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QUANTUM FOODS HOLDINGS LIMITED - Summary consolidated financial statements for the year ended 30 September 2016

Release Date: 24/11/2016 07:05
Code(s): QFH     PDF:  
Wrap Text
Summary consolidated financial statements for the year ended 30 September 2016

Quantum Foods Holdings Ltd
Incorporated in the Republic of South Africa
Registration number: 2013/208598/06
Tax registration number: 9095455193
Share code: QFH
ISIN code: ZAE000193686
("Quantum Foods" or "the Group" or "the Company")

Summary consolidated financial statements for the year ended 30 September 2016

Salient features

                                                                                                     2016             2015

Revenue                                                                                    R3 913 million   R3 468 million
Operating profit                                                                             R124 million     R164 million
Operating profit (before tax and items of a capital nature)*                                  R89 million     R162 million
Headline earnings                                                                             R66 million     R126 million
Earnings per share                                                                               39 cents         54 cents
Headline earnings per share                                                                      28 cents         54 cents
Final dividend per share                                                                          6 cents         10 cents

* Income or expenditure of a capital nature in the statement of comprehensive income, i.e. all profit or loss items that are excluded in the calculation of headline earnings per share. The principal
  items excluded under this measurement are profits or losses on disposal of property, plant and equipment.

Enquiries:
Quantum Foods:                    +27 21 864 8600, info@quantumfoods.co.za
Hennie Lourens:                   +27 82 808 3529, hennie.lourens@quantumfoods.co.za
Andre Muller:                     +27 83 660 6088, andre.muller@quantumfoods.co.za
PSG Capital - Willie Honeyball:   +27 21 887 9602, willieh@psgcapital.com

COMMENTARY

INTRODUCTION

The past financial year was very challenging for the poultry industry. Dramatic increases in raw material costs due to a combination of the continued drought in South Africa and a volatile rand,
as well as a strained consumer environment, created unfavourable trading conditions. Similar headwinds also impacted operations in the rest of Africa.

Quantum Foods showed resilience and weathered these conditions on the back of proactive business model changes in the past few years. This mitigated against market risk in the South African
broiler industry. However, the egg business in South Africa and operations in other African countries were severely affected and resulted in the Group reporting a weaker financial performance.

FINANCIAL OVERVIEW

Group revenue increased by 12.8% to R3.9 billion, with an increase of R463.7 million (14.1%) in South African operations and a decrease of R18.9 million (10.5%) in other African operations.
Revenue from other African operations contributed 4.1% of Group revenue for 2016 (2015: 5.2%) and the decrease in rand terms is due to translation at weaker foreign currency exchange rates.

Revenue from South African operations:

- Increased by R320.9 million for the feed segment, mostly due to increased selling prices in response to higher raw material costs and the acquisition of the Olifantskop feed mill in
  February 2016.
- Increased by R100.2 million for the farming segment, mostly due to increased volumes and prices of live broilers and point-of-lay hens sold.
- Increased by R42.6 million for the eggs segment where an average price increase of 8.1% was achieved.

Cost of sales increased by 12.6% to R3.2 billion. Cost of sales includes the biological assets (livestock) and agricultural produce (eggs) fair value adjustments that were realised and included
in other gains and losses in the statement of comprehensive income. These fair value adjustments for the year ended 30 September 2016 amounted to R145.1 million (2015: R238.0 million). Gross
profit, excluding these fair value adjustments, decreased by R8.3 million, resulting in a gross profit margin of 21.3% compared to 24.3% in 2015.

Cash operating expenses increased by 6.8% in 2016. The decrease in operating expenses due to the sale of the Hartbeespoort abattoir was however offset by additional expenditure at the Sterkstroom
layer-rearing facility rented from October 2015, the Olifantskop feed mill, the pasteurised eggs (Safe Eggs) business acquired in April 2015 and the Stutterheim egg layer farm and pack station
rented from May 2015. Included in other gains/(losses) is a foreign exchange loss of R15.9 million compared to a profit of R3.9 million in the previous year, mostly due to rand vs US dollar
currency fluctuations.

Operating profit, before items of a capital nature, decreased by R73.2 million from the profit of R162.5 million in 2015. The South African operations recorded a decrease of R37.5 million to a
profit of R106.7 million at a margin of 2.8% (2015: 4.4%). Feeds and Farming improved by R7.0 million and R14.0 million respectively, while Eggs reported a loss of R26.9 million compared to a
profit of R31.7 million in 2015. The other African operations recorded a decline of R25.5 million to report a loss of R0.2 million.

Headline earnings per share ("HEPS") decreased to 28 cents from the 54 cents per share of 2015.

Cash generated from operating activities amounted to an outflow of R42.1 million in 2016. This includes an additional investment in working capital of R173.6 million. Capital expenditure for the
year amounted to R167.0 million, R58.2 million of which was incurred on the table egg expansion projects in Zambia and Uganda, R43.6 million on the acquisition of the Olifantskop feed mill and
R24.6 million on the acquisition of the Galovos table egg business in Mozambique.

The Group had minimal borrowings at 30 September 2016 comprising an arrangement to purchase electricity from solar panels capitalised as a finance lease in terms of IFRS.

Cash and cash equivalents decreased from R187.5 million to R79.5 million and the Group has declared a dividend of 6 cents per share, at a HEPS cover of 4.7.

The Group's net asset value ("NAV") of R1 596 million at 30 September 2016 translates to a NAV per share of R6.89 based on the number of shares in issue at that date.

During the year, Quantum Foods repurchased and cancelled 1 445 274 shares.

OPERATIONAL OVERVIEW

The Nova Feeds business performed well. Volumes from the historical footprint (excluding Olifantskop Feeds) were maintained despite tough industry conditions. The financial performance and
volumes produced by the Olifantskop feed mill, acquired in February 2016, were in line with expectations. The additional volumes from this mill for the first time resulted in feed sales to
external customers exceeding feed consumed by the internal farming operations.

During the year, the broiler and layer farming operations were restructured into one division, which increased the focus on farming efficiencies. In the layer farming operations, disease had an
adverse effect on production volumes and efficiencies, negatively impacting financial performance. Layer livestock volumes increased, but increased production costs could not be recovered from
the market, resulting in margin compression. Following the sale of the Hartbeespoort abattoir to Sovereign Foods and the implementation of a supply agreement for live broilers, Quantum Foods is
now positioned as a livestock farming business within the broiler supply chain.  The production performances of the broiler breeder and commercial broiler farms remained world class. Financial
results met expectations as the business assumed production risk at a limited margin rather than facing market on top of production risk.

The performance of the egg business was unsatisfactory for the first six months. However, operational performance improved significantly during the second half of the year. This improvement can
be attributed to two main factors: firstly, management and leadership capacity was strengthened by new appointments, and secondly, increased focus at executive level followed the consolidation of
farming operations. Egg sales volumes declined due to lower production volumes caused by disease at some of the commercial egg farms. However, average selling prices increased by 8.1% due to an
improved sales mix and lower supply of eggs to the market.

The performance of the other African businesses was disappointing. While operational performance was generally satisfactory, financial results were poor.

In Zambia, the combination of drought, exchange rate fluctuation, a commodity price slump, energy supply challenges and oversupply of day-old broiler chicks, created a difficult environment. On
the positive side, Quantum Foods completed the expansion of the Mega Eggs operation in Zambia during the year. Looking ahead, this will result in increased volumes of eggs available for sale.

Uganda experienced high raw material prices that could not be transferred to the customer base, resulting in margin pressure. The new commercial egg farm in Masindi was completed and will be in
full production by December 2016. This farm will enable the Group to participate in the table egg market in Uganda for the first time.

During September 2016, Quantum Foods acquired Galovos Eggs, the largest commercial egg producer in Mozambique. This acquisition provides the Group with an entry point into the Mozambique table
egg market, and establishes a base for further expansion.

PROSPECTS

Protein consumption is largely driven by an increase in per capita income, as well as by higher levels of urbanisation. Although the latter continues in South Africa, per capita income declined
in recent years. This is reflected in weakened consumer demand, and will continue to put pressure on the Group's profitability, particularly if there is no decrease in the cost of raw materials.
To mitigate this risk, Quantum Foods will continue to focus on efficiencies in farms and factories. Optimal procurement of raw materials will remain a priority.

The focus created by combining broiler and layer farming at executive level has proven successful, and has enabled the egg business to concentrate on processing and commercial performance.

The feed business remains the backbone of Quantum Foods. We will continue to invest in organic and acquisitive growth opportunities as they arise. Africa faces a negative, medium-term outlook due
to the slowdown in global commodity prices as well as the drought in Southern Africa. Despite this, we believe that this current situation will turn around and that the Group is well positioned
to gain benefits from the recent investments in Zambia, Uganda and Mozambique. The Group will continue to consider opportunities on the African continent, focusing on the feed and egg value
chains.

DIVIDEND

A gross dividend of 6 cents per share has been approved and declared by the Board for the year ended 30 September 2016 from income reserves. The applicable dates are as follows:

Last date of trading cum dividend                                Tuesday, 7 February 2017
Trading ex dividend commences                                  Wednesday, 8 February 2017
Record date                                                      Friday, 10 February 2017
Dividend payable                                                 Monday, 13 February 2017

Share certificates may not be dematerialised or materialised between Wednesday, 8 February 2017 and Friday 10 February 2017, both days inclusive.

By order of the Board

WA Hanekom
Chairman

HA Lourens
Chief Executive Officer

24 November 2016

Summary consolidated statement of financial position
                                                                                                  Audited          Audited
                                                                                             30 September     30 September
                                                                                                     2016             2015
                                                                                                    R'000            R'000

ASSETS

Non-current assets                                                                              1 071 729          945 625
Property, plant and equipment                                                                   1 048 280          923 322
Intangible assets                                                                                  15 559           12 784
Investment in associate                                                                             6 988            6 731
Deferred income tax                                                                                   902            2 788

Current assets                                                                                  1 194 300        1 053 062
Inventories                                                                                       307 424          234 566
Biological assets                                                                                 323 950          288 775
Trade and other receivables                                                                       481 480          334 794
Derivative financial instruments                                                                        -            7 424
Current income tax                                                                                  1 935                -
Cash and cash equivalents                                                                          79 511          187 503
Assets held for sale                                                                                    -           83 399
Total assets                                                                                    2 266 029        2 082 086
 
EQUITY AND LIABILITIES

Capital and reserves attributable to owners of the parent                                       1 596 148        1 514 567
Share capital                                                                                   1 581 402        1 585 386
Other reserves                                                                                   (211 432)        (228 968)
Retained earnings                                                                                 226 178          158 149

Total equity                                                                                    1 596 148        1 514 567

Non-current liabilities                                                                           242 372          220 747
Interest-bearing liability                                                                          6 318                -
Deferred income tax                                                                               228 878          214 258
Provisions for other liabilities and charges                                                        7 176            6 489

Current liabilities                                                                               427 509          346 772
Trade and other payables                                                                          417 172          343 890
Derivative financial instruments                                                                    4 224                -
Current income tax                                                                                  6 029            2 882
Interest-bearing liability                                                                             84                -

Total liabilities                                                                                 669 881          567 519

Total equity and liabilities                                                                    2 266 029        2 082 086

Summary consolidated statement of comprehensive income
                                                                                                  Audited          Audited
                                                                                               Year ended       Year ended
                                                                                             30 September     30 September
                                                                                                     2016             2015
                                                                                      Notes         R'000            R'000

Revenue                                                                                         3 913 078        3 468 312
Cost of sales                                                                                  (3 224 202)      (2 864 073)
Gross profit                                                                                      688 876          604 239

Other income                                                                                       16 603           11 639
Other gains/(losses) - net                                                                3       155 800          238 482
Sales and distribution costs                                                                     (194 904)        (193 631)
Marketing costs                                                                                   (12 087)         (11 287)
Administrative expenses                                                                           (98 972)         (96 168)
Other operating expenses                                                                         (431 042)        (389 212)
Operating profit                                                                                  124 274          164 062

Investment income                                                                                   7 736            9 886
Finance costs                                                                                        (922)          (1 887)
Share of profit of associate company                                                                  257              619
Profit before income tax                                                                          131 345          172 680
Income tax expense                                                                                (39 991)         (45 764)
Profit for the year                                                                                91 354          126 916

Other comprehensive income for the year
Items that may subsequently be reclassified to profit or loss:
Fair value adjustments to cash flow hedging reserve                                                (2 283)             796
 For the year                                                                                       4 737           16 851
  Deferred income tax effect                                                                           47                -
  Current income tax effect                                                                        (1 374)          (4 718)
 Realised to profit or loss                                                                        (7 907)         (15 747)
  Deferred income tax effect                                                                            -               93
  Current income tax effect                                                                         2 214            4 317
Movement on foreign currency translation reserve
  Currency translation differences                                                                 25 026          (75 513)

Total comprehensive income for the year                                                           114 097           52 199

Profit for the year attributable to owners of the parent                                           91 354          126 916

Total comprehensive income for the year attributable to owners  of the parent                     114 097           52 199

Earnings per ordinary share (cents)                                                       4            39               54
Diluted earnings per ordinary share (cents)                                               4            39               54


Summary consolidated statement of changes in equity
                                                                                                  Audited          Audited
                                                                                               Year ended       Year ended
                                                                                             30 September     30 September
                                                                                                     2016             2015
                                                                                                    R'000            R'000

Share capital                                                                                   1 581 402        1 585 386
Opening balance                                                                                 1 585 386        1 585 386
Shares repurchased and cancelled                                                                   (3 984)               -

Other reserves                                                                                   (211 432)        (228 968)
Opening balance                                                                                  (228 968)        (155 395)
Other comprehensive income for the year                                                            22 743          (74 717)
Recognition of share-based payments                                                                 2 492            1 144
Adjustment to common control reserve *                                                             (7 699)               -

Retained earnings                                                                                 226 178          158 149
Opening balance                                                                                   158 149           31 233
Profit for the year                                                                                91 354          126 916
Dividends paid - net                                                                              (23 325)               -

Total equity                                                                                    1 596 148        1 514 567

* Deferred tax on business combinations prior to unbundling from the previous holding company not previously recognised, adjusted against common control reserve.



Summary consolidated statement of cash flows
                                                                                                  Audited          Audited
                                                                                               Year ended       Year ended
                                                                                             30 September     30 September
                                                                                                     2016             2015
                                                                                       Note         R'000            R'000

NET CASH FLOW FROM OPERATING ACTIVITIES                                                           (42 061)         163 819
Net cash profit from operating activities                                                         164 250          232 127
Working capital changes                                                                          (173 622)         (53 630)
Cash effect of hedging activities                                                                  (3 002)           1 104
Net cash (utilised in)/generated from operations                                                  (12 374)         179 601
Income tax paid                                                                                   (29 687)         (15 782)

NET CASH FLOW FROM INVESTING ACTIVITIES                                                           (48 762)         (62 031)
Additions to property, plant and equipment                                                        (98 759)         (58 323)
Additions to intangible assets                                                                          -           (5 389)
Proceeds on disposal of property, plant and equipment                                             122 080            9 295
Business combinations                                                                     7       (79 819)         (17 500)
Interest received                                                                                   7 736            9 886

Net cash (deficit)/surplus                                                                        (90 823)         101 788
  
NET CASH FLOW FROM FINANCING ACTIVITIES                                                           (27 668)          (1 370)
Repayment of interest-bearing liability                                                               (46)               -
Shares repurchased                                                                                 (3 984)               -
Interest paid                                                                                        (371)          (1 370)
Dividends paid to ordinary shareholders                                                           (23 267)               -

Net (decrease)/increase in cash and cash equivalents                                             (118 491)         100 418
Effects of exchange rate changes                                                                   10 499          (18 436)
Net cash and cash equivalents at beginning of year                                                187 503          105 521

Net cash and cash equivalents at end of year                                                       79 511          187 503

Summary consolidated segment report
                                                                                                                 Restated*
                                                                                                  Audited          Audited
                                                                                               Year ended       Year ended
                                                                                             30 September     30 September
                                                                                                     2016             2015
                                                                                                    R'000            R'000

Segment revenue                                                                                 3 913 078        3 468 312
 Eggs                                                                                           1 005 221          962 645
 Farming                                                                                        1 326 746        1 226 504
 Animal feeds                                                                                   1 420 758        1 099 905
 Other African countries                                                                          160 353          179 258

Segment results                                                                                   124 274          164 062
 Eggs                                                                                             (26 590)          32 406
 Farming                                                                                           96 319           47 871
 Animal feeds                                                                                      71 891           65 493
 Other African countries                                                                             (234)          25 286
 Head office costs                                                                                (17 112)          (6 994)

A reconciliation of the segment results to operating profit before income tax is provided below:
Segment results                                                                                   124 274          164 062
Adjusted for:
 Investment income                                                                                  7 736            9 886
 Finance costs                                                                                       (922)          (1 887)
 Share of profit of associate company                                                                 257              619
Profit before income tax per statement of comprehensive income                                    131 345          172 680

Items of a capital nature per segment included in other gains/(losses) - net 
Profit/(loss) on disposal of property, plant and equipment before income tax                       34 947            1 580
 Eggs                                                                                                 291              725
 Farming                                                                                           35 297              887
 Animal feeds                                                                                        (641)             (35)
 Other African countries                                                                                -                3
   
The farming segment's profit on disposal of property, plant and equipment includes the profit on the sale of the Hartbeespoort 
abattoir, which was disclosed as an asset held for sale at 30 September 2015.

Segment assets                                                                                  2 176 693        1 885 064
 Eggs                                                                                             229 799          218 054
 Farming                                                                                        1 068 460        1 087 162
 Animal feeds                                                                                     538 981          390 376
 Other African countries                                                                          304 894          168 645
 Head office costs                                                                                 34 559           20 827

A reconciliation of the segments' assets to the Group's assets is provided below:
Segment assets per segment report                                                               2 176 693        1 885 064
Adjusted for: 
 Investment in associate                                                                            6 988            6 731
 Current and deferred income tax assets                                                             2 837            2 788
 Cash and cash equivalents                                                                         79 511          187 503
Total assets per statement of financial position                                                2 266 029        2 082 086

Total segment liabilities                                                                         434 974          350 379
 Eggs                                                                                              50 991           41 158
 Farming                                                                                           94 827           96 556
 Animal feeds                                                                                     238 477          150 890
 Other African countries                                                                           19 464           18 686
 Head office costs                                                                                 31 215           43 089

A reconciliation of the segments' liabilities to the Group's liabilities is provided below:
Segment liabilities per segment report                                                            434 974          350 379
Adjusted for: 
Current and deferred income tax liabilities                                                       234 907          217 140
Total liabilities per statement of financial position                                             669 881          567 519

*  The comparative information has been restated to reflect the new reporting structure

As a result of the Group exiting the broiler meat market at the start of the reporting period and the change in the responsibilities of key management, the Group has updated the disclosure of the
previously disclosed segments to align with information reviewed by the Group's CODM for the purposes of allocating resources.

Previously reported segments of Eggs and layer livestock and Broilers have been restated based on the revised operating segments of Eggs, Layer farming and Broiler farming. Animal feeds and Other
African countries continue to be standalone segments as previously reported.

The Eggs business is the commercial egg business, which consist of the sale of ungraded eggs and the processing of eggs in the pack stations and distribution thereof, to the market. The Layer
farming business includes the layer livestock and commercial layer farms.

The broiler farming and layer farming operating segments are aggregated for segment reporting. Both operations have similar risk profiles, being the production risk inherent to live bird farming.
The exposure of these operations to market risk is very low.

Notes to the summary consolidated financial statements
1.  Basis of preparation
The summary consolidated financial statements are prepared in accordance with the requirements of the JSE Ltd Listings Requirements for preliminary reports, and the requirements of the Companies Act
applicable to summary financial statements. The Listings Requirements require preliminary reports to be prepared in accordance with the framework concepts and the measurement and recognition requirements
of International Financial Reporting Standards ("IFRS") and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the
Financial Reporting Standards Council and to also, as a minimum, contain the information required by IAS 34 Interim Financial Reporting. The accounting policies applied in the preparation of the
consolidated annual financial statements from which the summary consolidated financial statements were derived are in terms of IFRS and are consistent with those accounting policies applied in
the preparation of the previous consolidated annual financial statements.

The directors take full responsibility for the preparation of the preliminary report and that the financial information has been correctly extracted from the underlying
consolidated annual financial statements.

2.  Accounting policies
These summary consolidated financial statements incorporate accounting policies that are consistent with those applied in the Group's consolidated financial statements for the year ended 30
September 2016 and with those of previous financial years. The Group has not adopted any revised accounting standards for the first time for the financial year beginning on 1 October 2015.


                                                                                                  Audited          Audited
                                                                                               Year ended       Year ended
                                                                                             30 September     30 September
                                                                                                     2016             2015
                                                                                                    R'000            R'000

3.  Other gains/(losses) - net
Biological assets fair value adjustment                                                            50 293          111 882
 Unrealised - reflected in carrying amount of biological assets                                    (7 303)          (4 489)
 Realised - reflected in cost of goods sold                                                        57 596          116 371
Agricultural produce fair value adjustment                                                         86 475          121 128
 Unrealised - reflected in carrying amount of biological assets                                    (1 012)            (524)
 Realised - reflected in cost of goods sold                                                        87 487          121 652
Foreign exchange differences                                                                       (6 212)           4 000
Foreign exchange contract fair value adjustments                                                   (9 291)            (108)
Foreign exchange contract cash flow hedging ineffective losses                                       (412)               -
Profit on disposal of property, plant and equipment                                                34 947            1 580
                                                                                                  155 800          238 482

4.  Earnings per ordinary share
Basic and diluted
The calculation of basic and diluted earnings per share is based on profit for the period 
attributable to owners of the parent divided by the weighted average number of ordinary 
shares in issue during the year:

Profit for the year                                                                                91 354          126 916

Headline earnings is calculated in accordance with Circular 2/2015 issued by the South African
Institute of Chartered Accountants.

The Group has no dilutive potential ordinary shares.

Reconciliation between profit for the period attributable to owners of the parent and
headline earnings
   
Profit for the year                                                                                91 354          126 916

Remeasurement of items of a capital nature
Profit on disposal of property, plant and equipment                                               (25 516)          (1 000)
 Gross                                                                                            (34 947)          (1 580)
 Tax effect                                                                                         9 431              580

Headline earnings for the year                                                                     65 838          125 916

Weighted average number of ordinary shares in issue ('000)                                        233 128          233 249

Earnings per share (cents)
Basic and diluted                                                                                      39               54
Headline earnings per share (cents)
Basic and diluted                                                                                      28               54


                                                                                                  Audited          Audited
                                                                                             30 September     30 September
                                                                                                     2016             2015
                                                                                                    R'000            R'000

5.  Contingent liabilities
Guarantees in terms of loans by third parties to contracted service providers                      28 872           42 300

Litigation
Dispute with egg contract producers
The remaining claim, as previously reported, has been settled. The settlement had no adverse financial impact on the Group.

Termination of contract
The Group received a summons in respect of early termination of a distribution contract. The matter will be defended in the High Court.

Management is of the view, based on legal advice regarding the merits of the claim against the Group, that the Group will not incur any material liability in this respect.

Customer claim
The Group received a summons in respect of a claim for performance of day-old pullets delivered to the customer. The matter will be defended in the High Court.

Management is of the view, based on legal advice regarding the merits of the claim against the Group, that the Group will not incur any material liability in this respect.

Allegations of anti-competitive trade practices - Zambia
The Group received a notice of investigation from the Zambian Competition and Consumer Protection Commission regarding alleged breach of the Competition and Consumer Protection Act. The
investigation is currently still underway and no formal feedback has been received.

Management is of the view that the Group will not incur any material liability in this regard.

6. Future capital commitments
Capital expenditure approved by the Board and contracted for amounts to R12.4 million (2015: R49.0 million). Capital expenditure approved by the Board, but not yet contracted for, amounts to
R156.6 million (2015: R113.0 million).

7. Business combinations
During the year under review the following businesses were acquired and all assets and liabilities relating to these acquisitions have been accounted for on an acquisition basis:


                                                                                                                  Audited
                                                                                                               Year ended
                                                                                                             30 September
                                                                                                                     2016
                                                                                                                    R'000

Olifantskop Feed Mill (on 1 February 2016)
Fair value
Property, plant and equipment                                                                                      37 857
Intangible assets                                                                                                   5 758
Inventory                                                                                                           6 844
Trade and other payables                                                                                             (258)
Purchase consideration - settled in cash                                                                           50 201

Reason for business combination:
To grow the external feeds sales volumes by entering into the Eastern Cape animal feed market.

Contribution since acquisition:
Revenue                                                                                                           157 738
Operating profit before finance cost and income tax                                                                 6 215

Pro forma contribution assuming the acquisition was at the beginning of the year:
Revenue                                                                                                           236 607
Operating profit before finance cost and income tax                                                                 9 323

Galovos Egg business - Mozambique (on 19 September 2016)
Fair Value
Plant and equipment                                                                                                24 600
Current biological assets                                                                                           4 185
Inventory                                                                                                             913
Trade and other payables                                                                                              (80)
Purchase consideration - settled in cash                                                                           29 618

Reason for business combination:
The Acquisition supports the strategic objective of Quantum Foods to expand into selected new markets in Africa. The business in Mozambique relates to the producing and selling of commercial
eggs in the Mozambican market.

The operating results from this business combination has not been accounted for due to the effective date and the contribution of the transactions being minimal.

8.  Events after the reporting period
Dividend
A final dividend of 6 cents per ordinary share has been declared for the year ended 30 September 2016, on 22 November 2016. This will only be reflected in the statement of changes in equity in
the next reporting period.

Additional information disclosed:
These dividends are declared from income reserves and qualify as a dividend as defined in the Income Tax Act, Act 58 of 1962.

Dividends will be paid net of dividends tax of 15%, to be withheld and paid to the South African Revenue Service by the Company. Such tax must be withheld unless beneficial owners of the
dividend have provided the necessary documentary proof to the relevant regulated intermediary that they are exempt therefrom, or entitled to a reduced rate as result of the double taxation
agreement between South Africa and the country of domicile of such owner.

The net dividend amounts to 5.1 cents per ordinary share for shareholders liable to pay dividends tax. The dividend amounts to 6.0 cents per ordinary share for shareholders exempt from paying
dividends tax.

The number of issued ordinary shares is 231 803 316 as at the date of this declaration.

There have been no other events that may have a material effect on the Group that occurred after the end of the reporting period and up to the date of approval of the summary consolidated
financial statements by the Board.

9. Preparation of financial statements
The summary consolidated financial statements have been prepared under the supervision of AH Muller, CA(SA), Chief Financial Officer.

10. Audit
The summarised report is extracted from the audited information, but is not itself audited. The annual financial statements were audited by PricewaterhouseCoopers Inc., who expressed an
unmodified opinion thereon. The audited annual financial statements and the auditor's report thereon are available for inspection at the Company's registered office.

The Group's auditors have not reviewed nor reported on any of the comments relating to prospects.

Directors: WA Hanekom (Chairman), PE Burton, GG Fortuin, Prof. ASM Karaan, N Celliers, HA Lourens (CEO)*, AH Muller (CFO)*. (*Executive)

Company secretary: INT Ndlovu - Email: Ntokozo.Ndlovu@quantumfoods.co.za

Registered address: 11 Main Road, Wellington, 7655, PO Box 1183, Wellington, 7654, South Africa
Tel: 021 864 8600 - Fax: 021 873 5619 - Email: info@quantumfoods.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: 24/11/2016 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
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