Wrap Text
Unaudited group financial results and cash dividend declaration
RCL Foods Limited
(Incorporated in the Republic of South Africa)
Registration number: 1966/004972/06
JSE share code: RCL
ISIN: ZAE000179438
RCL Foods Limited ("RCL Foods" or "the Company")
UNAUDITED GROUP
FINANCIAL RESULTS
AND CASH DIVIDEND
DECLARATION
for the six months ended
31 December 2015
FINANCIAL HIGHLIGHTS
for the six months ended 31 December 2015
REVENUE
R12,9 billion up 7,0%
EBITDA
R1,1 billion down 5,0%
HEADLINE EARNINGS FROM CONTINUING OPERATIONS
R751,8 million up 25,0%
HEADLINE EARNINGS PER SHARE FROM CONTINUING OPERATIONS
87,2 cents up 24,5%
INTERIM DIVIDEND PER SHARE
15,0 cents
CASH GENERATED BY OPERATIONS
R372,7 million down 39,6%
KEY FEATURES
- Recent acquisitions and integration initiatives have created a substantially more balanced
portfolio
- Strong growth in the Consumer division for all business units except the Chicken business unit
- Oversupply in the poultry industry impacted the Chicken business unit's profitability
- Solid performances from the Logistics division and Animal Feed business unit
- Adverse impact of the drought on the Sugar business unit, affecting production volumes
and crop valuations
- Progress in the Millbake business unit, but issues not yet fully resolved
- Results include a positive pre-tax IAS 39 adjustment of R43,1 million (H1 2015: R 110,6 million)
- Results include a release of R163,3 million relating to a provision raised as part of the
Foodcorp acquisition for uncertain tax positions.
ABRIDGED CONSOLIDATED UNAUDITED RESULTS
for the six months ended 31 December 2015
FINANCIAL HIGHLIGHTS
Six months Six months
31 December 31 December %
2015 2014 change
Revenue (Rbillion) 12,9 12,0 Up 7,0
EBITDA (Rbillion) 1,1 1,2 Down 5,0
Headline earnings from continuing operations (Rmillion) 751,8 601,6 Up 25,0
Headline earnings per share from continuing operations (cents) 87,2 70,0 Up 24,5
Interim dividend per share (cents) 15,0 15,0
Cash generated by operations (Rmillion) 373,0 616,7 Down 39,6
INTRODUCTION
RCL FOODS is reporting on its new segments for the first time in this set of results. These segments are "Consumer"
(which includes the Chicken, Grocery, Beverages, Pies and Speciality business units) and "Sugar & Milling" (which includes
the Sugar, Animal Feed and Millbake business units), while the Logistics division (Vector) continues to operate as a stand-
alone business, ultimately responsible for Group operations' route to market.
RCL FOODS reported headline earnings from continuing operations for the six months ended 31 December 2015 of
R751,8 million (H1 2015: R601,6 million), which translated into headline earnings per share of 87,2 cents
(H1 2015: 70,0 cents). Excluding the once-off tax provision release, headline earnings and headline earnings per share from
continuing operations is R588,5 million and 68,3 cents, a decline of 2,2% and 2,5% respectively. The Board has declared
an interim dividend of 15,0 cents per share (H1 2015: 15,0 cents). Strong performances were recorded in the Grocery, Pies,
Speciality, Beverages, Animal Feed and Logistics businesses, but the Sugar and Chicken businesses remained under
pressure.
Significant individual financial impacts in the current period include:
- The release of a R163,3 million provision for uncertain tax positions raised in terms of IFRS 3 (Business Combinations)
as part of the Foodcorp acquisition. This matter has now been finalised with the South African Revenue Service and
consequently the income tax expense for the period has been reduced by R163,3 million;
- A substantially lower IAS 39 adjustment, relating to the Group's Animal Feed raw material procurement strategy, which
has added R43,1 million to profits for the current period relative to R110, 6 million in the comparable period. These
movements are attributable to rising commodity prices and a depreciating rand exchange rate which gave rise to
positive mark-to-market adjustments;
- A year-on-year reduction in the valuation of biological assets (sugar cane crop) as a result of the drought – lower
yields, expectations of further drought conditions and damage to current crops (R19,0 million relating the Sugar
business unit and a R15,8 million impact on the Group's share of profits of associates);
- Net finance costs of R133,7 million for the current period, relative to R171,4 million for the comparable period.
The positive movement is related to the replacement of the R4,5 billion bridging loan facility with a more appropriate
debt structure in 2015 and a positive mark–to-market valuation of R34,2 million relating to the interest rate hedges
taken out on the debt package; and
- Industrial action in the Logistics and Consumer division reduced profits by R40,0 million in the comparable period,
which was not repeated in the period under review.
The single biggest operational feature of the period being reported on has been the severe drought which has ravaged
large parts of South Africa and surrounding areas. The drought has had a pervasive impact on the business during this
period. The increase in commodity input prices has been exacerbated by the substantial decline in the value of the
rand, which more than off-set any benefit that may have been gained from the lower international oil price. In addition,
consumers remain under pressure with lower disposable income, increasing debt levels and rising interest rates, as well as
high unemployment.
ABRIDGED CONSOLIDATED UNAUDITED RESULTS
for the six months ended 31 December 2015 continued
STRATEGIC PROGRESS
The recent integration of the four businesses into "One Company" has been critically important from a strategic
perspective. It has created a simplified structure for a diversified business with a well-balanced portfolio across the food
spectrum. The Group has remained steadfast in its focus on implementing the strategic imperatives notwithstanding the
volatile operating conditions.
RCL FOODS has committed dedicated senior resources to the Transformation Management Office (TMO) to drive
integration projects associated with the new business structure. TMO's focus is to prioritise projects that deliver maximum
benefit, leveraging synergies across the divisions and implementation of the detailed structures, processes and systems.
There are currently 15 key business transformation programmes in place, covering compliance, business legal structure and
business enablement. Significant benefits have already been realised as set out below:
- The combination of the Consumer businesses and moving the former Foodcorp brands into an enhanced and focused
team is already showing signs of delivering value. This can be seen in increased sales and market share and in the
advances in the mayonnaise, pet food and peanut butter categories. Additional benefit is becoming evident from an
innovation and improved customer management point of view and from the ability to better identify value-enhancing
opportunities;
- Opportunities in Quick Service Restaurants (QSRs) to extend the basket and provide a range of new products to
these strategic customers have been realised. These include mayonnaise, sauces, salad dressings, cakes
and desserts among others;
- In February 2016 a single RCL FOODS customer team was established. This team will represent all consumer brands
across both the Consumer and Sugar & Milling divisions, effectively presenting "one face" to our retail and wholesale
customers;
- The integration of management teams and the supply chain has generated cost savings and improved efficiencies;
- Rainbow's chicken is now being used in a new range of pies;
- The Animal Feed business unit has increased the utilisation of Millbake by-products such as bran;
- The merger of Epol and Molatek has created one of the largest feed companies in the country, substantially increasing
the sales footprint and product offering. It has also allowed the rationalisation and related cost benefit of Epol and
Molatek sales and marketing effort;
- Centralised strategic sourcing continues to generate very real cost savings across the entire Group; and
- Logistics will ultimately manage the route to market for the entire Group and has been improving market access and
reducing costs across the Group's supply chain, while assimilating a sales and merchandising team in excess of 1 000
staff dedicated to RCL FOODS' business units.
RCL FOODS FINANCIAL REVIEW
Income statement
RCL FOODS' revenue for the six months to December 2015 increased by 7,0% to R12,9 billion (H1 2015: R12,0 billion).
EBITDA declined by 5,0% to R1 145,8 million from R1 206,1 million, with the associated margin decreasing from 10,0%
to 8,9%.
The table below depicts EBITDA from a statutory perspective and adjusted for unrealised gains and losses on financial
instruments (pre-IAS 39) used in Animal Feed's raw material procurement strategy. Reporting the financial effects of
certain financial instruments used in the feed procurement strategy in terms of IAS 39 introduces volatility to the Group's
financial results. For the period under review, the pre-tax impact on the Group's results of these unrealised positions is a
positive impact of R43,1 million (H1 2015: R110,6 million), being largely related to the increase in the maize price and rand
depreciation.
Six months Six months
31 December 31 December %
2015 2014 change
EBITDA
– Statutory (Rmillion) 1 145,8 1 206,1 (5,0)
– Pre-IAS 39 (Rmillion) 1 102,7 1 095,4 0,7
EBITDA margin
– Statutory (%) 8,9 10,0 (1,1)
– Pre-IAS 39 (%) 8,6 9,1 (0,5)
The Consumer division achieved strong results in all business units excluding Chicken, resulting in the EBITDA for the
period growing by 8,8% to R501,6 million (H1 2015: R461,2 million) and a margin of 7,1% (H1 2015: 7,5%).
Sugar & Milling's EBITDA decreased by 10,4% to R472,9 million (H1 2015: R527,9 million) with a resulting margin of 6,2%
(H1 2015: 7,2%). Operating profit was impacted by the negative movement in the biological asset fair value adjustment
versus the comparable period of R19,0 million relating to the effect of the drought on crop valuations as well as lower
production volumes.
EBITDA for the Logistics division increased by 22,0% to R134,9 million (H1 2015: R110,5 million) with a margin of 13,6%
(H1 2015: 11,2%), despite modest growth in revenue. The comparative numbers were negatively impacted by R20,0 million
of costs related to labour strikes.
Statement of financial position
Investment in associates has increased largely due to the additional investment of R61,5 million in Hudani Manji Holdings
Limited, a poultry producer in Uganda. The purchase price allocation exercise has not yet been finalised.
The reduction in cash and cash equivalents by R1 118,0 million largely relates to the reducing of the debt package by
R750,0 million and higher working capital requirements.
As reported at June 2015, the majority of the interest rate exposure on the debt package was fixed for the first 24 months.
During the period under review, RCL FOODS hedged the interest rates on R1,5 billion of the R3,35 billion debt package
relating to years 3 and 4. These hedges are proving valuable in the current increasing interest rate environment.
Following the refinancing process in February 2015, the Group's debt is now held in the Group's treasury company,
which forms part of the unallocated segment, which explains the significant movement in segmental assets and
liabilities from the comparable period.
Cash flow and working capital
The Group's working capital requirement seasonally peaks over the December trading period. It increased by 15,4%
to R801,8 million mainly as a result of cost push from a range of commodities and higher stock holdings as well as an
increase in debtors as a result of higher sales.
Net finance costs per the income statement are lower than net finance costs paid due to the positive mark–to-market
valuation of R34,2 million relating to the interest rate hedges which have no cash flow impact.
Cash from investing activities was distorted in the previous period as a result of a R424,0 million inflow from a money
market account that was closed. In order to realign its cash resources, the Group disinvested from the money market
account which, due to its maturity profile, was not classified as cash and cash equivalents.
Return on equity, which is calculated on a rolling 12-month basis, increased to 9,5% (H1 2015: 3,8%).
Capital expenditure
Capital expenditure (excluding intangibles) for the six-month period was R530,0 million (H1 2015: R342,8 million).
Significant spend includes the UHT project at the Beverage business unit, the upgrade to the pet food plant in the Grocery
business unit and the expansion at the Logistics division's Peninsula and Thekwini sites.
An amount of R386,9 million (H1 2015: R147,1 million) has been contracted and committed, but not spent, whilst a further
R254,5 million (H1 2015: R153,3 million) has been approved but not contracted. These projects mainly relate to continued
investment in the projects above.
REVIEW OF OPERATIONS
CONSUMER DIVISION
The Consumer division grew revenue by 9,0% to R6,7 billion (H1 2015: R6,2 billion). EBITDA for the division grew by 8,8%
to R501,6 million (H1 2015: R461,2 million) but was characterised by very different results from Chicken (EBITDA down
15,3%), relative to the rest of the business units (EBITDA up 37,0%). A 30,0% higher investment in the brands and strong
operational performances translated into pleasing market share gains for most of the business units. This was achieved
despite weak demand and aggressive competitor activity. The Consumer division has made use of ask'd, an independent
company that specialises in providing benchmarks that measure industry growth and trends, company performance and
consumer dynamics for a defined group, representing the majority of food manufactures. For the six months ended
31 December 2015 the Consumer division's sales volumes, excluding the chicken category, grew by 18,4% whilst the ask'd basket sales
volumes declined by 2,0%.
The division had a strong focus on cost control, synergies, as well as on appropriate pricing strategies targeted to recover
cost pressure whilst growing market share. Chicken managed its costs admirably, given the lower bird volumes as a
consequence of constrained QSR demand.
Chicken
The Chicken business unit delivered a first half EBITDA result of R210,8 million (H1 2015: R249,0 million), down 15,3% on
the comparable period. Within Chicken, gains were made in QSR share while chilled processed meat markets were more
competitive as consumers traded down in tough times.
The market remains massively oversupplied as a result of local production as well as dumping. The new model in the
Chicken business strives to reduce exposure to commodity based lines by growing QSR volumes while retaining/reducing
bird numbers. During this period, QSR growth has been muted for some customers, which required that overall bird
numbers be reduced further to limit additional consequential volume.
Chicken has been successful in reducing its cost base to mitigate against the lower revenue, despite the difficulties
of maintaining operational efficiencies in the face of lower volume throughput. The business has achieved very good
agriculture performance which assisted with the cost management efforts. The sharp increase in the price of yellow maize
and other soft commodities used in poultry feed was to a large extent effectively hedged in this reporting period, but will
affect feed cost significantly going forward.
The poultry industry remains exposed to two critical issues, those being imports including dumping of leg quarters and
the brining injection cap proposed by government.
- Impact of the African Growth and Opportunity Act (AGOA) – The negotiations around AGOA have culminated in,
amongst others, an agreement to allow the importation, free of anti-dumping duty, of 65 000 tons of chicken from the
United States. The AGOA agreement and the risk of associated dumping exacerbates the already substantial dumped
product that is finding its way into the market and which is disrupting pricing and supply dynamics in the poultry
industry.
- Brining – RCL FOODS continues to support the concept of a brining injection cap as well as the introduction of new
legislation as proposed by The Department of Agriculture, Forestry and Fisheries. These initiatives should help to
ensure a level playing field that will ultimately protect consumers and the future of the South African chicken industry.
RCL FOODS looks forward to a speedy resolution of this important matter.
Groceries (Grocery, Beverages, Pies and Speciality)
Notwithstanding a very competitive environment, the remaining business units achieved an outstanding performance
driven by a revised pricing strategy and well executed marketing and sales plans. EBITDA was R290,7 million
(H1 2015: R212,2 million), up 37,0% on the comparable period.
An enhanced focus on basic marketing and sales strategy has seen the Grocery business unit achieve robust volume
growth and market share gains in a range of key product categories, with mayonnaise overtaking competitors to become
the market leader in its category during this period. A strong focus on costs allowed the business unit to reduce its R/ton
operational cost base. As mentioned in the strategic section, Grocery has made great strides in offering further innovation
and a range of new products to its respective markets. The new ranges of dressing and spreads that are now produced
for KFC and Chicken Licken are prime examples. Good share gains have been seen in premium pet food, the key growth
sector of pet food, with Canine Cuisine and Ultra Dog growing market share. A sizeable investment in pet food will be
rolled out over the next 18 months. Whilst aggressive competitor activity was experienced in the peanut butter and rusk
categories, Yum Yum peanut butter held market share and Ouma rusks had a record winter season.
The Pies business unit has progressively reduced its cost base, and the focus for the next six months will be directed at
rolling out customer-specific plans, scaling up in-store visibility and introducing new innovation in the product ranges.
The Pie category is showing positive signs of a resurgence and recovery.
A heat wave in most parts of South Africa during December 2015, as well as increased depth of distribution and service
levels has contributed to the strong performance of Mageu No. 1. The Beverage business unit continues to see challenges
from competition given low barriers to entry, however the investment in UHT capability is expected to enhance the
competitive advantage and introduce new consumers to extended offerings.
The winning of QSR business and disciplined cost control in Speciality allowed the business unit to generate an improved
result after excluding the base effect of the R20,0 million strike impact in the comparable period. The Speciality margin
remains below acceptable levels.
SUGAR & MILLING DIVISION
The Sugar & Milling division grew revenue by 3,9% to R7,6 billion (H1 2015: R7,3 billion). Pre-IAS 39 EBITDA declined by
10,4% to R472,9 million (H1 2015: R527,9 million).
Sugar
While the decline in sugar imports as a result of the increased sugar tariff should have been positive for the profits of
South African sugar companies, the ongoing drought has proven to be a significant challenge, impacting production
volumes, yields and crop valuations. RCL FOODS Sugar was less affected than the rest of the industry as its use of
irrigation has largely protected it from the conditions during the first year of the drought. However, the absence of rain
in the Malalane area in recent months and the need to moderate irrigation because of declining dam levels and potential
poor rainfall in the coming months, also influenced its operational performance. The reduction in available cane supply
resulted in the Pongola and Komatipoort mills shutting down earlier than expected. Consequently, sugar production as
well as cane valuations have been impacted during this period. The cane crop decreased by 577 000 tons, resulting in
some 88 000 tons less sugar produced than the comparable period with a negative R19,0 million year-on-year impact
from crop valuations.
As a result of an expected decline in sugar availability in the country, the sugar industry reduced its exports in order to
ensure sufficient sugar for the domestic market. The increased sales in the domestic market significantly changed the mix
of retail, wholesale and industrial business for RCL FOODS Sugar, which put margins under pressure. The South African
Sugar Association (SASA) recovers its costs from industry members through an industrial levy on a R/ton basis. Despite
the Sugar business unit's lower manufacturing volumes, the significantly lower industry crop has resulted in a higher
R/ton charge. This, together with the Sugar business unit's increase in share of South African sugar production, has
resulted in an overall increase in Sugar's share of industry costs. RCL FOODS is currently engaging with SASA and other
millers and growers to review the level and costs of SASA's operations given the current economic and drought conditions.
The results were further impacted by the cost push from higher cane costs, lower throughput and increased energy cost,
resulting in EBITDA declining 29,9% to R163,6 million.
For a number of reasons, Massingir, the greenfield sugar project in Mozambique has been shelved and a R13,0 million final
impairment has been raised.
Animal Feed
The Animal Feed business unit experienced good growth of 5,5% with a pre-IAS 39 EBITDA of R169,9 million (H1 2015:
R161,1 million), and improved margins as a result of a better sales mix. The business unit significantly reduced exposure to
"pure commodity" segments of the market and increased its focus on the higher margin horse and game sector, where it
has managed to build a strong brand reputation.
The merging of Epol and Molatek into one Feed business unit with an integrated route to market strategy has been a great
success. The combined, comprehensive range of products is of value to farmers as it meets their entire spectrum of feed
requirements. Animal Feed has become a more resilient business with a diversified product range, customer profile and
species spread.
Millbake (Milling & Baking)
The Milling and Baking businesses were combined during the previous financial year recognising their highly integrated
nature. Millbake operates in a highly competitive market, made more difficult with wheat prices 23,5% higher since the
start of the financial period. Notwithstanding these challenges, the business unit achieved growth of 4,3% with an EBITDA
of R139,4 million (H1 2015: R133,6 million). The Sunbake brand was successfully relaunched with a new packaging design
positively received by consumers. Millbake continues to experience significant challenges with the Gauteng bakeries,
however, growth in milling volumes and in rural bakeries has offset this. The optimisation of the Gauteng distribution
network and plans to rectify the problems experienced with the commissioning of the new Gauteng plant are expected
to positively impact results from the last quarter of the financial year. The EBITDA margin remains significantly below
expectations for this business unit.
LOGISTICS DIVISION
Logistics' revenue growth for the six months of 0,8% to R994,5 million (H1 2015: R986,7 million) was subdued, as expected,
after the loss of some larger customers in the current and previous financial year. The business has been successful in
gaining new business to replace most of the lost revenue, although it has come on stream in staggered intervals and
customers are feeling the pressure of the tight economic conditions. Volumes in the Foodservice industry remain resilient.
EBITDA increased 22,0% to R134,9 million (H1 2015: R110,5 million). Excluding the impact of the labour disruptions
(R20,0 million) in the comparable period, EBITDA increased by 3,5%, a pleasing result which indicates sound cost control.
The new leased facility in Port Elizabeth (Coega) was successfully commissioned in July 2015. The expansion of both the
Thekwini and Peninsula depots are progressing well, with elements of the Peninsula expansion already complete; both
facilities are expected to be operational by June 2016.
EQUITY ACCOUNTED INVESTMENTS
Royal Swaziland Sugar Corporation ("RSSC")
RCL FOODS' Sugar holds a 27,4% shareholding in RSSC. RSSC's results for the six months were impacted upon by similar
conditions to the South African operations such that its after-tax contribution to RCL FOODS declined by 25,2% to
R78,3 million (H1 2015: R104,7 million). The Group's share of the negative fair value biological asset valuation was an
after-tax amount of R15,8 million.
Senn Foods Logistics ("Senn Foods")
RCL FOODS acquired 49,0% of Senn Foods in Botswana during 2014. Senn Foods continued to deliver satisfactory results
notwithstanding the challenging economic conditions with an after-tax profit contribution of R3,9 million
(H1 2015: R3,9 million).
Zam Chick Limited ("Zam Chick")
Zam Chick equity accounted earnings increased by 68,2% versus the comparable period to R7,4 million
(H1 2015: R4,4 million). The new breeding operations and hatchery (Zamhatch) were successfully commissioned in the
current period.
CASH DIVIDEND DECLARATION
The directors have resolved to declare an interim gross cash dividend (number 82) of 15,0 cents per share for the six months
ended 31 December 2015 (H1 2015: 15,0 cents).
The dividend has been declared from income reserves. Dividend tax, at the rate of 15,0%, will amount to 2,25 cents per share
and consequently shareholders, who are not exempt from dividend tax, will receive a net dividend amount of 12,75 cents per
share. The issued share capital as at date of declaration is 934 409 058. The company's income tax reference number is
9950019712.
The salient dates of the declaration and payment of the interim dividend are as follows:
Last date to trade ordinary shares cum dividend Friday, 15 April 2016
Ordinary shares trade ex dividend Monday, 18 April 2016
Record date Friday, 22 April 2016
Payment date Monday, 25 April 2016
Share certificates may not be dematerialised or rematerialised between Monday, 18 April 2016 and Friday, 22 April 2016
(both dates inclusive).
PROSPECTS
Key features for the next reporting period will be the pervasive impact of the drought as well as the impact of the weak
rand on soft commodity prices. These two issues are expected to drive food inflation and consequently challenge margins
across most categories. RCL FOODS is in the process of developing proactive pricing strategies designed to protect
market share as far as possible, whilst still recovering cost pressure. However, aggressive competition and a distressed
consumer will make it difficult to fully recover these increases from the market. Negative growth in real consumer
spending is expected over the next 12-18 months.
As a result, synergies, overhead savings and production efficiencies will continue to receive substantial focus in the next
period. In addition, innovation including formats and pack sizes suitable for "hard times" and export opportunities are
being evaluated.
The Chicken business is contemplating a further reduction in production volumes to both mitigate against the exposure to
commodity-based lines and to extend current feed procured positions.
A recovery in sugar production during the next season is dependent on a return to normal rainfall levels. The expectation
of a global production deficit and some recovery in world market prices is encouraging. However, if the drought persists,
sugar availability will remain under pressure, as will the financial results for this
business unit.
The Logistics division expects relatively stable growth going forward as its customer base settles.
RCL FOODS expects that cash flows in the business will remain positive. However, the current capital expenditure
investment programme will be reviewed and tempered as appropriate to the changing market environment. It remains
RCL FOODS' intention to explore opportunities in strategic growth markets in the food sector in South Africa and sub-
Saharan Africa in line with its long-term aspirations.
BASIS OF PREPARATION
The summarised consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards (IFRS), the information required by IAS 34 (Interim Financial Reporting), IFRIC interpretations, SAICA
financial reporting guides and in compliance with the Companies Act of South Africa and the Listings Requirements of
the JSE Limited, under the supervision of the Chief Financial Officer, Robert Field CA(SA). The accounting policies comply
with IFRS and are consistent with those applied in the previous year.
Restatement
As a result of the Group changing its operating structure from the four operating subsidiaries, Foodcorp, Rainbow, TSB
and Vector to three business divisions: Consumer, Sugar & Milling and Logistics, the Group has updated the disclosures of
the previously disclosed segments to align with the information reviewed by the Group's chief operating decision-maker
for the purpose of allocating resources. The prior year segmental reporting has been restated and is presented in the
segmental analysis below.
For and on behalf of the Board
JJ Durand M Dally
Non-executive Chairman Chief Executive Officer
Durban
23 February 2016
Directors: JJ Durand (Non-executive Chairman), M Dally (CEO)*, HJ Carse, RH Field*, PR Louw, NP Mageza, DTV Msibi,
MM Nhlanhla, RV Smither, GM Steyn, GC Zondi. * Executive directors
Company secretary: JMJ Maher
Registration number: 1966/004972/06 JSE share code: RCL ISIN: ZAE000179438
Registered office: RCL FOODS Limited, Six The Boulevard, Westway Office Park, Westville, 3629
Transfer secretaries: Computershare Investor Services Proprietary Limited, 70 Marshall Street, Johannesburg, 2001
Auditors: PricewaterhouseCoopers Inc.
Sponsor: RAND MERCHANT BANK (a division of FirstRand Bank Limited)
Bankers: ABSA Bank Limited, First National Bank, Standard Bank Limited
Website: www.rclfoods.com
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 December 2015
31 December 31 December 30 June
2015 2014 2015
R'000 R'000 R'000
ASSETS
Non-current assets
Property, plant and equipment 5 540 755 5 184 483 5 193 089
Intangible assets 2 591 346 2 689 977 2 640 039
Biological assets 457 652 424 519 549 608
Investment in joint ventures 412 427 407 560 416 626
Investment in associates 533 777 443 248 406 250
Deferred income tax asset 21 488 8 911 8 320
Loans receivable 42 681 1 555 1 555
Goodwill 3 035 823 3 035 823 3 035 823
12 635 949 12 196 076 12 251 310
Current assets
Inventories 2 869 626 2 787 326 2 761 151
Biological assets 540 280 528 100 548 525
Trade and other receivables 3 773 155 3 372 346 3 156 670
Derivative financial instruments 40 393 6 025 10 438
Tax receivable 850 9 923
Loan receivable 5 239
Investment in money market fund 22 000
Cash and cash equivalents 765 150 1 395 950 873 397
Assets of disposal group classified as held for sale 446 754 76 542
7 988 604 8 559 351 7 441 885
Total assets 20 624 553 20 755 427 19 693 195
EQUITY
Capital and reserves 10 662 334 9 900 308 10 113 499
LIABILITIES
Non-current liabilities
Deferred income 3 127 2 854 1 849
Interest-bearing liabilities 3 640 094 339 076 3 511 271
Deferred income tax liabilities 1 454 057 1 438 363 1 458 933
Retirement benefit obligations 189 538 233 399 187 656
Trade and other payables 8 827 8 567
5 286 816 2 022 519 5 168 276
Current liabilities
Trade and other payables 3 904 256 3 889 361 4 184 985
Deferred income 4 178 4 978 5 239
Interest-bearing liabilities 127 948 4 632 512 131 559
Derivative financial instruments 14 208 18 557 16 277
Current income tax liabilities 72 629 51 189 52 680
Bank overdraft 552 184 64 975 2 891
Liabilities of disposal group classified as held for sale 171 028 17 789
4 675 403 8 832 600 4 411 420
Total liabilities 9 962 219 10 855 119 9 579 696
Total equity and liabilities 20 624 553 20 755 427 19 693 195
CONSOLIDATED INCOME STATEMENT
for the six months ended 31 December 2015
Six months Six months Year ended
31 December 31 December 30 June
2015 2014 2015
Continuing operations R'000 R'000 R'000
Revenue 12 875 309 12 029 301 23 428 206
Operating profit before depreciation, amortisation and impairment
(EBITDA) 1 145 825 1 206 059 2 224 045
Depreciation, amortisation and impairment (363 410) (339 945) (771 654)
Operating profit 782 415 866 114 1 452 391
Finance costs (143 237) (202 018) (373 607)
Finance income 9 532 30 586 52 056
Share of profits of joint ventures 20 974 18 432 38 004
Share of profit of associates 76 244 104 723 84 178
Profit before tax 745 928 817 837 1 253 022
Income tax expense (29 595) (223 791) (359 160)
Profit after tax from continuing operations 716 333 594 046 893 862
Profit/(loss) for the period from discontinued operation 6 862 (31 905)
Profit for the period 716 333 600 908 861 957
Attributable to:
Equity holders of the company 745 846 612 758 848 121
Non-controlling interests (29 513) (11 850) 13 836
HEADLINE EARNINGS
Continuing operations
Profit for the period attributable to equity holders of the company 745 846 606 140 880 026
Profit on disposal of property, plant and equipment (9 853) (7 624) (3 920)
Loss on disposal of biological assets 6 795
Profit on sale of investment (1 546)
Insurance (gain)/loss on disposal of assets (2 880) 630
Impairment loss 11 906 3 101 89 269
Headline earnings from continuing operations 751 814 601 617 964 459
Discontinued operation
Profit/(loss) for the period attributable to equity holders
of the company 6 618 (31 905)
Loss on disposal of discontinued operation 28 193
Impairment to fair value less cost to sell 11 424
Headline earnings from discontinued operation 6 618 7 712
Earnings per share from continuing and discontinued operations
attributable to equity holders of the company
Continuing operations
Basic earnings per share (cents) 86,5 70,6 102,4
Basic earnings per share – diluted (cents) 86,5 70,4 101,7
Headline earnings per share (cents) 87,2 70,0 112,2
Headline earnings per share – diluted (cents) 87,2 69,8 111,5
Discontinued operation
Basic earnings per share (cents) 0,8 (3,7)
Basic earnings per share – diluted (cents) 0,8 (3,7)
Headline earnings per share (cents) 0,8 0,9
Headline earnings per share – diluted (cents) 0,8 0,9
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 31 December 2015
Six months Six months Year ended
31 December 31 December 30 June
2015 2014 2015
R'000 R'000 R'000
Profit for the period 716 333 600 908 861 957
Other comprehensive income
Items that will not be reclassified to profit and loss
Remeasurement of retirement medical obligations – net of tax (4 299)
Share of associates other comprehensive income 854
Items that may be reclassified subsequently to profit and loss
Cash flow hedges (12 940) 3 505 28 114
Currency translation differences 384 (2 059) (6 129)
Other comprehensive income for the period – net of tax (12 556) 1 446 18 540
Total comprehensive income for the period 703 777 602 354 880 497
Total comprehensive income for the period attributable to:
Equity holders of the company 733 290 614 204 866 661
Non-controlling interests (29 513) (11 850) 13 836
703 777 602 354 880 497
CONSOLIDATED CASH FLOW INFORMATION
for the six months ended 31 December 2015
Six months Six months Year ended
31 December 31 December 30 June
2015 2014 2015
R'000 R'000 R'000
Operating profit 782 415 866 114 1 452 391
Non-cash items 392 443 445 634 462 448
Operating profit before working capital requirements 1 174 858 1 311 748 1 914 839
Working capital requirements (801 821) (695 004) 151 276
Cash generated by operations 373 037 616 744 2 066 115
Net finance cost (161 570) (164 427) (322 558)
Net cash flows from operating activities – discontinued operation 98 069 54 275
Tax paid (180 769) (105 134) (280 896)
Cash available from operating activities 30 698 445 252 1 516 936
Dividend received 33 281 21 948 46 955
Dividends paid (190 545) (172 576) (301 777)
Cash (outflows)/inflows from investing activities – continuing operations (549 758) 47 899 (80 720)
Cash outflows from investing activities – discontinued operation (11 288) (17 510)
Cash inflows/(outflows) from financing activities – continuing operations 18 784 (26 295) (1 320 625)
Cash outflows from financing activities – discontinued operation (682) (1 455)
Net movement in cash and cash equivalents (657 540) 304 258 (158 196)
Cash and cash equivalents at the beginning of the period 870 506 1 026 717 1 026 717
Exchange rate translation 1 985
Cash and cash equivalents at the end of the period 212 966 1 330 975 870 506
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the six months ended 31 December 2015
Common Share- Controlling Non-
Stated Other control based Retained interest controlling
capital reserves reserve payments earnings total interest Total
R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000
Balance at 1 July 2014 9 955 700 2 462 (1 919 832) 330 338 1 005 921 9 374 589 61 697 9 436 286
Profit/(loss) for the period 1 446 612 758 614 204 (11 850) 602 354
Ordinary dividend paid (171 763) (171 763) (813) (172 576)
BEE share-based
payments charge 8 800 8 800 8 800
Employee share option scheme:
Proceeds from shares issued 2 635 2 635 2 635
Value of employee services 22 809 22 809 22 809
Balance at 31 December 2014 9 958 335 3 908 (1 919 832) 361 947 1 446 916 9 851 274 49 034 9 900 308
Profit for the period 235 363 235 363 25 686 261 049
Other comprehensive income
for the period 20 539 (3 445) 17 094 17 094
Ordinary dividend paid (129 200) (129 200) (1) (129 201)
Transfer of non-controlling
interests to retained earnings (4 063) (4 063) 4 063
BEE share-based
payments charge 8 800 8 800 8 800
Employee share option scheme:
Proceeds from shares issued 34 480 34 480 34 480
Value of employee services 20 969 20 969 20 969
Balance at 30 June 2015 9 992 815 24 447 (1 919 832) 391 716 1 545 571 10 034 717 78 782 10 113 499
Profit/(loss) for the period 745 846 745 846 (29 513) 716 333
Other comprehensive income
for the period (12 556) (12 556) (12 556)
Ordinary dividend paid (189 545) (189 545) (1 000) (190 545)
BEE share-based
payments charge 8 800 8 800 8 800
Employee share option scheme:
Proceeds from shares issued 30 979 30 979 30 979
Value of employee services (4 176) (4 176) (4 176)
Balance at 31 December 2015 10 023 794 11 891 (1 919 832) 396 340 2 101 872 10 614 065 48 269 10 662 334
SUPPLEMENTARY INFORMATION
for the six months ended 31 December 2015
Six months Six months Year ended
31 December 31 December 30 June
2015 2014 2015
R'000 R'000 R'000
Capital expenditure contracted and committed 386 903 147 063 461 742
Capital expenditure approved but not contracted 254 480 153 306 460 658
STATISTICS
Statutory ordinary shares in issue (includes BEE shares) (000's) 934 409 929 740 932 325
Ordinary shares in issue for accounting purposes (000's) 863 650 858 981 861 566
Weighted average ordinary shares in issue (000's) 861 837 858 854 859 611
Diluted weighted average ordinary shares in issue (000's) 861 844 861 345 865 355
Net asset value per share (cents) 1 234,6 1 152,6 1 173,9
Ordinary dividends per share:
Interim dividend declared (cents) 15,0 15,0 15,0
Final dividend declared (cents) 22,0
Total dividends (cents) 15,0 15,0 37,0
SEGMENTAL ANALYSIS
for the six months ended 31 December 2015
Restated Restated
Six months Six months Year ended
31 December 31 December 30 June
2015 2014 2015
R'000 R'000 R'000
Revenue 12 875 309 12 029 301 23 428 206
Consumer 6 708 636 6 157 280 12 084 157
Sugar & Milling 7 612 137 7 329 118 14 121 534
Logistics 994 505 986 664 1 883 664
Sales between segments:
Consumer to Sugar & Milling (100 982) (111 325) (213 331)
Sugar & Milling to Consumer (1 790 613) (1 849 301) (3 484 062)
Logistics to Consumer (535 058) (475 750) (950 309)
Logistics to Sugar & Milling (13 316) (7 385) (13 447)
Operating profit before depreciation, amortisation and impairment
(EBITDA) – Pre IAS 39 1 102 712 1 095 424 2 117 833
Consumer 501 621 461 188 868 806
Sugar & Milling 472 851 527 867 1 047 177
Logistics 134 866 110 538 206 190
Unallocated group costs (6 626) (4 169) (4 340)
IAS 39 adjustment 43 113 110 635 106 212
Operating profit before depreciation, amortisation and impairment
(EBITDA) 1 145 825 1 206 059 2 224 045
Depreciation, amortisation and impairment (363 410) (339 945) (771 654)
Operating profit/(loss)
Consumer 328 911 285 205 513 712
Sugar & Milling 359 167 501 647 790 955
Logistics 101 653 85 310 153 570
Unallocated group costs (7 316) (6 048) (5 846)
Operating profit 782 415 866 114 1 452 391
Finance costs (143 237) (202 018) (373 607)
Finance income 9 532 30 586 52 056
Share of profits of joint ventures
Sugar & Milling 9 736 10 151 19 815
Logistics 3 850 3 890 7 569
Zambian operations 7 388 4 391 10 620
Share of profits of joint ventures 20 974 18 432 38 004
Share of profit of associates
Sugar & Milling 78 312 104 723 84 178
Ugandan Operation (2 068)
Share of profit of associates 76 244 104 723 84 178
Profit before tax 745 928 817 837 1 253 022
ASSETS
Consumer 9 863 288 8 770 694 9 259 852
Sugar & Milling 9 455 520 9 617 979 9 174 697
Logistics 3 227 553 2 739 318 2 609 742
Unallocated segment (treasury and consolidation entries) 290 805 617 319 370 641
Zambian and Ugandan operations 292 416 228 007 230 382
Set-off of inter-segment balances (2 505 029) (1 217 890) (1 952 119)
Total per statement of financial position 20 624 553 20 755 427 19 693 195
LIABILITIE
Consumer 3 220 773 6 284 362 2 908 280
Sugar & Milling 2 575 917 3 709 708 2 793 750
Logistics 2 846 514 1 988 111 2 382 657
Unallocated segment (treasury and consolidation entries) 3 824 044 90 828 3 447 128
Set-off of inter-segment balances (2 505 029) (1 217 890) (1 952 119)
Total per statement of financial position 9 962 219 10 855 119 9 579 696
Date: 23/02/2016 05:01:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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