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OCEANA GROUP LIMITED - INTERIM REPORT AND DIVIDEND DECLARATION FOR THE SIX MONTHS ENDED 31 MARCH 2014

Release Date: 08/05/2014 17:30
Code(s): OCE     PDF:  
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INTERIM REPORT AND DIVIDEND DECLARATION FOR THE SIX MONTHS ENDED 31 MARCH 2014

Oceana Group Limited
Incorporated in the Republic of South Africa
(Registration Number 1939/001730/06)
("Oceana" or "the company" or "the group")


INTERIM REPORT AND DIVIDEND DECLARATION FOR THE SIX MONTHS ENDED 31 MARCH 2014


The unaudited interim results of the group for the six months ended 31 March 2014 are set out herein.

CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME

                                                             Unaudited         Unaudited*
                                                            six months        six months                       Audited*
                                                                 ended             ended                    year ended
                                                              31 March          31 March                       30 Sept
                                                                  2014              2013        Change            2013
                                                 Note            R'000             R'000             %           R'000


Revenue                                                      2 361 652         2 456 648            (4)      4 701 224
Cost of sales                                                1 456 299         1 539 313            (5)      2 833 604
Gross profit                                                   905 353           917 335            (1)      1 867 620
Sales and distribution expenditure                             241 878           216 818            12         458 384
Marketing expenditure                                           19 659            22 295           (12)         63 489
Overhead expenditure                                           299 388           323 464            (7)        675 526
Net foreign exchange gain                                      (21 588)           (8 508)                      (43 292)
Operating profit before joint venture income                   366 016           363 266             1         713 513
Joint venture income                                            22 628             2 262                        30 046
Operating profit                                               388 644           365 528             6         743 559
Investment income                                                6 312            10 406           (39)         16 451
Interest paid                                                   (4 249)             (654)                       (7 485)
Profit before taxation                                         390 707           375 280             4         752 525
Taxation                                                       118 541           116 980             1         228 135
Profit after taxation                                          272 166           258 300             5         524 390


Other comprehensive income
Items that may be re-classified subsequently 
to profit or loss
Movement on foreign currency translation 
reserve                                                          2 267             2 375            (5)          6 223
Movement on cash flow hedging reserve                           (9 386)              232                         8 787
Other comprehensive income, net of taxation                     (7 119)            2 607                        15 010


Total comprehensive income for the period                      265 047           260 907             2         539 400


Profit after taxation attributable to:
Shareholders of Oceana Group Limited                           253 758           240 118             6         491 016
Non-controlling interests                                       18 408            18 182             1          33 374
                                                               272 166           258 300             5         524 390


Total comprehensive income for the 
period attributable to:
Shareholders of Oceana Group Limited                           246 639           242 725             2         506 026
Non-controlling interests                                       18 408            18 182             1          33 374
                                                               265 047           260 907             2         539 400


Weighted average number of shares 
on which earnings per share is 
based (000's)                                        7         100 366           100 290                       100 302

Adjusted weighted average number of shares 
on which diluted earnings per share is based (000's)           111 051           110 387                       110 402
Earnings per share (cents)
  Basic                                                          252.8             239.4             6           489.5
  Diluted                                                        228.5             217.5             5           444.8
Dividends per share (cents)                                      106.0             100.0             6           322.0


Headline earnings per share (cents)
  Basic                                                          252.6             239.3             6           487.9
  Diluted                                                        228.3             217.4             5           443.2



CONDENSED GROUP STATEMENT OF FINANCIAL POSITION              Unaudited         Unaudited*      Audited*
                                                              31 March          31 March       30 Sept
                                                                  2014              2013          2013
                                                                 R'000             R'000         R'000


Assets
Non-current assets                                             813 650           731 537       814 277

 Property, plant and equipment                                 463 383           430 734       458 200
 Goodwill                                                       10 000            10 000        10 000
 Trademark                                                       8 873             7 276         8 873
 Fishing rights                                                 75 439            65 658        83 929
 Deferred taxation                                              22 967            22 502        28 502
 Investments and loans                                         232 988           195 367       224 773

Current assets                                               1 817 166         1 664 011     2 019 292

 Inventories                                                   976 115           880 681     1 213 169
 Accounts receivable                                           761 099           680 926       694 920
 Cash and cash equivalents                                      79 952           102 404       111 203


Total assets                                                 2 630 816         2 395 548     2 833 569


Equity and liabilities
Capital and reserves
 Share capital and premium                                      33 964            32 387        33 770
 Foreign currency translation reserve                            7 770             1 654         5 503
 Capital redemption reserve                                        130               130           130
 Cash flow hedging reserve                                        (198)              632         9 188
 Share-based payment reserve                                    61 353            59 688        59 337
 Distributable reserves                                      1 356 677         1 470 231     1 620 682
 Interest of own shareholders                                1 459 696         1 564 722     1 728 610
 Non-controlling interests                                      56 103            51 048        60 761

Total capital and reserves                                   1 515 799         1 615 770     1 789 371
Non-current liabilities                                        148 978           135 757       180 577

 Liability for share-based payments                            116 979           101 564       143 891
 Deferred taxation                                              31 999            34 193        36 686

Current liabilities                                            966 039           644 021       863 621

 Accounts payable and provisions                               557 966           523 021       606 621
 Distribution to Oceana Empowerment Trust beneficiaries        291 573                              
 Bank overdrafts                                               116 500           121 000       257 000


Total equity and liabilities                                 2 630 816         2 395 548     2 833 569


Number of shares in issue net of treasury shares (000's)       100 428           100 329       100 416
Net asset value per ordinary share (cents)                       1 453             1 560         1 721
Total liabilities excluding deferred 
taxation: Total equity (%)                                          71                46            56
Total borrowings: Total equity (%)                                   8                 7            14

CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY               Unaudited         Unaudited*
                                                            six months        six months       Audited*
                                                                 ended             ended    year ended
                                                              31 March          31 March       30 Sept
                                                                  2014              2013          2013
                                                                 R'000             R'000         R'000


Balance at the beginning of the period                       1 789 371         1 633 242     1 633 242
Total comprehensive income for the period                      265 047           260 907       539 400

Profit after taxation                                          272 166           258 300       524 390
Movement on foreign currency translation reserve                 2 267             2 375         6 223
Movement on cash flow hedging reserve                           (9 386)              232         8 787

Recognition of share-based payments                              2 016             2 567         2 211
Share options exercised                                            194               325         1 365
Decrease in shares held by share trust                                             1 370         1 713
Loss on sale of shares by share trust                                               (353)         (470)
Shares in subsidiary purchased from 
non-controlling interest                                                          (7 158)       (7 158)
Distribution to Oceana Empowerment Trust beneficiaries        (291 573)                               
Dividends declared                                            (249 256)         (275 130)     (380 932)
Balance at the end of the period                             1 515 799         1 615 770     1 789 371


Comprising:
Share capital and premium                                       33 964            32 387        33 770
Foreign currency translation reserve                             7 770             1 654         5 503
Capital redemption reserve                                         130               130           130
Cash flow hedging reserve                                         (198)              632         9 188
Share-based payment reserve                                     61 353            59 688        59 337
Distributable reserves                                       1 356 677         1 470 231     1 620 682
Non-controlling interests                                       56 103            51 048        60 761
Balance at the end of the period                             1 515 799         1 615 770     1 789 371


CONDENSED GROUP STATEMENT OF CASH FLOWS


Cash flow from operating activities
Operating profit before joint venture income                   366 016           363 266       713 513
Adjustment for non-cash and other items                         27 679            53 302       148 726
Cash operating profit before working capital changes           393 695           416 568       862 239
Working capital changes                                        125 843          (265 921)     (468 766)
Cash generated from operations                                 519 538           150 647       393 473
Investment income received                                      21 840             7 993         9 886
Interest paid                                                   (4 249)             (654)       (7 485)
Taxation paid                                                 (134 694)         (154 642)     (317 873)
Dividends paid                                                (249 256)         (277 010)     (380 934)
Cash inflow / (outflow) from operating activities              153 179          (273 666)     (302 933)
Cash outflow from investing activities                         (49 168)          (23 658)     (128 265)

Capital expenditure                                            (49 691)          (49 093)     (127 172)
Proceeds on disposal of property, plant and equipment              139               608         3 800
Repayment received on preference shares                          4 339            28 653        39 377
Net movement on loans and advances                              (4 223)             (131)       (5 848)
Acquisition of additional shares in subsidiary                                    (7 158)       (7 158)
Acquisition of business                                                                        (10 450)
Acquisition of fishing rights                                                                  (26 695)
Loss of control of subsidiary                                                      3 490         3 490
Proceeds on disposal of fishing right                                                            2 418
Proceeds on disposal of joint venture                              268                                
Acquisition of joint venture                                                         (27)          (27)

Cash inflow from financing activities                            4 540             5 058        10 908

Proceeds from issue of share capital                               195             1 342         2 608
Short-term borrowings raised                                     4 345             3 716         8 300


Net increase / (decrease) in cash and cash equivalents         108 551          (292 266)     (420 290)
Cash and cash equivalents at the beginning of the period      (145 797)          273 551       272 872
Effect of exchange rate changes                                    698               119         1 621
Cash and cash equivalents at the end of the period             (36 548)          (18 596)     (145 797)

NOTES


1. Basis of preparation


   The condensed financial information has been prepared in accordance with the framework concepts and the measurement 
   and recognition requirements of International Financial Reporting Standards (IFRS), the SAICA Financial Reporting 
   Guide as issued by the Accounting Practices Committee and the Financial Reporting Pronouncements as issued by the 
   Financial Reporting Standards Council, the information required by IAS 34 ­ Interim Financial Reporting, the JSE 
   Listings Requirements and the requirements of the Companies Act , 71 of 2008, as amended, of South Africa. The report
   has been prepared using accounting policies that comply with IFRS which are consistent with those applied in the 
   financial statements for the year ended 30 September 2013 except for the adoption of IFRS 10 ­ Consolidated Financial 
   Statements, IFRS 11 ­ Joint Arrangements, IFRS 12 ­ Disclosure of Interests in Other Entities, IAS 27 ­ Consolidated
   and Separate Financial Statements and IAS 28 ­ Investment in Associates and Joint Ventures during the period under 
   review. The group previously accounted for joint ventures using the proportionate consolidation method. The group 
   has applied IFRS 11 retrospectively in accordance with the transitional provisions and the 2013 results have been 
   restated accordingly. The condensed financial information was prepared under the supervision of the group financial 
   director, I Soomra CA(SA).

   The results have not been audited or reviewed by the group's auditors, Deloitte & Touche.


2. Effect of restatement of prior periods


   The adoption of IFRS 11 has resulted in the restatement of certain financial statement line items for the prior
   periods disclosed.

   None of the restatements are material to the group results previously reported and had no impact on the net asset 
   value of the group.


                                                             Unaudited         Unaudited*
                                                            six months        six months       Audited*
                                                                 ended             ended    year ended
                                                              31 March          31 March       30 Sept
                                                                  2014              2013          2013
                                                                 R'000             R'000         R'000


3. Segmental results


   Revenue
   Canned fish and fishmeal                                  1 401 580         1 385 880     2 631 686
   Horse mackerel and hake                                     611 279           761 536     1 373 824
   Lobster, squid and French fries                             204 424           172 033       369 394
   Commercial cold storage                                     144 369           137 199       326 320
   Total                                                     2 361 652         2 456 648     4 701 224


   Operating profit
   Canned fish and fishmeal                                    124 842           103 522       214 914
   Horse mackerel and hake                                     204 205           239 118       422 504
   Lobster, squid and French fries                              22 083              (891)       23 343
   Commercial cold storage                                      37 514            23 779        82 798
   Total                                                       388 644           365 528       743 559


   Total assets
   Canned fish and fishmeal                                  1 571 330         1 380 690     1 774 724
   Horse mackerel and hake                                     485 605           420 626       462 955
   Lobster, squid and French fries                             122 222           123 669       100 257
   Commercial cold storage                                     224 479           219 371       235 608
   Financing                                                   204 213           228 690       231 523
                                                             2 607 849         2 373 046     2 805 067
   Deferred taxation                                            22 967            22 502        28 502
   Total                                                     2 630 816         2 395 548     2 833 569


   Total liabilities
   Canned fish and fishmeal                                    414 702           314 178       476 028
   Horse mackerel and hake                                     126 152           222 338       149 596
   Lobster, squid and French fries                              57 986            30 911        41 460
   Commercial cold storage                                      55 461            45 442        67 129
   Financing                                                   428 717           132 715       273 299
                                                             1 083 018           745 584     1 007 512
   Deferred taxation                                            31 999            34 193        36 686
   Total                                                     1 115 017           779 778     1 044 198
 

4. Determination of headline earnings


  Profit after taxation attributable to 
  shareholders of Oceana Group Limited                         253 758           240 118       491 016
  Adjusted for:
  Net surplus on disposal of property, 
  plant and equipment                                             (316)             (151)       (2 351)
  Total tax effect of adjustments                                   63                43           660
  Headline earnings for the period                             253 505           240 010       489 325


5. Dividends


   Estimated dividend declared after reporting date            106 454           100 329       222 951
   Dividend on shares issued prior to last day 
   to trade                                                                                           
   Actual dividend declared after reporting date                                 100 329       222 951


6. Supplementary information


   Amortisation of fishing rights                                8 490             6 752        15 175
   Depreciation                                                 44 401            39 998        87 193
   Operating lease charges                                      23 383            22 516        53 178
   Capital expenditure                                          49 691            49 093       127 172

    Expansion                                                   17 320            11 242        23 182
    Replacement                                                 32 371            37 851       103 990

   Budgeted capital commitments                                137 107           157 277       212 870

    Contracted                                                  12 905            49 939        40 809
    Not contracted                                             124 202           107 338       172 061


                                                             Number of         Number of     Number of
                                                                shares            shares        shares
                                                                  '000              '000          '000
7. Elimination of treasury shares


   Weighted average number of shares in issue                  119 464           119 440       119 451
   Less: shares held by share trusts                           (14 004)          (14 056)      (14 055)
   Less: treasury shares held by subsidiary 
   company                                                      (5 094)           (5 094)       (5 094)
   Weighted average number of shares on which earnings 
   per share and headline earnings per share are based         100 366           100 290       100 302

8. Events after the reporting date


   No events occurred subsequent to the reporting date that may have an impact on the group's reported financial 
   position at 31 March 2014.


Note

* Prior period disclosure has been restated to account for the adoption of new and revised accounting standards.




COMMENTS

Financial results

Group earnings for the six months ended 31 March 2014 have been solid under tough trading conditions, coming off a 
strong base for the comparative six month period. Basic earnings per share and basic headline earnings per share 
increased by 5.6% over the same period.

Revenue for the period decreased by 4% primarily due to the effect of lower horse mackerel catch rates but offset 
by the positive growth in our three remaining divisions and bolstered by better than expected canned fish volumes 
and the positive effect of a weaker exchange rate on exported products.

Inventory levels have improved significantly in the last six months in line with our canned fish procurement 
strategy. As a result, the group has been cash generative to the extent of R109 million compared to a decrease in 
cash of R292 million for the comparative period.

An interim dividend of 106 cents per share has been declared (2013: 100 cents per share).


Review of operations

Canned fish and fishmeal

Canned fish performance has been better than expected for the six months under review.

Canned fish volumes of 4.7 million cartons (2013: 4.8 million cartons) represent good performance off a high base 
in the prior period which included the effect of heightened stock build by customers during February and March 2013.

With volume stability revenue growth for canned fish has been achieved through price adjustments necessitated by the
impact of the weaker rand exchange rate on the landed cost of imported product.

The 2014 South African Total Allowable Catch ("TAC") for pilchard remains the same as 2013 at 90 000 tons. Pilchard 
landings at the St Helena Bay cannery have been good and are currently higher than at the same stage last season. 
The Namibian pilchard TAC for 2014 is 30 000 tons (2013: 25 000 tons) and fishing commenced in April.

Profit from canned fish operations was above that for the same period last year due to the combined effect of stable 
volumes and operating efficiencies. 

The 2014 initial South Africa anchovy A season TAC is 404 251 tons (final A season TAC for 2013: 450 000 tons).
Current season landings of anchovy and redeye herring to the group's fishmeal plants were significantly higher than 
in the previous season resulting in improved production efficiencies and lower costs per ton of manufactured product.
Selling prices were high due to firm international market prices and the weaker rand exchange rate. The loss for 
the period was lower than the prior year.

Horse mackerel and hake

The 2014 Namibian horse mackerel TAC remains the same as 2013 at 350 000 tons. The Ministry of Fisheries and 
Marine Resources continued to allocate further quota to new rights holders.

In South Africa the Precautionary Maximum Catch Limit for targeted catch of horse mackerel increased by 10% to 
38 115 tons (2013: 34 650 tons).

Although catch rates in Namibia have been very good the overall tonnage caught was lower than for the comparative 
six month period. One of our three Namibian trawlers has been operating successfully in a joint venture in Angola 
since the second half of 2013. The revenue effect of the Angolan vessel is not included in the group revenues but 
included in joint venture income. Catch rates in South Africa were lower than in the previous year which resulted 
in an increase in vessel operating costs per ton.

Prices remained firm in our major markets with higher prices being achieved for certain fish sizes. Revenue was 
further enhanced in rand terms due to a favourable currency exchange rate.

Profit from horse mackerel showed a decrease as a direct result of lower tonnage caught for the period.

The 2014 hake TAC has remained unchanged at approximately 140 000 tons. Hake operations continue to benefit from the
successful Lusitania integration. Revenue growth has resulted from improved catch rates and a favourable exchange 
rate. Profit from hake operations showed a substantial improvement as a consequence of revenue growth and operating 
efficiencies.


Lobster, squid and French fries

The 2014 TAC for West coast lobster decreased by 11% to 2 167 tons (2013: 2 425 tons), and quota available to 
Oceana for the current season amounts to 288 tons (2013: 327 tons). Catch rates were in line with those of last year. 
Improved pricing and a favourable exchange rate positively impacted revenue growth. Profits from lobster were 
significantly higher than the prior year.

Following the 2013 commercial fishing rights allocation process in the squid sector, the fishing rights allocated to
Oceana remained unchanged. In the current year the squid business incurred a loss due to the continued decline in
landings. The effect of lower sales volumes was partly offset by higher prices.

The French fries operation has improved significantly with a return to profitability primarily due to increased 
volumes driven by better raw material quality compared to the prior period and in addition, stronger pricing of 
finished product.


Commercial cold storage (CCS)

The CCS Logistics business continues to show material improvement. Revenue increased by 5% due to improved occupancy 
levels at most stores while cost efficiencies have further contributed to growth in operating profit margins.


Foodcorp acquisition

Further to the announcement released on the Stock Exchange News Service of the JSE on 11 November 2013 in respect of 
Oceana's acquisition of the fishing interests of Foodcorp Proprietary Limited ("Foodcorp"), on 15 April 2014 the 
Competition Tribunal approved Oceana's acquisition, subject to conditions. The Competition Tribunal's decision followed 
a Request for Consideration challenging the conditions imposed by the Competition Commission which were not acceptable 
to both Oceana and Foodcorp. Oceana and Foodcorp have agreed to extend the sale of business agreement to  31 May 2014 
during which time the Competition Tribunal's reasons will be received and reviewed and a decision taken with regard to 
filing a notice of appeal with the Competition Appeal Court.


Oceana Empowerment Trust (OET)

On 13 February 2014 Oceana shareholders voted in favour of an extension to the OET lock-in period by a further four years 
from January 2017 to January 2021 and to a capital contribution of approximately R290 million to OET in order to make a 
once-off cash distribution to the 2,650 Employee Beneficiaries. This distribution was made on 4 April 2014 and has been 
positively received.


Prospects

In light of improved industrial fish landings to date the group is positioned to take advantage of opportunities for 
export revenue growth in the second half of this financial year. We are mindful that the pressure faced by domestic 
consumers will continue to impact canned fish volume growth for the remainder of the year. The forecast information has 
not been audited or reviewed by the group’s auditors. 

On behalf of the Board

MA Brey                                                        FP Kuttel
Chairman                                                       Chief executive officer

8 May 2014




CASH DIVIDEND DECLARATION


Notice is hereby given of dividend number 141. A gross interim dividend amounting to 106 cents per share, for the six 
months ended 31 March 2014, was declared on Thursday 8 May 2014. Where applicable the deduction of dividend withholding 
tax at a rate of 15% will result in a net dividend amounting to 90,1 cents per share.

The Company has no credits available in respect of secondary tax on companies.

The number of ordinary shares in issue at the date of this declaration is 119 526 157.

The Company's tax reference number is 9675/139/71/2.

Relevant dates are as follows:

Last day to trade cum dividend                   ­ Friday, 20 June 2014
Commence trading ex dividend                     ­ Monday, 23 June 2014
Record date                                      ­ Friday, 27 June 2014
Dividend payable                                 ­ Monday, 30 June 2014


Share certificates may not be dematerialised or re-materialised between Monday, 23 June 2014 and Friday,
27 June 2014, both dates inclusive.


By order of the Board


JC Marais
Company secretary

8 May 2014




COMPANY INFORMATION

Directors:                 MA Brey (chairman), FP Kuttel* (chief executive officer), ZBM Bassa,
                           PG de Beyer, ABA Conrad*, NP Doyle, PB Matlare, S Pather,
                           NV Simamane, I Soomra*, TJ Tapela (* executive)

Registered office:         9th Floor, Oceana House, 25 Jan Smuts Street, Foreshore, Cape Town, 8001

Transfer secretaries:      Computershare Investor Services Proprietary Limited
                           70 Marshall Street, Johannesburg, 2001
                           (PO Box 61051, Marshalltown, 2107)

Sponsor - South Africa:    The Standard Bank of South Africa Limited

Sponsor ­ Namibia:         Old Mutual Investment Services (Namibia) Proprietary Limited

Company secretary:         JC Marais

JSE share code:            OCE

NSX share code:            OCG

ISIN number:               ZAE000025284

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