Wrap Text
Unaudited Condensed Consolidated Interim Financial Statements For The Six Months Ended 31 March 2015
PIONEER FOOD GROUP LIMITED
Incorporated in the Republic of South Africa
REGISTRATION NUMBER: 1996/017676/06
TAX REGISTRATION NUMBER: 9834/695/71/1
SHARE CODE: PFG
ISIN CODE: ZAE000118279
("Pioneer Foods" or "the Group" or "the Company")
Salient Features
Continuing operations:
Revenue R9 450 million +8%
Adjusted operating profit (before items of a capital nature)* R1 166 million +36%
Adjusted headline earnings* R830 million +40%
Adjusted headline earnings per share* 451 cents +39%
Adjusted earnings** R834 million +40%
Adjusted earnings per share** 453 cents +39%
Group:
Adjusted headline earnings* R830 million +28%
Adjusted headline earnings per share* 451 cents +28%
Headline earnings R627 million -10%
Headline earnings per share 341 cents -10%
Earnings R545 million -15%
Earnings per share 296 cents -15%
Interim gross dividend per listed ordinary share (2014: 65 cents) 95 cents +46%
Headline earnings ("HE") is calculated based on Circular 2/2013 issued by the South African Institute of Chartered Accountants.
* HE and operating profit (before items of a capital nature) are adjusted for the impact of the share-based payment charge on the B-BBEE Phase I transaction on profit or
loss due to the volatility of this share-based payment charge.
** Earnings is adjusted as above (*) and also for the impairment of the available-for-sale financial assets (Quantum Foods shares held by the BEE SPVs) amounting to R51
million.
Pioneer Foods: +27 21 974 4000
Phil Roux: +27 73 306 4804 phil.roux@pioneerfoods.co.za
Cindy Hess +27 83 285 7043 cindy.hess@pioneerfoods.co.za
COMMENTARY
The results for the six months ended 31 March 2015 reflect the progress on the strategic delivery of the twin objectives of strengthening brands and expanding margins.
The following key value drivers underpinned the performance:
- Pleasing revenue growth despite price deflation in maize and vine fruit exports
- Power brands share growth
- Maize volume and production efficiency gains
- Step change in Bakeries performance
- Solid contribution from the International business
- Cash operating costs well contained
Continuing operations
Revenue increased by 8% on the prior period to R9 450 million, while adjusted operating profit increased by 36% to R1 166 million, with the resultant expansion of
margins.
Adjusted headline earnings for the six-month period increased by 40% to R830 million or 451 cents per share, from the 325 cents per share reported for the prior
period. Adjusted earnings increased by 40% to R834 million or 453 cents per share, from the 325 cents per share reported for the prior period.
Essential Foods
Essential Foods increased revenue by 7% to R5 610 million, while operating profit increased by 46% to R698 million on the prior period. Essential Foods' increased volume
market share with exceptional performance delivered by Bakeries. Bakeries increased volumes by 13%, revenue by 17% and concurrently increased margins.
Notwithstanding maize price deflation, maize delivered pleasing results through the diligent management of maize margins in a period of significant volatility.
Pasta, rice and wheat contributed positively to the overall results.
Groceries
Revenue increased by 9% to R2 628 million, whilst operating profit increased by 29% to R253 million. Operating profit margin expanded by 150 basis points to 9.6%
despite deeper losses on Pepsi. Cereals and the balance of the Groceries portfolio increased volumes by 9%. Beverage volumes, excluding Pepsi, increased by 8%. Strong
volume growth in breakfast cereals and market share gains in long-life juice contributed to the results.
International (comprising of exports, Bokomo UK, the fruit business and the newly acquired Food Concepts Pioneer Ltd - Nigerian bakery business)
International, which contributed 13% of total Group revenue and 19% of operating profit, increased revenue by 10% to R1 211 million and operating profit by 18% to R218 million,
for the six months ended 31 March 2015. Tough trading conditions within certain of the oil-dependent African countries, and increasing trade barriers in key global markets
challenged the export business.
Overall volume growth of 10%, tempered by lower fruit export, was achieved for the six months ended 31 March 2015. Africa achieved a 14% increase in volumes.
Performance was driven by growth in grocery and beverage volumes. Breakfast cereal volumes increased by 23% by leveraging the existing beverage route to market and
customer base. Global vine fruit price deflation and supply impacted performance relative to the prior period. As a result, overall fruit sales volumes declined by
11%. The UK business performed well as a result of favourable wheat procurement and a pleasing increase in sales volumes.
Pioneer Foods acquired 50.1% of Food Concepts Pioneer Ltd, a bakery business in Nigeria, during the period. The transaction became effective on 1 March 2015 and has
been consolidated from this date. For further detail in respect of the assets and liabilities acquired, refer to the Notes to the condensed consolidated interim financial
statements for the six months ended 31 March 2015.
Adjusted results
Adjusted results from continuing operations provide a consistent perspective on the operational performance of the continuing business. Adjusted operating profit
excludes the impact of the cash-settled Phase I (2006) B-BBEE transaction. The cash-settled Phase I (2006) B-BBEE transaction is accounted for in terms of IFRS 2 and
the resultant share-based payment charge is predominantly impacted by the relative movement in the Group's share price. A gain of R48 million was recorded in the
comparative six month period as a result of the share price decreasing from R87.50 to R83.50. Conversely, a charge of R203 million was recorded in the current period
as a result of an increase in the share price from R118.00 to R177.85.
Adjusted earnings excludes a R51 million impairment of Quantum Foods Holdings Limited ("Quantum Foods") shares held by consolidated special purpose entities relating
to the Phase II (2012) B-BBEE equity transaction.
Group Performance (including the discontinued operations of Quantum Foods and the effect of the 6 October 2014 unbundling)
Headline earnings for the six months ended 31 March 2015, decreased by 10% to R627 million or 341 cents per share from the 380 cents per share reported for the prior
period. Earnings for the same period decreased by 15% to R545 million or 296 cents per share from the 349 cents per share reported for the prior period.
Earnings were affected by the IFRS 2 share-based payment charge relating to the Phase I (2006) B-BBEE transaction as explained above and the unbundling of Quantum
Foods. Further detail in respect of the Quantum Foods unbundling is disclosed in the Notes to the condensed consolidated interim financial statements for the six months
ended 31 March 2015.
Net cash profit increased by 23% to R1 345 million and net cash from operating activities amounted to R339 million, after the seasonal investment in inventory and
income tax paid of R157 million.
Total capital invested by the Group during the six months under review amounted to R296 million (2014: R259 million).
Net interest-bearing debt (excluding third-party funding relating to the Phase II B-BBEE transaction) decreased to R535 million (2014: R1 541 million) with a debt to
equity ratio of 8% (2014: 22%).
Outlook
Pioneer Foods' prospects remain good. Overall, we are pleased with the quality of earnings and the ability to extract further value through the relentless execution of
the strategy. The environment, however, is likely to be characterised by ongoing muted consumer spending, costly energy disruptions, sustained exchange rate volatility
and significant competition.
Dividend
A gross interim dividend, for the six months ended 31 March 2015, of 95 cents (2014: 65 cents) per share, an increase of 46%, has been approved and declared by
the Board from income reserves. The applicable dates are as follows:
Last date of trading cum dividend Friday, 26 June 2015
Trading ex dividend commences Monday, 29 June 2015
Record date Friday, 3 July 2015
Dividend payable Monday, 6 July 2015
Share certificates may not be dematerialised or materialised between Monday, 29 June 2015 and Friday, 3 July 2015, both days inclusive.
A gross interim dividend of 28.5 cents (2014: 19.5 cents) per class A ordinary share, being 30% of the gross interim dividend payable to ordinary shareholders in terms
of the rules of the relevant employee scheme, will be paid during July 2015.
By order of the Board
ZL Combi P M Roux
Chairman CEO
Bellville
18 May 2015
PIONEER FOOD GROUP LIMITED
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS for the six months ended 31 March 2015
Group statement of comprehensive income
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
31 March 31 March 30 September
2015 2014 2014
R'm R'm R'm
Continuing operations
Revenue 9 449.7 8 775.7 17 698.6
Cost of goods sold (6 400.9) (6 114.7) (12 321.2)
Gross profit 3 048.8 2 661.0 5 377.4
Other income and gains/(losses) - net 57.0 56.3 115.9
Other expenses (2 143.4) (1 814.2) (4 000.5)
Excluding the following: (1 940.3) (1 862.3) (3 813.2)
Phase I B-BBEE transaction share-based payment (charge)/income (203.1) 48.1 (187.3)
Items of a capital nature (45.5) 0.6 (47.0)
Operating profit 916.9 903.7 1 445.8
Investment income 16.1 10.1 22.3
Finance costs (67.1) (65.4) (138.0)
Share of profit of investments accounted for using the equity method 33.3 34.6 69.8
Profit before income tax 899.2 883.0 1 399.9
Income tax expense (318.4) (238.8) (451.8)
Profit for the period from continuing operations 580.8 644.2 948.1
(Loss)/profit for the period from discontinued operations (attributable to
owners of the parent) (35.7) (4.2) 18.2
Profit for the period 545.1 640.0 966.3
Other comprehensive income/(loss) for the period
Items that will not subsequently be reclassified to profit or loss:
Remeasurement of post-employment benefit obligations - - 0.6
Items that may subsequently be reclassified to profit or loss: (7.0) (23.2) 10.8
Fair value adjustments to cash flow hedging reserve (11.2) (14.4) (9.3)
For the period 7.0 97.5 62.8
Current income tax effect (4.3) (28.2) (18.4)
Deferred income tax effect 2.3 0.9 1.7
Reclassified to profit or loss (22.5) (117.5) (75.8)
Current income tax effect 7.2 32.4 20.7
Deferred income tax effect (0.9) 0.5 (0.3)
Fair value adjustments on available-for-sale financial assets 2.7 2.8 4.9
For the period 5.6 5.3 9.9
Deferred income tax effect (0.5) (0.7) (1.2)
Reclassified to profit or loss (2.4) (1.8) (3.8)
Share of other comprehensive income of investments accounted for using
the equity method 2.6 - 3.1
Movement on foreign currency translation reserve (1.1) (11.6) 12.1
Total comprehensive income for the period 538.1 616.8 977.7
Profit/(loss) for the period attributable to:
Owners of the parent
For continuing operations 580.3 643.4 947.0
For discontinued operations (35.7) (4.2) 18.2
Non-controlling interest
For continuing operations 0.5 0.8 1.1
545.1 640.0 966.3
Total comprehensive income/(loss) for the period attributable to:
Owners of the parent
For continuing operations 573.3 646.3 973.7
For discontinued operations (35.7) (30.3) 2.9
Non-controlling interest
For continuing operations 0.5 0.8 1.1
538.1 616.8 977.7
Headline earnings reconciliation
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
31 March 31 March 30 September
2015 2014 2014
R'm R'm R'm
Reconciliation between profit attributable to owners of the
parent and headline earnings
Profit attributable to owners of the parent
For continuing operations 580.3 643.4 947.0
For discontinued operations (35.7) (4.2) 18.2
544.6 639.2 965.2
Remeasurement of items of a capital nature - continuing operations 45.5 (0.7) 47.0
Net (profit)/loss on disposal of property, plant and equipment and
intangible assets (2.7) (0.1) 1.3
Net profit on disposal of available-for-sale financial assets (2.4) (1.9) (3.7)
Impairment of property, plant and equipment and intangible assets
and available-for-sale financial assets 50.6 1.3 49.4
Tax effect on remeasurement of items of a capital nature 0.8 0.3 (12.9)
46.3 (0.4) 34.1
Remeasurement of items of a capital nature - discontinued operations 17.9 76.7 76.0
Net loss/(profit) on disposal of property, plant and equipment and
intangible assets and with unbundling 17.9 (1.0) (1.7)
Impairment of property, plant and equipment and intangible assets - 77.7 77.7
Tax effect on remeasurement of items of a capital nature 17.8 (20.4) (20.3)
35.7 56.3 55.7
Remeasurement of items of a capital nature included in equity-
accounted results
Effect on remeasurement of items of a capital nature 0.8 (0.3) 0.1
Tax effect on remeasurement of items of a capital nature (0.2) 0.1 -
0.6 (0.2) 0.1
Headline earnings 627.2 694.9 1 055.1
For continuing operations 627.2 642.8 981.2
For discontinued operations - 52.1 73.9
Phase I B-BBEE transaction share-based payment charge/(income) 203.1 (48.1) 187.3
Adjusted headline earnings (note 1) 830.3 646.8 1 242.4
For continuing operations 830.3 594.7 1 168.5
For discontinued operations - 52.1 73.9
Number of issued ordinary shares (million) 232.4 231.3 231.7
Number of issued treasury shares:
- held by subsidiary (million) 18.0 18.0 18.0
- held by share incentive trust (million) 0.8 1.2 1.1
- held by B-BBEE equity transaction participants (million) 18.1 18.1 18.1
- held by BEE trust (million) 10.7 10.6 10.6
Number of issued class A ordinary shares (million) 4.6 6.5 6.0
Weighted average number of ordinary shares (million) 184.0 183.1 183.3
Weighted average number of ordinary shares - diluted (million) 198.4 190.7 192.1
Earnings per ordinary share (cents):
- basic 295.9 349.2 526.5
- diluted 274.4 335.1 502.4
- headline 340.8 379.6 575.6
- diluted headline 316.1 364.3 549.2
- adjusted headline (note 1) 451.2 353.3 677.8
- diluted adjusted headline (note 1) 418.5 339.1 646.7
- adjusted headline for continuing operations (note 1) 451.2 324.9 637.4
- diluted adjusted headline for continuing operations (note 1) 418.5 311.8 608.2
Gross dividend per ordinary share (cents) 95.0 65.0 221.0
Gross dividend per class A ordinary share (cents) 28.5 19.5 66.3
Net asset value per ordinary share (cents) 3 450.0 3 818.7 3 318.2
Debt to equity ratio (%) 16.2 29.0 10.9
Note 1
Headline earnings ("HE") is calculated based on Circular 2/2013 issued by the South African Institute of Chartered Accountants. Adjusted HE is defined as HE adjusted
for the impact of the share-based payment charge on the B-BBEE Phase I transaction on profit or loss due to the volatility of this share-based payment charge.
Group statement of financial position
Unaudited Unaudited Audited
31 March 31 March 30 September
2015 2014 2014
R'm R'm R'm
Assets
Property, plant and equipment 4 364.9 4 242.0 4 229.1
Goodwill 251.3 219.7 220.8
Other intangible assets 480.0 460.3 457.2
Biological assets 16.0 16.0 16.0
Investments in and loans to associates and joint ventures 417.7 366.6 402.3
Available-for-sale financial assets 147.0 64.9 70.0
Trade and other receivables 23.3 22.6 23.4
Deferred income tax 2.1 74.6 3.7
Non-current assets 5 702.3 5 466.7 5 422.5
Current assets 5 592.3 4 913.4 5 420.9
Inventories 2 630.7 2 635.0 2 423.3
Derivative financial instruments 14.1 9.5 14.9
Trade and other receivables 2 206.3 1 950.6 1 873.8
Current income tax 0.3 0.1 1.3
Cash and cash equivalents 740.9 318.2 1 107.6
Assets of disposal group classified as held for sale 52.8 2 054.0 2 066.8
Total assets 11 347.4 12 434.1 12 910.2
Equity and liabilities
Capital and reserves attributable to owners of the parent 6 375.6 7 003.3 6 102.4
Share capital 23.2 23.1 23.2
Share premium 2 371.0 2 167.4 2 255.2
Treasury shares (1 204.8) (1 188.0) (1 186.5)
Other reserves 347.7 384.4 428.5
Retained earnings 4 838.5 5 616.4 4 582.0
Non-controlling interest 60.8 10.1 10.4
Total equity 6 436.4 7 013.4 6 112.8
Non-current liabilities 2 652.1 2 307.4 2 308.6
Borrowings
B-BBEE equity transaction third-party finance 449.7 449.7 449.7
Other 1 183.1 1 016.0 1 063.8
Provisions for other liabilities and charges 104.3 122.9 101.5
Share-based payment liability 363.1 201.6 245.2
Deferred income tax 551.9 517.2 448.4
Current liabilities 2 257.3 2 628.2 3 920.7
Trade and other payables 1 967.1 1 692.0 2 258.2
Current income tax 58.8 39.4 18.1
Derivative financial instruments 17.5 6.1 9.7
Borrowings 138.9 883.0 260.7
Loan from joint venture 5.5 7.3 15.7
Share-based payment liability 69.0 - 115.8
Dividends payable 0.5 0.4 1 242.5
Liabilities of disposal group classified as held for sale 1.6 485.1 568.1
Total equity and liabilities 11 347.4 12 434.1 12 910.2
Group statement of changes in equity
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
31 March 31 March 30 September
2015 2014 2014
R'm R'm R'm
Share capital, share premium and treasury shares 1 189.4 1 002.5 1 091.9
Opening balance 1 091.9 1 020.8 1 020.8
Movement in treasury shares (18.3) 2.9 4.4
Ordinary shares issued - share appreciation rights 115.9 25.7 66.8
Employee share scheme - repurchase of shares (0.1) (46.9) (0.1)
Other reserves 347.7 384.4 428.5
Opening balance 428.5 426.2 426.2
Equity compensation reserve transactions 17.2 9.1 26.5
Ordinary shares issued - share appreciation rights (115.8) (25.7) (66.8)
Deferred income tax on share-based payments 32.3 (2.0) 31.8
Share of other comprehensive income of investments
accounted for using the equity method 2.6 - 3.1
Unbundling of Quantum Foods (7.5) - -
Other comprehensive (loss)/income for the period (9.6) (23.2) 7.7
Retained earnings 4 838.5 5 616.4 4 582.0
Opening balance 4 582.0 5 134.3 5 134.3
Profit for the period 544.6 639.2 965.2
Other comprehensive income for the period - - 0.6
Dividends (287.6) (157.6) (1 519.2)
Management share incentive scheme - disposal of shares 0.1 0.9 1.7
Employee share scheme - transfer tax on share transactions (0.6) (0.4) (0.6)
Non-controlling interest 60.8 10.1 10.4
Opening balance 10.4 9.3 9.3
Non-controlling interest acquired - business combination 49.9 - -
Profit for the period 0.5 0.8 1.1
Total equity 6 436.4 7 013.4 6 112.8
Group statement of cash flows
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
31 March 31 March 30 September
2015 2014 2014
R'm R'm R'm
Net cash profit from operating activities 1 345.1 1 090.9 2 133.9
Cash effect from hedging activities (10.8) (14.7) (7.8)
Working capital changes (838.0) (886.3) 27.5
Net cash generated from operations 496.3 189.9 2 153.6
Income tax paid (157.2) (188.8) (386.4)
Net cash flow from operating activities 339.1 1.1 1 767.2
Net cash flow from investment activities (231.2) (210.8) (392.7)
Property, plant and equipment and intangible assets
- additions (63.9) (160.7) (269.7)
- replacements (231.7) (97.8) (216.3)
- proceeds on disposal 30.9 33.0 55.7
Business combination (81.3) - -
Proceeds on disposal of and changes in available-for-sale
financial assets and loans 76.5 (9.3) (1.1)
Interest received 15.1 10.5 24.3
Dividends received 1.0 0.7 1.6
Dividends received from joint ventures 22.2 12.8 12.8
Net cash flow from financing activities (419.8) (260.1) (422.0)
Proceeds from borrowings 86.9 15.5 78.1
Share schemes transactions (151.0) (44.9) (72.3)
Interest paid (68.3) (73.2) (150.8)
Dividends paid (287.4) (157.5) (277.0)
Net cash, cash equivalents and bank overdrafts on
unbundling of Quantum Foods (105.6) - -
Net cash, cash equivalents and bank overdrafts from
business combination 79.8 - -
Net (decrease)/increase in cash, cash equivalents
and bank overdrafts (337.7) (469.8) 952.5
Net cash, cash equivalents and bank overdrafts
at beginning of period 1 018.1 65.6 65.6
Net cash, cash equivalents and bank overdrafts
at end of period 680.4 (404.2) 1 018.1
For continuing operations 680.4 (513.9) 912.5
For discontinued operations - 109.7 105.6
Group segment report
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
31 March 31 March 30 September
2015 2014 2014
Restated Restated
R'm R'm R'm
Segment revenue (note 1)
Essential Foods 5 610.2 5 255.2 10 651.9
Quantum Foods - 1 789.9 3 591.4
Groceries: Cereals and other (formerly Bokomo Foods) 1 260.1 1 139.0 2 361.8
Groceries: Beverages (formerly Ceres Beverages) 1 368.3 1 283.4 2 411.3
International 1 211.1 1 098.0 2 273.6
Total 9 449.7 10 565.5 21 290.0
Segment results (note 1)
Essential Foods 698.3 477.7 975.5
Quantum Foods - 26.2 21.6
Groceries: Cereals and other (formerly Bokomo Foods) 128.2 86.1 220.7
Groceries: Beverages (formerly Ceres Beverages) 125.1 110.2 124.7
International 218.0 185.1 363.4
Other (4.1) 7.6 10.3
1 165.5 892.9 1 716.2
Reversal of depreciation charge in Quantum Foods legal entities
(asset held for sale) - 28.2 54.7
Phase I B-BBEE transaction share-based payment (charge)/income (203.1) 48.1 (187.3)
Operating profit before items of a capital nature 962.4 969.2 1 583.6
Reconciliation of operating profit (before items of a capital
nature) to profit before income tax
Operating profit before items of a capital nature 962.4 969.2 1 583.6
Adjusted for:
Remeasurement of items of a capital nature (63.4) (76.0) (123.0)
Interest income 15.1 10.5 24.3
Dividends received 1.0 0.7 1.6
Finance costs (67.1) (65.4) (138.7)
Share of profit of investments accounted for using the
equity method 33.3 34.6 70.4
Profit before income tax (including discontinued operations) 881.3 873.6 1 418.2
Note 1
Includes discontinued operations.
Note 2
Segment revenue and segment results were restated to:
- Reflect the operations of all exports, other than to Botswana, Namibia, Lesotho and Swaziland, as well as the operations of all foreign operations to a new segment, International; and
- Allocate all corporate results to the operating segments, except for the B-BBEE Phase I share-based payment charge, the results of the holding company and the
insurance captive legal entity, BEE socio-economic and enterprise development costs and group legal costs.
Refer to note 11 of the notes to the condensed consolidated interim financial statements for further detail regarding this restatement.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1. Basis of preparation
The condensed consolidated interim financial statements of the Group for the six months ended 31 March 2015 have been prepared in accordance with
International Financial Reporting Standards ("IFRS"), the Listings Requirements of the JSE Ltd and the Companies Act of South Africa, Act 71 of 2008, as amended. The
condensed consolidated interim financial statements comply with the requirements of IAS 34 - Interim Financial Reporting, the SAICA Financial Reporting Guides as
issued by the Accounting Practices Committee and the Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council. These condensed
consolidated interim financial statements have not been audited.
The directors take full responsibility for the preparation of the condensed consolidated interim financial statements and that the financial information has been
correctly extracted from the underlying financial records.
2. Accounting policies
These condensed consolidated interim financial statements incorporate accounting policies that are in terms of IFRS and are consistent with those applied in the
Group's annual financial statements for the year ended 30 September 2014 and with those of previous financial years, except for the adoption of the following new
standards, amendments to published standards and interpretations that became effective for the current reporting period beginning on 1 October 2014:
Amendments to IAS 32 - Financial Instruments: Presentation on financial instruments, asset and liability offsetting (effective 1 January 2014)
Amendments to IAS 36 - Impairment of Assets on recoverable amount disclosures (effective 1 January 2014)
Amendment to IAS 39 - Financial Instruments: Recognition and Measurement on novation of derivatives and hedge accounting (effective 1 January 2014)
Amendment to IAS 19 - Employee Benefits regarding defined benefit plans (effective 1 July 2014)
Annual improvements 2012 (issued December 2013) (effective 1 July 2014)
Annual improvements 2013 (issued December 2013) (effective 1 July 2014)
IFRIC 21 - Levies (effective 1 January 2014)
The adoption of these amendments to standards and interpretations did not have any material impact on the Group's results and cash flows for the six months ended 31
March 2015 and the financial position at 31 March 2015.
In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and
the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 30 September 2014.
Unaudited Unaudited Audited
Six months six months year
ended ended ended
31 March 31 March 30 September
2015 2014 2014
3. Share capital
During the period under review the following share transactions occurred:
Number of listed issued and fully paid ordinary shares
At beginning of period 231 691 881 231 006 847 231 006 847
Shares issued in terms of employee share appreciation rights scheme 741 469 297 286 685 034
At end of period 232 433 350 231 304 133 231 691 881
741,469 (30 September 2014: 685,034 and 31 March 2014: 297,286) listed
ordinary shares of 10 cents each were issued at an average of R156.23
(30 September 2014: R97.47 and 31 March 2014: R86.54) per share in terms
of the share appreciation rights scheme.
Number of treasury shares held by the share incentive trust
At beginning of period 1 110 213 1 422 116 1 422 116
Movement in shares (299 701) (188 756) (311 903)
At end of period 810 512 1 233 360 1 110 213
Proceeds on the sale of treasury shares by the share incentive trust (R'000) 4 675 4 018 6 262
Number of treasury shares held by B-BBEE transaction participants
At beginning and end of period 18 091 661 18 091 661 18 091 661
Number of treasury shares held by Pioneer Foods Broad-Based BEE Trust
At beginning of period 10 599 988 10 599 988 10 599 988
Shares acquired 145 362 - -
At end of period 10 745 350 10 599 988 10 599 988
Purchase price of shares acquired (R'000) 22 940 - -
Number of treasury shares held by a subsidiary
At beginning and end of period 17 982 056 17 982 056 17 982 056
Number of unlisted class A ordinary shares
At beginning of period 6 043 940 7 367 360 7 367 360
Shares bought back and cancelled (1 411 970) (885 500) (1 323 420)
At end of period 4 631 970 6 481 860 6 043 940
Purchase consideration paid for unlisted class A ordinary
shares bought back (R'000) 129 910 46 853 74 988
4. Borrowings
Pioneer Foods obtained a R300 million vehicle and asset finance facility during the previous year. This facility will be used to finance the replacement of the Group's
bakery delivery vehicle fleet. The vehicles are acquired in terms of instalment sale agreements. These borrowings are secured by the vehicles acquired in terms of
these agreements. At 31 March 2015 new borrowings obtained in terms of these facilities amounted to R110.2 million.
No other material new borrowings were concluded during the period under review. Changes in borrowings mainly reflect repayments made in terms of agreements. Short-term
borrowings fluctuate in accordance with changing working capital needs.
5. Events after the reporting date
5.1 Dividend
The Board approved and declared a gross interim dividend of 95.0 cents (2014: gross interim dividend of 65.0 cents and 2014: gross final dividend of 156.0 cents) per
ordinary share. This will amount to approximately R210,603,600 (2014: interim of R143,601,201 and 2014: final of R345,100,897) depending on the exact number of
ordinary shares issued at the record date. In addition, the 10,745,350 (2014 interim: 10,599,988 and 2014 final: 10,683,570) Pioneer Foods shares issued to the Pioneer
Foods Broad-based BEE Trust, will receive 20% of the dividend payable, i.e. 19.0 cents (2014: gross interim dividend of 13.0 cents and 2014: gross final dividend of 31.2 cents)
per share, amounting to R2,041,616 (2014: interim of R1,377,998 and 2014: final of R3,333,274).
The Board approved a gross interim dividend of 28.5 cents (2014: gross interim dividend of 19.5 cents and 2014: gross final dividend of 46.8 cents) per class A
ordinary share, being 30% of the dividend payable to the other class ordinary shareholders in terms of the rules of the relevant employee scheme. This will amount to
approximately R1,320,111 (2014: interim of R1,204,213 and 2014: final of R2,223,519) depending on the exact number of class A ordinary shares issued at the record
date.
Additional information disclosed:
These dividends are declared from income reserves and qualify as a dividend as defined in the Income Tax Act, Act 58 of 1962.
Dividends will be paid net of dividends tax of 15%, to be withheld and paid to the South African Revenue Service by the Company. Such tax must be withheld unless
beneficial owners of the dividend have provided the necessary documentary proof to the relevant regulated intermediary that they are exempt therefrom, or entitled to a
reduced rate as result of the double taxation agreement between South Africa and the country of domicile of such owner.
The net dividend amounts to 80.75 cents per ordinary share and 24.225 cents per class A ordinary share for shareholders liable to pay dividends tax. The dividend
amounts to 95.0 cents per ordinary share and 28.5 cents per class A ordinary share for shareholders exempt from paying dividends tax.
The number of issued ordinary shares and issued class A ordinary shares is 232,433,350 and 4,572,400 respectively as at the date of this declaration.
5.2 Disposal of biscuit plant
Pioneer Foods entered into an agreement to dispose of certain assets related to its biscuit plant to National Brands Ltd for a purchase consideration of approximately
R65 million. Regulatory approval for the transaction was obtained after the reporting date and the effective date of the transaction was 4 May 2015.
5.3 Acquisition of equity interest in FUTURELIFE Health Products (Pty) Ltd
After the reporting date, Pioneer Foods entered into an agreement to acquire a 50% shareholding in Futurelife Health Products (Pty) Ltd, a scientifically formulated
nutrient-dense functional food products company. The agreement is still subject to the necessary regulatory approvals.
5.4 Other material events
There have been no other material events requiring disclosure after the reporting date and up to the date of approval of the condensed consolidated interim
financial statements by the Board.
6. Contingent liabilities - guarantees
The Group had guarantees in issue of R34.9 million (30 September 2014: R50.2 million) as at 31 March 2015, primarily for loans by third parties to contracted
suppliers.
As part of the financial assistance provided by Rand Merchant Bank, a division of FirstRand Bank Ltd ("RMB"), to BEE Investors in terms of the B-BBEE equity
transaction concluded during 2012, Pioneer Foods (Pty) Ltd provided RMB with a guarantee amounting to R100 million.
7. Future capital commitments
Capital expenditure approved by the Board and contracted for amounts to R496.2 million (30 September 2014: R299.8 million). Capital expenditure approved by the Board,
but not contracted for yet, amounts to R206.5 million (30 September 2014: R351.6 million).
8. Non-current assets held for sale and discontinued operations
8.1 Quantum Foods
The assets and liabilities related to the Quantum Foods segment, which include the equity interests held in the wholly owned subsidiaries Quantum Foods Holdings Ltd,
Quantum Foods (Pty) Ltd, Philadelphia Chick Breeders (Pty) Ltd, Lohmann Breeders SA (Pty) Ltd, Bokomo Uganda (Pty) Ltd, Quantum Foods Zambia Ltd and Bokomo Zambia Ltd
(included with Quantum Foods until 31 July 2014), have been presented as an "asset held for sale" and as "discontinued operations" in terms of IFRS 5 - Non-current
Assets Held for Sale and Discontinued Operations for the year ended 30 September 2014 and the six months ended 31 March 2014 following the approval of the Board in
September 2013 to restructure the Company's interest in the Quantum Foods segment.
Shareholders were advised on SENS on 5 September 2014 and 18 September 2014 that the Board resolved to proceed with the unbundling of its interest in Quantum Foods and
to list Quantum Foods as a separate entity on the JSE. Quantum Foods was subsequently listed on the JSE on 6 October 2014.
The unbundling was accounted for as a dividend in specie at fair value in accordance with IFRIC 17 - Distributions of Non-cash Assets to Owners. IFRIC 17 requires
distributions within its scope to be measured at the fair value of the assets to be distributed at the date when the dividend is appropriately authorised and is no
longer at the entity's discretion. Consequently, an amount of R1,242.2 million, representing the fair value of the interest in Quantum Foods attributable to external
shareholders, was accounted for as a dividend payable to shareholders at 30 September 2014. Refer to Note 9 for the methods and assumptions used to determine the fair
value.
A profit of R92.1 million was recognised on the date of unbundling representing the difference between the carrying amount of the disposal group and the fair value of
the dividend in specie. The profit has been included in the line item "Items of a capital nature" for discontinued operations in the statement of comprehensive income
for the six months ended 31 March 2015.
Loss on the disposal of Quantum Foods shares
A wholly owned subsidiary, the management share incentive trust, the Pioneer Foods Broad-Based BEE Trust and the consolidated B-BBEE equity transaction participants of
Pioneer Food Group Ltd, collectively received 47,783,918 shares in Quantum Foods Holdings Ltd as part of the unbundling of Quantum Foods Holdings Ltd due to their
shareholding in Pioneer Food Group Ltd. The shares were initially recognised at the fair value on the date of unbundling. During December 2014, 29,692,257 of these
shares were sold at a loss of R109.9 million (before income tax). The loss has been included in the line item "Items of a capital nature" for discontinued operations
in the statement of comprehensive income for the six months ended 31 March 2015.
Impairment of Quantum Foods shares
The remaining 18,091,661 shares held by the B-BBEE equity transaction participants are accounted for as available-for-sale financial assets. As at 31 March 2015, the
market value of the Quantum Foods Holdings Ltd shares was significantly lower than the cost price (fair value as at 6 October 2014). Consequently an impairment loss of
R50.6 million has been recognised. The loss has been included in the line item "Items of a capital nature" for continuing operations in the statement of comprehensive
income for the six months ended 31 March 2015.
Unaudited Unaudited Audited
31 March 31 March 30 September
2015 2014 2014
R'm R'm R'm
Assets of the disposal group classified as held for sale:
Property, plant and equipment - 1 052.3 1 075.5
Intangible assets - - 7.2
Investment in associates - 5.9 6.1
Inventories - 227.7 232.5
Biological assets - 291.2 292.4
Trade and other receivables - 362.4 343.5
Deferred income tax - 4.3 3.1
Derivative financial instruments - - 0.9
Current income tax - 0.5 -
Cash and cash equivalents - 109.7 105.6
- 2 054.0 2 066.8
Unaudited Unaudited Audited
31 March 31 March 30 September
2015 2014 2014
R'm R'm R'm
Liabilities of the disposal group classified as held
for sale:
Deferred income tax - 186.9 195.7
Provision for other liabilities and charges - 9.3 15.6
Trade and other payables - 286.2 355.3
Derivative financial instruments - 1.5 -
Current income tax - 1.2 1.5
- 485.1 568.1
Hedging reserve - - 0.2
Currency translation reserve - (3.2) 7.3
The results of discontinued operations and the results recognised on the remeasurement of the Quantum Foods disposal group are as follows:
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
31 March 31 March 30 September
2015 2014 2014
R'm R'm R'm
Revenue - 1 789.8 3 591.3
Operating profit before items of a capital nature - 66.1 90.8
Items of a capital nature (17.9) 1.0 1.7
Investment income - 1.2 3.6
Finance costs - - (0.7)
Share of profit of associated companies - - 0.6
(Loss)/profit before income tax (17.9) 68.3 96.0
Income tax (17.8) (15.4) (20.7)
(Loss)/profit after income tax (35.7) 52.9 75.3
Loss after income tax recognised on the remeasurement
of assets of the disposal group - (57.1) (57.1)
Before income tax - (77.7) (77.7)
Income tax - 20.6 20.6
(Loss)/profit for the period from discontinued operations (35.7) (4.2) 18.2
Other comprehensive income/(loss) for the period from
discontinued operations
Fair value adjustments to cash flow hedging reserve
For the period - - 0.3
Deferred income tax effect - - (0.1)
Currency translation differences - (26.1) (15.5)
Total comprehensive (loss)/profit for the period from
discontinued operations (35.7) (30.3) 2.9
Cash flows of the disposal group classified as held
for sale:
Net cash flow from operating activities - 224.3 93.0
Net cash flow from investment activities - (20.1) (37.8)
Net cash flow from financing activities - (119.1) 25.8
Net cash, cash equivalents and bank overdrafts on
unbundling of Quantum Foods (105.6) - -
Net (decrease)/increase in cash, cash equivalents and bank
overdrafts (105.6) 85.1 81.0
Net cash, cash equivalents and bank overdrafts at
beginning of period 105.6 24.6 24.6
Net cash, cash equivalents and bank overdrafts at end
of period - 109.7 105.6
8.2 Clayville biscuits plant
Specific assets and liabilities related to the Clayville biscuits plant have been presented as an "asset held for sale" in terms of IFRS 5 - Non-current Assets Held
for Sale and Discontinued Operations for the six months ended 31 March 2015 following the conclusion of an agreement to dispose of certain assets related to the
biscuit plant to National Brands Ltd for a purchase consideration of approximately R65 million. Refer to note 5.2 for more information in this regard.
The assets and liabilities attributable to this disposal group are as follows:
Unaudited
31 March
2015
R'm
Assets of the disposal group classified as held for sale:
Property, plant and equipment 50.6
Inventories 2.2
52.8
Liabilities of the disposal group classified as held for sale:
Trade and other payables 1.6
1.6
9. Fair value measurement
The information below analyses assets and liabilities that are carried at fair value at each reporting period, by level of hierarchy as required by IFRS 7 and IFRS 13.
Unaudited fair value measurements at
31 March 2015 using:
Quoted prices
in active
markets Significant
for identical other Significant
assets and observable unobservable
liabilities input input
(Level 1) (Level 2) (Level 3)
R'm R'm R'm
Assets measured at fair value
Available-for-sale financial assets
- Listed securities 145.6 - -
- Unlisted securities - 1.4 -
Derivative financial instruments
- Foreign exchange contracts - 14.1 -
Biological assets
- Vineyards - - 16.0
Liabilities measured at fair value
Derivative financial instruments
- Foreign exchange contracts - 17.5 -
Unaudited fair value measurements at
31 March 2014 using:
Quoted prices
in active
markets Significant
for identical other Significant
assets and observable unobservable
liabilities input input
(Level 1) (Level 2) (Level 3)
R'm R'm R'm
Assets measured at fair value
Available-for-sale financial assets
- Listed securities 64.2 - -
- Unlisted securities - 0.7 -
Derivative financial instruments
- Foreign exchange contracts - 9.5 -
Biological assets
- Vineyards - - 16.0
Assets of disposal group classified as held for sale - - 2 054.0
Liabilities measured at fair value
Derivative financial instruments
- Foreign exchange contracts - 7.6 -
Liabilities of disposal group classified as held for sale - - 485.1
Audited fair value measurements at
30 September 2014 using:
Quoted prices
in active
markets Significant
for identical other Significant
assets and observable unobservable
liabilities input input
(Level 1) (Level 2) (Level 3)
R'm R'm R'm
Assets measured at fair value
Available-for-sale financial assets
- Listed securities 68.6 - -
- Unlisted securities - 1.4 -
Derivative financial instruments
- Foreign exchange contracts - 14.3 -
- Embedded derivative - 0.7 -
Biological assets
- Vineyards - - 16.0
Assets of disposal group classified as held for sale - - 2 066.8
Liabilities measured at fair value
Derivative financial instruments
- Foreign exchange contracts - 9.7 -
Liabilities of disposal group classified as held for sale - - 568.1
Dividend in specie - unbundling of Quantum Foods - - 1 242.2
There have been no transfers between level one, two or three during the period, nor were there any significant changes to the valuation techniques and inputs used to
determine fair values.
Financial assets and liabilities
The fair values of financial instruments traded in active markets (such as publicly traded derivatives and available-for-sale securities) are based on quoted market
prices at the reporting date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group,
pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm's length basis. The quoted market price
used for financial assets held by the Group is the current bid price. The appropriate quoted market price for financial liabilities is the current ask price. These
instruments are included in level 1. Instruments included in level 1 comprise primarily JSE-listed equity investments classified as available-for-sale.
The fair values of financial instruments that are not traded in an active market are determined by using valuation techniques. These valuation techniques maximise the
use of observable market data where it is available and rely as little as possible on entity-specific estimates. If all significant input required to fair value an
instrument were observable, the instrument is included in level 2.
The Group uses a variety of methods that makes assumptions that are based on market conditions existing at the reporting date. Quoted market prices or dealer quotes
for similar instruments are used for long-term debt instruments. Other techniques, such as estimated discounted cash flows, are used to determine the fair value for
the remaining financial instruments. The fair value of foreign exchange contracts is determined using quoted forward exchange rates at the reporting date.
The carrying amounts of cash, trade and other receivables less provision for impairment, trade and other payables and short-term borrowings are assumed to approximate
their fair values due to the short term until maturity of these assets and liabilities.
The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that
is available to the Group for similar financial instruments. The fair values of long-term investments and long-term borrowings are not materially different from the
carrying amounts.
Biological assets
The fair value of vineyards is calculated as the future expected net cash flows from the asset, discounted at a current market-determined rate, over the remaining
useful lives of the vineyards.
Assets and liabilities of disposal group classified as held for sale
The assets and liabilities related to the Quantum Foods segment have been presented as an "asset held for sale" and as "discontinued operations" in terms of IFRS 5 -
Non-current Assets Held for Sale and Discontinued Operations for the year ended 30 September 2014 and for the six months ended 31 March 2014. Refer to note 8 for
further detail.
In terms of IFRS 5, an entity shall measure a non-current disposal group classified as held for sale at the lower of its carrying amount and fair value less costs to
sell. The fair value less costs to sell was determined using the average results of an income valuation approach and different scenarios for a market valuation
approach.
In terms of the income approach, the discounted cash flow method is used to determine the present value of projected future cash flows for a cash-generating unit
("CGU") using a rate of return that is commensurate with the risk associated with the business and the time value of money. This approach requires assumptions about
revenue growth rates, operating margins, tax rates and discount rates. The assumptions regarding growth are based on the CGUs' internal forecasts for revenue,
operating margins and cash flows for a period of five years and by application of a perpetual long-term growth rate thereafter. Past experience, economic trends as
well as market and industry trends were taken into consideration. The discount rate used to arrive at the present value of future cash flows represents the weighted
average cost of capital ("WACC") for comparable companies operating in similar industries as the applicable CGU, based on publicly available information. The WACC is
an estimate of the overall required rate of return on an investment for both debt and equity owners. Its determination requires separate analysis of the cost of equity
and debt and considers a risk premium based on an assessment of risks related to the projected cash flows of the CGU.
The South African businesses consist of a number of CGUs. Bokomo Uganda (Pty) Ltd and Quantum Foods Zambia Ltd are two separate CGUs. The market approach assumes that
companies operating in the same industry will share similar characteristics and that company values will correlate to these characteristics. The publicly available
financial information of similar listed entities have been used to estimate two scenarios of fair value based on EBITDA multiples of these benchmark entities.
The key assumptions used in performing the impairment tests, by CGU, were as follows:
30 September 31 March
Discount rate 2014 2014
South Africa 17.4% 17.0%
Uganda 27.1% 28.6%
Zambia 25.1% 23.1%
Perpetual growth rate
South Africa 5.5% 5.5%
Uganda 5.5% 5.5%
Zambia 6.5% 6.5%
Income tax rate
South Africa 28.0% 28.0%
Uganda 30.0% 30.0%
Zambia 12.5% 12.5%
10. Business combination
During the period under review, the following business was acquired and all assets and liabilities relating to the acquisition have been accounted for on an
acquisition basis:
Unaudited
31 March
2015
Food Concepts Pioneer Ltd - 50.1% (Nigeria - 1 March 2015)
Purchase consideration - settled in cash (R'm) 81.3
Reason for acquisition
To create an in-market presence for Pioneer Foods in Nigeria via a low-risk entry strategy.
Reason for goodwill recognised on acquisition
Pioneer Foods expects to leverage the business's existing infrastructure as a lower risk, route-to-market opportunity to expand its range of products in the Nigerian
market. Goodwill arising on this acquisition is therefore attributable to future benefits expected from this venture.
The assets and liabilities acquired of this business can be summarised as follows:
Carrying Fair
value value
R'm R'm
Property, plant and equipment 79.6 79.6
Intangible assets - 22.6
Goodwill - 31.1
Inventories 1.3 1.3
Trade receivables 5.1 5.1
Cash and cash equivalents 79.8 79.8
Trade and other payables (28.3) (28.3)
Other current liabilities (9.5) (9.5)
Borrowings (45.3) (45.3)
Deferred income tax 1.6 (5.2)
Total 84.3 131.2
Less: Non-controlling interest (49.9)
Purchase consideration - settled in cash (R'm) 81.3
At 31 March 2015, the fair values of the acquired assets, liabilities and goodwill for this business
have been determined on a provisional basis as this business was acquired in close proximity
to the reporting date, pending finalisation of the post-acquisition review of the fair values of the
acquired net assets.
The contribution of this business since acquisition (R'm):
Revenue 4.2
Operating loss before finance cost and income tax 0.8
The pro forma contribution of this business assuming the acquisition was at the beginning of the period (R'm):
Revenue 25.2
Operating loss before finance cost and income tax 4.8
11. Restatement of segment information for comparative periods
Segment revenue and segment results were restated to:
- Reflect the operations of all exports, other than to BLNS countries, as well as all the operations of foreign operations to a new segment, International; and
- Allocate all corporate results to the operating segments, except for the B-BBEE Phase I share-based payment charge, the results of the ultimate holding company
and the insurance captive legal entity, BEE socio-economic and enterprise development costs and group legal costs.
Unaudited
Six months Audited
ended Year ended
31 March 30 September
2014 2014
R'm R'm
(Decrease)/increase in revenue
Essential Foods (148.9) (275.6)
Groceries: Cereals and other (formerly Bokomo Foods) (652.7) (1 366.5)
Groceries: Beverages (formerly Ceres Beverages) (421.9) (929.5)
International 1 098.0 2 273.6
Internal revenue reallocated to segments 125.5 298.0
Total - -
(Decrease)/increase in operating profit before items of a capital nature
Essential Foods (49.4) (99.4)
Groceries: Cereals and other (formerly Bokomo Foods) (98.9) (186.0)
Groceries: Beverages (formerly Ceres Beverages) (105.2) (204.0)
International 185.1 363.4
Other 68.4 126.0
Total - -
12. Preparation of financial statements
These unaudited condensed consolidated interim financial statements have been prepared under the supervision of CJ Hess, CA(SA), Group financial director.
13. Audit
These results have not been audited or reviewed by the external auditors.
Directors
ZL Combi (Chairman), PM Roux (CEO)*, CJ Hess*, N Celliers, MM du Toit, Prof ASM Karaan, NS Mjoli-Mncube, G Pretorius, LP Retief, AH Sangqu (* Executive)
Company secretary
J Jacobs
E-mail: Jay-Ann.Jacobs@pioneerfoods.co.za
Registered address
Glacier Place, 1 Sportica Crescent, Tyger Valley, 7530, South Africa
Tel: 021 974 4000 Fax: 086 407 0044
E-mail: info@pioneerfoods.co.za
Transfer secretaries
Computershare Investor Services (Pty) Ltd, PO Box 61051, Marshalltown, 2107, South Africa Tel: 011 370 5000 Fax: 011 688 5209
Sponsor
PSG Capital (Pty) Ltd, PO Box 7403, Stellenbosch, 7599, South Africa
Tel: 021 887 9602 Fax: 021 887 9624
Date: 18/05/2015 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 
