Wrap Text
Unaudited Interim Condensed Consolidated Results And Cash Dividend Declaration
Clover Industries Limited
Company registration number: 2003/030429/06
Ordinary share code: CLR Preference share code: CLRP
ISIN: ZAE000152377 ISIN: ZAE000152385
UNAUDITED INTERIM CONDENSED CONSOLIDATED RESULTS
for the six months ended 31 December 2012
and cash dividend declaration
SALIENT FEATURES
- Revenue increased by 10,8% to R3,98 billion
- New products launched and new technology introduced
- Market share and healthy volume growth in most product categories
- Operating profit decreased by 22,4% to R145,6 million
- Profit for the period decreased by 23,9% to R83,9 million
- Headline earnings decreased by 33,5% to R72,9 million
- Headline earnings per share decreased by 33,5% to 40,7 cents
- Interim gross cash dividend per share of 10 cents declared
OVERVIEW
While revenue increased by 10,8% from the previous comparative period, this was insufficient to
compensate for higher than normal marketing and promotional activities and the impact of sharp
increases in fuel and other costs. This resulted in reduced earnings being reported for the review period.
During the reporting period, a number of new production technology platforms were introduced which
will further differentiate the group's products which will entrench and grow market share in the years to
come. Most notable of these investments are:
- Extended Shelf Life (ESL) fresh milk with 18 days shelf life compared to the industry norm of 12 days;
- Prisma packaging for UHT milk and Tropika;
- 30 days shelf life ultra-pasteurised milk;
- Krush and Tropika brands in 2 litre carton packaging; and
- newly formulated Danao in the Tetra Top packaging.
The decision to launch these new products prior to the key festive season required substantial marketing
and promotional activities and advertising costs. In total, R27 million was spent on associated advertising
and other in-store promotional activities. Aggressive price promotions on the same products also
temporarily impacted on profit margins.
Due to seasonal milk peak production, not all inflationary price increases could be recovered during the
reporting period.
Overall sales volumes expressed in milk equivalent for those products containing dairy grew by 4,4%
when compared to the prior corresponding period. Excluding the strategic exit from bulk mozzarella,
as explained below, overall volumes increased by 5,6%. The group experienced seven days of industrial
action at the beginning of its financial year while the national transport strike also indirectly impacted
on the group's supply chain. The widespread industrial action in the mining sector undoubtedly slowed
consumption of the group's products. The combined effect of the strikes impacted sales volumes across
all segments.
The market for drinking milk changed considerably during the calendar year to December 2012, with very
competitive pricing on UHT resulting in a 7.5% growth in the market and a consequent 3,1% decline in the
market for fresh milk. Teething problems with the new Prisma pack platforms, delays in the importation of
product to supplement own production during the relocation of equipment and industrial action resulted
in Clover's 1,2% growth in the UHT market not correlating with overall market growth.
Clover's fresh and ultra-pasteurised milk volumes however grew by 1,1% against the backdrop of a
declining market. As a result, the dairy fluids segment volume saw overall growth of 1,2%.
With effect from 1 November 2012, the group ceased the majority of its bulk mozzarella business as part
of its strategic exit from commodity bulk products, which don't fit the group's strategy to focus on value-
added branded products. Concentrated segment volumes increased by 2,8%. If the volume loss resulting
from the exit from bulk mozzarella are excluded, segment volumes increased by 13,4%.
Pre-packed natural cheese volumes increased by 23,9%, feta cheese by 16,6% and condensed milk by
4,9%. Butter volumes fell by 6,6% due to a substantial buy-in from customers shortly before the start of the
financial year in response to Clover's promotional activity at the time.
Ingredient volumes declined by 16,7%. The relocation of UHT equipment to coastal areas in line with
Project Cielo Blu and initial efficiency problems with the conversion of these platforms to the Prisma
pack, saw Clover increase the utilisation of its milk powder facilities which in turn resulted in a reduction
in the manufacture and sale of bulk creamers of 41,9%. Bulk creamer is a loss leader commodity used to
increase throughput in powder factories during periods of low utilisation. The sale of skim milk powder
("SMP") also declined by 50,1% as the gap between the cost of locally manufactured product and import
parity widened. Clover will rather use its stock of SMP to supplement its raw milk during the coming
autumn and winter months.
Beverage volumes again showed excellent growth of 18,3% (12,1% excluding the effect of The Real Juice
Co. Holdings Proprietary Limited (Real Juice Co.) acquisition) largely underpinned by Tropika growth of
11,3%, fruit juices growth of 36,7% (14,8% excluding the effect of the Real Juice Co. acquisition), Danao
growth of 26,1% and Aquartz water growth of 24,0%. Super M volumes saw moderate growth of 4,0%.
Manhattan Ice Tea volumes declined by 5,7% and Capri-Sun volumes by 28,2% amidst fierce competition.
During the six months ending 31 December 2012, and with effect from 1 November 2012, the group
acquired the 49% minority interest in Clover Manhattan, which it did not own, for R24,7 million. The
acquisition of the Real Juice Co. was approved by the competition authorities and became effective on 1
October 2012. The full potential of synergies from this transaction is expected to be extracted over time, it
has already made a positive contribution to profitability.
Clover has secured two new principals during the period which will further enable a reduction in its supply
chain costs. The principals are Enterprise Foods (with effect from 1 June 2013) and Red Bull's top-end
sales and merchandising services from 1 March 2013 (in addition to the forecourt channel's business
already secured from 1 July 2012).
(All overall market statistics quoted from Aztec for the 12 months ending December 2012, for Shoprite
Checkers, Pick n Pay and Spar).
MARKET SHARES
Notwithstanding the above, Clover continued to achieve market share and volume growth in most of its
key product categories. The market shares for pure juice and fruit nectar below include the market shares
of the Real Juice Co. brands for all three years.
(Please see Press for graph illustrations)
(All market shares quoted from Aztec for the 12 months ending December 2012 for Shoprite Checkers,
Pick n Pay and Spar).
FINANCIAL PERFORMANCE
Headline earnings reduced by 33,5% from R109,6 million to R72,9 million while profit for the period
reduced by 23,9% from R110,2 million to R83,9 million. Profit for the period included R12,2 million
(R10,3 million after tax) of net capital profits which are excluded in the calculation of headline earnings.
This includes a R16,7 million (R13,6 million after tax) gain on the fair value of the group's investment in
Clover Manhattan after gaining control thereof. Headline earnings per share and earnings per share
reduced accordingly to 40,7 cents and 46,4 cents, respectively.
The effective tax rate reduced to 32,9% from 36,9% following a once-off tax adjustment in the
comparative period.
Net finance costs rose by 60,3% to R20,6 million on higher debt levels. Debt increased in the wake of an
increase in inventory levels, capital expenditure on Project Cielo Blu and other projects, the acquisitions of
The Real Juice Co. and the minority shares in Clover Manhattan, and lower profitability.
Non-controlling interests' share of the current year earnings reduced by 72,4% to R0,7 million after the
acquisition of the 30% minority stake in Clover Botswana earlier in 2012. The only remaining minority stake
in group subsidiaries is the 48% held by minorities in Lactolab (Pty) Limited.
Revenue from the sale of product increased to R3 391,8 million or 12%. Overall volume growth was 4,4%
which puts the average price inflation at 7,6%. The segmental volume and price inflation is set out in the
table below:
Segmental volume growth and price inflation: Please see Press for graphs.
Revenue from services rendered to principals grew by 7,1%. Services rendered is made up of contract
manufacturing income and income from distribution, selling and related services. Contract manufacturing
income decreased by 40,4% as the corresponding previous period benefitted from a temporary contract
manufacturing arrangement. In addition the move of UHT equipment resulted in much lower contract
packing income from a principal during the period under review. This reduction was of a temporary
nature. Income from distribution, selling and related services increase by 17,1% partly due to the Red Bull
and Epic Foods business which was secured during 2012.
Revenue from the sale of raw milk to Danone is subject to an agreed percentage of their demand that
they can buy from other parties. A higher percentage of direct purchases by Danone reduced this revenue
by 2,4%. This revenue makes no contribution to profit as the milk is sold at cost.
Planned price promotional activity on the newly launched products together with increased costs of
primary and raw milk transportation costs weakened the gross margin from 27,6% to 26,2%. The primary
distribution costs associated with the imported UHT milk also increased during the move of the
UHT equipment to the coastal areas. Industrial action during the period also contributed to higher
transportation costs as overall transportation requirements increased to relieve pressure at factory
warehouses. In addition the available freight during these times were often much more expensive than
Clover's usual contractors. As explained earlier, inflationary cost increases in production and other costs
also proved difficult to recover in the market during this period.
The increase of 425,6% in other operating income mainly consisted of the gain on the fair-value
adjustment of the investment in Clover Manhattan after buying control therein of R16,8 million, a
R6,5 million profit on the hedging of Share Appreciation Rights and a R3,7 million foreign exchange profit.
Included in selling and distribution expenses are the development, marketing and associated launch costs
of new products. Fuel cost inflation, staff cost inflation and the additional principal business from Red Bull
and Epic Foods all contributed to the 13,5% increase in cost.
The above inflation increase in administrative expenses of 10% is mainly attributed to the expansion of the
executive management team.
Although the cost of project Cielo Blu was always communicated as capital expenditure from a cash flow
perspective, the cost associated with the move of existing machines could not be capitalised fully and was
expensed as restructuring expenditure during the period under review. This resulted in an 556,1% increase
in this expense or R13,8 million.
To date, the phases of Project Cielo Blu which have been completed have contributed above expectation.
Although the Queensburgh phase has not been completed yet, the additional principal business secured
during the first half of the year has already made a positive contribution. Although only partially operational
during the review period, the savings realised on raw milk transport costs, through the move of UHT
manufacturing capacity to the coastal areas helped to protect the group against the severe fuel price
increases. The effect of the fuel price increases compared to the prior period amounted to R19 million
and were largely offset by the savings in transport achieved through Cielo Blu.
Operating profit ended 22,4% lower at R145,6 million.
FINANCIAL POSITION AND CASH FLOW
Inventory levels were R294,2 million higher than at June 2012. Inventory levels should normally increase
from June to December in line with the seasonal nature of the business. During the period under review
the seasonal increase was however inflated by the industrial actions, relocation of UHT equipment and
the initial lower throughput on the converted Prisma machines during the peak milk production period of
2012 which required Clover to divert more raw milk to its powder and cheese factories.
Inventory levels were however also R365,4 million higher than at December 2011. For the period ending
31 December 2011, Clover reported that due to on-farm cost inflation, milk intake during that period had
been lower than anticipated and that stock levels were consequently lower than required at 31 December
2011. This together with the above normal increase from June 2012 to December 2012 as explained in
the previous paragraph and inflationary increases in farmgate milk prices, packaging material, production
overheads and transport costs, caused the hike in inventory when compared to 31 December 2011.
This above normal inventory growth largely explain why cash flow from operating activities reduced from
a R303,2 million cash generation to a R195,6 million cash utilisation. Clover is however well positioned to
utilise this inventory during the coming autumn and winter which will release cash to operations in line
with the normal seasonal nature of its business.
Altogether R345,8 million was spent on capital expenditure, project Cielo Blu and the acquisitions of Real
Juice Co. and the minority stake in Clover Manhattan during the period under review. This was in line with
Clover's strategy to continuously invest in infrastructure, consolidate the industry and to buy out minorities
in the group.
The cash utilised by operations and the capital expenditure was funded by R252,8 million of available cash
and additional debt of R335,5 million.
At 31 December 2012, the group had only R18,3 million of long-term interest bearing debt as the
preference shares that must be redeemed in June 2013 and the debtors securitisation debt that matures in
March 2013 were included under current liabilities. The senior funder of the debtors' securitisation vehicle
has already committed to renew the funding to the maximum funding of approximately R650 million
which will be sufficient to redeem the preference shares. The seasonal reduction in inventory levels will
however in all likelihood generate sufficient cash to redeem the preference shares by June 2013 without
the need for increased debt facilities.
Property, plant and equipment increased by R200,8 million from June 2012, mainly because of the capital
expenditure and the assets acquired with the Real Juice Co. transaction. Intangible assets increased by
R95,2 million of which R17 million relates to the upgrade of the group's ERP system and the rest to the fair
value of trademarks and other intangible assets on the acquisitions of the Real Juice Co. and the minority
stake in Clover Manhattan.
PROSPECTS
The group is of the view that the factors leading to the weaker earnings during this period do not
negatively affect the long term strategic direction of Clover.
Some of the increased costs that were not recovered from the market during the first half of the financial
year will be recovered through the selling price increase already implemented, although this will affect
volumes in the short term.
The move of dairy equipment created logistical challenges and associated costs. This has now been
completed and will drastically reduce the supply chain management complications faced during
2012. It will enable management to focus on the successful roll out of the group's new products and
technological platforms. There will also be further exciting new product launches during the second half
of the year.
The renegotiated terms of the sales and distribution contracts with Danone became effective on
1 January 2013, which included the group's ability to enter the maas market. The Clover Amasi product
was accordingly launched at the end of January 2013. In addition, Clover looks forward to supporting the
additional Red Bull business from 1 March 2013 and Enterprise business from 1 June 2013.
The final phase of project Cielo Blu has already kicked off which involves the closure of the Mayfair
beverages factory and the relocation of its operations into the Clayville factory.
Subsequent to the period end, the newly formed Clover Waters (Pty) Ltd ("Clover Waters") acquired Nestlé
South Africa's Gauteng based Doornkloof property, bottled water manufacturing facility and water rights.
As a result of the transaction, Clover Waters will also obtain the right, by way of licence, to manufacture,
distribute, market and sell bottled mineral water under Nestlé's Pure-life, Valvita and Schoonspruit brands
as well as ice tea under the Nestea brand. These brands will complement Clover's Aquartz bottled
water and Manhattan ice tea brands which will also be manufactured, distributed, marketed and sold by
Clover Waters. The transaction is subject to the fulfilment of various conditions, including Competition
Commission approval. Once approved, the purchase consideration of R60 million will be settled through
the issue of 30% of the shares in Clover Waters to Nestlé.
South African consumers remain under pressure with high-food inflation and heavy-debt burdens.
Although the economy is not buoyant, the group has remained focused and is determined to
reposition itself for future growth. It has not deviated from its original strategic intent of investing in new
technologies, and to increase valuable supply chain capacities in line with its own market demands and
those of its principals. The group believes that the benefits to be had in the long term far out-weigh short-
term earnings sacrifices. Although the level of brand investment (marketing cost and price promotions)
in the second semester will not be the same as in the first semester, it remains to be seen whether
all of these investments could be recovered by June 2013. Price increases to consumers also have a
detrimental short-term effect on volumes but fortunately Clover has gained healthy market share and is
coming off a high base.
The group continues to invest and explore areas where it sees synergistic opportunities in its chosen
competitive areas of expertise, both in South Africa and selected sub-Saharan emerging markets. The
Board remains convinced that the investment in well needed infrastructure will serve the group well in
years to come and will give it a time-to-market advantage in its defined market space.
DIVIDEND DECLARATION
Notice is hereby given that the directors have declared an interim gross cash dividend of
10 cents (8,5 cents net of dividend withholding tax) per ordinary share for the for the six months ended
31 December 2012, payable in South African currency on 8 April 2013.
The dividend has been declared from income reserves and no secondary tax on companies' credits have
been used.
A dividend withholding tax of 15% will be applicable to all shareholders who are not exempt.
The issued ordinary share capital at the declaration date is 179 111 867 ordinary shares and 89 442 022
preference shares.
The salient dates will be as follows:
Last day to trade "cum" the ordinary share dividend Wednesday, 27 March 2013
Shares commence trading "ex" the ordinary share dividend Thursday, 28 March 2013
Record date on Friday, 5 April 2013
Payment date on Monday, 8 April 2013
Share certificates may not be dematerialised or rematerialised between Thursday, 28 March 2013 and
Friday, 5 April 2013, both days inclusive.
After the redemption of the preference shares in June 2013 the board will be in a position to reconsider
the current dividend policy. In considering this the board will take into account future funding
requirements as a number of exciting opportunities have already been identified.
On behalf of the Board
WI Büchner JH Vorster
Chairman Chief Executive
12 March 2013
INTERIM CONDENSED CONSOLIDATED
STATEMENT OF COMPREHENSIVE INCOME
For the period ended 31 December 31 December 30 June
2012 2011 2012
Unaudited Unaudited Audited
R'000 R'000 R'000
Sales of products 3 391 777 3 028 556 6 109 268
Rendering of services 413 726 386 337 763 723
Sale of raw milk 168 831 173 025 346 287
Rental income 2 948 2 216 4 585
REVENUE 3 977 282 3 590 134 7 223 863
Cost of sales (2 933 260) (2 600 198) (5 233 222)
Gross profit 1 044 022 989 936 1 990 641
Other operating income 30 266 5 758 14 716
Selling and distribution costs (817 943) (720 420) (1 422 643)
Administrative expenses (88 461) (80 383) (191 382)
Restructuring expenses (16 277) (2 481) (9 573)
Other operating expenses (5 986) (4 755) (10 527)
Operating profit 145 621 187 655 371 232
Finance income 6 008 17 386 28 598
Finance cost (26 655) (30 263) (52 460)
Profit before tax 124 974 174 778 347 370
Taxes (41 118) (64 562) (137 654)
PROFIT FOR THE PERIOD 83 856 110 216 209 716
Other comprehensive income
Exchange differences on translation
of foreign operations (118) 399 (822)
Total comprehensive income for the period, net of tax 83 738 110 615 208 894
Profit attributable to:
Equity holders of the parent 83 194 108 186 205 290
Non-controlling interests 662 2 030 4 426
83 856 110 216 209 716
Total comprehensive income attributable to:
Equity holders of the parent 83 076 108 218 204 388
Non-controlling interests 662 2 397 4 506
83 738 110 615 208 894
Headline earnings calculation
Profit for the period attributable to equity holders
of the parent company 83 194 108 186 205 290
Gross remeasurements excluded from
headline earnings (12 184) 2 017 3 918
Loss/(Profit) on sale and scrapping of property,
plant and equipment 607 2 017 (878)
Gain on fair valuing of existing investment in
joint venture due to gaining control (16 747)
Impairment of plant and equipment 3 956 4 796
Taxation effects of remeasurements 1 845 (565) (1 408)
Headline earnings attributable to shareholders
of the parent company 72 855 109 638 207 800
INTERIM CONDENSED CONSOLIDATED
STATEMENT OF COMPREHENSIVE INCOMME continued
For the period ended 31 December 31 December 30 June
2012 2011 2012
Unaudited Unaudited Audited
R'000 R'000 R'000
Issued ordinary shares 179 111 867 179 111 867 179 111 867
Number of ordinary shares used
in the calculation of:
Earnings per share
weighted average 179 111 867 179 111 867 179 111 867
Diluted earnings per share
weighted average 191 892 884 190 069 110 191 127 152
Earnings per share attributable
to ordinary equity holders
of the parent
Earnings per share (cents) 46,4 60,4 114,6
Diluted earnings per share (cents) 43,4 56,9 107,4
Headline earnings per share (cents) 40,7 61,2 116,0
Diluted headline earnings per share (cents) 38,0 57,7 108,7
INTERIM CONDENSED CONSOLIDATED
STATEMENT OF FINANCIAL POSITION
As at 31 December 31 December 30 June
2012 2011 2012
Unaudited Unaudited Audited
R'000 R'000 R'000
ASSETS
Non-current assets
Property, plant and equipment 1 368 886 1 082 166 1 168 047
Investment properties 38 937 492
Intangible assets 452 941 354 660 357 767
Deferred tax assets 9 363 4 091 492
1 831 228 1 441 854 1 526 798
Current assets
Inventories 896 279 530 888 602 053
Trade and other receivables 1 240 746 1 116 832 996 995
Pre-payments 26 898 10 683 25 631
Income tax receivable 3 868 16 073
Other current financial assets 2 838 173
Cash and short-term deposits 458 628 801 698 711 470
2 629 257 2 476 174 2 336 322
Assets classified as held-for-sale 2 172 423
2 631 429 2 476 174 2 336 745
Total assets 4 462 657 3 918 028 3 863 543
EQUITY AND LIABILITIES
Equity
Issued capital 8 955 8 955 8 955
Share premium 675 113 675 113 675 113
Other reserves 259 321 255 141 254 286
Retained earnings 1 006 929 887 872 955 890
Equity attributable to equity holders of the parent 1 950 318 1 827 081 1 894 244
Non-controlling interests 2 457 14 449 1 796
Total equity 1 952 775 1 841 530 1 896 040
Liabilities
Non-current liabilities
Interest-bearing loans and borrowings 18 257 428 857 21 686
Provisions 66 005 62 277 61 637
Deferred tax liability 141 082 80 102 116 950
Trade and other payables 13 161 10 794 6 904
238 505 582 030 207 177
Current liabilities
Trade and other payables 1 498 256 1 467 904 1 316 794
Interest-bearing loans and borrowings 760 263 11 804 421 376
Other current financial liabilities 4 308
Income tax payable 589 3 182 5 672
Provisions 12 269 11 578 12 176
2 271 377 1 494 468 1 760 326
Total liabilities 2 509 882 2 076 498 1 967 503
Total equity and liabilities 4 462 657 3 918 028 3 863 543
INTERIM CONDENSED CONSOLIDATED
STATEMENT OF CHANGES IN EQUITY
For the period ended 31 December 31 December 30 June
2012 2011 2012
Unaudited Unaudited Audited
R'000 R'000 R'000
Balance at 1 July 1 896 040 1 751 795 1 751 795
Profit for the period 83 856 110 216 209 716
Other comprehensive income (118) 399 (822)
Total comprehensive income 83 738 110 615 208 894
Acquisition of non-controlling interest 2 609 (20 792)
Share-based payment reserve accrued 8 027 6 120 13 115
Share appreciation rights exercised (10 435) (3 950) (4 440)
Dividends of subsidiaries non-controlling interest (349)
Dividends (24 721) (27 216) (53 734)
Dividends forfeited 126 1 557 1 551
Balance at end of the period 1 952 775 1 841 530 1 896 040
Consists of:
Share capital and premium 684 068 684 068 684 068
Other capital reserves 259 321 255 141 254 286
Retained earnings 1 006 929 887 872 955 890
Shareholder equity 1 950 318 1 827 081 1 894 244
Non-controlling interest 2 457 14 449 1 796
Total equity 1 952 775 1 841 530 1 896 040
INTERIM CONDENSED CONSOLIDATED
STATEMENT OF CASH FLOWS
For the period ended 31 December 31 December 30 June
2012 2011 2012
Unaudited Unaudited Audited
R'000 R'000 R'000
Operating activities
Profit before tax 124 974 174 778 347 370
Adjustment for non-cash items 42 257 52 793 117 848
Other adjustments 20 646 12 876 23 862
Working capital adjustments (350 422) 91 703 (28 202)
Income tax paid (33 080) (28 914) (44 519)
Net cash flow from operating activities (195 625) 303 236 416 359
Investing activities
Proceeds from sale of property, plant and equipment 452 3 196 4 181
Interest received 6 008 17 386 28 598
Acquisition of non-controlling interest (24 700) (20 792)
Acquisition of subsidiary (70 556)
Capital expenditure: tangible and intangible assets (250 573) (128 523) (273 682)
Net other investing activities (177) 4 120 5 545
Net cash flow used in investing activities (339 546) (103 821) (256 150)
Financing activities
Interest paid (26 654) (30 263) (52 460)
Dividends paid (24 721) (27 216) (53 734)
Dividends forfeited 126 1 551
Share appreciation rights paid out (1 880) (4 440)
Net increase/(repayment) of borrowings 335 458 (166 001) (163 599)
Net other financing activities 1 551 (269)
Net cash flows (used in)/from financing activities 282 329 (221 929) (272 951)
Net (decrease)/increase in cash and cash equivalents (252 842) (22 514) (112 742)
Cash and cash equivalents at beginning of the period 711 470 824 212 824 212
Cash and cash equivalents at end of the period 458 628 801 698 711 470
ACCOUNTING POLICIES AND NOTES
1. Corporate information and basis of preparation
Clover Industries Limited is a company incorporated and domiciled in South Africa.
These unaudited interim condensed consolidated financial statements were prepared in
accordance with IAS 34: Interim Financial Reporting, the Listings Requirements of the JSE
Limited ("JSE") and the Companies Act, 2008 (Act 71 of 2008), as amended. The accounting
policies adopted in the preparation of these unaudited interim condensed consolidated financial
statements are in accordance with International Financial Reporting Standards (IFRS) and are
consistent with those followed in the preparation of the annual financial statements for the year
ended 30 June 2012.
2. Segment reporting
Segment information is presented in respect of the Group's operating segments. The operating
segments are based on the Group's management and internal reporting structure.
The Group comprises the following operating segments:
dairy fluids segment is focused on providing the market with quality dairy fluid products;
the dairy concentrated products consist of cheese, butter, condensed milk and retail milk
powders;
the ingredients products consist of bulk milk powders, bulk butter, bulk condensed milk, bulk
creamers, calf feed substitutes, whey powder and buttermilk powder;
the non-alcoholic beverages segment focuses on the development and marketing of non-
alcoholic, value-added branded beverages products; and
other consists of Clover's holding company and Lactolab Proprietary Limited that renders
laboratory services.
SEGMENTAL REPORT
For the period ended 31 December 31 December 30 June
2012 2011 2012
Unaudited Unaudited Audited
R'000 R'000 R'000
External revenue
Dairy fluids 1 696 028 1 587 323 3 092 413
Dairy concentrated products 554 446 499 380 1 020 961
Ingredients 175 696 188 873 428 494
Non-alcoholic beverages 960 241 748 074 1 557 476
Other 5 366 4 906 9 924
3 391 777 3 028 556 6 109 268
Margin on material
Dairy fluids 609 329 626 996 1 225 251
Dairy concentrated products 154 328 151 672 300 797
Ingredients 38 962 42 717 83 903
Non-alcoholic beverages 498 932 382 499 805 551
Other 4 141 3 641 7 418
1 305 692 1 207 525 2 422 920
Assets, liabilities and overheads are managed on a Group basis and are therefore not allocated to
operating segments.
The Group operates mainly in the geographical area of South Africa. The revenue and assets of the
operations outside South Africa are insignificant.
ACCOUNTING POLICIES AND NOTES continued
3. Earnings per share
The difference between earnings per share and diluted earnings per share is due to the impact of
unexercised share appreciation rights.
4. Property, plant and equipment and intangible assets
During the six months under review the Group acquired property, plant and equipment to the value
R233,1 million and also acquired intangible assets (excluding intangibles acquired as part of business
combination) at a cost of R17,4 million.
5. Acquisition of Real Juice Co Holdings
On 1 October 2012, the Group acquired 100% of the issued shares of The Real Juice Co Holdings
Proprietary Limited. A cash consideration of R73,7 million was paid to AVI Limited and funded from
own resources.
The primary motivation for the acquisition was to extend the Clover Group's footprint in the
Western Cape and grow Clover's presence as one of the market-leading beverage businesses
in South Africa.
The fair value of the identifiable assets and liabilities of The Real Juice Co Holdings Proprietary Limited
at the date of acquisition was:
R'000
Assets
Property, plant and equipment 14 511
Intangible assets 30 511
Deferred tax asset 9 713
Inventories 7 611
Trade and other receivables 29 635
Cash and cash equivalents 3 130
95 111
Liabilities
Trade and other payables (21 425)
(21 425)
Total identifiable net assets at fair value 73 686
Goodwill arising at acquisition
Consideration, settled in cash 73 686
Cash flow on acquisition
Net cash acquired with subsidiary 3 130
Cash paid (73 686)
Net cash outflow (70 556)
No goodwill was recognised on the acquisition; however, expected synergies include supply chain
efficiencies, administration and shared service efficiencies, optimisation of sourcing arrangements and
distribution channels.
6. Acquisition of additional interest in Clover Manhattan
On 1 November 2012, Clover acquired the remaining 49,9% interest in Clover Manhattan Proprietary
Limited and the Unincorporated Joint Venture, for cash consideration of R24,7 million and funded
from own resources.
As communicated during the listing of the Clover Group, part of the listing proceeds were earmarked
to buy out non-controlling interest holders in Clover's businesses where possible.
The fair value of the identifiable assets and liabilities of Clover Manhattan at th he date of acquisition
was:
R'000
Assets
Intangible assets 28 494
28 494
Liabilities
Deferred tax liability (7 979)
(7 979)
Total identifiable net assets at fair value 20 515
Goodwill arising at acquisition 23 966
Original investment at cost (3 034)
Gain on fair valuing of existing investment due to gaining control (16 747)
Consideration for additional 49,9% interest, settled in cash 24 700
Cash flow on acquisition
Net cash acquired with subsidiary
Cash paid (24 700)
Net cash outflow (24 700)
Goodwill arising on acquisition represents the value paid for Clover Manhattan in excess of the fair
value of its net assets at acquisition date. Synergies are expected from the combining of operations
of Clover and Clover Manhattan, which include production efficiencies and optimisation of sourcing
arrangements.
7. Events after the reporting period
No significant events occurred subsequent to the end of the period.
8. Going concern
The Directors are satisfied that the Group is a going concern and has therefore continued to adopt
the going concern basis in preparing the interim condensed consolidated financial statements.
9. Preparation of unaudited interim condensed consolidated results
The interim condensed financial statements set out above were prepared under the supervision of
Louis Jacques Botha, CA(SA), in his capacity as Chief Financial Officer of the Group.
10. Independent audit by auditors
The interim condensed financial statements have not been audited or reviewed by the Group's
independent auditors.
DIRECTORATE AND STATUTORY INFORMATION
DIRECTORS: NON-EXECUTIVE
JAH Bredin**, WI Büchner*** (Chairman), TA Wixley* (Lead Independent), SF Booysen (Dr)*,
JNS du Plessis*, HPF du Preez**, MG Elliott, JC Hendriks (Dr), NP Mageza*, NA Smith
*Independent ** Director's whom have retired on 30 November 2012
*** Appointed as Chairman on 30 November 2012
DIRECTORS: EXECUTIVE
JH Vorster (Chief Executive), HB Roode (Deputy Chief Executive),
LJ Botha (Chief Financial Officer), CP Lerm (Dr)
COMPANY SECRETARY: J van Heerden
ORDINARY SHARE CODE: CLR ISIN: ZAE000152377
PREFERENCE SHARE CODE: CLRP ISIN: ZAE000152385
REGISTERED OFFICE: 200 Constantia Drive, Constantia Kloof, 1709
POSTAL ADDRESS: PO Box 6161, Weltevredenpark, 1715
TELEPHONE: (011) 471 1400
REGISTRATION NUMBER: 2003/030429/06
TAX NUMBER: 9657/002/71/4
TRANSFER SECRETARY
Computershare Investment Services Proprietary Limited
70 Marshall Street, Johannesburg, 2001
AUDITORS: Ernst & Young Inc., Johannesburg
BANKERS: The Absa Group, First National Bank, Investec Bank
SPONSOR: Rand Merchant Bank (a division of FirstRand Bank Limited)
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