Wrap Text
Unaudited Condensed Consolidated Interim Financial Statements For The Six Months Ended 31 March 2016
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")
UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 31 MARCH 2016
FINANCIAL HIGHLIGHTS
Continuing operations
REVENUE* +9%
ADJUSTED OPERATING PROFIT** +6%
ADJUSTED OPERATING PROFIT MARGIN** 12.3%
ADJUSTED HEADLINE EARNINGS PER SHARE** +6%
DIVIDEND PER SHARE +11%
SALIENT FEATURES
Continuing operations:
Revenue* R10 010 million +9%
Adjusted operating profit (before items of a capital nature)** R1 236 million +6%
Adjusted headline earnings** R887 million +7%
Adjusted headline earnings per share** 479 cents +6%
Group:
Earnings R1 037 million +90%
Earnings per share 560 cents +89%
Diluted earnings per share 520 cents +90%
Headline earnings R1 030 million +64%
Headline earnings per share 556 cents +63%
Diluted headline earnings per share 517 cents +63%
Net asset value per share 4 096 cents +19%
Interim gross dividend per listed ordinary share (2015: 95 cents) 105 cents +11%
Headline earnings ("HE") is calculated based on Circular 2/2015 issued by the South African Institute of Chartered Accountants.
*Excluding biscuits, Pepsi and Maitland Vinegar in the comparatives.
**HE and operating profit (before items of a capital nature) are adjusted for the impact of the share-based payment income/(charge)
amounting to R142.7 million (2015: (R203.1 million)) on the B-BBEE Phase I transaction on profit or loss due to the volatility of this share-
based payment income/(charge).
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
GROUP OVERVIEW
Pioneer Foods delivered positive results for the six months ended 31 March 2016. An improved portfolio mix and margin expansion in Groceries,
resilient Power Brands and well managed costs contributed to the overall financial outcome in a particularly challenging period.
The trading environment deteriorated given mounting concerns over the South African consumer amidst rising interest rates and significant
inflation resulting from a weaker rand, exacerbated by the severe drought.
Notwithstanding the aforementioned, revenue increased by 9% (excluding biscuits, Pepsi and Maitland Vinegar from the comparative period) to R10.01 billion.
Cost of goods sold increased by 8% to R6.91 billion, given significant raw material price increases, partially offset by manufacturing efficiency
improvements. As a result, gross profit increased by 2% to R3.10 billion, with a gross profit margin of 31.0% (2015: 32.3%).
The adjusted operating profit margin remained constant at the prior year high of 12.3%. Adjusted operating profit increased by 6% from R1 166
million to R1 236 million due to the healthier portfolio mix and stringent cost management.
Essential Foods delivered satisfactory results within bakeries and an excellent performance in rice. Overall profitability was negatively impacted by
volume and adverse raw material dynamics in both maize and wheat. The honed Groceries portfolio performed exceptionally well
generating significant operating leverage resulting in a 35% increase in operating profit from R253 million to R343 million. The International
segment achieved operating profit growth of 16% notwithstanding volume and pricing pressure in certain African export destinations, augmented by
a pleasing fruit result.
Profit from equity accounted joint venture interests, inclusive of Future Life and Food Concepts Pioneer (Nigeria) investments, increased by 25% to R42 million.
Adjusted headline earnings increased by 7% to R887 million. Adjusted headline earnings per share increased by 6% to 479.3 cents.
As at 31 March 2016, a gain of R143 million was recognised on the cash-settled Phase I (2006) B-BBEE transaction, accounted for in terms of IFRS
2. This resulted from the decrease in the Pioneer Foods share price from R195.76 at 30 September 2015 to R139.04 at 31 March 2016. Conversely, a
charge of R203 million was recognised in the comparative six months results due to the increase in the Pioneer Foods share price from R118.00 at
30 September 2014 to R177.85 at 31 March 2015. Headline earnings as a consequence increased by 64% from R627 million to R1 030 million. Headline
earnings per share increased by 63% from 340.8 cps to 556.4 cps with a 1% increase in the weighted average number of shares.
Cash generated from operations increased by 39% to R690 million amidst working capital pressure as a consequence of soft commodity inventories.
Capital expenditure of R349 million is R53 million higher than the comparative period. Major capital expansion projects include the Aeroton
Bakery expansion, the installation of the additional Weet-Bix line, the Bokomo Foods UK plant relocation and the Duens Bakery upgrade. Total
capital expenditure for the year, including replacement capital, is forecasted at R930 million.
On 1 October 2015, Pioneer disposed of its controlling share in Maitland Vinegar. The investment in Future Life became effective on the 1st of
December 2015 and has been accounted for accordingly.
SEGMENTAL REVIEW
Six months ended 31 March 2016
Segmental revenue* Segmental operating profit
2016 % change 2016 % change
R'm R'm
Essential Foods 6 054 8 645 (8)
Groceries 2 508 (5) 343 35
International 1 448 20 252 16
Corporate - - (4) -
Total 10 010 6 1 236 6
*Includes biscuits, Pepsi and Maitland Vinegar in the comparatives
Essential Foods
Revenue increased by 8% to R6.054 billion while operating profit decreased by 8% to R645 million resulting in an operating profit margin of 10.6%
(2015: 12.4%).
The performance of Essential Foods was overwhelmingly impacted by maize. Significant raw material price inflation, as a result of the drought and
rand weakness, resulted in a decline in maize volumes. The White Star brand however maintained its category leadership position.
The bakery business continued to deliver volume growth and operating leverage in a very competitive environment. Planned manufacturing upgrades
stifled volume growth in the Western Cape.
Pleasing volume and market share growth was achieved in the rice business with the resultant improvement in operating profit and margin.
The wheat performance was negatively affected by substantial raw material inflation as a result of the import duty which increased from R156 to
R1 224 per tonne. The duty now constitutes c.25% of the cost of wheat milled. Marginally lower volumes were sold as a consequence.
Pasta and legumes performed satisfactorily.
Stringent cost management across all operations contributed to a better than initially anticipated financial performance.
Groceries
Revenue (excluding biscuits, Pepsi and Maitland Vinegar from the comparative period) increased by 7% to R2 508 million, whilst operating profit
increased by 35% to R343 million.
The operating profit margin expanded by 410 basis points to 13.7% as a result of volume growth, the exit of underperforming categories and
successful fixed cost reduction initiatives.
Core cereal brands were extremely resilient in a competitive environment. The revenue of the cereals portfolio increased by 9%. The Bokomo
cereals portfolio further entrenched its market leadership position. The growth was stimulated by well positioned product offerings to value
conscious consumers. Weet-Bix, Bokomo Corn Flakes and ProNutro delivered pleasing growth.
The Spreads category contributed positively by virtue of stringent cost controls throughout the value chain. Baking aids, desserts, meals and
salads had mixed results, with baking aids and salads showing positive volume growth.
Beverages delivered strong results due to additional brand investment behind core brands. Beverage volumes, excluding Pepsi, increased by 6%
whilst revenue on the same basis, increased by 9%.
The Snacks & Treats category delivered strong operating profit growth as a result of Safari activations, operational efficiencies and the
divestment from biscuits.
International
Revenue increased by 20% to R1 448 million while operating profit increased by 16% to R252 million with an operating profit margin of 17.4% (2015: 18.0%).
Export volumes increased by 7%, with pleasing growth in fruit.
Beverage export volumes and pricing came under pressure on the African continent due to softening currencies. A creditable commercial outcome was
realised notwithstanding the aforementioned.
Bokomo Foods UK delivered excellent growth in volume and revenue. The deliberate relocation of the muesli plant negatively impacted the first
half operating profit. The plant improvements will enable further volume growth and the fulfilment of demand. The devaluation of the rand
further benefited the consolidated results of Bokomo Foods UK.
Joint Ventures
The conservative investment in Food Concepts Pioneer (Nigeria) continued to show progress with its fix and optimise strategy, inclusive of
systems integration, plant improvements and a new management team.
Bokomo Namibia, Bokomo Botswana and Bowmans Ingredients continued to deliver strong results.
The performance of Heinz was somewhat muted as a result of South African competitor dynamics, however the Africa exports continue to show
significant growth, albeit off a low base.
OUTLOOK
The external environment is likely to remain difficult for the near future. That said, Pioneer Foods has a high degree of strategic coherence and
the ability to execute and compete effectively. There is sufficient scope to enhance efficiencies and curtail costs across the value chain. These
will be deployed as a key enabler of revenue growth in a constrained market. Capital projects geared for growth and a strong balance sheet bode
well for a sustainable performance.
DIVIDEND
A gross interim dividend for the six months ended 31 March 2016 of 105 cents (2015: 95 cents) per share, an increase of 11%, has been approved
and declared by the Board from income reserves. The applicable dates are as follows:
Last date of trading cum dividend Friday, 24 June 2016
Trading ex dividend commences Monday, 27 June 2016
Record date Friday, 1 July 2016
Dividend payable Monday, 4 July 2016
Share certificates may not be dematerialised or materialised between Monday, 27 June 2016 and Friday, 1 July 2016, both days inclusive.
A gross interim dividend of 31.5 cents (2015: 28.5 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 2016.
The above statements have not been reviewed or reported on by the auditors of Pioneer Foods.
By order of the Board
ZL Combi PM Roux
Chairman Chief executive officer
Bellville
23 May 2016
PIONEER FOOD GROUP LIMITED
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 31 MARCH 2016
Group Statement of Comprehensive Income
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
31 March 31 March 30 September
2016 2015 2015
R'm R'm R'm
Continuing operations
Revenue 10 009.7 9 449.7 18 748.2
Cost of goods sold (6 905.3) (6 400.9) (12 773.7)
Gross profit 3 104.4 3 048.8 5 974.5
Other income and gains/(losses) - net 111.2 57.0 184.7
Other expenses (1 837.3) (2 143.4) (4 313.3)
Excluding the following: (1 980.0) (1 940.3) (4 006.5)
Phase I B-BBEE transaction share-based payment income/(charge) 142.7 (203.1) (306.8)
Items of a capital nature 12.3 (45.5) (48.5)
Operating profit 1 390.6 916.9 1 797.4
Investment income 27.3 16.1 39.3
Finance costs (74.8) (67.1) (142.1)
Share of profit of investments accounted for using the equity method 41.6 33.3 71.4
Profit before income tax 1 384.7 899.2 1 766.0
Income tax expense (347.9) (318.4) (588.7)
Profit for the period from continuing operations 1 036.8 580.8 1 177.3
Loss for the period from discontinued operations
(attributable to owners of the parent) - (35.7) (45.0)
Profit for the period 1 036.8 545.1 1 132.3
Other comprehensive income/(loss) for the period
Items that will not subsequently be reclassified to profit or loss:
Remeasurement of post-employment benefit obligations - - (1.0)
Items that may subsequently be reclassified to profit or loss: 55.0 (7.0) 70.3
Fair value adjustments to cash flow hedging reserve 37.3 (11.2) 12.3
For the period 282.1 7.0 86.9
Current income tax effect (78.1) (4.3) (31.0)
Deferred income tax effect (0.8) 2.3 6.6
Reclassified to profit or loss (230.4) (22.5) (69.8)
Current income tax effect 66.4 7.2 26.4
Deferred income tax effect (1.9) (0.9) (6.8)
Fair value adjustments on available-for-sale financial assets 4.9 2.7 (4.6)
For the period 8.9 5.6 (0.6)
Deferred income tax effect (0.3) (0.5) (0.2)
Reclassified to profit or loss (3.7) (2.4) (3.8)
Share of other comprehensive income of investments accounted
for using the equity method 6.7 2.6 22.7
Movement on foreign currency translation reserve 6.1 (1.1) 39.9
Total comprehensive income for the period 1 091.8 538.1 1 201.6
Profit/(loss) for the period attributable to:
Owners of the parent
For continuing operations 1 036.8 580.3 1 175.4
For discontinued operations - (35.7) (45.0)
Non-controlling interest
For continuing operations - 0.5 1.9
1 036.8 545.1 1 132.3
Total comprehensive income/(loss) for the
period attributable to:
Owners of the parent
For continuing operations 1 091.8 573.3 1 244.7
For discontinued operations - (35.7) (45.0)
Non-controlling interest
For continuing operations - 0.5 1.9
1 091.8 538.1 1 201.6
Headline Earnings Reconciliation
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
31 March 31 March 30 September
2016 2015 2015
R'm R'm R'm
Reconciliation between profit/(loss) attributable to
owners of the parent and headline earnings
Profit/(loss) attributable to owners of the parent 1 036.8 544.6 1 130.4
For continuing operations 1 036.8 580.3 1 175.4
For discontinued operations - (35.7) (45.0)
Remeasurement of items of a capital nature - continuing operations (6.7) 46.3 50.8
Net (profit)/loss on disposal of property,
plant and equipment and intangible assets (2.5) (2.7) 1.7
Net profit on disposal of available-for-sale financial assets (3.7) (2.4) (3.8)
Net profit on disposal of subsidiary (24.2) - -
Impairment of available-for-sale financial assets 18.1 50.6 50.6
Before tax (12.3) 45.5 48.5
Tax effect on remeasurement of items of a capital nature 5.6 0.8 2.3
Remeasurement of items of a capital nature - discontinued operations - 35.7 45.0
Net loss on unbundling of Quantum Foods and disposal of Quantum Foods shares - 17.9 27.4
Tax effect on remeasurement of items of a capital nature - 17.8 17.6
Remeasurement of items of a capital nature included in
equity-accounted results (0.1) 0.6 1.1
Effect on remeasurement of items of a capital nature (0.1) 0.8 1.5
Tax effect on remeasurement of items of a capital nature - (0.2) (0.4)
Headline earnings 1 030.0 627.2 1 227.3
For continuing operations 1 030.0 627.2 1 227.3
For discontinued operations - - -
Phase I B-BBEE transaction share-based payment (income)/charge (142.7) 203.1 306.8
Adjusted headline earnings (Note 1) 887.3 830.3 1 534.1
For continuing operations 887.3 830.3 1 534.1
For discontinued operations - - -
Number of issued ordinary shares (million) 232.3 232.4 232.7
Number of issued treasury shares:
- held by subsidiary (million) 18.0 18.0 18.0
- held by share incentive trust (million) 0.1 0.8 0.7
- held by B-BBEE equity transaction participants (million) 18.1 18.1 18.1
- held by BEE trust (million) 10.7 10.7 10.7
Number of issued class A ordinary shares (million) 3.9 4.6 4.2
Weighted average number of ordinary shares (million) 185.1 184.0 184.5
Weighted average number of ordinary shares - diluted (million) 199.4 198.4 200.1
Earnings per ordinary share (cents):
- basic 560.1 295.9 612.8
- diluted 520.1 274.4 564.9
- headline 556.4 340.8 665.3
- diluted headline 516.6 316.1 613.4
- adjusted headline (Note 1) 479.3 451.2 831.6
- diluted adjusted headline (Note 1) 445.1 418.5 766.7
Gross dividend per ordinary share (cents) 105.0 95.0 332.0
Gross dividend per class A ordinary share (cents) 31.5 28.5 99.6
Net asset value per ordinary share (cents) 4 096.1 3 450.0 3 757.6
Debt to equity ratio (%) 12.5 16.2 5.8
Note 1
Headline earnings ("HE") is calculated based on Circular 2/2015 issued by the South African Institute of Chartered Accountants. Adjusted HE is
defined as HE adjusted for the impact of the share-based payment income/(charge) on the B-BBEE Phase I transaction on profit or loss due to the
volatility of this share-based payment income/(charge).
Group Statement of Financial Position
Unaudited Unaudited Audited
31 March 31 March 30 September
2016 2015 2015
R'm R'm R'm
Assets
Property, plant and equipment 4 476.3 4 364.9 4 328.9
Goodwill 225.0 251.3 224.4
Other intangible assets 472.2 480.0 475.1
Biological assets 16.0 16.0 16.0
Investments in and loans to associates and joint ventures 799.1 417.7 574.0
Available-for-sale financial assets 133.2 147.0 141.8
Trade and other receivables 19.7 23.3 24.3
Deferred income tax - 2.1 0.2
Non-current assets 6 141.5 5 702.3 5 784.7
Current assets 6 489.9 5 592.3 6 298.2
Inventories 3 249.9 2 630.7 2 678.9
Derivative financial instruments 13.9 14.1 20.6
Trade and other receivables 2 371.2 2 206.3 2 148.6
Current income tax 0.3 0.3 1.3
Cash and cash equivalents 854.6 740.9 1 448.8
Assets of disposal group classified as held for sale - 52.8 88.1
Total assets 12 631.4 11 347.4 12 171.0
Equity and liabilities
Capital and reserves attributable to owners of the parent 7 594.1 6 375.6 6 958.7
Share capital 23.2 23.2 23.3
Share premium 2 372.4 2 371.0 2 430.5
Treasury shares (1 188.0) (1 204.8) (1 204.1)
Other reserves 473.6 347.7 460.5
Retained earnings 5 912.9 4 838.5 5 248.5
Non-controlling interest - 60.8 12.3
Total equity 7 594.1 6 436.4 6 971.0
Non-current liabilities 2 234.2 2 652.1 2 273.4
Borrowings
B-BBEE equity transaction third-party finance 449.7 449.7 449.7
Other 870.0 1 183.1 850.5
Provisions for other liabilities and charges 112.3 104.3 110.4
Share-based payment liability 239.5 363.1 395.8
Deferred income tax 562.7 551.9 467.0
Current liabilities 2 803.1 2 257.3 2 901.0
Trade and other payables 2 189.9 1 967.1 2 210.0
Current income tax 42.0 58.8 21.0
Derivative financial instruments 32.4 17.5 15.8
Borrowings 486.6 138.9 553.9
Loan from joint venture 2.0 5.5 20.5
Share-based payment liability 49.7 69.0 79.3
Dividends payable 0.5 0.5 0.5
Liabilities of disposal group classified
as held for sale - 1.6 25.6
Total equity and liabilities 12 631.4 11 347.4 12 171.0
Group Statement of Changes in Equity
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
31 March 31 March 30 September
2016 2015 2015
R'm R'm R'm
Share capital, share premium and treasury shares 1 207.6 1 189.4 1 249.7
Opening balance 1 249.7 1 091.9 1 091.9
Movement in treasury shares 16.1 (18.3) 5.3
Ordinary shares acquired by BEE trust - - (22.9)
Ordinary shares issued - share appreciation rights 23.9 115.9 175.6
Ordinary shares bought back from management share
incentive trust and cancelled (82.1) - -
Employee share scheme - repurchase of shares - (0.1) (0.2)
Other reserves 473.6 347.7 460.5
Opening balance 460.5 428.5 428.5
Equity compensation reserve transactions 22.1 17.2 38.9
Ordinary shares issued - share appreciation rights (23.9) (115.8) (175.6)
Deferred income tax on share-based payments (40.1) 32.3 105.9
Share of other comprehensive income of investments accounted
for using the equity method 6.7 2.6 22.7
Unbundling of Quantum Foods - (7.5) (7.5)
Other comprehensive income for the period 48.3 (9.6) 47.6
Retained earnings 5 912.9 4 838.5 5 248.5
Opening balance 5 248.5 4 582.0 4 582.0
Profit for the period 1 036.8 544.6 1 130.4
Other comprehensive loss for the period - - (1.0)
Dividends paid (439.3) (287.6) (463.3)
Management share incentive scheme - disposal of shares 67.3 0.1 1.4
Employee share scheme - transfer tax on share transactions (0.4) (0.6) (1.0)
Non-controlling interest - 60.8 12.3
Opening balance 12.3 10.4 10.4
Non-controlling interest acquired - business combination - 49.9 -
Disposal of subsidiary (12.3) - -
Profit for the period - 0.5 1.9
Total equity 7 594.1 6 436.4 6 971.0
Group Statement of Cash Flows
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
31 March 31 March 30 September
2016 2015 2015
R'm R'm R'm
Net cash profit from operating activities 1 427.8 1 345.1 2 512.2
Cash effect from hedging activities 42.0 (10.8) 16.2
Working capital changes (779.6) (838.0) (546.4)
Net cash generated from operations 690.2 496.3 1 982.0
Income tax paid (285.1) (157.2) (475.5)
Net cash flow from operating activities 405.1 339.1 1 506.5
Net cash flow from investment activities (393.7) (231.2) (422.7)
Property, plant and equipment and intangible assets
- additions (217.3) (63.9) (186.3)
- replacements (131.7) (231.7) (465.5)
- proceeds on disposal 45.1 30.9 176.3
Business combinations - (81.3) -
Proceeds on disposal of and changes in
available-for-sale financial assets and loans (15.0) 76.5 117.6
Proceeds on disposal of subsidiary and proceeds from repayment of related loan 74.2 - -
Investment in joint ventures (200.5) - (126.3)
Interest received 24.8 15.1 37.2
Dividends received 2.5 1.0 2.1
Dividends received from joint ventures 24.2 22.2 22.2
Net cash flow from financing activities (552.3) (419.8) (603.5)
Proceeds from borrowings 5.4 86.9 207.1
Treasury shares acquired by BEE trust - - (22.9)
Repurchase of class A ordinary shares from leavers and
other share scheme transactions (42.3) (151.0) (187.1)
Interest paid (76.1) (68.3) (137.4)
Dividends paid (439.3) (287.4) (463.2)
Net cash, cash equivalents and bank overdrafts on unbundling of Quantum Foods - (105.6) (105.6)
Net cash and cash equivalents on disposal of subsidiary (11.9) - -
Net cash, cash equivalents and bank overdrafts from business combinations - 79.8 -
Net (decrease)/increase in cash, cash equivalents and bank overdrafts (552.8) (337.7) 374.7
Net cash, cash equivalents and bank overdrafts at beginning of period 1 392.8 1 018.1 1 018.1
Net cash, cash equivalents and bank overdrafts at end of period 840.0 680.4 1 392.8
Disclosed as continuing operations 840.0 680.4 1 380.9
Disclosed as disposal group held for sale - - 11.9
Group Segment Report
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
31 March 31 March 30 September
2016 2015 2015
R'm R'm R'm
Restated Restated
Segment revenue (Note 1)
Essential Foods 6 053.7 5 610.2 11 334.5
Groceries 2 508.2 2 628.4 4 797.4
International 1 447.8 1 211.1 2 616.3
Total 10 009.7 9 449.7 18 748.2
Segment results (Note 1)
Essential Foods 644.5 698.3 1 278.5
Groceries 342.7 253.3 434.5
International 251.8 218.0 444.5
Other (3.4) (4.1) (4.8)
1 235.6 1 165.5 2 152.7
Phase I B-BBEE transaction share-based payment income/(charge) 142.7 (203.1) (306.8)
Operating profit before items of a capital nature 1 378.3 962.4 1 845.9
Reconciliation of operating profit (before items of a capital nature)
to profit before income tax
Operating profit before items of a capital nature 1 378.3 962.4 1 845.9
Adjusted for:
Remeasurement of items of a capital nature 12.3 (63.4) (75.9)
Interest income 24.8 15.1 37.2
Dividends received 2.5 1.0 2.1
Finance costs (74.8) (67.1) (142.1)
Share of profit of investments accounted for using the equity method 41.6 33.3 71.4
Profit before income tax (including discontinued operations) 1 384.7 881.3 1 738.6
Note 1
Segment revenue and segment results were restated to consolidate the Groceries: Beverages and Groceries: Cereals and other segments into a single
segment, Groceries. Refer to note 12 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 for the six months ended 31 March 2016
1.Basis of preparation
The condensed consolidated interim financial statements of the Group for the six months ended 31 March 2016 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 2015 and with those of previous financial years.
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 2015.
Assessment of joint control over Food Concepts Pioneer Ltd
Pioneer Foods acquired an interest of 50.1% in Food Concepts Pioneer Ltd ("FCP"), a bakery business in Nigeria, for a purchase consideration of
R81.3 million on 1 March 2015.
In the interim financial statements for the six months ended 31 March 2015, FCP was consolidated as the Group was of the opinion that it had
power over the relevant activities of the company.
The assessment of whether the Group had power over the relevant activities of FCP involved the application of significant judgement and legal
interpretation of the respective legal agreements. Since the publication of the interim financial statements for the six months ended 31 March
2015, the Group reassessed its interpretation and concluded that, given the requirement for unanimous consent of both parties to the agreement
in respect of the most significant relevant activities, a more appropriate classification would be that of a joint venture. Consequently, FCP was
accounted for as a joint venture and equity accounted in the financial statements of the Group for the year ended 30 September 2015 and the six
months ended 31 March 2016.
As the transaction is considered immaterial in the context of the financial statements, the condensed consolidated interim financial statements
for the six months ended 31 March 2015 were not restated.
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
31 March 31 March 30 September
2016 2015 2015
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 232 739 331 231 691 881 231 691 881
Shares issued in terms of employee share
appreciation rights scheme 146 075 741 469 1 047 450
Shares repurchased from management share
incentive trust and cancelled (612 000) - -
At end of period 232 273 406 232 433 350 232 739 331
146,075 (30 September 2015: 1,047,450 and 31 March 2015: 741,469)
listed ordinary shares of 10 cents each were issued at an average of R163.54
(30 September 2015: R167.71 and 31 March 2015: R156.23) per share
in terms of the share appreciation rights scheme.
612,000 shares were repurchased at an average price of
R134.11 per share and subsequently cancelled.
Number of treasury shares held by the share incentive trust
At beginning of period 729 612 1 110 213 1 110 213
Movement in shares (61 790) (299 701) (380 601)
Repurchased by the Company and cancelled (612 000) - -
At end of period 55 822 810 512 729 612
Proceeds on the sale of treasury shares by the share
incentive trust (R'000) 1 373 4 675 6 660
Proceeds on the repurchase of treasury shares from
the share incentive trust by the Company (R'000) 82 075 - -
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 10 745 350 10 599 988 10 599 988
Shares acquired - 145 362 145 362
At end of period 10 745 350 10 745 350 10 745 350
Purchase consideration paid for shares acquired
by BEE Trust (R'000) - 22 940 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 4 234 300 6 043 940 6 043 940
Shares bought back and cancelled (289 800) (1 411 970) (1 809 640)
At end of period 3 944 500 4 631 970 4 234 300
Purchase consideration paid for unlisted class A ordinary
shares bought back (R'000) 40 414 129 910 189 405
4.Borrowings
Pioneer Foods obtained a R300 million vehicle and asset finance facility during the 2014 financial year. This facility is 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 2016, new borrowings obtained in terms of these facilities amounted to
R28.8 million (31 March 2015: R110.2 million and 30 September 2015: R210.5 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 105.0 cents (2015: gross interim dividend of 95.0 cents and 2015: gross final
dividend of 237.0 cents) per ordinary share. This will amount to approximately R232,604,459 (2015: interim of R210,743,649 and 2015: final of
R526,332,444) depending on the exact number of ordinary shares issued at the record date. In addition, the 10,745,350 Pioneer Foods shares issued
to the Pioneer Foods Broad-Based BEE Trust, will receive 20% of the dividend payable, i.e. 21.0 cents (2015: gross interim of 19.0 cents and
2015: gross final dividend of 47.4 cents) per share, amounting to R2,256,524 (2015: interim of R2,041,617 and 2015: final of R5,093,296).
The Board approved a gross interim dividend of 31.5 cents (2015: gross interim dividend of 28.5 cents and 2015: gross final dividend of 71.1
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 R1,242,518 (2015: interim of R1,226,047 and 2015: final of R2,862,920) 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 Services 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 89.250 cents per ordinary share and 26.775 cents per class A ordinary share for shareholders liable to pay dividends
tax. The dividend amounts to 105.0 cents per ordinary share and 31.5 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 232,330,904 and 3,841,460 respectively as at the date of this
declaration.
5.2 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 unaudited condensed
consolidated interim financial statements by the Board.
6.Contingent liabilities
6.1 Guarantees
The Group had guarantees in issue of R35.5 million (30 September 2015: R36.5 million) as at 31 March 2016, 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.
6.2 Dispute with egg contract producers - discontinued operations
Pioneer Foods is defending contractual claims from its former privatised egg contract producers. The matters were set down for arbitration
during 2012. Since the hearings commenced in 2012, settlements were negotiated with all except one egg contract producer. These settlements had
no adverse financial impact on Pioneer Foods.
During the 2015 financial year, settlement agreements were reached with Kwazulu Egg Producers (Pty) Ltd and Moerasrivier Boerdery (Pty) Ltd. The
claim of the remaining contract egg producer, being Flinkwink Properties (Pty) Ltd is still unresolved.
Pioneer Foods filed pleas to this claim and, in respect of this claim, a counterclaim has been filed to recover damages suffered by Pioneer
Foods as a result of breach of contract by the contract producer. No further legal action transpired during the period under review. Based on
legal opinion obtained, management is satisfied that this unresolved matter is low risk and poses no material financial risk to the Group.
Pioneer Foods unbundled its interests in Quantum Foods to its shareholders and subsequently Quantum Foods was listed on the JSE on 6 October
2014. Quantum Foods indemnified Pioneer Foods from any potential financial exposure to the claims from the egg contract producers.
7.Future capital commitments
Capital expenditure approved by the Board and contracted for 2016 amount to R443.2 million (30 September 2015: R492.0 million). Capital
expenditure approved by the Board and contracted for 2017 amount to R373.0 million (30 September 2015: Rnil).
Capital expenditure approved by the Board for 2016, but not contracted for yet, amount to R137.8 million (30 September 2015: R372.7 million).
Capital expenditure approved by the Board for years thereafter, but not contracted for yet, amount to R71.1 million (30 September 2015: R494.6
million).
Capital commitments relating to joint ventures amount to R77.7 million (30 September 2015: R137.8 million).
8.Impairment of Quantum Foods shares
The 18,091,661 Quantum Foods Holdings Ltd shares held by the Phase II B-BBEE transaction participants are accounted for as available-for-sale
financial assets. As at 31 March 2016, the market value of the Quantum Foods Holdings Ltd shares was significantly lower than the original cost
price and market value at 30 September 2015. Consequently, an impairment loss of R18.1 million (30 September 2015: R50.6 million) has been
recognised. The loss has been included in the line item "Items of a capital nature" in the statement of comprehensive income for the six months
ended 31 March 2016.
This impairment charge attributable to available-for-sale financial assets is as follows:
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
31 March 31 March 30 September
2016 2015 2015
Nature R'm R'm R'm
Available-for-sale financial assets 18.1 50.6 50.6
Income tax effect - - -
After income tax effect 18.1 50.6 50.6
9. Acquisition of a 50% equity interest in Future Life Health Products (Pty) Ltd ("Future Life")
Pioneer Foods acquired a 50% shareholding in Future Life for an amount of R200 million. As announced on SENS on 9 November 2015, The Competition
Tribunal of South Africa granted conditional approval of this transaction. These conditions will have no negative impact on the commercial
prospects for this venture.
The effective date of this transaction was 1 December 2015.
10. Disposal of interest in Maitland Vinegar Works (Pty) Ltd
As at 1 October 2015, all conditions precedent for the disposal of the Group's interests in Maitland Vinegar Works (Pty) Ltd were met.
Consequently, the assets and liabilities related to Maitland Vinegar were presented as a "disposal group held for sale" in terms of
IFRS 5 - Non-current Assets Held for Sale and Discontinued Operations for the year ended 30 September 2015.
A profit of R24.2 million was recognised on this sale and has been included in the line item "Items of a capital nature" in the statement of
comprehensive income for the six months ended 31 March 2016.
11.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 2016 using:
Quoted prices
in active Significant
markets for other Significant
identical assets observable unobservable
and 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 133.2 - -
Derivative financial instruments
- Foreign exchange contracts - 13.9 -
Biological assets
- Vineyards - - 16.0
Liabilities measured at fair value
Derivative financial instruments
- Foreign exchange contracts - 32.4 -
Unaudited fair value measurements at 31 March 2015 using:
Quoted prices
in active Significant
markets for other Significant
identical assets observable unobservable
and 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 -
Audited fair value measurements at 30 September 2015 using:
Quoted prices
in active Significant
markets for other Significant
identical assets observable unobservable
and 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 141.6 - -
- Unlisted securities - 0.2 -
Derivative financial instruments
- Foreign exchange contracts - 20.4 -
- Futures - fair value hedges - 0.2 -
Biological assets
- Vineyards - - 16.0
Liabilities measured at fair value
Derivative financial instruments
- Foreign exchange contracts - 15.1 -
- Embedded derivative - 0.7 -
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 input 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 inputs 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.
12.Restatement of segment information for comparative periods
Segment revenue and segment results were restated to consolidate the Groceries: Cereals and other and Groceries: Beverages segments into a
single Groceries segment.
Unaudited
Six months Audited
ended Year ended
31 March 30 September
2015 2015
R'm R'm
Increase/(decrease) in revenue
Groceries 2 628.4 4 797.4
Groceries: Cereals and other (1 260.1) (2 420.3)
Groceries: Beverages (1 368.3) (2 377.1)
Total - -
Increase/(decrease) in operating profit before items of a capital nature
Groceries 253.3 434.5
Groceries: Cereals and other (128.2) (252.0)
Groceries: Beverages (125.1) (182.5)
Total - -
13.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.
14.Audit
These results have not been audited or reviewed by the external auditors.
Directors: ZL Combi (Chairman), PM Roux (CEO)*, CJ Hess*, N Celliers, Prof ASM Karaan, NS Mjoli-Mncube, PJ Mouton, SS Ntsaluba, G Pretorius, LP
Retief, AH Sangqu, NW Thomson (* 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: 23/05/2016 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.
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