Wrap Text
Unaudited Group Results for the six months ended 31 August 2012
Sovereign Food Investments Limited
Incorporated in the Republic of South Africa
Registration Number: 1995/003990/06
JSE Code: SOV ISIN: ZAE000009221
(“Sovereign” or “the Group”)
Unaudited Group Results for the six months ended 31 August 2012
Improved headline earnings per share to 16,5 cents from 0,7 cents
Statement of Financial Position
Audited
Unaudited as at as at
31 August 29 February
2012 2011 2012
R’000 R’000 R’000
Assets
Non-current assets
Property, plant and equipment 821 419 801 597 829 333
Current assets 308 866 266 594 287 277
Inventory 41 469 35 241 35 134
Biological assets 80 715 92 128 86 197
Trade and other receivables 115 414 134 061 97 860
Cash and cash equivalents 71 268 5 164 68 086
Total assets 1 130 285 1 068 191 1 116 610
Equity and liabilities
Share capital and premium 272 999 272 999 272 999
Non-distributable reserve and share
based payments 76 311 53 026 76 378
Retained earnings 335 843 281 379 323 828
Equity 685 153 607 404 673 205
Non-current liabilities
Interest bearing borrowings 118 412 142 987 131 367
Deferred taxation 144 506 117 180 139 844
Current liabilities 182 214 200 620 172 194
Current portion of interest bearing
borrowings 27 487 27 261 28 930
Trade, other payables and provisions 154 691 153 290 143 016
Bank overdraft 36 20 069 248
Total equity and liabilities 1 130 285 1 068 191 1 116 610
Shares in issue (‘000) 79 396 79 396 79 396
Net asset value (cents) 863 765 848
Statement of Comprehensive Income
Audited
Unaudited as at as at
31 August 29 February
2012 2011 2012
R’000 R’000 R’000
Revenue 623 531 610 463 1 258 694
Operating profit before depreciation
and impairments 37 191 25 980 109 034
Depreciation and impairments 16 917 16 768 34 724
Profit before finance costs 20 274 9 212 74 310
Net finance costs 3 586 8 490 18 925
Profit before taxation 16 688 722 55 385
Deferred taxation 4 673 202 12 416
Profit after taxation 12 015 520 42 969
Other comprehensive income for the
period – (loss)/gain on revaluation of
property, plant and equipment (67) – 23 498
Total comprehensive income for the
period 11 948 520 66 467
Weighted average shares in issue (‘000) 79 396 77 165 78 274
Earnings per share (cents) 15,0 0,7 54,9
Headline earnings per share (cents) 16,5 0,7 57,9
Diluted earnings per share (cents) 15,0 0,7 54,9
Diluted headline earnings per share
(cents) 16,5 0,7 57,9
Reconciliation between earnings and
headline earnings
Earnings after taxation 12 015 520 42 969
Reconciling items:
Disposal of property, plant and
equipment 1 497 – 684
Taxation effect (424) – 1 684
Headline earnings after taxation 13 088 520 45 337
Statement of Cash Flows
Audited
Unaudited as at as at
31 August 29 February
2012 2011 2012
R’000 R’000 R’000
Cash generated from operations before
working capital changes 38 688 25 980 108 756
Changes in working capital (6 732) (66 512) (33 370)
Net cash flows from operations 31 956 (40 532) 75 386
Interest paid (3 586) (8 490) (18 925)
Net cash flows from operating
activities 28 370 (49 022) 56 461
Net cash flows from investing in
property, plant and equipment (13 109) (8 121) (22 463)
Proceeds on the sale of property, plant
and equipment 2 531 36 025 37 263
Net cash flows from shares issued – 145 000 145 316
Net cash flows from debt repaid (14 398) (193 437) (203 389)
Net movement in cash and cash
equivalents 3 394 (69 555) 13 188
Cash and cash equivalents at the
beginning of the period 67 838 54 650 54 650
Cash and cash equivalents at the end of
the period 71 232 (14 905) 67 838
Statement of Changes in Equity
Share
capital Share- Non-
and based distributable Retained
premium payments reserve earnings Total
R’000 R’000 R’000 R’000 R’000
For the six months
ended 31 August 2012
Opening balance 272 999 297 76 081 323 828 673 205
Sale of property,
plant and equipment – – (67) – (67)
Net value of
employee services – – – – –
Total comprehensive
income for the
period – – – 12 015 12 015
Closing balance 272 999 297 76 014 335 843 685 153
For the six months
ended 31 August 2011
Opening balance 127 683 1 192 52 583 280 859 462 317
Shares issued 145 316 – – – 145 316
Net value of
employee services – (749) – – (749)
Total comprehensive
income for the
period – – – 520 520
Closing balance 272 999 443 52 583 281 379 607 404
Commentary
Overview
Headline earnings per share for the period under review (“H113”) increased
to 16,5 cents from 0,7 cents for the prior period (“H112”) due to good
agricultural peformance and cost control. Although poultry prices increased
by 5%, this was offset by an 11% increase in the cost of feed raw materials.
Operational and financial results
The Group lowered its slaughter age by 2% in line with its stated objectives
of simplifying the business and improving consistency across its supply
chain. As a result, live mass per bird declined by 1% and feed conversion
ratio improved by 3%. Although a colder winter was experienced than last
year, mortalities decreased from 8% in H112 to 6% in H113 and the Group
achieved a 7% increase in its performance efficiency factor. Live birds
slaughtered decreased by 2% and together with a 1% decrease in net yield
this led to a 3% decrease in sales volumes.
Although pricing improved by 5%, pricing per quarter was volatile with first
quarter pricing up 8% and second quarter pricing up only 2% on the previous
comparable periods. As a result of this and the volume decrease, revenue
increased by 2%. This was a due to a surge in import volumes this year that
not only led to an oversupply situation but also caused the national cold
storage supply chain to become congested which in turn led to producers
being unable to move stock.
The Group continues to diversify away from commodity lines such as mixed
portions towards higher margin product lines with sales of mixed portions
declining to 44% from 46% in the prior comparative period.
Increases in maize and soya prices resulted in the Group’s broiler feed
costs increasing by 11% per ton. The drought in the United States and
production problems in South America will place the poultry industry under
pressure for the next six months as raw material prices remain volatile.
Despite increases in energy costs and inflationary pressure on other
overheads, non-feed costs increased by only 2% per unit sold and the Group
continues to work at reducing non-feed costs on a long term structural basis.
Finance charges reduced by 57% due to lower debt levels and holding higher
amounts of cash.
Working capital as a percentage of annualised revenue improved from 9% as at
H112 to 7% as at H113, and as a result of this and the improved business
performance, cash on hand increased from R68 million as at 29 February 2012
to R71 million as at 31 August 2012.
Gross long term gearing has improved to 21% from 28% as at 31 August 2012.
Capital expenditure for the period under review was limited to R13 million
of which R12 million was spent at the abattoir on increasing capacity for
new products.
Prospects
Industry margins over the next six months will remain under pressure due to
high levels of imported poultry volumes together with increases in maize and
soya prices. Urgent action is required to impose an import tariff structure
that will allow South African poultry companies to compete on a level
playing field with other countries that have either structural cost
advantages or are supported by their governments through direct or indirect
agricultural subsidies.
Directorate
During the period under review, Mr Chris Coombes, who was previously Chief
Financial Officer, was appointed as Chief Executive Officer. Mr Charles
Davies, who held the role of Executive Chairman, resumed the role of Non-
Executive Chairman and Mr Litha Nyhonyha, who held the role of Lead
Independent Director, resumed his role as Independent Non-Executive Director.
The search for a Chief Financial Officer has commenced and the position will
be filled in due course.
Accounting Policies
The unaudited condensed consolidated interim financial statements have been
prepared in accordance with International Financial Reporting Standards and
comply with the requirements of International Accounting Standard 34 –
Interim Financial Reporting, the AC500 series of interpretations as issued
by the Accounting Practices Board, the JSE Limited Listing Requirements and
the Companies Act of South Africa (2008). The accounting policies are
consistent with those applied by the Group for the year ended 29 February
2012. These financial results have been prepared by Mr C Coombes CA (SA),
and have not been reviewed or reported on by the Group’s auditors.
Interim Dividend
Whilst gearing has improved and the cash flow position of the Group is also
improving, the Board did not consider it prudent to declare an interim
dividend for the period under review.
By order of the Board
CP Davies C Coombes
Non-Executive Chairman Chief Executive Officer
1 October 2012
E-mail: info@sovfoods.co.za
Transfer secretaries
Computershare Investor Services (Pty) Limited, PO Box 61051, Marshalltown
2107, Gauteng
Sponsor
One Capital
Directorate
CP Davies* (Non-Executive Chairman), C Coombes (CEO), JA Bester*, PM Madi*,
LM Nyhonyha*, T Pritchard*, BJ Van Rensburg, GG Walter
* Non-Executive
www.sovereignfoods.co.za
Date: 01/10/2012 07:05:00 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.
Sharenet Sites 
