. The production plants are of high quality, and the production results have been very satisfactory for a number of years.

The production foundation for the crop production is 1,500 hectares of arable land of high quality. Crop rotation is varied, mostly consisting of grain, rape and maize.

The total payment for full take-over of Hospoda Invest A/S constitutes DKK 185.7 million.

Company announcement no. 11/2019 for FirstFarms A/S

FirstFarms A/S

Majsmarken 1 – 7190 Billund – Danmark – Tel.: +45 7586 8787

www.firstfarms.dk – www.firstfarms.com – [email protected]

CVR no.: 28312504 – Registered office: Billund