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CLR / CLRP - Clover Industries Limited - Unaudited interim condensed

Release Date: 14/03/2011 07:55
Code(s): CLR CLRP
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CLR / CLRP - Clover Industries Limited - Unaudited interim condensed consolidated financial statements for the period ended 31 December 2010 and cash dividend declaration CLOVER INDUSTRIES LIMITED Registration number: 2003/030429/06 ISIN: ZAE000152377 Ordinary Share Code: CLR ISIN: ZAE000152385 Preference Share Code: CLRP ("Clover" or "the Group" or the "Company") www.clover.co.za UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2010 AND CASH DIVIDEND DECLARATION HIGHLIGHTS Revenue up 10.8% to R3,349 billion (H1 2009: R3,023 billion) Operating Profit up 43% to R176 million (H1 2009: R123.1 million) Headlines from continuing operations up 693% to R 94 million (H1 2009: R 12 million) Interim dividend of 10c per ordinary share declared Market share gains across categories Successful JSE listing in December 2010 with R575m capital raised Johann Vorster, CEO of Clover, said: "We are pleased with the performance achieved in this first set of financial results since our successful listing on the JSE in December 2010. In particular, the impact of our drive to save costs and further efficiency improvements combined with lower input costs and market share gains have resulted in a material improvement in the overall financial performance. Looking ahead, although the cyclicality inherent to our business results in a typically weaker second half, we expect to deliver a solid performance for the full year." ENQUIRIES Clover +27 (0) 11 471 1703 Johann Vorster College Hill +27 (0) 11 447 3030 Frederic Cornet +27 (0) 83 307 8286 Morne Reinders +27 (0) 82 815 1844 FINANCIAL OVERVIEW Headline earnings increased by 113,7% to R94,0 million from the corresponding prior year period. This increase is exaggerated by the higher than normal retrenchment costs of approximately R34 million incurred during December 2009. Headline Earnings from continuing operations is 692,6% higher than the previous period and even after taking into account the above average retrenchment costs of R34 million referred to, it still reflects a healthy 105% increase. This greatly improved operating performance can be attributed mainly to the growth in sales volumes, a result of Project Reset during which the Group corrected its brand premiums where necessary, an improved product mix following the strategic exit from bulk markets and a reduction in overhead costs despite normal inflationary increases. Project Reset was fuelled by efficiency improvements and cost savings. The Headline Earnings per Ordinary Share increased significantly from the previous corresponding period. During the six months to 31 December 2009 the preference shares were entitled to 97% of ordinary dividends declared. Earnings per share calculations are based on the dividend rights attached to the different classes of shares and accordingly 97% of the earnings during the comparative period accrued to the preference shares. Following the capital restructuring on 31 May 2010 the preference shares are no longer entitled to share in ordinary dividends and all earnings accrue to the ordinary shares. This increase shows the tremendous value that has been added to the ordinary shareholders since December 2009. Revenue increased by R326,4 million or 10,8% and Operating Profit by R52,9 million or 43% for the same period. This growth was achieved despite a modest GDP growth in South Africa, but the relatively low interest rates had a positive effect on overall consumer spending. Clover has, however, shared in the economic recovery across all of its chosen market segments. Clover benefited further from continuing lower input costs during this period, and by passing savings on to the consumer, Clover has gained market share from its competitors with the exception of cheese where very aggressive discounting by competitors in the bulk cheese market lead to volume losses in Clover`s pre-packed cheese sales. As mentioned in previous reports, Clover had been investigating for more than a decade a way in which to recapitalise its Balance Sheet. During May 2010, the Producer Shareholders voted in favour of delinking their milk quota allocation from the Ordinary Shares. This enabled Clover to approach shareholders other than milk producers to invest in the capital of the business. As a result, Clover listed on the JSE Limited ("the JSE") on 14 December 2010 and through a private placement, secured a capital inflow of R575 million before costs (R75 million received after the period end) from some of the most prominent institutional investors in South Africa. Simultaneously to this delinking of milk quota and Ordinary Shares, Clover collapsed the dual share structure of the Ordinary Shares and Participating Preference Shares. From June 2010 Preference Shares` participation in ordinary dividends ceased and they became debt instruments only, redeemable in June 2013. A further significant event was the disinvestment of Hosken Consolidated Investments ("HCI") from Clover`s shareholding. HCI had been a pro-active shareholder in Clover for 5 years prior to its exit and made a significant contribution to the Group`s transformation from a Co-op to a public company. The proceeds from the JSE listing will be utilised to fund Project Cielo Blu, a major capital project aimed at the repositioning and expansion of facilities, to simplify the group structure and for other corporate activities. Review of Operations Overall supply chain Clover has concentrated heavily on reducing supply chain costs during the past three years. These measures continued during the period under review and proceeds from the process were utilised to reduce selling prices as part of Project Reset. A multi-disciplinary team oversees the implementation of this project. Dairy operations Strong market share gains have been achieved since the financial crisis of 2008/9. Lower costs and consequential lower prices played a major part in this success. Margins are recovering well and after Project Cielo Blu, further efficiencies and margin improvements are expected. Beverage operations Despite tighter consumer spending, the Beverages business continued to show healthy growth with sales volumes increasing by 12,8%. Revenue however did not grow to the same extent as a result of Project Reset. Clover`s juice brands have shown strong competition against the housebrands and the Tropika brand has again demonstrated its popularity with consumers. Operating margin for Clover Beverages, although lower than the corresponding prior year period, increased to 10,7% from 10,3% for the year ending 30 June 2010. Project Cielo Blu will also improve margins and increase capacities for the future. During the period the group launched its premier brand Tropika in Nigeria through a joint venture with a local partner, New Age Beverage Co. Ltd. The joint venture is housed in Clover West Africa (Pty) Ltd. The costs associated with establishing this venture and preparation for trading negatively influenced the beverages segment`s results for the period. Clover West Africa started trading in December 2010. Cash flow Cash generation for the reporting period, although less than the comparative period, was above expectation during this traditional cash consuming period. The measures put in place to reduce the Group`s exposure to cyclical and seasonal oversupply of milk effectively contained inventory build-up during the seasonal spring and summer period to levels required to supplement raw material supply during the autumn and winter periods. Planned and actual milk intake was much higher than for the six months to 31 December 2009 in order to supply the Group`s volume and raw milk sales growth with resultant stronger demand on cash flow. The six months to December 2009 further benefitted from high opening inventory levels at 1 July 2009 which allowed for a lower milk intake and the conversion of inventory into cash. The new capital raised by the listing of R489,3 million, net of costs, caused net current assets to increase from R510,8 million to R1 026,7 million. Excluding inventory, net current assets increased to R465,1 million from R44,8 million. The Group is now adequately funded to complete Project Cielo Blu over the next three years. Prospects The listing of Clover on the JSE and the simultaneous raising of new capital has given Clover the means to address historical inefficiencies and to expand its operations. Project Cielo Blu will see the move of the long life products plant from Midrand to Port Elizabeth and Pinetown, the move of the central Johannesburg beverages factory into the Midrand facility and the expansion of several other production and distribution sites. These improvements will take between 2-3 years to complete after which margin improvements can be anticipated. In the short term Clover will still be subject to an uncertain economy, high unemployment, rising fuel and energy prices and a fluctuating currency. All of these factors create unpredictable trading conditions. The second half of the financial year is traditionally weaker than the first, but the gain in market share and continuing lower supply chain costs are expected to deliver positive results. Any forward looking statement included in this announcement has not been reviewed and reported on by Clover`s external auditors and does not constitute an earnings forecast. Post balance sheet events In the Prelisting Statement issued on 29 November 2010 the company announced that a share price stabilisation mechanism would be in place for a period of 30 days following the listing on the JSE. In terms of this mechanism the stabilisation manager was granted an option to subscribe for up to 7,142,857 ordinary shares at the same price as the listing price should price stabilisation be necessary. Price stabilisation was not required during this period and the stabilisation manager exercised its option subsequent to the year end to subscribe for the additional shares. This raised an additional R75 million in share capital during January 2011. Competition Commission As reported previously, the Competition Commission referred certain complaints against seven dairy processors (including Clover) to the Competition Tribunal for determination. This event has, over a prolonged period of time, received wide publicity in the press. The complaints contain allegations of unlawful conduct on the part of Clover (and other respondents) that involve prohibited practices including collusion in regard to the fixing of milk prices. Clover has from inception disputed these contentions. To date there have been several interlocutory proceedings between the Competition Commission and some of the respondents, including Clover. These were dealt with by the Competition Tribunal and the Competition Appeal Court resulting in the litigation to become protracted. The matter of determining the merits of the complaints has, in the result, not commenced as yet. It is anticipated - in view of what follows below - that there will be further interlocutory applications at the behest of certain respondents including Clover. In one of these interlocutory proceedings, the Competition Appeal Court held that a summons, in terms of which certain documentary evidence had been procured from a co-respondent, was invalid. The commission was ordered to return all documents thus procured to the respondent. In a further proceeding, the Supreme Court of Appeal concluded, inter alia, that the initiation of the complaints against these respondents was invalid and that, pursuant thereto, the referral of such complaints to the Competition Tribunal was similarly flawed. The Competition Tribunal was accordingly not vested with the requisite capacity to entertain the referral. In this case, the Supreme Court of Appeal emphasised that the Competition Act has to be interpreted in a manner that is consistent with the Constitution and that the powers of the Competition Commission must be interpreted in a manner that least impinges on constitutional values and rights. Clover has informed the Competition Commission that it intends pursuing a similar challenge against the Competition Commissioner`s referral and has requested clarification from the Competition Commission of its position following the Supreme Court of Appeal judgement in the above mentioned matter. To date the Commission has failed to respond. In the meantime Clover is proceeding with its application to have the referral set aside. Application for designation of the dairy industry Clover lodged and application for the designation of the Dairy Industry with the Minister of Trade and Industry on 14 November 2008. During 2009 the Department indicated that Clover should receive an update on the process during September and later November 2009 which did not materialise. Correspondence was received recently from the Minister of Economic Development confirming that a meeting will be scheduled to discuss the application. Flowing from enquiries made at the Department of Agriculture with regard to the application for designation, a meeting was held with the Department of Agriculture and a proposal was made by representatives of National Marketing Council that an application could be made to appoint a Section 7 (Marketing Act) Committee to deal with certain critical issues regarding the Dairy Industry. The decision whether to form the Section 7 Committee will be taken by the Minister of Agriculture by the end of February 2011. In the event that Clover is successful with its application for the designation of the Dairy Industry, the Competition Commission may provide guidelines and/or directives with regard to agreements or practices or category of agreements or practices relating to the dairy industry, taking cognisance of the provisions of the Competition Act. Dividends An interim dividend of 10 cents per ordinary share has been declared. For and on behalf of the Directors JAH Bredin JH Vorster Chairman Chief Executive 10 March 2011 INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Unaudited *Unaudited Notes Audited (Restated) Six months ended Year ended
31 December 31 December 30 June 2010 2010 2009 R`000 R`000 R`000
Continuing operations Sales of products 3 022 482 2 720 846 5 409 689 Rendering of services 325 575 300 636 583 073 Rental income 1 220 1 386 2 978 Revenue 3 349 277 3 022 868 5 995 740 Cost of sales (2 452 367) (2 146 194) (4 328 694) Gross profit 896 910 876 674 4 1 667 046 Other operating income 5 668 57 485 60 054 Profit on sale of associated company - - 337 682 Dividends received - 650 649 Selling and distribution costs ( 632 431) ( 624 076) (1 200 290) Administration expenses ( 82 940) ( 102 668) ( 149 061) Restructuring expenses ( 11 218) ( 78 894) ( 149 458) Other operating expenses - ( 6 069) ( 7 652) Operating profit 175 989 123 102 4 558 970 Finance income 6 770 7 726 27 353 Finance cost ( 32 775) ( 61 178) ( 90 871) Profit before tax from 149 984 69 650 495 452 continuing operations ( 52 078) ( 3 622) ( 191 662) Income tax expense Profit for the period from 97 906 66 028 303 790 continuing operations Discontinued operations - * 32 123 32 123 Profit after tax for the period from discontinued operations Profit for the period 97 906 98 151 335 913 Other comprehensive income Exchange differences on translation of foreign operations ( 810) ( 1 577) ( 2 717) Total comprehensive income 97 096 96 574 333 196 for the period, net of tax Profit attributable to: Equity holders of the 96 743 94 516 330 819 parent 1 163 3 635 5 094 Non-controlling interests 97 906 98 151 335 913
Total comprehensive income attributable to: Equity holders of the 96 080 93 372 328 881 parent 1 016 3 202 4 315 Non-controlling interests 97 096 96 574 333 196 * In the prior year interim report the Group`s share of Danone Clover`s earnings was disclosed as Income from associated company. This investment was sold on 1 January 2010 and treated as a discontinued operation in the 2010 annual report. The comparative figures for the six months ended 31 December 2009 were restated accordingly. 31 December 31 December 30 June 2010
2010 2009 Cents per Cents per Cents per share share share Earnings per share Basic earnings for the 75,3 2,0 5 214,0 period attributable to ordinary equity holders adjusted on a two for one basis.* Basic earnings for the - 104,4 5 - period attributable to preference equity holders. Diluted earnings for the 75,0 2,0 5 214,0 period attributable to ordinary equity holders adjusted on a two for one basis.* Diluted earnings for the - 104,4 5 - period attributable to preference equity holders. Earnings per share from continuing operations Basic earnings for the 75,3 1,3 5 193,2 period attributable to ordinary equity holders adjusted on a two for one basis* Basic earnings for the - 68,9 5 - period attributable to preference equity holders Diluted earnings for the 75,0 1,3 5 193,2 period attributable to ordinary equity holders adjusted on a two for one basis* Diluted earnings for the - 68,9 5 - period attributable to preference equity holders. Headline earnings per share Headline earnings for the 73,2 0,9 6 period attributable to 33,1 ordinary equity holders adjusted on a two for one basis .* Headline earnings for the - 48,6 6 - period attributable to preference equity holders Diluted headline earnings 72,8 0,9 6 33,1 for the period attributable to ordinary equity holders adjusted on a two for one basis.* Dulited headline earnings - 48,6 6 - for the period attributable to preference equity holders Headline earnings from continuing operations per share Headline earnings for the 73,2 0,3 6 12,3 period attributable to ordinary equity holders adjusted on a two for one basis* Headline earnings for the - 13,1 6 - period attributable to preference equity holders Diluted headline earnings 72,8 0,3 6 12,3 for the period attributable to ordinary equity holders on a two for one basis* Dulited headline earnings - 13,1 6 - for the period attributable to preference equity holders * The ordinary shares were sub divided on a two for one basis on 4 November 2010. The comparative figures for the year ended 30 June 2010 and for the six months ended on 31 December 2009 were restated accordingly. INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at 31 December 2010 Unaudited Unaudited Notes Audited as at as at as at
31 December 31 December 30 June 2010 2010 2009 R`000 R`000 R`000 Assets Non-current assets Property, plant and equipment 967 660 915 604 914 413 Investment properties 985 1 034 1 010 Intangible assets 294 744 286 821 287 060 Other investments - 2 - Deferred tax assets 2 516 134 312 18 740 1 265 905 1 337 773 1 221 223
Current assets Inventories 561 610 527 993 465 994 Trade and other receivables Prepayments 1 032 568 952 473 807 463 Income tax receivable 9 884 7 138 6 170 Cash and short-term 1 492 - - deposits 792 411 963 758 429 274
2 397 965 2 451 362 1 708 901 Assets classified as held- 937 741 421 1 979 for-sale 2 398 902 3 192 783 1 710 880
Total assets 3 664 807 4 530 556 2 932 103 Equity and liabilities Equity attributable to equity holders of the parent Issued capital 8 598 17 793 7 6 192 Share premium 602 269 123 277 7 115 348 Treasury share capital and share premium - ( 977) - Other reserves 245 786 842 443 242 188 Retained earnings 740 566 556 545 684 631 1597 219 1539 081 1 048 359
Non-controlling interests 27 318 26 995 28 108 Total equity 1624 537 1566 076 1 076 467 Non-current liabilities 594 790 460 429 592 504 Interest-bearing loans and - 241 - borrowings 53 210 59 303 50 357 Share-based payments 11 895 6 016 6 363 Provisions 8 145 - 6 320 Deferred tax liabilities Trade and other payables 668 040 525 989 655 544 Current liabilities Trade and other payables 1 320 130 1 302 172 1 115 327 Proceeds on disposal of associated company received in advance - 1 085 000 - Interest-bearing loans and borrowings 35 622 33 653 66 947 Income tax payable - 1 011 1 368 Provisions 16 478 16 655 16 450 1 372 230 2 438 491 1 200 092
Total liabilities 2 040 270 2 964 480 1 855 636 Total equity and 3 664 807 4 530 556 2 932 103 liabilities INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the six months ended 31 December 2010 Oridinary Oridinary Preference Treasury Other and and share capital share capital preference preference and premium capital reserves
share share transferred and capital premium to debt premium issued R`000 R`000 R`000 R`000 R`000
Balance at 1 July 17 498 270 425 (149 393) (4 024) 848 026 2009 Profit for the period Other comprehensive income Total comprehensive income Preference Shares issued 295 8 967 (4 464) Reversal of debt portion on issue of treasury preference shares (2 258) Treasury Preference shares issued to executives 3 047 Dividends of subsidiaries Preference shares repaid Balance at 31 17 793 279 392 (156 115) (977) 848 026 December 2009 Profit for the period Other comprehensive income Total comprehensive income Reduction in (3 088) ordinary share capital - HCI Reduction in ( 504) ordinary share capital - Stabilisation Trust Ordinary shares 935 86 394 issued Increase in debt (103 267) portion on conversion of preference shares to redeemable preference shares Increase in ( 41) ordinary treasury shares Ordinary treasury 1 018 shares realised and written off on deconsolidation of CIL Stabilisation Trust Share based 733 payment transaction Transfer to (600 194) retained earnings Buy-back of equity rights of preference shares (Special dividend) Balance at 30 June 15 136 365 786 (259 382) - 248 565 2010 (Audited) Foreign Retained Total Non- Total currency earnings controlling Equity translation interests
reserve R`000 R`000 R`000 R`000 R`000 Balance at 1 July (4 439) 462 029 1440 122 40 886 1481 008 2009 Profit for the period 94 516 94 516 3 635 98 151 Other comprehensive income (1 144) (1 144) ( 433) (1 577) Total comprehensive income (1 144) 94 516 93 372 3 202 96 574 Preference Shares issued 4 798 4 798 Reversal of debt portion on issue of treasury preference shares (2 258) (2 258) Treasury Preference shares issued to executives 3 047 3 047 Dividends of subsidiaries - (1 884) (1 884) Preference shares repaid - (15 209) (15 209) Balance at 31 (5 583) 556 545 1 539 081 26 995 1 566 076 December 2009 Profit for the ( 794) 236 303 236 303 1 459 237 762 period Other comprehensive ( 794) ( 346) (1 140) income Total ( 794) 236 303 235 509 1 113 236 622 comprehensive income Reduction in (337 363) (340 451) (340 451) ordinary share capital - HCI Reduction in ( 504) ( 504) ordinary share capital - Stabilisation Trust Ordinary shares 87 329 87 329 issued Increase in debt (103 267) (103 267) portion on conversion of preference shares to redeemable preference shares Increase in ( 41) ( 41) ordinary treasury shares Ordinary treasury (1 018) - - shares realised and written off on deconsolidation of CIL Stabilisation Trust Share based 733 733 payment transaction Transfer to 600 194 - - retained earnings Buy-back of equity rights of preference shares (Special dividend) (370 030) (370 030) (370 030) Balance at 30 June (6 377) 684 631 1048 359 28 108 1 076 467 2010 (Audited) INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the six months ended 31 December 2010 Oridinary and Oridinary and Preference Treasury Other preference preference share capital share capital share capital share and premium capital reserves issued premium/ transferred to and
debt premium R`000 R`000 R`000 R`000 R`000 Balance at 30 15 136 365 786 (259 382) - 248 565 June 2010 Profit for the period Other comprehensive income Total comprehensive income Ordinary shares 2 407 499 929 Issued Share issue cost (13 009) Dividends Dividends of subsidiaries Share based 4 395 payment reserve Balance at 31 17 543 852 706 (259 382) - 252 960 December 2010 (Unaudited) Foreign Retained Total Non- Total Equity currency earnings controlling
translation interests reserve R`000 R`000 R`000 R`000 R`000 Balance at 30 (6 377) 684 631 1 048 359 28 108 1 076 467 June 2010 Profit for the 96 743 96 743 1 163 97 906 period Other (797) (797) (147) (944) comprehensive income Total (797) 96 743 95 946 1 016 96 962 comprehensive income Ordinary shares Issued 502 336 502 336 Share issue cost (13 009) (13 009) Dividends (40 808) (40 808) (40 808) Dividends of - (1 806) (1 806) subsidiaries Share based 4 395 - 4 395 payment reserve Balance at 31 (7 174) 740 566 1 597 219 27 318 1 624 537 December 2010 (Unaudited) INTERIM CONSOLIDATED CASH FLOW STATEMENT for the six months ended 31 December 2010 Unaudited Unaudited Notes Audited Six months ended Year ended 31 December 31 December 30 June 2010 2009 2010
R`000 R`000 R`000 Operating activities Profit before tax from 149 984 69 650 495 452 continuing operations Tax paid (33 181) (30 366) (102 124) Adjustments to reconcile profit before tax to net cash flow Adjustment for non cash items: Depreciation and 45 160 44 759 89 253 impairment of property, plant and equipment Impairment of plant - - 10 732 included in restructuring cost Amortisation and 3 947 3 857 7 438 impairment of intangible assets Depreciation investment 24 187 48 properties Foreign exchange loss 759 2 181 2 005 Impairment of assets held- - - 1 013 for-sale Movement in provisions 2 881 (1 228) (10 205) Movement in longterm 1 825 - 6 320 incentive bonus provisions Profit on disposal of - - (337 682) investment in associated company Profit on disposal and (3 827) (42 741) (49 011) scrapping of assets Foreign exchange 1 595 544 959 differences on fixed assets Movement in provision 4 395 (873) (382) for share based payments Other Adjustments Finance cost 32 775 61 178 90 871 Finance income (6 770) (7 726) (27 353) Dividends received - (650) (649) Working capital adjustments Decrease/(increase) in (95 616) 1 227 63 226 inventories Increase in trade and (228 819) (163 788) (17 810) other receivables Increase in trade and 204 803 311 821 124 976 other payables Net cash flow from 79 935 248 032 347 077 operating activities Investing activities Proceeds from sale of 5 887 150 839 155 661 property, plant and equipment Proceed on disposal of - 1 085 000 - associate company received in advance Foreign exchange loss (759) (2 181) (2 005) Interest received 6 770 7 726 27 353 Proceeds on sale of other - - 3 investments Dividends received - 650 649 Proceed on sale of - - 1 079 560 associated company Increase of investment in - (150 051) (150 554) associated company Capital expenditure: (101 023) (42 306) (98 089) tangible assets Capital expenditure: (11 628) (1 516) (5 527) intangible assets Foreign currency (797) (1 154) (1 938) translation reserve Net cash flow (used in) / (101 550) 1 047 007 1 005 113 from investing activities Net cash (outflow) / (21 615) 1 295 039 1 352 190 inflow before financing activities Financing activities Interest paid (32 775) (61 178) (90 871) Dividends paid (40 808) (29 984) (400 014) Repayment of preference - (50 000) (50 000) share liability in subsidiary company Decrease in non- (1 953) (2 317) (2 665) controlling interest Proceeds from issue of - 9 262 9 262 preference shares Treasury shares sold - 789 3 006 Ordinary share buy back - - (340 955) Proceeds from issue of 502 336 - 87 329 ordinary shares Share issue cost (13 009) - - Repayment of borrowings (29 039) (471 824) (450 515) Proceeds from borrowings - - 38 536 Net cash flows from / 384 752 (605 252) (1196 887) (used in) financing activities Net increase in cash and 363 137 689 787 155 303 cash equivalents Cash and cash equivalents 429 274 273 971 273 971 at the beginning of the period Cash and cash equivalents at the end of the period 792 411 963 758 429 274 NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1 CORPORATE INFORMATION Clover is a company incorporated and domiciled in South Africa. The unaudited consolidated financial statements of the Group for the six months ended 31 December 2010 comprise the Company and its subsidiary companies (together referred to as the "Group"). The companies within the Group have coterminous year-ends. The unaudited interim condensed financial statements of Clover for the six months ended 31 December 2010 were authorised for issue in accordance with a resolution of the Directors on 10 March 2011. 2 BASIS OF PREPARATION AND ACCOUNTING POLICIES 2.1 BASIS OF PREPARATION The interim condensed consolidated financial statements for the six months ended 31 December 2010 have been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards ("IFRS"), the presentation as well as the disclosure requirements of IAS 34 Interim Financial Reporting, the listing Requirements of the JSE Limited and the requirements of the South African Companies Act. The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group`s annual financial statements as at 30 June 2010. 2.2 SIGNIFICANT ACCOUNTING POLICIES The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group`s annual financial statements for the year ended 30 June 2010. 3 SEASONALITY OF RESULTS The Group`s operating results from normal trading activities for the first semester are traditionally better than the second semester. High sales volumes during the December festive season, and November in anticipation of the festive season, are much higher than Easter sales volumes during the second semester. Beverage volumes are also higher during the warm spring and summer months. Raw milk intake reaches a peak during late spring and early summer and because all these peak milk volumes are not sold by end December, stock levels normally increase towards the end of December and are then gradually depleted towards the end of the financial year. Stock level increases consume cash and the first semester is therefore a weaker cash flow period than the second semester when the stock is sold. 4 SEGMENT REPORTING Segment information is presented in respect of the Group`s business segments. The business segments are based on the Group`s management and internal reporting structure. Inter-segment pricing is determined on an arm`s length basis. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. BUSINESS SEGMENTS The Group comprises the following main business segments: - The dairy products segment is focused on providing the market with quality dairy products. Other dairy consist of Clover Botswana, Clover Zambia, Clover Fonterra, Clover Swaziland and Clover Namibia. - The non-alcoholic beverages segment focus on the development and marketing of non-alcoholic, value-added branded beverages products. - "Other" in the tables below consist of Clover Industries Ltd holding company and Laktolab (Pty) Ltd that render laboratory services. OPERATING SEGMENTS The following tables present revenue, profit and assets and liability information of the Group`s operating segments for the six months ended 31 December 2010 and 2009, respectively, as well as for the year ended 30 June 2010. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 31 December 2010 Dairy products Non alcoholic beverages SEGMENT REPORT Clover S.A. Other Total Clover Other Beverages
R`000 R`000 R`000 R`000 R`000 Statement of income External revenue 2 532 543 216 178 2 748 721 593 802 2 162 Inter-segment 244 621 1 548 246 169 - - revenue Total revenue 2 777 164 217 726 2 994 890 593 802 2 162 Revenue 2 777 164 217 726 2 994 890 593 802 2 162 Cost of sales (2 012 676) (179 268) (2 191 944) (369 836) (2 123) Gross profit 764 488 38 458 802 946 223 966 39 Depreciation (46 700) (645) (47 345) (1 384) (7) Other (cost) / (615 586) (27 836) (643 422) (158 828) (7 715) income Recurring 102 202 9 977 112 179 63 754 (7 683) operating profit/ (loss) Dividends 24 039 - 24 039 - - received Restructuring (3 388) (204) (3 592) - 441 expenses Operating profit 122 853 9 773 132 626 63 754 (7 242) as per statement of comprehensive income Net financing (14 635) (883) (15 518) 7 263 1 cost Profit / (loss) 108 218 8 890 117 108 71 017 (7 241) before taxation Income tax (24 147) (2 654) (26 801) (19 885) 2 074 expense Profit / (loss) 84 071 6 236 90 307 51 132 5 167) for the period Assets and liabilities Segment assets 3 426 773 196 799 3 623 572 378 770 4 528 Segment 2 405 941 150 871 2 556 812 19 733 9 253 liabilities 31 December 2010 Other Consolidated - Total SEGMENT REPORT Clover Industries Adjustments and Clover Industries and Laktolab eliminations Group R`000 R`000 R`000 Statement of income External revenue 4 592 - 3 349 277 Inter-segment revenue - (246 169) - Total revenue 4 592 (246 169) 3 349 277 Revenue 4 592 (246 169) 3 349 277 Cost of sales (1 477) 113 013 (2 452 367) Gross profit 3 115 (133 156) 896 910 Depreciation (241) (187) (49 164) Other (cost) / income 16 270 133 156 (660 539) Recurring operating 19 144 (187) 187 207 profit/ (loss) Dividends received 461 012 (485 051) - Restructuring (8 067) - (11 218) expenses Operating profit as 472 089 (485 238) 175 989 per statement of comprehensive income Net financing cost (17 751) - (26 005) Profit / (loss) 454 338 (485 238) 149 984 before taxation Income tax expense (7 466) - (52 078) Profit / (loss) for 446 872 (485 238) 97 906 the period Assets and liabilities Segment assets Segment Assets 830 928 (1 174 483) 3 663 315 Segment liabilities 277 674 (824 694) 2 038 778 NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 31 December 2009* Dairy products Non (Restated) alcoholic beverages SEGMENT REPORT Clover S.A. Total Clover Other Beverages/ R`000 R`000 R`000 R`000 Statement of income External revenue 2 491 232 180 102 2 671 334 551 287 Inter-segment 37 821 2 938 40 759 - revenue Total revenue 2 529 053 183 040 2 712 093 551 287 Revenue 2 529 053 183 040 2 712 093 551 287 Cost of sales (1 789 083) (138 953) (1 928 036) (341 881) Gross profit 739 970 44 087 784 057 209 406 Depreciation (46 154) (449) (46 603) (1 665) Other (cost) / (631 941) (36 802) (668 743) (144 180) income Recurring 61 875 6 836 68 711 63 561 operating profit Profit from sale 93 365 - 93 365 - of Boksburg properties Dividends 22 096 - 22 096 - received Restructering (77 688) - (77 688) (1 206) cost Operating profit 99 648 6 836 106 484 62 355 as per statement of comprehensive income Net financing (51 562) 188 (51 374) 4 640 cost Profit before 48 086 7 024 55 110 66 995 taxation Income tax 23 953 (2 639) 21 314 (18 758) expense Profit for the 72 039 4 385 76 424 48 237 period after tax Profit after tax - - - - for the period from discontinued operations Profit for the 72 039 4 385 76 423 48 237 period Assets and liabilities Segment assets 3 502 374 129 377 3 631 751 368 569 Segment 2 748 070 81 551 2 829 621 76 017 liabilities 30 June 2010 Non alcoholic beverages
Dairy products SEGMENT REPORT Clover S.A. Other Total Clover Beverages/ R`000 R`000 R`000 R`000
Statement of Income External revenue 4 596 983 333 951 4 930 934 1 055 800 Inter-segment 459 706 5 383 465 089 - revenue Total revenue 5 056 689 339 334 5 396 023 1 055 800 Revenue 5 056 689 339 334 5 396 023 1 055 800 Cost of sales (3 644 520) (261 320) (3 905 840) (658 427) Gross profit 1 412 169 78 014 1 490 183 397 373 Depreciation (92 856) (1 035) (93 891) (3 169) Other (cost) / (1 161 719) (66 645) (1 228 364) (284 253) income Recurring 157 594 10 334 167 928 109 951 operating profit Profit from sale 908 981 - 908 981 - of Danone Clover Profit from sale 93 365 - 93 365 - of Boksburg properties Dividends 25 675 - 25 675 - received Restructuring (131 442) - (131 442) (1 289) expenses Operating profit 1 054 173 10 334 1 064 507 108 662 as per statement of comprehensive income Net financing (55 351) (24) (55 375) 9 068 cost Profit before 998 822 10 310 1 009 132 117 730 taxation Income tax (127 905) (5 215) (133 120) (32 933) expense Profit for the 870 917 5 095 876 012 84 797 year after tax Profit after tax - - - - for the period from discontinued operations Profit for the 870 917 5 095 876 012 84 797 year Assets and liabilities Segment assets 3 151 070 140 722 3 291 792 374 363 Segment 1 757 693 96 770 1 854 463 45 249 liabilities 31 December Other Consolidated Discontinued Consolidated 2009* - Continuing operation - Total/ (Restated) operations SEGMENT REPORT Clover Adjustments Clover Danone Clover Clover Industries and Industries Industries and eliminations Group/ Group Laktolab
R`000 R`000 R`000 R`000 R`000 Statement of income External 4 548 (204 301) 3 022 868 - 3 022 868 revenue Inter-segment - (40 759) - - - revenue Total revenue 4 548 (245 060) 3 022 868 - 3 022 868 Revenue 4 548 (245 060) 3 022 868 - 3 022 868 Cost of sales (1 522) 125 245 (2 146 194) - (2 146 194) Gross profit 3 026 (119 815) 876 674 - 876 674 Depreciation (121) (237) (48 626) - (48 626) Other (cost) / 14 564 120 839 (677 520) - 677 520 income Recurring 17 469 787 150 528 - 150 528 operating profit Profit from - (42 546) 50 819 - 50 819 sale of Boksburg properties Dividends 30 649 (52 096) 649 - 649 received Restructering - - (78 894) - (78 894) cost Operating 48 118 (93 855) 123 102 - 123 102 profit as per statement of comprehensive income Net financing (6 718) - (53 452) - (53 452) cost Profit before 41 400 (93 855) 69 650 - 69 650 taxation Income tax (6 178) - (3 622) - (3 622) expense Profit for the 35 222 (93 855) 66 028 - 66 028 period after tax Profit after - - - 32 123 32 123 tax for the period from discontinued operations Profit for the 35 222 (93 855) 66 028 32 123 98 151 period Assets and liabilities Segment assets 505 311 24 925 4 530 556 - 4 530 566 Segment 208 356 -149 514 2 964 480 - 2 964 480 liabilities 30 June 2010 Other Consolidated Discontinued Consolidated - Continuing operation - Total/ operations
SEGMENT REPORT Clover Adjustments Clover Danone Clover Clover Industries and Industries Industries and eliminations Group/ Group Laktolab
R`000 R`000 R`000 R`000 R`000 Statement of Income External 9 006 - 5 995 740 - 5 995 740 revenue Inter-segment - (465 089) - - - revenue Total revenue 9 006 (465 089) 5 995 740 - 5 995 740 Revenue 9 006 (465 089) 5 995 740 - 5 995 740 Cost of sales (2 984) 238 557 (4 328 694) - (4 328 694) Gross profit 6 022 (226 532) 1 667 046 - 1 667 046 Depreciation (335) (358) (97 753) - (97 753) Other (cost) / 26 187 236 415 (1 250 015) - (1 250 015) income Recurring 31 874 9 525 319 278 - 319 278 operating profit Profit from - (571 299) 337 682 - 337 682 sale of Danone Clover Profit from - (42 546) 50 819 - 50 819 sale of Boksburg properties Dividends 195 649 (220 675) 649 - 649 received Restructuring (16 727) - (149 458) - (149 458) expenses Operating 210 796 (824 995) 558 970 - 558 970 profit as per statement of comprehensive income Net financing (17 211) - (63 518) - (63 518) cost Profit before 193 585 (824 995) 495 452 - 495 452 taxation Income tax (63 594) 37 985 (191 662) - (191 662) expense Profit for the 129 991 (787 010) 303 790 - 303 790 year after tax Profit after - - - 32 123 32 123 tax for the period from discontinued operations Profit for the 129 991 (787 010) 303 790 32 123 335 913 year Assets and liabilities Segment assets 497 605 (1 231 657) 2 932 103 - 2 932 103 Segment 838 285 (882 361) 1 855 636 - 1 855 636 liabilities NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Unaudited Unaudited Audited Six months Year ended
ended 31 December 31 December 30 June 2010 2009 2010 R`000 R`000 R`000
5 Earnings and diluted earnings per share The preference shares participated in the ordinary dividends with the ordinary shares proportionate to the par value of ordinary shares and the issue prices of the preference shares, up to 31 May 2010. Even though preference shares only participate in earnings to the extent that ordinary dividends have been declared, earnings per share and diluted earnings per share are disclosed for both ordinary as well as preference shares based on the dividend rights associated with the type of shares. On 31 May 2010 the preference shares were converted into redeemable preference shares and the rights of preference shares to ordinary dividends were suspended. 5.1 Profit attributable to the different classes of shares Profit attributable to ordinary 96 743 3 151 330 819 shareholders of the parent company Profit attributable to preference - 91 365 - shareholders of the parent company Profit attributable to 96 743 94 516 330 819 shareholders of the parent company Profit from a discontinued - 32 123 32 123 operation Profit from continued operations 96 743 62 393 298 696 Profit from continued operations attributable to the different classes of shares Profit attributable to ordinary 96 743 2 080 298 696 shareholders of the parent company Profit attributable to preference 60 313 shareholders of the parent company Profit attributable to 96 743 62 393 298 696 shareholders of the parent company 5.2 Weighted and diluted weighted average number of issued ordinary shares Number of Number of Number of shares shares shares Weighed average number of issued 128 404 439 88 485 311 86 302 270 ordinary shares Less: Weighted average number of - (9 773 771) (9 004 549) treasury shares Total weighted average number of 128 404 439 78 711 540 77 297 721 issued ordinary shares Total weighted average number of 128 404 439 157 423 080 154 595 442 issued ordinary shares adjusted on a two for one basis Total weighted average number of 129 064 377 157 423 080 154 595 442 issued ordinary share for calculating of diluted earnings per share adjusted on a two for one basis 5.3 Weighted and diluted average number of issued preference shares Number of Number of Number of
shares shares shares Number of issued preference - 89 442 022 - shares Total weighted and diluted - 87 475 733 - average number of issued preference shares 6 Headline earnings As headline earnings were not disclosed in the annual financial reports at 30 June 2010, it was not audited 96 743 94 516 330 819
Profit attributable to equity holders of the parent Adjusted for: Loss/(profit) on sale and (3 826) (2 653) 908 scrapping of property plant and equipment Profit on the sale of Boksburg - (50 818) (50 818) factory Profit on sale of Danone Clover - (337 682) Impairment of plant and equipment - 10 532 10 732 recognised as restructuring cost Impairment of property, plant and - 814 assets held for sale Tax adjustment on the above items 1 071 (7 596) 96 347 Total of adjustments (2 755) (50 535) (279 699) Headline earnings 93 988 43 981 51 120 Attributable to: Continuing operations 93 988 11 858 18 997 Discontinued operations - 32 123 32 123 93 988 43 981 51 120
7 Share capital and share premium Authorised share capital 2 billion (2009: 100 million) 10 000 10 000 10 000 ordinary shares with a par value of 5 cents (2009: 10 cents) each 100 million cumulative preference 10 000 10 000 10 000 shares with a par value of 10 cents each Issued share capital 172,0 million (2009: 88,5 8 598 8 849 6 192 Million) ordinary shares with a par value of 5 cents (2009: 10 cents) each 89,4 million (2009: 89,4 Million) 8 944 8 944 8 944 preference shares with a par value of 10 cents each Total issued share capital 17 542 17 793 15 136 Debt portion of preference share 8 944 - 8 944 capital Total issued share capital net of 8 598 17 793 6 192 debt Share premium Ordinary share premium 601 790 28 476 114 870 Preference share premium 250 916 250 916 250 916 Debt portion of preference share (250 437) (156 115) (250 438) premium Total share premium 602 269 123 277 115 348 8 Dividends Mandatory dividends paid to preference shareholders are recognised as finance cost. During the period equity dividends were declared as follows: To ordinary shareholders 40 808 - - To preference shareholders - - 370 030 Total dividends declared 40 808 - 370 030 Cents per Cents per Cents per share share share
Dividend per share based on the number of shares issued on the date of payment To ordinary shareholders 65,9 - - To preference shareholders - - 413,7 9. Dividend declaration Notice is hereby given that an ordinary cash dividend has been declared for the six months ended 31 December 2010, payable in South African currency, on 04 April 2011 and amounts to 10 cents per share. The salient dates will be as follows: Last day to trade cum the dividend Friday, 25 March 2011 Shares commence trading "ex" distribution Monday, 28 March 2011 Record date Friday, 01 April 2011 Payment date Monday, 04 April 2011 Share certificates may not be dematerialised or rematerialised between Monday, 28 March 2011 and Friday, 01 April 2011, both days inclusive. Johannesburg 10 March 2011 DIRECTORATE NON-EXECUTIVE MILK PRODUCER DIRECTORS JAH Bredin (Chairman), WI Buchner (Vice-chairman), HPF du Preez, VP Turner (Resigned: 10 March 2011), MG Elliot, JC Hendriks (Dr), JW Lotz (Resigned: 7 October 2010), MG MacKenzie (Resigned: 7 October 2010), FG Meyer (Resigned: 7 October 2010/Bedank: 7 Oktober 2010) NON-EXECUTIVE INDEPENDENT DIRECTORS TA Wixley (Lead Independent Director), SF Booysen (Dr) (Appointed: 7 October 2010), JN du Plessis (Appointed: 7 October 2010, NP Mageza (Appointed: 22 October 2010), DK Smith (Resigned: 22 October 2010) EXECUTIVE DIRECTORS JH Vorster (Chief Executive), HB Roode (Deputy Chief Executive), LJ Botha (Chief Financial Officer), CP Lerm (Dr COMPANY SECRETARY HB Roode ADMINISTRATION COMPANY REGISTRATION NUMBER 2003/030429/06 JSE Codes Ordinary Share Code: CLR ISIN: ZAE000152377 Preference Share Code: CLRP ISIN: ZAE000152385 REGISTERED OFFICE 200 Constantia Drive, Constantia Kloof, 1709 TELEPHONE 011 471 1400 TELEFAX 011 471 1504 INTERNET ADDRESS www.clover.co.za AUDITORS Ernst & Young Incorporated BANKERS The Absa Group First National Bank Investec Bank ATTORNEYS Werksmans Roestoff, Venter and Kruse Kocks and Dreyer SPONSOR RAND MERCHANT BANK (A division of FirstRand Bank Limited) Date: 14/03/2011 07:55:01 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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