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CROOKES BROTHERS LIMITED - Interim results and Dividend Declaration foe the six month ended 30 September 2016

Release Date: 29/11/2016 14:00
Code(s): CKS     PDF:  
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Interim results and Dividend Declaration foe the six month ended 30 September 2016

CROOKES BROTHERS LIMITED
(Incorporated in the Republic of South Africa)
Registration No. 1913/000290/06
Share code : CKS      ISIN No: ZAE000001434
("Crookes Brothers" or "the company" or "the group")

Interim results and Dividend Declaration foe the six month ended 30 september 2016

COMMENTARY

The board cautions against using interim results to project full year earnings, due to the effect of seasonality of crop revenues
on profitability.

Earnings
Profit after tax has increased by 165% to R70,0 million compared to R26,4 million in the corresponding prior period. Headline
earnings for the first half of the financial year have been favourably impacted by a number of factors, which have resulted in
an increase of 54% to R39,2 million, compared to R25,5 million in the corresponding prior period. Profitability for the full year is
expected to be higher than the prior year, but below that indicated by an extrapolation of the interim results.

On 1 April 2016 the company terminated a lease which had four years' remaining on a significant portion of the Komatipoort
operation in exchange for a 49% participation in a community joint venture with a 20 year lease over the farm. Profit attributable
to non-controlling interests increased by R30 million as a result.

The group's participation represents a positive contribution to the land transformation process. In the first year significant
payments have been made in respect of lease fees and dividends to the community benefiting more than 500 families.

Change in accounting policy
Prior year earnings are adjusted to account for the effects of the adoption of IAS 16 whereby bearer biological assets are no
longer fair valued, and are classified as Property Plant and Equipment at cost and depreciated over their useful life. The effects
of this restatement are presented in note 6 of the interim financial statements.

Operations
Deciduous fruit
Operating profit for the six month period ended 30 September 2016 is R25,6 million lower than the corresponding prior period,
mainly as a result of a decline in deciduous fruit prices since the beginning of the financial year. This resulted in a write-down
against stock valuation at then forecast prices as at 31 March 2016, the effects of which are reversed in the current year and
are reflected in the interim results.

Sugar cane
Sugar cane operating profit has increased by R84,5 million against the corresponding prior period, driven by higher prices
across all regions. Cane production volumes decreased by 19% due to persistent drought conditions affecting the whole of
Southern Africa.

South African cane operations in aggregate realised an improvement in operating profit of R56 million, mainly due to a 30%
increase in the SA RV price. Operating profit from the Swaziland operation is R25 million higher than the corresponding prior
period as a result of a 30% increase in the Swaziland sucrose price. Zambia operations have realised an improvement of
R4 million as a result of a 21% increase in the ERC price.

Bananas
Banana production has improved by 6% on 2015 supported by a 48% increase in banana prices, as the market has been
undersupplied as a result of the drought conditions. This resulted in a R16,6 million increase in operating profit against the
corresponding prior period.

Macadamias
The macadamia orchards under development in northern Mozambique continue to make good progress, with the first small
crop expected in March 2017.

Worldwide demand for macadamia nuts remains strong and continues to outstrip supply, keeping macadamia prices high.
It is expected that this operation will become a major contributor to the group's operating profit in years to come, with positive
cash flows from the project being achieved from around 2021.

Prospects
In addition to the macadamia project in northern Mozambique, two other major projects are currently under implementation
following receipt of the required regulatory approvals.

The greenfield development of a 300 hectare banana farm in southern Mozambique, in partnership with our shareholder,
SilverStreet, was initiated following receipt of environmental authority approval. The first 40 hectares of bananas will be planted
in February 2017.

The first phase of the Renishaw property development, comprising a 550 unit mature lifestyle estate, commenced in April 2016.
This six year project is on budget with all 28 units in phase one pre-sold to date and continuing strong demand. Initial revenue
from first unit sales will reflect in the group's financial statements in the year ending March 2018.

The prospects of the group are encouraging, with these new projects under implementation, the macadamia project coming
into production and the deciduous orchards approaching maturity. The group continues to seek expansion opportunities in
the agricultural sector in Southern Africa to expand and diversify its portfolio of assets. The group has responded well to the
drought conditions through a combination of better prices, quality farms and good agricultural practices.

Interim cash dividend declaration
The board continues to maintain a conservative dividend policy, given the group's ongoing growth and investment strategy.

The board has consequently declared a gross cash dividend of 50,0 cents (2016: 35,0 cents) per share for the six month period
ended 30 September 2016, payable to shareholders recorded in the register of the company at the close of business on the
record date, Friday, 6 January 2017.

In respect of the gross interim cash dividend, the following further information is provided:

-  The dividend has been declared from income reserves;
-  The dividend withholding tax rate is 15% resulting in a net dividend of 42,5 cents per share to those shareholders who are
   not exempt from the dividend withholding tax;
-  The company's tax reference number is 9696/001/71/9; and
-  The issued number of shares as at declaration date is 15 264 317.

The interim dividend will be paid on Monday, 9 January 2017 to shareholders recorded in the register of the company at close
of business on the record date Friday, 6 January 2017.

The salient dates of the declaration and payment of these dividends are as follows:
Last day to trade cum-dividend                                                                     Tuesday, 3 January 2017
Shares commence trading ex-dividend                                                              Wednesday, 4 January 2017
Record date                                                                                         Friday, 6 January 2017
Payment date                                                                                        Monday, 9 January 2017

Share certificates may not be dematerialised or re-materialised between Wednesday, 4 January 2017 and Friday, 6 January 2017,
both days inclusive.

Any reference to the group's future financial performance included in this announcement has not been reviewed nor reported
on by the company's auditors.

For and on behalf of the board

JR Barton                                                                                                      GS Clarke
Chairman                                                                                               Managing Director

Durban
29 November 2016

Registered office and postal address
170 Flanders Drive, Mount Edgecombe, KwaZulu-Natal
PO Box 611, Mount Edgecombe, KwaZulu-Natal, 4300

Website
www.cbl.co.za

Transfer secretaries
Computershare Investor Services (Pty) Ltd
PO Box 61051, Marshalltown, 2107

Sponsor
Sasfin Capital
A division of Sasfin Bank Limited

Directors:
JR Barton* (Chairman), GS Clarke (Managing), GL Veale (Financial), RGF Chance*, TJ Crookes*, TK Denton*(#), JAF Hewat*,
P Mnganga*, MT Rutherford*, RE Stewart*, G Vaughan-Smith*(#)
*Non-executive director (#)British

Company secretary:
Highway Corporate Services (Pty) Limited

CONDENSED CONSOLIDATED STATEMENT OF
PROFIT OR LOSS

                                                                                           Unaudited        Unaudited       Unaudited
                                                                                       Six months to    Six months to    12 months to
                                                                                        30 September     30 September        31 March
                                                                                                2016            2015*           2016*
                                                                              Notes            R'000            R'000           R'000
Revenue                                                                                      451 699          353 162         542 712
Operating profit                                                                             103 342           43 456          72 212
 Share of profit of associate companies                                                            –                –           3 549
 Dividend income                                                                                   –                –             109
 Net finance income/(cost)                                                        1            1 295          (4 693)         (4 179)
Profit before taxation                                                                       104 637           38 763          71 691
 Taxation                                                                                   (34 636)         (12 301)        (21 638)
Profit for the period                                                                         70 001           26 462          50 053
Profit attributable to:
 Owners of the company                                                                        39 287           25 462          48 893
 Non-controlling interests                                                                    30 714            1 000           1 160
                                                                                              70 001           26 462          50 053
Earnings per share
 Basic                                                                       (cents)           257,4            202,5           366,9
 Diluted                                                                     (cents)           256,7            198,7           365,5
Headline earnings per share
 Basic                                                                       (cents)           257,0            203,1           366,0
 Diluted                                                                     (cents)           256,4            199,3           364,6
Dividend per share
 Interim                                                                     (cents)            50,0             35,0            35,0
 Final                                                                       (cents)               –                –           115,0
* Prior periods restated to account for change in accounting policy per note 6.

CONDENSED CONSOLIDATED STATEMENT OF
OTHER COMPREHENSIVE INCOME

                                                                                           Unaudited        Unaudited       Unaudited
                                                                                       Six months to    Six months to    12 months to
                                                                                        30 September     30 September        31 March
                                                                                                2016            2015*           2016*
                                                                                               R'000            R'000           R'000
     
Net profit for the period                                                                     70 001           26 462          50 053
Other comprehensive loss                                                                    (58 143)          (8 661)        (26 254)
Items that may not be reclassified subsequently to profit or loss, net of tax:     
Remeasurement of defined benefit surplus                                                           –                –           (115)
Remeasurement of post-employment medical aid obligation                                            –                –           1 773
Items that may be reclassified subsequently to profit or loss, net of tax:     
Net fair value gain on available-for-sale financial assets                                         –                –             128
Exchange differences on translating foreign operations (refer to note 5)                    (58 143)          (8 661)        (28 040)
Total comprehensive income for the period                                                     11 858           17 801          23 799
Total comprehensive income for the period attributable to:     
Owners of the company                                                                       (18 856)           16 801          22 639
Non-controlling interests                                                                     30 714            1 000           1 160
     
                                                                                              11 858           17 801          23 799
* Prior periods restated to account for change in accounting policy per note 6.

CONDENSED CONSOLIDATED STATEMENT OF
FINANCIAL POSITION   
                                                                                             Unaudited        Unaudited     Unaudited
                                                                                          30 September     30 September      31 March
                                                                                                  2016            2015*         2016*
                                                                                 Notes           R'000            R'000         R'000
ASSETS   
Non-current assets                                                                             760 916          824 545       801 209
Property, plant and equipment                                                                  731 988          794 947       769 941
Unlisted investments                                                                               710              627           710
Investment in associates                                                                        23 612           19 336        23 612
Retirement benefit surplus                                                                           –            9 095             –
Unsecured loans: long-term                                                                           –              540             –
Deferred taxation asset                                                                          2 421                –         6 946
Goodwill                                                                             7           2 185                –             –
Current assets                                                                                 575 791          297 312       495 433
Inventories                                                                                     51 863           28 917       105 058
Biological assets                                                                              159 018          127 906       196 065
Trade and other receivables                                                                    184 993          123 050        53 963
Taxation                                                                                         2 587              786         4 356
Retirement benefit surplus                                                                       9 708                –         9 708
Unsecured loans: short-term                                                                        540                –           540
Other financial assets                                                                               –            6 221             –
Cash and cash equivalents                                                                      167 082           10 432       125 743
   
Total assets                                                                                 1 336 707        1 121 857     1 296 642
EQUITY AND LIABILITIES   
Capital and reserves                                                                         1 025 249          790 714     1 004 117
Share capital and premium                                                                      226 271           13 009       226 271
Investment revaluation reserve                                                                     997              869           997
Foreign currency translation reserve                                                 5        (83 458)          (5 936)      (25 315)
Share-based payment reserve                                                                      1 434            1 036         1 434
Retained earnings                                                                              818 548          776 128       796 815
Equity attributable to owners of the company                                                   963 792          785 106     1 000 202
Non-controlling interests                                                                       61 457            5 608         3 915
Non-current liabilities                                                                        206 378          215 826       209 485
Deferred taxation                                                                              130 080          118 050       132 559
Long-term borrowings: interest-bearing                                                          45 223           47 492        42 967
Long-term liability: interest-free                                                              31 075           39 714        33 959
Post-employment medical aid obligation                                                               –           10 570             –
Current liabilities                                                                            105 080          115 317        83 040
Trade, other payables and provisions                                                            34 167           26 223        46 441
Short-term borrowings: interest-bearing                                                         33 973           85 845        24 629
Outside shareholders' loan                                                                         616              624           660
Taxation                                                                                        27 321            2 590         2 307
Dividend withholding taxation                                                                       63               35            63
Post-employment medical aid obligation                                                           8 940                –         8 940
   
Total equity and liabilities                                                                 1 336 707        1 121 857     1 296 642
Net asset value per share                                                                        6 717            6 287         6 578
Number of shares   
In issue                                                                                    15 264 317       12 576 817    15 264 317
Weighted average (basic)                                                                    15 264 317       12 576 817    13 325 792
Weighted average (diluted)                                                                  15 304 690       12 812 817    13 376 735
* Prior periods restated to account for change in accounting policy per note 6.

CONDENSED CONSOLIDATED STATEMENT OF
CASH FLOWS

                                                                                           Unaudited        Unaudited       Unaudited
                                                                                       Six months to    Six months to    12 months to
                                                                                        30 September     30 September        31 March
                                                                                                2016            2015*           2016*
                                                                                               R'000            R'000           R'000
     
Operating profit for the period                                                              103 342           43 456          72 212
Other comprehensive income                                                                         –                –           2 302
Depreciation                                                                                  22 490           23 690          51 326
Change in fair value of biological assets                                                     34 143           33 171        (24 327)
Other non-cash items                                                                           5 059            2 194          13 388
     
Operating cash flows before movements in working capital                                     165 034          102 511         114 901
Net outflow from changes in working capital                                                 (83 943)         (40 856)        (30 778)
Interest received                                                                              4 304              178           3 847
Interest paid                                                                                (3 009)          (4 871)         (8 026)
Income taxes paid                                                                            (6 772)          (1 500)         (8 358)
Purchase of annuities for post-employment medical aid benefits                                     –                –           (366)
     
Net cash flows from operating activities                                                      75 614           55 462          71 220
Net investing activities     
Proceeds on disposal of investments                                                                –              100             100
Proceeds on disposal of property, plant and equipment                                          7 027            1 078             665
Net cash gained from acquisition of subsidiary                                                18 237                –               –
Investment in expansion of area under crop                                                     2 019         (14 827)        (45 530)
Capital expenditure and other investing activities                                          (52 677)         (22 630)        (27 915)
     
Net cash flows before dividends and financing activities                                      50 220           19 183         (1 460)
Dividends paid                                                                              (17 554)         (10 690)        (16 945)
Proceeds from issue of equity instruments of the company                                           –                –         215 000
Payment for share issue costs                                                                      –                –         (1 738)
Net increase/(decrease) in borrowings                                                          8 673         (11 134)        (82 187)
     
Net increase/(decrease) in cash and cash equivalents                                          41 339          (2 641)         112 670
Cash and cash equivalents at beginning of the period                                         125 743           13 073          13 073
     
Cash and cash equivalents at end of the period                                               167 082           10 432         125 743
* Prior periods restated to account for change in accounting policy per note 6.

CONDENSED CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
     
                                                                                           Unaudited        Unaudited       Unaudited
                                                                                       Six months to    Six months to    12 months to
                                                                                        30 September     30 September        31 March
                                                                                                2016            2015*           2016*
                                                                                               R'000            R'000           R'000
     
Balance at beginning of period                                                             1 004 117          783 603         783 603
Share-based payment reserve movement                                                               –                –             398
Total comprehensive income for the period                                                     11 858           17 801          23 799
Dividends declared and paid                                                                 (17 554)         (10 690)        (16 945)
Share issue                                                                                        –                –         215 000
Share issue costs                                                                                  –                –         (1 738)
Additional non-controlling interests arising on the acquisition of subsidiary     
  (refer to note 7)                                                                           26 828                –               –
     
Total equity                                                                               1 025 249          790 714       1 004 117     
* Prior periods restated to account for change in accounting policy per note 6.

CONDENSED CONSOLIDATED
SEGMENTAL ANALYSIS

                                                                                        Unaudited         Unaudited         Unaudited
                                                                                    Six months to     Six months to      12 months to
                                                                                     30 September      30 September          31 March
                                                                                             2016             2015*             2016*
                                                                                            R'000             R'000             R'000

Revenue
Sugar cane                                                                                265 909           222 740           283 321
Deciduous fruit                                                                            99 720            69 424           134 012
Bananas                                                                                    74 590            49 035           104 962
Other operations                                                                           11 480            11 963            20 417

                                                                                          451 699           353 162           542 712

Operating profit*
Sugar cane^                                                                               134 336            49 872            49 108
Deciduous fruit                                                                          (24 861)               832            46 719
Bananas^                                                                                   26 582             9 934            23 718
Macadamias^                                                                              (11 837)          (11 258)          (13 782)
Other operations/sundry income                                                              (595)             6 164             6 291
Group^                                                                                   (20 283)          (12 088)          (39 842)

                                                                                          103 342            43 456            72 212

The effects of foreign exchange losses included in operating segments
above, are as follows:
Sugar cane                                                                                    691           (3 085)           (1 820)
Bananas                                                                                       297                 –                 –
Macadamias                                                                               (12 697)           (4 692)           (8 119)

                                                                                         (11 709)           (7 777)           (9 939)
*    Prior periods restated to account for change in accounting policy per note 6.
^    Operating lease rentals and unrealised foreign exchange losses have been reclassified and allocated to relevant crop segments in current
     and prior periods.

CONDENSED CONSOLIDATED NOTES


                                                                                           Unaudited        Unaudited       Unaudited
                                                                                       Six months to    Six months to    12 months to
                                                                                        30 September     30 September        31 March
                                                                                                2016            2015*           2016*
                                                                                               R'000            R'000           R'000
1.NET FINANCE INCOME/(COST)   
  Interest paid                                                                              (3 009)          (4 871)         (8 026)
  Interest received                                                                            4 304              178           3 847
                                                                                               1 295          (4 693)         (4 179)
2.CAPITAL EXPENDITURE   
  Capital expenditure   
  – Incurred                                                                                  36 639           25 955          46 305
  Capital commitments   
  – Contracted                                                                                14 442            5 940           9 880
  – Authorised but not contracted                                                            152 677            7 914         221 351
   
                                                                                             167 119           13 854         231 231
3.HEADLINE EARNINGS   
  Profit for the period attributable to owners of the company                                 39 287           25 462          48 893
  Adjusted for:   
  (Profit)/loss on disposal of plant and equipment                                              (73)               53           (399)
  Tax effect of the adjustments                                                                   21               23             280
   
  Headline earnings                                                                           39 235           25 538          48 774
   
4.EXCHANGE RATES   
  Rand/US Dollar closing                                                                       13,87            13,90           14,85
  Rand/US Dollar average                                                                       14,56            12,55           13,79
  Rand/Metical closing                                                                          0,18             0,33            0,29
  Rand/Metical average                                                                          0,23             0,33            0,33
  Rand/Kwacha closing                                                                           1,40             1,24            1,33
  Rand/Kwacha average                                                                           1,44             1,58            1,40
  * Prior periods restated to account for change in accounting policy per note 6.

5.FOREIGN CURRENCY TRANSLATION RESERVE
  Exchange differences relating to the translation of foreign operations
  from their functional currency to the group's presentation currency are
  recognised through other comprehensive income and accumulated
  in the foreign currency translation reserve.

  The movement in the foreign currency translation reserve, arising
  mainly from the devaluation of the Meticais over the past six months,
  is as follows:
  Balance at beginning of period                                                            (25 315)            2 725           2 725
  Exchange differences recognised in other comprehensive income                             (58 143)          (8 661)        (28 040)
  
  Balance at end of period                                                                  (83 458)          (5 936)        (25 315)
  * Prior periods restated to account for change in accounting policy per note 6.

6.AMENDMENTS TO IAS 16 AND IAS 41 – AGRICULTURE: BEARER PLANTS
  The amendments to IAS 16 Property Plant and Equipment and IAS 41 Biological Assets require bearer assets to be accounted
  for under property, plant and equipment in accordance with IAS 16 instead of IAS 41.

  Previously under IAS 41, bearer assets were fair valued through profit and loss on an annual basis resulting in the group
  enjoying a non-cash flow profit, as bearer fair values increased over time. Under the new standard, the bearer asset is
  capitalised at cost, to property plant and equipment and depreciated over its useful life.

  Agricultural produce growing on bearer plants continues to be accounted for at fair value in accordance with IAS 41.

  In terms of the adoption of IAS 16, prior year comparatives must be restated by adjusting for the effects of prior year bearer
  fair value adjustments. The prior period's adjustment on the group's income statement is as follows:

                                                                                                         Unaudited        Unaudited
                                                                                                     Six months to     12 months to
                                                                                                      30 September         31 March
                                                                                                              2015             2016
                                                                                                             R'000            R'000
  Operating profit                                                                                           4 112         (15 326)
  Deferred tax                                                                                             (1 507)            3 616
  Total attributable to:                                                                                     2 605         (11 710)
  Non-controlling interests                                                                                    113              138
  Owners of the company                                                                                      2 718         (11 572)
  
  In terms of the adoption of IAS 16, bearer biological assets are now reclassified as    
  property, plant and equipment.    
  
  The effect of the reclassification adjustment on the prior periods group balance sheet    
  is as follows:    
  
  Deemed cost of bearer biological assets reclassified as property, plant and equipment                    284 891          309 652
  Effect of change in accounting policy                                                                      4 112         (15 326)
  Net book value of bearer biological assets reclassified as property, plant and equipment                 289 003          294 326

7.ACQUISITION OF SILVERLANDS MOZAMBIQUE HOLDINGS LIMITED
  As part of the group's investment into a 300 hectare banana project, on 7 September 2016, the group acquired a 49,5%
  share in Silverlands Mozambique Holdings Limited ("SMHL"). SMHL is incorporated in Mauritius and is the parent company
  of Quinta da Bela Vista Limitada ("QBV"), the wholly owned operating entity incorporated in Mozambique.

  The remaining 50,5% ownership interest in SMHL is held by SilverStreet Private Equity Strategies ("SilverStreet"), a subsidiary
  of the group's majority shareholder Silverlands (SA) Plantations S.A.R.L. a company incorporated in the United Kingdom.

  Based on the contractual arrangements between the group and SilverStreet, the group has the power to direct the
  relevant activities of SMHL, and thereby QBV. The directors therefore concluded that the group has control over SMHL and
  QBV.

  Fair value of SMHL net assets acquired                                                                                       R'000

  As at 7 September 2016
  Share capital                                                                                                               57 770
  Pre-acquisition retained losses                                                                                            (3 090)
  Pre-acquisition foreign currency translation reserve                                                                       (1 506)

  Fair value of identifiable net assets                                                                                       53 174
  Adjusted for non-controlling interests @ 50,5%                                                                            (26 828)

  Fair value of identifiable net assets attributable to owners of the company                                                 26 346
  Consideration paid                                                                                                        (28 621)

  Goodwill – at acquisition                                                                                                    2 275
  Effect of foreign currency exchange differences1                                                                              (90)

  Goodwill – at end of period                                                                                                  2 185
  (1) In accordance with IAS 21, goodwill arising from the acquisition of SMHL, has been translated at period end at the spot exchange 
      rate, with the corresponding exchange difference accumulated in equity, reflected under foreign currency translation reserve.


8.BASIS OF PREPARATION AND ACCOUNTING POLICIES
  The condensed consolidated unaudited results for the half-year ended 30 September 2016 have been prepared in
  accordance with the framework concepts and the measurement and recognition requirements of International Financial
  Reporting Standards (IFRS), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee,
  Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, the information as required
  by International Accounting Standard 34 Interim Financial Reporting and the requirements of the Companies Act of South
  Africa, as amended.

  The report has been prepared using accounting policies that comply with IFRS which are consistent with those applied
  in the financial statements for the year ended 31 March 2016 and were prepared by Mr N Naidoo CA(SA) under the
  supervision of the Group Financial Director, Mr GL Veale CA(SA).

  Crookes Brothers Limited has adopted all the new or revised accounting pronouncements as issued by the IASB which
  were effective for Crookes Brothers Limited from 1 January 2016. The adoption of these standards and its recognition and
  measurement impact on the financial results of the group, have been disclosed in note 6.

  29 November 2016

  Sponsor
  SASFIN CAPITAL (a division of SASFIN Bank Limited)

www.cbl.co.za



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