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Select Harvests Limited
Half Year Results Announcement and Western Australia Project Update
21 February 2013
Select Harvests today announces results for the 6 months ended 31 December 2012 with a Net Loss After Tax of
$19.5 million, including a $27.9 million after tax write down on its Western Australia Almond Orchard project. The
write down follows the completion of a full economic and horticultural review.
Excluding the impact of the Western Australia write down, 1H13 Net Profit After Tax (NPAT) increased 40% to $8.4
million, driven by higher almond crop yields, strong almond prices, operational improvements and lower debt levels
in the business.
Overview of Results:
Reported:
Reported Net Loss After Tax of $ 19.5 million, including the impact of Western Australia write down (after
tax) of $27.9 million
Non-cash write down on Western Australian Almond Orchard Project of $39.9 million (pre tax)
Operating cash flow of $11.5 million (1H12 $11.7 million)
Result excluding impact of write down of Western Australian project
Net Profit After Tax +40% to $8.4 million (1H12 $6.0 million)
Earnings Before Interest and Tax (EBIT) +53% to $14.4 million (1H12 $9.4 million)
Profit Before Tax (PBT) +94% to $12.0 million (1H12 $ 6.2 million), with interest expense down by 28%
as a result of lower debt and interest rates
Balance Sheet
Net Debt $61.2 million (1H12 $82.5 million), reduced by 26% over the last 12 months
The Directors announce an interim dividend (fully franked) of 3 cents per share, payable on 26 April 2013 and with
a Record Date of 8 March 2013. The dividend is lower than last year as directors seek to conserve balance sheet
capacity.
A more detailed summary of the result is included in the appendix to this announcement.
Commenting on the result, Paul Thompson, Managing Director, said “The underlying result reflects the combined
benefits of excellent growing conditions, improved market prices for almonds and a strong focus by management
on productivity, cost control, cash flows and reducing debt. The harvest has now commenced and the weather
outlook is encouraging. Assuming harvest conditions remain favourable, we are on track for a significant
improvement in full year underlying earnings”.
“While the write down from the Western Australian Almond Orchard Project is extremely disappointing, following the
outcome of the full economic and horticultural review, the priority for management is to maximise value from the
assets. Our business aim is to free up capital, strengthen the balance sheet and provide more flexibility to invest in
the growth of our company orchards business, which will ultimately improve the performance of Select Harvest’s
integrated almond business”.
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Almond Division
Excluding the impact of the WA write down, Almond Division EBIT of $12.1 million (1H12 $7.9 million) increased
53% year on year, in spite of the loss of orchard management fees from Olam from 1 July 2012. Company
orchards EBIT was $8.9 million (1H12 $2.5 million), an increase of 260%. This was driven by a combination of
factors including new management’s yield, quality and cost initiatives, a greater emphasis on benchmarking,
customised orchard management practices to optimise tree health and productivity and the 2013 crop valuation,
which at the half year is based on best estimates of yield, almond price and costs.
An estimate of the yield for the 2013 crop has been developed based on 8,736 acres (3,540 ha) of planted almond
orchards in NSW and Victoria. The projected yield is 8,850 MT (1H12 5,830 MT), an increase of 52% on last year’s
projection. The crop forecast excludes the impact of the orchard acquisitions announced in January and February
2013.
An almond price for the 2013 crop of $6.08/kg has been estimated. This compares to a latest estimate 2012 crop
price of $5.05/kg ($4.94 estimated at time of 30 June accounts), a projected increase of 20% year on year, inclusive
of the impact of currency. To date, over 30% of the 2013 crop yield projection is committed to sales contracts
supportive of the almond price estimates. Currency hedging is in place against these commitments.
Production costs have benefitted this year from improved productivity and better than anticipated processing of the
2012 crop. Benchmarking of orchard programs, costs and yield outcomes remains a key focus for the management
team to ensure industry best practises are in place. Notably, orchard operating costs have been maintained in line
with prior year whilst absorbing incremental costs of temporary water, which are now part of the orchard costs,
following the sale of the majority of the permanent water rights in FY12. New technologies, including “leaf pressure
moisture testing” have recently been implemented to help optimise the timing of harvest across each orchard.
Managed Orchard EBIT of $3.2 million (1H12 $ 5.5 million) was down 39% due to the lost orchard management fee
income from Olam. The first half result includes a component of fee income for the processing of the residual 2012
Olam crop which will fall out in the second half of FY13 as Olam takes this activity in house.
The primary processing plant in Northern Victoria is now operating with improved efficiency. A pasteuriser has
been installed to support processing of the 2013 crop, making Select Harvests the first in the Australian almond
industry to have the capability to supply “in-house” pasteurised almonds to its customers.
To assist in understanding the Select Harvests almond orchard portfolio (owned/ leased and managed), refer to the
portfolio summary included as an appendix to this announcement.
Western Australia Project
Select Harvests’ strategy has been to diversify the geographical location of its orchard portfolio by expanding its
Company Orchards. An initial feasibility study, which commenced in 2005, supported by independent expert
advice, was supportive of the potential to grow and process almonds in a 10,000 acre ( 4,048 hectares)
development in Western Australia. It was anticipated other parties would join Select Harvests in this investment.
The Company proceeded with the initial Greenfield development in Western Australia resulting in 3,949 acres
(1,599 hectares) being planted. However a number of factors have compounded to impede the development:
Following the GFC there has been a lack of interest from potential investors in almond orchards,
particularly greenfields developments, resulting in the Project having significantly lower scale compared to
the original strategy.
Select doesn’t have the financial capacity to develop the entire project
Horticultural challenges, including impact of climate and soils
Unforeseen and uncontrollable cost increases such as the cost of power and water extraction being in
excess of 50% higher than the East Coast
At 30 June 2012 the Company booked an impairment provision of $20 million to reflect the valuation impact caused
by the quantity, quality and costs of farming relative to the capital invested. A formal independent expert review of
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all horticultural and economic aspects of the project was initiated. The review is now complete and has found that
terrain and soil conditions have been more challenging than anticipated, while water requirements and the power
costs associated with the project have proved to be significantly higher than expected.
The book value of the Western Australia almond orchard assets has been written down, and management will now
plan to realise the optimal value of this asset, which may include a sale as a going concern.
Orchard Acquisitions
Consistent with the Company’s strategy to acquire established orchards on the East Coast, Select Harvests
completed two acquisitions in Wemen, Victoria in January/February 2013 to bring Select Harvests total Company
Orchards (owned and leased) to 10,022 acres (4,057 ha). The acquisitions represented the opportunity to acquire
high performing orchards with attractive yield profiles located close to the company’s state of the art processing
facility. The Company will continue to look at opportunities to invest in yielding orchards on the east coast where it
makes financial sense to do so.
The half year result does not include the impact of the 1,286 acres (521 ha) of orchards acquired in
January/February 2013. The benefit of these acquisitions will be reflected in the full year result, where EBIT
derived from ownership will more than offset the loss of management fees relating to these orchards, the impact
being earnings accretive, applying prevailing crop yield and almond price projections.
In addition to the Company Orchards, Select Harvest also manages 1,427 acres (528 ha) of almond orchards on
behalf of 3rd parties. Combined with the Company Orchards and Managed Orchards, this brings the total Select
Harvests almond portfolio to 11,449 acres (4,635 ha).
Also in February, the Company renegotiated a long term processing and marketing agreement for 1,782 acres (721
hectares) of mature orchards with an existing investor grower effective March 31st.
Food Division
The Food division achieved Net Sales of $74.7 million, an increase of 2% compared to last year. EBIT increased
15% to $4.0 million. Improvement in underlying profitability is largely due to margin mix and cost reduction
initiatives coming through. Working capital across the food business has reduced by 14% year on year, driven by
the continued efforts on range rationalisation and supply chain management.
The management team will continue to focus on refining the product range, quality and development of insight
driven strategies to grow market share, reducing costs and improving returns on capital employed.
Debt and Cash flow development
The Company has deliberately targeted debt reduction, asset optimisation and the balance sheet. As a result, the
sale of permanent water rights in 2012 and strong operating cash flows has enabled the company to maintain the
capacity to take advantage of a number of acquisition opportunities that have emerged.
The gearing ratio is 44.3 %, after the impact of the WA write down. Excluding the impact of the WA write down,
gearing is at 36.9%, compared to 47.6% at the same time last year.
Outlook
The outlook for FY13 remains positive and the harvest began this week with reports of good yields of bright,
sizeable kernels. The full exposure to the almond value chain through an increase in Company orchards will
provide strong leverage to earnings and cash flows given the maturity profile of the Company orchard portfolio. The
current yield and almond price projections, if realised, will benefit the full year earnings accordingly.
The reduced future investments in the Western Australia Project will provide improved balance sheet capacity
through substantial cash flow savings and will free up significant management time. Combined with the now
minimal capital expenditure commitments required in the outlook period, this will position the company well to
deploy those cash flows to other more certain and higher returning commercial opportunities that will boost group
processing capacity utilisation and return on capital. In this regard, the Company will continue to evaluate
opportunities to increase the orchard portfolio where it makes financial sense to do so.
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The objective of growing almond processing volumes through establishing new contracts with third party growers in
the Sunraysia and Riverina districts will remain a key focus, aimed at improving capacity utilisation and helping to
encourage new almond industry investment in areas that are in need of processing capacity.
The Company continues to focus on the “One Select” performance improvement program, including a focus on
culture, process, growth, innovation, cost savings and working capital reductions. Positive outcomes have been
delivered across the business and significant opportunities for continued improvement remain.
Looking forward, Select Harvests’ integrated business model leaves the Company well positioned to take full
advantage of the positive dynamics of the international almond market to increase shareholder returns.
FOR FURTHER INFORMATION, PLEASE CONTACT: Paul Thompson, Managing Director 03 9474 3544 Andrew Angus, Investor Relations 0402 823 757 BACKGROUND: Select Harvests Ltd (ASX:SHV) is an ASX listed, fully integrated almond business, consisting of orchards (company owned, leased, joint venture and managed), primary processing (hulling & shelling), secondary processing (blanching, roasting, slicing, dicing, meal), trading (industrial products) and consumer products (Private Label & Brands - Lucky, Sunsol, Soland, Nuvit, Renshaw & Allinga Farms). Select Harvests also import a full range of nuts (in addition to almonds) for inclusion in their Consumer Products range of nut products. Australia is a significant global almond producer and Select Harvests are one of Australia’s largest almond companies, supplying almonds domestically and internationally, to supermarkets, health food shops, industrial segments and the almond trade. The company is headquartered at Thomastown on the outskirts of Melbourne, Australia while its orchards are located in North West Victoria, and Southern New South Wales.. Its primary processing facility (Carina West) is
located at Wemen in North West Victoria and the secondary processing facility is located at Thomastown.
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Half Year Results - Key Financial Data
$000’s FY 2012 FY 2013 %
Revenues* 132,799 108,364 -18.4%
EBIT
Company Orchards 2,466 8,885 +260%
Managed Orchards 5,455 3,248 -39%
Almond Division 7,921 12,133 +53%
Food Division 3,476 3,988 +15%
Corporate (1,969) (1,758) -11%
Total EBIT 9,428 14,363 +53%
Interest Expense (3,201) (2,314) -28%
Profit Before Tax 6,227 12,049 +94%
Tax (excluding R and D benefits)
(1,712) (3,615) -
NPAT (exc R & D tax benefit) 4,514 8,434 +87%
R and D tax benefit (1,500) - -
NPAT before WA impairment 6,014 8,434 +40%
WA impairment - (27,935) -
NPAT (loss) reported 6,014 ( 19,501) -
EPS (exc WA write down) 10.7 cents 14.8 cents +38%
Net Debt ($000’s) 82,500 61,222 -26%
Net Debt/equity % 47.6% 36.9%
Net Debt/equity % post WA write down
47,6% 43.8%
*FY 2012 revenues includes costs of Olam orchards reimbursed from Olam
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Select Harvests - Orchard Portfolio
Company Orchards Acres Hectares Acres Hectares
Owned 4,013 1,624 4,013 1,624
Leased 1,481 600 1,481 600
Victoria 5,494 2,224 5,494 2,224
Owned 1,511 612 1,511 612
Leased 3,017 1,221 3,017 1,221
NSW 4,528 1,833 4,528 1,833
Total Company Orchards 10,022 4,057 10,022 4,057
Managed Orchards 1,427 578 3,209 1,299
Total Portfolio 11,449 4,635 13,231 5,356
Orchard Category
Owned 5,524 2,236 5,524 2,236
Leased 4,498 1,821 4,498 1,821
Managed Orchards 1,427 578 3,209 1,299
Total Portfolio 11,449 4,635 13,231 5,356
Orchard Geography
VIC 6,921 2,802 8,703 3,523
NSW 4,528 1,833 4,528 1,833
Total Portfolio 11,449 4,635 13,231 5,356
Orchard Management Area Almond Processing Area
Orchard Management Almond Processing
Acres Hectares Acres Hectares
Company Orchards
Owned 4,013 1,624 4,013 1,624 Leased 1,481 600 1,481 600 VICTORIA 5,494 2,224 5,494 2,224 Owned 1,511 612 1,511 612 Leased 3,017 1,221 3,017 1,221 NSW 4,528 1,833 4,528 1,833
Total Company Orchards 10,022 4,057 10,022 4,057
Managed orchards 1,427 578 3,209 1,299 Total Portfolio 11,449 4,635 13,231 5,356
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SELECT HARVESTS LIMITED ABN 87 000 721 380
AND CONTROLLED ENTITIES
HALF-YEAR INFORMATION FOR THE SIX MONTHS ENDED 31 DECEMBER 2012
PROVIDED TO THE ASX UNDER LISTING RULE 4.2A
This half-year financial report is to be read in conjunction with the financial report for the year ended 30 June 2012.
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Rule 4.2A.3
Appendix 4D Half Year Report for the six months to 31 December 2012 Name of entity Select Harvests Limited
ABN 87 000 721 380 1. Reporting period Report for the half year ended 31 December 2012
Previous corresponding period is the financial year ended 30 June 2012 and half year ended 31 December 2011
2. Results for announcement to the market (All amounts in this report are expressed in $’000 unless otherwise stated)
Revenues from continuing ordinary activities (item 2.1)
Down 24.0% to 98,866
Profit (loss) from continuing ordinary activities after tax attributable to members (item 2.2)* Profit excluding impact of Western Australian orchard biological asset fair value write downs and impairment losses on property, plant and equipment* *Loss from continuing activities after tax includes the impact of biological asset fair value write downs and impairment losses on property, plant and equipment in relation to the Western Australian Greenfield orchard development with a combined impact of $27.9m after tax
Down Up
424.3%
40.2%
to to
(19,501) 8,434
Dividends (item 2.4) Amount per security Franked amount per security
Interim dividend 3.0¢ 3.0¢
Previous corresponding period
Interim dividend
5.0 ¢
5.0 ¢
Record date for determining entitlements to the interim and special dividend (item 2.5)
8 March 2013
Brief explanation of any of the figures reported above necessary to enable the figures to be understood (item 2.6): Please refer to the attached announcement.
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3. Net tangible assets per security (item 3)
Current period Previous corresponding period
Net tangible asset backing per ordinary security
$1.81
$2.24
4. Details of entities over which control has been gained or lost during the
period: (item 4)
Control gained over entities Name of entities (item 4.1) -
Date(s) of gain of control (item 4.2)
-
Contribution to consolidated profit (loss) from ordinary activities after tax by the controlled entities since the date(s) in the current period on which control was acquired (item 4.3)
$ -
Profit (loss) from ordinary activities after tax of the controlled entities for the whole of the previous corresponding period (item 4.3)
$ -
5. Dividends (item 5)
Date of payment Total amount of dividend ($’000)
Interim dividend – year ended 30 June 2013
26 April 2012 1,715
Interim dividend – year ended 30 June 2012
16 April 2012 2,820
Amount per security
Amount per security
Franked amount per security at 30 % tax
Amount per security of foreign sourced dividend
Total dividend: Current year (interim) 3.0 ¢ 3.0 ¢ Nil ¢ Previous year (interim) 5.0 ¢ 5.0 ¢ Nil ¢
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Total dividend on all securities
Current period $'000
Previous corresponding Period - $'000
Ordinary securities (each class separately) 1,715 2,820
Preference securities (each class separately) - -
Other equity instruments (each class separately) - -
Total 1,715 2,820 6. Details of dividend or distribution reinvestment plans in operation are
described below (item 6): The interim dividend may be reinvested in ordinary shares under the company’s Dividend Reinvestment Plan at a 2.5% discount to the DRP price. The last date(s) for receipt of election notices for participation in the dividend or distribution reinvestment plan
8 March 2013
7. Details of associates and joint venture entities (item 7)
Name of associate or joint venture entity %Securities held
N/a
Aggregate share of profits (losses) of associates and joint venture entities Group’s share of associates’ and joint venture entities’:
2012 $
2011 $
Profit (loss) from ordinary activities before tax - -
Income tax on ordinary activities - -
Net profit (loss) from ordinary activities after tax - -
Adjustments - -
Share of net profit (loss) of associates and joint venture entities
- -
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8. The financial information provided in the Appendix 4D is based on the half
year condensed financial report (attached), which has been prepared in accordance with Australian accounting standards.
9. Independent review of the financial report (item 9)
The financial report has been independently reviewed. The financial report is not subject to a qualified independent review statement.
10. Matters relating to a qualified independent review statement
A description of the dispute or qualification in respect of the independent review of the half-year financial report is provided below (item 17)
N/a
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SELECT HARVESTS LIMITED ABN 87 000 721 380
AND CONTROLLED ENTITIES
FINANCIAL REPORT FOR THE HALF-YEAR ENDED
31 DECEMBER 2012
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SELECT HARVESTS LIMITED AND CONTROLLED ENTITIES ABN 87 000 721 380
FINANCIAL REPORT FOR THE HALF-YEAR ENDED 31 DECEMBER 2012
TABLE OF CONTENTS
Page
Directors' report 1
Auditor’s independence declaration 3
Financial report for the half-year ended 31 December 2012
Consolidated Income Statement 4
Consolidated Statement of Comprehensive Income 5
Consolidated Balance Sheet 6
Consolidated Statement of Changes in Equity 7
Consolidated Statement of Cash Flows 8
Notes to the financial statements 9
Directors' declaration 14
Independent auditor’s review report 15
This interim financial report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual financial report for the year ended 30 June 2012 and any public announcements made by Select Harvests Limited during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001
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SELECT HARVESTS LIMITED AND CONTROLLED ENTITIES ABN 87 000 721 380
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DIRECTORS’ REPORT The directors present their report together with the financial report of Select Harvests Limited and controlled entities (referred to hereafter as the “consolidated entity” and “group”) for the half-year ended 31 December 2012 and independent review report thereon. Directors The names of the directors in office at any time during or since the end of the half-year are: M Iwaniw (Chairman) P Thompson (Managing Director) (appointed 9 July 2012) R M Herron M Carroll F S Grimwade P Riordan (appointed 2 October 2012) The directors have been in office since the start of the financial period to the date of this report unless otherwise stated. Review of Operations The consolidated loss of the group for the half-year after providing for income tax amounted to $19,500,485 (half-year 31 December 2011, $6,014,164). The Company has recognised write downs of biological assets of $26,147,387 and impairment losses of $13,760,204 in relation to property, plant and equipment at the Western Australia Greenfield orchard development during the period. Excluding the impact of the write downs and impairment relating to the Western Australian orchards the consolidated profit for the group would have been $8,434,830 Interim Dividend On 21 February 2013, the Directors declared a fully franked interim dividend of 3 cents per ordinary share to be paid on 26 April 2013 to shareholders registered at 5.00pm on 8 March 2013. Subsequent Events On 17 January 2013 Select Harvests purchased 690 acres of almond orchards in Northern Victoria for $4.3 million cash consideration, which included $3.0 million for the orchard assets and $1.3 million for title to the 2013 crop. On 4 February 2013 Select Harvests purchased 596 acres of almond orchards in Northern Victoria for $3.3 million, which included $2.7 million for the orchard assets and $0.6 million for title to the 2013 crop. No other significant events have occurred subsequent to reporting date. Auditor’s Independence Declaration A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 3.
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SELECT HARVESTS LIMITED AND CONTROLLED ENTITIES ABN 87 000 721 380
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Rounding of amounts to nearest thousand dollars The amounts contained in the report and in the financial report have been rounded to the nearest $1,000 (where rounding is applicable) under the option available to the company under ASIC Class Order 98/0100. The company is an entity to which the Class Order applies. Signed in accordance with a resolution of the directors:
Michael Iwaniw Chairman Dated this 21st day of February 2013
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PricewaterhouseCoopers, ABN 52 780 433 757Freshwater Place, 2 Southbank Boulevard, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
Auditor’s Independence Declaration
As lead auditor for the review of Select Harvests Limited for the half-year ended 31 December 2012, Ideclare that to the best of my knowledge and belief, there have been:
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 inrelation to the review; and
b) no contraventions of any applicable code of professional conduct in relation to the review.
This declaration is in respect of Select Harvests Limited and the entities it controlled during theperiod.
John O'Donoghue MelbournePartner 21 February 2013PricewaterhouseCoopers
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SELECT HARVESTS LIMITED AND CONTROLLED ENTITIES ABN 87 000 721 380
The above Consolidated Income Statement should be read in conjunction with the accompanying notes
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CONSOLIDATED INCOME STATEMENT FOR THE HALF-YEAR ENDED 31 DECEMBER 2012
Note Half-year
2012 $ ‘000
2011 $ ‘000
Sales revenue 98,719 129,821 Cost of sales (82,685) (115,563) Other revenues from ordinary activities 147 287 Change in fair value of biological assets 6,703 2,691 Distribution expenses (3,613) (3,661) Marketing expenses (396) (451) Occupancy expenses (668) (613) Administrative expenses (2,118) (2,015) Finance costs expensed (2,408) (3,444) Other expenses from ordinary activities (1,632) (825) Write down of biological assets – Western Australian orchards (26,147) - Impairment of property, plant and equipment – Western Australian orchards (13,760) - Profit/(loss) before income tax (27,858) 6,227 Income tax expense 5 8,357 (213) Profit/(loss) for the half-year (19,501) 6,014
Earnings per share for profit attributable to the ordinary equity holders of the company:
Basic earnings per share (34.3) 10.7
Diluted earnings per share (34.3) 10.7
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SELECT HARVESTS LIMITED AND CONTROLLED ENTITIES ABN 87 000 721 380
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes
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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE HALF-YEAR ENDED 31 DECEMBER 2012
Half-year
2012 $ ‘000
2011 $ ‘000
Profit/(loss) for the half-year (19,501) 6,014 Other Comprehensive Income
Changes in fair value of cash flow hedges, net of tax 82 (262) Other Comprehensive Income for the half-year 82 (262) TOTAL COMPREHENSIVE INCOME/(LOSS) ATTRIBUTABLE TO MEMBERS OF SELECT HARVESTS LIMITED (19,419) 5,752
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SELECT HARVESTS LIMITED AND CONTROLLED ENTITIES ABN 87 000 721 380
The above Consolidated Balance Sheet should be read in conjunction with the accompanying notes
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CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2012
Note 31 December 2012 $ ‘000
30 June 2012 $ ‘000
ASSETS CURRENT ASSETS Cash and cash equivalents 5,028 1,061 Trade and other receivables 26,309 37,398 Inventories 52,714 36,644 Derivative financial instruments - 375 Current tax receivables - 1,458 TOTAL CURRENT ASSETS 84,051 76,936 NON-CURRENT ASSETS Property, plant and equipment 76,297 90,970 Biological assets – almond trees 53,862 74,171 Intangible assets 36,183 36,183 Other receivables 930 1,047 TOTAL NON-CURRENT ASSETS 167,272 202,371 TOTAL ASSETS 251,323 279,307 LIABILITIES CURRENT LIABILITIES Trade and other payables 29,971 25,365 Interest bearing liabilities 8 19,000 25,495 Derivative financial instruments 516 818 Provisions 2,132 2,691 TOTAL CURRENT LIABILITIES 51,619 54,369 NON-CURRENT LIABILITIES Interest bearing liabilities 8 47,250 42,500 Deferred tax liabilities 12,052 21,171 Provisions 742 937 TOTAL NON-CURRENT LIABILITIES 60,044 64,608 TOTAL LIABILITIES 111,663 118,977 NET ASSETS 139,660 160,330 EQUITY Contributed equity 96,345 95,957 Reserves 10,619 10,472 Retained profits 32,696 53,901 TOTAL EQUITY 139,660 160,330
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SELECT HARVESTS LIMITED AND CONTROLLED ENTITIES ABN 87 000 721 380
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE HALF-YEAR ENDED 31 DECEMBER 2012
Half-year
2012 $ ‘000
2011 $ ‘000
Balance at 1 July 160,330 168,815 Profit/(loss) for the half-year (19,501) 6,014 Other Comprehensive Income 82 (262) Total comprehensive income/(loss) for the half-year (19,419) 5,752 Transactions with equity holders in their capacity as equity holders: - Dividends provided for or paid (note 6) (1,704) (1,687) - Contributions of equity (note 7) 388 231 - Employee share options reserve 65 61 (1,251) (1,395) Total equity at the end of the half-year 139,660 173,172
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SELECT HARVESTS LIMITED AND CONTROLLED ENTITIES ABN 87 000 721 380
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes
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CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE HALF-YEAR ENDED 31 DECEMBER 2012
Half-year
2012 $ ‘000
2011 $ ‘000
CASH FLOW FROM OPERATING ACTIVITIES Receipts from customers (inclusive of goods & services tax) 112,279 138,851 Payments to suppliers and employees (inclusive of goods & services tax)
(99,158) (125,722)
Interest received 95 287 Interest paid (2,446) (1,679) Income tax refunds received 852 - Net cash inflow from operating activities 11,622 11,737 CASH FLOW FROM INVESTING ACTIVITIES Proceeds from sale of water rights 2,339 - Payment for tree development costs (5,086) (12,594) Payment for property, plant and equipment (2,412) (7,352) Proceeds from sale of property, plant and equipment 566 225 Net cash outflow from investing activities (4,593) (19,721) CASH FLOW FROM FINANCING ACTIVITIES Proceeds from/(repayment of) borrowings (750) 3,700 Dividends paid to the company’s shareholders (1,317) (1,456) Net cash inflow/(outflow) from financing activities (2,067) 2,244 Net increase/(decrease) in cash and cash equivalents 4,962 (5,740) Cash and cash equivalents at the beginning of the half-year 66 5,940 Cash and cash equivalents at the end of the half-year 5,028 200 Reconciliation of cash and cash equivalents Cash and cash equivalents as per consolidated balance sheet
5,028 261
Bank overdraft included in interest bearing liabilities - (61) Cash and cash equivalents as per consolidated statement of cash flows
5,028 200
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SELECT HARVESTS LIMITED AND CONTROLLED ENTITIES ABN 87 000 721 380
NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2012
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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of preparation of half-year report This general purpose interim financial report for the half-year reporting period ended 31 December 2012 has been prepared in accordance with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Act 2001. This interim financial report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 30 June 2012 and any public announcements made by Select Harvests Limited during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001. The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period. 2. COMPARATIVE INFORMATION The Statement of Comprehensive Income, Statement of Changes in Equity, and Statement of Cash Flows provide comparative information for the half-year ended 31 December 2011. The Balance Sheet provides comparative information as at 30 June 2012. Where necessary, the comparatives have been reclassified and repositioned to be consistent with the current year disclosures. 3. CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS The consolidated entity makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. In addition to those critical accounting estimates and assumptions disclosed in the Group's previous annual financial report, the estimates and assumptions that have a risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. Inventory - Current Year Almond Crop The current year almond crop is classified as a biological asset and valued in accordance with AASB 141 "Agriculture". In applying this standard, the consolidated entity has made various assumptions at the interim balance date as the current year almond crop is only partially through the growing season. The main assumptions include future almond selling prices of $6.08 per kg and almond yield based on a crop estimate for Company Orchards of 8,850mt. The actual outcome of these assumptions will not be known until the almond crop is brought through to harvest and sold.
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SELECT HARVESTS LIMITED AND CONTROLLED ENTITIES ABN 87 000 721 380
NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2012
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WA Project expenditure Following a formal independent expert review of all horticultural and economic aspects of the Western Australia Greenfield orchard development, it has been found that the growing conditions have been more challenging than anticipated and water requirements and power costs have proved to be significantly higher than expected. The assessment, based on experience so far, is that commercial crop yields can only be achieved in this geographical area, with significant future investment and this would not be without a high level of horticultural risk. As a result of the review a decision has been made to impair the carrying value of the assets, with write downs of biological assets of $26,147,387 and impairment losses of property, plant and equipments of $13,760,204 recognised. The remaining amount capitalised on the balance sheet of $5,000,000, consisting of land and irrigation infrastructure, plant and equipment represents the estimated recoverable amount of the assets, less cost to sell. A number of judgements have been made in determining the estimated recoverable amount of the assets, including considerations in relation to the nature of the assets, the location of the assets and the alternate uses of the assets. It is reasonably possible, on the basis of existing knowledge, that outcomes in the future that are different from the assumptions could require an adjustment to the carrying amount, either positive or negative. 4. EVENTS OCCURRING AFTER THE BALANCE SHEET DATE On 21 February 2013, the Directors declared a fully franked interim dividend of 3 cents per ordinary share to be paid on 26 April 2013 to shareholders registered at 5.00pm on 8 March 2013. On 17 January 2013 Select Harvests purchased 690 acres of almond orchards in Northern Victoria for $4.3 million cash consideration, which included $3.0 million for the orchard assets and $1.3 million for title to the 2013 crop. On 4 February 2013 Select Harvests purchased 596 acres of almond orchards in Northern Victoria for $3.3 million, which included $2.7 million for the orchard assets and $0.6 million for title to the 2013 crop. Details of the purchase consideration are as follows: Purchase consideration Cash Paid $2.0 million Deferred consideration $1.3 million The following assets and liabilities were acquired in both of the above transactions: Property, plant and equipment Biological assets – almond trees Inventory Deferred tax liability The fair values of the assets and liabilities acquired are in the process of being determined at the date of this report.
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SELECT HARVESTS LIMITED AND CONTROLLED ENTITIES ABN 87 000 721 380
NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2012
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No other significant events have occurred subsequent to reporting date. 5. NUMERICAL RECONCILIATION OF INCOME TAX EXPENSE TO PRIMA FACIE TAX PAYABLE
Half-year
2012 $ ‘000
2011 $ ‘000
Profit from continuing operations before income tax expense (27,858) 6,227 Tax at the Australian tax rate of 30% (2011 – 30%) (8,357) 1,868 Over provision of previous year (a) - (1,655) Income tax expense (8,357) 213 (a) Includes additional Research and Development claims from prior years. Due to changes in legislation and associated uncertainty, no claim has been recorded for 2012 and 2013 at the half year. 6. DIVIDENDS Half-year 2012
$ ‘000 2011
$ ‘000 (a) Dividends paid during the half-year Total dividends paid during the half-year 1,704 1,687 (b) Dividends not recognised at the end of the half-year: In addition to the above dividends, since the end of the half-year the directors have declared the payment of an interim dividend of 3 cents per fully paid ordinary share (2011 – 5.0 cents per fully paid ordinary share), fully franked based on tax paid at 30%. The aggregate amount of the declared dividends expected to be paid on 26 April 2013 out of retained profits at 31 December 2012, but not recognised as a liability at the end of the half-year, is: 1,715 2,820
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SELECT HARVESTS LIMITED AND CONTROLLED ENTITIES ABN 87 000 721 380
NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2012
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7. EQUITY SECURITIES ISSUED Half-year Half-year
2012 Shares
2011 Shares
2012 $’000
2011 $’000
Dividend reinvestment scheme issues
338,413 165,704 388 231
Contributions of equity
388
231
8. INTEREST BEARING LIABILITIES The interest bearing liabilities relate to commercial bills drawn against the banking facility.
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SELECT HARVESTS LIMITED AND CONTROLLED ENTITIES ABN 87 000 721 380
NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2012
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9. SEGMENT INFORMATION The segment information provided to the Chief Executive Officer is referenced in the following table:
($'000) ($'000) ($'000) ($'000) ($'000) ($'000)2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011
RevenueTotal revenue from external customers 74,700 73,088 16,806 48,054 7,213 8,679 24,019 56,733 - - 98,719 129,821Intersegment revenue - - - - 5,948 2,297 5,948 2,297 (5,948) (2,297) - - Total segment revenue 74,700 73,088 16,806 48,054 13,161 10,976 29,967 59,030 (5,948) (2,297) 98,719 129,821Other revenue - - - - 51 44 51 44 96 243 147 287Total revenue 74,700 73,088 16,806 48,054 13,212 11,020 30,018 59,074 (5,852) (2,054) 98,866 130,108
EBIT 3,988 3,476 3,248 5,455 (31,023) 2,466 (27,775) 7,921 (1,758) (1,969) (25,545) 9,428Interest received - - - - - - - - 95 243 95 243Finance costs expensed - - - - - - - - (2,408) (3,444) (2,408) (3,444)Profit before income tax 3,988 3,476 3,248 5,455 (31,023) 2,466 (27,775) 7,921 (4,071) (5,170) (27,858) 6,227
Segment assets (excluding intercompany debts)
68,267 71,701 178,584 239,289 1,677 2,459 248,528 313,449
Segment liabilities (excluding intercompany debts)
17,622 10,125 30,539 47,359 63,502 82,793 111,663 140,277
Acquisition of non-current segment assets 198 232 7,288 19,696 13 18 7,499 19,946
Depreciation and amortisation of segment assets
316 344 2,524 2,533 47 49 2,887 2,926
Food Products Managed Orchards Almond Division
Company Orchards Almond Division
Total Almond Division Eliminations and Corporate
Consolidated Entity
Assets and liabilities in the almond division are managed and reported at the total almond division level. 2012 Company Orchards EBIT includes the impact of biological asset fair value write downs and impairment losses on property, plant and equipment in relation to the Western Australian orchards with a combined impact of $39.9 million. Excluding the impact of the write downs and impairment losses the Company Orchards EBIT would have been $8.9 million. Excluding the impact of the write downs and impairment losses the Total Almond Division EBIT would have been $12.1 million. Excluding the impact of the write downs and impairment losses the Consolidated Entity EBIT would have been $14.4 million.F
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SELECT HARVESTS LIMITED AND CONTROLLED ENTITIES ABN 87 000 721 380
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DIRECTORS’ DECLARATION In the directors’ opinion:
a) the financial statements and notes set out on pages 4 to 13 are in accordance with the Corporations Act 2001 including:
i) complying with Accounting Standards, the Corporations Regulations
2001 and other mandatory professional reporting requirements; and ii) giving a true and fair view of the consolidated entity’s financial position
as at 31 December 2012 and of its performance for the half-year ended on that date; and
b) there are reasonable grounds to believe that Select Harvests Limited will be
able to pay its debts as and when they become due and payable. This declaration is made in accordance with a resolution of the directors.
Michael Iwaniw Chairman Dated: 21 February 2013
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PricewaterhouseCoopers, ABN 52 780 433 757Freshwater Place, 2 Southbank Boulevard, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
Independent auditor’s review report to the members ofSelect Harvests Limited
Report on the Half-Year Financial Report
We have reviewed the accompanying half-year financial report of Select Harvests Limited, whichcomprises the balance sheet as at 31 December 2012, and the income statement, the statement ofcomprehensive income, statement of changes in equity and statement of cash flows for the half-yearended on that date, selected explanatory notes and the directors’ declaration for the Select HarvestsLimited Group (the consolidated entity). The consolidated entity comprises both Select HarvestsLimited (the company) and the entities it controlled during that half-year.
Directors’ responsibility for the half-year financial report
The directors of the company are responsible for the preparation of the half-year financial report thatgives a true and fair view in accordance with Australian Accounting Standards (including theAustralian Accounting Interpretations) and the Corporations Act 2001 and for such internal control asthe directors determine is necessary to enable the preparation of the half-year financial report that isfree from material misstatement whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express a conclusion on the half-year financial report based on our review. Weconducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410Review of a Financial Report Performed by the Independent Auditor of the Entity, in order to statewhether, on the basis of the procedures described, we have become aware of any matter that makes usbelieve that the financial report is not in accordance with the Corporations Act 2001 including: givinga true and fair view of the consolidated entity’s financial position as at 31 December 2012 and itsperformance for the half-year ended on that date; and complying with Accounting Standard AASB 134Interim Financial Reporting and the Corporations Regulations 2001. As the auditor of SelectHarvests Limited, ASRE 2410 requires that we comply with the ethical requirements relevant to theaudit of the annual financial report.
A review of a half-year financial report consists of making enquiries, primarily of persons responsiblefor financial and accounting matters, and applying analytical and other review procedures. A review issubstantially less in scope than an audit conducted in accordance with Australian Auditing Standardsand consequently does not enable us to obtain assurance that we would become aware of all significantmatters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Independence
In conducting our review, we have complied with the independence requirements of the CorporationsAct 2001.F
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Conclusion
Based on our review, which is not an audit, we have not become aware of any matter that makes usbelieve that the half-year financial report of Select Harvests Limited is not in accordance with theCorporations Act 2001 including:
(a) giving a true and fair view of the consolidated entity’s financial position as at 31 December 2012and of its performance for the half-year ended on that date; and
(b) complying with Accounting Standard AASB 134 Interim Financial Reporting and theCorporations Regulations 2001.
PricewaterhouseCoopers
John O'Donoghue MelbournePartner 21 February 2013
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