Sovereign Food Investments Ltd HY 2013 results

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Sovereign Food Investments Ltd HY 2013 results

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Sovereign Food Investments Ltd HY 2013 results

  1. 1. Unaudited Group Results for the six months ended 31 August 2012 “The Group has achieved strong operational results although volatile poultry pricing and feed input costs have been challenging.” Improved headline earnings per share to 16,5 cents from 0,7 cents
  2. 2. Statement of Financial Position Unaudited as at 31 August Audited as at 29 February 2012 2011 2012 R’000 R’000 R’000 Property, plant and equipment 821 419 801 597 829 333 Current assets 308 866 266 594 287 277 Inventory 41 469 35 241 35 134 Biological assets 80 715 92 128 86 197 Trade and other receivables 115 414 134 061 97 860 Cash and cash equivalents 71 268 5 164 68 086 1 130 285 1 068 191 1 116 610 272 999 272 999 272 999 76 311 53 026 76 378 Retained earnings 335 843 281 379 323 828 Equity 685 153 607 404 673 205 Interest bearing borrowings 118 412 142 987 131 367 Deferred taxation 144 506 117 180 139 844 Current liabilities 182 214 200 620 172 194 27 487 27 261 28 930 154 691 153 290 143 016 36 20 069 248 1 130 285 1 068 191 1 116 610 79 396 79 396 79 396 863 765 848 Assets Non-current assets Total assets Equity and liabilities Share capital and premium Non-distributable reserve and share based payments Non-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) Statement of Cash Flows Unaudited six months ended 31 August 2012 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 issued 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 R’000 38 688 (6 732) 31 956 (3 586) 28 370 (13 109) 2 531 – (14 398) 3 394 67 838 71 232 2011 R’000 25 980 (66 512) (40 532) (8 490) (49 022) (8 121) 36 025 145 000 (193 437) (69 555) 54 650 (14 905) Audited year ended 29 February 2012 R’000 108 756 (33 370) 75 386 (18 925) 56 461 (22 463) 37 263 145 316 (203 389) 13 188 54 650 67 838
  3. 3. Statement of Comprehensive Income Audited year ended 29 February Unaudited six months ended 31 August 2012 2011 2012 R’000 R’000 R’000 623 531 610 463 1 258 694 Operating profit before depreciation and impairments 37 191 25 980 109 034 Depreciation and impairments 16 917 16 768 34 724 Profit before finance costs 20 274 9 212 74 310 3 586 8 490 18 925 16 688 722 55 385 4 673 202 12 416 12 015 520 42 969 Revenue Net finance costs Profit before taxation Deferred taxation Profit after taxation Other comprehensive income for the period – (loss)/gain on revaluation of property, plant and equipment (67) – 23 498 Total comprehensive income for the period 11 948 520 66 467 Weighted average shares in issue (‘000) 79 396 77 165 78 274 Earnings per share (cents) 15,0 0,7 54,9 Headline earnings per share (cents) 16,5 0,7 57,9 Diluted earnings per share (cents) 15,0 0,7 54,9 Diluted headline earnings per share (cents) 16,5 0,7 57,9 12 015 520 42 969 1 497 – 684 – 1 684 520 45 337 Reconciliation between earnings and headline earnings Earnings after taxation Reconciling items: Disposal of property, plant and equipment (424) Taxation effect Headline earnings after taxation 13 088 Statement of Changes in Equity Share capital and premium R’000 ShareNonbased distributable payments reserve R’000 R’000 Retained earnings R’000 Total R’000 323 828 673 205 For the six months ended 31 August 2012 272 999 297 Sale of property, plant and equipment – – (67) – Net value of employee services – – – – – Total comprehensive income for the period – – – 12 015 12 015 272 999 297 76 014 335 843 685 153 Opening balance 127 683 1 192 52 583 280 859 462 317 Shares issued 145 316 – – – 145 316 – – Opening balance Closing balance 76 081 (67) For the six months ended 31 August 2011 Net value of employee services – Total comprehensive income for the period – – – 520 520 272 999 443 52 583 281 379 607 404 Closing balance (749) (749)
  4. 4. Overview Headline earnings per share for the period under review (“H113”) increased to 16,5 cents from 0,7 cents for the prior period (“H112”) due to good agricultural performance and cost control. Although poultry prices increased by 5%, this was offset by an 11% increase in the cost of feed raw materials. Operational and financial results The Group lowered its slaughter age by 2% in line with its stated objectives of simplifying the business and improving consistency across its supply chain. As a result, live mass per bird declined by 1% and feed conversion ratio improved by 3%. Although a colder winter was experienced than last year, mortalities decreased from 8% in H112 to 6% in H113 and the Group achieved a 7% increase in its performance efficiency factor. Live birds slaughtered decreased by 2% and together with a 1% decrease in net yield this led to a 3% decrease in sales volumes. Although pricing improved by 5%, pricing per quarter was volatile with first quarter pricing up 8% and second quarter pricing up only 2% on the previous comparable periods. As a result of this and the volume decrease, revenue increased by 2%. This was a due to a surge in import volumes this year that not only led to an oversupply situation but also caused the national cold storage supply chain to become congested which in turn led to producers being unable to move stock. The Group continues to diversify away from commodity lines such as mixed portions towards higher margin product lines with sales of mixed portions declining to 44% from 46% in the prior comparative period. Prospects Industry margins over the next six months will remain under pressure due to high levels of imported poultry volumes together with increases in maize and soya prices. Urgent action is required to impose an import tariff structure that will allow South African poultry companies to compete on a level playing field with other countries that have either structural cost advantages or are supported by their governments through direct or indirect agricultural subsidies. Directorate During the period under review, Mr Chris Coombes, who was previously Chief Financial Officer, was appointed as Chief Executive Officer. Mr Charles Davies, who held the role of Executive Chairman, resumed the role of Non-Executive Chairman and Mr Litha Nyhonyha, who held the role of Lead Independent Director, resumed his role as Independent Non-Executive Director. The search for a Chief Financial Officer has commenced and the position will be filled in due course. Accounting Policies The unaudited condensed consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standards and comply with the requirements of International Accounting Standard 34 – Interim Financial Reporting, the AC500 series of interpretations as issued by the Accounting Practices Board, the JSE Limited Listing Requirements and the Companies Act of South Africa (2008). The accounting policies are consistent with those applied by the Group for the year ended 29 February 2012. These financial results have been prepared by Mr C Coombes CA (SA), and have not been reviewed or reported on by the Group’s auditors. Increases in maize and soya prices resulted in the Group’s broiler feed costs increasing by 11% per ton. The drought in the United States and production problems in South America will place the poultry industry under pressure for the next six months as raw material prices remain volatile. Interim Dividend Despite increases in energy costs and inflationary pressure on other overheads, non-feed costs increased by only 2% per unit sold and the Group continues to work at reducing non-feed costs on a long term structural basis. Finance charges reduced by 57% due to lower debt levels and holding higher amounts of cash. By order of the Board Gross long term gearing has improved to 21% from 28% as at 31 August 2012. Capital expenditure for the period under review was limited to R13 million of which R12 million was spent at the abattoir on increasing capacity for new products. 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”) CP Davies Non-Executive Chairman Officer C Coombes Chief Executive 1 October 2012 E-mail: info@sovfoods.co.za Transfer secretaries Computershare Investor Services (Pty) Limited, PO Box 61051, Marshalltown 2107, Gauteng Sponsor One Capital www.sovereignfoods.co.za Directorate CP Davies* (Non-Executive Chairman), C Coombes (CEO), JA Bester*, PM Madi*, LM Nyhonyha*, T Pritchard*, BJ Van Rensburg, GG Walter * Non-Executive Midnight Sta r Working capital as a percentage of annualised revenue improved from 9% as at H112 to 7% as at H113, and as a result of this and the improved business performance, cash on hand increased from R68 million as at 29 February 2012 to R71 million as at 31 August 2012. Whilst gearing has improved and the cash flow position of the Group is also improving, the Board did not consider it prudent to declare an interim dividend for the period under review.

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