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Hippo Valley Estates Limited FY 2014 financial results

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Hippo Valley Estates Limited FY 2014 financial results

Hippo Valley Estates Limited FY 2014 financial results

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  • 1. GROUP STATEMENT OF FINANCIAL POSITION GROUP STATEMENT OF CHANGES IN EQUITY NOTES TO THE GROUP FINANCIAL STATEMENTS Audit Opinion HIPPO VALLEY ESTATES LIMITED Abridged Audited Results for the year ended 31 March 2014 GROUP STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME GROUP STATEMENT OF CASH FLOWS DIRECTORS: M H Munro (Chairman), S D Mtsambiwa* (Chief Executive Officer), P H Staude, S L Slabbert, L R Bruce, N Kudenga, J P Maposa, S G Nhari, J E Chibwe*, F A D Musikavanhu* * Executive Revenue Operating profit Net finance charges Note 1 Profit before tax Income tax expense Note 2 Profit after tax Share of profit of associated companies Profit for the year Other comprehensive income, net of tax Total comprehensive income for the year Number of shares in issue (‘000 of shares) Earning per share (cents) Year ended 31.03.14 US$’000 136 125 19 113 (8 410) 10 703 (2 911) 7 792 1 223 9 015 (33) 8 982 193 021 4.7 Year ended 31.03.13 (Note 5) US$’000 174 239 23 288 (6 794) 16 494 (4 138) 12 356 1 230 13 586 (53) 13 533 193 021 7.0 Cash flows from operating activities Operating profit Depreciation Note 3 Net movement in provisions Gross movement in provisions Movement attributable to non distributable reserves Changes in biological assets Loss on disposal of property, plant and equipment Cash generated from operations Changes in working capital Decrease/(increase) in deferred plant maintenance costs Net cash generated from operations Net finance charges paid Tax paid Net cash inflow from operating activities Cash flows from investing activities Property, plant and equipment purchased Proceeds from disposal of property, plant and equipment Dividends received from associated companies Net cash outflow from investing activities Cash flows from financing activities Proceeds from borrowings Repayment of borrowings Net cash inflow from financing activities Net increase in cash and cash equivalents Net cash balance at 31 March 2013 Net cash balance at 31 March 2014 Year ended 31.03.14 US$’000 19 113 10 873 (4 978) (5 144) 166 3 922 212 29 142 (10 500) 3 731 22 373 (8 410) (982) 12 981 (8 099) 689 828 (6 582) 27 956 (10 515) 17 441 23 840 10 665 34 505 Year ended 31.03.13 (Note 5) US$’000 23 288 11 918 451 33 418 (3 729) - 31 928 (12 186) (1 300) 18 442 (6 794) - 11 648 (17 585) - 861 (16 724) 22 113 (16 691) 5 422 346 10 319 10 665 ASSETS Non-current assets Property, plant and equipment Long term biological assets Investment in associated companies Current assets Short term biological assets Deferred plant maintenance cost Inventories Trade and other receivables Current tax asset Cash and cash equivalents Total assets EQUITY AND LIABILITIES Capital and reserves Shareholders’interest Issued capital Non-distributable reserve Retained earnings Non-current liabilities Deferred tax Provisions Current liabilities Trade and other payables Short term borrowings Current tax liability Total equity and liabilities Year ended 31.03.14 US$’000 234 010 198 753 31 830 3 427 147 223 49 958 7 204 33 034 22 522 - 34 505 381 233 219 883 15 442 128 213 76 228 71 410 65 427 5 983 89 940 23 449 65 995 496 381 233 Year ended 31.03.13 (Note 5) US$’000 243 519 202 428 37 917 3 174 119 786 47 793 10 935 25 153 24 881 359 10 665 363 305 210 901 15 442 128 246 67 213 75 424 64 297 11 127 76 980 28 427 48 553 - 363 305 1 . Net finance charges Interest paid Interest received 2 . Income tax expense Normal tax Deferred tax Transfer to Non-distributable reserve Charged to Income statement 3 . Depreciation Depreciation of property, plant and equipment 4 . Capital expenditure commitments Contracted and orders placed Authorised by Directors but not contracted 5 . Accounting policies Hippo Valley Estates Limited has adopted all the new or revised accounting pronouncements as issuedbytheIASBwhichwereeffectiveforHippoValleyfrom1January2013. Theadoptionofthese standards had no recognition and measurement impact on the financial results, other than for the adoption of the revised IAS19 which requires that post-retirement benefit accounting acturial gains and losses be recognised immediately in other comprehensive income and no longer be amortised through profit or loss. Comparative figures have been restated with the effect of the compulsory adoption of the revised IAS19 on profit or loss for the year ended 31 March 2013 being a decrease in operating profit of US$81 000, a corresponding tax charge of US$21 000 and net profit for the period of US$60 000. Other comprehensive income increased by US$310 000 after tax. The effect on the statement of financial position at 31 March 2013 was a decrease in provisions for retirement benefits of US$661 000 and increases in equity and deferred tax of US$491 000 and US$170 000 respectively. These financial results should be read in conjunction with the complete set of financial statements for the year ended 31 March 2014, which have been audited by Deloitte &Touche in accordance with International Standards on Auditing. An unmodified audit opinion has been issued thereon. The auditor’s report on the financial statements which form the basis of these financial results is available for inspection at the Company’s registered office. Any reference to future financial performance and operational information included in this announcement, has not been audited or reported on by the Group’s external auditors. 6 . Currency of reporting The financial statements are reported in United Sates Dollars (US$). This is the functional currency of the Group. Year ended 31.03.14 US$’000 (8 476) 66 (8 410) (1 837) (1 130) 56 (2 911) 10 873 2 989 7 2 996 Year ended 31.03.13 (Note 5) US$’000 (6 854) 60 (6 794) - (4 141) 3 (4 138) 11 918 6 909 2 214 9 123 Balanceat31March2012(aspreviouslyreported) Change in accounting policy Balance at 31 March 2012 (Note 5) Restated comprehensive income Comprehensive income for the year (as previously reported) Change in accounting policy Balance at 31 March 2013 (Note 5) Comprehensive income for the year Balance at 31 March 2014 Issued capital US$’000 15 442 - 15 442 - - 15 442 - 15 442 Non- distributable reserves US$’000 128 299 - 128 299 (53) (363) 310 128 246 (33) 128 213 Retained income US$’000 53 386 241 53 627 13 586 13 646 (60) 67 213 9 015 76 228 Total US$’000 197 127 241 197 368 13 533 13 283 250 210 901 8 982 219 883 By order of the Board Hippo Valley Estates Limited Registration No. 371/1956 Registered Office; Hippo Valley Estates Chiredzi B Shava Company Secretary 27 May 2014 JERICHO038058a
  • 2. HIPPO VALLEY ESTATES LIMITED Abridged Audited Results for the year ended 31 March 2014 DIRECTORS: M H Munro (Chairman), S D Mtsambiwa* (Chief Executive Officer), P H Staude, S L Slabbert, L R Bruce, N Kudenga, J P Maposa, S G Nhari, J E Chibwe*, F A D Musikavanhu* * Executive • Sugar production of 239 000 tons (2013: 228 000 tons) + 5% • Revenue of $136,1 million (2013: $174,2 million) - 22% • Cash generated from operations of $29,1 million (2013: $31,9 million) –9% • Operating profit of $19,1 million (2013: $23,3 million) - 18% • Profit for the year of $9,0 million (2013: $13,6 million) - 34% INTRODUCTION Production increased marginally during the period under review despite both the Company and private growers significantly curtailing their plough out and replanting programmes due to a shortage of irrigation water during the season. The results for the year were negatively impacted upon by substantially increased imports in the market and the resultant additional exports at lower prices. These severe market dynamics impacting revenue and cane valuations were partially off-set by substantial cost reductions and volume growth. OPERATIONS Sugar production increased by 5% to 239 000 tons (2013: 228 000 tons). A total of 1 874 524 tons of cane was crushed during the season (2013: 1 906 156 tons) of which 1 082 205 tons was Company cane. The 2013/14 milling season commenced on 16 April and closed on 17 December 2013. Overall recovery was 87,11%, up from 84,75% achieved in the previous season.The marked improvement in mill performance was a direct result of the extensive mill refurbishment programmes carried out in the past four years. The Industry was negatively impacted upon by increased imports at substantially discounted prices into the local market, as well as the pressure of significantly lower sugar prices realised from exports into the European Union. The Industry’s domestic market sales for the year amounted to 148 000 tons compared to 258 000 tons achieved in the previous marketing season, a decrease of 43%. A combination of declining consumer disposable income and the influx of cheap imported sugar into the local market, militated against the industry’s efforts to maximise sales volumes. Local market dynamics have since shifted favourably following government interventions to protect the industry from unfair competition presented by cheap imports. The recent good rains received country-wide since February 2014 have resulted in most storage dams that supply the industry spilling. As a result of this significantly improved water situation, the previously scaled down replanting programmes have resumed as the industry seeks to accelerate recovery to regain lost ground. A total of 279 000 tons of raw sugar was exported by the industry to the European Union which was an increase of 38% on the 202 000 exported during 2012/13.With the changing market dynamics in the European Union, the price levels achieved by the Industry from its multiple commercial export arrangements were substantially lower than the levels achieved in the last two years. FINANCIAL RESULTS Revenue for the year under review amounted to $136,1 million (2013: $174,2 million), a decrease of 22% as a result of significantly reduced local market sales (mainly due to substantially increased imports in the market) and the resultant additional lower priced exports. Cane valuations were impacted by lower prices and the effect of curtailed root replanting as a consequence of the water dynamics during the year. Operating profit and net profit for the year amounted to $19,1 million and $9,0 million (2013: $23,3 million and $13,6 million), respectively. The decline in profitability is a result of margin squeeze in both the domestic and export markets caused by the low prices achieved during the 2013/14 marketing season. Significant success has been achieved in the drive to reduce sugar production costs. Substantialcostreductionsamountingto$26,2millionwererealised duringthepast season. Cash generated from operations totalled $29,1 million for the year under review (2013: $31,9 million). Working capital increased by $10,5 million (2013: $12,2 million) as a consequence of an increase in sugar stocks resulting from the low sugar sales volumes on the local market. The Company’s net debt at the end of March 2014 was $31,5 million compared to $37,9 million at 31 March 2013. A total of $8,4 million was incurred in finance costs commensurate with the levels of borrowings during the 12 months under review, compared to a total of $6,8 million incurred in the year ended 31 March 2013. As a consequence of the decrease in profit after tax, earnings per share dropped to 4,7 US cents from 7,0 US cents achieved in the prior year. SUSTAINABLE RURAL COMMUNITIES Only 1 011 hectares of private farmer cane land were replanted against a target of 3 990 hectares for the season, due to the shortage of irrigation water. This resulted in a cumulative total of 11 160 hectares being replanted to date which is 70% of the total area farmed by private growers since commencement of the Sustainable Rural Communities project in 2010/11. Private farmer cane deliveries to the industry mills totalled 1 017 163 tons valued at $58 million in 2013/14 compared to 852 979 tons delivered in 2012/13, an increase of 19%. At the end of the 2013/14 season, some 813 active indigenous private farmers, farming some 14 000 hectares employed more than 6 700 workers. Current initiatives will increase the number of private farmers to some 1 022 supplying more than 1 800 000 tons of cane at yields in excess of 100 tons per hectare from 18 880 farmed hectares by 2017/18. A stable industrial relations climate prevailed in the Industry throughout the year. Despite the harsh economic environment, the Company continues to develop and implement mutually beneficial and collaborative initiatives with Government and local communities to improve the quality of life of its employees and the surrounding communities at large. As part of the company’s ongoing community empowerment drive under its Socio Economic Development programme, a total of $1,5 million (2012/13: $1,5 million) was spent in various community related initiatives. OUTLOOK The recent good rains which saw almost all the supply dams for the industry attaining the 100% full capacity level has revived the industry’s hopes of restoring sugar production to installed milling capacity of around 640 000 tons per annum by 2017/18. The replanting programme which has since resumed and is now back on track is gaining momentum with sugar production expected to progressively increase over the next four years. In light of the positive outturn of the 2013/14 rainfall season, the industry will receive a full water allocation during the 2014/15 season and consequently will apply full irrigation duty to the entire crop.The imminent completion of theTokwe Mukorsi Dam, besides augmenting the current water sources, will present new development opportunities for expansion. The recently instituted measures to protect the local market against unfair competition from dumped world market imports are expected to yield positive results by assisting the industry to regain lost market share. The sustainable cost reductions achieved in the past year provide a solid platform from which the ongoing cost reduction initiatives will be accelerated into the future, further enhancing the company’s competitiveness. DIVIDENDS In light of the on-going recapitalization of the business, the Directors have decided not to declare a dividend for the year ended 31 March 2014. By Order of the Board B Shava Company Secretary 27 May 2014 JERICHO038058b