High potato prices have helped drive turnover at Greenvale owner Produce Investments through the £200 million barrier.
In a 12-month period to 1 July 2017 described by chairman Neil Davidson as “a year of two halves”, Produce Investments reported revenue up 8.1 per cent to £200.1m, a figure driven by high-priced potatoes following a lower yield and new business wins.
The company pointed to a more robust business model that features longer-term commitments with key customers, improved visibility of volume and margin, a strong performance in Jersey, an expanded customer base in the daffodil sector and continued recovery at Sawncote Foods.
However, despite an 88 per cent increase in pre-tax profit to £6.6m, it wasn’t all good news as operating profit before exceptionals fell 9.1 per cent to £8.4m.
“As we anticipated in the interim report, the second half saw a much improved trading result as we began to recover higher raw material costs in our core Greenvale potato business, enjoyed a strong season for Jersey Royals, and started to realise the benefits of our new ERP system,” said Davidson, who also revealed he will be retiring at the AGM on 29 November, along with non-executive director Sean Christie.
Davidson will be replaced by his predecessor Barrie Clapham, who resumes the position as chairman on an interim basis.
The company outlined a challenging year from a potato production perspective, with lower crop yields, higher raw material costs and retail price deflation. Despite that, Greenvale secured increased volumes with a major customer on a three-year contract, and won a third mainstream retail account, also on a three-year basis. There was also good growth in the foodservice and wholesale sectors, alongside the launch of Linwood Crops as a subsidiary trading division.
Much of the group’s capital expenditure was accounted for by a £4.8m spend on its two packing facilities in Scotland and Cambridgeshire.
Looking forward, Davidson said: “Harvest is now progressing, although with the majority of the potato crop still in the ground, favourable weather is required during October to see the harvest safely secured. Assuming harvest proceeds as it should, an increase in the planted area will see a gross crop yield that will exceed demand and therefore deflate raw material prices.
“A solid start to the year sees trading in line with forecast and the new business gains, and new contractual arrangements with established customers, give us much enhanced visibility on both volume and margins in our core retail potato business. We are achieving improved efficiencies in our two fresh potato processing sites, and anticipate further significant efficiency benefits from the implementation of our new ERP system. All this allows us to feel confident in the group's ability to achieve good progress during the current year.”