Seeka Limited Lifts Six Months Earnings In Spite Of A Very Challenging Operating Environment

Seeka Limited [NZX: SEK] unaudited interim results for six months ended 30 June 2020 ( H1 FY20 )

NZX-listed New Zealand and Australia produce company Seeka reports a 55% lift in the company's unaudited profit after tax for the six months ended 30 June 2020. Alongside the results announcement, Seeka announces a fully imputed dividend of 10 cents per share.

While the result includes the benefit from the taxation change arising from reinstatement of the tax deductibility of depreciation on buildings and its effect on deferred tax, underlying earnings for Seeka were up. This was in spite of the significant costs and losses arising from Covid-19, the impact of drought and the pressure created by a severe labour shortage through the periods that New Zealand has been subject to Alert Level restrictions, particularly with the shortfall of overseas workers.

The results for the six months ended 30 June 2020 includes:

– Total revenue of $178.7m - up 5.2% on pcp.

– EBITDA of $30.4m - up 9.1% on pcp. Seeka estimates that the costs and losses associated with Covid-19 totalled $5.3m. Seeka received zero wages subsidy support and only $27,800 received to support vulnerable workers who were unable to work in lockdown.

– Profit before tax of $17.4m - up 5.2% on pcp .

– Net profit after tax of $18.4m - up 54.9% on pcp reflecting the effect of the $5.6m tax benefit.

– Total net debt of $129.3m compared to $148.1m at June 30, 2019.

– Dividend of $0.10 per share, to be paid on 30 September 2020, to all shareholders on the register at 5pm on 4 September 2020. The dividend reinvestment plan will apply with a 2% discount to the strike price.

Covid-19 and the severe labour shortage placed significant pressure on the business along with operational challenges in New Zealand arising from changes in the fruit maturity confirmation processes. Our people, contractors and community demonstrated incredible commitment and leadership in successfully completing harvests in Australia and New Zealand across avocados, kiwiberry, kiwifruit, European pears and nashi pears. Throughout this process, Seeka ensured that it took all steps to ensure the safety of its people and their protection in a pandemic environment.

The summer drought experienced in New Zealand has impacted on kiwifruit volumes processed particularly in those locations or orchards where irrigation is not available.

In the six months ended 30 June 2020, Seeka announced the conditional sale and lease back of three of its mature Australian orchards for AUD$26.5m along with access to additional water alongside that deal. This transaction

is subject to the approval of the Foreign Investment Review Board in Australia with the outcome expected in the second six months of 2020 ending 31 December 2020.

Operational performance

The following table outlines Seeka’s performance H1 FY20.

Dividend announcement

At the date of this announcement, Seeka directors declared a fully-imputed dividend of $0.10 per share, to be paid on 30 September 2020 to those shareholders on the register at 5pm on 4 September 2020. The dividend reinvestment plan will apply with a 2% discount to the strike price.

Outlook

Seeka is anticipating lower operational earnings for the second half of the financial year reflecting lower volumes of fruit in store at 30 June 2020 and an early selling season. Seeka has conditionally sold and leased back three Australian kiwifruit orchards for AU$26.5m. When completed these sales are expected to reduce debt and realise a gain on sale. The following guidance is based on Seeka’s best estimate on the forward six months’ earnings

including the anticipated gain from the sale of the Australian orchards with the upper range for net profit before tax increased to $12m. The market will be updated if there is material deviation.

The following table outlines Seeka’s guidance for the 12 months ended December 2020.

© Scoop Media