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Favourable balance of risk

ArborGen Holdings 23 June 2021 Update
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ArborGen Holdings

A favourable balance of risk

FY21 results

Basic materials

23 June 2021

Price

NZ$0.22

Market cap

NZ$107m

US$0.69/NZ$

Core net debt (US$m) at end March 2021

27.4

Shares in issue

499.9m

Free float

53%

Code

ARB

Primary exchange

NZX

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

22.9

29.5

21.5

Rel (local)

22.4

27.9

10.6

52-week high/low

NZ$0.24

NZ$0.13

Business description

ArborGen is an NZX-listed investment company and is the world’s largest integrated developer, commercial manufacturer and supplier of advanced forestry seedlings with operations in the United States, Brazil and Australasia.

Next events

H122 period end

September

Analyst

Toby Thorrington

+44 (0)20 3077 5721

ArborGen Holdings is a research client of Edison Investment Research Limited

After delivering earnings progress in a challenging FY21 trading year, ArborGen is operationally very well positioned to deliver on its strategy of improving the volume and mix of seedling sales in its key US markets. Behind this, business resilience is improving and net debt declining, so the medium-term risk appears to be to the upside, though this is yet to be reflected in the company’s share price in our view.

Year end

Revenue (US$m)

EBITDA* (US$m)

PBT**
(US$m)

EPS**
(c)

P/E
(x)

EV/EBITDA*
(x)

03/20

56.9

7.7

6.0

1.4

10.7

13.5

03/21

52.7

8.1

8.9

1.9

8.0

12.5

03/22e

62.1

12.0

12.1

2.4

6.3

8.1

03/23e

69.3

13.4

12.9

2.6

5.9

6.9

Note: *US GAAP (after central costs). **PBT and EPS are normalised, excluding acquired intangibles amortisation and exceptional items. No tax charge is anticipated in our estimates.

Progress made in a challenging year

ArborGen’s FY21 results were US$1m ahead of our expectations at the US GAAP EBITDA level (at US$8.1m after central costs and before abnormal items, which was above FY20’s US$7.7m comparable), but slightly lower at the PBT level, including lower R&D and other adjustments. Global seedling sales were 10% lower – the United States in particular and South America to a lesser extent showed some revenue impact from the COVID-19 pandemic – but underlying operations are strengthening through investment, self-help actions and the growing availability of higher value advanced genetic seeds, which are expected to facilitate a ramp up in seedling sales and revenue growth in future periods. A net cash inflow of c US$2m, reduced core net debt at the year end to c US$27m.

Positioned to grow

ArborGen is about to enter an important phase of increasing the availability of its advanced genetics seedlings in the United States, facilitating an uplift in volumes and average selling prices through mix improvements. Strong global demand for construction timber currently should directly feed into higher logging activity and in turn result in increased replanting among commercial forestry owners in due course, so the company appears well positioned in this regard. Our revised estimates show good progression over a three-year horizon; headline FY22 profit expectations are largely unchanged, though our lower FY23 projections reflect a commercial strategy to grow volumes and then migrate customers across to higher-value seedlings subsequently. We expect net debt to continue to trend down.

Valuation: Single-digit FY22 P/E

ArborGen’s share price has performed well since the FY21 results announcement and is now up c 34% year-to-date. The building blocks are visibly in place to deliver a significant and sustained uplift in profitability from FY21 levels, though this is not reflected in the valuation despite the recent positive share price move. On our revised estimates, ArborGen is still only trading on a current year P/E of 6.3x and barely more than half the level of the FY21 year-end net asset value.

FY21 results overview

ArborGen delivered FY21 EBITDA progress that was in line with its year-end guidance. This was despite some COVID-19 related market disruption to revenues during the year. The company also reduced net debt by US$2m to US$27m at the year end. ArborGen remains focused on capturing the value from its portfolio of advanced genetics seeds/seedlings through both increasing the volume of sales and improving the business mix.

Exhibit 1: ArborGen interim and geographic splits

Year end 31 March, US$m

H120

H220

FY20

H121

H221

FY21

% change y-o-y

H121

H221

FY21

Group revenue

14.2

42.7

56.9

11.9

40.8

52.7

-16.2%

-4.4%

-7.3%

North America

0.9

37.8

38.7

0.1

36.7

36.8

-88.9%

-2.9%

-4.9%

ANZ

9.7

0.6

10.3

9.0

0.9

9.9

-7.2%

43.8%

-4.2%

South America

3.6

4.3

7.9

2.8

3.2

6.0

-22.2%

-26.4%

-24.5%

Gross profit (group/reported)

3.0

16.7

19.7

2.7

15.5

18.2

-10.0%

-7.1%

-7.6%

Group EBITDA – US GAAP (after central)

(3.5)

11.2

7.7

(2.8)

10.8

8.1

-18.6%

-3.2%

5.2%

R&D – capitalised

1.9

2.2

4.1

1.8

1.9

3.7

IFRS 16 adjustments

0.3

0.8

1.1

0.7

0.5

1.2

Other

(0.3)

(0.1)

(0.4)

2.4

(0.4)

2.0

Change in FV of biological assets

6.5

(7.1)

(0.6)

6.8

(6.9)

(0.1)

Group EBITDA – NZ IFRS (after central)

4.9

7.0

11.9

8.9

6.0

14.9

80.7%

-14.4%

25.6%

Depreciation – owned assets

(1.0)

(1.8)

(2.8)

(0.8)

(2.2)

(3.0)

Depreciation IFRS 16

(0.4)

(0.4)

(0.8)

(0.5)

(0.5)

(1.0)

Group Operating Profit

3.5

4.8

8.3

7.5

3.3

10.9

114.4%

-30.5%

31.9%

EBITDA margin % – US GAAP

-24.6%

26.2%

13.5%

-23.9%

26.5%

15.3%

EBITDA margin % – NZ IFRS

34.5%

16.4%

20.9%

74.4%

14.6%

28.3%

Source: ArborGen Holdings, Edison Investment Research

Exhibit 1 clearly shows a typical heavy H2 trading bias to ArborGen’s reported results owing to the timing of the seasonal selling and planting season in the US market, which is ArborGen’s largest. This is partly balanced out by the New Zealand/Australia seasons, while South America typically has a more even selling period. At the EBITDA and EBIT levels, the revenue skew is counter-balanced to some extent by recognition of the appreciation in value of seedlings in the ground at ArborGen’s facilities (chiefly in the United States) during the growing season in H1 and this is substantially reversed in H2 when the seedlings are lifted and sold, realising actual proceeds. The COVID-19 pandemic did have some operational implications in both the US and South America, but the natural underlying seasonality of the business remained dominant.

Operational model: ArborGen’s seed orchards planted with its genetically superior trees produce seeds that are subsequently sown in nurseries, cultivated into seedlings and then lifted and sold to forestry owners to coincide with regional seedling planting seasons. Achieving seed orchard tree maturity to the seed-bearing stage can take around seven years. The selection of the parent trees and the degree of control over the pollination process is critical to yielding seeds and seedlings with superior properties. Mass controlled pollination (MCP) selects parent trees with the best genetic characteristics and controls the fertilisation process by isolating tree flowers (through bagging) and introducing pollen from a known parent. This contrasts with open pollination, occurring naturally where the flowers are not isolated and the other pollen parent tree is not known.

North America: Driving progress despite FY21 challenges

Activity in North America is concentrated in the US south-east where loblolly pine in particular is the prevalent forestry species supplied. ArborGen’s operations stretch from eastern Texas to the Eastern Seaboard with 10 seed orchards in five states – each with at least one nursery operation also – and a larger number of distribution locations together providing sales coverage in nine states in total.

US operations sold 294m seedlings in FY21, which was almost 12% below the prior year. In Q4 (13 January) management had flagged the twin issues of delayed log harvest levels and a shortage of site preparation/planting labour among customers arising from COVID-19 visa restrictions on migrant labour, which had a pull-through effect on seedling supplier sales. Nevertheless, North America revenues were only down by 4.9%, which indicates that average seedling selling prices firmed. The proportion of higher value (MCP and varietal) seedlings sold increased slightly to 31% of total loblolly sales and, by implication, the average price of those seedling types must also have risen such that the overall revenue impact of lower year-on-year seedling sales was dampened. This may have been partly due to the launch of the new MCP 2.0 variety during the year. As previously noted at the interim stage, prior year seed production had been affected by hurricane damage sustained at one seed orchard, but, in any event, the impact on FY21 seedling sales was probably less punitive than it might have been given that end market seedling volume requirements were themselves constrained. US operations were substantially sustained throughout the year partly due to the support of the government Paycheck Protection Programme (with income net of COVID-19 related additional costs included under other in Exhibit 1). Discretionary operating costs were otherwise closely controlled.

MCP seed activity undertaken during FY21 to benefit future periods was reported on favourably. Specifically, MCP seed harvested in Q3 increased significantly and could support a 30% year-on-year uplift in sales of this seedling category in FY22. In addition, the bagging and pollination of MCP producing mother tree flowers in the company’s seed orchards rose by 35% and this should feed through into further seedling production/sales volume increases in FY24. ArborGen has regularly referenced both an increase in seed/seedling production volumes and an improving mix with a higher proportion of advanced genetics and it is very encouraging to see the company report positively on tangible leading indicators in generating this outcome. The visibility this provides together with conversations with forestry customers, approaching half of which in revenue terms are under multi-year contracts, supports the company’s confidence in its strategy and outlook.

Exhibit 2: Illustrative seed and seedling production timeline

Source: ArborGen Holdings

There is obviously always scope for some natural variation to occur in the pollination to seedling production cycle (shown in Exhibit 2), but where possible management is taking steps to strengthen business resilience to external events. Having a spread of operations across states is one example, as is managing the maturity profile of seed orchards and building inventory buffers over time. Continuous improvement of nursery management procedures and practices is also designed to optimise seedling output. At the same time, ArborGen continues to invest to further advance the performance characteristics of its advanced genetics seedlings (ie adding more value to forestry owners measured through quality and growth of planted trees) in order to reinforce its leading market share position in this segment. The progression of our estimates, in which US GAAP EBITDA is expected to double from FY21 to FY24 (see below), is substantially driven by ArborGen’s US operations and the projected uplift in advanced seedling sales.

Australasia: A favourable mix on lower volumes

ArborGen also has an extensive, vertically integrated seed orchard/nursey/distribution in New Zealand, which is the largest part of the Australasian operations. This is primarily focused on radiata pine species, again founded upon proprietary advanced genetics.

Of the 32m seedlings sold in Australasia in FY21, c 60% were controlled pollination (CP) types, so while the volume is obviously smaller than the US, the local market has already migrated further along the adoption of advanced seedling types. That said, total volume sales were down by c 17% versus the prior year; as reported at the interim stage, a lower demand pull-through from land owners under the NZ government’s one billion trees programme was the explanation for this. As the decline occurred in the lower value open pollinated (OP) seedling categories, the impact on Australasian revenues was limited to a c 7% y-o-y reduction in local currency (and c 4% in US dollar terms). Exhibit 1 shows that the regional seasonality is almost opposite to that in the US, and the financial performance was substantially generated in the first half of the group’s financial year. ArborGen NZ is developing its horticultural services reach into consumer crops such as hops and blueberries. This constitutes another revenue stream for the local operations, but is unlikely to be material in a group context in the near term.

South America: Flat FY21 volumes, building a broader base

ArborGen’s South American operations are entirely located within Brazil, with around three-quarters of seedling sales being eucalyptus and the majority of the remainder pine species.

FY21 sales volumes of c 65m seedlings was in line with FY20 levels, which was a reasonable outturn in our view, though ArborGen commented that sales were ‘materially affected’ by the COVID-19 pandemic. We believe that local currency revenues were down slightly – inferring no significant mix changes – but this was amplified to a c 24% drop in US dollar terms due to adverse FX movements. While a broadly similar mix would ordinarily feed into a comparable local gross margin, the company noted that some operational structural changes were beneficial. Specifically, bringing more nursery capacity under in house management reduced the cost of goods sold compared to the use of third-party nurseries. As importantly, this also brings greater control over the full seedling production process. In addition to its own proprietary advanced genetics offering, ArborGen has agreements in place to develop and commercialise eucalyptus clones from three separate vertically integrated industrial customers with in-house forestry operations (ie International Paper, Gerdau and latterly Vallourec). We presume that this means that ArborGen will be able to sell seedlings directly to these companies and also a broader range more widely to third parties. So, in conjunction with increased in-house production capacity, we see these developments as broadening ArborGen’s platform in Brazil and facilitating increased business momentum, subject to successful value-added seedling output development.

ArborGen is seeing positive indicators for future sales – including a c 70% uplift in orders and increasing end consumer capacity investment – though we note wider news reporting regarding low COVID-19 vaccination levels and still high mortality rates. Consequently, while many of the ingredients are in place for a sustained uplift in volume sales for ArborGen in Brazil, some near-term caution seems appropriate in our view.

Generating cash, building inventory buffer

At the end of FY21, ArborGen had a c US$27m core net debt position, which was lowered by c US$2m year-on-year. This was achieved in a challenging year and after significant investment in seed inventory, reflecting both increasing yields from maturing seed orchards and a strategic objective to build buffering against adverse climate events.

The rise in operating profit shown in Exhibit 1 together with depreciation edging up pushed FY21 EBITDA (on an NZ IFRS basis) up to almost US$15m, US$3m above FY20 levels. EBIT adjustments for non-cash items, including deferred grant income and FX, enhanced ‘cash profit’ by a further c US$2m. In operational terms, this was partly applied to an overall working capital absorption of US$7m for the year, dominated by c US$5m into inventory. Of this movement, seed investment (both finished goods and work in progress for sale as seedlings over the next three years) accounted for 70% of the total and the remainder was split broadly equally between the equivalent seedling categories. Consequently, operating cash flow in FY21 was US$10m and was just over twice the level seen in FY20.

Interest costs of US$2m were below the prior year and, as seen in previous years, no cash tax payment was made. As we have already seen, R&D spend (capitalised under NZ IFRS) was slightly lower year-on-year and ArborGen kept tangible fixed asset capex to US$1m. The latter figure was well down on the FY20 level (which itself was inflated by the US head office property acquisition) but also around half of what we would expect as a normal ongoing spend due to tight control of projects in the light of COVID-19 disrupted markets. As a result, group free cash flow after the above items was just above US$3m.

Lease principal repayments were just over US$1m in FY21 and, for the record, ArborGen had US$5.9m of IFRS 16 leases on the balance sheet at the year end. This was marginally up year-on-year and compared to right of use assets at the same date of US$5.8m.

Cash flow outlook: the primary and common features factored into our model across our three estimate years are rising profitability/EBITDA being more than sufficient to fund further investment in inventory (for the same reasons as above) and a normalisation of tangible fixed asset capex at around US$2m per annum. As a consequence, we have modelled net cash inflows slightly above US$4m for the next two years before a more material uplift in FY24 as increased availability of higher-value seedlings kicks in. Hence, we expect the core net debt profile to continue to trend down further to around US$11m by the end of FY24, which would represent net debt:EBITDA (US GAAP, after central costs basis) well below 1x.

Preparing the ground for rising advanced seedling sales

Company guidance is for FY22 US GAAP EBITDA (before central costs) to be between US$13.0–14.5m. There are no material changes to our FY22 headline profit estimates, which are consistent with guidance and show a good uplift versus FY21. We have, however, varied the composition and this has a more significant impact on our previous FY23 estimate, as shown in Exhibit 3.

Exhibit 3: ArborGen estimate revisions

Normalised EPS, fully diluted (c)

Normalised PBT (US$m)

EBITDA (US$m)*

Old

New

% chg.

Old

New

% chg.

Old

New

% chg.

FY22e

2.5

2.4

-1.7%

12.3

12.1

-1.7%

12.1

12.0

-1.1%

FY23e

3.3

2.6

-21.2%

16.4

12.9

-21.2%

15.9

13.4

-15.5%

FY24e

N/A

3.3

N/A

N/A

16.5

N/A

N/A

16.7

N/A

Source: Edison Investment Research. Note: *US GAAP, after central costs of c US$1.4m.

Behind these numbers, we have trimmed revenue and gross profit expectations, primarily driven by the commercial decision to flatten near-term OP pricing in North America. Consistent with the company’s Acquire, Build, Convert and Defend (ABCD) strategy, this is designed to encourage further market penetration as a precursor to migrating existing and new customers onto higher-value MCP and varietal seedlings as availability increases.

OP seedlings continue to represent over half of annual seedlings supplied in our three-year estimates and hence the revenue reduction feeds directly into gross profits. In FY22, this change is effectively offset by lower than previously expected opex costs. Moving into FY23, the OP pricing change has a larger impact at the gross profit level and a smaller proportion is offset in the opex line, resulting in a more material adjustment to our FY23 estimate. It is important to note that total expected North American seedling sales in our model in FY22 and FY23 are unchanged and some uplift in the absolute and proportionate number of MCP/varietal seedlings is already factored in. We should also state that there have been no other seedling category price changes apart from OP as described earlier, so our revenue and gross profit adjustments are almost entirely driven by this. We introduce FY24 estimates and, with an improving mix of MCP/varietal seedling sales in North America, expect another step up in profitability. We do not currently incorporate dividend payments into our model; based on our estimates we believe that the declaration of dividends is becoming a more realistic expectation based on increasing earnings and reducing net debt. That said, the company may have further growth ambitions – such as adding further US nurseries or expansion in South America – which would influence broader capital allocation decisions. We will revisit this issue with management during the current financial year.

ArborGen’s published chart for expected MCP supply availability forms the foundation for the relatively near-term estimate assumptions above. The bar chart (reproduced in Exhibit 4) shows projected MCP seed availability in seedling equivalents, noting that the corresponding seedling sales are in the following year.

Exhibit 4: MCP supply availability (million seedling equivalents)

Source: ArborGen Holdings

Particularly noteworthy is the jump in seed supply from FY22 to FY24 – based substantially on flowers pollinated in FY20 and FY21 – supporting rising seedling sales. It is also worth pointing out that ArborGen’s eastern and western regions both contribute to this uplift; orchards in the former region were most affected by historical weather events and this is considered to be where supply is tightest relative to demand such that these forestry markets can absorb the volume increases expected beyond our current estimate horizon.


DCF suggests share price upside of more than double

Updating our discounted cash flow (DCF) analysis for our latest estimates, rolling forward our 10-year illustrative estimate period and using the 10.6% discount rate employed in the company’s intangible asset investment and impairment modelling (see FY21 results note 16, page 14) generates a group equity value just above US$200m. This equates to a value per share of NZ$0.59 compared to the prevailing NZ$0.22 share price (270%).

While we do not have full visibility of the company’s assumptions, from the published information, we believe that our US sales volumes (and market share) are a little ahead of the company’s modelling, but with a lower proportion of MCP and varietal seedlings.


Exhibit 5: Financial summary

US$m

2017R

2018

2019

2020

2021

2022e

2023e

2024e

March (from 2018 onwards)

15m to Sep

6m to March

IFRS16

IFRS16

IFRS16

IFRS16

IFRS16

PROFIT & LOSS

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

6

35.4

49.1

56.9

52.7

62.1

69.3

77.6

Cost of Sales

 

 

(4)

(19.4)

(30.3)

(34.8)

(31.7)

(35.3)

(39.9)

(44.0)

Gross Profit

 

 

2

16.0

18.8

22.1

20.9

26.8

29.5

33.6

EBITDA - US GAAP (after central)

 

 

(6)

6.0

4.6

7.7

8.1

12.0

13.4

16.7

EBITDA - NZ IFRS (after central)

 

 

(1)

6.2

9.8

11.9

14.9

17.8

18.5

22.0

Operating Profit (before GW and except.)

 

 

(2)

5.0

6.9

8.3

10.9

13.8

14.5

18.0

Intangible Amortisation - acquired

 

 

(-1)

(2.6)

(5.8)

(5.9)

(6.2)

(6.2)

(6.2)

(6.2)

Exceptionals

 

 

0

(1.4)

(3.6)

(3.9)

0.0

0.0

0.0

0.0

Associate

 

 

3

0

0

0

0

0

0

0

Operating Profit

 

 

0

1.0

(2.5)

(1.5)

4.7

7.6

8.3

11.8

Net Interest

 

 

(2)

(1.4)

(2.2)

(2.3)

(2.0)

(1.7)

(1.6)

(1.5)

Profit Before Tax (norm)

 

 

(1)

3.6

4.7

6.0

8.9

12.1

12.9

16.5

Profit Before Tax (statutory)

 

 

(2)

(0.4)

(4.7)

(3.8)

2.6

5.9

6.7

10.3

Tax

 

 

0

2.6

0.5

1.1

0.6

0.0

0.0

0.0

Minorities

 

 

0

0

0

(0)

(0)

0

0

0

Discontinued

 

 

(4)

0

(0.1)

0.0

0.0

0.0

0.0

0.0

Profit After Tax (norm)

 

 

(1)

6

5.2

7.1

9.5

12.1

12.9

16.5

Profit After Tax (statutory)

 

 

(6)

2

(4.2)

(2.7)

3.2

5.9

6.7

10.3

 

 

 

 

 

 

 

 

 

 

 

Average Number of Shares Outstanding (m)

 

 

425.0

487.9

496.9

497.8

499.5

499.6

499.6

499.6

EPS - normalised (US c)

 

 

(0.2)

1.3

1.0

1.4

1.9

2.4

2.6

3.3

EPS - statutory (US c)

 

 

(1.4)

0.5

(0.8)

(0.5)

0.6

1.2

1.3

2.1

Dividend per share (US c)

 

 

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

 

 

 

 

 

 

 

 

 

 

 

Gross Margin (%)

 

 

33.3

45.2

38.3

38.8

39.7

43.2

42.5

43.3

EBITDA Margin (%)

 

 

-16.7

17.5

20.0

20.9

28.3

28.7

26.7

28.4

Operating Margin (before GW and except.) (%)

 

 

-33.3

14.1

14.1

14.6

20.7

22.3

21.0

23.2

 

 

 

 

 

 

 

 

 

 

 

BALANCE SHEET

 

 

 

 

 

 

 

 

 

 

Fixed Assets

 

 

187

156.0

152.3

155.0

150.4

146.9

143.5

140.3

Intangible Assets

 

 

125

106.7

105.6

103.8

101.3

98.8

96.4

94.2

Tangible Assets

 

 

62

43.3

42.7

49.2

49.1

48.1

47.1

46.1

Investments

 

 

0

6.0

4.0

2.0

0.0

0.0

0.0

0.0

Current Assets

 

 

81

57.8

41.7

45.7

52.9

62.8

74.5

89.6

Stocks

 

 

41

24.8

29.4

29.3

34.5

38.3

43.2

47.7

Debtors

 

 

9

10.0

9.1

10.5

12.2

15.0

17.5

20.1

Cash

 

 

31

23.0

3.2

5.9

6.2

9.5

13.9

21.8

Current Liabilities

 

 

(57)

(36.2)

(15.8)

(20.6)

(15.9)

(16.4)

(18.0)

(19.6)

Creditors

 

 

(38)

(20.4)

(15.0)

(14.3)

(14.9)

(16.4)

(18.0)

(19.6)

Short term borrowings

 

 

(19)

(15.8)

(0.8)

(6.3)

(1.0)

0.0

0.0

0.0

Long Term Liabilities

 

 

(51)

(26.2)

(30.6)

(38.2)

(39.2)

(39.2)

(39.2)

(39.2)

Long term borrowings

 

 

(45)

(22.8)

(16.5)

(31.2)

(32.6)

(32.6)

(32.6)

(32.6)

Other long term liabilities

 

 

(6)

(3.4)

(14.1)

(7.0)

(6.6)

(6.6)

(6.6)

(6.6)

Net Assets

 

 

160

151.4

147.6

141.9

148.2

154.1

160.8

171.1

 

 

 

 

 

 

 

 

 

 

 

CASH FLOW

 

 

 

 

 

 

 

 

 

 

Operating Cash Flow

 

 

(3)

3.5

4.1

4.8

9.9

13.0

13.2

16.8

Net Interest

 

 

(4)

(1.4)

(2.1)

(2.5)

(2.0)

(1.7)

(1.6)

(1.5)

Tax

 

 

0

0

0

0

0

0

0

0

Capex

 

 

(5)

(3.0)

(6.6)

(9.3)

(4.7)

(5.7)

(5.9)

(6.1)

Acquisitions/disposals

 

 

66

0.9

(7.6)

0

0

0

0

0

Financing

 

 

12

0

0

0

0

0

0

0

Dividends

 

 

0

0

0

0

0

0

0

0

Net Cash Flow

 

 

66

0

(12.2)

(7.0)

3.2

5.6

5.7

9.2

Opening net debt/(cash)

 

 

65

33.0

9.6

9.8

29.6

27.4

23.1

18.7

Lease principal payments

 

 

0

0

0

(12.6)

(1.3)

(1.3)

(1.3)

(1.3)

Other

 

 

(34)

23.4

0

(0.2)

0

0

0

0

Closing net debt/(cash)*

 

 

33

9.6

21.8

29.6

27.4

23.1

18.7

10.8

IFRS 16 leases*

5.7

5.9

5.9

5.9

5.9

Source: ArborGen, Edison Investment Research. Note: 2017R was restated to show discontinued operations separately. Significant other items in 2017R and 2018 cash flow relate to M&A activity associated with the disposed Tenon operations. *FY20 opening net debt has been restated to exclude IFRS 16 leases (which are now shown at projected year ends); the group’s purchase of its US head office property in August 2019 moved this from a leased asset to an owned one.

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