Unaudited interim results for the six months ended 31 March 2018
Oceana Group Limited
Incorporated in the Republic of South Africa
(Registration number 1939/001730/06)
JSE Share Code: OCE
NSX Share Code: OCG
ISIN Number: ZAE 000025284
("Oceana" or "the company" or "the group")
UNAUDITED INTERIM RESULTS
FOR THE SIX MONTHS ENDED 31 MARCH 2018
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the period ended 31 March 2018
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 Mar 2018 31 Mar 2017 Change 30 Sep 2017
Note R'000 R'000 % R'000
Revenue 3 489 151 3 140 602 11 6 807 927
Cost of sales 2 176 284 1 918 812 13 4 360 013
Gross profit 1 312 867 1 221 790 7 2 447 914
Sales and distribution expenditure 268 550 243 750 10 548 078
Marketing expenditure 23 143 15 373 51 48 299
Overhead expenditure 475 931 405 100 17 795 533
Net foreign exchange loss 21 414 44 677 (52) 60 940
Operating profit before associate and joint
venture (loss)/profit 523 829 512 890 2 995 064
Associate and joint venture (loss)/profit (29 132) (8 629) (238) 6 364
Operating profit before other operating items 494 697 504 261 (2) 1 001 428
Other operating (expense)/income items 3 (15 922) 774 (2 157) 8 701
Operating profit 478 775 505 035 (5) 1 010 129
Investment income 22 063 14 927 48 29 248
Interest expense (169 887) (186 073) (9) (372 405)
Profit before taxation 330 951 333 889 (1) 666 972
Taxation (income)/expense 4 (46 731) 104 856 (145) 187 622
Profit after taxation 377 682 229 033 65 479 350
Other comprehensive income
Items that may be reclassified subsequently to
profit or loss:
Movement on foreign currency translation reserve (488 743) (136 394) (145 763)
Movement on foreign currency translation reserve of
associate and joint ventures (31 299) (1 542) (8 234)
Movement on cash flow hedging reserve 8 469 (20 907) 9 438
Income tax related to loss recognised in equity 70
Other comprehensive income, net of taxation (511 573) (158 843) (144 489)
Total comprehensive income for the period (133 891) 70 190 (291) 334 861
Profit after taxation attributable to:
Shareholders of Oceana Group Limited 364 873 226 324 61 468 310
Non-controlling interests 12 809 2 709 373 11 040
377 682 229 033 65 479 350
Total comprehensive income for the period
attributable to:
Shareholders of Oceana Group Limited (146 700) 67 481 (317) 323 821
Non-controlling interests 12 809 2 709 373 11 040
(133 891) 70 190 (291) 334 861
Earnings per share (cents)
Basic 312.5 194.0 61 401.3
Diluted 286.6 176.7 62 366.5
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 31 March 2018
Unaudited Unaudited Audited
31 Mar 31 Mar 30 Sep
2018 2017 2017
Notes R'000 R'000 R'000
ASSETS
Non-current assets 5 732 916 6 514 249 6 493 594
Property, plant and equipment 1 444 943 1 616 962 1 604 099
Intangible assets 3 901 285 4 448 917 4 434 878
Derivative assets 5 11 594 4 197 1 837
Deferred taxation 27 178 15 724 27 616
Investments and loans 347 916 428 449 425 164
Current assets 3 321 484 3 733 335 3 549 631
Inventories 1 035 551 1 197 337 1 201 049
Accounts receivable 1 366 554 1 456 850 1 071 444
Taxation 62 642 95 681 55 098
Cash and cash equivalents 856 737 983 467 1 222 040
Total assets 9 054 400 10 247 584 10 043 225
EQUITY AND LIABILITIES
Capital and reserves 3 596 402 3 608 689 3 756 629
Stated capital 1 187 724 1 184 684 1 184 194
Foreign currency translation reserve (254 130) 281 973 265 912
Capital redemption reserve 130
Cash flow hedging reserve (3 679) (42 563) (12 148)
Share-based payment reserve 86 617 93 491 92 586
Distributable reserves 2 499 021 2 000 821 2 134 148
Interest of own shareholders 3 515 553 3 518 536 3 664 692
Non-controlling interests 80 849 90 153 91 937
Non-current liabilities 3 414 375 4 675 821 3 924 245
Liability for share-based payments 11 134 32 321 17 019
Long-term loans 2 918 015 3 962 558 3 209 875
Derivative liabilities 6 1 723 6 283
Deferred taxation 485 226 679 219 691 068
Current liabilities 2 043 623 1 963 074 2 362 351
Accounts payable and provisions 1 175 841 1 162 715 1 221 941
Current portion - long-term loan 844 062 578 991 954 026
Current portion - derivative liabilities 6 164 615 164 181
Taxation 23 720 56 753 22 203
Total equity and liabilities 9 054 400 10 247 584 10 043 225
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the period ended 31 March 2018
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 Mar 2018 31 Mar 2017 30 Sep 2017
R'000 R'000 R'000
Balance at the beginning of the period 3 756 629 4 007 699 4 007 699
Total comprehensive income for the period (133 891) 70 190 334 861
Profit after taxation 377 682 229 033 479 350
Movement on foreign currency translation reserve (488 743) (136 394) (145 763)
Movement on foreign currency translation reserve of associate
and joint ventures (31 299) (1 542) (8 234)
Movement on cash flow hedging reserve 8 469 (20 907) 9 438
Income tax related to loss recognised in equity 70
Share-based payment expense 8 041 8 366 9 664
Share-based payment exercised (10 480) (21 447) (24 740)
Decrease in treasury shares held by share trusts 493 1 235
(Loss)/profit on sale of treasury shares (962) 1 153
Oceana Empowerment Trust dividend distribution (23 829) (29 734)
Dividends paid (23 897) (431 821) (543 509)
Balance at the end of the period 3 596 402 3 608 689 3 756 629
Comprising:
Stated capital* 1 187 724 1 184 684 1 184 194
Foreign currency translation reserve (254 130) 281 973 265 912
Capital redemption reserve 130
Cash flow hedging reserve (3 679) (42 563) (12 148)
Share-based payment reserve* 86 617 93 491 92 586
Distributable reserves 2 499 021 2 000 821 2 134 148
Non-controlling interests 80 849 90 153 91 937
Balance at the end of the period 3 596 402 3 608 689 3 756 629
*R3.5 million (March 2017: R4.5 million) was transferred between stated capital and share-based payment reserve during the period.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the period ended 31 March 2018
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 Mar 2018 31 Mar 2017 30 Sep 2017
R'000 R'000 R'000
Cash flow from operating activities
Operating profit before associate and joint venture (loss)/profit 523 829 512 890 995 064
Adjustment for non-cash and other items 132 774 33 632 151 605
Cash operating profit before working capital changes 656 603 546 522 1 146 669
Working capital changes (245 797) 39 529 560 579
Cash generated from operations 410 806 586 051 1 707 248
Investment income received 33 390 24 203 37 966
Interest paid (155 717) (199 677) (344 895)
Taxation paid (108 649) (67 361) (148 456)
Dividends paid (23 897) (455 650) (573 243)
Cash inflow/(outflow) from operating activities 155 933 (112 434) 678 620
Cash outflow from investing activities (253 009) (67 329) (191 097)
Capital expenditure (68 602) (83 347) (154 476)
Replacement of intangible assets (14 615) (6 035) (38 772)
Proceeds on disposal of property, plant and equipment 9 952 2 636 15 900
Payment on disposal of non-current assets held for sale (2 900)
Movement on loans and advances 5 492 19 417 (11 167)
Acquisition of subsidiary (2)
Acquisition of a joint venture (2)
Settlement of put premium (185 232)
Decrease of investment 318
Cash outflow from financing activities (208 186) (121 668) (553 613)
Proceeds from issue of share capital 953 2 387
Long-term borrowings (repaid)/raised (122 621) 300 000
Short-term borrowings repaid (200 353) (831 260)
Equity-settled share-based payment (7 833) (24 740)
Net decrease in cash and cash equivalents (305 262) (301 431) (66 090)
Cash and cash equivalents at the beginning of the period 1 222 040 1 312 942 1 312 942
Effect of exchange rate changes (60 041) (28 044) (24 812)
Cash and cash equivalents at the end of the period 856 737 983 467 1 222 040
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the period ended 31 March 2018
1. BASIS OF PREPARATION
The condensed consolidated interim financial information has been prepared in accordance with and containing the information
required by IAS 34: Interim Financial Reporting as well as the SAICA Financial Reporting Guides as issued by the Accounting
Practices Committee and Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, the
JSE Listings Requirements and Companies Act of South Africa. The condensed consolidated interim financial statements
have been prepared using accounting policies that comply with IFRS which are consistent with those applied in the financial
statements for the year ended 30 September 2017, except for the adoption of revised standards that became effective during the
current period. The adoption of these standards had no material impact on the group. The condensed financial information was
prepared under the supervision of the group financial director, I Soomra CA(SA).
The results have not been audited or reviewed by the group's auditors, Deloitte & Touche.
Canned Fishmeal Commercial
fish and and Horse Lobster cold
fishmeal fish oil mackerel and storage and Deferred
March 2018 (Africa) (USA) and hake squid logistics taxation Financing(3) Total
Segment R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000
2. SEGMENTAL
RESULTS
Operating results
Revenue 1 893 511 614 361 672 053 102 357 206 869 3 489 151
Operating profit before
other operating items 178 541 72 618 175 769 27 003 40 766 494 697
Other operating items (7 526) (11 893) 3 497 (15 922)
Operating profit 171 015 60 725 179 266 27 003 40 766 478 775
Investment income 19 036 3 067 (40) 22 063
Interest expense (120 997) (45 814) (2 893) (78) (105) (169 887)
Profit before taxation 69 054 14 911 179 440 26 925 40 621 330 951
Taxation expense/(income) 25 645 (152 181) 56 344 7 520 15 941 (46 731)
Profit after tax for
the period 43 409 167 092 123 096 19 405 24 680 377 682
The above profit for the
period include the following:
Depreciation
and amortisation 31 241 45 548 44 316 1 386 10 804 133 295
Statement of
financial position
Total assets 2 058 917 5 138 513 553 727 57 492 252 330 27 178 966 243 9 054 400
Total liabilities 770 359 67 511 231 037 38 895 80 642 485 226 3 784 328 5 457 998
The above amounts of
assets and liabilities
includes the following:
Interest in associate and
joint ventures 132 738 105 670 1 238 409
South
Africa and Other North
March 2018 Namibia Africa America Europe Far East Other Total
Region R'000 R'000 R'000 R'000 R'000 R'000 R'000
Revenue(1) 2 017 030 341 770 530 611 311 101 216 060 72 579 3 489 151
Non-current assets(2) 853 428 4 492 800 5 346 228
Canned Fishmeal Commercial
fish and and Horse Lobster cold
fishmeal fish oil mackerel and storage and Deferred
March 2017 (Africa) (USA) and hake squid logistics taxation Financing(3) Total
Segment R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000
Operating results
Revenue 1 671 436 704 733 490 519 73 875 200 039 3 140 602
Operating profit before
other operating items 119 843 216 299 101 361 19 732 47 026 504 261
Other operating items 774 774
Operating profit 120 617 216 299 101 361 19 732 47 026 505 035
Investment income 10 526 4 247 70 84 14 927
Interest expense (143 236) (40 867) (1 767) (101) (102) (186 073)
Profit before taxation (12 093) 175 432 103 841 19 701 47 008 333 889
Taxation (income)/expense (9 607) 60 665 31 649 5 529 16 620 104 856
Profit after tax for
the period (2 486) 114 767 72 192 14 172 30 388 229 033
The above profit for
the period include
the following:
Depreciation
and amortisation 29 768 49 255 32 195 1 378 10 293 122 889
Statement of
financial position
Total assets 2 305 618 5 937 767 549 465 49 547 260 405 15 724 1 129 058 10 247 584
Total liabilities 846 027 258 540 193 359 35 965 67 444 679 219 4 558 341 6 638 895
The above amounts of
assets and liabilities
includes the following:
Interest in associate and
joint ventures 144 990 137 866 1 282 857
South
Africa and Other North
March 2017 Namibia Africa America Europe Far East Other Total
Region R'000 R'000 R'000 R'000 R'000 R'000 R'000
Revenue(1) 1 708 506 179 056 541 547 388 357 222 355 100 781 3 140 602
Non-current assets(2) 868 606 5 197 273 6 065 879
Canned Fishmeal Commercial
fish and and Horse Lobster cold
fishmeal fish oil mackerel and storage and Deferred
September 2017 (Africa) (USA) and hake squid logistics taxation Financing(3) Total
Segment R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000
Operating results
Revenue 3 768 707 1 438 605 1 054 153 144 907 401 555 6 807 927
Operating profit before
other operating items 276 622 390 230 197 559 37 827 99 190 1 001 428
Other operating items 11 601 (2 900) 8 701
Operating profit 288 223 390 230 197 559 37 827 96 290 1 010 129
Investment income 19 792 7 7 907 54 1 488 29 248
Interest expense (277 276) (88 843) (6 027) (37) (222) (372 405)
Profit before taxation 30 739 301 394 199 439 37 844 97 556 666 972
Taxation (income)/expense (11 142) 94 333 59 886 10 540 34 005 187 622
Profit after tax for
the year 41 881 207 061 139 553 27 304 63 551 479 350
The above profit for the
year include the following:
Depreciation
and amortisation 61 170 95 187 55 834 2 741 20 906 235 838
Statement of
financial position
Total assets 1 888 696 5 964 460 545 056 39 322 241 036 27 616 1 337 039 10 043 225
Total liabilities 647 896 435 671 232 444 29 944 68 313 691 068 4 181 260 6 286 596
The above amounts of
assets and liabilities
includes the following:
Interest in associate and
joint ventures 127 530 182 209 1 309 740
South
Africa and Other North
September 2017 Namibia Africa America Europe Far East Other Total
Region R'000 R'000 R'000 R'000 R'000 R'000 R'000
Revenue(1) 3 641 248 412 486 1 137 749 753 315 623 775 239 354 6 807 927
Non-current assets(2) 888 863 5 150 114 6 038 977
Revenue excludes inter-segmental revenues in South Africa and Namibia which are eliminated on consolidation.
Notes:
(1) Revenue per region discloses the region in which product is sold and services rendered.
(2) Non-current assets per region discloses where the subsidiary is located, includes property, plant and equipment, and intangible assets.
(3) Financing includes cash and cash equivalents and loans receivable and payable.
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 Mar 2018 31 Mar 2017 30 Sep 2017
R'000 R'000 R'000
3. OTHER OPERATING (EXPENSE)/INCOME ITEMS
Transaction costs* (19 419)
Profit on disposal of fishing vessel 3 497 796
Profit on the disposal of immovable property 11 601
Loss on disposal of non-current assets held for sale (2 900)
Loss on disposal of business interests (22)
(15 922) 774 8 701
*Transaction costs relates to the extension of the Westbank Fishing Limited Liability Company ("Westbank") operating agreement and subsequent
change in Westbank shareholding.
Transactions outside the ordinary course of business that are substantially capital or non-recurring in nature and are identified
by management as warranting separate disclosure are disclosed under other operating items in the statement of comprehensive
income. These comprise profits or losses on disposal and scrapping of property, plant and equipment, intangible assets and
non-current assets held for sale, impairments or reversal of impairments, profits or losses on disposal of investments, operations
or subsidiaries and business combination related costs or gains.
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 Mar 2018 31 Mar 2017 30 Sep 2017
R'000 R'000 R'000
4. TAXATION (INCOME)/EXPENSE
Current taxation 103 230 95 092 175 037
Current year 86 014 104 279 192 752
Withholding tax 5 323 653 13 452
Adjustments in respect of previous years 11 893 (9 840) (31 167)
Deferred taxation (149 961) 9 764 12 585
Current year 10 629 9 764 27 582
Adjustments in respect of previous years (14 997)
Adjustments in respect of change in tax rate** (160 590)
(46 731) 104 856 187 622
**This adjustment relates to a USD13 million release in Daybrook following the reduction in the federal corporate tax rate in the
United States of America from 35% to 21%.
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 Mar 2018 31 Mar 2017 30 Sep 2017
R'000 R'000 R'000
5. DERIVATIVE ASSETS
Non-current
Interest rate caps held as hedging instruments
Opening balance 1 837 7 636 7 636
Fair value adjustments recognised in profit or loss (ineffective portion) (1 712) (562) (243)
Fair value adjustments recognised in other comprehensive income
(effective portion) 11 644 (2 877) (5 556)
Reclassified from derivative liability 207
Foreign currency translation adjustment (382)
11 594 4 197 1 837
Interest rate caps and swaps recorded in the cash flow hedging reserve, derivative assets and derivative liabilities (note 6) are
regarded as level 2 financial instruments. Level 2 fair value measurements are those derived from inputs that are observable for
the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
The fair value of interest rate caps and swaps is calculated as the present value of the estimated future cash flows based on
observable yield curves.
Interest rate caps were executed in the 2016 financial year, with a maturity date of 20 July 2018 and 20 July 2020. Interest rate
caps were designated as cash flow hedges and executed to hedge the interest that is payable under various debt facilities with
principal values of R1 810 million. The amount of the principal value designated as a hedged item is R980 million. Gains or losses
on interest rate caps held as hedging instruments in designated and effective hedging relationships are recognised in other
comprehensive income and are reclassified to profit or loss in the same period that the hedge cash flows affect profit or loss.
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 Mar 2018 31 Mar 2017 30 Sep 2017
R'000 R'000 R'000
6. DERIVATIVE LIABILITIES
Non-current
Opening balance 6 283 176 301 176 301
(Gain)/loss recognised in other comprehensive income (5 055) (6 749) 246
(Gain)/loss recognised in profit or loss (273) 2 080
Transferred to current liabilities (164 615) (164 181)
Foreign currency translation adjustment (748) (5 294) (6 083)
Reclassified to derivative asset (207)
Closing balance 1 723 6 283
Interest rate swap 1 723 6 283
Current
Opening balance 164 181
Transferred from current liabilities 164 615 164 181
Loss recognised in profit or loss 34 577
Put premium exercised (185 232)
Foreign currency translation adjustment (13 526)
Closing balance 164 615 164 181
Put option 164 615 164 181
The put option recorded in derivative liabilities is regarded as a level 3 financial instrument for fair value measurement purposes.
Level 3 financial instruments are those derived from inputs that are not based on observable market data (unobservable inputs).
The fair value of the put option is determined using discounted cash flow analysis.
In terms of the Westbank operating agreement the remaining shareholders of Westbank Fishing Limited Liability Company
("Westbank") could put their 75% equity stake in Westbank to Daybrook Fisheries Incorporated ("Daybrook") or its nominee for
a fixed price of USD31.5 million ("put option strike price"). Effective 1 November 2016, the Westbank Fishing Limited Liability
Company exercised the put option in terms of the Westbank operating agreement. The exercise of the put option triggered the
payment of the put option strike price plus the put option premium as well as any unpaid distributions on the put closing date,
being 15 November 2017.
In terms of the first addendum to the Westbank operating agreement, the put closing date was extended to 15 February 2018.
In terms of this addendum, the put option premium (USD 15.0 million) was settled on 15 January 2018. The put option liability
was remeasured to fair value prior to settlement by measuring the put option strike price plus put premium to the fair value
of Westbank. Westbank was valued using a discounted cash flow model and unobservable inputs including forecast annual
growth rates of 2.0% (March 2017: 2.0%), forecast EBITDA margin of 18.0% (March 2017: 18.0% to 22.2%) and a risk-adjusted
discount rate of 6.8% (March 2017: 7.8%). A fair value loss of R34.6 million (March 2017: Nil) was recognised in operating
profit, which offset the fair value gain that was recognised in 2016 of R42.6 million.
In terms of the second addendum to the Westbank operating agreement, the put closing date was extended to 15 April 2018 on
which date the put option strike price (USD31.5 million) would be paid. In terms of this addendum, the unpaid distributions
(USD7.9 million) were settled on 15 February 2018.
The notional principal amount of the interest rate swaps at 31 March 2018 amounts to R832 million (March 2017:
R1 085 million). This comprises hedges on the term debt of R1 388 million (March 2017: R1 734 million). The swap is to hedge
the interest that is payable under the debt facility. During the period a fair value gain of R5.1 million (March 2017: R6.7 million)
was recognised in other comprehensive income. The interest rate swap was reclassified to derivate assets.
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 Mar 2018 31 Mar 2017 30 Sep 2017
R'000 R'000 R'000
7. DETERMINATION OF HEADLINE EARNINGS
Profit after taxation attributable to shareholders of Oceana Group Limited 364 873 226 324 468 310
Adjusted for:
Profit on disposal of immovable property (11 601)
Insurance proceeds (998) (998)
Headline earnings adjustments - joint ventures (1 144)
Net (profit)/loss on disposal of property, plant and equipment and
intangible assets (3 472) 672 1 200
Loss/(profit) on change of interest in investment 22 (122)
Total non-controlling interest in above 68 195
Total tax effect of adjustments 972 (69) 1 469
Headline earnings for the period 362 373 226 019 457 309
Headline earnings per share (cents)
- Basic 310.4 193.8 391.9
- Diluted 284.6 176.4 357.9
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 Mar 2018 31 Mar 2017 30 Sep 2017
R'000 R'000 R'000
8. DIVIDENDS
Dividend declared after reporting date 130 763 105 035
Dividends per share (cents) 112.0 90.0 90.0
Number of shares in issue net of treasury shares 116 753 116 705 116 753
9. SUPPLEMENTARY INFORMATION
Amortisation 27 649 27 467 57 568
Depreciation 105 646 95 422 178 270
Operating lease charges 45 304 25 127 129 059
Share-based expenses 6 569 11 836 2 187
Cash-settled compensation (1 472) 3 470 (7 475)
Equity-settled compensation 8 041 7 771 8 999
Oceana Empowerment Trust 595 663
Capital expenditure 83 217 89 382 193 248
Expansion 14 730 14 730
Replacement 83 217 74 652 178 518
Budgeted capital commitments 136 649 223 351 161 047
Contracted 43 489 36 020 14 445
Not contracted 93 160 187 331 146 602
Number of Number of Number of
shares shares shares
'000 '000 '000
10. WEIGHTED AVERAGE NUMBER OF SHARES
Weighted average number of shares in issue 135 526 135 526 135 526
Less: Weighted average treasury shares held by share trusts (13 679) (13 785) (13 732)
Less: Weighted average treasury shares held by subsidiary company (5 094) (5 094) (5 094)
Weighted average number of shares on which basic earnings per share
and basic headline earnings per share are based 116 753 116 647 116 700
Weighted average number of shares on which diluted earnings per share
and diluted headline earnings per share are based 127 313 128 098 127 769
11. CONTINGENT LIABILITIES AND GUARANTEES
The group has given cross suretyships in support of bank overdraft facilities of certain subsidiaries and the company.
12. EVENTS AFTER THE REPORTING DATE
Effective 13 April 2018 Makimry Patronus Limited Liability Company, a U.S. company majority owned and controlled by Mr
Francois Kuttel, the previous Oceana Group Limited ("Oceana") Chief Executive Officer, acquired the 75% shareholding in
Westbank Fishing Limited Liability Company from Westbank Fishing Partners for USD31.5 million. The acquisition was approved
by the requisite majority of Oceana shareholders present in person or represented by proxy at the General Meeting held
on 13 April 2018.
The put option strike price due to Westbank Fishing Partners of USD 31.5 million was also settled on 13 April 2018.
No other events occurred after the reporting date that may have an impact on the group's reported financial position
at 31 March 2018 or require separate disclosure in these financial statements.
COMMENTS
FINANCIAL RESULTS
Overall financial performance of the Group for the six months has been solid, underpinned by a recovery of the African
operations after a challenging year in 2017. Material volume improvements in the canned fish and hake and horse mackerel segments
and continued efficiencies contributed to the positive performance, bolstered by improved management of foreign currency exposure.
The Daybrook operations in the United States (US), as previously communicated, endured the negative impact of 2017 prices on long
term fishmeal and fish oil contracts.
Group revenue increased by 11% to R3 489 million (March 2017: R3 141 million) driven by an 18% improvement in Africa operations
revenue mainly due to improved sales volumes. Fishmeal volume growth in our Daybrook operations was offset by lower fish oil
volumes, reduced prices and the effect of a stronger Rand on US revenues.
Group operating profit before associate and joint venture income and fair value adjustments increased by 9% to R560 million
(March 2017: R516 million). This is primarily due to a 51% increase in operating profit from Africa operations which, in addition to the
revenue drivers listed above, is the effect of improved cost efficiencies resulting from lower raw material and logistics costs, improved
vessel utilisation and higher catch rates.
Losses from associate and joint ventures increased to R29 million (March 2017: R9 million) attributable largely to the moratorium on
Pilchard fishing in Namibia and challenging fishing conditions experienced in Angola
Other operating expenses of R16 million (March 2017: R 1 million profit) relate mainly to transaction costs incurred in extending the
Westbank Fishing operating agreement and the subsequent change in the majority shareholder of Westbank Fishing.
Interest expense for the period of R170 million (March 2017: R186 million) related to finance costs on facilities and long-term
borrowings. The average interest rate for all debt is currently 6.87% (March 2017: 7.21%).
Taxation income of R47 million (March 2017: R105 million taxation expense) is reported for the period primarily due to a once-off
R161 million deferred tax adjustment in Daybrook following the reduction in the federal corporate tax rate in the United States
from 35% to 21%, effective after 31 December 2017. A blended tax rate of 25% was accordingly applied in calculating the deferred
tax adjustment in this period.
Headline earnings for the period increased by 60% compared to the prior period. Excluding the effect of the once-off deferred tax
adjustment, fair value adjustments and other operating items, headline earnings increased by 8%. An interim dividend of 112.0 cents
per share has been declared (March 2017: 90.0 cents per share).
FINANCIAL POSITION AND CASH FLOW
Group cash flows from operations reduced by 30% to R411 million (March 2017: R586 million) mainly due to an increase in
accounts receivable following the higher canned fish, horse mackerel and hake volumes sold. At the end of the period, the group
has positive cash balances of R857 million (March 2017: R983 million) of which R324 million (March 2017: R827 million) is held in
dollar-denominated accounts.
At March 2018, group net debt was R2 905 million (March 2017: R3 558 million) of which R1 064 million (March 2017: R908 million)
was US Dollar-denominated.
REVIEW OF OPERATIONS
Canned fish and fishmeal (Africa)
Sales volumes in the canned fish division increased by 23% to 4.4 million cartons (March 2017: 3.6 million cartons) due to an
improved pricing strategy which stimulated consumer demand. Average sales prices remained in line with the prior period with no
price increases actualised in the current period.
From a supply perspective our strategy of importing frozen raw material for local processing has been well executed. Production of
canned fish from frozen fish raw material is on par with production from fresh fish landings for the period. Local supply has been
bolstered by an increase in the initial 2018 South African Total Allowable Catch (TAC) for pilchard to 59 214 tons from 45 560 tons
in 2017, but offset by a Ministerial decision in Namibia to suspend pilchard fishing in 2018 (March 2017: 14,000 tons) based on
scientific advice. Costs have been well managed due to the positive impact of stable international procurement prices and the
stronger Rand on raw material costs, supported by a revised forward cover policy.
As a result the canned fish segment has delivered an improved profit for the period.
The fishmeal and fish oil division has been adversely affected by lower landings and production yields in Angola. Anchovy landings in
South Africa have been consistent with prior periods. Fishmeal and fish oil pricing for this segment remained firm in USD terms but
have been offset by the stronger Rand.
Fishmeal and fish oil (USA)
The 2017 fishing season for the Gulf Menhaden fishery ended on 1 November 2017 and consequently our fishing and processing
operations in Daybrook were inactive for a large portion of the period under review. During the closed season we invested $2 million
towards improvements in plant efficiency and throughput. The 2018 season opened on 16 April 2018 and will run to the end of
October 2018.
Revenue was down on the prior period by 8% in USD terms. The reduced oil yield in the 2017 fishing season contributed to lower
opening oil inventory levels for the period. Accordingly, despite the excellent 2017 landings, sales volumes of fishmeal and fish oil
remain in line with the prior period at 31 315 tons (March 2017: 31 507 tons). Since a large portion of fishmeal and fish oil sales are
concluded in advance, sales prices were adversely impacted by the lag effect of lower prices contracted during the latter part of 2017.
Operating profit reduced to USD10 million for the six months compared to USD16 million for the comparable period which was
exacerbated by the effects of a stronger Rand when consolidating earnings into the group's results. Operating profit before other
operating items and fair value adjustments (R35 million) reduced by 50% in Rand terms.
Horse mackerel and hake
In Namibia the 2018 horse mackerel TAC remained in line with 2017 at 340 000 tons. The Ministry of Fisheries and Marine
Resources made an initial allocation of 236,000 tons (March 2017: 140 000 tons) for the 2018 fishing season with 48.7%
(March 2017: 34.8%) allocated to existing rights holders.
Namibian landings improved against the comparable period due to higher catch rates and better vessel utilisation. The higher catch
rates together with the positive effect of the stronger rand on USD denominated costs reduced the cost per ton of landed fish.
In South Africa, the Precautionary Maximum Catch Limit (PMCL) for targeted catch of horse mackerel decreased by 9.7%
to 25 500 tons (March 2017: 28 231 tons). Quota available to Oceana through own and joint venture allocations remained in line
with 2017 at 30.3% of the PMCL.
Catch rates in South Africa have improved by 55% during the period. Demand in the transhipment market for the larger sized South
African fish was firm resulting in increased sales prices however this was partially offset by smaller size mix of the Namibian fish and
the stronger exchange rate.
As a result revenue and operating profit for the horse mackerel segment is materially higher than the prior period.
The 2018 hake offshore TAC reduced by 5.0% to 111 294 tons (March 2017: 117 194 tons). Despite the TAC reduction revenue in
the hake segment has grown by 30% on the prior period. Improved vessel utilisation due to a managed maintenance programme and
higher opening stock volumes have contributed positively, marginally offset by a smaller size mix. Realised sales prices increased due
to stronger European pricing and a stronger Euro exchange rate.
Operating profit in the hake segment also improved materially.
Lobster and squid
The 2018 TAC for west coast lobster remained unchanged at 1 924 tons, although the offshore allocation dropped from 1 204 tons
in 2017 to 995 tons with a higher tonnage being allocated to small scale fishing.
Revenue and operating profit in the lobster business increased following the combined effect of higher landings, a higher mix of live
sales and firmer pricing for live sales to China in USD terms.
Fishing rights allocated to the squid business remained unchanged over the period. Squid revenue and operating profit improved due
to increased landings, stable prices and a stronger Euro exchange rate.
Commercial cold storage and logistics (CCS)
The CCS coastal stores have delivered improved performance over the period. The Western Cape region experienced increased
activity with new customers contracted and increased volumes of frozen fish imports. The Namibian and Angolan stores operated at
full occupancy during the period.
Tough trading conditions in the Gauteng region continued with occupancy levels adversely impacted by increased price competition
and the oversupply of pallet space in the region.
Revenue growth of 3% in this division has been offset by the impact of low occupancies on leased sites. As a result operating profit
reduced to R41 million (March 2017: R47 million) in the period.
WESTBANK FISHING U.S. SHAREHOLDER
The acquisition of the 75% equity stake in Westbank Fishing by a suitable U.S.-based partner was successfully concluded on
13 April 2018, following the fulfillment of all conditions precedent including Oceana majority shareholder approval and the
approval of the U.S. regulator. Westbank Fishing commenced the 2018 fishing season on 16 April 2018 as planned, under the control
of the new U.S.-based partner.
PROSPECTS
Our African operations are well positioned to deliver a solid performance for the next six months. Our US operations are expected to
be positively impacted by good landings and improved oil yields based on early season indicators.
The search for a new Chief Executive Officer ("CEO") is underway. Imraan Soomra, who was appointed interim CEO in February 2018,
will remain in the joint role of interim CEO and Chief Financial Officer until an appointment is made.
The information set out in the paragraphs above has not been reviewed or reported on by the auditors.
On behalf of the board
MA Brey I Soomra
Chairman Interim Chief executive officer
17 May 2018
CASH DIVIDEND DECLARATION
Notice is hereby given of dividend number 148. A gross interim dividend amounting to 112 cents per share, for the six months
ended 31 March 2018, was declared on Thursday, 17 May 2018, out of current earnings. Where applicable the deduction of
dividends withholding tax at a rate of 20% will result in a net dividend amounting to 89.6 cents per share.
The number of ordinary shares in issue at the date of this declaration is 135 526 154. The company's tax reference number
is 9675/139/71/2. Relevant dates are as follows:
Last day to trade cum dividend Tuesday, 26 June 2018
Commence trading ex dividend Wednesday, 27 June 2018
Record date Friday, 29 June 2018
Dividend payable Monday, 2 July 2018
Share certificates may not be dematerialised or rematerialised between Wednesday, 27 June 2018 and Friday, 29 June 2018, both
dates inclusive.
By order of the board
JC Marais
Company secretary
17 May 2018
DIRECTORATE AND STATUTORY INFORMATION
Directors: MA Brey (chairman), I Soomra* (interim chief executive officer and chief financial officer),
ZBM Bassa, PG de Beyer, NP Doyle, GG Fortuin, LL Mac Dougall, S Pather, NV Simamane
(*Executive)
Change to Directors: FP Kuttel resigned from the Board of Directors effective 13 February 2018
Registered Office: 9th Floor, Oceana House, 25 Jan Smuts Street, Foreshore, Cape Town, 8001
Transfer Secretaries: Computershare Investor Services Proprietary Limited
Rosebank Towers, 15 Biermann Avenue, Rosebank, Johannesburg, 2196
(PO Box 61051, Marshalltown, 2107)
Sponsor - South Africa: The Standard Bank of South Africa Limited
Sponsor - Namibia: Old Mutual Investment Services (Namibia) Proprietary Limited
Auditors: Deloitte & Touche
Company Secretary: JC Marais
JSE share code: OCE
NSX share code: OCG
ISIN: ZAE000025284
www.oceana.co.za
Date: 17/05/2018 04:30:00
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