Wrap Text
Condensed Unaudited Results For The Six Months Ended 31 August 2018
Zeder Investments Limited
Incorporated in the Republic of South Africa
(Registration number: 2006/019240/06)
JSE Ltd ("JSE") share code: ZED
ISIN number: ZAE000088431
("Zeder" or "the group")
CONDENSED UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2018
HIGHLIGHTS
- SOTP value per share R6,23 as at 1 October 2018
- Recurring headline earnings increased by 158% to 9,8 cents per share
- Headline earnings increased by 605% to 30,3 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
R12,52bn on 31 August 2018. Zeder's 27,0% interest in Pioneer Foods remains its largest investment, representing 49,1% (28 February 2018: 53,9%) 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 period under review, it dedicated most of
its efforts to existing investments while evaluating select new and adjacent opportunities. Zeder continues to drive for additional growth from its existing
investment platforms while aiming to add to its portfolio when opportune.
PERFORMANCE OF PORTFOLIO COMPANIES
A significant recovery in earnings was delivered by the majority of Zeder's investee companies during the period under review despite continuing to trade under
challenging macro conditions. Apart from Agrivision Africa, all portfolio companies managed to stabilise or reverse the corresponding lower levels of profitability
reported in the results for the previous interim period. In addition to the strong improvement in recurring headline earnings, a substantial increase in headline
earnings was recorded as a result of the upward fair value adjustment relating to Capespan's interest in its Chinese investment, Joy Wing Mau (previously known
as Golden Wing Mau).
From a valuation point of view, the share prices of Zeder and its investee companies were suppressed during the period under review resulting in a decline in
Sum-of-the-Parts ("SOTP") valuations. The overall market sentiment towards Zeder and the sector it operates in continues to be negative following the volatile
and challenging trading conditions previously reported on. While challenges remain, Zeder believes the underlying operating environment will continue to improve.
The first six months of Zeder's earnings traditionally represents the lesser half of its annual earnings as this period reflects the annual input-cost cycle
associated with many of its agriculture investments as well as the softer half of the annual consumer sales and spending cycles associated with its other
investments. Year-on-year comparisons at the interim stage of reporting may therefore reflect seasonal variances.
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,
decreased by 15,0% during the reporting period to R6,67 as at 31 August 2018. At the close of business on Monday, 1 October 2018, Zeder's SOTP value per share
was R6,23.
28 Feb 2018 31 Aug 2018 1 Oct 2018
Interest Interest Interest
Company (%) Rm (%) Rm (%) Rm
Pioneer Foods 27,0 7 660 27,0 6 145 27,0 5 428
Capespan 97,5 2 259 96,9 2 167 96,9 2 167
Zaad 93,2 2 043 93,5 2 235 93,5 2 235
Kaap Agri 40,9 1 376 40,9 1 198 40,9 1 183
Agrivision Africa 56,0 591 56,0 493 56,0 493
Quantum Foods 27,7 246 29,3 259 29,3 259
Other 33 23 21
Total investments 14 208 12 520 11 786
Cash and cash equivalents 111 272 266
Other net assets 108 111 117
Debt funding (1 000) (1 500) (1 510)
SOTP value 13 427 11 403 10 659
Number of shares in issue (net of treasury shares) (million) 1 710 1 710 1 710
SOTP value per share (rand) 7,85 6,67 6,23
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 Unaudited
28 Feb 18 31 Aug 17 31 Aug 18
12 months 6 months Change 6 months
Rm Rm % Rm
Recurring headline earnings from investments 576 115 231
Net interest, taxation and other income and expenses (102) (50) (64)
Recurring headline earnings 474 65 157 167
Non-recurring headline earnings (49) 9 348
Headline earnings 425 74 596 515
Non-headline items (171) 53 (51)
Attributable earnings 254 127 265 464
Weighted average number of shares in issue (net of treasury shares) (million) 1 717 1 722 1 702
Recurring headline earnings per share (cents) 27,6 3,8 158 9,8
Headline earnings per share (cents) 24,8 4,3 605 30,3
Attributable earnings per share (cents) 14,8 7,4 269 27,3
Recurring headline earnings per share increased by 158% to 9,8 cents mainly due to a strong recovery in earnings from most of its underlying investee companies
compared to the previous period.
Headline earnings per share increased by 605% to 30,3 cents mainly as a result of the above and due to the upward fair value adjustment of the investment in
Joy Wing Mau.
Attributable earnings per share increased by 269% to 27,3 cents, a lower percentage than headline earnings per share, mainly due to an impairment in Agrivision
Africa goodwill in the current period in contrast to a non-headline profit on disposal of underlying business operations at a subsidiary level during the previous period.
NOTEWORTHY TRANSACTIONS
As detailed on the JSE Limited's Stock Exchange News Service ("SENS") on 21 September 2018, Capespan Group Limited, a subsidiary of Zeder, has entered into share
transfer agreements for the sale of its entire shareholding in the Joy Wing Mau Group in China for an aggregate purchase consideration of ¥566m, amounting to
approximately R1,18bn, at exchange rates at the time. If the disposal is implemented as anticipated, this would represent a very successful investment that would
enable Zeder to inject growth capital into the core fruit and logistics divisions of Capespan, improving debt levels while also providing Zeder with improved cash
resources at a group level.
PROSPECTS AND OUTLOOK
The climatic cycle within which our companies operate has improved but the South African and regional economies and investment climate remains constrained.
The recent positive changes should contribute to improved conditions in the medium term. Zeder remains committed and actively involved with its
underlying portfolio of companies. It continues to invest in organic growth opportunities within while actively seeking new investments to compliment the portfolio.
We believe that, despite inevitable cyclicality, investing in the agribusiness industry should offer attractive long-term returns and the strength of the our companies
and management teams, combined with a defensive portfolio mix, should contribute to the continued sustainability of results. We believe that the company and its
shareholders will benefit from same.
WEBCAST
Shareholders are reminded that Zeder will be hosting a webcast and a conference call at 15h00 (South African time) on Wednesday, 10 October 2018 to present the results
to shareholders and the market. To register for the webcast or the conference call, please follow the below links.
Webcast details:
- View and listen mode, with a Q&A facility
- Link: www.diamondpass.net/zeder181010
Conference call details:
- Listen-only mode, with an interactive Q&A at the end
- Link: www.diamondpass.net/1846770
DIVIDEND
It is currently Zeder's policy to only declare a final dividend at year-end.
CONDENSED CONSOLIDATED INCOME STATEMENT
Unaudited Audited
Aug 18 Aug 17 Feb 18
6 months 6 months 12 months
Rm Rm Rm
Revenue 3 408 4 440 8 485
Cost of sales (2 760) (3 863) (6 996)
Gross profit 648 577 1 489
Income
Change in fair value of biological assets 31 39 195
Investment income 42 33 77
Net fair value gains 479 17 45
Other operating income 12 98 116
Total income 564 187 433
Expenses
Marketing, administration and other expenses (826) (738) (1 671)
Total expenses (826) (738) (1 671)
Net income from associates and joint ventures
Share of profits of associates and joint ventures 324 226 472
Impairment of associates and joint ventures (note 2) (1)
Net loss on dilution of interest in associates (note 2) (10) (20) (29)
Net income from associates and joint ventures 314 206 442
Profit before finance costs and taxation 700 232 693
Finance costs (150) (144) (289)
Profit before taxation 550 88 404
Taxation (88) 26 (196)
Profit for the period 462 114 208
Profit attributable to:
Owners of the parent 464 127 254
Non-controlling interests (2) (13) (46)
462 114 208
EARNINGS PER SHARE AND NUMBER OF SHARES IN ISSUE
Earnings per share (cents)
Recurring headline 9,8 3,8 27,6
Headline (basic) (note 2) 30,3 4,3 24,8
Headline (diluted) 29,2 3,8 23,7
Attributable (basic) 27,3 7,4 14,8
Attributable (diluted) 26,2 6,8 14,0
Number of shares (million)
In issue 1 715 1 731 1 715
In issue (net of treasury shares) 1 702 1 725 1 702
Weighted average 1 702 1 722 1 717
Diluted weighted average 1 703 1 724 1 719
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Audited
Aug 18 Aug 17 Feb 18
6 months 6 months 12 months
Rm Rm Rm
Profit for the period 462 114 208
Other comprehensive income for the period, net of taxation 57 33 (16)
Items that may be reclassified to profit or loss
Currency translation adjustments 109 (11) (100)
Share of other comprehensive income of associates and joint ventures (48) 31 64
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) 13 20
Total comprehensive income for the period 519 147 192
Attributable to:
Owners of the parent 504 167 257
Non-controlling interests 15 (20) (65)
519 147 192
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Audited
Aug 18 Aug 17 Feb 18
Rm Rm Rm
Assets
Non-current assets 10 020 10 392 10 298
Property, plant and equipment 1 704 1 624 1 626
Intangible assets 638 675 606
Biological assets (bearer plants) 413 397 406
Biological assets (agricultural produce) 11
Investment in ordinary shares of associates and joint ventures 6 812 7 180 6 636
Loans to associates and joint ventures 170 235 136
Equity securities 38 45 688
Loans and advances 80 113 100
Deferred income tax assets 112 85 61
Employee benefits 42 38 39
Current assets 3 845 3 537 3 103
Biological assets (agricultural produce) 70 71 152
Inventories 1 367 1 160 1 286
Loans and advances 47 28 38
Trade and other receivables 1 849 1 836 1 274
Current income tax assets 27 38 27
Cash, money market investments and other cash equivalents 485 404 326
Non-current assets held for sale (note 5) 1 185 19 7
Total assets 15 050 13 948 13 408
Equity and liabilities
Ordinary shareholders' equity 8 561 8 311 8 269
Non-controlling interests 342 370 327
Total equity 8 903 8 681 8 596
Non-current liabilities 2 987 1 265 2 276
Deferred income tax liabilities 359 83 222
Borrowings 2 500 1 039 1 939
Derivative financial liabilities 26 42 24
Employee benefits 102 101 91
Current liabilities 3 160 4 002 2 536
Borrowings 1 779 2 669 1 428
Derivative financial liabilities 14 15
Trade and other payables 1 268 1 247 994
Current income tax liabilities 32 27 34
Employee benefits 67 59 65
Total liabilities 6 147 5 267 4 812
Total equity and liabilities 15 050 13 948 13 408
Net asset value per share (cents) 503,0 481,8 485,8
Tangible asset value per share (cents) 465,5 442,7 450,2
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Unaudited Audited
Aug 18 Aug 17 Feb 18
6 months 6 months 12 months
Rm Rm Rm
Ordinary shareholders' equity at beginning of the period 8 247 8 291 8 291
Previously reported 8 269 8 291 8 291
Adjustment due to initial application of IFRS 9 (note 1.1) (22)
Total comprehensive income for the period 504 167 257
Shares purchased and cancelled (94)
Net movement in treasury shares 2 (23)
Transactions with non-controlling interests (11) 37 18
Other movements 9 4 10
Dividends paid (188) (190) (190)
Ordinary shareholders' equity at end of the period 8 561 8 311 8 269
Non-controlling interests at beginning of the period 325 407 407
Previously reported 327 407 407
Adjustment due to initial application of IFRS 9 (note 1.1) (2)
Total comprehensive income for the period 15 (20) (65)
Shares issued 10 10 8
Transactions with non-controlling interests 13 (12) (5)
Other movements 2 2
Dividends paid (21) (17) (20)
Non-controlling interests at end of the period 342 370 327
Total equity 8 903 8 681 8 596
Dividend per share (cents) 11,0
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Audited
Aug 18 Aug 17 Feb 18
6 months 6 months 12 months
Rm Rm Rm
Cash (utilised by)/generated from operations (note 3) (246) (232) 267
Investment income 121 108 342
Finance cost and taxation paid (178) (132) (297)
Cash flow from operating activities (303) (256) 312
Acquisition of subsidiary (note 4) (41)
Cash acquired from acquisition of subsidiary 1
Proceeds from disposal of subsidiaries/subsidiaries' operations 4 27 27
Acquisition of associates and joint ventures (172) (183)
Loans granted to associates and joint ventures (31) (3) (52)
Additions to property, plant and equipment (81) (94) (213)
Proceeds from disposal of property, plant and equipment 1 2 25
Additions to intangible assets (34) (36) (97)
Acquisition of equity securities (6)
Proceeds from disposal of equity securities 5 9
Other 58 16 76
Cash flow from investing activities (119) (260) (413)
Capital contributions by non-controlling interests 1 4 4
Shares purchased and cancelled (94)
Purchase of treasury shares (27)
Treasury shares sold 2 5
Dividends paid to group shareholders (188) (190) (190)
Dividends paid to non-controlling interests (21) (17) (20)
Borrowings repaid (183) (160) (1 333)
Borrowings drawn 962 869 1 660
Other (17) (10)
Cash flow from financing activities 571 491 (5)
Net increase/(decrease) in cash and cash equivalents 149 (25) (106)
Exchange differences on cash and cash equivalents 10 7 10
Cash and cash equivalents at beginning of the period 326 422 422
Cash and cash equivalents at end of the period 485 404 326
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES
These condensed consolidated interim 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, 71 of 2008, as amended; and the Listings Requirements of the JSE.
The condensed consolidated interim financial statements do not include all of the information required for full consolidated annual financial statements and
should be read in conjunction with the consolidated annual financial statements for the year ended 28 February 2018.
The accounting policies applied in the preparation of these condensed consolidated interim financial statements are in terms of IFRS and consistent in all
material respects with those used in the prior year's consolidated annual financial statements and includes the adoption of the new standard IFRS 9 Financial
Instruments (refer note 1.1). The group adopted other various revisions to IFRS which were effective for its financial year ending 28 February 2019 however,
these revisions have not resulted in material changes to the group's reported financial interim results or disclosures.
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 similar to those disclosed in the consolidated annual financial statements for the year ended
28 February 2018.
1.1 Adoption of IFRS 9 Financial Instruments
IFRS 9 Financial Instruments is the new standard governing the classification, recognition and measurement of financial instruments, and replaces
IAS 39 Financial Instruments: Recognition and Measurement. The six-month period ended 31 August 2018 is the first period during which IFRS 9 was applied,
thus the group transitioned to IFRS 9 on 1 March 2018. IFRS 9 was generally adopted without restating comparative information, thus any differences in
the carrying amounts of financial instruments will be made to opening retained earnings as at the start of the current financial year, in accordance with the
new standard's transitional arrangements. The reclassifications and the adjustments arising from the new impairment rules are therefore not reflected in the
statement of financial position as at 28 February 2018, but are recognised in the opening statement of financial position on 1 March 2018.
Classification and recognition:
IFRS 9, inter alia, replaces the multiple classification and measurement models in IAS 39 with a single model that has only two categories: amortised cost and
fair value. On 1 March 2018 (the date of initial application of IFRS 9), the group's management has assessed which business models apply to the financial
assets and financial liabilities held by the group and has classified its financial instruments into the appropriate IFRS 9 categories. There were no effects with
regards to the changes in categories of financial assets and financial liabilities.
Change in measurement:
IFRS 9 establishes a new approach for loans and receivables, including trade and other receivables - an "expected loss" model that focuses on the risk that
a loan or trade debtor will default rather than whether a loss has been incurred. The group applies the IFRS 9 simplified approach to measuring expected
credit losses which uses a lifetime expected loss allowance for all loans and receivables.
The group has four types of financial assets that are subject to IFRS 9's new expected credit loss model: loans to associates and joint ventures; loans and
advances; trade and other receivables; and cash and cash equivalents. The group was required to revise its impairment methodology under IFRS 9 for each
of these classes of assets. The impact of the change in impairment methodology on the group's retained earnings and equity is disclosed in the table below.
While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identified impairment loss was immaterial.
The following table shows the adjustments recognised for each individual line item. Line items that were not affected by the changes have not been included.
As a result, the sub-totals and totals disclosed cannot be recalculated from the numbers provided.
Adjustment
due
Previously to initial
reported application Restated
28 Feb 18 of IFRS 9 1 Mar 18
Statement of financial position (extract) Rm Rm Rm
Assets
Investment in ordinary shares of associates and joint ventures(1) 6 636 (3) 6 633
Loans to associates and joint ventures 136 (2) 134
Loans and advances 138 (1) 137
Deferred income tax assets 61 4 65
Trade and other receivables 1 274 (22) 1 252
Total assets 8 245 (24) 8 221
Equity and liabilities
Ordinary shareholders' equity 8 269 (22) 8 247
Non-controlling interests 327 (2) 325
Total equity 8 596 (24) 8 572
(1) IFRS 9 also has an impact on the financial assets and liabilities of the group's underlying associates and joint ventures. The equity method of accounting applied in
terms of IAS 28 Investments in Associates and Joint Ventures requires the group to account for its share of post-acquisition movements in other comprehensive income
and other equity movements are recognised in other comprehensive income with a corresponding adjustment to the carrying amount of the investment. Due to the
aforementioned, an estimation calculation was performed on the adjustment due to the initial application of IFRS 9 on the underlying associates and joint ventures
financial assets and liabilities.
2. HEADLINE EARNINGS
Unaudited Audited
Aug 18 Aug 17 Feb 18
6 months 6 months 12 months
Rm Rm Rm
Profit for the period attributable to owners of the parent 464 127 254
Non-headline items 51 (53) 171
Gross amounts
Profit on disposal of subsidiaries' operations (80) (85)
Net loss on dilution of interest in associates 10 20 29
Impairment of associates and joint ventures 1
Fair value gain resulting from transfer of associate to equity security (15)
Non-headline items of associates and joint ventures (9) (7) 7
Impairment of intangible assets and goodwill 52 7 123
Net loss on sale and impairment of property, plant and equipment (1) 4 10
Other (1) 1 (1)
Non-controlling interests 2 (49)
Taxation 151
Headline earnings 515 74 425
During the period under review, Zeder impaired the goodwill relating to the investment in Agrivision Africa as a result of tough trading conditions in Zambia.
During the previous period under review, the impairment related to computer software at a restructured United Kingdom operation, intellectual property at
Klein Karoo Seed Marketing, where there is no foreseeable future commercialisation of the specific seed line, and goodwill at Mpongwe Milling, following
two consecutive loss-making years.
During the previous period under review, the group, through Capespan Group Limited ("Capespan") merged its Asian operations with Golden Wing Mau to
form JWM Asia and therefore 70% of its business operations were sold to JWM Asia and Capespan retained a 30% shareholding in JWM Asia.
3. CASH (UTILISED BY)/GENERATED FROM OPERATIONS
Unaudited Audited
Aug 18 Aug 17 Feb 18
6 months 6 months 12 months
Rm Rm Rm
Profit before taxation 550 88 404
Investment income (42) (33) (77)
Finance costs 150 144 291
Depreciation and amortisation 102 98 203
Changes in fair value of biological assets (31) (39) (195)
Net fair value gains (474) (43)
Profit on disposal of subsidiaries' operations (80) (85)
Share of profits of associates and joint ventures (324) (226) (472)
Impairment of associates and joint ventures 1
Net loss on dilution of interest in associates 10 20 29
Net loss on sale and impairment of property, plant and equipment (1) 10
Impairment of intangible assets and goodwill 52 123
Net harvest short-term biological assets 105 60 60
Other non-cash items (11) (3) (7)
86 29 242
Changes in working capital and other financial instruments (246) (154) 204
Additions to biological assets (86) (107) (179)
Cash (utilised by)/generated from operations (246) (232) 267
4. SUBSIDIARIES' ACQUIRED
Hygrotech Properties Proprietary Limited
During August 2018, Zaad Holdings Limited ("Zaad"), acquired 100% of the shareholding in Hygrotech Properties Proprietary Limited ("Hygrotech") for a
cash consideration of R44m. Goodwill of R1m arose in respect of, inter alia, synergies pertaining to the integration of the current operations within the Zaad
group of companies. Accounting for the Hygrotech business combination has not been finalised.
The summarised assets and liabilities recognised at the acquisition date was:
Unaudited
Hygrotech Total
Rm Rm
Identifiable net assets acquired 43 43
Goodwill recognised 1 1
Cash purchase consideration 44 44
Cash consideration paid (44) (44)
Cash and cash equivalents acquired 3 3
Cash flow for subsidiary acquired (41) (41)
The aforementioned business combination does not contain any contingent consideration or indemnification asset arrangements and the acquisition-related
costs expensed were insignificant.
Had Hygrotech been consolidated with effect from 1 March 2018 instead of its acquisition date, the consolidated income statement would have reflected
additional revenue of R89m and loss after tax of R12m.
5. NON-CURRENT ASSETS HELD FOR SALE
As at 31 August 2018, non-current assets held for sale comprise mainly Capespan Group Limited's ("Capespan") investment in Joy Wing Mau amounting
to R1,18bn (transferred on 31 August 2018 from equity securities to non-current assets held for sale). As reported on SENS on 21 September 2018, Zeder is
in the process of disposing of its investment in Joy Wing Mau. In the current period it also includes property, plant and equipment within the Capespan UK
operations, amounting to R3m (31 August 2017: R12m) (28 February 2018: R7m), following the adoption of a plan to sell the assets in the previous period.
6. FINANCIAL INSTRUMENTS
6.1 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 condensed consolidated interim financial statements do not include all financial risk management information and disclosures set out in the consolidated
annual financial statements, and therefore they should be read in conjunction with the group's annual financial statements for the year ended 28 February
2018. Risk management continues to be carried out throughout the group under policies approved by the respective boards of directors.
6.2 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.
There have been no significant transfers between level 1, 2 or 3 during the period under review and the valuation techniques and inputs used to determine
fair values are similar to those disclosed in the consolidated annual financial statements for the year ended 28 February 2018.
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:
Unaudited Level 1 Level 2 Level 3 Total
31 August 2018 Rm Rm Rm Rm
Assets
Equity securities 9 29 38
Opening balance 679
Fair value gains 490
Disposals (5)
Transfer to non-current assets held for sale (note 5) (1 182)
Currency translation adjustments 47
Liabilities
Derivative financial liabilities 1 39 40
Opening balance 39
Fair value gains (1)
Finance cost 1
Unaudited Level 1 Level 2 Level 3 Total
31 August 2017 Rm Rm Rm Rm
Assets
Equity securities - 45 45
Opening balance 1 44
Transfer between levels (1) 1
Liabilities
Derivative financial liabilities 42 42
Opening balance 94
Transactions with non-controlling interests (50)
Fair value gains (7)
Finance cost 5
Audited Level 1 Level 2 Level 3 Total
28 February 2018 Rm Rm Rm Rm
Assets
Equity securities 9 679 688
Opening balance 44
Transfer from associates to equity securities 700
Disposals (7)
Fair value gains 8
Exchange differences (66)
Liabilities
Derivative financial liabilities 39 39
Opening balance 94
Disposals (47)
Fair value gains (15)
Finance cost 7
7. 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 each of its underlying investments. The result is that investments
which Zeder does 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 and 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 using the relevant accounting standards which include historical cost and the equity accounting method.
The chief operating decision-maker (executive committee) evaluates the following information to assess the segments' performance:
Unaudited Audited
Aug 18 Aug 17 Feb 18
6 months 6 months 12 months
Rm Rm Rm
Recurring headline earnings segmental analysis:
Segments
Food, beverages and related services 187 85 394
Agri-related retail, trade and services 58 50 102
Agri-inputs 10 (6) 110
Agri-production (24) (14) (30)
Recurring headline earnings from investments 231 115 576
Net interest, taxation and other income and expenses (64) (50) (102)
Recurring headline earnings 167 65 474
Non-recurring headline items 348 9 (49)
Headline earnings 515 74 425
Non-headline items (note 2) (51) 53 (171)
Attributable earnings 464 127 254
SOTP segmental analysis:
Segments
Food, beverages and related services 8 575 9 853 10 169
Agri-related retail, trade and services 1 217 1 602 1 405
Agri-inputs 2 235 2 043 2 043
Agri-production 493 614 591
Cash and cash equivalents 272 75 111
Other net assets 111 101 108
Debt funding (1 500) (977) (1 000)
SOTP value 11 403 13 311 13 427
SOTP value per share (rand) 6,67 7,72 7,85
Profit before tax segmental analysis:
Segments
Food, beverages and related services 661 172 479
Agri-related retail, trade and services 57 46 93
Agri-inputs (5) (27) 102
Agri-production (44) (39) (156)
Management fees and other income and expenses (119) (64) (114)
Profit before tax 550 88 404
IFRS revenue (revenue and investment income) segmental analysis:
Segments
Food, beverages and related services 2 762 3 729 6 672
Revenue 2 739 3 710 6 621
Investment income 23 19 51
Agri-inputs 501 503 1 412
Revenue 493 495 1 398
Investment income 8 8 14
Agri-production 176 235 467
Revenue 176 235 466
Investment income 1
Unallocated investment income (mainly head office interest income) 11 6 11
IFRS revenue 3 450 4 473 8 562
8. CAPITAL COMMITMENTS, CONTINGENCIES AND SURETYSHIPS
Capital commitments, contingencies and suretyships similar to those disclosed in the consolidated annual financial statements for the year ended 28 February
2018 remained in effect during the period under review.
9. RELATED-PARTY TRANSACTIONS
Related-party transactions similar to those disclosed in the consolidated annual financial statements for the year ended 28 February 2018 took place during
the period under review.
10. EVENTS SUBSEQUENT TO THE REPORTING DATE
No material event occurred between the end of the reporting period and the date of approval of these condensed consolidated interim financial statements.
11. PREPARATION
These condensed consolidated interim financial statements were compiled under the supervision of the financial director, Mr JH le Roux, CA (SA), and were
not reviewed or audited by the group's external auditor, PricewaterhouseCoopers Inc.
Signed on behalf of the board
Jannie Mouton Norman Celliers
Chairman Chief executive officer
Stellenbosch
9 October 2018
DIRECTORS
JF Mouton (Chairman), N Celliers* (CEO), JH le Roux* (FD), GD Eksteen#, WL Greeff, ASM Karaan#, NS Mjoli-Mncube#, PJ Mouton, CA Otto#
*executive
#independent non-executive
COMPANY SECRETARY AND REGISTERED OFFICE
Zeder Corporate Services Proprietary Limited
2nd Floor, Ou Kollege, 35 Kerk Street, Stellenbosch, 7600
PO Box 7403, Stellenbosch, 7599
TRANSFER SECRETARY
Computershare Investor Services Proprietary Limited
Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196
PO Box 61051, Marshalltown, 2107
SPONSOR
PSG Capital Proprietary Limited
AUDITOR
PricewaterhouseCoopers Inc.
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