Sovereign Food Investments Limited Sens ANSI 14h23_FINAL
Sovereign Food Investments Limited Incorporated in the Republic o...
Sovereign Food Investments Limited Sens ANSI 14h23_FINAL
Reconciling items:
Disposal of property, plant and
equipment
–
1 ...
Sovereign Food Investments Limited Sens ANSI 14h23_FINAL
Restatement
(76 081) (14 285) (90 366)
Restated opening balance
–...
Sovereign Food Investments Limited Sens ANSI 14h23_FINAL
were made on the basis of recent market transactions on arms-leng...
Sovereign Food Investments Limited Sens ANSI 14h23_FINAL
issued by the Financial Reporting Standards Council (“FRSC”) and ...
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Sovereign Food Investments Ltd HY 2014 results

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Sovereign Food Investments Ltd HY 2014 results

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Sovereign Food Investments Ltd HY 2014 results

  1. 1. Sovereign Food Investments Limited Sens ANSI 14h23_FINAL Sovereign Food Investments Limited Incorporated in the Republic of South Africa Registration Number: 1995/003990/06 JSE Code: SOV ISIN: ZAE000009221 (“Sovereign” or “the Group”) Interim Unaudited Group Results for the six months ended 31 August 2013 Net gearing improved to 6% from 14% Headline earnings per share of 18,9c Consolidated Statement of Financial Position Audited Unaudited as at as at 31 August 28 February Restated 2013 2012 2013 R’000 R’000 R’000 Assets Non-current assets Property, plant and equipment Current assets Inventory Biological assets Trade and other receivables Cash and cash equivalents Total assets Equity and liabilities Share capital and premium Share based payments Retained earnings Equity Non-current liabilities Interest bearing borrowings Deferred taxation Current liabilities Current portion of interest bearing borrowings Trade, other payables and provisions Bank overdraft Total equity and liabilities Shares in issue (‘000) Net asset value (cents) 707 345 57 90 115 81 1 053 951 215 140 841 624 610 166 713 308 41 80 115 71 1 021 099 533 469 715 081 268 631 699 332 54 83 97 96 1 031 350 630 525 906 357 842 980 258 187 74 361 851 620 112 272 999 297 324 923 598 219 263 163 109 362 001 625 273 92 526 134 037 206 491 125 829 115 369 182 214 105 704 128 387 172 616 26 116 180 332 43 1 053 166 76 376 812 27 487 154 691 36 1 021 631 79 396 753 28 841 143 775 – 1 031 980 77 379 808 Statement of Comprehensive Income Revenue Operating profit before depreciation and impairments Depreciation and impairments Profit before finance costs Net finance costs Profit before taxation Deferred taxation Total comprehensive income for the period Weighted average shares in issue (’000) Earnings per share (cents) Headline earnings per share (cents) Diluted earnings per share (cents) Diluted headline earnings per share (cents) Reconciliation between earnings and headline earnings Earnings after taxation Unaudited six Audited months ended year ended 31 August 28 February Restated 2013 2012 2013 R’000 R’000 R’000 675 449 623 531 1 267 968 37 15 22 2 20 5 938 758 180 003 177 650 41 15 25 4 21 5 430 866 564 203 361 981 116 37 79 7 72 19 511 202 309 245 064 606 14 527 52 458 76 918 18,9 18,9 18,9 79 396 19,4 20,7 19,4 79 258 66,2 74,5 66,2 18,9 20,7 74,5 14 527 Page 1 15 380 15 380 52 458
  2. 2. Sovereign Food Investments Limited Sens ANSI 14h23_FINAL Reconciling items: Disposal of property, plant and equipment – 1 497 8 531 Taxation effect – (424) (1 943) Headline earnings after taxation 14 527 16 453 59 046 Statement of Cash Flows Unaudited six Audited months ended year ended 31 August 28 February Restated 2013 2012 2013 R’000 R’000 R’000 Cash generated from operations before working capital changes Changes in working capital Net cash flows from operations Interest paid Net cash flows from operating activities Net cash flows from investing in property, plant and equipment Proceeds on the sale of property, plant and equipment Net cash flows from shares repurchased Dividends paid Net cash flows from debt repaid Net movement in cash and cash equivalents Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period 37 938 8 765 46 703 (2 003) 42 927 (6 766) 36 161 (4 203) 116 323 (16 591) 99 732 (7 245) 44 700 31 958 92 487 (25 011) (13 109) (19 839) 592 (4 976) (14 677) (15 903) 2 262 – – (17 717) 2 680 (9 836) – (36 488) (15 275) 3 394 29 004 96 842 67 838 67 838 81 567 71 232 96 842 Share capital and premium R’000 Sharebased payments R’000 263 163 (4 976) – – – 258 187 109 – (35) – – 74 272 999 – 272 999 – 272 999 297 – 297 – 297 Statement of Changes in Equity For the six months ended 31 August 2013 Opening balance Shares repurchased Net value of employee services Total comprehensive income for the period Dividends paid Closing balance For the six months ended 31 August 2012 Opening balance as previously stated Restatement Restated opening balance Total comprehensive income for the period Closing balance Nondistributable reserve R’000 For the six months ended 31 August 2013 Opening balance Shares repurchased Net value of employee services Total comprehensive income for the period Dividends paid Closing balance For the six months ended 31 August 2012 Opening balance as previously stated Page 2 – – – – – – 76 081 Retained earnings R’000 Total R’000 362 001 – – 625 273 (4 976) (35) 14 527 14 527 (14 677) (14 677) 361 851 620 112 323 828 673 205
  3. 3. Sovereign Food Investments Limited Sens ANSI 14h23_FINAL Restatement (76 081) (14 285) (90 366) Restated opening balance – 309 543 582 839 Total comprehensive income for the period – 15 380 15 380 Closing balance – 324 923 598 219 Commentary Operational and financial results Headline earnings per share for the period under review (“H114”) decreased by 9% to 18,9 cents from 20,7 cents for the prior period as restated (“H113”) due primarily to 4% lower volumes and a 22% increase in feed costs per ton. However, agricultural performance continued to improve and increases in non-feed costs at a Rand level were contained to 7% notwithstanding large increases in administered costs such as labour and energy. The Group improved its broiler performance by 12% whilst keeping its bird age consistent. A fertility challenge in the first quarter of the year, which has now been resolved, resulted in birds processed reducing by 8% although this was mitigated by a 4% improvement in bird mass. Poultry prices increased by 12% of which 10% can be attributed to price inflation and 2% to changes in product mix. Although import volumes (including mechanically deboned meat) remained high during the period under review, it is noted that on 30 September 2013, Government approved increases in import tariffs in certain categories of poultry. However, the bulk of leg quarter imports originate in the European Union and these import tariff increases will only apply to countries other than the European Union. The Group’s strategy to diversify away from commodity lines towards higher margin product lines is on-going with sales of IQF mixed portions as a percentage of volume sold declining by 7%. Of the R25 million capital expenditure in the period, R17 million was directed towards this product mix strategy and R8 million was directed towards reducing the Group’s risk profile in the agricultural supply chain. Increases in maize and soya prices resulted in the Group’s broiler feed costs increasing by 22% per ton. Chicago Board of Trade spot corn prices for the period under review have declined by 14% over the six months ended 28 February 2013 but due to the weakening Rand and a lower than forecast maize crop, South African maize prices have not declined to the same extent and spot white maize prices have only decreased by 3% over the same period. Despite large increases in labour and energy costs as well as inflationary pressure on other overheads, non-feed costs increased by only 7% in Rand terms. However, due to the lower volumes, non-feed costs increased by 11% per kg sold. Finance charges decreased by 44% in Rand terms due to a combination of lower debt and higher cash levels. The Group declared a final dividend for the year ended 28 February 2013 of 19,0 cents per share and due to this, an amount of R15 million was paid out to shareholders in the period under review. In addition, the Group continued with its share repurchase program and repurchased and delisted 1 003 851 shares for an amount of R5 million in the period under review. Working capital as a percentage of annualised revenue improved to 6,3% from 6,5% and as a result of the dividend paid, share repurchases and capital expenditure noted above, cash on hand decreased from R97 million as at 28 February 2013 to R82 million as at 31 August 2013. “Trade, other payables and provisions” increased by R36 million, which included an amount of R9 million in respect of a dispute with a local service provider. Due to the lower debt levels, net gearing improved to 6% from 14% as at 31 August 2012. Prospects and industry conditions The consumer remains under pressure from amongst other things, above inflation increases in energy and transport costs and these increases continue to reduce the amount of disposable income available for food. The introduction of additional import tariffs should lead to a more stable balance between poultry supply and demand and bring some relief to the industry. However, in the near term, industry margins could remain suppressed due to high feed and input costs and a constrained consumer. Change in accounting policy During the year ended 28 February 2013, the Group changed its accounting policy in respect of the revaluation of land and buildings. Previously, the Group re-valued land and buildings at regular intervals. Valuations Page 3
  4. 4. Sovereign Food Investments Limited Sens ANSI 14h23_FINAL were made on the basis of recent market transactions on arms-length terms. The revaluation surplus net of applicable deferred income taxes was credited to “revaluation reserve in shareholder’s equity” which was non-distributable. In order to bring the Group’s accounting policy in respect of the revaluation of land and buildings in line with its peers, land and buildings are now shown at historical cost less subsequent depreciation for buildings. All other property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. This change in accounting policy has been applied retrospectively and was reflected in the Group results for the year ended 28 February 2013. Prior period restatement During the year ended 28 February 2013, a prior period restatement was also made in respect of operating leases that had been classified as finance leases in prior years, the reallocation of assets classified as plant and equipment to buildings and the impairment of certain plant, equipment and vehicles. These changes were reflected in the Group results for the year ended 28 February 2013. The net effect of these changes on the interim unaudited financial results for the six months to 31 August 2012 is as follows: As previously stated R’000 Restatement Restatement due to due to prior change in period accounting adjustments policy R’000 R’000 Restated R’000 Statement of Financial Position Property, plant and equipment at net book value 821 419 (10 230) (98 090) 713 099 Non-distributable reserve 76 014 – (76 014) – Net current assets 126 652 (333) – 126 319 Retained earnings 335 843 (12 946) 2 026 324 923 Deferred taxation 144 506 (5 035) (24 102) 115 369 Statement of Comprehensive Income Profit before finance costs, depreciation and impairment 37 191 4 239 – 41 430 Depreciation 16 917 (1 051) – 15 866 Profit before finance costs 20 274 5 290 – 25 564 Net finance costs 3 586 617 – 4 203 Profit before taxation 16 688 4 673 – 21 361 Taxation 4 673 1 308 – 5 981 Profit after taxation 12 015 3 364 – 15 380 Other comprehensive income for the period – (loss)/gain on revaluation of property, plant and equipment (67) – 67 – Total comprehensive income for the period 11 948 3 364 67 15 380 Earnings per share (cents) 15,0 4,2 0,1 19,4 Headline earnings per share (cents) 16,5 5,6 1,4 20,7 Directorate During the period under review, Mr Grant Coley was appointed as Chief Financial Officer. Accounting policies The unaudited condensed consolidated financial results are prepared in accordance with the JSE Limited Listings Requirements and the requirements of the Companies Act of South Africa. The JSE Limited Listings Requirements require that the unaudited financial statements are prepared in accordance with the conceptual framework, the measurement and recognition requirements of International Financial Reporting Standards (IFRS), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, and Financial Reporting Pronouncements (“FRPs”) as Page 4
  5. 5. Sovereign Food Investments Limited Sens ANSI 14h23_FINAL issued by the Financial Reporting Standards Council (“FRSC”) and also, as a minimum, require that they contain the information required by IAS 34 Interim Financial Reporting. The accounting policies applied in the preparation of these financial results are consistent with those applied in the previous annual financial statements apart from the change in accounting policy noted above. This report was compiled under the supervision of G Coley CA(SA), Financial Director. Interim dividend It is the policy of the Group to only declare a final dividend and therefore no interim dividend is declared for the period under review. By order of the Board CP Davies C Coombes Non-Executive Chairman Chief Executive Officer 4 October 2013 E-mail: info@sovfoods.co.za Transfer secretaries Computershare Investor Services Proprietary Limited, PO Box 61051, Marshalltown 2107, Gauteng Sponsor One Capital Directorate CP Davies* (Non-Executive Chairman), C Coombes (CEO), JA Bester*, GL Coley, PM Madi*, LM Nyhonyha*, T Pritchard*, BJ Van Rensburg, GG Walter * Non-Executive www.sovereignfoods.co.za Page 5

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