Wrap Text
Condensed Consolidated Provisional Group Results for the year ended 28 February 2013
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 or the Company)
Condensed consolidated provisional Group results for the year ended
28 February 2013
Dividend announcement and notice of annual general meeting
Headline earnings per share up 10% to 74,5 cents
EBITDA margin of 9,2%
Dividend per share of 19,0 cents declared
Net asset value per share up 10% to 808 cents
Summarised Statement of Financial Position
Restated Restated
As at As at As at
28 February 29 February 28 February
2013 2012 2011
R000 R000 R000
Assets
Non-current assets
Property, plant and equipment 699 350 719 274 777 512
Current assets 332 630 289 676 268 829
Inventories 54 525 38 066 23 268
Biological assets 83 906 86 197 93 816
Trade and other receivables 97 357 97 327 97 095
Net cash and cash equivalents 96 842 68 086 54 650
Total assets 1 031 980 1 008 950 1 046 341
Equity and liabilities
Share capital and premium 263 163 272 999 127 683
Share based payments 109 297 1 192
Retained earnings 362 001 309 543 267 637
Equity 625 273 582 839 396 512
Non-current liabilities
Interest bearing borrowings 105 704 134 281 327 512
Deferred taxation 128 387 109 048 96 933
Current liabilities 172 616 182 782 225 384
Overdraft 248
Trade, other payables and
provisions 143 775 145 782 171 868
Current portion of interest
bearing borrowings 28 841 36 752 53 516
Total equity and liabilities 1 031 980 1 008 950 1 046 341
Shares in issue (000) 77 379 79 396 47 817
Net asset value per share
(cents) 808 734 829
Summarised Statement of Comprehensive Income
Restated Restated
Year ended Year ended Year ended
28 February 29 February 28 February
2013 2012 2011
R000 R000 R000
Revenue 1 267 968 1 258 694 1 113 110
Operating profit before
depreciation and impairments 116 511 117 994 124 686
Depreciation and impairments 37 202 42 711 30 697
Profit before finance costs 79 309 75 283 93 989
Net finance costs 7 245 21 374 52 148
Profit before taxation 72 064 53 909 41 841
Deferred taxation 19 606 12 003 10 289
Profit after taxation 52 458 41 906 31 552
Other comprehensive income
for the year
Total comprehensive income
for the year 52 458 41 906 31 552
Weighted average shares in
issue (000) 79 258 78 274 47 817
Earnings
Earnings per share (cents) 66,2 53,5 66,0
Headline earnings per share
(cents) 74,5 67,5 70,0
Diluted earnings per share
(cents) 66,2 53,5 65,7
Diluted headline earnings
per share (cents) 74,5 67,4 69,8
Dividend
Dividend per share (cents) 19,0
Reconciliation between earnings
and headline earnings
Total comprehensive income 52 458 41 906 31 552
for the year
Reconciling items:
(Profit)/loss on disposal of
property, plant and equipment (45) 918 661
Impairment 8 576 11 609 1 702
Taxation effect (1 943) (1 633) (421)
Headline earnings 59 046 52 800 33 494
Summarised Statement of Cash Flows
Year ended Year ended Year ended
28 February 29 February 28 February
2013 2012 2011
R000 R000 R000
Cash generated from
operations before working
capital changes 116 323 117 099 125 841
Changes in working capital (16 591) (32 658) 46 290
Cash generated from
operating activities 99 732 84 441 172 131
Net finance costs (7 245) (21 374) (52 148)
Net cash flow from
operating activities 92 487 63 067 119 983
Net cash flow from
investing in property,
plant and equipment (19 839) (22 463) (45 037)
Proceeds on the sale of
property, plant and
equipment 2 680 37 263 11 445
Net cash flow from shares
issued/re-purchased (9 836) 145 316 (6 692)
Net cash flow from debt
repaid (36 488) (209 995) (79 277)
Net movement in cash and
cash equivalents 29 004 13 188 422
Net cash and cash equivalents
at the beginning of the year 67 838 54 650 54 228
Net cash and cash equivalents
at the end of the year 96 842 67 838 54 650
Summarised Statement of Changes in Equity
Share Non-
Capital Share distribu-
and Based Retained table
Premium Payments Earnings reserve Total
R000 R000 R000 R000 R000
2013
Balance at 1 March
2012 272 999 297 309 543 582 839
Total comprehensive
income for the year 52 458 52 458
Ordinary shares
re-purchased (9 836) (9 836)
Net value of
employee services (188) (188)
Balance at 28
February 2013 263 163 109 362 001 625 273
2012
Balance at 1 March
2011 as previously
stated 127 683 1 192 280 859 52 583 462 317
Restatement (13 222) (52 583) (65 805)
Restated balance
at 1 March 2011 127 683 1 192 267 637 396 512
Total comprehensive
income for the
year 41 906 41 906
Ordinary shares
issued 145 316 145 316
Net value of
employee services (895) (895)
Restated balance at
29 February 2012 272 999 297 309 543 582 839
2011
Balance at 1 March
2010 as previously
stated 134 375 895 253 778 28 848 417 896
Restatement (17 693) (28 848) (46 541)
Restated balance
at 1 March 2010 134 375 895 236 085 371 355
Total comprehensive
income for the
year 31 552 31 552
Ordinary shares
issued (6 692) (6 692)
Net value of
employee services 297 297
Restated balance at
28 February 2011 127 683 1 192 267 637 396 512
Commentary
Results for the period under review
Headline earnings per share for the period under review (FY13)
increased by 10% to 74,5 cents per share from 67,5 cents per share
for the prior period (FY12) due to a more profitable product mix,
good agricultural and production numbers and an on-going focus on
cost control. Headline earnings before taxation improved by 21% to
R81 million with profit after tax increasing by 25% to R52 million
from R42 million.
Turnover increased by 1% due to a 5% increase in prices and a 4%
decline in volumes. Much has been said of the high import volumes
from the EU and Brazil and total import volumes into South Africa
(including mechanically deboned meat) increased by 15% to an all-
time record of 404 163 tons for the year ended 31 December 2012
compared to 350 175 tons for the year ended 31 December 2011.
The result of this can be seen in the average national price of
frozen poultry which has remained flat over the past three years
despite large increases in input costs such as maize, soya,
sunflower, packaging materials, fossil fuels, electricity, municipal
charges and wages. The poultry Industry has submitted a number of
applications to Government for additional tariffs that could lead to
a reduction in import volumes although the timing on the outcome of
these applications remains uncertain.
In order to optimise its supply chain and change product mix, the
Group laid down 5% fewer birds and decreased its average slaughter
age. This led to a 3% decrease in average bird weights and
improvements in mortality and feed conversion and as a result the
Groups overall broiler performance improved by 6%.
Despite the improvement in feed conversion, the cost of broiler feed
per unit sold increased by 9% due to the 15% increase in the cost of
raw materials per ton. This increase must be contrasted with the
increase in market prices with the spot price of white maize
increasing by 12% and soya beans increasing by 46% on the South
African Futures Exchange (SAFEX) from FY12 to FY13.
Non-feed costs increased by 3% per unit sold in the period under
review driven by increased costs of packaging and value added
materials due to changes in product mix and also above inflation
increases in administered costs such as wages, electricity, diesel,
other fossil fuels, water and municipal charges. During the previous
financial year, the Group took a number of steps to introduce a right
sized, frugal and cost conscious culture within the business and the
Group would have experienced a much higher increase in this component
if these steps had not been taken.
The 5% increase in selling prices offset by the 9% increase in feed
costs and the 3% increase in non-feed costs placed continued pressure
on the Groups headline earnings before taxation margin which only
increased to 6,4% from 5,3%.
During the year under review, the Group initiated a share repurchase
programme and repurchased 2 016 783 shares out of the market at an
average price of R4,88 per share at a total cost of R10 million.
Lower debt levels and strong working capital management coupled with
good cash flows from operations resulted in net finance costs
declining to R7 million from R21 million for the period under review.
Capital expenditure continues to be focussed on product mix
changes at the abattoir and total capital expenditure for the year
was R20 million. No long term debt was raised during the year and
gross long term debt declined to R135 million at year end with net
gearing declining to 6% at year end.
Net working capital increased to 7,3% of turnover at year end
compared to 6,0% a year ago due to the higher value of feed in
inventory at year end. Cash on hand increased by R29 million and the
Group ended the year with a net cash position of R97 million.
Change in accounting policy
During the year under review, the Group changed its accounting policy
in respect of the revaluation of land and buildings. Previously, the
Group revalued land and buildings at regular intervals. Valuations
were made on the basis of recent market transactions on arms length
terms. The revaluation surplus net of applicable deferred income
taxes was credited to revaluation reserve in shareholders equity
which was non-distributable.
In order to bring the Groups accounting policy in respect of the
revaluation of land and buildings in line with its peers, land and
buildings are now shown at historical cost less subsequent
depreciation for buildings. All other property, plant and
equipment is stated at historical cost less depreciation. Historical
cost includes expenditure that is directly attributable
to the acquisition of the items. This change in accounting policy has
been applied retrospectively.
Prior period restatements
A prior period restatement was made in respect of finance leases that
were incorrectly classified as operating leases in prior years, the
reallocation of assets classified as plant and equipment to buildings
and the impairment of certain plant, equipment and vehicles.
The net effect of these changes on the 2012 and 2011 annual financial
statements is as follows:
Restatement
Restatement due to
As due to change in
previously prior period accounting
stated adjustments policy Restated
R000 R000 R000 R000
Year ended 29
February 2012
Statement of
Financial Position
Property, plant and
equipment at cost 975 074 (19 142) (100 730) 855 202
Property, plant and
equipment at net
book value 829 333 (11 902) (98 157) 719 274
Non-distributable
reserve 76 081 (76 081)
Net current assets 115 083 (8 189) 106 894
Retained earnings 323 828 (16 311) 2 026 309 543
Deferred taxation 139 844 (4 981) (25 815) 109 048
Statement of
Comprehensive Income
Profit before finance
costs, depreciation and
impairment 109 651 8 343 117 994
Depreciation 33 686 (1 645) (939) 31 102
Impairment of property,
plant and
equipment 1 655 10 572 (618) 11 609
Profit before
finance costs 74 310 (584) 1 557 75 283
Net finance costs 18 925 2 449 21 374
Profit before
taxation 55 385 (3 033) 1 557 53 909
Taxation 12 416 (676) 263 12 003
Profit after
taxation 42 969 (2 357) 1 294 41 906
Earnings per share
(cents) 54,9 (3,1) 1,7 53,5
Headline earnings per
share (cents) 57,9 7,9 1,7 67,5
Year ended 28
February 2011
Statement of
Financial Position
Property, plant and
equipment at cost 976 429 (7 653) (67 416) 901 360
Property, plant and
equipment at net
book value 846 269 (2 358) (66 399) 777 512
Non-distributable
reserve 52 583 (52 583)
Net current assets 49 801 (6 356) 43 445
Retained earnings 280 859 (13 954) 732 267 637
Deferred taxation 116 978 (5 213) (14 832) 96 933
Statement of
Comprehensive Income
Profit before finance
costs, depreciation and
impairment 117 199 7 487 124 686
Depreciation 31 818 (2 484) (339) 28 995
Impairment of property,
plant and
equipment 1 077 625 1 702
Profit before
finance costs 84 304 9 346 339 93 989
Net finance costs 48 673 3 475 52 148
Profit before
taxation 35 631 5 871 339 41 841
Taxation 8 550 1 644 95 10 289
Profit after
taxation 27 081 4 227 244 31 552
Earnings per share
(cents) 56,6 9,0 0,4 66,0
Headline earnings per
share (cents) 58,1 11,5 0,4 70,0
Prospects and industry conditions
Industry selling prices will continue to be dominated by the
imbalance between supply and demand created by the high import
volumes. Consumer demand is also expected to be weaker in the coming
year and both of these factors are expected to lead to a flat
industry selling price in the year ahead.
Although local maize prices have decreased over the past several
weeks, the December 2013 forward price for maize on the Chicago Board of
Trade is trading at considerably lower levels than the nearby months
and this low price is not yet reflected in the December
2013 SAFEX price.
In addition, administered prices over which the poultry industry and
the Group has little or no control such as wages, electricity,
diesel, other fossil fuels, water and municipal charges continue
to increase at rates far in excess of inflation.
It will therefore be difficult for the industry to pass on these
input cost increases to the consumer through an increased selling
price and industry margins are therefore expected to decline in the
coming year.
The Group continues to work to change its product mix, to make its
operations as effective and efficient as possible and to reduce
discretionary expenditure where possible so as to mitigate the
expected margin decline in the coming year.
Annual general meeting
Shareholders are advised that the annual general meeting of the
Company will be held at 10:00 on Wednesday, 7 August 2013 at the
registered offices of the Company in Uitenhage, Eastern Cape.
A separate notice, incorporated in the Integrated Report 2013,
convening the annual general meeting, will be distributed to
shareholders in due course.
Dividend
The board has reviewed its dividend policy and has adopted a
policy of declaring one final dividend per annum. In terms of this
policy, the board has approved and declared a final dividend of
19,0 cents per ordinary share (gross) in respect of the year ended
28 February 2013. This equates to a cover of four times on
headline earnings.
The dividend is payable to shareholders recorded in the register
of shareholders of the Company at the close of business on Friday,
7 June 2013. The directors of Sovereign confirm that the Group
will satisfy the solvency and liquidity test immediately after
completion of the dividend distribution.
The dividend will be subject to Dividends Tax that was introduced
with effect from 1 April 2012. In accordance with paragraphs
11,17(a)(i) to (ix) and 11,17(c) of the JSE Limited Listings
Requirements, the following information is disclosed:
The dividend has been declared out of income reserves;
The local Dividend Tax is 15% (fifteen percent);
There are no Secondary Tax on Companies (STC) credits utilised;
The gross local dividend is 19,0 cents per ordinary share for
shareholders exempt from the Dividend Tax;
The net local dividend is 16,15 cents per ordinary share for
share-holders liable to pay Dividend Tax;
The local dividend withholding tax amount is 2,85 cents per
ordinary share for shareholders liable to pay the dividend
withholding tax.
Sovereign currently has 77 250 616 ordinary shares in issue;
Sovereign Food Investments Limiteds income tax reference number
is 9999607717; and
The Companys auditors are Deloitte & Touche.
In compliance with the requirements of Strate, the electronic
settlement and custody system used by JSE Limited, the following
salient dates for the payment of the dividend are applicable:
Last date to trade CUM dividend Friday, 31 May 2013
Trading commences EX dividend Monday, 3 June 2013
Record date Friday, 7 June 2013
Date of payment Monday, 10 June 2013
Share certificates may not be dematerialised or rematerialised
between Monday, 3 June 2013 and Friday, 7 June 2013, both dates
inclusive.
On Monday, 10 June 2013, the dividend will be electronically
transferred to the bank accounts of certificated shareholders who use
this facility. In respect of those who do not, cheques dated
10 June 2013 will be posted on or about that date. The accounts of
those shareholders who have dematerialised their shares (which are
held at their participant or broker) will be credited on Monday,
10 June 2013.
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.
Basis of preparation
The condensed consolidated provisional financial results are prepared
in accordance with the JSE Limited Listings Requirements for
provisional reports and the requirements of the Companies Act of
South Africa. The JSE Limited Listings Requirements require that the
provisional financial results are prepared in accordance with the
conceptual framework, the measurement and recognition requirements of
International Financial Reporting Standards (IFRS), the SAICA
Financial Reporting Guides as issued by the Accounting Practices
Committee and also, as a minimum, require that they contain the
information required by IAS 34 Interim Financial Reporting. The
accounting policies applied in the preparation of these financial
results are consistent with those
applied in the previous annual financial statements apart from the
change in accounting policy noted above. This report was compiled
under the supervision of C Coombes, Financial Director.
Auditors review
The condensed consolidated provisional financial information for
the year ended 28 February 2013 has been reviewed by the Groups
auditors, Deloitte & Touche. The review was conducted in accordance
with ISRE 2410 Review of Interim Financial Information performed by
the Independent Auditor of the Entity. A copy of
their unmodified review report is available for inspection at the
Companys registered office. Any reference to future financial
performance included in this announcement, has not been reviewed or
reported on by the Groups auditors.
By order of the Board
CP Davies C Coombes
Non-Executive Chairman Chief Executive Officer
16 May 2013
E-mail: info@sovfoods.co.za
Transfer secretaries:
Computershare Investor Services (Pty) Limited, PO Box 61051,
Marshalltown 2107, Gauteng
Company Secretary:ME Hoppe
Sponsor:One Capital
Directorate:
CP Davies* (Non-Executive Chairman), JA Bester*, C Coombes (CEO),
Prof PM Madi*, LM Nyhonyha*, T Pritchard*, GG Walter, BJ van Rensburg
(*Non-Executive)
These results may be viewed on the internet at
www.sovereignfoods.co.za
Date: 16/05/2013 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 
