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Interim unaudited group results for the six months ended 31 August 2015
SOVEREIGN FOOD INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
Registration Number 1995/003990/06
JSE Code: SOV
ISIN Number: ZAE000009221
(‘Sovereign’ or ‘Group’ or ‘Company’)
Interim Unaudited Group Results for the six months ended 31 August 2015
Revenue up 2% to R832 million
EBITDA margin up from 6.0% to 13.4% (10.1% excluding once off credit)
Earnings per share up 222% to 89.6 cents
Headline Earnings per share up 219% to 89.7 cents
Net Asset Value up 16% to 1,001 cents
Net gearing down from 7% to 2%
Consolidated Statement of Financial Position
Audited
Unaudited as at as at
31 August 28 February
2015 2014 2015
R'000 R'000 R'000
Assets
Non-current assets
Property, plant and equipment 806 302 734 693 754 136
Current assets 399 400 375 631 452 559
Inventory 81 737 69 685 71 873
Biological assets 111 915 106 060 111 881
Trade and other receivables 155 931 155 877 197 952
Cash and cash equivalents 49 817 44 009 70 853
Total assets 1 205 702 1 110 324 1 206 695
Equity and liabilities
Share capital and premium 244 596 257 420 252 429
Share based payments 2 712 - 1 459
Retained earnings 499 836 401 929 458 335
Equity 747 144 659 349 712 223
Non current liabilities
Interest bearing borrowings 42 830 66 279 53 554
Deferred taxation 204 069 155 586 177 852
Current liabilities 211 659 229 110 263 066
Current portion of interest bearing
borrowings 23 441 26 279 25 892
Trade, other payables and provisions 188 218 202 831 237 174
Total equity and liabilities 1 205 702 1 110 324 1 206 695
Shares in issue (‘000) 74 662 76 222 75 647
Net asset value (cents) 1 001 865 942
Statement of Comprehensive Income
Unaudited six Audited
months ended year ended
31 August February
2015 2014 2015
R'000 R'000 R'000
Revenue 831 549 814 828 1 648 631
Operating profit before depreciation and
impairments 111 230 49 007 145 204
Depreciation and impairments 17 408 17 598 34 308
Profit before finance costs 93 822 31 409 110 896
Net finance costs 188 1 976 2 793
Profit before taxation 93 634 29 433 108 103
Deferred taxation 26 217 8 241 30 507
Total comprehensive income for the period 67 417 21 192 77 596
Other comprehensive income for the period - - -
Total comprehensive income for the period 67 417 21 192 77 596
Weighted average shares in issue (‘000) 75 219 76 222 76 128
Earnings per share (cents) 89.6 27.8 101.9
Headline earnings per share (cents) 89.7 28.1 103.3
Diluted earnings per share (cents) 89.6 27.8 101.9
Diluted headline earnings per share
(cents) 89.7 28.1 103.3
Reconciliation between earnings and
headline earnings
Earnings after taxation 67 417 21 192 77 596
Reconciling items:
Loss on disposal of property, plant and
equipment 56 341 1 485
Taxation effect (16) (95) (416)
Headline earnings after taxation 67 457 21 438 78 665
Statement of Cash Flows
Unaudited
for the Audited
six months year ended
ended 31 August 28 February
2015 2014 2015
R'000 R'000 R'000
Cash generated from operations 112 539 49 348 147 395
Changes in working capital (16 833) (4 563) (20 304)
Net cash flows from operations 95 706 44 785 127 091
Interest paid (188) (1 976) (2 793)
Net cash flows from operating activities 95 518 42 809 124 298
Net cash flows from investing in
property, plant and equipment (69 902) (16 186) (53 842)
Proceeds on the sale of property, plant
and equipment 272 525 1 637
Net cash flows from shares repurchased (4 945) (15) (16)
Net cash flows from shares purchased for
ESOP (2 888) - (4 990)
Dividends paid (25 916) (11 433) (11 431)
Net cash flows from debt repaid (13 175) (13 062) (26 174)
Net movement in cash and cash equivalents (21 036) 2 638 29 482
Cash and cash equivalents at the
beginning of the period 70 853 41 371 41 371
Cash and cash equivalents at the end of
the period 49 817 44 009 70 853
Statement of Changes in Equity
Share
Capital Share-
and based Retained
premium payments earnings Total
R'000 R'000 R'000 R'000
For the six months ending
31 August 2015
Opening balance 252 429 1 459 458 335 712 223
Shares Repurchased (Treasury
Shares) (4 945) - - (4 945)
Shares Repurchased (held by
Employee Share Ownership Plan
"ESOP") (2 888) - - (2 888)
Total comprehensive income for the
period - - 67 417 67 417
Dividends paid - - (25 916) (25 916)
Net value of employee services - 1 253 - 1 253
Closing balance 244 596 2 712 499 836 747 144
For the six months ending
31 August 2014
Opening balance 257 435 - 392 170 649 605
Shares Repurchased (15) - - (15)
Total comprehensive income for the
period - - 21 192 21 192
Dividends paid - - (11 433) (11 433)
Closing balance 257 420 - 401 929 659 349
Commentary
Operational and financial results
Headline earnings per share for the period under review increased by 219%
to 89.7 cents from 28.1 cents for the prior period. Revenue increased 2%
due to a 10% price increase and 8% lower sales volumes whilst feed costs
decreased by 6% per ton and non-feed costs increased by 6% per unit.
Included in this result is a post-taxation amount of R19.5 million or
26.0c per share in respect of credits received from the local municipality
as settlement for the dispute around electricity tariffs.
The number of birds processed increased by 4% but due to a deterioration
in bird performance, live mass for the period decreased by 4%. This
decrease, together with lower abattoir yields and the increase in value
added product, resulted in sales volumes for the period being down 8%.
The strong market prices experienced in the first quarter of the year
weakened in the second quarter due to high import volumes and lower
international poultry prices. In line with the Group’s strategy to
diversify away from commodity lines towards higher margin product lines,
IQF mixed portions as a percentage of volume sold declined by 3% to 32%
and value added, fresh and weight graded portions in aggregate increased
by 3% to 10%.
Although SAFEX white maize prices increased by 30%, the Group was able to
mitigate this increase by switching to yellow maize as well as buying
forward which resulted in the Group’s landed maize cost decreasing by 7%.
This, together with a weighted 16% decrease in the landed price of soya
beans and soya meal cake, offset by a 16% increase in other feed inputs,
led to the Group’s broiler feed cost decreasing by 6% per ton.
Excluding the R27 million pre-taxation credit received from the local
municipality as settlement for the electricity tariff dispute, non-feed
costs for the period increased by 4%. The Group benefited from the
decrease in the fuel price and has implemented a number of projects in the
six months under review to decrease energy consumption and other major
costs.
Earnings before interest and taxation (EBIT) margin before the once off
electricity credit increased from 3.9% to 8.0%.
The Group generated cash from operating activities of R96 million. R70
million was invested in property, plant and equipment, R26 million went
towards paying dividends and normal debt repayments amounted to R13
million. R5 million was allocated to the re-purchase of 635 000 shares
and R3 million was allocated towards purchasing 350 000 shares in
fulfilment of the Company’s obligations to the Employee Share Ownership
Plan. The net result was a decrease in cash of R21 million.
The Group continued to strengthen its balance sheet and although working
capital as a percentage of annualised revenue increased to 9.7% from 7.9%
over the six months, net gearing was 2% and net asset value increased by
16% to 1 001 cents per share.
Hartebeespoort Abattoir Acquisition
As noted in the SENS announcement on 7 October 2015, the Group is pleased
to report that the Competition Commission approved the acquisition of the
Hartebeespoort Abattoir unconditionally on 6 October 2015 and as a result
the Group will take operational control of the abattoir as from 19 October
2015.
Proposed black economic empowerment (“BEE”) transaction and share
repurchase, proposed amendments to the executive remuneration policy and
introduction of a new non-executive director fee policy; Board
Restructuring and withdrawal of cautionary.
As set out in the SENS announcement published on 12 October 2015, the
Group has announced the following:
• a proposed BEE transaction and share repurchase;
• proposed amendments to the current executive director remuneration
policy;
• the proposed introduction of a new non-executive director fee policy;
• a Board restructuring; and
• a withdrawal of cautionary.
Further information pertaining to the above is detailed in the
announcement published on 12 October 2015.
Industry matters
On 1 October 2015, the Department of Agriculture, Forestry and Fisheries
released a media statement announcing, amongst other regulations, that
brining levels for individual portions would be capped at a maximum level
of 15% and that these brining regulations would be published in the
Government Gazette on 2 October 2015. However, as at the date of this
announcement, nothing has been published in the Government Gazette.
As shown by recent retail growth numbers, the South African consumer
remains under considerable financial pressure and this will have an impact
on disposable income in the near future.
Industry selling prices will be affected by the level of imports which
will be dependent on two issues: the decision to allow up to 65 000 tons
of bone-in-chicken portions from the United States free of anti-dumping
tariffs and continued high levels of imports from European Union and other
countries.
Directorate
Sovereign has implemented a restructuring of its board of directors in
order to implement various strategic and cost savings initiatives. Further
details pertaining to the Board restructuring and the rationale therefore
are set out in the announcement published on 12 October 2015.
Results presentation
A presentation on these Interim Unaudited Results will be available on the
Group’s website at www.sovereignfoods.co.za.
Accounting policies
The unaudited condensed consolidated financial results are prepared in
accordance with the JSE Limited Listings Requirements (‘Listings
Requirements’) and the requirements of the Companies Act No. 71 of 2008 of
South Africa. The Listings Requirements require that the unaudited
financial statements are prepared in accordance with the conceptual
framework, the measurement and recognition requirements of International
Financial Reporting Standards, the SAICA Financial Reporting Guides as
issued by the Accounting Practices Committee, and Financial Reporting
Pronouncements as issued by the Financial Reporting Standards Council and
also, as a minimum, require that they contain the information required by
IAS 34 Interim Financial Reporting. The accounting policies applied in the
preparation of these financial results are consistent with those applied
in the previous annual financial statements apart from the change in
accounting policy noted above. This report was compiled under the
supervision of GL Coley CA (SA), Chief Financial Officer.
Interim dividend
It is the policy of the Company to only declare a final dividend and
therefore no interim dividend is considered for the period under review.
By order of the Board
T Pritchard C Coombes
Non-Executive Chairman Chief Executive Officer
12 October 2015
E-mail: info@sovfoods.co.za
Transfer secretaries: Computershare Investor Services Proprietary Limited,
PO Box 61051, Marshalltown 2107, Gauteng
Company Secretary: ME Hoppe
Sponsor: One Capital
Directorate: T Pritchard (Non-Executive Chairman), C Coombes (CEO), JA
Bester*, GL Coley, CP Davies*
* Non-Executive
These results may be viewed on the Company’s website at
www.sovereignfoods.co.za
Date: 12/10/2015 05:00:00 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.
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