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Audited group results for the year ended 28 February 2015, dividend announcement and notice of AGM
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")
Audited summarised consolidated provisional group results for the year
ended 28 February 2015, dividend announcement and notice of annual general
meeting
Highlights:
Revenue up 19% to R1.65 billion
EBITDA margin up from 7.2% to 8.8%
Headline Earnings per share up 72% to 103.3 cents
Net Asset Value up 11% to 942 cents
Net gearing down from 10% to 1%
Dividend per share declared up from 15 cents to 34 cents
Summarised Consolidated Statement of Financial Position
Audited Audited
As at As at
28 February 28 February
2015 2014
R’000 R’000
Assets
Non-current assets
Property, plant and equipment 754 136 736 971
Current assets 452 559 336 601
Inventories 71 873 61 730
Biological assets 111 881 106 042
Trade and other receivables 197 952 127 458
Net cash and cash equivalents 70 853 41 371
Total assets 1 206 695 1 073 572
Equity and liabilities
Share capital and premium 252 429 257 435
Share based payments 1 459 -
Retained earnings 458 335 392 170
Equity 712 223 649 605
Non current liabilities
Interest bearing borrowings 53 554 79 438
Deferred taxation 177 852 147 345
Current liabilities 263 066 197 184
Trade, other payables and provisions 237 174 171 002
Current portion of interest bearing
borrowings 25 892 26 182
Total equity and liabilities 1 206 695 1 073 572
Shares in issue ('000) 75 647 76 226
Net asset value per share (cents) 942 852
Summarised Consolidated Statement of Comprehensive Income
Audited Audited
Year Ended Year Ended
28 February 28 February
2015 2014
R’000 R’000
Revenue 1 648 631 1 391 224
Operating profit before depreciation and
impairments 145 204 99 502
Depreciation and impairments 34 308 30 886
Profit before finance costs 110 896 68 616
Net finance costs 2 793 4 811
Profit before taxation 108 103 63 805
Taxation 30 507 18 958
Profit after taxation 77 596 44 847
Other comprehensive income for the year - -
Total comprehensive income for the year 77 596 44 847
Weighted average shares in issue (‘000) 76 128 76 651
Earnings
Earnings per share (cents) 101.9 58.5
Headline earnings per share (cents) 103.3 60.2
Diluted earnings per share (cents) 101.9 58.5
Diluted headline earnings per share (cents) 103.3 60.2
Dividend
Dividend per share (cents) 34.0 15.0
Reconciliation between earnings and
headline earnings
Total comprehensive income for the year 77 596 44 847
Reconciling items:
Loss on disposal of property, plant and
equipment 732 405
Impairment of plant and equipment 753 1 429
Taxation effect (416) (514)
Headline earnings 78 665 46 167
Summarised Consolidated Statement of Cash Flows
Audited Audited
Year Ended Year Ended
28 February 28 February
2015 2014
R’000 R’000
Cash generated from operations before
working capital changes 147 395 99 798
Changes in working capital (20 304) (32 215)
Cash generated from operating activities 127 091 67 583
Net finance costs (2 793) (4 811)
Net cash flow from operating activities 124 298 62 772
Net cash flow from investing in property,
plant and equipment (53 842) (72 929)
Proceeds on the sale of property, plant and
equipment 1 637 4 017
Dividends paid to shareholders (11 431) (14 678)
Net cash flow from shares re-purchased (16) (5 728)
Net cash flow from shares purchased for
Employee Share Option Plan (4 990) -
Net cash flow from debt repaid (26 174) (28 925)
Net movement in cash and cash equivalents 29 482 (55 471)
Net cash and cash equivalents at the
beginning of the year 41 371 96 842
Net cash and cash equivalents at the end of
the year 70 853 41 371
Summarised Consolidated Statement of Changes in Equity 2015
Audited
Share Capital Share Based
R'000 and Premium Payments
Balance at 1 March 2014 257 435 -
Total comprehensive income for the year - -
Ordinary shares re-purchased (16) -
Shares repurchased held by Employee Share
Option Plan (4 990) -
Net value of employee services 1 459
Dividends paid to shareholders - -
Balance at 28 February 2015 252 429 1 459
Balance at 1 March 2013 263 163 109
Total comprehensive income for the year - -
Ordinary shares re-purchased (5 728) -
Dividends paid to shareholders - -
Net value of employee services - (109)
Balance at 28 February 2014 257 435 -
Audited
Retained
Earnings Total
Balance at 1 March 2014 392 170 649 605
Total comprehensive income for the year 77 596 77 596
Ordinary shares re-purchased - (16)
Shares repurchased held by Employee Share
Option Plan - (4 990)
Net value of employee services 1 459
Dividends paid to shareholders (11 431) (11 431)
Balance at 28 February 2015 458 335 712 223
Balance at 1 March 2013 362 001 625 273
Total comprehensive income for the year 44 847 44 847
Ordinary shares re-purchased - (5 728)
Dividends paid to shareholders (14 678) (14 678)
Net value of employee services - (109)
Balance at 28 February 2014 392 170 649 605
Results for the financial year under review
Group performance
The Group is pleased to announce a strong set of results for the year
under review with headline earnings per share increasing by 72% to 103.3
cps and revenue increasing by 19% to R1.65 billion. The higher net sales
price was due to a combination of a strong improvement in overall market
conditions and the Group’s strategy to move away from commodity IQF type
products towards higher margin value added and fresh products. This,
together with a marginal increase in feed costs and continued strong
operational results, has increased the EBITDA margin to 8.8% from 7.2%.
The Group increased revenue by 19% as a result of, inter alia, increased
volumes, food inflation and changes in the product mix. The cost of
broiler feed per unit sold increased by 5% due to a 2% increase in the
cost of raw materials per ton together with an increase in the feed
conversion ratio on the broiler farms and a decreased abattoir yield due
to the change in the product mix. Non-feed costs increased by 16% per unit
driven mainly by increases in the costs of inputs into value added
products and other above inflation increases such as energy, plastics and
labour.
Strong operational cash flows together with lower debt levels resulted in
net finance costs declining to R2.8 million (FY14 – R4.8 million).
The Group’s Statement of financial position remains strong with net asset
value per share up 10.5% from the previous financial year to R9.42 (FY14 –
R8.52). Cash balances increased from R41.4 million in FY14 to R70.9
million. Net gearing at the end of the year was 1%, compared to 10% at
the end of the previous year.
Working capital levels decreased from 8.9% of revenue in FY14 to 8.8%. The
increase in trade and other receivables was as a result of increases in
selling prices and volumes combined with the year-end falling over a
weekend which resulted in some customers only paying after year-end.
Trade, other payables and provisions includes an amount of R27 million in
respect of a dispute with a local service provider.
Due to the increased levels of profitability and despite the additional
working capital requirements, cash flow from operating activities
increased to R124.3 million compared to R62.8 million in FY14.
Capital expenditure of R53.8 million (FY14 – R72.9 million), including the
installation of a carton freezer and portioning equipment, was focused on
plant and equipment which will enable the Group to increase the supply of
high margin products.
Dividends of R 11.4 million were paid during the year compared to R14.7
million in FY14.
Industry issues
The issue of imports and the African Growth and Opportunity Act (“AGOA”)
have recently received large amounts of media attention and the Group
supports the South African Poultry Association (“SAPA”) in its efforts to
find a negotiated settlement with the US poultry industry as part of the
package to renew AGOA for the benefit of all South African citizens. The
anti-dumping duties provisionally imposed against imports of bone-in
products from certain companies in the UK, Netherlands and Germany on
4 July 2014 were finalised on 27 February 2015 and although this move is
welcomed, the Group notes with concern the recent trend to source an
almost equivalent volume of bone-in product from Spain, Belgium and France
where no anti-dumping duties are applicable.
As much as the proposed imposition of a maximum brining level continues to
be unresolved, the Group is confident that a solution will be reached that
is in the best interests of all stakeholders.
Maize prices have experienced large volatility over the past several
months with a low being reached in September 2014 followed by a spike in
February 2015 due to the drought experienced in various parts of the
country. However, international corn prices have continued to decline
over this period and this has meant that local maize prices will be capped
at import parity, especially as South Africa is now able to import maize
from Brazil and Argentina.
CORPORATE ACTIVITY
Pending Acquisition of Hartebeespoort Abattoir
On 7 May 2015 Quantum Foods Holdings Limited accepted a binding offer from
the Group for the purchase of their Hartebeespoort Abattoir for a sum of
R120 million. This acquisition will enable the Group to slaughter an
additional 250 000 birds per week, giving Sovereign greater access to the
Gauteng market and its largest customers. Broiler birds will be sourced
from Quantum Foods Holdings Limited in terms of a long term supply
agreement.
Prospects and industry conditions
The South African consumer remains under financial pressure despite the
recent decrease in fuel costs which resulted from the collapse in the oil
price.
Industry selling prices will continue to be dominated by the level of
imports which will in turn be affected by the outcome of the AGOA
negotiations and imports from European Union countries that are not
affected by the anti-dumping tariffs.
Maize prices are expected to be higher in the coming year but this will to
some extent be offset by lower soya prices.
The Group continues to execute on its product mix strategy whilst focusing
on reducing its cost base.
Annual general meeting
Shareholders are advised that the annual general meeting of the Company
will be held at 10:00 on Wednesday, 12 August 2015 at the registered
offices of the Company in Uitenhage, Eastern Cape.
A separate notice, incorporated in the Integrated Report 2015, convening
the annual general meeting, will be distributed to shareholders in due
course.
Dividend
Past practice has been to declare one final dividend per annum. The board
has approved and declared a final dividend with a cover of three times
headline earnings in respect of the year ended 28 February 2015, which is
34.0 cents (FY14 – 15.0 cents) per ordinary share (gross).
The dividend is payable to shareholders recorded in the register as
shareholders of the Company as at the close of business on Friday, 5 June
2015. 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
(xi) and 11.17(c) of the JSE Limited Listings Requirements (“Listings
Requirements”), the following information is disclosed:
* The dividend has been declared out of income reserves;
* The local Dividend Tax is 15% (fifteen percent);
* The gross local dividend is 34.0 cents per ordinary share for
shareholders exempt from the Dividend Tax;
* The net local dividend is 28.9 cents per ordinary share for shareholders
liable to pay Dividend Tax;
* The local dividend withholding tax amount is 5.1 cents per ordinary
share for shareholders liable to pay the dividend withholding tax;
* Sovereign currently has 76 222 266 ordinary shares in issue;
* Sovereign’s income tax reference number is 9999607717; and
* The Company’s auditors are Deloitte & Touche.
In compliance with the requirements of Strate Limited, 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, 29 May 2015
Trading commences "EX" dividend Monday, 1 June 2015
Record date Friday, 5 June 2015
Date of payment Monday, 8 June 2015
Share certificates may not be dematerialised or rematerialised between
Monday, 1 June 2015 and Friday, 5 June 2015, both dates inclusive.
On Monday, 8 June 2015, 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 8 June 2015 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, 8 June 2015.
Basis of preparation
The summarised consolidated financial statements are prepared in
accordance with the Listings Requirements for provisional reports and the
requirements of the Companies Act of South Africa. The Listings
Requirements require that the provisional financial statements are
prepared in accordance with the conceptual framework, the measurement and
recognition requirements of the International Financial Reporting
Standards (“IFRS”), the SAICA Financial Reporting Guides as issued by the
Accounting Practices Committee, the Financial Reporting Pronouncements as
issued by the Financial Reporting Standards Council and, as a minimum,
requires that they contain the information required by IAS 34 Interim
Financial Reporting. The accounting policies applied in the preparation of
the consolidated financial statements from which the summary financial
statements were derived are in terms of IFRS and are consistent with those
accounting policies applied in the preparation of the previous
consolidated annual financial statements. This report was compiled under
the supervision of G Coley, Chief Financial Officer.
The auditors, Deloitte & Touche, have issued their unmodified opinion on
the Group’s summarised consolidated provisional financial results for the
year ended 28 February 2015. The audit was conducted in accordance with
ISA 810: ‘Engagements to Report on Summary Financial Statements’. These
summarised financial statements have been derived from the Group financial
statements and are consistent in all material respects with the Group
financial statements. An unmodified opinion was issued on the Group
financial statements in accordance with ISA 700.
A copy of the auditor’s report on these summarised consolidated
provisional financial results and of the auditor’s report on the annual
financial statements for the year ended 28 February 2015 is available for
inspection at the Company’s registered office. Any reference to future
financial performance included in this announcement, has not been reviewed
or reported on by the Company’s auditors.
The auditor’s report does not necessarily report on all of the information
contained in this announcement/financial results. Shareholders are
therefore advised that in order to obtain a full understanding of the
nature of the auditor’s engagement they should obtain a copy of the
auditor’s report together with the accompanying financial information from
the issuer’s registered office.
By order of the board
CP Davies C Coombes
Non-executive Chairman Chief Executive Officer
15 May 2015
Email: info@sovereignfoods.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*, GL Coley, 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: 15/05/2015 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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