TasFoods : Revised Business Activity Report and Appendix 4C (Sep 2021)

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[phone]	PO Box 425
[e-mail]..au	54 Tamar St,
	Launceston,
tasfoods.com.au	TAS, 7250, Australia
ABN 53 084 800 902	ACN 084 800 902

ASX Announcement: 2 December 2021

Revised Business Activity Report accompanying Appendix 4C Quarterly Cash Flow for the Quarter Ending 30 September 2021

TasFoods Limited (ASX: TFL) ('TasFoods' or 'the Company') refers to the Business Activity Report and Appendix 4C Quarterly Cash Flow for the Quarter Ending 30 September 2021 lodged with the ASX on 27 October 2021. The Company now provides a revised Business Activity Report.

Quarter 3 2021 and YTD 2021 reported EBITDA has been updated to reflect additional expenditure of $0.60m due to additional accrued costs and stock valuation adjustments as at 30 September 2021. As a result of this, total EBITDA loss for Q3 increases to $0.97m and YTD EBITDA loss increases to $1.27m.

This correction impacts financial numbers provided and general commentary made throughout the Business Activity Report and TasFoods has consequently significantly rewritten it as at 2 December 2021.

There is no change to the accompanying Appendix 4C however it is attached again for completeness.

In order to improve business processes and data accuracy the Company is in the process of implementing an ERP across the group which is expected to be completed in late H1 2022.

Authorised for ASX release by the Board of Directors of TasFoods Ltd.

TasFoods contact

Scott Hadley

Chief Executive Officer

[phone]

For personal use only

[phone]	PO Box 425
[e-mail]..au	54 Tamar St,
	Launceston,
tasfoods.com.au	TAS, 7250, Australia
ABN 53 084 800 902	ACN 084 800 902

2 December 2021

Business Activity Report and Appendix 4C Quarterly Cash Flow

TasFoods Limited (ASX: TFL) ('TasFoods' or 'the Company') today released its Business Activity Report and Appendix 4C Quarterly Cash Flow for the quarter ended 30 September 2021 (Q3 2021).

Highlights:

• As previously announced TFL recently appointed a new Chief Executive Officer, Scott Hadley, and Chief Financial Officer, Shona Croucher, to lead the business through its next phase of growth.
• The immediate priority of the newly appointed management team has been to stabilise the foundations of the TFL business and to then leverage this foundation to accelerate a refreshed growth strategy.
• Sales momentum has continued into Q3 2021, with year-to-date sales up 4% against PCP, driven by moderate sales growth across both the Poultry and Dairy divisions, despite the adverse trading conditions brought on by COVID-19.
• Strong initial demand for newly launched organic chicken range Isle & Sky, with range now being stocked in Coles supermarkets across the Eastern States of Australia, in conjunction with premium butchers in both Victoria and Tasmania.
• Additional Persian Fetta and Chocolate Cream products launched in the quarter, under the premium Meander Valley Dairy brand, which have exhibited strong sales momentum, anticipated to continue into the Christmas trading period.
• Mixed divisional performance for the quarter with the Dairy business unit delivering EBITDA profitability being partially offset by an EBITDA loss in the Poultry business unit on a standalone basis.

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Financial update - Income Statement

			Q3 2021				Q3 2020			Change	Change
		Dairy	Poultry	Corporate	Total		Dairy	Poultry	Corporate	Total
		and Other		and Other		$'000	%
		$'000	$'000	$'000		$'000	$'000	$'000
		$'000		$'000
Revenue		7,517	10,085	100	17,702		7,565	9,289	137	16,992		710	4%
COGS		(5,038)	(8,261)	(49)	(13,348)		(4,739)	(7,162)	(52)	(11,953)		(1,395)	-12%
Gross Profit		2,479	1,824	51	4,354		2,826	2,128	85	5,039		(685)	-14%
GP Margin		33%	18%	51%	25%		37%	23%	62%	30%			-5%
Expenditure		(1,788)	(2,134)	(1,404)	(5,326)		(1,852)	(1,843)	(1,108)	(4,803)		(523)	-11%
EBITDA		691	(310)	(1,353)	(972)		974	285	(1,023)	236		(1,208)	-512%
			YTD Q3 2021				YTD Q3 2020			Change	Change
		Dairy	Poultry	Corporate	Total		Dairy	Poultry	Corporate	Total
		and Other		and Other		$'000	%
		$'000	$'000	$'000		$'000	$'000	$'000
		$'000		$'000
Revenue		22,329	28,992	318	51,638		21,698	27,728	360	49,786		1,852	4%
COGS	(14,908)	(22,979)	(139)	(38,026)	(14,559)	(21,954)	(362)	(36,875)	(1,151)	-3%
Gross Profit	7,421	6,013	179	13,613	7,140	5,774	(2)	12,911	701	5%
GP Margin	33%	21%	56%	26%	33%	21%	-1%	26%			0%
Expenditure	(5,642)	(5,471)	(3,771)	(14,884)	(6,977)	(7,209)	(4,488)	(18,674)	3,790	20%
EBITDA	1,779	542	(3,592)	(1,271)	162	(1,435)	(4,490)	(5,762)	4,491	78%
Impairment Expense and	Biological Asset Write Down 2020		1,500	2,000	1,179	4,679
Comparative EBITDA	1,779	542	(3,592)	(1,271)	1,662	565	(3,311)	(1,083)	(188)	-17%

Dairy Division

TasFoods Dairy Division remains the largest contributor to TasFoods profitability and has delivered a strong comparative year-to-date growth across all key financial metrics:

• Revenue - $22.3m (up 2.9% on PCP)
• Gross Profit - $7.4m (up 3.9% on PCP)
• EBITDA - $1.8m (up 7.0% on PCP)1

GP Margin pressure was driven by higher farm gate milk prices and increased competition during the quarter. This saw a 4.0% reduction in Gross Margins generated for the quarter against Q3 2020, resulting in GP Margins for the division tracking in-line with 2020 on year-to-date basis, at 33%. This is expected to be offset in the medium term through increased sales volumes of higher margin, premium dairy products.

Management continues to progress its strategy of a deliberate shift towards focusing product development, sales and marketing of higher margin, premium dairy products.

In-line with this strategy, under the Meander Valley Dairy brand TFL launched two premium dairy products: including a Persian Fetta and Chocolate Cream range. Both products are establishing sales momentum which is expected to continue into the Christmas trading period, as brand and product awareness continues to improve across key retailers.

1 After adjusting for Impairment Expense and Biological Asset Write Down in 2020

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Pleasingly, at the recent Australian Dairy Awards, Pyengana Traditional Cloth Matured Cheddar cheese won the award for the highest scoring cheddar cheese in Australia and Pyengana Real Milk received a Gold award in the modified milk class.

The Dairy Division continues to deliver strong growth, with both the Pyengana and Meander Valley Dairy brands continuing to see sales volume growth and an expansion of higher value, higher margin products set to bolster Gross Profit and EBITDA margins over the medium term.

Poultry Division

TasFoods poultry division reported moderate sales and Gross Profit growth on a year-to-date basis, the benefits of which have been largely offset by increased input costs incurred throughout Q2 and Q3. On a year- to-date comparative basis, the Poultry Division delivered:

• Revenue - $29.0m (up 4.6% on PCP)
• Gross Profit - $6.0m (up 4.1% on PCP)
• EBITDA - $0.5m (down 4.1% on PCP)1

The increase in input cost pressures highlights the importance of pursuing a premium, value-add strategy in poultry, capable of absorbing seasonal margin pressure into the future.

As an initial step towards delivering on this strategy within the Poultry Division, TasFoods launched its new organic chicken range Isle & Sky. The range is now being stocked in premiums Coles stores across Eastern Australian States.

In addition, Isle & Sky products are being ranged through premium butchers and retail stores throughout Victoria, New South Wales, Queensland, and South Australia, with customers being serviced by a newly implemented direct to door refrigerated delivery service.

New Product Releases

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Initial demand for this newly launched product range has been strong, providing management with confidence that an increased focus on this value-add strategy represents a significant opportunity for improving revenue and margin growth within the Poultry division and a discernible competitive advantage in the broader Australian poultry market.

This is a pleasing result due to the negative impact of COVID-19 on our sales into food service and restaurants due to the continued lockdown in NSW and Victoria during Q3 2021 along with the impact to the Tasmanian economy due to lower inbound domestic and international tourism.

Quarterly Cash Flow

TasFoods' Appendix 4C for the quarter ended 30 September 2021 (Q3 2021) has been lodged with the ASX today.

Key points include:

• The quarter ended with a closing cash on hand balance of $2.06m and unused finance facilities of $1.11m.
• Cash receipts from customers increased by $0.37m against PCP.
• Net operating cash outflows increased to negative $1.24m, reflecting the quarterly trading performance, a net reduction in in trade creditors balances from Q2 2021 of $0.5m and a net increase in trade debtors balance from Q2 2021 of $0.5m.
• Investment in property plant and equipment of $0.78m primarily comprising plant and equipment related to the development of new growing facilities for organic chicken.

Foundations for growth

There has been a significant amount of change to the TasFoods business during the quarter. Two new Directors were appointed in June 2021, initiating their tenure in Q3 2021. Additional leadership changes in the CEO and CFO positions have established the quarter as a period of significant change for the TFL business. Against that backdrop, the incoming leadership team is working to expedite a strategic review quickly and develop a renewed set of strategic priorities to best set up TasFoods to build earnings momentum into FY22. The Company's balance sheet remains in a healthy position and debt levels are low. A review of gearing will occur to ensure TFL have the financial foundations for growth established.

We are now embarking on a program to embed new ways of working, through the implementation of a new Enterprise Resource Planning ('ERP') system and operational excellence measures to capitalise on these strengths, improve profitability and ensure positive cash flow.

Whilst the strategic review is continuing the newly appointed management team expects to focus on growing our range of premium, value-add branded food & beverage opportunities which will deliver sustainable revenue growth and margin over time. The business holds a portfolio of strong brands and the existing operational infrastructure of the business offers the opportunity to leverage its existing strengths in poultry and dairy whilst ensuring it is remaining close to new opportunities in the food and beverage sector.

With a focus on stabilising the business in the immediate term, maximising value of the two complementary business divisions each generating strong revenue and positive EBITDA, TasFoods will be positioned to capitalise on the strategic and financial opportunity of taking premium, value-add, Tasmanian produce to domestic and international consumers in the future.