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OCEANA GROUP LIMITED - Summarised consolidated audited results for the year ended 30 September 2019

Release Date: 15/11/2019 07:07
Code(s): OCE     PDF:  
 
Wrap Text
Summarised consolidated audited results for the year ended 30 September 2019

Oceana Group Limited
Incorporated in the Republic of South Africa
(Registration number 1939/001730/06)
JSE Share Code: OCE
NSX Share Code: OCG
ISIN Number: ZAE 000025284
("Oceana" or "the company" or "the group")

  
http://oceana.co.za/pdf/2019_SUMMARISED_CONSOLIDATED_AUDITED_RESULTS_FOR_THE_YEAR_ENDED_30_SEPTEMBER.pdf


SUMMARISED CONSOLIDATED AUDITED** RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2019 
AND DIVIDEND DECLARATION

HIGHLIGHTS

                                            Audited** Year Ended   Audited** Year Ended     Change %
                                                     30 Sep 2019            30 Sep 2018 
                                                           R'000                  R'000 
Revenue*                                               7 647 415              7 657 311            -
Operating profit before
other operating items                                  1 175 325              1 188 907          (1)
Profit before tax                                        897 012                883 051            2
Earnings per share (cents)                                 528.3                  734.6         (28)
Diluted earnings per share (cents)                         486.1                  674.6         (28)
Headline earnings per share (cents)                        544.3                  727.1         (25)
Diluted headline earnings per share (cents)                500.9                  667.7         (25)
Dividends per share (cents)                                  363                    416         (12)

*   September 2018 restated as a result of the adoption of IFRS 15.
**  This announcement itself is not audited but extracted from audited results for the 
    year ended 30 September 2019.

COMMENTS

FINANCIAL RESULTS

The group has delivered a solid operating performance for the year in the face of tough global
economic conditions and environmental headwinds. Strong demand for canned fish, horse mackerel
and hake resulted in good performance in these segments while reduced landings due to adverse
weather conditions curtailed the performance of our fishmeal and fish oil segment in both South
Africa and the United States of America (USA).

Group revenue remained flat for the year at R7 647 million (2018: R7 657 million). Revenue from
Africa operations increased by 1.0%, underpinned by volume growth of 8% in canned fish and 8% increase in
horse mackerel and hake pricing. This growth was negatively impacted by a decline in South African
fishmeal and oil revenues due to lower landings. The Daybrook operations in the USA delivered a 3.8%
decline in revenue impacted by a slow start to the 2019 fishing season mitigated by improved pricing
for the year. US Dollar revenue for 2019 was converted at an average exchange rate of R14.60/USD
compared to R13.42/USD for the comparative year.

Group operating profit before other operating items decreased by 1.1% to R1 175 million (2018: R1 189 million). 
Africa operations delivered a 2.5% increase in operating profit before other operating items
arising from the volume and price growth in canned fish, growth in pricing for horse mackerel and
hake, the impact of operational efficiencies on production costs together with a favourable
movement in net foreign exchange gains from R19 million in 2018 to R30 million this year.

Total costs remained flat year on year as a direct result of focused initiatives to lower our cost base.
Improved production efficiencies in our canneries and fishmeal operations, increased procurement
savings and the effects of centralisation of key services have delivered strong returns for the year.

Other operating expenses of R17 million (2018: R14 million) relate mainly to impairment of loans
and assets in relation to the Angolan Operations that have been mothballed (R20 million) offset by
profit on disposal of assets.

Net interest expense related to finance costs on facilities and long-term borrowings has reduced by
10.6% for the year to R261 million (2018: R292 million). The average interest rate for all debt is
currently 6.8% (2018: 7.2%).

Group profit before taxation increased by 1.6% to R897 million (2018: R883 million).

TAXATION

Taxation expense of R248 million for the year is materially higher than the comparative year 
(2018: R0.8 million). The 2018 financial year included a once-off release of deferred taxation of 
USD18.6 million (R238 million) following the reduction in the federal corporate tax rate in the 
United States of America from 35% to 21%, effective after 31 December 2018.

HEADLINE EARNINGS AND DIVIDEND

Primarily as a result of the once-off deferred tax adjustment, headline earnings for the year decreased 
by 25.1% compared to the prior year. Excluding the effect of the once-off deferred tax adjustment in the 
prior year, headline earnings increased by 4.1%.

A final dividend of 240 cents (2018: 304 cents) per share has been declared which together with the
interim dividend of 123 cents (2018: 112 cents) per share brings the total dividend for the year to 
363 cents (2018: 416 cents) per share.

FINANCIAL POSITION AND CASH FLOW

Notwithstanding the year on year decline in cash generated from operations to R1 042 million 
(2018: R1 303 million) overall cash performance remained relatively strong. At year-end the group 
had positive cash balances of R588 million (2018: R1 015 million) of which R515 million (2018: R681 million) 
is held in dollar denominated accounts including USD26 million (R395 million) being held in the 
USA.

In September we refinanced and increased our US term facility to USD118 million (2018: USD113 million). 
The facility was refinanced as a 5 year, amortisation facility with final settlement due on 
30 September 2024. Improved terms and conditions were negotiated, and the refinance also provided a
more favourable pricing margin range.

REVIEW OF OPERATIONS

Canned fish and fishmeal (Africa)

Due to strong demand and favourable pricing, sales volumes in the canned fish business increased to
9.5 million cartons (2018: 8.8 million cartons). This was achieved primarily in the Southern Africa 
market which consumes approximately 96% of all volumes and achieved 8% volume growth for the year.

Due to a continued reduction in the SA pilchard Total Allowable Catch (TAC) and a moratorium on pilchard 
fishing in Namibia, canned fish production was primarily driven by supply of imported frozen fish from 
various geographies. For the year under review we procured 106 224 tons of frozen fish (2018: 103 490 tons) 
resulting in consistent supply to own and third-party canneries.

Driving cannery and supply chain efficiencies continues to be a focal point, resulting in increased
throughput, improved labour productivity and overall cost containment. These production
savings mitigated the impact of the weaker exchange rate on the cost of imported frozen fish.

Operating performance in the canned fish segment increased significantly.

Extended winter weather patterns affected landings of industrial fish to the group's fishmeal plants
in South Africa resulting in a volume decline of 20% on the prior year. In Angola the continued
challenging catch rates, location of the resource and difficult operating environment resulted in a
decision to mothball the operation for the 2019 fishing season resulting in impairment which
affected profitability for the year.

Fishmeal and fish oil (USA)

As a result of historically high rainfalls in the US Mid-West prior to the start of the fishing season, 
fresh-water levels in our traditional fishing grounds were substantially higher than normal, negatively 
impacting early landings of Gulf Menhaden. A strong mid-season aided by good plant capacity resulted in an
improvement in overall landings to 685 million fish for the season, in line with the five year average
and well above our original investment case assumptions. These volumes are, however, down by
14% on the prior year.

An increase in capital investment in the 2019 closed season has resulted in significant improvements
in plant capacity and volume throughput. During this season the highest recorded week improved
by 7% on the prior year and overall production capacity has increased by 20%.

Daybrook production of 51 605 tons fishmeal (2018: 63 966 tons) and 16 746 tons fish oil 
(2018: 23 650 tons) for the year resulted in a combined production yield of 33.4% (2018: 34.8%). 
Oil yields at 8.2% (2018: 9.5%) have not yet restored to historical averages due to the impact 
of higher water levels on access to larger fish.

Sales prices achieved by Daybrook have improved over the year with our US petfood strategy,
yielding improved margins and reduced exposure to price volatility. Global demand remains positive
over the longer term but has been suppressed in the current year due to the negative impacts on
pork farming consumption caused by the Swine Fever outbreak in China.

The overall positive operational performance of Daybrook was muted by the reduction in landed
volumes. As a result revenue declined by 4% to R1 721 million (2018: R1 789 million) and operating
profit decreased to R359 million (2018: R367 million).

During the year the Gulf Menhaden Fishery received the Marine Stewardship Council (MSC)
certification in acknowledgement of the sound management and sustainability of the Gulf
Menhaden resource.

Although Daybrook has had a challenging year from a volume point of view the business continues
to deliver healthy operating margins with consistent cash generation.

Horse mackerel, hake, lobster and squid

Our horse mackerel segment delivered good growth for the year aided by strong demand and the
positive impact of a weaker exchange rate.

In South Africa, the Precautionary Maximum Catch Limit (PMCL) for targeted catch of horse
mackerel increased by 9% to 27 760 tons (2018: 25 500 tons). Quota available to Oceana through
own and joint venture allocations remained in line with 2018. Subsequent to the outcomes of appeal 
process published in terms of the 2016 SA Horse Mackerel Fishing Rights Application Process (FRAP), 
Oceana together with other industry players has decided to challenge the quantum allocation methodology.

Landings of South African Horse Mackerel were impacted by poor winter catch rates and fewer
available fishing days due to scheduled dry-dock repairs. Demand remains strong reducing the
impact on performance of lower sales volumes.

Our hake segment delivered a stellar performance for the year. The 2019 hake offshore TAC
increased by 10% to 122 423 tons (2018: 111 294 tons). Revenue and operating profit increased
significantly driven by improved vessel utilisation, larger size mix and strong demand for MSC
certified hake further supported by a weaker exchange rate.

The 2019 TAC for West Coast Rock Lobster (WCRL) reduced substantially to 1 084 tons (2018: 1 924 tons),
in response we reduced the number of fishing vessels and operational sites and actively
pursued third party quota for catching, processing and marketing. The full 2019 quota allocation was
harvested this year.

The squid business reported a significant decline in catch levels this year versus the previous four
consecutive strong years' negatively impacting operational efficiencies. Sales pricing remained
favourable and benefited from a weaker exchange rate.

Commercial cold storage and logistics (CCS)

The CCS business played a critical role in enabling the supply of frozen fish to Lucky Star resulting in
higher occupancies in the Western Cape region but reduced third party sales, impacting margins for
the segment.

On an overall basis the business continued to experience the effect of a subdued local economy , low
occupancy levels in Walvis Bay, and the closure of Angolan operations following increased
government import duties.

DIRECTORATE CHANGES

Mr Aboubakar Jakoet was appointed as a non-executive director with effect from 14 November 2019. 
The board wishes Aboubakar well in his new role.

Aboubakar is a qualified Chartered Accountant with vast experience in the private sectors, 
spanning over many years. He has diverse professional experience in auditing, finance management, 
corporate governance and strategy development and implementation.

He serves as a Non-Executive Director ("NED") for the Pick n Pay Stores Limited.

PROSPECTS

In our canned fish segment the focus will remain on driving production efficiencies while continuing
to seek volume growth, by maintaining supply and affordability.

In the US and Africa fishmeal and oil businesses our focus will be on ensuring improved utilisation of
fleet and land based facilities to help improve catch rates, while increasing sales pricing through a
global sales and distribution strategy. In the US specifically, during the course of next season, we
expect to add an additional vessel and commence fishing on weekends. We maintain our demand
assumptions for fishmeal and oil over the longer term.

In South Africa and Namibia there will be continued engagement with regulators in both countries to
ensure that ongoing transformation activities are sufficiently aligned with government expectations.
Oceana has recently received the accolade of most empowered food producer on the JSE. As a level
1 B-BBEE contributor we are proud of this achievement which will help further enhance our
credentials for strong quota renewal in the 2021 FRAP process. In Namibia we have recently
concluded the sale of 30% of our cold storage facility to our Namibian staff trust in a
transformational transaction for the Namibian fishing sector.

On 8th September 2019 the Ministerial Cabinet took a decision to extend the fishing rights allocation
process (FRAP 2020) in the 12 commercial fishing sectors, which includes the SA small pelagic, Hake
Deep Sea trawl, Squid and South Coast Rock Lobster sectors by a year to 31 December 2021.
Information relating to the above is expected to be communicated to the industry in due course.

Any forward-looking statements set out in this announcement have not been reviewed or reported
on by the auditors.

This short-form announcement is the responsibility of the company's board of directors and is only a
summary of the information in the full announcement and therefore does not contain full or complete
details. Any investment decisions by investors and/or shareholders should be based on consideration
of the full announcement published on the group's website www.oceana.co.za and on the JSE website
using https://senspdf.jse.co.za/documents/2019/jse/isse/oce/FY_19.pdf.

Copies of the full announcement are available for inspection at the registered office of the company
and the company's Sponsor, at no charge, during office hours. For more information contact the
Company Secretary or visit our website.

On behalf of the board

MA Brey                                                  I Soomra
Chairman (non-executive)                                 Chief executive officer
Cape Town

14 November 2019

By order of the board 

CASH DIVIDEND DECLARATION

Notice is hereby given of dividend number 151. A gross final dividend amounting to 240 cents per
share, in respect of the year ended 30 September 2019, was declared on Thursday, 14 November 2019, 
out of current earnings. Where applicable the deduction of dividends withholding tax at a rate
of 20% will result in a net dividend amounting to 192 cents per share.

The number of ordinary shares in issue at the date of this declaration is 135 526 154. The company's
tax reference number is 9675/139/71/2. Relevant dates are as follows:

Last day to trade cum dividend          Tuesday, 17 December 2019
Commence trading ex dividend            Wednesday, 18 December 2019
Record date                             Friday, 20 December 2019
Dividend payable                        Monday, 23 December 2019

Share certificates may not be dematerialised or rematerialised between Wednesday, 18 December 2019, 
and Friday, 20 December 2019, both dates inclusive.

A Fortune
Company secretary

14 November 2019

Directorate and statutory information

Directors:                  MA Brey (chairman), I Soomra* (chief executive officer), E Bosch* (chief financial officer), 
                            ZBM Bassa, PG de Beyer, S Pather, NA Pangarker, L Sennelo, NV Simamane, A Jakoet. 
                            (*Executive)

Registered Office:          9th Floor, Oceana House, 25 Jan Smuts Street, Foreshore, Cape Town, 8001

Transfer Secretaries:       Computershare Investor Services Proprietary Limited
                            Rosebank Towers, 15 Biermann Avenue, Rosebank, Johannesburg, 2196
                            (PO Box 61051, Marshalltown, 2107)

Sponsor - South Africa:     The Standard Bank of South Africa Limited

Sponsor - Namibia:          Old Mutual Investment Services (Namibia) Proprietary Limited

Auditors:                   Deloitte & Touche

Company Secretary:          A Fortune

JSE share code:             OCE

NSX share code:             OCG

ISIN:                       ZAE000025284



Date: 15/11/2019 07:07:00
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