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Half Yearly Financial Report to 31 December 2017

Half Yearly Financial Report to 31 December 2017

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Dear Shareholders

Please find below a link to our half-yearly audit reviewed financial report for the six months to 31 December 2017 as well as an update below.

Boundary Bend Ltd 31 December 2017 Half Year Financial Report

Half-yearly results

For the half year to 31 December 2017, Boundary Bend Limited reported a net after tax loss of $7.44 million (2016: $5.26 million loss). The loss was driven by a few key factors, including the continued development spend on our USA business, the increased spending on the innovation & value-add and the increased marketing spend across our brands as we continue to drive increased farm gate returns from selling olive oil.  It is also important to note that we do not recognise the net value of the 2018 olive crop in our half yearly accounts: the net value of the crop will not be realised until after we harvest and mill the olives in the June quarter.

The consolidated entity reported positive cash flow from operations of $9.58 million compared to $10.12 million for the same period last year. For the half year to 31 December, capital expenditure was $16.57 million (2016: $10.60 million). This primarily relates to the acquisition of a 5,500 hectare property near Mildura (with 3,000 hectares suitable for planting olive trees), continued spend on re-developing our existing olive groves and the expansion of our USA oil storage and processing plant.

A dividend of 12 cents per share was paid on 16 February 2018 in respect of the full-year ended 30 June 2017. A Dividend Reinvestment Plan (DRP) was offered to shareholders, with 23.86% of shares participating.

Sales Update (Australia)

Sales Update

Packaged goods sales are tracking 6% ahead of budget for the 8 months to the end of February 2018 and forecast to finish slightly ahead of budget by 30 June 2018.  This is a strong result in a very competitive market with deep competitor discounting.  We have also had wins outside of the traditional retail channel, such as Cobram Estate ultra-premium EVOO now selling successfully through Wine Selectors which has a database of around 200,000 people.

Cobram Estate

Cobram Estate has maintained a market leading position in the olive oil category as of February 2018 with strong baseline (non-promotion) sales in both Woolworths and Coles.  The brand has stood up against intense half-price discounting by our European competitors and low everyday pricing by our Australian olive oil competitors.  Cobram Estate is performing to forecast in Aldi following national ranging in July 2017.  We are pleased to announce that the Masterchef partnership has been renewed for another year.  Masterchef will be back on Channel Ten in May.

Red Island

Red Island sales have maintained momentum throughout the financial year with the re-introduction of glass bottles in Woolworths.  The 3 litre tin has been an extremely strong performer in Woolworths, being the third largest selling olive oil product by revenue over the past 12 months.  Since the AGM we are pleased to announce the Red Island website has been relaunched, and I encourage you to have a look – redisland.com

As previously announced, Consumer advocacy group CHOICE, recently tested and compared 23 Australian and European extra virgin olive oils, to see if they met the quality criteria, and rated them for their quality, taste and authenticity.    Only 6 of the 23 olive oils tested were recommended by Choice and 4 of those 6 were produced and bottled by Boundary Bend.  More pleasingly Cobram Estate Classic came 1st and was the only Gold medal awarded and Red Island came 2nd with a Silver Medal.
Choice  

USA Operations

Overall, our USA business is performing well with excellent support from Californian olive growers giving us the future fruit supply and hence the scale we had hoped to achieve.  Pleasingly, branded sales of Cobram Estate are performing well ahead of forecast.

Operationally, our 2017 harvest was in line with expectations and we are currently expanding our olive processing and storage capacity in readiness for the substantial increase in contracted fruit for the 2018 harvest. We now have a fully operational bottling line, and we are continuing to search for land suitable for planting olives, with another 400 acres expected to be planted in the first half of 2019.

Value adding by-products and waste streams

We continue to research and develop value-added products using the by-product waste streams from our groves. Our first new products have successfully progressed from research phase into commercial production, and we are close to finalising our first sales agreements for these products. The process and products are still commercially sensitive, but as always, we will update shareholders with further details when appropriate.

Olive Wellness Institute

We are pleased to announce that the Olive Wellness Institute (sponsored by Boundary Bend) has just launched a new website.  It is certainly worth a look.  http://olivewellnessinstitute.org/

The Olive Wellness Institute has been created to increase awareness of Extra Virgin Olive Oil and other olive products by gathering, sharing and promoting expert, credible and evidence-based information on their nutrition, health and wellness benefits.

Key benefits of the site include:

  • Provides a credible reference point for yourself, colleagues, friends and family – to help share accurate science and debunk myths;
  • Contains an olive science database with credible references related to olive health and wellness; and
  • Lists olive health and wellness experts across the globe, including our own global Advisory Panel, who provide insight and guidance, and ensure a high level of scientific direction.

Grove improvement and 2018 Australian harvest

We are continuing with the grove redevelopment program at Boort Estate.  We are currently planting 300 hectares which we expect to be completed in the coming weeks.

Harvest will start in a limited capacity on early varieties at both groves in late March, however will commence in earnest in mid-April.  As advised in November, a late Spring frost affected the groves, therefore we expect the crop will be about 30% lower than anticipated.  We anticipate harvest to be complete by the end of June and will send shareholders a summary shortly thereafter.

Strategic planning

The board and key executives have just completed our annual two-day strategic planning retreat. It was a productive two days, which was mostly spent focusing on our four growth pillars, and how we continue to increase shareholder value.

We thank you for your continuing support.  Should you have any questions please feel free to contact me at any time on mobile 0418 955 363 or via email r.mcgavin@boundarybend.com

Shareholder day at Boundary Bend

We hope to see you all at Boundary Bend Estate to see the harvest in full swing on the 22nd April.  I have attached the invitation again but please email Tristen t.vanderkley@boundarybend.com to RSVP or if you have any questions or need help.

Kindest regards

Rob McGavin

Executive Chairman