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Unaudited interim results for the six months ended 31 August 2012
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")
Unaudited interim results for the six months ended 31 August 2012
Sum-of-the-parts value per share up 5,1% to R3,31
Recurring headline earnings per share down 35.1% to 8,5 cents
Headline earnings per share down 33,0% to 5,9 cents
CONDENSED GROUP INCOME STATEMENT
for the six months ended 31 August 2012
Notes Unaudited Audited
31 Aug 31 Aug 29 Feb
2012 2011 2012
Rm Rm Rm
Revenue 79,3
Cost of sales (52,3)
Gross profit 27,0
Income
Investment income 7,6 8,3 63,7
Other gains and losses 62,5 13,1 51,2
Other income 1,8 0,3 0,6
Total income 71,9 21,7 115,5
Expenses
Management fee 2 (28,0) (21,7) (48,0)
Operating expenses (43,3) (0,2) (3,1)
Total expenses (71,3) (21,9) (51,1)
Share of profits of associated
companies 101,6 88,7 277,8
Results of operating activities 129,2 88,5 342,2
Finance costs (14,9) (1,8) (7,2)
Profit before taxation 114,3 86,7 335,0
Taxation 3 (7,4) (2,5) (0,4)
Profit for the period 106,9 84,2 334,6
Attributable to
Owners of the parent 107,9 84,2 334,6
Non-controlling interest (1,0)
106,9 84,2 334,6
Attributable to owners of the parent 107,9 84,2 334,6
Non-headline items, net of taxation
Interest in non-headline items of
associated companies (32,6) 2,1 (43,3)
(Profit)/loss on dilution of interest
in associated company (1,2) 7,9
Fair value gain resulting from step-
up acquisition (22,0)
Realised loss on sale of interest in
associated company 4,3 0,7
Realised loss on sale of equity
securities 0,9
Headline earnings 57,3 86,3 299,9
Earnings per share (cents)
Attributable (basic and diluted) 11,0 8,6 34,2
Headline (basic and diluted) 5,9 8,8 30,7
Recurring headline (basic and
diluted) 8,5 13,1 27,9
Number of shares (million)
In issue and weighted average 978,1 978,1 978,1
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 31 August 2012
Unaudited Audited
31 Aug 31 Aug 29 Feb
2012 2011 2012
Rm Rm Rm
Net profit for the period 106,9 84,2 334,6
Other comprehensive income for the period (1,1) (8,8) (0,3)
Share of other comprehensive income/(loss) of
associated companies 0,2 5,0 55,3
Currency translation differences (1,2)
Other equity movements of associated
companies (0,1) (13,8) (15,2)
Reversal of other comprehensive income of
associated company (40,4)
Total comprehensive income for the period 105,8 75,4 334,3
Attributable to:
Owners of the parent 106,9 75,4 334,3
Non-controlling interest (1,1)
105,8 75,4 334,3
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
at 31 August 2012
Notes Unaudited Audited
31 Aug 31 Aug 29 Feb
2012 2011 2012
Rm Rm Rm
Assets
Non-current assets 3 294,8 2 581,7 2 850,7
Property, plant and equipment 352,5
Intangible assets 99,8
Investment in associated companies 2 571,7 2 304,7 2 633,2
Equity securities 250,6 277,0 217,5
Loans and advances 20,2
Current assets 494,2 23,1 132,0
Inventories 113,4
Biological assets 73,3
Trade and other receivables 62,3 7,7 54,5
Cash and cash equivalents 245,2 15,4 77,5
Total assets 3 789,0 2 604,8 2 982,7
Equity and liabilities
Ordinary shareholders' equity 2 870,5 2 558,1 2 817,0
Non-controlling interest 31,4
Total equity 2 901,9 2 558,1 2 817,0
Non-current liabilities 459,7 7,7 132,6
Deferred income tax 3 37,2 7,7 2,6
Borrowings 422,5 130,0
Current liabilities 427,4 39,0 33,1
Borrowings 308,4 10,1 0,7
Trade and other payables 99,5 28,6 32,4
Current income tax payable 5,2 0,3
Provisions for other liabilities and
charges 14,3
Total liabilities 887,1 46,7 165,7
Total equity and liabilities 3 789,0 2 604,8 2 982,7
Net asset value per share (cents) 293,5 261,5 288,0
Net tangible asset value per share
(cents) 283,3 261,5 288,0
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
for the six months ended 31 August 2012
Unaudited Audited
31 Aug 31 Aug 29 Feb
2012 2011 2012
Rm Rm Rm
Ordinary shareholders' equity at beginning of
period 2 817,0 2 521,8 2 521,8
Total comprehensive income for the period 106,9 75,4 334,3
Dividend paid (39,1) (39,1) (39,1)
Transactions with non-controlling interest (14,3)
Ordinary shareholders' equity at end of period 2 870,5 2 558,1 2 817,0
Non-controlling interest 31,4
Non-controlling interest at beginning of the
period
Transactions with non-controlling interest 32,5
Total comprehensive loss for the period (1,1)
Total equity 2 901,9 2 558,1 2 817,0
CONDENSED GROUP STATEMENT OF CASH FLOWS
for the six months ended 31 August 2012
Unaudited Audited
31 Aug 31 Aug 29 Feb
2012 2011 2012
Rm Rm Rm
Net cash flow from operating activities 56,9 26,8 21,3
Net cash flow from investment activities (126,8) (188,4) (240,7)
Net cash flow from financing activities 237,6 (29,0) 90,9
Net increase/(decrease) in cash and cash
equivalents 167,7 (190,6) (128,5)
Cash and cash equivalents at beginning of
period 77,5 206,0 206,0
Cash and cash equivalents at end of period 245,2 15,4 77,5
CONDENSED GROUP SEGMENTAL REPORT
for the six months ended 31 August 2012
Unaudited Audited
31 Aug 31 Aug 29 Feb
2012 2011 2012
Rm Rm Rm
Recurring earnings 119,9 146,2 323,4
- Food and agri 99,6 130,2 265,1
- Beverages 20,3 16,0 58,3
Net interest and other income and expenses (8,8) 4,0 (2,4)
Management fee (28,0) (21,7) (48,0)
Taxation (0,7)
Recurring headline earnings (refer note 6) 83,1 127,8
Non-recurring headline earnings, net of
taxation (refer note 6) (25,8) (41,5) 26,9
Recurring earnings adjustment (food and agri),
net of taxation 17,4 (20,0) 48,6
One-off items
- Pioneer Foods Competition Commission
settlement impact (20,6) (20,6)
- Pioneer Foods B-BBEE share-based payment (22,2)
charge
- Distell excise duty provision (12.6)
- Agri Voedsel unbundling costs (6,1)
- Other (2,3) (0,9) (1,1)
Headline earnings 57,3 86,3 299,9
Non-headline items, net of taxation 50,6 (2,1) 34,7
Attributable earnings 107,9 84,2 334,6
Recurring headline earnings per share (cents) 8,5 13,1 27,9
Segmental income reconciliation to investment
income:
Segmental income (refer note 6) 197,9 107,5 396,8
- Food and agri 191,5 91,5 338,2
- Beverages 6,4 16,0 58,6
Share of profits of associated companies
included (101,6) (88,7) (285,8)
- Food and agri (95,2) (72,7) (227,2)
- Beverages (6,4) (16,0) (58,6)
Gross profit - food and agi (27,0)
Other income - food and agri (1,8)
Loss on disposal of investment in associated
company included - food and agri 4,3 0,1
Net fair value gains on financial instruments
included - food and agri (66,8) (13,1) (51,2)
Interest income not included - unallocated 2,6 2,6 3,8
Investment income 7,6 8,3 63,7
Dividend income - food and agri 4,1 5,7 59,5
Interest income - unallocated 3,5 2,6 4,2
NOTES TO THE CONDENSED GROUP FINANCIAL STATEMENTS
1. Basis of presentation and accounting policies
The condensed interim group financial statements have been prepared in accordance
with IAS 34 Interim Financial Reporting and should be read in conjunction with the
annual financial statements for the year ended 29 February 2012, which have been
prepared in accordance with International Financial Reporting Standards (IFRS),
including the AC 500 standards; the requirements of the South African Companies Act
of 2008, as amended, and the Listings Requirements of the JSE Ltd. The accounting
policies applied in the preparation of these interim group financial statements are
consistent with those used in the previous financial year. No new standards,
interpretations or amendments, which are relevant to the group's operations, became
effective during the year.
Results of operating activities, as presented in the condensed group income
statement, include share of profits of associated companies as a significant part of
Zeder Investments Ltd's ("Zeder") business activity is performed through associated
companies. The financial year-ends of the majority of the investments in associated
companies/subsidiaries are different to that of Zeder, resulting in Zeder applying
the so called 'lag accounting' principle to same. The maximum time period allowed
between the reporting date of an associated company/subsidiary and that of Zeder is
three months. Adjustments have been made for any significant transactions that
occurred between the reporting date of an associated company/subsidiary and that of
Zeder. The comparatives have been presented on a consistent basis.
The condensed interim financial statements for the six months ended 31 August 2012
for the first time include the consolidated results of Chayton Atlas Investments and
Agricol, the subsidiary companies in which Zeder acquired controlling interests
during the period under review.
2. Management fee
A management fee is payable to PSG Group Ltd ("PSG Group"), Zeder's ultimate holding
company, in terms of a management agreement. This represents a related-party
transaction. In accordance with the management agreement, PSG Group provides all
investment, administrative, advisory, financial and corporate services to Zeder
and its wholly owned subsidiaries.
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 for the year ended 29 February 2012.
3. Taxation
Deferred income tax is provided for on the fair value adjustments to the group's
equity investment portfolio, using an effective capital gains tax rate of 18,6%.
Taxable income is subject to normal taxation at a rate of 28%.
4. Commitments and contingencies
On 28 March 2012, the group committed to invest R334m in Chayton Atlas Investments.
As at the reporting date, the committed capital not yet invested approximated
R110m.
Distell Group Ltd ("Distell") received an assessment from the South African
Revenue Service for additional employees tax relating to its share incentive scheme.
Distell obtained legal and tax specialist opinions on this matter, which indicated
that no provision is necessary and submitted an objection to this assessment. The
Zeder group's interest in the amount that is at risk is R3,1m (excluding penalties
and interest).
At the current and prior reporting dates, the group had no contingent liabilities.
5. Related-party transactions and balances
The management fee expense (note 2) was incurred with PSG Group in terms of the
existing management agreement, with the amount payable included under trade and
other payables.
Included in Borrowings is a loan of R100,6m from PSG Corporate Services (Pty) Ltd
("PSG Corporate Services"), a fellow PSG Group subsidiary.
6. Segmental reporting
The group is organised into two reportable segments, namely food and agri, and
beverages. These segments represent the major subsidiary, associate and equity
investments of the group. The beverages segment operates mainly in the Republic of
South Africa. The food and agri segment operates in the Republic of South Africa,
Mauritius and Zambia.
Recurring headline earnings is 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 investments. The result is that investments which Zeder do not
equity account in terms of accounting standards, are included in the calculation
of recurring headline earnings.
Non-recurring headline earnings include equity securities' see-through recurring
headline earnings and the related net fair value gains/losses and investment
income (as recognised in the income statement). Associated companies' and
subsidiaries' one-off gains/losses are excluded from recurring headline earnings
and included in non-recurring headline earnings.
Segmental income comprises dividends received and fair value gains and losses
relating to equity securities, income from associated companies/subsidiaries and
gains/losses on disposal of interests in associated companies, as per the income
statement.
7. Business combinations
7.1 On 28 March 2012, Zeder acquired the remaining 74,9% of the share capital in
Agricol for a cash consideration of R150.4m. Agricol is a seed company
operating primarily in the Republic of South Africa. The net identifiable
assets acquired amounted to R149.1m, with goodwill amounting to R51.7m.
Goodwill primarily relates to the skills and technical talent of the work
force. Zeder's initial 25.1% interest in Agricol was remeasured to its fair
value of R50.4m, which resulted in a gain of R22.0m.
The summarised assets and liabilities recognised at acquisition
date were:
Rm
Property, plant and equipment 39,0
Intangible assets 21,5
Other investments 2,3
Inventory 79,1
Trade and other receivables 61,4
Cash and cash equivalents 31,3
Deferred income tax (8,5)
Provisions for other liabilities and charges (20,5)
Trade and other payables (56,5)
Total net identifiable assets 149,1
7.2 Chayton Atlas Investments ("Chayton")
On 10 April 2012, Zeder acquired 100% of the share capital of Chayton, a
company incorporated in Mauritius for a cash consideration of R23.6m. At the
time, Chayton had negative equity of R4,5m, resulting in the recognition of
R28,1m in goodwill. Goodwill primarily relates to the skills and technical
talent of the work force. Subsequently, Zeder invested an additional R253,3m
cash in Chayton, and held a 93.8% interest in the company as at 31 August
2012. Chayton operates as holding company for its investments in farming
operations in Zambia.
Rm
Property, plant and equipment 129,2
Biological assets 18,2
Inventory 4,3
Trade and other receivables 10,1
Cash and cash equivalents 0,7
Deferred income tax (1,3)
Borrowings (147,3)
Trade and other payables (18,4)
Total net identifiable assets (4,5)
7.3 Somawhe
On 31 July 2012, Zeder, through its subsidiary Chayton, acquired 100% of the
share capital of Somawhe, a company operating in Zambia. The consideration
payable is estimated at R204,1m, equating to the net identifiable asset value
of Somawhe. Negotiations regarding the consideration will be finalised
during the second half of the financial year.
The summarised assets and liabilities recognised at acquisition
date were: Rm
Property, plant and equipment 169,4
Biological assets 58,6
Inventory 7,3
Trade and other receivables 5,1
Cash and cash equivalents 9,8
Deferred income tax (16,8)
Provisions for other liabilities and charges (5,3)
Borrowings (18,1)
Trade and other payables (5,9)
Total net identifiable assets 204,1
8. Events after the reporting period
There were no significant events after the reporting period.
9. Unaudited condensed financial statements
These condensed financial statements were compiled under the supervision of Zeder's
financial director, Mr WL Greeff, who is a Chartered Accountant (SA).
ZEDER INTERIM RESULTS COMMENTARY
RESULTS
Zeder invested a further R439m during the period under review, of which R427m related
to the acquisition of controlling interests in Chayton and Agricol (see below). Its
investment portfolio now amounts to R3,6bn of which Agri Voedsel Beleggings (Pioneer)
and Capevin Holdings (Distell) represent 65,3% (29 Feb 2012: 62,4%).
The two key benchmarks we believe to measure Zeder's performance by are growth in its
recurring headline earnings per share and sum-of-the-parts ("SOTP") value per share.
Zeder's recurring headline earnings is the sum of its effective interest in that of
each of its underlying investments. The result is that investments in which Zeder
holds less than 20% and are generally not equity accountable 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 per share decreased by 35,1% to 8,5 cents. This was mainly
due to 1) a lower earnings contribution from Pioneer Foods; 2) initial losses incurred
by Chayton, a startup business in its development phase; and 3) a net interest expense
as opposed to net interest income in the prior period as a result of the debt raised to
fund the acquisitions of mainly Agricol and Chayton. Headline earnings per share
decreased by 33,0% to 5,9 cents, while attributable earnings per share increased by
27,9% to 11,0 cents.
Zeder's SOTP value per share, calculated using the quoted market prices for all listed
and over-the-counter (OTC) traded unlisted investments, and market related
valuations for unquoted, unlisted investments, increased by 5,1% to R3,31 since
year-end. The SOTP value is analysed in the table below:
31 August 2012 29 February 2012
Interest Interest
Company (%) Rm (%) Rm
Agri Voedsel Beleggings 44,7 1 068,8 44,7 1 230,4
Capevin Holdings 20,3 963,9 39,8 713,1
Capespan 37,0 283,4 40,9 293,0
Chayton 93,8 276,9
Kaap Agri 33,8 205,6 33,4 205,5
Agricol 92,0 182,4 25,1 49,8
Suidwes 24,1 90,2 23,7 82,7
Other 542,4 541,3
Total investments 3 613,6 3 115,8
Cash and cash equivalents 32,8 77,5
Other net liabilities (408,8) (108,6)
SOTP value 3 237,6 3 084,7
SOTP value per share 3,31 3,15
Number of shares in issue 978,1 978,1
Agri Voedsel Beleggings (Pioneer)
Zeder largely maintained its 13,8% indirect interest in Pioneer Foods. Grain commodity
prices remained within a high range and had a negative impact on Pioneer's margins. In
addition, cheap broiler imports had a negative impact on the entire industry. Despite
the current period of margin compression, Zeder remains optimistic about Pioneer in
the long run. It is a leading company with strong fundamentals, and is well poised to
benefit from the growing demand for food and beverages, both in sub-Sahara Africa and
select international markets.
Capevin Holdings (Distell)
Capevin Holdings, with its core asset an effective interest of 29,0% in Distell,
reported a 2,2% decrease in headline earnings per share for the year ended 30 June
2012. This decrease was largely due to Distell's provision of R297,8m for additional
excise duties. Normalised headline earnings, however, increased by 20,3% to 37,9 cents
per share as a result of Distell's strong operational performance.
The listing of Capevin Holdings on the JSE following its merger with and the delisting
of Capevin Investments created R264m in value for Capevin Holdings shareholders during
the period under review. Zeder now has a 20,3% interest in Capevin Holdings, which is
underpinned by an attractive dividend yield.
New investments
Zeder acquired the remaining shares in Agricol for R150.4m during the period under
review. The company is a dynamic player in the Agri-seed industry with attractive
organic and acquisitive growth prospects.
In addition, Zeder invested R276.9m in Chayton Atlas Investments, a company that
acquires, develops and operates commercial grain production hubs in sub-Sahara Africa.
Chayton's first investments are all in Zambia where more than 4 000 hectares of
irrigated farm land have been acquired and developed for double cropping purposes. At
present the focus is on soya and wheat production, and opportunities for crop
diversification and vertical integration will be explored in the long term. While this
investment is still in the development phase, Zeder is confident that Chayton provides
it with a compelling exposure to the growing market opportunity for staple foods in
Africa. In September 2012, Norfund (a private equity company owned by the Norwegian
Ministry of Foreign Affairs) invested US$10m in Chayton for a 21.8% interest.
Other investments
During the period under review, Zeder largely maintained its investments in Capespan,
Kaap Agri, Suidwes, NWK and Overberg Agri. Most of these companies performed above
expectations. While the upside through arbitrage has diminished, significant
long-term value remains to be created through the removal of structural layers,
improved efficiencies, market consolidation and organic growth.
PROSPECTS
We continue to believe that the agribusiness, food and beverage sectors offer
rewarding investment opportunities, both locally and abroad. It is for this reason
that we are passionate about investment opportunities in Africa and beyond.
DIVIDEND
It is Zeder's policy to only declare a final dividend at year-end.
On behalf of the board
Jannie Mouton
Chairman
Norman Celliers
Chief executive officer
Stellenbosch
1 October 2012
Zeder Investments Limited Incorporated in the Republic of South Africa
Registration number:
2006/019240/06 JSE-share code: ZED
ISIN code:
ZAE00008843
Directors:
JF Mouton (Chairman)**, N Celliers* (CEO), WL Greeff* (FD),
GD Eksteen#, PJ Mouton**, MS du P le Roux#, CA Otto#, LP Retief#,
* executive
** non-executive
# independent non-executive
Secretary and registered office:
PSG Corporate Services (Pty) Ltd,
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,
POBox 61051, Marshalltown, 2107
Sponsor: PSG Capital
Website: www.zeder.co.za
Date: 01/10/2012 03:15:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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