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CROOKES BROTHERS LIMITED - Interim results for the six months ended 30 September 2018

Release Date: 28/11/2018 14:00
Code(s): CKS     PDF:  
Wrap Text
Interim results for the six months ended 30 September 2018

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
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2018

Commentary

As in prior years, the board cautions against using interim earnings to project full year earnings, due to the impact of seasonality,
particularly in the deciduous and macadamia segments.
At the interim stage, cash generated by operations is believed to be a more reliable indicator of group performance as it
eliminates the vagaries of price estimates of the prior year crop. Cash generated by operations for the six month period ended
30 September 2018 increased by 86% to R52 million (2017: R28 million).

Operations
Sugar cane
Operating profit from sugar cane increased by 16% to R78 million due to excellent yields and quality following extensive
replanting after the drought although results are undermined by current estimated RV prices which are still 16% below
the 2017 price estimates and 22% below those of 2016. The group has expanded its area under crop to 6 755 hectares
(2017: 6 192 hectares).

Deciduous fruit
The Western Cape has experienced debilitating drought conditions and results in the deciduous operations reflect the resultant
poor yields and quality of the crop. The unmatched results in the interim period reflect the tail-end of revenues from the 2018
crop and the cost of establishing the 2019 crop.

Bananas
Following two years of outstanding results, revenue and operating profit has declined due to weaker prices following increased
production in Mozambique and South Africa.

Macadamias
Revenue is significantly higher than that of the previous year as new orchards come into production. Growth continues to
exceed expectations.

Property
Revenue is up 113% as the sale of units in Renishaw Hills gains momentum. Operating margins have improved as early sales
were done at attractive prices to encourage early entrants to the development.

Prospects
We expect results for the full year to reflect a recovery with record sugar cane yields following our replant programme, new
young macadamia and deciduous orchards coming into production early in 2019 and recovery in sugar prices.

Interim dividend declaration
The board continues to maintain a conservative dividend policy during this recovery period and has taken the decision not to
declare an interim dividend for the six month period ended 30 September 2018.
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
28 November 2018

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 member of the Sasfin Group

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   
                                                                                                           Unaudited        Restated       Restated   
                                                                                                       Six months to   Six months to   12 months to   
                                                                                                        30 September    30 September       31 March   
                                                                                                                2018           2017*          2018*   
                                                                                                Note           R'000           R'000          R'000   
Revenue                                                                                                      373 000         346 602        577 371   
Operating profit before biological assets                                                                     83 229         101 648            460   
Change in fair value of biological assets                                                                   (43 009)        (57 803)          2 600   
Operating profit after biological assets                                                                      40 220          43 845          3 060   
Share of profit of joint venture and associate companies                                                           -               -          3 641   
Investment income                                                                                                791             634          1 666   
Finance costs                                                                                      1        (13 601)         (7 866)       (16 700)   
Profit/(loss) before tax                                                                                      27 410          36 613        (8 333)   
Income tax expense                                                                                           (6 939)        (10 252)          5 096   
Profit/(loss) for the period                                                                                  20 471          26 361        (3 237)   
Attributable to:                                                                                                                                      
Owners of the company                                                                                          9 963           7 209        (7 587)   
Non-controlling interests                                                                                     10 508          19 152          4 350   
                                                                                                              20 471          26 361        (3 237)   
Items that will not be reclassified subsequently to profit or loss:                                                                                   
Remeasurement of post-employment medical aid obligation                                                            -               -          (514)   
                                                                                                                   -               -          (514)   
Items that may be reclassified subsequently to profit or loss:                                                                                        
Exchange differences on translating foreign operations                                                       (3 937)             445        (5 238)   
Other comprehensive (loss)/income, net of income tax                                                         (3 937)             445        (5 752)   
Total comprehensive income/(loss) for the period                                                              16 534          26 806        (8 989)   
Attributable to:                                                                                                                                      
Owners of the company                                                                                          6 026           7 654       (13 339)   
Non-controlling interests                                                                                     10 508          19 152          4 350   
                                                                                                              16 534          26 806        (8 989)   
Earnings/(loss) per share                                                                                                                             
Basic                                                                                        (cents)            65,3            47,2         (49,7)   
Diluted                                                                                      (cents)            65,3            47,1         (49,7)   
Headline earnings/(loss) per share                                                                                                                    
Basic                                                                                        (cents)            52,9            47,2         (50,6)   
Diluted                                                                                      (cents)            52,9            47,1         (50,6)   
Dividend per share                                                                                                                                    
Interim                                                                                      (cents)               -            35,0           35,0   
Final                                                                                        (cents)               -               -              -   
* Restated for change in accounting policy per note 5.                                                                         


Condensed consolidated statement of
financial position

                                                                                                                            Unaudited     Unaudited
                                                                                                           Unaudited         Restated      Restated
                                                                                                        30 September     30 September      31 March
                                                                                                                2018            2017*         2018*
                                                                                              Notes            R'000            R'000         R'000
ASSETS
Non-current assets                                                                                         1 064 251        1 006 212     1 052 815
Property, plant and equipment                                                                                967 627          937 599       967 756
Investment property                                                                                           19 995                -        11 432
Deferred tax assets                                                                                            8 972            6 112         6 044
Other financial assets                                                                                         4 151            2 738         3 269
Investments in joint venture and associates                                                                   59 843           56 361        60 816
Unsecured loans                                                                                                3 663            3 402         3 498
Current assets                                                                                              564 663           520 615       515 615
Inventories                                                                                       3          141 969          137 863       128 494
Biological assets                                                                                            169 837          155 762       213 443
Trade and other receivables                                                                       4          171 744          166 815       124 419
Current tax assets                                                                                             5 688            2 673         8 398
Other financial assets                                                                                           107                -           102
Retirement benefit surplus                                                                                    10 212           10 212        10 212
Unsecured loans                                                                                                3 803            5 232         3 673
Cash and bank balances                                                                                        61 303           42 058        26 874

Total assets                                                                                               1 628 914        1 526 827     1 568 430
EQUITY AND LIABILITIES
Capital and reserves                                                                                       1 048 690        1 076 230     1 032 156
Share capital and premium                                                                                    226 271          226 271       226 271
Investment revaluation reserve                                                                                   951              951           951
Foreign currency translation reserve                                                                        (32 939)         (23 319)      (29 002)
Share-based payment reserve                                                                                    3 473            2 414         3 473
Retained earnings                                                                                            815 434          816 618       805 471
Equity attributable to owners of the company                                                               1 013 190        1 022 935     1 007 164
Non-controlling interests                                                                                     35 500           53 295        24 992
Non-current liabilities                                                                                     253 070           220 662       207 202
Deferred tax liabilities                                                                                     118 868          132 568       126 986
Borrowings - interest-bearing                                                                                 73 020           49 590        24 104
Other financial liabilities                                                                                   13 543                -         8 797
Obligation to restore leased farmland                                                                         44 998           38 504        44 674
Post-employment medical aid obligation                                                                         2 641                -         2 641
Current liabilities                                                                                         327 154           229 935       329 072
Trade and other payables and provisions                                                                       62 382           46 890        55 200
Current tax liabilities                                                                                       13 304           25 899           337
Post-employment medical aid obligation                                                                         7 693            9 023         7 693
Borrowings - interest-bearing                                                                                218 847          147 519       241 792
Outside shareholders' loan                                                                                         -              604             -
Bank overdraft                                                                                                24 928                -        24 050

Total equity and liabilities                                                                               1 628 914        1 526 827     1 568 430
Net asset value per share                                                                                      6 870            7 051         6 762
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)                                                                                15 264 317       15 295 846    15 320 090
* Restated for change in accounting policy per note 5.

Condensed consolidated statement of
cash flows

                                                                                                                          Unaudited      Unaudited   
                                                                                                          Unaudited        Restated       Restated   
                                                                                                      Six months to   Six months to   12 months to   
                                                                                                       30 September    30 September       31 March   
                                                                                                               2018           2017*          2018*   
                                                                                                              R'000           R'000          R'000   
Operating activities                                                                                                                                 
Operating profit for the period                                                                              40 220          43 845          3 060   
Adjustment for non-cash items:                                                                                                                       
Depreciation                                                                                                 27 001          21 856         49 290   
Change in fair value of biological assets                                                                    43 009          57 803        (2 600)   
Other non-cash items                                                                                        (2 861)         (7 647)        (4 405)   
Operating cash flows before movements in working capital                                                    107 369         115 857         45 345   
Net outflow from changes in working capital                                                                (55 109)        (87 749)       (22 621)   
Cash generated from operations                                                                               52 260          28 108         22 724   
Interest received                                                                                               481             634          1 591   
Interest paid                                                                                               (9 266)         (7 866)       (16 594)   
Income taxes paid                                                                                           (1 725)         (3 038)       (17 171)   
Net cash generated by/(used in) operating activities                                                         41 750          17 838        (9 450)   
Investing activities                                                                                                                                 
Investment in other financial assets                                                                          (955)               -        (2 356)   
Increase in unsecured loans                                                                                       -               -        (7 171)   
Proceeds on disposal of property, plant and equipment                                                           398           3 463          6 402   
Investment in property, plant and equipment                                                                (28 876)        (87 824)      (155 217)   
Investment in investment property                                                                           (4 704)               -       (11 449)   
Investment in joint venture and associate companies                                                             558           (951)        (2 525)   
Other net investing activities                                                                                  113         (1 719)           (75)   
Net cash flows before dividends and financing activities                                                      8 284        (69 193)      (181 841)   
Net increase in/(repayment of) term-loans                                                                    42 040           4 824        (2 732)   
Net (repayment of)/increase in other loans and borrowings                                                  (16 773)        (24 989)         10 345   
Net increase in general banking facilities                                                                        -         101 985        154 985   
Net increase in other financial liabilities                                                                       -               -          8 873   
Dividends paid                                                                                                    -        (17 554)       (33 791)   
Net increase/(decrease) in cash and cash equivalents                                                         33 551         (4 927)       (44 161)   
Cash and cash equivalents at beginning of the period                                                          2 824          46 985         46 985   
Cash and cash equivalents at end of the period                                                               36 375          42 058          2 824   
* Restated for change in accounting policy per note 5.                                                                                               


Condensed consolidated statement of
changes in equity

                                                                                                          Unaudited       Unaudited      Unaudited   
                                                                                                      Six months to   Six months to   12 months to   
                                                                                                       30 September    30 September       31 March   
                                                                                                               2018            2017           2018   
                                                                                                              R'000           R'000          R'000   
Balance at beginning of period                                                                            1 032 156       1 066 978      1 066 978   
Share-based payment expense                                                                                       -               -          1 059   
Other comprehensive income/(loss) for the period                                                             16 534          26 806        (8 989)   
Dividends declared and paid                                                                                       -        (17 554)       (33 791)   
Adjustments to non-controlling interests                                                                          -               -          6 899   
Balance at end of period                                                                                  1 048 690       1 076 230      1 032 156   


Condensed consolidated
segmental analysis

                                                                                                                          Unaudited      Unaudited   
                                                                                                          Unaudited        Restated       Restated   
                                                                                                      Six months to   Six months to   12 months to   
                                                                                                       30 September    30 September       31 March   
                                                                                                               2018           2017*          2018*   
                                                                                                              R'000           R'000          R'000   
Revenue                                                                                                                                              
Sugar cane                                                                                                  232 963         240 462        300 080   
Deciduous fruit                                                                                              35 917          41 812        119 163   
Bananas                                                                                                      48 775          38 991         88 464   
Macadamias                                                                                                    8 007           2 041          2 166   
Property development                                                                                         35 241          16 518         49 538   
Other operations                                                                                             12 097           6 778         17 960   
                                                                                                            373 000         346 602        577 371   
Operating profit before biological assets                                                                                                            
Sugar cane                                                                                                   99 424         111 578         48 993   
Deciduous fruit                                                                                             (8 294)           1 738       (19 197)   
Bananas                                                                                                       9 475           9 072         26 240   
Macadamias                                                                                                    3 041           2 679        (1 398)   
Property development                                                                                          2 906           (646)          (974)   
Other operations                                                                                              (265)         (2 037)        (3 667)   
Disposal of plant and equipment and unlisted shares                                                             220               -            361   
Corporate expenses                                                                                         (23 278)        (20 736)       (49 898)   
                                                                                                             83 229         101 648            460   
Change in fair value of biological assets                                                                                                            
Sugar cane                                                                                                 (21 010)        (43 772)        (4 684)   
Deciduous fruit                                                                                            (18 817)        (20 044)        (1 227)   
Bananas                                                                                                     (1 528)           6 013          1 584   
Macadamias                                                                                                  (1 654)               -          6 927   
                                                                                                           (43 009)        (57 803)          2 600   
Operating profit after biological assets                                                                                                             
Sugar cane                                                                                                   78 414          67 806         44 309   
Deciduous fruit                                                                                            (27 111)        (18 306)       (20 424)   
Bananas                                                                                                       7 947          15 085         27 824   
Macadamias                                                                                                    1 387           2 679          5 529   
Property development                                                                                          2 906           (646)          (974)   
Other operations                                                                                              (265)         (2 037)        (3 667)   
Disposal of plant and equipment and unlisted shares                                                             220               -            361   
Corporate expenses                                                                                         (23 278)        (20 736)       (49 898)   
                                                                                                             40 220          43 845          3 060   
* Restated for change in accounting policy per note 5.                                                                                               


Condensed consolidated notes

                                                                                                                          Unaudited      Unaudited   
                                                                                                          Unaudited        Restated       Restated   
                                                                                                      Six months to   Six months to   12 months to   
                                                                                                       30 September    30 September       31 March   
                                                                                                               2018           2017*          2018*   
                                                                                                              R'000           R'000          R'000   
1. Finance costs
   Interest paid - bank overdraft and borrowings                                                             13 395           7 866         16 594   
   Interest paid - reversionary sale and transfer obligations                                                   206               -            106   
                                                                                                             13 601           7 866         16 700   
2. Headline earnings/(loss)
   Profit/(loss) for the period attributable to owners of the company                                         9 963           7 209        (7 587)   
   Adjusted for:                                                                                                                                     
   Gain on disposal of property, plant and equipment                                                          (190)               -          (361)   
   (Gain)/loss on disposal of available-for-sale financial assets - held at cost                               (30)               -              4   
   Impairment of investment premium                                                                               -               -            150   
   (Gain)/loss arising on changes in fair value of investment property                                      (2 393)               -             17   
   Tax effect of the adjustments                                                                                732               -             54   
   Headline earnings/(loss)                                                                                   8 082           7 209        (7 723)   
3. Inventories                                                                                                                                    
   Consumable stores and other                                                                               45 336          41 390         39 843   
   Property for development and sale                                                                         96 633          96 473         88 651   
                                                                                                            141 969         137 863        128 494   
4. Trade and other receivables
   Receivables - trade and other                                                                            164 646         157 708        108 869   
   Less: Allowances for doubtful debts                                                                        (347)           (271)          (347)   
   Net trade receivables                                                                                    164 299         157 437        108 522   
   Prepayments                                                                                                7 445           9 378         15 897   
                                                                                                            171 744         166 815        124 419   
* Restated for change in accounting policy per note 5.                                                                                            


   
5.Changes in IFRS 15 Revenue
  IFRS 15 Revenue from contracts with customers
  IFRS 15 the new revenue standard, came into effect on 1 January 2018. Under IFRS 15, revenue is now recognised when
  control over goods passes to customers. The effect of the standard on the group is felt mainly in our deciduous sector
  where Two a Day ("TAD"), a distributor and marketing agent for Crookes, is now treated as a customer and not as an
  agent. Deliveries of deciduous fruit are now recognised as revenue upon TAD receiving the fruit into its care and control.

  Under the old IAS 18 revenue standard, revenue was only recognised upon TAD selling the fruit, and unsold inventory held
  by TAD was recognised by the group as inventory, measured at the estimated selling price less direct costs.
  The financial effect of IFRS 15 on the group's results is summarised as follows:
  - Revenue is measured and disclosed net of customer processing costs, whereas previously, was disclosed at gross
    revenue, with processing costs accounted for separately.
  - Stock sold to distributors are reclassified as a trade receivables, whereas previously, was disclosed as inventory measured
    at selling price less direct costs.
  - As there is no net impact on operating profit, tax, earnings and earnings per share remain unchanged.
  - Prior period comparatives have been restated.

  The following tables summarise the impact of IFRS 15 on the prior period comparatives

                                                                                                    Unaudited       Unaudited
                                                                                                Six months to    12 months to
                                                                                                 30 September        31 March
                                                                                                         2017            2018
  Statement of profit or loss                                                                           R'000           R'000

  Revenue - reduced                                                                                  (65 665)        (79 852)
  Cost of sales - reduced                                                                              51 123          47 360
  Distribution expenses - reduced                                                                      14 542          32 492

  Net effect on operating profit                                                                            -               -


                                                                                                    Unaudited       Unaudited
                                                                                                Six months to    12 months to
                                                                                                 30 September        31 March
                                                                                                         2017            2018
  Statement of financial position                                                                       R'000           R'000

  Inventories - reduced                                                                                     -        (30 527)
  Trade and other receivables - increased                                                                   -          30 527

  Net effect                                                                                                -               -

  Reconciliation to prior period audited results
  Revenue as previously reported - audited                                                                            657 223
  IFRS 15 change above - unaudited                                                                                   (79 852)

  Revenue restated - unaudited                                                                                        577 371

  Inventories as previously reported - audited                                                                        159 021
  IFRS 15 change above - unaudited                                                                                   (30 527)

  Inventories restated - unaudited                                                                                    128 494

  Trade and other receivables as previously reported - audited                                                         93 892
  IFRS 15 change above - unaudited                                                                                     30 527

  Trade and other receivables restated - unaudited                                                                    124 419

   
6. Basis of preparation and accounting policies
   The condensed consolidated unaudited results for the half-year ended 30 September 2018 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 2018 and were prepared 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 2018. The adoption of these standards and its recognition and
   measurement impact on the financial results of the group, have been disclosed in note 5.

28 November 2018
Sponsor
Sasfin Capital (a member of the Sasfin Group)





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