Country Bird Holdings Limited HY 2014 results

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Country Bird Holdings Limited HY 2014 results

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Country Bird Holdings Limited HY 2014 results

  1. 1. Celebrating Poultry UNAUDITED INTERIM RESULTS FOR THE PERIOD ENDED 31 DECEMBER 2013 • Group operating loss of R30.1 million • Other Africa operating profit up 9% and contributes R48.2 milllion in operating profit • Headline loss per share of 21.62 cents • Loss per share of 21.44 cents Profile Country Bird Holdings Limited (CBH) is a focused African poultry group comprising: • integrated poultry and stock feed operations in South Africa trading as Supreme Poultry and Nutri Feeds; • Poultry breeding, broiler and stock feed operations in the southern African region trading as Ross Africa and Master Farmer; and • South African retail and distribution operations trading as Long Iron Meats, Supreme Distributors and Ama Chick Chick. CBH currently operates in Botswana, the DRC, Malawi, Mozambique, Namibia, South Africa, Zambia and Zimbabwe. Financial review Group revenue for the period increased to R1.9 billion (2012 R1.6 billion). An operating loss of R30.1 million was recorded against an operating profit of R77.5 million for the same period last year. The other African poultry and feed businesses produced satisfactory results, whilst significant losses were incurred in the integrated South African poultry division. An operating profit of R48.2 million was achieved in the other African businesses which increased by 9% over the comparative figure of R44.4 million. These operations are now a significant contributor to the Group’s performance and are reflective of the strategic decision to grow outside of South Africa. Finance costs reduced by 8% to R30 million with a loss before income tax of R60.1 million being recorded against an equivalent profit before income tax of R45.1 million in the previous period. An attributable tax rate of 35% resulted in a loss after tax for the period of R38.8 million as against the previous period’s profit after tax of R37.1 million. Operational review Group The Group recorded a disappointing set of results mainly due to the considerable challenges facing the poultry industry in South Africa. The results from the other African existing operations continue to show steady growth and these operations, together with other selected regional opportunities, will continue to be a key component of the Group’s future strategy. As a result of difficult trading conditions in South Africa, combined with substantial increases in raw material prices and growth in our other African operations, the Group’s working capital requirements and consequent interest charges were high. Notwithstanding these challenges the Group recorded a positive cash position at the end of the period of R3.8 million (2012: -R12.1 million). Integrated Poultry South Africa This segment consists of the combined poultry, animal nutrition and retail and distribution segments in South Africa. This new segment was created to more effectively implement group strategy and reporting lines to the chief executive officer. COMMENTARY ON RESULTS
  2. 2. During the period under review Government provided some assistance to the poultry industry through the implementation of an increase in import tariffs on specific poultry products. Despite these measures, poultry imports remain at record levels, to the extent that they regularly exceed the production output of the largest producer in the country and the industry continues to operate under severe pressure. In conjunction with the South African Poultry Association the company has engaged extensively with Government’s Department of Trade and Industry as well as the International Trade and Administration Commission of South Africa to find an acceptable solution that will protect local industry and employment, whilst also promoting fair trade. It is accepted that as an industry we remain internationally competitive. However the South African consumer on average prefers drumsticks, thighs and leg quarters to breast meat. In contrast to this, other first world markets prefer breast meat and can therefore afford to dump the other portions into the accessible and unprotected South African market. These imports occur in spite of recent tariff increases as portions are imported under the free trade agreement with the EU. In addition, export markets to the region are difficult to penetrate because of various levels of government protection whilst exports further afield are thwarted through non-tariff barriers. During the period under review, volumes increased by 2%. However, selling prices were insufficient to counter large cost increases such as maize and soya costs, electricity, water and fuel. This sector recorded an operating loss for the year of R78.3 million compared with an operating profit of R33.1 million in the prior period. Local maize supply remains tight, caused in the main by exports, with the exchange rate volatility and Rand weakness also having a material impact on maize and soya prices. In an effort to minimize the impact of these challenges we have continued to make inroads with our market demand and diversification strategy. We have recorded growth with existing Quick Service Restaurant business whilst making further inroads into growth prospects with sustainable new customers. Some relief in maize pricing is anticipated shortly as new season drives take effect. Poultry Other Africa Volumes at our processing plant in Botswana were slightly down on last year whilst Day Old Chick volumes have remained constant. The Zambian poultry industry has remained resilient throughout the year and an increase in volumes of production and sales in both the Day Old Chick and Parent market was achieved. This, together with good parent flock utilisation, ensured acceptable and sustainable operating profit levels. The sector achieved an operating profit of R33.9 million for the period under review which was an increase on last year’s figure of R20.1 million. Animal Nutrition Other Africa In Botswana volumes were down on last year and pricing remained competitive. Management continues to focus on rationalisation of product lines, efficiency improvement and streamlined procurement policies. In Zambia, tonnage was up 15% against last year. This was achieved at reasonable margins despite significant increases on all feed raw material inputs. Growth was achieved by establishing exports into neighboring countries whilst maintaining market share in the local economy. Focus remains centered around continual efficiency improvements, cost control and full utilization of group resources for quality enhancement and raw material procurement. Operating profit for the year was R14.3 million compared with R23.5 million for the comparative year. Prospects Given the constraints facing the South African poultry industry management is focusing on cost reduction, efficiency improvements and various alternate solutions inclusive of selective capacity reduction. In addition we will concentrate our efforts on providing efficient and sustainable milling operations whilst aggressively targeting poultry market segments that we can serve to best advantage. We will also invest in developing branded chicken products with more relevance and benefit to the consumer. We continue to liaise closely with all relevant departments in Government to seek a mutually acceptable resolution to the problems and challenges facing both Government and industry. Government understandably seeks transformation in order to enable small poultry enterprises to enter mainstream processing and seeks recognition that marination levels need capping and monitoring. The industry continues to engage with Government in order to emphasise the severity of its problems which exist mainly as a result of the EU duty-free treaty, as well as to outline the implications of effective dumping of portions. As long as the international playing fields are not level, job protection and creation, as well as the country’s ability to provide sustainable food security will remain at risk. A new paradigm of cooperation from all parties in this regard is imperative. In Zambia, a new state of the art hatchery will be commissioned during April 2014, providing an additional 40% capacity. The local market is robust, in line with the economy, and we plan to increase our market share. We also believe there is potential for growth in the regional Parent market as neighboring economies grow. In Botswana, the economy remains strong and we are well positioned to take advantage of any natural growth as well as to become more competitive in existing markets. The board continues to assess the need for impairment of assets. Should the operating margins in the integrated poultry South Africa division not show improvement in the foreseeable future, an impairment of assets may need to be raised by the end of this financial year. Final capital distribution or dividend Given the continued difficult trading conditions that exist and losses being incurred by the company, it is appropriate that no interim capital distribution dividend be declared. MP Stander Chief Executive Officer 24 March 2014 UNAUDITED INTERIM RESULTS FOR THE PERIOD ENDED 31 DECEMBER 2013
  3. 3. CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 31 Dec 2013 Unaudited R’000 31 Dec 2012 Unaudited R’000 % change 30 Jun 2013 Audited R’000 Revenue 1 859 540 1 594 008 17% 3 236 576 Operating profit / (loss) (30 113) 77 512 -139% 132 597 Finance income 462 118 292% 921 Finance costs (30 416) (32 543) -7% (60 204) Profit / (loss) before income tax (60 067) 45 087 -233% 73 314 Income tax expense 21 243 (7 982) -366% (15 179) Profit / (loss) for the year (38 824) 37 105 -205% 58 135 Other comprehensive income: Currency translation differences 9 365 5 184 81% 24 602 Total comprehensive income / (loss) for the year (29 459) 42 289 -170% 82 737 Profit / (loss) attributable to: Owners of the parent (43 395) 30 879 -241% 51 396 Non-controlling interest 4 571 6 226 -27% 6 739 (38 824) 37 105 -205% 58 135 Total comprehensive income / (loss) attributable to: Owners of the parent (34 030) 36 063 -194% 75 998 Non-controlling interest 4 571 6 226 -27% 6 739 (29 459) 42 289 -170% 82 737 Earnings / (loss) per share (cents): - basic -21,44 15,36 -240% 25,63 - diluted -21,44 15,36 -240% 25,63 ADDITIONAL INFORMATION TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Ordinary shares (total number of shares) - Issued net of treasury shares 202 443 918 202 443 918 202 443 918 - Weighted average number of ordinary shares 202 443 918 201 086 716 200 524 282 - Diluted number of ordinary shares 202 443 918 201 086 716 200 524 282 Headline earnings / (loss) per ordinary share (cents): - basic -21,62 14,98 -244% 25,51 - diluted -21,62 14,98 -244% 25,51 Net asset value per share (cents) 297,14 293,68 1% 314,67 Tangible asset value per share (cents) 244,52 240,52 2% 261,43 Gearing ratio (net of cash and cash equivalents) 1,88 1,60 18% 1,80 CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 31 Dec 2013 Unaudited R’000 As at 31 Dec 2012 Unaudited R’000 % change As at 30 Jun 2013 Audited R’000 ASSETS Non-current assets 678 394 584 875 16% 623 940 Property, plant and equipment 540 462 448 958 20% 499 542 Intangible assets 106 519 106 900 0% 106 757 Financial assets and other investments 990 673 47% 931 Deferred income tax assets 30 423 28 344 7% 16 710 Current assets 1 270 859 1 102 505 15% 1 331 595 Inventories 310 921 271 653 14% 367 986 Biological assets 228 926 191 597 19% 214 585 Trade and other receivables 504 271 478 103 5% 553 045 Derivative financial instruments 10 577 6 610 100% 3 355 Current income tax receivable 850 1 064 -20% 1 023 Cash and cash equivalents 215 314 153 478 40% 191 601 Total assets 1 949 253 1 687 380 16% 1 955 535 EQUITY Total equity 601 535 590 546 2% 630 994 Ordinary shares 2 024 2 024 0% 2 024 Share premium 761 103 761 103 0% 761 103 Other reserves 46 245 17 462 165% 36 880 Retained earnings 579 560 602 437 -4% 622 955 Common control deficit (832 110) (832 110) 0% (832 110) Equity attributable to the owners of the parent 556 822 550 916 1% 590 852 Non-controlling interest 44 713 39 630 13% 40 142 LIABILITIES Non-current liabilities 499 601 360 737 38% 283 280 Borrowings 395 930 244 060 62% 179 499 Employee share scheme liability 1 668 1 158 44% 1 752 Derivative financial liability 9 258 - 100% - Deferred income tax liabilities 92 745 115 519 -20% 102 029 Current liabilities 848 117 736 097 15% 1 041 261 Trade and other payables 553 288 499 456 11% 744 360 Current income tax liabilities 1 802 6 163 -71% 4 403 Borrowings 292 762 226 791 29% 292 448 Provision for other liabilities and charges 265 3 687 -93% 50 Total liabilities 1 347 718 1 096 834 23% 1 324 541 Total equity and liabilities 1 949 253 1 687 380 16% 1 955 535 UNAUDITED INTERIM RESULTS FOR THE PERIOD ENDED 31 DECEMBER 2013
  4. 4. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS 31 Dec 2013 Unaudited R’000 31 Dec 2012 Unaudited R’000 30 Jun 2013 Audited R’000 Cash flows from operating activities Net cash generated from/(used in) operating activities (122 953) 30 513 127 492 Cash receipts from customers 1 908 314 1 596 919 3 164 542 Cash paid to suppliers and employees (1 995 771) (1 528 079) (2 959 035) Cash generated from operations (87 457) 68 840 205 507 Interest paid (30 416) (32 543) (60 204) Income tax paid (5 080) (5 784) (17 811) Cash flows from investing activities Net cash used in investing activities (54 576) (20 724) (76 844) Purchases of property, plant and equipment (56 122) (25 515) (82 154) Proceeds from sale of property, plant and equipment 1 143 4 693 4 667 Purchases of financial assets and investments ( 59) ( 20) ( 278) Interest received 462 118 921 Cash flows from financing activities Net cash generated from/(used in) financing activities 175 998 (7 946) (11 938) Share issue and listing expenses - ( 5) ( 6) Proceeds from borrowings 266 808 40 828 107 776 Repayments of borrowings (90 810) (44 052) (114 991) Capital repayments to shareholders - (4 717) (4 717) Net increase /(decrease) in cash and cash equivalents (1 531) 1 843 38 710 Cash and cash equivalents at beginning of period 20 845 (15 591) (15 591) Exchange gains on cash and bank overdrafts (15 506) 1 558 (2 274) Cash and cash equivalents at end of period 3 808 (12 190) 20 845 CONDENSED SEGMENT REPORT 31 Dec 2013 Unaudited R’000 31 Dec 2012 Unaudited R’000 30 Jun 2013 Audited R’000 Revenue Integrated poultry South Africa 1 480 731 1 251 079 2 548 115 - South Africa 1 596 626 1 366 040 2 776 475 Intersegment revenue (115 895) (114 961) (228 360) Other Africa 378 809 342 929 688 461 - Poultry 161 487 141 856 292 558 Intersegment revenue (3 716) (4 234) (3 768) - Animal Nutrition 282 949 255 594 507 945 Intersegment revenue (61 911) (50 287) (108 274) 1 859 540 1 594 008 3 236 576 Operating profit / (loss) Integrated poultry South Africa (78 334) 33 077 67 951 - South Africa (78 334) 33 077 67 951 Other Africa 48 221 44 435 64 646 - Poultry 33 937 20 985 29 180 - Animal Nutrition 14 284 23 450 35 466 (30 113) 77 512 132 597 Assets Integrated poultry South Africa 1 312 673 1 276 201 1 445 191 - South Africa 1 312 673 1 276 201 1 445 191 Other Africa 636 580 411 179 510 344 - Poultry 540 221 331 465 421 993 - Animal Nutrition 96 359 79 714 88 351 1 949 253 1 687 380 1 955 535 Revenues of approximately R 206.9 million(2012: R 206.8 million) are derived from a single external customer. These revenues are attributable to the South African Poultry segment. UNAUDITED INTERIM RESULTS FOR THE PERIOD ENDED 31 DECEMBER 2013
  5. 5. CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Share capital R’000 Share premium R’000 Other reserves R’000 Retained earnings R’000 Common control deficit R’000 Total attributable to owners of the parent R’000 Non- controlling interest R’000 Total equity R’000 Balance at 1 July 2012 1 984 745 508 30 834 571 559 (832 110) 517 775 33 403 551 178 Total comprehensive income - - 5 184 30 879 - 36 063 6 226 42 289 Shares issued related to business combination 40 20 312 (18 556) - - 1 796 - 1 796 Capital distribution to shareholders - (4 717) - - - (4 717) - (4 717) Balance at 31 December 2012 2 024 761 103 17 462 602 438 (832 110) 550 917 39 629 590 546 Total comprehensive income - - 19 418 20 517 - 39 935 513 40 448 Balance at 30 June 2013 2 024 761 103 36 880 622 955 (832 110) 590 852 40 142 630 994 Total comprehensive income - - 9 365 (43 395) - (34 030) 4 571 (29 459) Balance at 31 December 2013 2 024 761 103 46 245 579 560 (832 110) 556 822 44 713 601 535 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of preparation The unaudited condensed consolidated interim financial information announcement for the half-year ended 31 December 2013 was prepared in accordance with International Financial Reporting Standards (IFRS), Accounting Standard 34, Interim Financial Reporting, the Listing Requirements of the JSE Limited and the South African Companies Act of 2008. The condensed consolidated financial statements were supervised by MJC Antunes CA (SA)). The accounting policies are consistent with those of the previous financial period and comply with IFRS. These financial statements do not include all the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements as at and for the year ended 30 June 2013. These unaudited condensed consolidated interim financial statements were approved by the Board of Directors on 24 March 2014. 31 Dec 2013 Unaudited R’000 31 Dec 2012 Unaudited R’000 30 Jun 2013 Audited R’000 2. Operating profit / (loss) The following amounts have been accounted for in the operating profit / (loss): Foreign exchange loss on the revaluation of long term borrowings (9 988) - - Fair value gains / (losses) on financial assets at fair value through profit or loss 3 866 (1 390) (4 644) 3. Reconciliation to headline earnings / (loss) Net profit / (loss) attributable to the owners of the parent (43 395) 30 879 51 396 Adjusted for: Profit on disposal of property, plant and equipment (364) ( 750) ( 243) Adjusted headline earnings / (loss) (43 759) 30 129 51 153 4. Capital expenditure and depreciation Capital expenditure 56 122 25 515 82 154 Depreciation 27 938 25 194 48 440 Amortisation of intangible assets 277 277 553 5. Capital and other commitments Inventories contracted for 142 711 89 086 135 729 6. Cash and cash equivalents Bank balances, deposits and cash 215 314 153 481 191 603 Short-term borrowings (211 506) (165 671) (170 758) 3 808 (12 190) 20 845 7. Borrowings During the year under review, the group entered into a convertible loan agreement for the value of USD25 million with the International Finance Corporation (“IFC”). The convertible loan has a term of five years and bears interest at a variable rate calculated with reference to the 6 month Libor rate plus 3% per annum for an initial period of 2.5 years (“Initial Period”). In the event that the loan is not converted to equity in the Initial Period, the loan becomes a term loan bearing interest at 4.5% above the 6 month Libor rate, repayable in 5 approximately equal semi-annual instalments starting after the end of the Initial Period. Interest is payable on 15 June and 15 December each year. The IFC has an option to convert a portion or the whole of the principal amount of the convertible loan into Country Bird Holdings Ltd (“CBH”) ordinary shares in multiple tranches at any time during the Initial Period at a strike price of R4.90 per share, provided a minimum conversion amount would be USD5million equivalent per tranche and further provided that IFC’s shareholding in CBH would not exceed 18% in total. UNAUDITED INTERIM RESULTS FOR THE PERIOD ENDED 31 DECEMBER 2013
  6. 6. 8. Reclassification of comparative figures In the prior period condensed consolidated interim financial information announcement, the segment reporting consisted of Poultry South Africa, Poultry Other Africa, Animal Nutrition South Africa, Animal Nutrition Other Africa and Retail and Distribution South Africa and Retail and Distribution Other Africa. In order to more fairly present the reporting done to the Chief Executive Officer and in line with the revised strategy for the group, segments are now disclosed as Integrated South African Poultry, Poultry Other Africa and Animal Nutrition Other Africa. The Integrated South African Poultry segment consists of all the South African operations. This reclassification and change in strategy has resulted in the restatement of the prior period figures for the segment report. Condensed segment report as previously disclosed: 31 Dec 2012 Unaudited R’000 30 Jun 2013 Audited R’000 31 Dec 2012 Unaudited R’000 30 Jun 2013 Audited R’000 31 Dec 2012 Unaudited R’000 30 Jun 2013 Audited R’000 Revenue Operating Profit Assets Poultry 941 026 1 783 587 3 506 9 208 1 077 293 1 283 738 - South Africa 1 052 774 2 007 573 (17 107) (24 666) 763 388 884 884 Intersegment revenue (246 011) (506 098) - - - - - Other Africa 146 254 287 138 20 613 33 874 313 905 398 854 Intersegment revenue (11 991) (5 026) - - - - Animal nutrition 334 325 860 708 72 121 133 582 445 264 497 854 - South Africa 751 330 1 579 294 48 671 98 116 365 550 409 503 Intersegment revenue (622 312) (1 118 254) - - - - - Other Africa 255 594 507 945 23 450 35 466 79 714 88 351 Intersegment revenue (50 287) (108 276) - - - - Retail and distribution 318 657 592 279 1 885 (10 194) 164 823 173 943 - South Africa 320 730 593 385 1 514 (5 500) 147 263 150 805 Intersegment revenue (5 432) (4 804) - - - - - Other Africa 3 359 6 678 371 (4 693) 17 560 23 138 Intersegment revenue - (2 981) - - - - 1 594 008 3 236 574 77 512 132 597 1 687 380 1 955 535 Disclosure as per condensed segment report for the period ended 31 December 2013: Integrated poultry 1 251 079 2 548 115 33 077 67 951 1 276 201 1 445 191 - South Africa 1 366 040 2 776 475 33 077 67 951 1 276 201 1 445 191 Intersegment revenue (114 961) (228 360) - - - - Other Africa 342 929 688 461 44 435 64 646 411 179 510 344 - Poultry 141 856 292 558 20 985 29 180 331 465 421 993 Intersegment revenue (4 234) (3 768) - - - - - Animal nutrition 255 594 507 945 23 450 35 466 79 714 88 351 Intersegment revenue (50 287) (108 274) - - - - 1 594 008 3 236 576 77 512 132 597 1 687 380 1 955 535 Country Bird Holdings Limited (Incorporated in the Republic of South Africa) Registration number: 2005/008505/06 ISIN: ZAE000094835 JSE Share code: CBH (“CBH” or “the group”) Directors of CBH Limited: BH Kent (Chairman)# , R Gibbison# , GP Heath, IWM Isdale# , KW James, MP Stander, CD Stein# # Independent non-executive Registered office: 8 Melville Road, Illovo, Johannesburg, 2196 (PO Box 412523, Craighall, 2024) Investment Bank and Sponsor: Investec Bank Limited Registration number: 1969/004763/06 2nd Floor, 100 Grayston Drive, Sandton, 2196 (PO Box 785700, Sandton, 2146) Company secretary: MJC Antunes 48 President Steyn Street, Westdene, Bloemfontein, 9301 (PO Box 6851, Bloemfontein, 9300) Auditors: PricewaterhouseCoopers Inc. 61 Second Avenue, Westdene, Bloemfontein, 9301 (PO Box 818, Bloemfontein, 9300) Transfer secretaries: Computershare Investor Services (Proprietary) Limited Registration number: 2004/003647/07 Ground Floor, 70 Marshall Street Johannesburg, 2001 (PO Box 61051 Marshalltown, 2107) WWW.CBH.CO.ZA UNAUDITED INTERIM RESULTS FOR THE PERIOD ENDED 31 DECEMBER 2013

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