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ZED - Zeder Investments Limited - Audited abridged results for the year ended 28
February 2011
Zeder Investments Limited
Incorporated in the Republic of South Africa
Registration number: 2006/019240/06
JSE share code: ZED
ISIN number: ZAE000088431
("Zeder" or "the company" or "the group")
Audited abridged results for the year ended 28 February 2011
Recurring headline earnings per share up 14,8% to 27,1 cents
Headline earnings per share up 9,2% to 18,9 cents
Attributable earnings per share up 89,3% to 26,5 cents
Sum-of-the-Parts value per share up 29,9% to 274 cents
Abridged group income statement 2011 2010
R`m R`m
Investment income 22,8 41,2
Net fair value gains 32,0 15,2
Other operating income 0,8 1,1
Total income 55,6 57,5
Management fee (note 3) (53,2) (40,7)
Other expenses (0,2) (0,1)
Total expenses (53,4) (40,8)
Share of profits of associated companies 199,8 128,5
Results of operating activities 202,0 145,2
Finance cost (2,4) (0,6)
Loss on dilution of interest in associated company (17,5)
Gain on disposal of investment in associated company 81,3
Profit before taxation 280,9 127,1
Taxation (21,8) (3,5)
Profit for the year 259,1 123,6
Profit for the year attributable to equity holders of 259,1 123,6
the company
Non-headline items
Loss on dilution of interest in associated company 17,5
Non-headline items of associated companies (10,1) 10,9
Gain on disposal of investment in associated company (65,6)
Impairment of investment in an associated company 1,4
Headline earnings 184,8 152,0
Earnings per share (cents)
- Attributable (basic and diluted) 26,5 14,0
- Headline (basic and diluted) 18,9 17,3
Number of shares in issue and weighted average
(million)
- In issue 978,1 978,1
- Weighted average * 978,1 880,6
* Increased number of shares in issue due to rights
issue during June 2009 at R1,35 per share
Abridged group statement of comprehensive income 2011 2010
R`m R`m
Profit for the year 259,1 123,6
Share of other comprehensive income/(loss) of 8,4 (16,9)
associated companies
Other equity movements of associated companies 1,3 1,1
Disposal of investment in associated company 10,1
Step acquisition from equity securities to investment
in associated companies
Reversal of previous fair value gains after taxation (0,4)
on equity securities
Revaluation of assets and liabilities of associated 0,4
companies
Total comprehensive income for the year 278,9 107,8
Attributable to equity holders of the company 278,9 107,8
Abridged group statement of financial position 2011 2010
R`m R`m
Assets
Non-current assets 2 350,3 2 183,0
Investment in associated companies (note 2) 2 143,6 1 967,8
Equity securities 206,7 215,2
Current assets 207,6 121,8
Trade and other receivables 1,6
Current income tax receivable 0,2
Cash and cash equivalents 206,0 121,6
Total assets 2 557,9 2 304,8
Equity
Ordinary shareholders` funds 2 521,8 2 282,0
Total equity 2 521,8 2 282,0
Liabilities
Non-current liabilities
Deferred income tax 5,9 1,7
Current liabilities
Trade and other payables 30,2 21,1
Total liabilities 36,1 22,8
Total equity and liabilities 2 557,9 2 304,8
Net asset value per share (cents) 257,8 233,3
Abridged group statement of changes in owners` equity 2011 2010
R`m R`m
Ordinary shareholders` equity at beginning of year 2 282,0 1 725,4
Shares issued 491,6
Dividend paid (39,1) (42,8)
Total comprehensive income for the year 278,9 107,8
Ordinary shareholders` equity at end of year 2 521,8 2 282,0
Dividend per share
- 2009: 7 cents (declared on 6 April 2009 and paid on 11 May 2009)
- 2010: 4 cents (declared on 12 April 2010 and paid on 10 May 2010)
- 2011: 4 cents (declared on 11 April 2011 and paid on 9 May 2011)
Abridged group statement of cash flows 2011 2010
R`m R`m
Cash flow from operating activities 27,0 21,9
Cash flow from investment activities 96,5 (376,9)
Cash flow from financing activities (39,1) 448,7
Net increase in cash and cash equivalents 84,4 93,7
Cash and cash equivalents at beginning of year 121,6 27,9
Cash and cash equivalents at end of year 206,0 121,6
Notes to the abridged financial statements
1. Basis of presentation and accounting policies
The abridged financial statements have been prepared in accordance with the
recognition and measurement principles of International Financial Reporting
Standards ("IFRS"), and IAS 34 - Interim Financial Reporting; the requirements
of the South African Companies Act of 1973, as amended; and the Listings
Requirements of the JSE Limited. The accounting policies applied in the
preparation of these abridged financial statements are consistent with those
used in the previous financial year, except for the following standards and
interpretation which are effective for the financial year beginning 1 March
2010:
IFRS 3 Revised - Business Combinations
IAS 27 Revised - Consolidated and Separate Financial Statements
IFRIC 17 - Distribution of Non-Cash Assets to Owners
These standards and interpretation had no impact on the reported results.
Results of operating activities, as presented in the income statement, include
share of profits of associated companies as a significant part of Zeder`s
business activity is performed through associates. The comparatives have been
presented on a consistent basis.
2. Investment in associated companies
Zeder invests in the agriculture, food and beverage sectors.
3. Management fee
A management fee is payable to PSG Group Ltd ("PSG Group"), the group`s ultimate
holding company, in terms of a management agreement. In accordance with the
management agreement, PSG Group provides all investment, administrative,
advisory, financial and corporate services to the group. Management fees payable
consist of a base fee and a performance fee element. The base fee is calculated
at 2% p.a. (exclusive of VAT) on the net asset value of the group (excluding
cash) at the end of every month and 0,15% p.a. (exclusive of VAT) on the daily
average cash balances. The base fee is accrued at the end of every month. The
performance fee is calculated on the last day of the financial year at 10% p.a.
on the outperformance of the group`s equity portfolio above the equally weighted
FTSE-JSE Beverage Total Return Index (TRI041) and the FTSE-JSE Food Producers
Total Return Index (TRI043) over any financial year. No performance fee was
payable during the current or prior year.
4. Segment report
The group is organised into two reportable segments, namely: food and agri, and
beverages. These segments represent the major associate and equity investments
of the group. Both segments operate mainly in the Republic of South Africa.
Segmental income comprises dividends received and fair value gains/(losses)
relating to equity investments, as well as income from associated companies
(including loss on dilution of investment in associated company), after tax, as
per the income statement.
Recurring headline earnings are calculated on a see-through basis. Zeder`s
recurring headline earnings is the sum of its effective interest in that of each
of its underlying investees, regardless of its percentage shareholding. The
result is that equity investments which Zeder does not equity account in terms
of accounting standards, are included in the calculation of recurring headline
earnings.
Non-
Recurring recurring
Headline Headline Headline Net asset
For the year ended Income earnings earnings earnings Value
28 February 2011 R`m R`m R`m R`m R`m
Food and agri 188,7 256,5 (73,6) 182,9 1 671,4
Beverages 144,5 60,3 60,3 675,6
333,2 316,8 (73,6) 243,2 2 347,0
Net interest and other 0,9 1,1 (0,3) 0,8 207,6
income and expenses
Management fees and (75,0) (53,2) (6,0) (59,2) (32,8)
taxation
Total 259,1 264,7 (79,9) 184,8 2 521,8
Non-headline items 74,3
Attributable earnings 259,1
Recurring headline 27,1
earnings per share
(cents)
For the year ended
28 February 2010
Food and agri 124,5 190,3 (56,4) 133,9 1 396,2
Beverages 26,9 45,9 45,9 786,8
151,4 236,2 (56,4) 179,8 2 183,0
Net interest and other 16,5 16,5 16,5 121,6
income and expenses
Management fees and (44,3) (44,6) 0,3 (44,3) (22,6)
taxation
Total 123,6 208,1 (56,1) 152,0 2 282,0
Non-headline items (28,4)
Attributable earnings 123,6
Recurring headline 23,6
earnings per share
(cents)
7. Commitments and contingencies
Contingencies of associated companies which could have an impact on the group`s
equity accounted earnings can be summarised as follows:
The Competition Commission has initiated an investigation into the alleged
collective price fixing of grain storage tariffs by agricultural businesses,
including Kaap Agri Ltd. The Competition Commission informed all parties
involved that the matter had been referred to the Competition Tribunal. The
maximum fine could be as much as ten percent of the affected revenue. This could
have a bearing on the results of the group`s investments in agricultural
businesses. The potential timing and financial consequences, if any, for the
group`s investee companies can not be determined as yet.
COMMENTARY
OVERVIEW
Zeder is a long-term value investor in the agriculture, food and beverage
sectors. The current value of its portfolio is R2,5bn, of which Kaap Agri Ltd
and Capevin Holdings Ltd ("Capevin Holdings") represent 78%.
During the year under review, we invested R211,8m to increase our interests in
already existing investments trading at attractive values.
RESULTS
Zeder had a satisfactory year ended 28 February 2011. The two key benchmarks we
believe to measure performance is our growth in recurring headline earnings per
share and in our Sum-of-the-Parts ("SOTP") value per share, which respectively
increased by 14,8% and 29,9%.
Zeder`s recurring headline earnings is the sum of its effective interest in that
of each of its underlying investees, regardless of its percentage shareholding.
The result is that investments in which Zeder holds less than 20% and is usually
not equity accounted in terms of accounting standards, are included in the
calculation of our consolidated recurring headline earnings. This provides
management and investors with a more realistic and simplistic way of evaluating
Zeder`s earnings performance.
Recurring headline earnings increased by 27,2% to R264,7m and recurring headline
earnings per share by 14,8% to 27,1 cents for the year under review. Headline
earnings per share increased by 9,2% to 18,9 cents, and attributable earnings
per share increased by 89,3% to 26,5 cents. The significant increase in
attributable earnings per share was mainly as a result of the R65,6m non-
headline profit on the disposal of Zeder`s interest in KWV Holdings.
During the year under review, Zeder`s SOTP value per share (calculated using the
quoted market prices for all OTC-traded unlisted investments) increased by 29,9%
to R2,74. The SOTP value is analysed in the table below:
2009 2010 2011
% Value % Value % Value
Interest (Rm) Interest (Rm) Interest (Rm)
Kaap Agri 34,3 437,2 41,3 812,8 43,9 1 270,4
Capevin Holdings 25,7 413,7 37,0 552,5 39,5 691,3
KWV Holdings * 31,3 214,6
Capespan 12,1 49,8 14,6 54,5 22,7 84,7
Suidwes 17,1 47,1 18,4 53,4 21,8 76,1
NWK 5,9 31,9 7,4 42,1 8,8 57,9
Other investments 162,7 235,7 318,0
Total investments 1 142,4 1 965,6 2 498,4
Cash and cash 27,9 121,6 206,0
equivalents
Other net 3,0 (20,9) (28,6)
assets/(liabilities)
SOTP value 1 173,3 2 066,3 2 675,8
SOTP value per share 1,92 2,11 2,74
(rand)
Number of shares in 611,3 978,1 978,1
issue (million)
Intrinsic value per 2,85 2,68 3,14
share (rand) **
* KWV Holdings unbundled from Capevin Holdings (July 2009) and disposed of
(February 2011)
** Calculated using the see-through market prices for Zeder`s indirect
investments in Pioneer Foods and Distell, quoted market prices for all other
OTC-traded unlisted investments, and where applicable, appropriate valuation
multiples for unquoted investments
Kaap Agri / Pioneer Foods
Zeder increased its interest in Kaap Agri from 41,3% to 43,9% during the past
year. Kaap Agri`s own operations, together with its 31,2% economic interest in
Pioneer Foods, continued to deliver attractive results.
During November 2010, Pioneer Foods and the Competition Commission announced the
final penalty settlement figure of R855m emanating from the investigation into
bread and milling price-irregularities. Pioneer Foods engaged pro-actively with
the Competition Commission to resolve the matter as amicably and quickly as
possible. Zeder`s share of the non-recurring penalty had a negative impact of
R40,5m on both headline and attributable earnings in the current financial year.
Excluding the effects of the penalty, Pioneer Foods` headline earnings per share
increased by 42% for their financial year ending 30 September 2010. Zeder
remains positive about Pioneer Foods` future.
Capevin Holdings (Distell) / KWV Holdings
The history can be summarised as follow:
* Before July 2009, KWV housed KWV`s own operational assets together with an
indirect interest in Distell.
* During July 2009, KWV`s own operations (transferred to a newly created KWV
Holdings) were unbundled to existing shareholders of KWV.
* Zeder was instrumental in unbundling KWV`s operational assets from the
Distell interest, primarily to create shareholder value and to ensure that
the management of KWV focus on the profitability of KWV`s own operations.
* Subsequent to the unbundling, KWV changed its name to Capevin Holdings and
accordingly shareholders were now invested in two entities, being Capevin
Holdings (indirect interest in Distell) and KWV Holdings (KWV`s own
operational assets).
* For each KWV share held on 30 June 2009, trading at R3,90, the combined
market value of the Capevin Holdings and KWV Holdings shares received from
the unbundling amounted to R5,05 at 28 February 2011. This represents a
29,5% growth in shareholder value.
Since the unbundling, Zeder increased its interest in KWV Holdings to 35,3%.
Although KWV Holdings is asset rich, its performance was disappointing with
their interim results to 31 December 2010 implying an ROE of about 1%. Pioneer
Foods made a bid for KWV Holdings` entire share capital, which Zeder supported,
believing it to be a fair offer and amongst other things, a perfect fit in
obtaining distribution synergies. Following the failed bid, we sold our entire
interest in KWV Holdings to Hosken Consolidated Investments and other parties
for R286m (average disposal price of R11,82 per share). This, combined with the
current market value of the retained interest in Capevin Holdings and dividends
received over the investment period, represent a compounded annual rate of
return of 18,8%.
Zeder remains invested in Capevin Holdings and has increased its interest to
39,5%. Capevin Holdings, through its 14,8% indirect interest in Distell,
recently reported interim results reflecting a 3% increase in headline earnings
per share. This increase is considered encouraging, taking into account the
continuing difficult economic conditions and adverse exchange rates.
Capespan
Zeder increased its stake in Capespan from 14,6% to 22,7% during the year under
review.
Capespan performed well and their attributable earnings per share, adjusted to
exclude extraordinary items, increased by 18% for their financial year ended 31
December 2010.
Capespan is underpinned by an attractive dividend yield of 6,8%, and we remain
optimistic about its growth potential.
Other investments
Although small when compared to the above companies, the rest of our investment
portfolio continues to yield attractive returns. We believe shareholder value
can be created through increased tradability in these shares, once share
restrictions and holding structures have been relaxed.
PROSPECTS
Zeder remains confident in the continued importance of the agri, food and
beverage sectors and will continue investing in such. Current cash of R206m and
funding resources of R250m provide Zeder with the necessary means to continue
acquiring assets at low price-earnings multiples and price-to-book values.
AUDITED FINANCIAL STATEMENTS
PricewaterhouseCoopers Inc. has audited the results for the year ended 28
February 2011 and their unqualified audit opinion on the annual financial
statements and the summarised financial statements contained herein, are
available for inspection at the company`s registered office.
DIVIDEND
The directors of Zeder have resolved to declare a final dividend of 4 cents per
share (2010: 4 cents) for the year ended 28 February 2011, in accordance with
its dividend policy of paying 100% of free cash flow as an ordinary dividend.
As a result of the Competition Commission penalty, Pioneer Foods paid no
dividend for the financial year ended 30 September 2010 which resulted in a 20%
reduction in Kaap Agri`s dividend. This had a negative impact on Zeder`s free
cash flow and dividend.
The salient dates of Zeder`s dividend distribution are:
Last day to trade cum dividend Thursday, 28 April 2011
Trading ex dividend commences Friday, 29 April 2011
Record date Friday, 6 May 2011
Date of payment Monday, 9 May 2011
Share certificates may not be dematerialised or rematerialised between Friday,
29 April 2011 and Friday, 6 May 2011, both days included.
Signed on behalf of the board of directors
Jannie Mouton Antonie Jacobs
Chairman Chief executive officer
Stellenbosch
11 April 2011
Directors:
JF Mouton (Chairman), AE Jacobs* (CEO), WL Greeff* (FD), CA Otto, MS du Pre le
Roux+, GD Eksteen+, LP Retief+
(* executive, + independent non-executive)
Secretary:
PSG Corporate Services (Pty) Ltd
Registered office:
1st Floor, Ou Kollege, 35 Kerk Street, Stellenbosch, 7600; PO Box 7403,
Stellenbosch, 7599
Transfer secretaries:
Computershare Investor Services (Pty) Ltd
70 Marshall Street, Johannesburg, 2001; PO Box 61051, Marshalltown, 2107
Sponsor: PSG Capital
Auditor: PricewaterhouseCoopers Inc.
Date: 11/04/2011 14:30:07 Supplied by www.sharenet.co.za
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