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Summary Preliminary Group Financial Results For The Year Ended 28 February 2017
Zeder Investments Limited
Incorporated in the Republic of South Africa
(Registration number: 2006/019240/06)
JSE share code: ZED
ISIN number: ZAE000088431
("Zeder" or "the group")
SUMMARY PRELIMINARY GROUP FINANCIAL RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2017
HIGHLIGHTS
- SOTP value up 23.1% to R8.53 per share as at 28 February 2017
- Recurring headline earnings up 0.5% to 42.6 cents per share
- Dividend up 22.2% to 11 cents per share
OVERVIEW
Zeder is an investor in the broad agribusiness industry, with a specific focus on the food and beverage
sectors. Its underlying investment portfolio was valued at R15.2bn on 28 February 2017. Zeder's 27.1%
interest in Pioneer Foods remains its largest investment, representing 62.7% (2016: 60.9%) of the
portfolio.
STRATEGY
Zeder is a long-term investor that owns large, strategic interests in companies and plays an active
role therein. It assists with the determination of appropriate long-term strategies, optimal allocation
of capital and ongoing measurement and monitoring of performance. During the year under review, Zeder
maintained its strategy of "Internal Focus" and dedicated most of its efforts to existing investments.
This strategic focus has delivered satisfactory results and will be maintained, as Zeder seeks to drive
for additional growth from its existing investment platform. New opportunities are evaluated on an
ongoing basis and will be pursued when appropriate.
INTERNALISATION OF PSG GROUP MANAGEMENT AGREEMENT
On 29 August 2016, Zeder shareholders voted in favour of acquiring the rights to the management
agreement from PSG Group in exchange for the issue of 207,661,758 Zeder shares, representing a 12%
equity interest. PSG Group's shareholding consequently increased from 34.5% to 42.1%, with no further
management fees payable to PSG Group in terms of this agreement with effect from 1 September 2016.
The base management fee payable to PSG Group for the six months to 31 August 2016, calculated as
1.5% p.a. of Zeder's volume weighted average market capitalisation, amounted to R75m
(Feb 2016: R155m). The rights to the PSG Group management agreement so acquired, valued at R1.45bn,
did not meet the recognition criteria for intangible assets in terms of International Financial
Reporting Standards (IFRS), and was consequently accounted for in the income statement as a
non-recurring headline expense. It should be noted that this was a once-off charge, with Zeder
benefiting from the related cost savings thereafter.
This transaction should yield positive results for Zeder shareholders as free cash flow will improve
significantly, while the large historical discount between Zeder's share price and
sum-of-the-parts ("SOTP") value per share has already narrowed as anticipated. The existing PSG Group
representatives continue to serve on both the Zeder Executive Committee and Zeder Board and assist in
determining strategy and making investment decisions. PSG Group remains the largest shareholder in
Zeder.
FINANCIAL RESULTS
The two key benchmarks which Zeder believes to measure performance by are SOTP value per share and
recurring headline earnings per share.
SOTP
Zeder's SOTP value per share, calculated using the quoted market prices for all JSE-listed investments,
and market-related valuations for unlisted investments, increased by 23.1% during the reporting period
to R8.53 as at 28 February 2017. At the close of business on Friday, 31 March 2017, Zeder's SOTP value
per share was R8.95.
29 Feb 2016 28 Feb 2017 31 Mar 2017
Interest Interest Interest
Company (%) Rm (%) Rm (%) Rm
Pioneer Foods 27.2 7 574 27.1 9 538 27.1 10 288
Capespan 96.6 2 027 98.1 1 975 98.1 1 975
Zaad 92.3 1 246 91.4 1 531 91.4 1 531
Kaap Agri 39.4 758 39.8 1 321 39.8 1 321
Agrivision 55.9 614 55.6 614 55.6 614
Quantum Foods 26.4 168 26.7 193 26.7 184
Other 44 39 41
Total investments 12 431 15 211 15 954
Cash 118 173 166
Other net liabilities (324) (678) (680)
SOTP value pre mgmt fee liability 12 225 14 706 15 440
Mgmt fee liability* (1 667)
SOTP value post mgmt fee liability 10 558 14 706 15 440
Number of shares in issue (net of
treasury shares) (million) 1 523 1 725 1 725
SOTP value per share post mgmt fee
liability (rand) 6.93 8.53 8.95
* Calculated as 12% newly issued Zeder shares multiplied by Zeder SOTP value per share.
Note: Zeder’s live SOTP is available at www.zeder.co.za.
Recurring headline earnings
Zeder’s consolidated recurring headline earnings is the sum of its effective interest in that of each
of its underlying investments. The result is that investments in which Zeder holds less than 20% and
are generally not equity accountable in terms of accounting standards, are included in the calculation
of consolidated recurring headline earnings, whilst once-off (i.e. non-recurring) income and expenses
are excluded. This provides management and investors with a more realistic and transparent way of
evaluating Zeder’s earnings performance.
Audited
29 Feb 2016 Change 28 Feb 2017
Rm (%) Rm
Recurring headline earnings from investments 805 2 821
Management (base) fee (155) (75)
Net interest, taxation and other income and expenses (18) (55)
Recurring headline earnings 632 9 691
Non-recurring headline earnings
Management fee internalisation charge (1 449)
Other (87) (12)
Headline earnings/(loss) 545 n/a (770)
Non-headline items 237 (26)
Attributable earnings/(loss) 782 n/a (796)
Weighted average number of shares in issue (net of treasury
shares) (million) 1,490 1,622
Recurring headline earnings per share (cents) 42.4 0.5 42.6
Headline earnings/(loss) per share (cents) 36.5 n/a (47.5)
Attributable earnings/(loss) per share (cents) 52.5 n/a (49.1)
The modest 0.5% increase in recurring headline earnings per share for the year under review resulted
from the higher number of shares in issue following the aforementioned internalisation of the PSG Group
management agreement as well as the tough trading conditions experienced at Pioneer Foods, Capespan and
Quantum Foods in particular, offset by commendable results from Kaap Agri, Zaad and Agrivision.
Following the once-off management fee internalisation charge of R1.45bn to the income statement,
Zeder's headline earnings per share and attributable earnings per share decreased significantly from a
36.5 cents per share and 52.5 cents per share profit in the prior year, to a loss of 47.5 cents and
49.1 cents per share in the current year, respectively.
Pioneer Foods
Pioneer Foods reported a 6% increase in adjusted headline earnings per share from continuing operations
for the year ended 30 September 2016. While the core divisions reported satisfactory results from a
volumes, revenue and market share perspective, the impact of rising costs because of the rand weakening
and high commodity prices were evident in declining margins. Pioneer Foods has confirmed the continued
impact of these factors in a SENS trading statement dated 21 February 2017, and cautioned that its
earnings for the six months ended 31 March 2017 were expected to decrease significantly compared to the
corresponding period in the previous financial year. However, management emphasized that they
anticipated earnings to recover during the second half of the financial year. Pioneer Foods is one of
the leading food companies in South Africa and is well positioned to benefit from the growing demand
for food and beverages, both in South Africa and select international markets.
Pioneer Foods is listed on the JSE and further information is available at www.pioneerfoods.co.za.
Capespan
Capespan is an unlisted group with a history spanning more than 70 years. Its core business activities
are focused on the production, procurement, distribution and marketing of fruit worldwide, while it also
owns and operates several strategic logistical and terminal assets in Southern Africa. For its financial
year ended 31 December 2016, Capespan reported a 45% decline in recurring headline earnings per share
following the negative impact that El Nino and corresponding drought conditions had on fruit volumes in
most procurement territories, the negative impact of which was not recoverable through higher market
pricing. The group continues to reposition itself in order to achieve its long-term growth objectives.
During the past year, Zeder invested an additional R206m in Capespan to fund further growth.
Further information about Capespan can be viewed at www.capespangroup.com.
Kaap Agri
Kaap Agri is an unlisted retail, trade and services group that supplies a variety of products and
services to the agri sector and the general public. It has been in existence for more than
100 years with 180 operating points throughout South Africa and Namibia. Despite a challenging macro
environment, the group delivered encouraging results for its financial year ended 30 September 2016,
with headline earnings per share having increased by 15.1%. Its strategy of product and geographic
diversification bodes well, while its recent focus on adding non-agri income streams and improving
efficiencies has gained traction. Kaap Agri recently announced its intention to list on the main
board of the JSE during 2017.
Kaap Agri's results can be viewed at www.kaapagri.co.za.
Zaad
Zaad operates in the specialised agri-inputs industry and currently owns, develops, imports and
distributes a broad range of agri seeds in Africa, Europe and other international emerging markets.
Through Agricol, Klein Karoo Seed Marketing and Gebroeders Bakker, it has a proud history spanning more
than 50 years and currently exports to more than 90 countries. Its portfolio, product and geographic
mix have been structured to mitigate agri cyclicality. The specialised agri-inputs market, and
particularly the proprietary hybrid seed segment, remains attractive and Zaad is well positioned to
benefit from it.
Zaad reported a 13% increase in recurring headline earnings per share for its financial year ended
31 January 2017. In the past year, Zeder invested an additional R57m in Zaad to fund growth, which
should yield positive results in the medium to long term. Zaad entered the agri-chemical market having
acquired a 49% equity investment in Farm-AG, which in recent years has established itself as one of the
largest South African-owned formulators and distributors of crop protection chemicals, selling both
locally and internationally.
On 31 March 2017, Zeder announced that Zaad would be acquiring a 35% equity interest in May Seed, the
largest private sector breeder, producer and distributor of agricultural seed in Turkey. The numerous
potential synergies between Zaad and May Seed should yield additional attractive returns.
Further information can be viewed at www.agricol.co.za, www.seedmarketing.co.za and
www.bakkerbrothers.nl.
Agrivision
Agrivision currently owns and operates two large-scale commercial farming operations and a milling
business in Zambia. It has developed extensive irrigated productive farmland since 2011, and is
continuously evaluating expansion opportunities. After rapid expansion, the focus during the past
18 months has been on achieving acceptable operational efficiencies, while navigating a volatile and
challenging phase in the macro and business cycle. This strategy has yielded positive results with
Agrivision having reported a R40m recurring headline profit for its financial year ended
31 December 2016, as opposed to a R60m recurring headline loss in the previous year.
Further information about Agrivision can be viewed at www.agrivisionafrica.com.
Quantum Foods
Quantum Foods is a diversified feeds and poultry business providing quality animal protein to select
South African and African markets.
Quantum Foods is listed on the JSE and its results can be viewed at www.quantumfoods.co.za.
PROSPECTS
Zeder remains actively involved with its underlying portfolio of companies and continuously seeks new
investment opportunities. We believe that, despite inevitable cyclicality, investing in the agribusiness
industry should offer attractive long-term returns.
CORPORATE ACTIVITY
Pioneer Foods released a cautionary announcement on 7 March 2017 informing the market of preliminary
discussions held in relation to potential corporate activity. Given the significance of Zeder's interest
in Pioneer Foods, Zeder was compelled to release its own cautionary announcement in response thereto.
This cautionary remains in place and shareholders are advised to continue exercising caution when
dealing in the Company's securities until a further announcement is made.
DIVIDEND
The directors have resolved to declare a gross final dividend of 11 cents (2016: 9 cents) per share
from income reserves in respect of the year ended 28 February 2017, which represents a 22.2% increase.
The final dividend amount, net of South African dividend tax of 20%, is 8.8 cents per share for those
shareholders who are not exempt from dividend tax. The number of ordinary shares in issue at the
declaration date is 1,730,514,648 and the income tax number of the company is 9406891151.
The salient dates of this dividend distribution are:
Last day to trade cum dividend Tuesday, 2 May 2017
Trading ex dividend commences Wednesday, 3 May 2017
Record date Friday, 5 May 2017
Date of payment Monday, 8 May 2017
Share certificates may not be dematerialised or re-materialised between Wednesday, 3 May 2017 and
Friday, 5 May 2017, both days inclusive.
SUMMARY GROUP INCOME STATEMENT
Audited Audited
2017 2016
Rm Rm
Revenue 10 209 9 318
Cost of sales (8 546) (7 759)
Gross profit 1 663 1 559
Income
Change in fair value of biological assets 224 244
Investment income 67 47
Net fair value losses (7) (53)
Other operating income 29 51
Total income 313 289
Expenses
Management fees (note 2) (75) (155)
Management fee internalisation charge (note 2) (1 449)
Marketing, administration and other expenses (1 562) (1 430)
Total expenses (3 086) (1 585)
Net income from associates and joint ventures
Share of profits of associates and joint ventures 629 569
Net (loss)/profit on dilution of interest in associates (note 3) (8) 258
Net income from associates and joint ventures 621 827
(Loss)/profit before finance costs and taxation (489) 1 090
Finance costs (232) (180)
(Loss)/profit before taxation (721) 910
Taxation (21) (122)
(Loss)/profit for the year (742) 788
Attributable to:
Owners of the parent (796) 782
Non-controlling interests 54 6
(742) 788
EARNINGS PER SHARE AND NUMBER OF SHARES IN ISSUE
(Loss)/earnings per share (cents)
Recurring headline 42.6 42.4
Headline (basic) (note 3) (47.5) 36.5
Headline (diluted) (49.7) 33.8
Attributable (basic) (49.1) 52.5
Attributable (diluted) (51.3) 49.4
Number of shares (m)
In issue 1 731 1 523
In issue (net of treasury shares) 1 725 1 523
Weighted average 1 622 1 490
Diluted weighted average 1 624 1 490
SUMMARY GROUP STATEMENT OF COMPREHENSIVE INCOME
Audited Audited
2017 2016
Rm Rm
(Loss)/profit for the year (742) 788
Other comprehensive income for the year, net of taxation (470) (132)
Items that may be reclassified to profit or loss
Currency translation adjustments (423) (131)
Share of other comprehensive income of associates (43) (8)
Cash flow hedges (2)
Items that may not be reclassified to profit or loss
(Losses)/gains from changes in financial and demographic assumptions of
post-employment benefit obligations (4) 9
Total comprehensive income for the year (1 212) 656
Attributable to:
Owners of the parent (1 193) 765
Non-controlling interests (19) (109)
(1 212) 656
SUMMARY GROUP STATEMENT OF FINANCIAL POSITION
Audited Audited
2017 2016
Rm Rm
Assets
Non-current assets 9 835 9 182
Property, plant and equipment 1 640 1 562
Intangible assets 666 657
Biological assets (bearer plants) 364 279
Investment in ordinary shares of associates and joint ventures 6 833 6 456
Loans to associates and joint ventures 80
Equity securities 46 50
Loans and advances 111 65
Deferred income tax assets 58 70
Employee benefits 37 43
Current assets 3 336 3 722
Biological assets (agricultural produce) 122 127
Inventories 1 319 1 291
Debt securities 23
Trade and other receivables 1 414 1 575
Loans and advances 36 2
Current income tax assets 23 20
Cash, money market investments and other cash equivalents 422 684
Total assets 13 171 12 904
Equity and liabilities
Ordinary shareholders' equity 8 291 8 251
Non-controlling interests 407 442
Total equity 8 698 8 693
Non-current liabilities 1 320 1 474
Deferred income tax liabilities 94 102
Borrowings 1 015 1 166
Derivative financial liabilities 94 65
Employee benefits 117 141
Current liabilities 3 153 2 737
Borrowings 1 958 1 276
Trade and other payables 1 092 1 328
Current income tax liabilities 37 62
Employee benefits 66 71
Total liabilities 4 473 4 211
Total equity and liabilities 13 171 12 904
Net asset value per share (cents) 480.6 541.8
Tangible net asset value per share (cents) 442.0 498.6
SUMMARY GROUP STATEMENT OF CHANGES IN EQUITY
Audited Audited
2017 2016
Rm Rm
Ordinary shareholders' equity at end of the year 8 291 8 251
Ordinary shareholders' equity at beginning of the year 8 251 7 133
Shares issued 1 449 610
Total comprehensive income for the year (1 193) 765
Transactions with non-controlling interests (37) (181)
Net movement in treasury shares (50)
Other movements 8 3
Dividends paid (137) (79)
Non-controlling interests at end of the year 407 442
Non-controlling interests at beginning of the year 442 608
Shares issued 25 365
Total comprehensive income for the year (19) (109)
Transactions with non-controlling interests (31) (413)
Other movements 3 11
Dividends paid (13) (20)
Total equity 8 698 8 693
Dividend per share (cents) 11.0 9.0
SUMMARY GROUP STATEMENT OF CASH FLOWS
Audited Audited
2017 2016
Rm Rm
Cash generated from operations (note 6) 97 107
Investment income 314 267
Finance costs and taxation paid (235) (254)
Cash flow from operating activities 176 120
Acquisition of subsidiaries (note 4) (115) (275)
Acquisition of associates and joint ventures (109) (58)
Loans to associates and joint ventures (69)
Acquisition of equity securities (1) (7)
Additions to property, plant and equipment (311) (359)
Additions to intangible assets (89) (95)
Proceeds from disposal of non-current assets held for sale (note 5) 13
Proceeds from disposal of property, plant and equipment 35 48
Other (66) (9)
Cash flow from investment activities (725) (742)
Capital contributions by non-controlling interests 25 365
Purchase of treasury shares (62)
Treasury shares sold 11
Dividends paid to group shareholders (137) (79)
Dividends paid to non-controlling interests (13) (20)
Borrowings repaid (289) (396)
Borrowings drawn 866 694
Other (53) (6)
Cash flow from financing activities 348 558
Net decrease in cash and cash equivalents (201) (64)
Exchange differences on cash and cash equivalents (61) (22)
Cash and cash equivalents at beginning of the year 684 770
Cash and cash equivalents at end of the year 422 684
NOTES TO THE SUMMARY GROUP FINANCIAL STATEMENTS
1. Basis of presentation and accounting policies
These summary group financial statements have been prepared in accordance with the recognition and
measurement principles of International Financial Reporting Standards ("IFRS") as issued by the
International Accounting Standards Board, including IAS 34 Interim Financial Reporting; the SAICA
Financial Reporting Guides, as issued by the Accounting Practices Committee; the Financial Reporting
Pronouncements, as issued by the Financial Reporting Standards Council; the requirements of the South
African Companies Act; and the Listings Requirements of the JSE for preliminary reports.
The accounting policies applied in the preparation of these summary group financial statements are
consistent in all material respects with those used in the prior year's annual financial statements.The
group adopted the various revisions to IFRS which were effective for its financial year ended
28 February 2017, however, these revisions have not resulted in material changes to the group's reported
results or disclosures in these summary group financial statements.
In preparing these summary group financial statements, the significant judgements made by management in
applying the group's accounting policies and the key sources of estimation uncertainty were similar to
those disclosed in the group annual financial statements for the year ended 29 February 2016.
2. Management fees and management fee internalisation charge
The base and performance fees were payable to PSG Corporate Services (Pty) Ltd ("PSGCS"), a
subsidiary of PSG Group Ltd, the company's ultimate holding company (as accounted for in terms of
IFRS), in terms of the PSG management agreement. In accordance with the management agreement, PSGCS
provided management services, including corporate, secretarial, advisory, investment and financial
services and all related aspects thereto to the Zeder group of companies.
With regards to the PSG management agreement, the base management fee was calculated at the end of
every half-year as 1.5% p.a (exclusive of VAT) of the company's volume weighted average market
capitalisation for that half-year. The performance management fee was calculated at the end of each
financial year as 20% p.a (exclusive of VAT) of the company's share price outperformance of the GOVI
(comprising the most liquid government bonds, being the government bonds within the top 10 of the All
Bond Index) yield plus 4%, adjusted for dividends ("hurdle price"). The performance management fee
pertaining to a financial year may not exceed that year's base management fee. If the performance
management fee exceeded the base management fee, the excess performance management fee was carried
forward to the following financial year, by adjusting the starting hurdle price of the following year
accordingly. The excess performance management fee at 29 February 2016 amounted to Rnil. Consequently,
the starting hurdle share price for performance fee determination purposes at 1 March 2016 was R5.65.
Effective 1 September 2016, Zeder internalised the management agreement, and issued 207,661,758
ordinary shares to PSGCS, valued at R1.45bn. The rights to the acquired management agreement, did not
meet the recognition criteria for intangible assets in terms of IFRS, and was consequently accounted
for in the income statement as a non-recurring headline expense. It should be noted that this was a
once-off charge, with no further management fees payable to PSGCS in terms of this agreement.
3. Headline (loss)/earnings
Audited Audited
2017 2016
Rm Rm
(Loss)profit for the year attributable to owners of the parent (796) 782
Non-headline items 26 (237)
Gross amounts
Non-headline items of associates and joint ventures 12 20
Net (loss)/profit on dilution of interest in associates 8 (258)
Fair value gains on step-up from associates and joint ventures to subsidiaries (4)
Net profit on sale of property, plant and equipment (1) (30)
Impairment of property, plant and equipment 3 14
Impairment of intangible assets (incl. goodwill) 5 8
Other 1 2
Non-controlling interests (2) 11
Headline (loss)/earnings (770) 545
During the current year, the group through Capespan, incurred a further dilution in the interest in
Golden Wing Mau to 10.46%, due to the issue of shares to a new shareholder in order to finalise the
prior year agreed merger arrangements. During the prior year, Golden Wing Mau, an associate of
Capespan Group Ltd, merged as equals with Joyvio. Both companies are leading players in China’s fresh
fruit business and the merger resulted in the group’s interest in Golden Wing Mau diluting from 25% to
11.3% during the prior year. The group continues to exercise significant influence through, inter alia,
board representation. The dilution gain of R277m consequently recognised by the group was determined
with reference to the fair value at which the merger was concluded being above the carrying value of
the investment. The fair value was determined by the appointed appraiser using the discounted cash
flow method and price-to-sales ratios.
4. Subsidiaries acquired
Incotec laboratory division ("Incotec")
During August 2016, the group, through Zaad Holdings Ltd ("Zaad"), acquired the laboratory division of
Incotec South Africa (Pty) Ltd for a cash consideration of R8m. The laboratory support the research
and development operations of Zaad. No goodwill arose in respect of this business combination.
Accounting for Incotec’s business combination has been finalised.
Loza Lodge
During October 2016, the group, through Agrivision Africa, acquired the business operations of Loza
Lodge, for a cash consideration of R4m. Loza Lodge is a guest house in Mkushi, Zambia. Goodwill arose
in respect of, inter alia, synergies pertaining to the reputation of the lodge and the current farming
operations, but was subsequently impaired. Accounting for Loza Lodge's business combination has been
finalised.
Groot Patrysvlei farming operations ("Groot Patrysvlei")
During September 2016, the group, through Capespan Group Ltd ("Capespan"), acquired the farming
operations of Groot Patrysvlei, a citrus fruit farm, for a cash consideration of R73m. Groot
Patrysvlei complements the group's existing citrus farming operations in South Africa. No goodwill
arose in respect of this business combination. Accounting for Groot Patrysvlei's business combination
has been finalised.
Port Services (Pty) Ltd ("Port Stevedores")
During January 2017, the group, through Capespan, acquired 100% of the issued share capital of Port
Stevedores for a cash consideration of R33m and a contingent consideration of R17m. Port Stevedores
operates in the port logistics industry and goodwill arose in respect of, inter alia, expected
synergies with Capespan's current logistical operations. Accounting for Port Stevedores's business
combination is provisional.
The summarised assets and liabilities recognised at the respective acquisition dates were:
Loza Groot Port Total
Lodge Incotec Patrysvlei Stevedores
Audited Rm Rm Rm Rm Rm
Property, plant and equipment 1 8 29 41 79
Biological assets (bearer plants) 40 40
Inventories 4 4
Trade and other receivables 10 10
Cash, money market investments and other
cash equivalents 3 3
Borrowings (6) (6)
Deferred tax liabilities (1) (1)
Trade and other payables (4) (4)
Total identifiable net (liabilities)/assets 1 8 73 43 125
Goodwill recognised 3 7 11
Total consideration 4 8 73 50 135
Total consideration 4 8 73 50 135
Contingent consideration (17) (17)
Total consideration transferred 4 8 73 33 118
Cash consideration paid (4) (8) (73) (33) (118)
Cash and cash equivalents acquired 3 3
Net cash outflow from subsidiaries acquired (4) (8) (73) (30) (115)
The aforementioned business combinations do not contain any contingent consideration or indemnification
asset arrangements (except for Loza Lodge) and the acquisition-related costs expensed were insignificant.
Had Incotec, Loza Lodge, Groot Patrysvlei and Port Stevedores been consolidated with effect from
1 March 2016 instead of their respective acquisition dates, the consolidated income statement would have
reflected additional revenue of R96.8m and profit after tax of R8.2m.
5. Non-current assets held for sale
At 29 February 2015, non-current assets held for sale comprised the assets of Addo Cold Storage (Pty) Ltd
(a subsidiary). The disposal was concluded during the prior year under review for cash proceeds of R13m,
and non-controlling interests of R17m was derecognised.
6. Cash generated from operations
Audited Audited
2017 2016
Rm Rm
(Loss)/profit before taxation (721) 910
Share of profits of associates and joint ventures (629) (569)
Depreciation and amortisation 180 167
Changes in fair value of biological assets (224) (244)
Net loss/(profit) on dilution of interest in associates 8 (258)
Investment income (67) (47)
Finance costs 232 180
Net harvest short-term biological assets 67 44
Other non-cash items (15) 74
Management fee internalisation 1 449
280 257
Change in working capital and other financial instruments 68 26
Additions to biological assets (251) (176)
Cash generated from operations 97 107
7. Financial instruments
7.1 Financial risk factors
The group's activities expose it to a variety of financial risks; market risk (including currency
risk, cash flow and fair value interest rate risk, and price risk), credit risk and liquidity risk.
The summary group financial statements do not include all financial risk management information and
disclosures as set out in the annual financial statements, and therefore they should be read in
conjunction with the group's annual financial statements for the year ended 28 February 2017. Risk
management continues to be carried out throughout the group under policies approved by the respective
boards of directors.
7.2 Fair value estimation
The information below analyses financial assets and financial liabilities, which are carried at fair
value, by level of hierarchy as required by IFRS 13. The different levels in the hierarchy are defined
below:
Level 1
The fair value of financial instruments traded in active markets is 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.
Level 2
Financial instruments that trade in markets that are not considered to be active but are valued
(using valuation techniques) based on quoted market prices, dealer quotations or alternative pricing
sources supported by observable inputs are classified within level 2. These include over-the-counter
traded financial instruments. As level 2 investments include positions that are not traded in active
markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity
and/or non-transferability, which are generally based on available market information. If all
significant inputs in determining an instrument's fair value are observable, the instrument is included
in level 2.
Level 3
If one or more of the significant inputs is not based on observable market data, the instrument is
included in level 3. Investments classified within level 3 have significant unobservable inputs, as
they trade infrequently.
The fair value of financial assets and liabilities carried at amortised cost approximates their fair
value, while those measured at fair value in the statement of financial position can be summarised as
follows:
Level 1 Level 2 Level 3 Total
Audited Rm Rm Rm Rm
28 February 2017
Assets
Equity securities 1 44 45
Opening balance 72
Disposal (23)
Fair value losses (5)
Liabilities
Derivative financial liabilities 94 94
Opening balance 65
Additions 25
Fair value gains (3)
Finance costs 7
29 February 2016
Assets
Equity securities 1 49 50
Debt securities 23 23
Closing balance 1 72 73
Opening balance 80
Additions 30
Disposal (29)
Fair value losses (9)
Liabilities
Derivative financial liabilities 65 65
Opening balance 64
Fair value gains (4)
Finance costs 5
8. Segmental reporting
The group is organised into four reportable segments, namely i) food, beverages and related services,
ii) agri - related retail, trade and services, iii) agri - inputs and iv) agri - production. The
segments represent different sectors in the broad agribusiness industry.
Headline earnings comprise recurring and non-recurring headline earnings. Recurring headline earnings
(being a measure of segment profit) is calculated on a see-through basis. Zeder's recurring headline
earnings is the sum of its effective interest in that of each of its underlying investments. The
result is that investments which Zeder do not equity account or consolidate in terms of accounting
standards, are included in the calculation of recurring headline earnings.
Non-recurring headline earnings include the elimination of equity securities' see-through recurring
headline earnings not equity accounted, the related net fair value gains/losses and investment income
(as recognised in the income statement). Associates' and subsidiaries' once-off gains/losses are
excluded from recurring headline earnings and included in non-recurring headline earnings.
Segmental income comprises revenue and investment income, as per the income statement.
Sum-of-the-Parts ("SOTP") is a key valuation tool used to measure Zeder's performance. The SOTP value
is calculated using the quoted market prices for all JSE-listed investments, and market-related
valuations for unlisted investments. These values will not necessarily correspond with the values per
the statement of financial position since the latter are measured predominantly using the relevant
accounting standards which include historical cost and the equity accounting method.
The chief operating decision-maker (the executive committee) evaluates the following information to
assess the segments' performance:
Audited Audited
2017 2016
Rm Rm
Recurring headline earnings segmental analysis:
Segments
Food, beverages and related services 582 662
Agri-related retail, trade and services 89 79
Agri-inputs 124 101
Agri-production 26 (37)
Recurring headline earnings from investments 821 805
Management (base) fee (75) (155)
Net interest, taxation and other income and expenses (55) (18)
Recurring headline earnings 691 632
Non-recurring headline earnings
Management fee internalisation charge (1 449)
Other (12) (87)
Headline earnings (770) 545
Non-headline items (note 3) (26) 237
Attributable earnings (796) 782
SOTP segmental analysis:
Segments
Food, beverages and related services 11 706 9 768
Agri-related retail, trade and services 1 360 802
Agri-inputs 1 531 1 246
Agri-production 614 614
Cash and cash equivalents 173 118
Other net liabilities (678) (323)
SOTP value - pre management fee liability 14 706 12 225
Management fee liability* (1 667)
SOTP value - post management fee liability 14 706 10 558
* Calculated at 12% newly issued Zeder shares multiplied by Zeder SOTP value per share.
SOTP value per share (rand)
Pre management fee liability 8.03
Post management fee liability 8.53 6.93
Profit before tax segmental analysis:
Segments
Food, beverages and related services 638 913
Agri-related retail, trade and services 89 76
Agri-inputs 123 134
Agri-production 29 (46)
Management fees and other income and expenses (1 600) (167)
(721) 910
IFRS revenue (revenue and investment income) segmental analysis:
Segments
Food, beverages and related services 8 359 7 720
Revenue 8 311 7 688
Investment income 48 32
Agri-inputs 1 325 1 231
Revenue 1 314 1 226
Investment income 11 5
Agri-production 585 404
Revenue 584 404
Investment income 1
Unallocated investment income (mainly head office interest income) 6 10
10 275 9 365
9. Related party transactions
Related-party transactions similar to those disclosed in the group’s annual financial statements for
the year ended 29 February 2016 took place during the year under review, except for the
internalisation of the management agreement (refer to Internalisation of PSG Group management
agreement included in the commentary section of this announcement for further details) and loans
granted to executive directors of Zeder, in terms of shares obtained through the vesting of share
options.
10.Events subsequent to the reporting date
Zeder, through its subsidiary, Zaad Holdings Ltd, has concluded agreements for the acquisition of a
35% stake in the Turkish seed company May-Agro Tohumculuk Sanayi ve Ticaret Anonim Sirketi
("May Seed"), subject to the fulfilment of certain conditions precedent.
The directors are, except for the above, unaware of any matter or event which is material to the
financial affairs of the group that have occurred between the reporting date and the date of approval
of these annual financial statements.
11.Preparation
These summary group preliminary financial statements were compiled under the supervision of the group
financial director, Mr JH le Roux, CA (SA), and have been audited by PricewaterhouseCoopers Inc., who
expressed an unmodified opinion thereon. The auditor also expressed an unmodified opinion on the
annual financial statements from which these summary group financial statements were derived.
A copy of the auditor's report on the summary group preliminary financial statements and of the
auditor's report on the annual group financial statements are available for inspection at the
company's registered office, together with the financial statements identified in the respective
auditor's reports.
The auditor's report does not necessarily report on all of the information contained in this
announcement and/or financial results. Shareholders are therefore advised that in order to obtain a
full understanding of the nature of the auditor's engagement they should obtain a copy of the auditor's
report together with the accompanying financial information from the issuer's registered office.
On behalf of the board
Jannie Mouton Norman Celliers
Chairman Chief executive officer
Stellenbosch
10 April 2017
DIRECTORS
JF Mouton (Chairman), N Celliers* (CEO), JH le Roux* (FD), GD Eksteen#, WL Greeff, ASM Karaan#,
N Mjoli-Mncube#, PJ Mouton, CA Otto#
* executive
# independent non-executive
COMPANY SECRETARY AND REGISTERED OFFICE
Zeder Corporate Services (Pty) Ltd
2nd Floor Ou Kollege, 35 Kerk Street, Stellenbosch, 7600
PO Box 7403, Stellenbosch, 7599
TRANSFER SECRETARY
Computershare Investor Services (Pty) Ltd
Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196
PO Box 61051, Marshalltown, 2107
SPONSER
PSG Capital (Pty) Ltd
AUDITOR
PricewaterhouseCoopers Inc.
Date: 10/04/2017 02:11:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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