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Trading update and trading statement for the year ending 30 September 2018

Rhodes Food Group Holdings Limited
(Incorporated in the Republic of South Africa)
Registration number 2012/074392/06
JSE share code: RFG
ISIN: ZAE000191979
(“RFG” or “the group”)


Trading update

The increasingly challenging local economic environment and the prolonged
drought in the Western Cape have adversely impacted the group’s regional and
international performance.

Regional segment (South Africa and the rest of Africa)
Trading conditions showed a marked deterioration in the second half of the
group’s financial year as declining consumer disposable income resulted in a
sharp slowdown in sales growth, in line with the pressure being experienced in
the food retail sector.

Despite the tougher trading environment, market shares have been maintained or

-    The pie category has proven to be resilient in the current consumer
     slowdown. However, the turnaround in Ma Baker has been slower than
     expected and the business is anticipated to report a small loss for the full

-    Dry foods (formerly Pakco) continues to perform well and gain momentum
     from the relaunch of its brand portfolio earlier in the year.

-    Escalating meat prices have contributed to margin dilution in Bull Brand.

-    Fruit juices have shown good growth in an intensely competitive

Trading in the sub-Saharan Africa markets remains tough owing to poor
economic conditions and liquidity constraints in some major markets.

The regional operating margin for the second half is anticipated to be at a similar
level to the 7.8% reported for the first half, although the margin for the first six
months was net of certain once-off costs.

International segment
International revenue will show an increase for the year due to improving export
volumes. Industrial puree and concentrate pricing has remained weak and
margins continued to be impacted by increased canned fruit product costs as a
result of the drought in the Western Cape over the last two seasons.

The higher canned fruit costs could not be recovered through price increases and
this together with the currency impact has had a material impact on profitability
which will contribute to the international segment posting a loss for the year.

Trading statement

In addition to the trading performance, the group’s earnings will be adversely
impacted by increased interest payments which are expected to be between R26
million and R28 million higher than the previous year. This relates mainly to the
funding for the acquisition of Ma Baker, the increased capital investment
programme and lower levels of cash generated as a result of the lower profit over
the past year.

Earnings have benefited by R11 million from an income tax rebate relating to
capital projects in the current year and the release of an over-provision for prior

As a result of these factors outlined above, management expects headline
earnings for the year ending 30 September 2018 to be between 28% and 38%
lower than the R237.0 million reported for the previous year.

Earnings per share measures have been impacted by the 8.1 million or 3.3%
increase in the weighted average number of shares in issue over the prior year
relating to the issue of shares for the capital raise and the acquisition of Pakco in
the previous year.

                                   Year ended                   Year ending
                                   1 October 2017            30 September 2018
                                   Reported                    Expected range
Headline earnings                  R237.0m            28% - 38% lower   R170.6m – R146.9m
Earnings per share (EPS)*          95.9c              31% - 41% lower   66.2c – 56.6c
Headline earnings per share        96.9c              30% - 40% lower   67.8c – 58.1c
Diluted HEPS*                      93.4c              30% - 40% lower   65.4c – 56.0c
* Impacted by the increase in the weighted average number of shares in issue

The forecast financial information on which this trading update and trading
statement is based has not been reviewed and reported on by the group’s
independent external auditors.

The group’s annual financial results for the year ending 30 September 2018 will
be released on the Stock Exchange News Service of the JSE on 20 November

Groot Drakenstein
17 September 2018

RAND MERCHANT BANK (A division of FirstRand Bank Limited)

Date: 17/09/2018 07:05:00 
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