| Wed 23 May 2007, 17:05 | | RBW - Rainbow - Abridged Audited Group Results for |
|
RBW
RBW
RBW - Rainbow - Abridged Audited Group Results for the year ended 31 March 2007
RAINBOW CHICKEN LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1966/004972/06)
JSE share code: RBW & ISIN code: ZAE000019063
("Rainbow" or "the Group")
ABRIDGED AUDITED GROUP RESULTS FOR THE YEAR ENDED 31 MARCH 2007
SALIENT FEATURES
Revenue up 15.3%
Operating profit up 13.2%
Headline earnings as reported up 19.2%
Headline earnings excluding non-recurring taxation benefit up 13.7%
Dividends per share up 19.3%
CONSOLIDATED BALANCE SHEET
31 March 31 March
2007 2006
R`000 R`000
ASSETS
Non-current assets
Property, plant and equipment 1 054 124 962 194
Trademarks 404
Goodwill 287 444 287 444
Deferred taxation 15 285
1 356 853 1 250 042
Current assets
Inventories 409 356 320 420
Biological assets 269 278 242 199
Trade and other receivables 464 539 517 442
Derivative financial instruments 2 969 19 790
Taxation receivable 2 246 1 513
Cash and cash equivalents 590 336 394 383
1 738 724 1 495 747
Total assets 3 095 577 2 745 789
EQUITY
Capital and reserves 1 920 889 1 595 901
LIABILITIES
Non-current liabilities
Deferred taxation 179 606 168 519
Post-retirement medical obligation 75 535 69 683
Finance lease liability 116
255 141 238 318
Current liabilities
Trade and other payables 834 153 781 800
Provisions 40 687 30 771
Finance lease liability 389 698
Derivative financial instruments 16 970 402
Taxation payable 27 348 97 899
919 547 911 570
Total liabilities 1 174 688 1 149 888
Total equity and liabilities 3 095 577 2 745 789
CONSOLIDATED INCOME STATEMENT
Year ended Year ended
31 March 31 March
2007 2006
R`000 R`000
Revenue 4 730 363 4 101 454
Operating profit before depreciation 772 315 687 588
and amortisation
Depreciation and amortisation (118 181) (109 744)
Operating profit 654 134 577 844
Finance costs (2 714) (2 351)
Finance income 25 179 9 930
Profit before taxation 676 599 585 423
Taxation (202 354) (186 578)
Profit for the year attributable to 474 245 398 845
the equity holders of the Group
HEADLINE EARNINGS
Year ended Year ended
31 March 31 March
2007 2006
R`000 R`000
Profit for the year attributable to 474 245 398 845
the equity holders of the Group
Loss on disposal of property, plant 2 759 3 626
and equipment
Net asset impairment provision (2 186)
release
Headline earnings 477 004 400 285
STATEMENT OF CHANGES IN EQUITY
Stated Share-based Retained
capital payments earnings Total
R`000 R`000 R`000 R`000
Balance at 1 April 1 105 959 8 391 172 356 1 286 706
2005
Profit for the 398 845 398 845
year attributable
to the equity
holders of the
Group
Ordinary dividends (105 273) (105 273)
paid
Employee share
option scheme:
Proceeds from 9 788 9 788
shares issued
Value of employee 5 835 5 835
services
Balance at 31 1 115 747 14 226 465 928 1 595 901
March 2006
Profit for the 474 245 474 245
year attributable
to the equity
holders of the
Group
Ordinary dividends (168 817) (168 817)
paid
Employee share
option scheme:
Proceeds from 11 538 11 538
shares issued
Value of employee 8 022 8 022
services
Balance at 31 1 127 285 22 248 771 356 1 920 889
March 2007
CONSOLIDATED CASH FLOW INFORMATION
Year ended Year ended
31 March 31 March
2007 2006
R`000 R`000
Operating profit before working 783 096 693 971
capital requirements
Working capital requirements 38 398 (13 880)
Cash generated by operations 821 494 680 091
Net finance income 22 465 7 579
Taxation paid (277 836) (81 341)
Cash available from operating 566 123 606 329
activities
Dividends paid (168 817) (105 273)
Net cash flows from investing (212 466) (221 367)
activities
Net cash flows from financing 11 113 8 687
activities
Net increase in cash and cash 195 953 288 376
equivalents
Cash and cash equivalents at the 394 383 106 007
beginning of the year
Cash and cash equivalents at the end 590 336 394 383
of the year
SUPPLEMENTARY INFORMATION
Capital expenditure contracted 76 008 102 590
and committed
Capital expenditure approved 217 221 48 981
but not contracted
Contingencies 56 950 36 914
STATISTICS
Ordinary shares in issue (000`s) 282 712 279 222
Weighted average ordinary (000`s) 281 393 277 096
shares in issue
Fully diluted weighted average (000`s) 290 118 285 558
ordinary shares in issue
Basic earnings per share (cents) 168.5 143.9
Basic earnings per share - (cents) 163.5 139.7
diluted
Headline earnings per share (cents) 169.5 144.5
Headline earnings per share - (cents) 164.4 140.2
diluted
Net asset value per share (cents) 679.5 571.6
Ordinary dividends:
Interim dividend paid (cents) 20.0 17.0
Final dividend declared/paid (cents) 48.0 40.0
BASIS OF PREPARATION
The financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRS) and in compliance with the Companies Act of
South Africa of 1973 and the Listings Requirements of the JSE Limited.
The accounting policies are consistent with those of the previous financial
year, however they have been updated to include the following new standards,
interpretations and amendments which the Group adopted from 1 April 2006 - IFRS
4 (Financial Guarantee Contracts), International Financial Reporting
Interpretations Committee (IFRIC) 4 (Determining whether an arrangement contains
a lease) and amendments to IAS 19 (Employee Benefits) and IAS 39 (Financial
Instruments: Recognition and Measurement). There was no impact on the results
for the current or prior years as a consequence of adopting these new standards,
interpretations and amendments.
OVERVIEW AND MARKET CONDITIONS
The Group`s results for the year ended 31 March 2007 reflect headline earnings
growth of 19.2% compared to the previous year.
The South African economy continues to grow at approximately 4%. The macro
economic environment has remained positive during the year despite increasing
inflation and interest rates.
Consumer demand during the year has remained strong. The full impact of the four
interest rate hikes in 2006 on real disposable income of households is only
expected to be felt in coming months. Growth in real household consumption
expenditure is expected to slow to just below 5% on average in 2007 compared
with the 6.9% in 2006.
Higher international grain prices, largely as a consequence of lower
international stock levels and increased ethanol production in the US, together
with local drought conditions has led to a 79.5% increase in local yellow maize
prices since March 2006. The estimated crop size of 6.9 million tons represents
an average yield reduction of 30% and it is expected that imports of 1.5 million
tons will be required to meet the production deficit. As a consequence, yellow
maize prices are expected to remain high, trading close to import parity.
The local chicken market is estimated to have grown by 11.1% to R13.6 billion
for the financial year to 31 March 2007. Local producer broiler growth of almost
1.5 million birds per week (approximately 10%) is expected in the next financial
year with the majority of the increased volume channelled into the Individually
Quick Frozen (IQF) category.
Notwithstanding the volatility of the rand, chicken import volumes have remained
high increasing by approximately 27% during the year. The extension of the anti-
dumping tariffs imposed on the US for a further five year period is positive.
The local chicken industry remains on high alert for Avian Influenza (AI). AI
outbreaks continue to be reported internationally. Preparation for AI has
received much attention and disease and communication management strategies have
been shared with our trading partners. Better co-operation between the industry
and the Department of Agriculture has been established. Strict bio-security
policies are in place and are the best means to manage this risk.
REVIEW OF OPERATIONS
The Group continues to focus on its five strategic pillars namely, consumer
insight (consumers being the heart of our business); customer focus (creating
win-win partnerships); supply chain (delivering excellence); business investment
(investing for future growth) and our culture (doing things inspirationally).
The results achieved in the period continue to reflect the benefits of this
strategy.
Continued product innovation to meet consumer needs has been a feature of the
year under review, particularly in the IQF category where four new products
under the Rainbow brand were launched during September. A first into the South
African market is Rainbow Flavoured IQF Mixed Portions in three flavours which
have performed in line with expectations. These products have been actively
supported via TV advertising, in-store promotions and point of sale activity.
Rainbow implemented category management initiatives in both the fresh and frozen
chicken categories in selected customer accounts. This is an important
initiative in terms of driving mutually beneficial projects with our customers
and will be rolled out further in the coming year.
The new further processed products have continued to perform well, despite
challenges faced in terms of managing the short shelf life nature of certain of
the products. Utilisation of the plant`s capacity continues to improve in line
with expectation.
FoodSolutions strategy of building strategic partnerships with key customers,
optimising route to market opportunities and optimising product mix has led to a
strong performance in the Foodservice channel. Growth is underpinned by strong
performance in the Quick Service Restaurant (QSR) sector and new business
development enabled by exciting product offerings from the further processing
plant to suit customer needs. Rainbow recently won the prestigious "KFC
International Food Supplier of the Year Award", the first South African company
to do so. Rainbow also proudly celebrated 25 years as sole supplier of the
Chicken Licken franchise.
Epol has performed well during the year, with improved capacity utilisation
through higher external volumes. The raw material procurement strategy has
enabled Epol to be price competitive despite certain inflationary pressures. The
significantly higher maize prices will, however, be felt in feed and chicken
prices in the new year.
Recovery of the feed contamination claim against the responsible supplier is
progressing and is in the hands of our legal representatives, but to date
remains outstanding.
Vector`s results are in line with expectation mainly due to growth in the Multi-
temperature Contract Distribution (MTCD) and Vector Cold Storage business units.
The major capital expansion projects were completed in line with planned timing
and are operating well. Vector`s recent investment in new technology, such as
the fully integrated fleet management system and supply chain integrity control
system, is proving worthwhile in driving supply chain efficiencies.
Rainbow has made good progress in leveraging the Vector SAP system to integrate
Rainbow`s outbound sales and distribution processes. A review of the Group`s
business application requirements is being conducted to confirm the roadmap for
Enterprise Resource Planning (ERP) replacement within the extended Rainbow
business.
FINANCIAL REVIEW
Chicken revenue was 13.0% higher than the previous year. Rainbow`s average price
realisation increased by 8.0%. Overall chicken volumes increased by 5.0% with
the QSR sector, targeted customers and branded products (including the new
further processed products) all showing pleasing growth.
Group revenue increased by 15.3% to R4.7 billion (2006: R4.1 billion) benefiting
from Epol and Vector`s higher external volumes and higher feed selling prices
due to the significantly increased maize prices.
Revenue - Rm 2007 2006 %
Chicken 3 767.2 3 335.1 13.0
External sales - Cobb, Epol and Vector 963.2 766.4 25.7
Reported revenue 4 730.4 4 101.5 15.3
Headline EBITDA increased by 12.6% to R775.1 million (2006: R688.1 million),
reflecting the higher realisations and volumes as well as improved customer and
product mix. The headline EBITDA margin decreased slightly to 16.4% (2006:
16.8%) largely as a result of the higher feed input costs.
As previously noted, reporting the financial effects of certain financial
instruments used in the feed raw material procurement strategy in accordance
with IAS39, introduces volatility to the Group`s financial results. The pre-
taxation impact of applying IAS39 on the Group`s results for the year is a
negative R14.2 million (2006: R63.5 million positive). The underlying pre-IAS39
performance and margin continues to reflect an improving trend.
2007 2006 % 2005 %
Headline EBIT (Rm)
- pre IAS 39 671.1 514.8 30.3 317.4 62.2
- post IAS 39 656.9 578.3 13.6 290.2 99.3
Headline EBIT margin (%)
- pre IAS 39 14.2 12.6 1.6 7.9 4.7
- post IAS 39 13.9 14.1 (0.2) 7.2 6.9
Rainbow Chicken Foods, the company containing the new further processing plant,
has been approved by the Minister of Trade and Industry as a qualifying
strategic industrial project with preferred status. The company`s preferred
status grants an additional taxation allowance of 100% of the cost of qualifying
industrial assets. The preferred status is subject to the company maintaining
certain performance criteria set out in the approval, failing which the
allowance will reduce to 50% of the cost. As a consequence, only 50% of the
additional taxation allowance has been recognised in the current financial year
(R21.8 million) as a deferred taxation asset. The remaining 50% will be
recognised when it is confirmed that the performance criteria for the required
four year period will be achieved.
Despite a higher secondary taxation on companies as a result of the
significantly increased 2006 final dividend, the effective taxation rate
decreased to 29.9% (2006: 31.9%) due to the additional tax allowance.
Net finance income increased by R14.9 million due to the higher cash balances.
Headline earnings increased by 19.2% to R477.0 million (2006: R400.3 million)
with diluted headline earnings per share improving by 17.3% to 164.4 cents per
share (2006: 140.2 cents per share). Excluding the taxation allowance benefit
noted above, headline earnings increased by 13.7% to R455.2 million and diluted
headline earnings per share improving by 11.9% to 156.9 cents per share.
Cash generated by operations increased by 20.8% to R821.5 million (2006: R680.1
million) as a result of improved performance of the Group and continued focus on
working capital requirements.
Capital expenditure was R214.1 million (2006: R234.4 million). A further amount
of R76.0 million (2006: R102.6 million) has been contracted and committed, but
not spent, whilst a further R217.2 million (2006: R49.0 million) has been
approved, but not contracted. The Group continues to follow a policy of
upgrading its facilities and funding normal levels of replacement capital
expenditure from its own resources.
Return on equity decreased slightly to 27.0% (2006: 27.7%).
DIRECTORATE
Mr N Phillips resigned from the Board on 12 March 2007 due to ill health. Noel
made a significant contribution to the business during the eleven years he
served as a non-executive director. Sadly Noel passed away on 3 April 2007 and
will be greatly missed by all his colleagues.
AUDIT OPINION
The annual financial statements, from which the abridged Group Results contained
herein are derived, have been audited by PricewaterhouseCoopers Inc. Their
unqualified Audit Reports on the annual financial statements and the abridged
Group Results are available for inspection at the company`s registered office.
MINORITY OFFER
On 20 March 2007 Remgro made a firm offer to buy out the 38.5% minority
shareholding for R16.00 cash for each Rainbow share or 9 Remgro shares for every
100 shares in Rainbow. The circular to shareholders was posted on 15 May 2007
and includes all the relevant details in respect of this offer.
PROSPECTS
Consumer spending is expected to remain positive with demand for chicken
specifically as an affordable protein source also expected to remain strong.
Maize and soya prices are likely to remain at the current high levels and it is
expected that feed input costs will be significantly higher than the 2007
financial year.
Rainbow remains committed to upgrading its facilities within agriculture and
feedmilling which will enable further supply chain efficiencies and additional
chicken volume capacity. Investment will be made to meet growing demand but will
be focused on key customers and sustainable product categories.
The combination of the above events will translate into margin compression off
the current higher levels meaning that earnings in the 2008 financial year is
likely to be lower than 2007.
DIVIDEND DECLARATION
Notice is hereby given that on 23 May 2007 the Board declared a final dividend
(number 68) of 48.0 cents per ordinary share in respect of the twelve months
ended 31 March 2007 (2006: 40.0 cents). The total dividend for the year is 2.4
times covered by diluted headline earnings per share (2006: 2.5 times).
The salient dates of the declaration and payment of this dividend are as
follows:
Last date to trade ordinary shares cum Friday, 8 June 2007
dividend
Ordinary shares trade ex dividend Monday, 11 June 2007
Record date Friday, 15 June 2007
Payment date Monday, 18 June 2007
Share certificates may not be dematerialised or rematerialised between Monday,
11 June 2007 and Friday, 15 June 2007 (both dates inclusive).
For and on behalf of the Board
M H Visser M Dally Durban
Non-executive Chairman Chief Executive Officer 23 May 2007
Directors: MH Visser (Non-executive chairman), M Dally (CEO)*,RH Field*, M
Griessel, JB Magwaza, M M Nhlanhla, DW Vale, DG Zwiegelaar
* Executive Directors
Company secretary: SB Heath
Registered office: Rainbow Chicken Limited, One the Boulevard, Westway Office
Park, Westville, 3629
Transfer secretaries: Computershare Investor Services 2004 (Proprietary)
Limited, 70 Marshall Street, Johannesburg 2001
Auditors: PricewaterhouseCoopers Inc
Sponsor: RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Bankers: ABSA Bank Limited
Website: www.rainbowchicken.co.za
Date: 23/05/2007 17:05:02 Produced by the JSE SENS Department.
