Seeka Limited — Annual Report 2017

Feb 23, 2018

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Financial Results FY17 Published February 2018

Key points for 2017

A seasonal reduction in New Zealand kiwifruit volumes handled by Seeka by 21% compared to 2016, Hayward (Green) reduced by 33%, had the potential to significantly impact earnings

Operational initiatives and innovation put in place mitigated the effect of lower volume. Improved earnings were achieved in Australia, avocados, orcharding and the Delicious Nutritious Food Company

In addition, active measures to save costs resulted in improved earnings

Deferred tax correction resulted in a larger than normal tax provision in earnings of $1m Supply change of a key customer led to Seeka impair banana business by $2.031m

Seeka is providing positive guidance for FY18 NPAT up 5-10%

Dividend of 12 cents per share to be paid 23 March 2018 declared

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Financial summary

Audited financial results FY2017

	2017 $m	2016 $m
Turnover¹	217.9	229.4
Revenue	186.8	191.3
EBITDA²	23.1	24.8
Net profit before tax	9.9	13.6
Net profit after tax	5.8	10.4

Turnover & revenue NZ$m

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229.4 217.9
187.7
142.1 191.3 186.8
2015 2016 2017
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EBITDA NZ$m

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24.8
23.1
23.2
13.9
2015 2016 2017
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2016 EBITDA includes insurance proceeds of $4.1m (2017:$0.125m) and gain on sale of investments $0.4m and cost of grower shareholder scheme at $2.9m. Adjusted EBITDA is $23.2m

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1. Turnover is revenue plus the value of sales Seeka makes as an agent.

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1. EBITDA is earnings before interest, tax, depreciation, amortisation, impairments and revaluations.

Earnings, net debt and net asset backing

35 cents Earnings Per Share

	2017	2016
Earnings per share (cents)	35 (44)	65 (47)
Net debt ($m)	83.1	72.8
Total assets ($m)	222.0	197.3
Net asset backing per share ($)	5.63	4.89

Earnings per share Cents

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65
47
35
29
2015 2016 2017
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2016 Normalised EPS excludes receipt of $3.6m insurance proceeds which after tax reduces EPS from $0.65 to $0.47.

2017 a prior period deferred tax adjustment of $1m was expensed. This had the effect of reducing EPS by $0.06 per share and would have resulted in $0.41 EPS. Impairments less revaluation gains resulted in a further $0.3 reduction and would have made EPS $0.44

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Revenue, EBITDA and packed kiwifruit volumes

Lower kiwifruit volumes across the industry, total kiwifruit down by 21% on the previous year and Hayward (Green) down by 33%

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$191m
$187m
2% decrease in revenue
$142m 6% decrease in EBITDA
$24.7m
$116m $23.1m
Revenue $97m 21% decrease in kiwifruit volumes
$13.9m offset by:
$9.9m $11.5m •• Seeka Australia Avocados
EBITDA • Delicious Nutritious Food
Company
32.4m
27.8m
25.5m
21.4m
19.6m
Total kiwifruit
trays packed
2013 2014 2015 2016 2017
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Net profit after tax and earnings per share

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$0.65
$0.47 2016 Normalised EPS excluding insurance settlement
A prior period deferred tax
adjustment of $1m was
expensed in 2017. This had
$10.4m the effect of reducing EPS by
$0.35 $0.06 per share and would
$0.29
have resulted in $0.41 EPS.
Impairments less revaluation
$0.22 gains resulted in a further $0.3
reduction and would have
Earnings $0.16 made EPS $0.44
per share
$5.8m
$4.3m
$3.2m
Net profit $2.3m
after tax
2013 2014 2015 2016 2017
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Capital expenditure

Expanding infrastructure to support growth

$20.9m capex in FY2017

Expenditure largely completed in 2016/17

• New Zealand capital projects include: > Packing machine

• Coolstore capacity

• Ongoing development in Australia

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Capital expenditure
$m 40.9
20.9
16.4
5.6
1.6
2013 2014 2015 2016 2017
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Operating segments’ performance

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New Zealand Orchard Division

Volume and market returns

$6.4m EBITDA

▪ Up 14% on PCP

Kiwifruit volumes decreased

in line with industry wide drop in yields

Grew 8.45m trays kiwifruit (30.7m kilograms)

Grew 98,356 trays avocado (0.54m kilograms)

Millions of trays	2017	2016
Hayward (Green)	5.9	8.9
Zespri SunGold	2.6	2.3
Total	8.5	11.2
Turnover/ revenue ($m)	48.6	47.9
EBITDA ($m)	6.4	5.6

New Zealand kiwifruit grown Millions of class 1 trays

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11.2
9.2
8.5
6.9 7.2
2013 2014 2015 2016 2017
Hayward SunGold
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Growing kiwifruit, avocado and kiwiberry

• Operates over 220 orchards via management, lease and long term lease contracts

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New Zealand Post Harvest Division

Volume and profit

$22m EBITDA

• Down 18% on PCP

• 25.5m trays processed

• Down 21%

Fruit loss the best in

Seeka’s history

• 1.18% Hayward (Green) conventional

• 0.42% for Hayward (Green) organic

• 0.73% for Zespri SunGold

Innovation in management and procurement has yielded positive results

Millions of trays	2017	2016
Hayward (Green)	16.6	25.0
Zespri SunGold	9.0	7.4
Total	25.5	32.4
Turnover/ revenue ($m)	96.7	110.8
EBITDA ($m)	22.0	26.8

Class 1 & 2 kiwifruit trays

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Millions 32.4
27.8
25.5
21.4
19.6
2013 2014 2015 2016 2017
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Processing service to harvest, pack, coolstore and supply kiwifruit, avocado and kiwiberry

• Processes fruit from over 700 orchards including Seeka’s managed orchards and independent growers

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New Zealand Retail Services Division

$2.9m EBITDA

• Up 53% on PCP

Seeka benefits from strong avocado market. Returns to

growers forecast an excess of $40 per tray

Delicious Nutritious Food Company had partial first year EBITDA totalling $0.29m

Supply change of a key customer led Seeka to impair banana business by $2.03m

	2017 ($m)	2016 ($m)
Turnover	54.2	53.7
Revenue	24.3	16.8
EBITDA	2.9	1.9

Markets produce from Group operations plus imports and processes tropical fruits

• Sell avocados under Seeka brand

• Market kiwifruit in Australasia and work in collaboration with Zespri to market kiwifruit in Asia

• Import and ripen bananas and other tropical fruits

• • Operate a wholesale fruit and vegetable market • Delicious Nutritious Food Company manufacture and market Kiwi Crush products, avocado oil and packing and distributing kiwiberry

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Seeka Australia Division

Integrated orchard to market

$2.3m EBITDA

• Up 130% on PCP

Kiwifruit harvest yields and quality improved on previous year

Nashi volumes down with seasonal fluctuation

Expanding kiwifruit orchards

• Infill planting of existing orchards

• 63ha development of new orchards

	2017	2016
Kiwifruit (tonnes)	2,982	2,375
Nashi pears (tonnes)	1,201	1,523
Packham pears (tonnes)	854	996
Other (tonnes)	727	884
Revenue ($m)	16.5	15.2
EBITDA ($m)	2.3	1.0

The largest grower and supplier of Australian kiwifruit and nashi pears

• Own nine large orchards, packs, markets and distributes the produce throughout Australia

• • Grow kiwifruit and nashi, as well as european pears, apricots, plums and cherries

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Share performance

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Dividend announcement

12 cents per share to be paid 23 March 2018

12 cents per share

• Fully imputed

• Payment date: 23 March

• Record date: 16 March

Dividend reinvestment plan applies

22 cents per share fully imputed dividend paid in the last 12 months

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Cents per share
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12
10 10 10 10
9
8 8
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Nov 14 Mar 15 Sep 15 Mar 16 Sep 16 Mar 17 Sep 17 Mar 18

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Share price

69% shareholder return over two years

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$3.75 $5.95
10c 10c 10c 10c
$2.20 lift in price
40 cents paid in dividends
Feb 16 Apr 16 Jun 16 Aug 16 Oct 16 Dec 16 Feb 17 Apr 17 Jun 17 Aug 17 Oct 17 Dec 17 Feb 18
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