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Country Bird Holdings Financial Results
Country Bird Holdings Limited
(Incorporated in the Republic of South Africa)
Registration number: 2005/008505/06
ISIN: ZAE000094835
JSE Share code: CBH
("CBH" or "the group")
Audited results for the year ended 30 June 2012
Revenue up 9%
Operating profit down 32%
South African normalised operating margin 5,37%
"KFC Supplier of the Year 2011"
Commentary on results
Profile: Country Bird Holdings Limited (CBH) is an agricultural group that during the period under review comprised:
- integrated poultry and stock feed business operations in South Africa trading as Supreme Poultry and Nutri Feeds;
- poultry breeding, broiler and stock feed operations in the southern African region trading as Ross Africa and Master Farmer; and
- a South African red meat abattoir and trading operation trading as Long Iron Meats.
CBH currently operates in Botswana, the DRC, Malawi, Mozambique, Namibia, South Africa and Zambia.
Financial review
Operating profit of R149,5 million was achieved for the year ended 30 June 2012 which, when compared to the previous year's figure of
R220,8 million, is a decrease of 32%. Operating profit for the year was negatively impacted by unusually high levels of imports, significant
increases in raw material input costs and the nine-week strike at Supreme Poultry's Botshabelo plant. The strike gave rise to increased costs
of R23,6 million. Revenue was up 9% to R3 billion for the year (2011: R2,8 billion), but gross profit decreased by 19% to R289,7 million
(2011: R357,3 million) after accounting for a 13% increase in cost of sales mostly as a result of increased commodity prices and volume growth
of 5,5%.
Higher average levels of working capital, resulting from increases in raw material input prices and a buildup in finished poultry product in the
second half of the year resulted in increased finance costs for the period.
Profit before income tax dropped 49% to R88,9 million (2011: R174,9 million).
Operational review
Poultry - South Africa: The South African poultry division reported an increase of 11,3% in revenue for the year to R1,9 billion
(2011: R1,7 billion). This was as a result of volume increases of 3% and a sales price increase of 8%. The group continues to focus on the
quick service restaurant market and expanding its factory shop footprint. Sales volumes in these sectors rose by 44% in the period under review.
Profit as a result of the improved revenue was, however, negatively impacted by the costs associated with increased commodity prices and the
impact of the nine week strike.
Poultry - Other Africa: This comprises a grandparent breeding operation in Zambia and a parent breeding and broiler operation in Botswana.
Revenues for the year increased by 31% to R190 million (2011: R145 million) through improved pricing in Botswana and an increase in demand for
day-old chicks in Zambia. These factors combined to provide an increase in operating profit of 20% for the segment to R21 million
(2011: R17,6 million).
Animal Nutrition - South Africa: Nutri Feeds reported an improvement of 3% in volumes sold for the period under review and a 23% increase
in selling prices, giving a net 27% improvement in revenue to R529,2 million (2011: R416,8 million). Disciplined cost control and effective
raw material procurement strategies resulted in a 24% increase in operating profit to R60,5 million (2011: R48,9 million).
Animal Nutrition - Other Africa: Revenues for the combined African operations increased 23% to R319 million (2011: R260 million). However, a
shortage of supply of good quality raw materials in Botswana and the general volatility of commodity prices, resulted in a 47% drop in operating
profit to R7,6 million (2011: R14,5 million).
Red Meat: The Klerksdorp abattoir was closed during the second half of the year and currently carcasses are bought and deboned based on
demand and pricing. Fixed costs in this business have been significantly reduced.
Turnover reduced by 40% to R206,5 million (2011: R346,1 million). However, as a result of the change in the business model, this division
reported an operating margin of R3,6 million, which included abattoir closure costs of R4 million (2011: R2,4 million operating loss).
Prospects
The poultry industry continues to face the challenge of increasing feed prices and high levels of dumping of imported poultry. Awareness of the
impact surrounding the issue of dumping and illegal imports is higher than it has ever been and the industry is actively engaging with government
and the relevant authorities for relief.
The group generated positive cash flows on the back of a reduction of frozen stock as pricing improved.
The group has effectively hedged its raw materials positions until March 2013 which should give rise to improved margins in the Zambian, Botswana
and South African feed milling operations.
After achieving recognition as KFCs Supplier of the Year 2011, the Groups KFC franchise in Zimbabwe has successfully concluded its first
operating lease in Harare and trading is expected to commence in the next six months.
Capital distribution
In line with the group's dividend policy of three times cover, a capital distribution of 2,33 cents per share for the period has been declared
for payment on 19 November, 2012.
By order of the board
JD Wright
Chief executive officer
10 September 12
Audited condensed consolidated statement of comprehensive income
30 June 2012 30 June 2011
Audited % Audited
R'000 change R'000
Revenue 3 094 519 9 2 834 659
Operating profit 149 469 (32) 220 838
Finance income 472 (74) 1 841
Finance costs (61 075) 29 (47 402)
Share of loss of associates - (100) (297)
Profit before income tax 88 866 (49) 174 980
Income tax expense (27 803) (47) (52 129)
Profit for the year 61 063 (50) 122 851
Other comprehensive income
Currency translation differences 10 064 (174) (13 526)
Total comprehensive income for the year 71 127 (35) 109 325
Profit attributable to:
Owners of the parent 60 010 (51) 122 638
Non-controlling interest 1 053 394 213
61 063 (50) 122 851
Total comprehensive income attributable to:
Owners of the parent 70 074 (36) 109 112
Non-controlling interest 1 053 394 213
71 127 (35) 109 325
Earnings per share (cents):
- basic 30,79 (53) 65,21
- diluted 30,79 (52) 63,98
Additional information
Ordinary shares
- Issued net of treasury shares 198 372 313 188 772 313
- Weighted average number of ordinary shares 194 931 980 188 071 896
- Diluted number of ordinary shares 194 931 980 191 674 288
Headline earnings per ordinary share (cents):
- basic 24,93 (62) 65,81
- diluted 24,93 (61) 64,57
Capital distribution per share - interim (cents) 5,98 (46) 11,10
Capital distribution per share - final (cents) 2,33 (79) 10,84
Net asset value per share 282,75 13 251,28
Tangible asset value per share 229,83 14 201,46
Gearing ratio (net of cash and cash equivalents) 1,72 10 1,57
Audited condensed consolidated statement of financial position
As at As at
30 June 2012 30June 2011
Audited % Audited
R'000 Change R'000
ASSETS
Non-current assets 559 295 10 509 098
Property, plant and equipment 445 235 15 387 647
Intangible assets 103 160 10 93 706
Financial assets and other investments 653 61 405
Investment in associates - (100) 10 096
Deferred income tax assets 10 247 (41) 17 244
Current assets 1 092 350 27 862 743
Inventories 280 373 96 143 119
Biological assets 171 330 8 158 253
Trade and other receivables 481 015 21 398 578
Derivative financial instruments 7 999 100 -
Current income tax receivable 469 (86) 3 239
Cash and cash equivalents 151 164 (5) 159 554
Total assets 1 651 645 20 1 371 841
EQUITY
Total equity 551 178 17 472 592
Ordinary shares 1 984 5 1 888
Share premium 745 508 (3) 772 167
Other reserves 30 834 284 8 029
Retained earnings 571 559 15 497 715
Common control deficit (832 110) 0 (832 110)
Equity attributable to the owners of the parent 517 775 16 447 689
Non-controlling interest 33 403 34 24 903
LIABILITIES
Non-current liabilities 340 566 (4) 355 004
Borrowings 240 091 (11) 269 592
Employee share scheme liability 2 223 52 1 467
Deferred income tax liabilities 98 252 17 83 945
Current liabilities 759 901 40 544 245
Trade and other payables 520 038 40 372 637
Current income tax liabilities 2 284 (18) 2 799
Borrowings 235 070 39 168 779
Provision for other liabilities and charges 2 509 8 265 30
Total liabilities 1 100 467 22 899 249
Total equity and liabilities 1 651 645 20 1 371 841
Audited condensed consolidated statement of cash flows
30 June 2012 30 June 2011
Audited Audited
R'000 R'000
Cash flows from operating activities
Net cash generated from operating activities 9 082 179 613
Cash receipts from customers 3 012 083 2 820 224
Cash paid to suppliers and employees (2 928 646) (2 564 051)
Cash generated from operations 83 437 256 173
Interest paid (61 075) (47 402)
Income tax paid (13 280) (29 158)
Cash flows from investing activities
Net cash used in investing activities (27 712) (42 287)
Purchases of property, plant and equipment (47 684) (43 799)
Proceeds from sale of property, plant and equipment 2 960 873
Acquisition of subsidiaries, net of cash acquired 5 047 -
Realisation of financial assets and investments 11 493 -
Purchases of financial assets and investments - (22)
Interest received 472 661
Cash flows from financing activities
Net cash used in financing activities (16 518) (103 693)
Proceeds from the issuance of ordinary shares 8 100 1 673
Proceeds from borrowings 318 497 104 458
Repayments of borrowings (309 840) (186 104)
Capital repayments to shareholders (33 275) (23 720)
Net increase/(decrease) in cash and cash equivalents (35 148) 33 633
Cash and cash equivalents at beginning of year 16 299 (14 513)
Exchange gains on cash and bank overdrafts 3 258 (2 821)
Cash and cash equivalents at end of year (15 591) 16 299
Audited condensed segment report
Revenue Operating profit Assets
30 June 2012 30 June 2011 30 June 2012 30 June 2011 30June 2012 30 June 2011
Audited Audited Audited Audited Audited Audited
R'000 R'000 R'000 R'000 R'000 R'000
Poultry 2 039 310 1 811 519 77 608 159 735 1 135 183 919 031
- South Africa 1 861 270 1 674 377 56 562 142 114 885 369 726 303
- Other Africa 189 760 145 478 21 046 17 621 249 814 192 728
Intersegment revenue (11 720) (8 336) - - - -
Animal nutrition 848 621 677 031 68 267 63 510 455 834 419 495
- South Africa 1 378 566 1 048 651 60 561 48 950 374 045 367 970
- Other Africa 394 440 309 496 7 706 14 560 81 789 51 525
Intersegment revenue (924 385) (681 116) - -
Beef 206 588 346 109 3 594 (2 407) 60 628 33 315
- South Africa 206 725 346 109 3 594 (2 407) 60 628 33 315
Intersegment revenue (137) - - - - -
3 094 519 2 834 659 149 469 220 838 1 651 645 1 371 841
Revenues of approximately R241,5 million (2011: R342 million) are derived from a single external customer. These revenues are attributable
to the South African Poultry segment.
Audited condensed consolidated statement of changes in equity
Share Share Other Retained
capital premium reserves earnings
R'000 R'000 R'000 R'000
Balance at 1 July 2010 1 871 795 887 17 435 375 077
Total comprehensive income - - (13 526) 122 638
Transactions with owners
Proceeds from shares issued 17 - 1 656 -
Employee share scheme - - 2 464 -
Capital distribution to shareholders - (23 720) - -
Total transactions with owners 17 (23 720) 4 120 -
Balance at 30 June 2011 1 888 772 167 8 029 497 715
Balance at 1 July 2011 1 888 772 167 8 029 497 715
Total comprehensive income - - 10 064 60 010
Transactions with owners
Proceeds from shares issued 96 6 616 8 019 -
Shares to be issued related to business combination - - 18 556 -
Employee share scheme transferred to retained earnings - - (13 834) 13 834
Capital distribution to shareholders - (33 275) - -
Non-controlling interest arising on business combination - - - -
Total transactions with owners 96 (26 659) 12 741 13 834
Balance at 30 June 2012 1 984 745 508 30 834 571 559
Audited condensed consolidated statement of changes in equity (continued)
Total
attribut-
able to Non-
Common owners con-
control of the trolling Total
deficit parent interest equity
R'000 R'000 R'000 R'000
Balance at 1 July 2010 (832 110) 358 160 24 690 382 850
Total comprehensive income - 109 112 213 109 325
Transactions with owners
Proceeds from shares issued - 1 673 - 1 673
Employee share scheme - 2 464 - 2 464
Capital distribution to shareholders - (23 720) - (23 720)
Total transactions with owners - (19 583) - (19 583)
Balance at 30 June 2011 (832 110) 447 689 24 903 472 592
Balance at 1 July 2011 (832 110) 447 689 24 903 472 592
Total comprehensive income - 70 074 1 053 71 127
Transactions with owners
Proceeds from shares issued - 14 731 - 14 731
Shares to be issued related to business combination - 18 556 - 18 556
Employee share scheme transferred to retained earnings - - - -
Capital distribution to shareholders - (33 275) - (33 275)
Non-controlling interest arising on business combination - - 7 447 7 447
Total transactions with owners - 12 7 447 7 459
Balance at 30 June 2012 (832 110) 517 775 33 403 551 178
Notes to the condensed consolidated financial statements
1. Basis of preparation
The audited condensed consolidated financial information announcement for the year ended 30 June 2012 was prepared in accordance with
International Financial Reporting Standards (IFRS), International Standard 34, the Listing Requirements of the JSE Limited and the
South African Companies Act of 2008. The condensed consolidated financial statements were supervised by MB le Roux (CA(SA)).
The accounting policies are consistent with those of the previous financial year and comply with IFRS. These financial statements do
not include all the information required for full annual financial statements and should be read in conjunction with the consolidated
financial statements as at and for the year ended 30 June 2012. These results have been audited by PricewaterhouseCoopers Inc, Chartered
Accountants (SA), Registered Auditors. Their unqualified audit opinion is available for inspection at the company's registered office.
These audited condensed consolidated financial statements were approved by the board of directors on 10 September 2012.
30 June 2012 30 June 2011
Audited Audited
R'000 R'000
2. Operating profit
The following amounts have been accounted for in the operating profit:
Gain on bargain purchase of Silver Blade Abattoir Proprietary Limited 11 171 -
Fair value gains/(losses) on financial assets at fair value through profit or loss 9 075 -
3. Reconciliation to headline earnings
Profit attributable to owners of parent 60 010 122 638
Adjusted for:
(Profit)/loss on disposal of property, plant and equipment (239) 1 135
Gain on bargain purchase of Silver Blade Abattoir Proprietary Limited (11 171) -
Adjusted headline earnings 48 600 123 773
4. Capital expenditure and depreciation
Capital expenditure 47 684 43 799
Depreciation 42 698 37 832
Amortisation of intangible assets 553 553
5. Capital and other commitments
Inventories contracted for 108 975 136 752
6. Cash and cash equivalents
Bank balances, deposits and cash 151 164 159 554
Short-term borrowings (166 755) (143 255)
(15 591) 16 299
7. Business combinations
Renidroc Proprietary Limited
On 1 January 2012 the group acquired 100% of the share capital of "Renidroc Proprietary Limited", a distributor of poultry product to
retail and wholesale markets, operating in South Africa. The purchase consideration of R22,5 million will be paid through the issue of
CBH shares once group results have been published. The revenue included in the consolidated statement of comprehensive income since
1 January 2012 contributed by Renidroc Proprietary Limited was R244,3 million. Renidroc Proprietary Limited also contributed a loss
of R972 335 over the same period. Had Renidroc Proprietary Limited been consolidated from 1 July 2011, the consolidated statement of
income would show revenue of R564,2 million and profit of R1,7 million.
Silver Blade Abattoir Proprietary Limited
On 1 July 2011 the group acquired an additional 37,5% of the share capital of "Silver Blade Abattoir Proprietary Limited", a beef abattoir,
operating in South Africa for R1. The revenue included in the consolidated statement of comprehensive income since 1 July 2011 contributed
by Silver Blade Abattoir Proprietary Limited was R3,4 million. Silver Blade Abattoir Proprietary Limited also contributed a loss of R8 337
over the same period. The group recognised a loss of R2 million as a result of measuring at fair value its 37,5% equity interest in Silver
Blade Abattoir Proprietary Limited held before the business combination.
Other
In addition, the group established the company "CBH Restaurants Proprietary Limited" in order to operate in Zimbabwe and "Supreme Poultry
Mozambique Limitada" in order to operate in Mozambique. Operations of these companies are set to commence after year end and as at year end
these company are dormant.
8. Contingent liability
The South African Revenue Services has raised additional assessments for the 2009 tax year in Country Bird Proprietary Limited and
Webram Thirty Two Proprietary Limited. SARS is not allowing the deductibility of certain expenses claimed by these two companies. These two
companies are currently in a liquidation process which was not finalised at reporting date. Based on legal advice obtained objections will be
raised against the assessments received. The repayment of tax amounts to R25,8 million and interest R1,2 million.
9. Declaration of capital distribution
Notice is hereby given that a capital distribution out of share premium of 2,33 cents per ordinary share in respect of the year ended
30 June 2012 has been declared by the board. The total capital distribution for the period is three times covered by headline earnings per share.
The capital distribution has been declared out of capital reserves and is not subject to Dividends Withholding Tax. The company has no Secondary
Tax on Companies credits available. The income tax reference number is 9931572144. The issued shares at the date of declaration is 198 372 313
ordinary shares.
The salient dates of the declaration and payment of this capital distribution is as follows:
Last date to trade ordinary shares cum distribution Friday, 16 November 2012
Ordinary shares trade ex distribution Monday, 19 November 2012
Record date Friday, 23 November 2012
Payment date Monday, 26 November 2012
Share certificates may not be dematerialised or rematerialised between Monday, 19 November 2012 and Friday, 23 November 2012
(both dates inclusive).
The board of directors were given the general authority to make payments to shareholders out of the company's share premium account at
the annual general meeting held on 24 November 2011.
The illustrative financial effects of the distribution set out below have been prepared to assist shareholders in assessing the impact of
the distribution of capital out of share premium on the Net Asset Value per share ("NAV") and Tangible Net Asset Value per share ("TNAV").
Impact of the distribution Pro forma after the
of 2,33 cents per share on distribution
R'000 R'000
Assets
Cash and cash equivalents (4 622) 146 542
Equity and liabilities
Equity attributable to owners of the parent (4 622) 513 153
NAV (cents per share) (2,37) 280,38
TNAV (cents per share) (2,37) 227,46
Directors of CBH Limited: BH Kent (Chairman)#, R Gibbison#, GP Heath, IWM Isdale#, KW James, MB le Roux, CD Stein#,
JD Wright #Independent non-executive
Registered office: 269 Oxford Road, Corner Harries Road, Illovo, Johannesburg, 2196
Attorneys: Fluxmans Inc, 11 Biermann Avenue, Rosebank, Johannesburg, 2196 (Private Bag X41, Saxonwold, 2132)
Investment Bank and Sponsor: Investec Bank Limited, (Registration number 1969/004763/06), 2nd Floor, 100 Grayston Drive,
Sandton, 2196(PO Box 785700, Sandton, 2146)
Company secretary: MJC Antunes, 15 Coro Street, Bloemfontein, 9301 (PO Box 6851, Bloemfontein, 9300)
Auditors: PricewaterhouseCoopers Inc. 61 Second Avenue, Westdene, Bloemfontein, 9301 (PO Box 818, Bloemfontein, 9300)
Transfer secretaries: Computershare Investor Services (Proprietary) Limited, (Registration number 2004/003647/07) Ground Floor,
70 Marshall Street Johannesburg, 2001 (PO Box 61051 Marshalltown, 2107)
www.cbhltd.co.za
Date: 11/09/2012 04:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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