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Voluntary Trading Update
SOVEREIGN FOOD INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
Registration Number 1995/003990/06
JSE Code: SOV
ISIN Number: ZAE000009221
(“Sovereign”)
VOLUNTARY TRADING UPDATE
The board of directors of Sovereign is satisfied that a reasonable degree of certainty exists that
headline earnings per share (“HEPS”) for the year ended 29 February 2016 is expected to be
between 15% lower and 10% higher when compared to the HEPS of 103.3 cents for the year ended
28 February 2015. HEPS for the year ended 29 February 2016 is therefore expected to be between
87.8 cents and 113.7 cents.
Update on Product Mix Strategy and National Sales Footprint
Sovereign and its subsidiaries (collectively, the “Group”) continue to execute on its product mix
strategy and in the second half of the year, sales of value added, fresh and weight graded portions
increased to 11% of sales volume compared to 7% in the comparable prior period. Exports of fully
cooked value added products also continue to increase and although these volumes are still small in
comparison to total sales, the Group has built a solid export sales channel and expects a continued
increase in export volumes over the following three years.
The Hartbeespoort abattoir (“Hartbeespoort”) has increased the Group’s national sales footprint and
in the last quarter of the financial year, 81% of the Group’s total sales volume was from outside the
Eastern Cape.
Update on Hartbeespoort Acquisition
The Group took operational control of Hartbeespoort on 19 October 2015. Currently the abattoir is
processing 280 000 birds per week and, on an annualised basis, this will increase the number of birds
processed by the Group by 31% to approximately 1.2 million birds per week.
The Group’s strategy for Hartbeespoort is that a material proportion of the abattoir’s output will be
fresh portions which are, to a large extent, not affected by the high volume of frozen imports or by any
amendments to the brining regulations. In order to give effect to this strategy, the Group is working
closely with its major customers and has already started supplying a major customer with fresh
portions, initially into the Gauteng market and thereafter on a national basis. The acquisition of
Hartbeespoort has also allowed the Group to enter the “formal” Quick Service Restaurant (“QSR”)
market and it now supplies one of the large national QSR chains.
The Group has started to rationalise its production across both Uitenhage and Hartbeespoort, with
some product lines already being transferred to Hartbeespoort. This in turn will allow for increased
production of higher margin products and better utilisation of the value added facility at Uitenhage.
In addition, Hartbeespoort will allow the Group to decrease its average distribution cost as the abattoir
is in close proximity to its primary market. Hartbeespoort will also decrease the overall sales,
marketing and Group services costs per unit as no significant additional costs will be incurred in these
divisions in the production of the additional volumes from this abattoir.
The financial information on which this voluntary trading update is based has not been reviewed or
reported on by Sovereign’s external auditors. Sovereign’s financial results for the year ended
29 February 2016 will be released on or about 31 May 2016.
Port Elizabeth
6 May 2016
Sponsor
One Capital
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