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CROOKES BROTHERS LIMITED - Interim results and dividend declaration for the six months ended 30 September 2017

Release Date: 29/11/2017 11:01
Code(s): CKS     PDF:  
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Interim results and dividend declaration for the six months ended 30 September 2017

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
for the six months ended 30 September 2017

Commentary

The period under review has been challenging in the wake of the drought and under the prevailing tough economic
conditions. Profit after tax decreased by 70,5% to R26,4 million (2016: R89,4 million) driven mainly by a decrease in sugar cane
revenue and a write down in the cane biological asset value, both factors resulting from the aftermath of drought conditions
in the sugar producing areas. Commensurately, operating cash flows decreased by 33% to R115,9 million (2016: R173,5 million).

Good progress was made in bringing our development projects to fruition, in particular the macadamia project in Mozambique
and the property development at Renishaw. This is reflected in capital expenditure of R87 million and a similar value of working
capital, utilised in the construction of housing stock by Renishaw Property Developments, both of which were funded from
existing cash and debt facilities. As indicated in our integrated report we intend raising short and medium-term debt of
approximately R200 million to bring these other projects into production over the next two years.

The board cautions against using interim results to project full year earnings, due to the effect of seasonality of crop revenues
and the impact of biological asset valuations on earnings particularly in the deciduous and macadamia segments at
half year.

Operations
Sugar cane
Revenue decreased by 9,6% to R240,5 million (2016: R265,9 million) driven by a decrease in sugar prices in South Africa and
Zambia and a production decrease attributable to a decline in area under crop of 646 hectares caused by the drought.
These factors also resulted in a biological asset write down of R43,8 million (2016: R10,1 million) for the six-month period ended
30 September 2017. Consequently, sugar cane operating profit decreased by 49,5% to R67,8 million (2016: R134,3 million).

Deciduous fruit
Despite the precarious water supply position in the Western Cape, water resources at the group's deciduous farms in the
Elgin-Grabouw-Villiersdorp area, supplied mainly from farm dams and boreholes, are adequate to meet the 2017/2018
summer requirements. While prices in the year to date have followed the depressed trend of the previous year, firmer prices
are expected for our 2018 deciduous crop, which will be harvested in January through to May.

The deciduous operating loss of R18,3 million (2016: loss R24,8 million) includes operating costs incurred in the preparation
of our 2018 deciduous crop which are not accounted for in the biological asset valuation at half year. These costs will be
recovered from revenue from the 2018 crop.

Bananas
Banana operating profit decreased by 42,8% to R15,1 million (2016: R26,4 million) due mainly to a lag in production for the
six months to September 2017 when compared to the prior corresponding period, again, driven by the drought and early
season storm damage. Production is expected to catch up over the balance of the season and the annual production should
compare favourably to that of last year. Banana prices remain firm in South Africa and Mozambique following the effects of
the drought.

Macadamias
We are expecting our first significant macadamia crop in March 2018. This will be accounted for in the biological asset
valuation at 31 March 2018.

Revenue and operating profit for the period ending September 2017 arises from our first small crop of 52 tons dry-nut-in-shell,
which was harvested in the first three months of this financial year.

Property
In the six months ending 30 September 2017, Renishaw Property Developments closed contracts for 58 units in the lifestyle
village currently under development. Of these, only 11 units were transferred by 30 September 2017, which is reflected in
revenue of R16,5 million. Since then, 16 units have been transferred and we expect a further eight units to be transferred before
year-end.

Prospects
Although profitability for the six months ended 30 September 2017 is down on that of the prior period, it is in line with our
expectations, particularly given the impact of the drought on our sugar cane operations. We expect results for the full year
to reflect a recovery from the current position, with a firming of the deciduous markets and the macadamia and property
projects contributing for the first time. An expected recovery to normal rainfall in the Northern region also bodes well for the
following financial year.

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 declared a gross cash dividend of 35,0 cents (2016: 50,0 cents) per share for the six-month period ended
30 September 2017, payable to shareholders recorded in the register of the company at the close of business on the record
date, Friday, 5 January 2018.

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 20% resulting in a net dividend of 28,0 cents per share to those shareholders who are not
   exempt from the dividend withholding tax;
-  the company's income 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, 8 January 2018 to shareholders recorded in the register of the company at close
of business on the record date Friday, 5 January 2018.

The salient dates of the declaration and payment of these dividends are as follows:

Last day to trade cum-dividend                                                                       Tuesday, 2 January 2018
Shares commence trading ex-dividend                                                                Wednesday, 3 January 2018
Record date                                                                                           Friday, 5 January 2018
Payment date                                                                                          Monday, 8 January 2018

Share certificates may not be dematerialised or rematerialised between Wednesday, 3 January 2018 and Friday, 5 January 2018,
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 2017

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 Proprietary Limited
PO Box 61051, Marshalltown, 2107

Sponsor
Sasfin Capital
A division of Sasfin Bank Limited

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

Company secretary
Highway Corporate Services Proprietary Limited

Condensed consolidated statement of profit or loss

                                                                                                         Unaudited
                                                                                        Unaudited         Restated          Audited
                                                                                    Six months to    Six months to     12 months to
                                                                                     30 September     30 September         31 March
                                                                                             2017            2016*             2017
                                                                            Note            R'000            R'000            R'000
 
Revenue                                                                                   412 267          452 036          663 951
 
Operating profit before biological assets                                                 101 648          157 262          102 156
 Change in fair value of biological assets                                               (57 803)         (34 278)           22 998
 
Operating profit after biological assets                                                   43 845          122 984          125 154
 Share of profit of joint venture and associate companies                                       -                -            2 105
 Dividend income                                                                                -                -               97
 Net finance (cost)/income                                                     1          (7 232)            1 140            3 505
 
Profit before tax                                                                          36 613          124 124          130 861
 Income tax expense                                                                      (10 252)         (34 663)         (34 655)

Profit for the period                                                                      26 361           89 461           96 206
 
Profit attributable to: 
 Owners of the company                                                                      7 209           58 195           64 826
 Non-controlling interests                                                                 19 152           31 266           31 380
 
                                                                                           26 361           89 461           96 206
 
Earnings per share 
 Basic                                                                   (cents)             47,2            381,2            424,7
 Diluted                                                                 (cents)             47,1            380,2            424,6
Headline earnings per share 
 Basic                                                                   (cents)             47,2            380,9            424,1
 Diluted                                                                 (cents)             47,1            379,9            424,0
Dividend per share
 Interim                                                                 (cents)             35,0             50,0             50,0
 Final                                                                   (cents)                -                -            115,0

* Prior period restated to account for change in functional currency per note 3.

Condensed consolidated statement of other comprehensive income

                                                                                                         Unaudited
                                                                                        Unaudited         Restated          Audited
                                                                                    Six months to    Six months to     12 months to
                                                                                     30 September     30 September         31 March
                                                                                             2017            2016*             2017
                                                                                            R'000            R'000            R'000

Net profit for the period                                                                  26 361           89 461           96 206
Other comprehensive income                                                                    445            1 942            1 756
Items that may not be reclassified subsequently to profit or loss, net of tax:

 Remeasurement of defined benefit surplus                                                       -                -            (211)
 Remeasurement of post-employment medical aid obligation                                        -                -              462

Items that may be reclassified subsequently to profit or loss, net of tax:

 Net fair value loss on available-for-sale financial assets                                     -                -             (46)
 Exchange differences on translating foreign operations                                       445            1 942            1 551
 
Total comprehensive income for the period                                                  26 806           91 403           97 962
 
Total comprehensive income for the period attributable to: 
 Owners of the company                                                                      7 654           60 137           66 582
 Non-controlling interests                                                                 19 152           31 266           31 380
 
                                                                                           26 806           91 403           97 962

* Prior period restated to account for change in functional currency per note 3.

Condensed consolidated statement of financial position

                                                                                                         Unaudited
                                                                                        Unaudited         Restated         Audited
                                                                                     30 September     30 September        31 March
                                                                                             2017            2016*         2017(#)
                                                                                            R'000            R'000           R'000

ASSETS
Non-current assets                                                                      1 006 212          846 678         944 326
    
Property, plant and equipment                                                             937 599          790 517         874 815
Other financial assets                                                                      2 738              710           1 019
Investment in joint venture and associates                                                 56 361           53 030          55 410
Unsecured loans                                                                             3 402                -               -
Deferred tax assets                                                                         6 112            2 421          13 082
   
Current assets                                                                            520 615          542 318         523 495
    
Inventories                                                                               137 863           53 733         151 191
Biological assets                                                                         155 762          161 402         213 272
Trade and other receivables                                                               166 815          188 768          84 512
Current tax assets                                                                          2 673            2 580           6 900
Retirement benefit surplus                                                                 10 212            9 708          10 212
Unsecured loans                                                                             5 232              540             540
Cash and bank balances                                                                     42 058          125 587          56 868
    
Total assets                                                                            1 526 827        1 388 996       1 467 821
 
EQUITY AND LIABILITIES 
Capital and reserves                                                                    1 076 230        1 077 966       1 066 978
  
Share capital and premium                                                                 226 271          226 271         226 271
Investment revaluation reserve                                                                951              997             951
Foreign currency translation reserve                                                     (23 319)         (23 373)        (23 764)
Share-based payment reserve                                                                 2 414            1 434           2 414
Retained earnings                                                                         816 618          837 456         836 706
  
Equity attributable to owners of the company                                            1 022 935        1 042 785       1 042 578
Non-controlling interests                                                                  53 295           35 181          24 400
 
Non-current liabilities                                                                   220 662          208 322         218 918
    
Deferred tax liabilities                                                                  132 568          130 106         148 326
Long-term borrowings: interest-bearing                                                     49 590           47 141          33 169
Long-term liability: interest-free                                                         38 504           31 075          37 423
    
Current liabilities                                                                       229 935          102 708         181 925
   
Trade payables, other payables and provisions                                              46 890           33 672          67 992
Short-term borrowings: interest-bearing                                                    30 519           32 095          65 341
Outside shareholders' loan                                                                    604              617             597
Current tax liabilities                                                                    25 899           27 321          14 074
Dividend withholding tax                                                                        -               63               -
Post-employment medical aid obligation                                                      9 023            8 940           9 023
Bank overdraft                                                                            117 000                -          24 898
    
Total equity and liabilities                                                            1 526 827        1 388 996       1 467 821
   
Net asset value per share                                                                   7 051            7 062           6 990
Number of shares 
In issue                                                                               15 264 317       15 264 317      15 264 317
Weighted average (basic)                                                               15 264 317       15 264 317      15 264 317
Weighted average (diluted)                                                             15 295 846       15 304 690      15 268 767

 *  Prior period restated to account for change in functional currency per note 3.
(#) Reclassified demand deposit facilities to bank overdraft.

Condensed consolidated statement of cash flows

                                                                                                         Unaudited 
                                                                                        Unaudited         Restated         Audited
                                                                                    Six months to    Six months to    12 months to
                                                                                     30 September     30 September        31 March
                                                                                             2017            2016*         2017(#)
                                                                                            R'000            R'000           R'000

Operating activities
Operating profit for the period                                                            43 845          122 984         125 154
Other comprehensive income                                                                      -                -             348
Depreciation                                                                               21 856           22 580          48 557
Change in fair value of biological assets                                                  57 803           34 278        (22 998)
Other non-cash items                                                                      (7 647)          (6 305)           2 262

Operating cash flows before movements in working capital                                  115 857          173 537         153 323
Net outflow from changes in working capital                                              (87 749)        (103 256)        (51 505)
Interest received                                                                             634            4 304           8 958
Interest paid                                                                             (7 866)          (3 164)         (5 453)
Income taxes paid                                                                         (3 038)          (6 769)        (15 962)

Net cash generated by operating activities                                                 17 838           64 652          89 361

Investing activities
Proceeds on disposal of property, plant and equipment                                       3 463            7 027           1 743
Investment in joint venture and associate companies                                         (951)         (29 418)        (31 798)
Investment in property, plant and equipment                                              (87 824)         (33 577)       (158 999)
Other net investing activities                                                            (1 719)                -           (212)

Net cash flows before dividends and financing activities                                 (69 193)            8 684        (99 905)
Dividends paid                                                                           (17 554)         (17 554)        (36 081)
Net (decrease)/increase in borrowings                                                    (20 165)            8 714          42 213

Net decrease in cash and cash equivalents                                               (106 912)            (156)        (93 773)
Cash and cash equivalents at beginning of the period                                       31 970          125 743         125 743

Cash and cash equivalents at end of the period                                           (74 942)          125 587          31 970

 *  Prior period restated to account for change in functional currency per note 3.
(#) Reclassified demand deposit facilities to bank overdraft.

Condensed consolidated statement of changes in equity

                                                                                                         Unaudited
                                                                                        Unaudited         Restated        Audited
                                                                                    Six months to    Six months to   12 months to
                                                                                     30 September     30 September       31 March
                                                                                             2017            2016*           2017
                                                                                            R'000            R'000          R'000

Balance at beginning of period                                                          1 066 978        1 004 117      1 004 117
Share-based payment expense                                                                     -                -            980
Total comprehensive income for the period                                                  26 806           91 403         97 962
Dividends declared and paid                                                              (17 554)         (17 554)       (36 081)
 
Total equity                                                                            1 076 230        1 077 966      1 066 978

* Prior period restated to account for change in functional currency per note 3.

Condensed consolidated segmental analysis

                                                                                                         Unaudited
                                                                                        Unaudited         Restated       Audited
                                                                                    Six months to    Six months to  12 months to
                                                                                     30 September     30 September      31 March
                                                                                             2017            2016*          2017
                                                                                            R'000            R'000         R'000
Revenue
Sugar cane                                                                                240 462          265 909       342 844
Deciduous fruit                                                                            92 462           99 720       170 219
Bananas                                                                                    53 533           74 590       126 493
Macadamias                                                                                  2 514                -             -
Property                                                                                   16 518                -             -
Other operations                                                                            6 778           11 817        24 395

                                                                                          412 267          452 036       663 951

Operating profit
Sugar cane                                                                                 67 806          134 336       136 979
Deciduous fruit                                                                          (18 306)         (24 861)      (10 386)
Bananas                                                                                    15 085           26 402        38 076
Macadamias^                                                                                 2 679            6 373         2 317
Property                                                                                    (646)                -       (1 530)
Other operations                                                                          (2 037)               87         9 261
Group overheads                                                                          (20 736)         (19 353)      (49 563)

                                                                                           43 845          122 984       125 154

* Prior period restated to account for change in functional currency per note 3.
^ Operating profit from the macadamia operation in the current period arises mainly from the sale of macadamia nuts, whereas
  operating profit from the corresponding prior period is mainly due to foreign exchange gains from the translation of foreign 
  operations.

Condensed consolidated notes

                                                                                                         Unaudited
                                                                                        Unaudited         Restated       Audited
                                                                                    Six months to    Six months to  12 months to
                                                                                     30 September     30 September      31 March
                                                                                             2017            2016*          2017
                                                                                            R'000            R'000         R'000


1. Net finance (cost)/income
   Interest paid                                                                          (7 866)          (3 164)       (5 453)
   Interest received                                                                          634            4 304         8 958

                                                                                          (7 232)            1 140         3 505
   
   
2. Headline earnings   
   Profit for the period attributable to owners of the company                              7 209           58 195        64 826
   Adjusted for:   
   Gain on disposal of property, plant and equipment                                            -             (73)         (128)
   Tax effect of the adjustments                                                                -               21            36
    
   Headline earnings                                                                        7 209           58 143        64 734

   * Prior period restated to account for change in functional currency per note 3.

3. Change in functional currency
   Mozambique operations
   With effect from 1 April 2016, due to changes in trading arrangements that meet the requirements of IAS 21:36, the
   functional currency of the group's Mozambique operations changed from Meticais (MZN) to Rands (ZAR). In accordance
   with IAS 21:37, the group has applied the new functional currency prospectively from 1 April 2016, with the prior interim
   period ended 30 September 2016 restated accordingly.
   
   The effect of the change in functional currency on the measurement of account balances and transactions disclosed in
   the consolidated financial statements is as follows:
   
   - Non-monetary assets - translated at the actual ZAR/MZN spot exchange rate at the date of acquisition or disposal. 
   - Monetary assets - translated at the closing ZAR/MZN spot exchange rate as at 30 September 2017. In the case of ZAR
     denominated cash and bank balances, measured at the actual ZAR amount in the bank account as at 30 September 2017.
   - Liabilities - translated at the closing ZAR/MZN spot exchange rate as at 30 September 2017. In the case of ZAR creditor
     and loan accounts with related or unrelated parties, measured at the actual ZAR amount owing as at 30 September 2017.
   - Equity (including share capital) - translated at the historical exchange rate at the date of issue of the equity instruments.
   - Opening retained earnings - recorded at the actual ZAR value of closing retained earnings, as at the end of the
     previous financial year.
   - Current year profit or loss - translated at the average ZAR/MZN exchange rate for each month, in which the transaction
     was recorded, or the actual ZAR/MZN spot exchange rate where practiceable.
   - The foreign currency translation reserve as reported in the prior year, is retained in the current year and in future
     financial periods.

4. Basis of preparation and accounting policies
   The condensed consolidated unaudited results for the half-year ended 30 September 2017 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 2017 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 2017.
 
   The adoption of these standards had no recognition and measurement impact on the financial results of the current
   reporting period.

29 November 2017

Sponsor
SASFIN CAPITAL (a member of the SASFIN Group)

www.cbl.co.za



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