Wrap Text
Unaudited Condensed Consolidated Interim Financial Statements For The Six Months Ended 31 March 2017
Pioneer Food Group Ltd
(Incorporated in the Republic of South Africa)
(Registration number: 1996/017676/06)
(Tax registration number: 9834/695/71/1)
(Share code: PFG)
(ISIN code: ZAE000118279)
("Pioneer Foods" or "the Group" or "the Company")
Unaudited condensed consolidated interim financial statements for the six months ended 31 March 2017
Salient Features
Revenue R10 183 million +2%
Adjusted operating profit (before items of a capital nature)* R700 million -43%
Adjusted headline earnings* R470 million -47%
Adjusted headline earnings per share* 253 cents -47%
Earnings R460 million -56%
Earnings per share 248 cents -56%
Headline earnings R454 million -56%
Headline earnings per share 244 cents -56%
Cash generated by operations R875 million +27%
Net asset value per share 4 275 cents +4%
Interim gross dividend per listed ordinary share (2016: 105 cents) 105 cents -
Headline earnings ("HE") is calculated based on Circular 2/2015 issued by the South African Institute of Chartered Accountants.
* HE and operating profit (before items of a capital nature) are adjusted for the impact of:
- Share-based payment (charge)/income on the B-BBEEE phase I transaction on profit or loss (and the impact of the related hedge) due to
the volatility of these items; and
- once off merger and acquisition costs.
Pioneer Foods: +27 21 974 4000
Phil Roux: +27 73 306 4804 phil.roux@pioneerfoods.co.za
Commentary
INTRODUCTION
A confluence of various inhibitors contributed to a material decline in profitability for the first half of the financial year ended 31 March 2017. The most
significant detractor was maize due to the unfavourable procurement position taken in 2016 in order to protect supply for South Africa's leading maize brand.
This decision was predicated on careful consideration of the available information at the time. The International Division was severely impacted by a raisin crop
shortfall, African exports and a stronger rand.
Group turnover increased by 2%, with the South African business increasing turnover by 4% and International declining by 11%.
FINANCIAL PERFORMANCE
Cost of goods sold increased by 10% due to significant raw material cost push, resulting in gross profit decreasing by 16% to R2.6 billion and the gross profit margin
compressed from 31% to 26%.
Operating profit, before items of a capital nature, adjusted for the 2017 IFRS 2 share-based payment ("SBP") charge and the related hedge gain on the Phase I B-BBEE
("BEE") transaction, the 2016 SBP BEE transaction gain and once-off merger and acquisition ("M&A") costs ("adjusted"), decreased by 43% to R700 million and the
adjusted operating profit margin declined from 12% to 7%. This, notwithstanding a sustained focus on cost management and the extraction of efficiencies.
The BEE SBP charge and the marked-to-market on the hedge relating to the BEE transaction amounted to a net charge of R3.1 million (the Pioneer Foods share price
increased from R173.87 at 30 September 2016 to R176.61 at 31 March 2017) compared to a gain of R142.7 million (share price decreased from R195.76 to R139.04 with no
hedge in place) in the prior period. The M&A costs amounted to R9.3 million in 2017.
Profit before income tax decreased by 53% to R648 million, after finance costs of R88 million (2016: R75 million). The share of profit of joint ventures and
associates amounted to R30 million (2016: R42 million). The regression in the share of profit from joint ventures and associates can largely be ascribed to the
performance of Bokomo Botswana that was also negatively impacted by the same maize procurement strategy as the Group. Bowman Ingredients (SA) and Future Life Health
Products continued their excellent performances.
Adjusted earnings per share ("EPS") and headline earnings per share ("HEPS") decreased by 48% and 47% to 256.5 and 253.4 cents per share respectively. In 2016, EPS
was also adjusted for the impairment of the Quantum Foods Holdings shares held by the Phase II B-BBEE SPVs.
DIVISIONAL PERFORMANCE
SEGMENTAL REVIEW
Six months ended 31 March 2017
Segmental revenue Segmental operating profit*
2017 % 2017 %
R'm Change R'm Change
Essential Foods 6 457 7 331 (49)
Groceries 2 432 (3) 301 (12)
International 1 294 (11) 69 (73)
Corporate - - (1) 79
Total 10 183 2 700 (43)
* Before items of a capital nature, the BEE SBP and in 2017, M&A costs.
Essential Foods
The performance of Essential Foods was overwhelmingly impacted by maize. The margin drag on maize will cease from June as lower cost raw material comes into effect.
Stringent cost management was enforced to partially mitigate the aforementioned. The bakery business continued to deliver volume growth and operating leverage.
Pleasingly, the Aeroton bakery upgrade and expansion was commissioned in April. Pasta, flour and legumes contributed positively, whilst rice regressed amidst
aggressive competition.
Groceries
The Groceries performance was disappointing, beverages in particular. Cost push inflation into the summer season coupled to a cooler summer inland, impacted volumes
and margins significantly.
Breakfast cereals, also affected by cost push inflation and competition, managed to increase profitability.
The balance of the categories showed a significant improvement in profitability.
International
Profit contraction was the most severe in this division consequent to lower export beverage volumes and margins as a result of currency devaluation in key markets,
placing pressure on the Ceres value proposition in market.
Raisins historically contributed materially to profitability of International. Profitability in the first half was eroded due to a smaller crop and a relative
stronger currency.
The UK business was affected by higher irrecoverable input costs due to Brexit. That said, Streamfoods has been efficiently integrated and the overall top line
performance of the business was pleasing.
Nigeria, whilst small, contributed positively increasing market share and profitability.
FINANCIAL POSITION AND CASH FLOWS
Strong cash generation continues to underpin the Group's operations with cash generated from operations up by 27% to R875 million (2016: R690 million). Investment in
working capital was pleasingly restricted to R167 million notwithstanding significant seasonal investment in the 2017 dried fruit crop.
Capital expenditure amounted to R369 million (2016: R349 million) with the expansion of the Aeroton bakery and the additional Weet-Bix line being the major projects.
In October 2016 the Group settled the obligation of R493.3 million for the forward purchase contracts on own equity. This transaction was entered into in 2016 to
hedge the Group against the upside risk of the Group's share price in terms of the BEE scheme. This obligation was disclosed as an accrual at 30 September
2016.
The Group acquired a 49.89% interest in Weetabix East Africa for R190 million on 3 March 2017. The Group's investment in this entity is included as an interest in an
associate from this date.
The Group's net interest-bearing debt, excluding the R463 million third-party debt relating to the Phase II B-BBEE transaction partners, amounted to R1 425 million at
31 March 2017, with a debt to equity ratio of 18% (30 September 2016: 6%), compared to net debt of R501 million at 30 September 2016.
OUTLOOK
We anticipate an improvement in performance in the second half of the financial year notwithstanding a constrained trading environment in South Africa. Various
factors should assist in improving profitability, namely:
- Increased raisin supply, however at a lower level of profitability to the prior year
- Lower maize input costs from June
- Lower beverage input costs
- Aeroton bakery and Weet-Bix capacity
Pioneer Foods will continue to be vigilant for acquisitions as a growth vector to bolster the core business.
DIVIDEND
A gross interim dividend for the six months ended 31 March 2017 of 105 cents (2016: 105 cents) per share has been approved and declared by the Board from income
reserves. The applicable dates are as follows:
Last date of trading cum dividend Tuesday, 27 June 2017
Trading ex dividend commences Wednesday, 28 June 2017
Record date Friday, 30 June 2017
Dividend payable Monday, 3 July 2017
Share certificates may not be dematerialised or materialised between Wednesday, 28 June 2017 and Friday, 30 June 2017, both days inclusive.
A gross interim dividend of 31.5 cents (2016: 31.5 cents) per class A ordinary share, being 30% of the gross interim dividend payable to ordinary shareholders in terms
of the rules of the relevant employee scheme, will be paid during July 2017.
The above statements have not been reviewed or reported on by the auditors of Pioneer Foods.
By order of the Board
ZL Combi PM Roux
Chairman Chief Executive Officer
Tyger Valley
17 May 2017
PIONEER FOOD GROUP LTD
Condensed consolidated interim financial statements for the six months ended 31 March 2017
Group Statement of Comprehensive Income
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
31 March 31 March 30 September
2017 2016 2016
R'm R'm R'm
Revenue 10 183.0 10 009.7 20 599.7
Cost of goods sold (7 561.7) (6 905.3) (14 516.7)
Gross profit 2 621.3 3 104.4 6 083.0
Other income and gains/(losses) - net 48.8 111.2 169.8
Other expenses (1 982.3) (1 837.3) (3 934.8)
Excluding the following: (1 969.9) (1 980.0) (3 979.6)
Once off merger and acquisition costs (9.3) - -
Phase I B-BBEE transaction share-based payment and related hedge (charge)/income (3.1) 142.7 44.8
Items of a capital nature 5.6 12.3 21.3
Operating profit 693.4 1 390.6 2 339.3
Investment income 12.7 27.3 46.8
Finance costs (88.0) (74.8) (167.3)
Share of profit of investments accounted for using the equity method 30.0 41.6 100.4
Profit before income tax 648.1 1 384.7 2 319.2
Income tax expense (188.5) (347.9) (629.0)
Profit for the period 459.6 1 036.8 1 690.2
Other comprehensive income/(loss) for the period
Items that will not subsequently be reclassified to profit or loss:
Remeasurement of post-employment benefit obligations - - 0.9
Items that may subsequently be reclassified to profit or loss: 83.4 55.0 (203.4)
Fair value adjustments to cash flow hedging reserve 105.7 37.3 (118.3)
For the period (69.7) 282.1 134.7
Current income tax effect 18.8 (78.1) (36.7)
Deferred income tax effect 0.7 (0.8) (1.0)
Reclassified to profit or loss 216.5 (230.4) (299.0)
Current income tax effect (60.6) 66.4 85.6
Deferred income tax effect - (1.9) (1.9)
Fair value adjustments on available-for-sale financial assets 3.5 4.9 (1.2)
For the period 5.2 8.9 7.0
Deferred income tax effect 0.9 (0.3) 0.1
Reclassified to profit or loss (2.6) (3.7) (8.3)
Share of other comprehensive income of investments accounted for using the equity method (2.1) 6.7 (28.7)
Movement on foreign currency translation reserve (23.7) 6.1 (55.2)
Total comprehensive income for the period 543.0 1 091.8 1 487.7
Profit for the period attributable to:
Owners of the parent 459.6 1 036.8 1 690.2
Total comprehensive income for the period attributable to:
Owners of the parent 543.0 1 091.8 1 487.7
Headline Earnings Reconciliation
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
31 March 31 March 30 September
2017 2016 2016
R'm R'm R'm
Reconciliation between profit/(loss) attributable to owners of the parent and headline earnings
Profit attributable to owners of the parent 459.6 1 036.8 1 690.2
Remeasurement of items of a capital nature (5.8) (6.7) (13.4)
Net profit on disposal of property, plant and equipment and intangible assets (3.0) (2.5) (12.1)
Net profit on disposal of available-for-sale financial assets (2.6) (3.7) (8.3)
Net profit on disposal of subsidiary - (24.2) (24.2)
Impairment of available-for-sale financial assets - 18.1 23.3
Before tax (5.6) (12.3) (21.3)
Tax effect on remeasurement of items of a capital nature (0.2) 5.6 7.9
Remeasurement of items of a capital nature included in equity-accounted results - (0.1) (1.1)
Effect on remeasurement of items of a capital nature - (0.1) (1.3)
Tax effect on remeasurement of items of a capital nature - - 0.2
Headline earnings 453.8 1 030.0 1 675.7
Phase I B-BBEE transaction share-based payment and related hedge charge/(income) 7.4 (142.7) (38.7)
Once off merger and acquisition costs 9.3 - -
Adjusted headline earnings (Note 1) 470.5 887.3 1 637.0
Number of issued ordinary shares (million) 233.0 232.3 232.5
Number of issued treasury shares:
- held by subsidiary (million) 18.0 18.0 18.0
- held by share incentive trust (million) - 0.1 -
- held by B-BBEE equity transaction participants (million) 18.1 18.1 18.1
- held by BEE trust (million) 10.7 10.7 10.7
Number of issued class A ordinary shares (million) 3.4 3.9 3.7
Weighted average number of ordinary shares (million) 185.6 185.1 185.3
Weighted average number of ordinary shares - diluted (million) 199.7 199.4 199.6
Earnings per ordinary share (cents):
- basic 247.6 560.1 912.1
- diluted 230.2 520.1 846.9
- headline 244.4 556.4 904.3
- diluted headline 227.2 516.6 839.6
- adjusted headline (Note 1) 253.4 479.3 883.4
- diluted adjusted headline (Note 1) 235.6 445.1 820.2
Gross dividend per ordinary share (cents) 105.0 105.0 365.0
Gross dividend per class A ordinary share (cents) 31.5 31.5 109.5
Net asset value per ordinary share (cents) 4 275.2 4 096.1 4 238.7
Debt to equity ratio (%) 23.7 12.5 12.5
Note 1:
Headline earnings ("HE") is calculated based on Circular 2/2015 issued by the South African Institute of Chartered Accountants. Adjusted HE
is defined as HE adjusted for the impact of:
* share-based payment (charge)/income on the B-BBEE Phase I transaction on profit or loss (and the impact of the related hedge) due to the
volatility of these items; and
* once off merger and acquisition costs.
Group Statement of Financial Position
Unaudited Unaudited Audited
31 March 31 March 30 September
2017 2016 2016
R'm R'm R'm
Assets
Property, plant and equipment 4 940.8 4 476.3 4 763.4
Goodwill 295.1 225.0 302.8
Other intangible assets 479.3 472.2 479.6
Biological assets - 16.0 16.0
Investments in and loans to associates and joint ventures 1 016.1 799.1 861.2
Derivative financial instruments 426.2 - 439.7
Available-for-sale financial assets 134.3 133.2 128.3
Trade and other receivables 14.8 19.7 16.8
Deferred income tax 3.2 - 3.9
Non-current assets 7 309.8 6 141.5 7 011.7
Current assets 6 064.0 6 489.9 6 518.8
Inventories 3 245.7 3 249.9 3 212.5
Derivative financial instruments 61.1 13.9 57.6
Trade and other receivables 2 290.9 2 371.2 2 245.9
Current income tax 43.8 0.3 2.0
Cash and cash equivalents 422.5 854.6 1 000.8
Total assets 13 373.8 12 631.4 13 530.5
Equity and liabilities
Capital and reserves attributable to owners of the parent 7 957.1 7 594.1 7 867.3
Share capital 23.3 23.2 23.2
Share premium 2 495.3 2 372.4 2 406.3
Treasury shares (1 186.4) (1 188.0) (1 187.8)
Other reserves 274.0 473.6 253.3
Retained earnings 6 350.9 5 912.9 6 372.3
Total equity 7 957.1 7 594.1 7 867.3
Non-current liabilities 2 336.0 2 234.2 2 344.8
Borrowings
B-BBEE equity transaction third-party finance 418.9 449.7 449.6
Other 869.5 870.0 883.7
Provisions for other liabilities and charges 112.5 112.3 111.2
Share-based payment liability 295.9 239.5 317.9
Deferred income tax 639.2 562.7 582.4
Current liabilities 3 080.7 2 803.1 3 318.4
Trade and other payables 1 973.4 2 189.9 2 037.6
Current income tax 9.6 42.0 30.3
Derivative financial instruments 5.7 32.4 16.1
Borrowings 1 021.8 486.6 653.5
Loan from joint venture 10.0 2.0 26.0
Accrual for forward purchase contracts on own equity - - 493.3
Dividends payable 0.6 0.5 0.6
Share-based payment liability 59.6 49.7 61.0
Total equity and liabilities 13 373.8 12 631.4 13 530.5
Group Statement of Changes in Equity
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
31 March 31 March 30 September
2017 2016 2016
R'm R'm R'm
Share capital, share premium and treasury shares 1 332.2 1 207.6 1 241.7
Opening balance 1 241.7 1 249.7 1 249.7
Movement in treasury shares 1.4 16.1 16.4
Ordinary shares issued - share appreciation rights 89.1 23.9 57.8
Ordinary shares bought back from management share incentive trust and cancelled - (82.1) (82.1)
Employee share scheme - repurchase of shares - - (0.1)
Other reserves 274.0 473.6 253.3
Opening balance 253.3 460.5 460.5
Equity compensation reserve transactions 22.5 22.1 49.5
Ordinary shares issued - share appreciation rights (89.1) (23.9) (57.8)
Deferred income tax on share-based payments 3.9 (40.1) 4.5
Share of other comprehensive income of investments accounted for using the equity method (2.1) 6.7 (28.7)
Other comprehensive income for the period 85.5 48.3 (174.7)
Retained earnings 6 350.9 5 912.9 6 372.3
Opening balance 6 372.3 5 248.5 5 248.5
Profit for the period 459.6 1 036.8 1 690.2
Other comprehensive income for the period - - 0.9
Dividends paid (482.7) (439.3) (634.0)
Management share incentive scheme - disposal of shares 1.9 67.3 67.2
Employee share scheme - transfer tax on share transactions (0.2) (0.4) (0.5)
Non-controlling interest - - -
Opening balance - 12.3 12.3
Disposal of subsidiary - (12.3) (12.3)
Total equity 7 957.1 7 594.1 7 867.3
Group Statement of Cash Flows
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
31 March 31 March 30 September
2017 2016 2016
R'm R'm R'm
Net cash profit from operating activities 891.8 1 427.8 2 667.9
Cash effect from hedging activities 149.4 42.0 (174.6)
Working capital changes (166.6) (779.6) (774.5)
Net cash generated from operations 874.6 690.2 1 718.8
Settlement of share-based payment liability (39.0) - (69.2)
Cash effect of forward purchase contracts related to share-based payments 27.4 - 25.2
Settlement of accrual for forward purchase contracts on own equity (493.3) - -
Income tax paid (229.5) (285.1) (451.1)
Net cash flow from operating activities 140.2 405.1 1 223.7
Net cash flow from investment activities (464.0) (393.7) (982.9)
Property, plant and equipment and intangible assets
- additions (272.0) (217.3) (469.2)
- replacements (97.1) (131.7) (339.9)
- proceeds on disposal 34.5 45.1 69.3
Business combinations - - (146.9)
Proceeds on disposal of and changes in available-for-sale financial assets and loans 14.8 (15.0) (29.0)
Proceeds on disposal of subsidiary - 74.2 62.3
Investment in joint ventures - (200.5) (200.5)
Investment in associates (189.9) - -
Interest received 10.5 24.8 42.7
Dividends received 2.2 2.5 4.1
Dividends received from joint ventures 33.0 24.2 24.2
Net cash flow from financing activities (617.7) (552.3) (1 204.9)
Repayment of syndicated bullet loans - - (400.0)
(Repayments)/proceeds from other borrowings (38.5) 5.4 2.1
Other share scheme transactions 0.3 (42.3) (3.0)
Interest paid (96.8) (76.1) (170.1)
Dividends paid (482.7) (439.3) (633.9)
Net cash and cash equivalents on disposal of subsidiary - (11.9) -
Effect of exchange rate changes on cash and cash equivalents 8.3 - (7.1)
Net decrease in cash, cash equivalents and bank overdrafts (933.2) (552.8) (971.2)
Net cash, cash equivalents and bank overdrafts at beginning of period 421.6 1 392.8 1 392.8
Net cash, cash equivalents and bank overdrafts at end of period (511.6) 840.0 421.6
Disclosed as:
Cash and cash equivelants 422.5 854.6 1 000.8
Bank overdrafts and call loans (included in current borrowings) (934.1) (14.6) (579.2)
(511.6) 840.0 421.6
Group Segment Report
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
31 March 31 March 30 September
2017 2016 2016
R'm R'm R'm
Segment revenue
Essential Foods 6 456.7 6 053.7 12 854.8
Groceries 2 431.9 2 508.2 4 695.1
International 1 294.4 1 447.8 3 049.8
Total 10 183.0 10 009.7 20 599.7
Segment results
Essential Foods 330.9 644.5 1 249.5
Groceries 301.2 342.7 541.6
International 68.8 251.8 484.2
Other (0.7) (3.4) (2.1)
700.2 1 235.6 2 273.2
Once off merger and acquisition costs (9.3) - -
Phase I B-BBEE transaction share-based payment and related hedge (charge)/income (3.1) 142.7 44.8
Operating profit before items of a capital nature 687.8 1 378.3 2 318.0
Reconciliation of operating profit (before items of a capital nature) to profit before
income tax
Operating profit before items of a capital nature 687.8 1 378.3 2 318.0
Adjusted for:
Remeasurement of items of a capital nature 5.6 12.3 21.3
Interest income 10.5 24.8 42.7
Dividends received 2.2 2.5 4.1
Finance costs (88.0) (74.8) (167.3)
Share of profit of investments accounted for using the equity method 30.0 41.6 100.4
Profit before income tax 648.1 1 384.7 2 319.2
Notes to the unaudited condensed consolidated interim financial statements for the six months ended 31 March 2017
1. Basis of preparation
The condensed consolidated interim financial statements of the Group for the six months ended 31 March 2017 have been prepared in accordance
with International Financial Reporting Standards ("IFRS"), the Listings Requirements of the JSE Ltd and the Companies Act of South Africa,
Act 71 of 2008, as amended. The condensed consolidated interim financial statements comply with the requirements of IAS 34 - Interim Financial
Reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and the Financial Reporting Pronouncements as
issued by the Financial Reporting Standards Council. These condensed consolidated interim financial statements have not been audited.
The directors take full responsibility for the preparation of the condensed consolidated interim financial statements and that the financial
information has been correctly extracted from the underlying financial records.
2. Accounting policies
These condensed consolidated interim financial statements incorporate accounting policies that are in terms of IFRS and are consistent with
those applied in the Group's annual financial statements for the year ended 30 September 2016 and with those of previous financial years.
In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's
accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements
for the year ended 30 September 2016.
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
31 March 31 March 30 September
2017 2016 2016
3. Share capital
During the period under review, the following share transactions occurred:
Number of listed issued and fully paid ordinary shares
At beginning of period 232 472 909 232 739 331 232 739 331
Shares issued in terms of employee share appreciation rights scheme 518 110 146 075 345 578
Shares repurchased from management share incentive trust and cancelled - (612 000) (612 000)
At end of period 232 991 019 232 273 406 232 472 909
518 110 (30 September 2016: 345 578 and 31 March 2016: 146 075) listed
ordinary shares of 10 cents each were issued at an average of R172.11
(30 September 2016: R167.24 and 31 March 2016: R163.54) per share in
terms of the share appreciation rights scheme.
612 000 shares were repurchased in 2016 at an average price of
R134.11 per share and subsequently cancelled.
Number of treasury shares held by the share incentive trust
At beginning of period 47 620 729 612 729 612
Movement in shares (47 620) (61 790) (69 992)
Repurchased by the Company and cancelled - (612 000) (612 000)
At end of period - 55 822 47 620
Proceeds on the sale of treasury shares by the share incentive trust (R'000) 3 193 1 373 1 630
Proceeds on the repurchase of treasury shares from the share incentive trust
by the Company (R'000) - 82 075 82 075
Number of treasury shares held by B-BBEE transaction participants
At beginning and end of period 18 091 661 18 091 661 18 091 661
Number of treasury shares held by Pioneer Foods Broad-Based BEE Trust
At beginning and end of period 10 745 350 10 745 350 10 745 350
Number of treasury shares held by a subsidiary
At beginning and end of period 17 982 056 17 982 056 17 982 056
Number of unlisted class A ordinary shares
At beginning of period 3 707 830 4 234 300 4 234 300
Shares bought back and cancelled (293 020) (289 800) (526 470)
At end of period 3 414 810 3 944 500 3 707 830
Purchase consideration paid for unlisted class A ordinary shares
bought back (R'000) 38 983 40 414 69 244
4. Borrowings
No material new borrowings were concluded during the period under review. Changes in borrowings mainly reflect repayments made in
terms of agreements. Short-term borrowings fluctuate in accordance with changing working capital needs.
5. Events after the reporting date
5.1 Dividend
The Board approved and declared a gross interim dividend of 105.0 cents (2016: gross interim dividend of 105.0 cents and 2016: gross
final dividend of 260.0 cents) per ordinary share. This will amount to approximately R233 357 952 (2016: interim of R232 727 851 and
2016: final of R576 558 788) depending on the exact number of ordinary shares issued at the record date. In addition, the 10 745 350
Pioneer Foods shares issued to the Pioneer Foods Broad-Based BEE Trust, will receive 20% of the dividend payable, i.e. 21.0 cents
(2016: gross interim of 21.0 cents and 2016: gross final dividend of 52.0 cents) per share, amounting to R2 256 524 (2016: interim of
R2 256 524 and 2016: final of R5 587 582).
The Board approved a gross interim dividend of 31.5 cents (2016: gross interim dividend of 31.5 cents and 2016: gross final dividend
of 78.0 cents) per class A ordinary share, being 30% of the dividend payable to the other class ordinary shareholders in terms of the
rules of the relevant employee scheme. This will amount to approximately R1 075 665 (2016: interim of R1 185 210 and 2016: final of
R2 737 644) depending on the exact number of class A ordinary shares issued at the record date.
Additional information disclosed:
These dividends are declared from income reserves and qualify as a dividend as defined in the Income Tax Act, Act 58 of 1962.
Dividends will be paid net of dividends tax of 20%, 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 84.0 cents per ordinary share and 25.2 cents per class A ordinary share for shareholders liable to pay
dividends tax. The dividend amounts to 105.0 cents per ordinary share and 31.5 cents per class A ordinary share for shareholders
exempt from paying dividends tax.
The number of issued ordinary shares and issued class A ordinary shares is 233 006 362 and 3 376 170 respectively as at the date of
this declaration.
5.2 Other material events
There have been no other material events requiring disclosure after the reporting date and up to the date of approval of the unaudited
condensed consolidated interim financial statements by the Board.
6. Contingent liabilities - guarantees
The Group had guarantees in issue of R23.0 million as at 31 March 2017 (30 September 2016: R32.7 million and 31 March 2016: R35.5 million),
primarily for loans by third parties to contracted suppliers.
As part of the financial assistance provided by Rand Merchant Bank, a division of FirstRand Bank Ltd ("RMB"), to BEE Investors in terms of
the B-BBEE equity transaction concluded during 2012, Pioneer Foods (Pty) Ltd provided RMB with a guarantee amounting to R100 million.
Unaudited Unaudited Audited
31 March 31 March 30 September
2017 2016 2016
R'm R'm R'm
7. Future capital commitments
Contractually committed 370.3 816.2 307.6
Approved by the Board, but not contractually committed yet 1 127.7 208.9 1 085.5
Share of items of joint ventures and associates 52.7 77.7 74.1
1 550.7 1 102.8 1 467.2
8. Impairment of Quantum Foods shares
The 18 091 661 Quantum Foods Holdings Ltd shares held by the Phase II B-BBEE transaction participants are accounted for as available-for-sale financial
assets. As at 31 March 2016 and 30 September 2016, the market value of the Quantum Foods Holdings Ltd shares was significantly lower than the original
cost price and market value at 30 September 2015. Consequently, impairment losses of R18.1 million and R23.3 million were recognised for the periods
ending 31 March 2016 and 30 September 2016 respectively. These losses were included in the line item "Items of a capital nature" in the statement of
comprehensive income for the six months ended 31 March 2016 and the full year ended 30 September 2016.
No further impairment was required at 31 March 2017 as the market value of the Quantum Foods Holdings Ltd shares exceeded the market value
thereof as at 30 September 2016.
The impairment charge attributable to available-for-sale financial assets was as follows:
Unaudited Unaudited Audited
Six months ended Six months ended Year ended
31 March 31 March 30 September
2017 2016 2016
Nature R'm R'm R'm
Available-for-sale financial assets - 18.1 23.3
Income tax effect - - -
After income tax effect - 18.1 23.3
9. Acquisition of a 49.89% equity interest in Weetabix East Africa Ltd
As announced on SENS on 16 November 2016, Pioneer Foods entered into an agreement to acquire a 49.89% shareholding in Weetabix East Africa Ltd.
All regulatory approvals were obtained and the transaction became effective on 3 March 2017.
The total purchase consideration amounted to R189.9 million.
10. Fair value measurement
The information below analyses assets and liabilities that are carried at fair value at each reporting period, by level of hierarchy as
required by IFRS 7 and IFRS 13.
Unaudited fair value measurements at
31 March 2017 using:
Quoted prices
in active Significant
markets for other Significant
identical assets observable unobservable
and liabilities input input
(Level 1) (Level 2) (Level 3)
R'm R'm R'm
Assets measured at fair value
Available-for-sale financial assets
- Listed securities 133.3 - -
- Unlisted securities - 1.0 -
Derivative financial instruments
- Foreign exchange contracts - 9.6 -
- Forward contracts on own equity - 477.7 -
Liabilities measured at fair value
Derivative financial instruments
- Foreign exchange contracts - 5.7 -
Unaudited fair value measurements at
31 March 2016 using:
Quoted prices
in active Significant
markets for other Significant
identical assets observable unobservable
and liabilities input input
(Level 1) (Level 2) (Level 3)
R'm R'm R'm
Assets measured at fair value
Available-for-sale financial assets
- Listed securities 133.2 - -
Derivative financial instruments
- Foreign exchange contracts - 13.9 -
Biological assets
- Vineyards - - 16.0
Liabilities measured at fair value
Derivative financial instruments
- Foreign exchange contracts - 32.4 -
Audited fair value measurements at
30 September 2016 using:
Quoted prices
in active Significant
markets for other Significant
identical assets observable unobservable
and liabilities input input
(Level 1) (Level 2) (Level 3)
R'm R'm R'm
Assets measured at fair value
Available-for-sale financial assets
- Listed securities 126.8 - -
- Unlisted securities - 1.5 -
Derivative financial instruments
- Foreign exchange contracts - 6.6 -
- Forward contracts on own equity - 489.9 -
- Embedded derivatives - 0.8 -
Biological assets
- Vineyards - - 16.0
Liabilities measured at fair value
Derivative financial instruments
- Foreign exchange contracts - 16.1 -
There have been no transfers between level one, two or three during the period, nor were there any significant changes to the valuation
techniques and input used to determine fair values.
Financial assets and liabilities
The fair values of financial instruments traded in active markets (such as publicly traded derivatives and available-for-sale securities)
are based on quoted market prices at the reporting date. A market is regarded as active if quoted prices are readily and regularly available
from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly
occurring market transactions on an arm's length basis. The quoted market price used for financial assets held by the Group is the current
bid price. The appropriate quoted market price for financial liabilities is the current ask price. These instruments are included in level 1.
Instruments included in level 1 comprise primarily JSE-listed equity investments classified as available-for-sale.
The fair values of financial instruments that are not traded in an active market are determined by using valuation techniques. These valuation
techniques maximise the use of observable market data where it is available and rely as little as possible on entity-specific estimates. If
all significant inputs required to fair value an instrument were observable, the instrument is included in level 2.
The fair values of the forward purchase contracts on own equity are determined at each reporting date and any changes in the values are
recognised in profit or loss. The fair values of the forward purchase contracts have been determined by an independent external professional
financial instruments specialist by using a discounted cash flow model. The inputs to this valuation method include the risk free rate, dividend
yield, contractual forward price and the spot price at the reporting date.
The Group uses a variety of methods that makes assumptions that are based on market conditions existing at the reporting date. Quoted market
prices or dealer quotes for similar instruments are used for long-term debt instruments. Other techniques, such as estimated discounted cash
flows, are used to determine the fair value for the remaining financial instruments. The fair value of foreign exchange contracts is determined
using quoted forward exchange rates at the reporting date.
The carrying amounts of cash, trade and other receivables less provision for impairment, trade and other payables and short-term borrowings are
assumed to approximate their fair values due to the short term until maturity of these assets and liabilities.
The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current
market interest rate that is available to the Group for similar financial instruments. The fair values of long-term investments and long-term
borrowings are not materially different from the carrying amounts.
Biological assets
The fair value of vineyards was calculated as the future expected net cash flows from the asset, discounted at a current market-determined rate,
over the remaining useful lives of the vineyards.
11. Preparation of financial statements
These unaudited condensed consolidated interim financial statements have been prepared under the supervision of CR Lamprecht, CA(SA),
Acting Chief Financial Officer.
12. Audit
These results have not been audited or reviewed by the external auditors.
Directors:
ZL Combi (Chairman), PM Roux (CEO)*, N Celliers, Prof ASM Karaan, NS Mjoli-Mncube, PJ Mouton, LE Mthimunye-Bakoro, SS Ntsaluba, G Pretorius,
AH Sangqu, NW Thomson (* Executive)
Ms CJ Hess resigned as Chief Financial Officer with effect of 31 October 2016. There were no other changes to the Pioneer Foods Board during the
period under review.
Company secretary: J Jacobs E-mail: Jay-Ann.Jacobs@pioneerfoods.co.za
Registered address: Glacier Place, 1 Sportica Crescent, Tyger Valley, 7530, South Africa
Tel: 021 974 4000 Fax: 086 407 0044 E-mail: info@pioneerfoods.co.za
Transfer secretaries: Computershare Investor Services (Pty) Ltd, Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196, South Africa,
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
Released on SENS: 22 May 2017
Date: 22/05/2017 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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