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ITR
ITR
ITR - Intertrading Limited - Audited results for the year ended 28 February 2007
INTERTRADING LIMITED
Registration number 1987/004777/06
("Intertrading","the group" or "the company")
Share code: ITR
ISIN code: ZAE000015566
CONSOLIDATED INCOME STATEMENT
Year ended Year ended
28 February 28 February
2007 2006
R`000 R`000
Revenue 293 478 298 101
Operating profit/(loss) before
exceptional income 427 (7 364)
Exceptional items
Retrenchment costs (518) -
Bad debt provision (3 798) -
Software write off (1 365) -
Impairment of goodwill (26 299) -
Operating (loss) before interest (31 553) (7 364)
Interest received 4 410 486
Interest paid (6 962) (1 436)
Net (loss) before taxation (34 105) (8 314)
Taxation (3 419) 1 395
Net income after taxation (37 524) (6 919)
Net (loss)/income attributable to (37 524) (6 919)
shareholders
STATEMENT OF CHANGES IN EQUITY
Equity at beginning of period 64 132 71 551
Net (loss) for the period (37 524) (6 919)
Dividend (500)
Equity at end of period 26 608 64 132
CASH FLOW STATEMENT
Cash generated/(utilised) by
operations 10 804 (5 281)
Net interest paid (2 552) (950)
Taxation paid 824 (1 614)
Dividend paid - (500)
Cash generated/(utilised) by
operating activities 9 076 (8 344)
Net cash outflow from investing (3 002) (6 547)
activities
Net cash outflow from financing 931 1 484
activities
Net movement in cash 7 005 (13 407)
Net cash resources at beginning of year (8 339) 5 068
Net cash resources at end of the period (1 334) (8 339)
CONSOLIDATED BALANCE SHEET
Year ended Year ended
28 February 28 February
2007 2006
R`000 R`000
ASSETS
Non-current assets
- Property, plant, equpiment 12 755 12 584
- Intangible assets 6 442 34 074
- Deferred taxation 770 3 293
- Investments 10 66
- loan to related party 2 505 2 164
Current assets 55 668 58 686
78 150 110 867
EQUITY AND LIABILITIES
Share capital and premium 47 452 47 452
Non-distributable reserves 503 9
Distributable reserves (21 346) 16 671
Shareholders` interest 26 609 64 132
Long-term liabilities 1 881 1 478
Deferred taxation 1 124 552
Current liabilities 48 536 44 705
78 150 110 867
SUPPLEMENTARY INFORMATION
Number of ordinary shares (`000) 50 000 50 000
Weighted average number of shares in 50 000 50 000
issue (`000)
Headline earnings per share (cents) (22,5) (13,8)
Add: impairment of goodwill (52,6) 0,0
Loss per share (cents) (75,0) (13,8)
Net asset value per share - excluding 40,3 60,1
intangible assets (cents)
SEGMENTAL ANALYSIS
Segmental revenue
Seafreight 143 018 189 168
Airfreight 183 758 133 012
Other 6 245 4 307
Less internal revenue (39 543) (28 386)
Net revenue 293 478 298 101
Segmental results
Seafreight (8 141) (3 627)
Airfreight (700) 1 563
Other* 22 712 (5 300)
Operating loss before interest (31 553) (7 364)
*Mainly goodwill impairment and foreign exchange operations
The financial information contained in this report has been audited by the
group`s auditors PKF (Jhb) Inc. A copy of the unqualified audit report is
available for inspection at Intertrading`s registered office.
Profile
Intertrading specialises in the procurement and marketing of fresh produce to
global markets. Allied to this, Intertrading also provides services to the
agricultural sector including technical advice, freight forwarding and
logistical services.
Operational Review
The period under review was characterised by a volatile and unpredictable rand
exchange rate, which aggravated an already tough trading environment for
exporters operating in competitive global markets.
As mentioned in the August 2006 Interim review, improved prospects for the
second half of the year were dependent on higher turnover from greater volumes
to absorb the group`s cost base. Unfortunately the expected volumes from the
largest division, Sea Freight export fruit, did not materialise and a
substantial operating loss of R 6,9 Million was incurred before exceptional
costs of R 5,7 Million. All other divisions increased their volumes and turnover
but this did not compensate for the loss incurred by Sea Freight division.
Seafreight Division
Citrus fruit and grapes
This division procures and exports citrus fruits and table grapes. The business
model is predicated on high volumes and low margins and is influenced by weather
patterns, domestic and international supply, exchange rates and intense
competition in global markets. Intertrading has little or no competitive
advantage in these commodities exacerbated by no "in house" or "tied"
production. In 2007 financial year volumes declined to 840 267 cartons (2006
volume was 1 161 553 cartons) and for the third successive year failed to meet
its costs. The decline in turnover in 2007 was in part due to the conscious
decision not to continue to follow the industry norms of offering financial
inducements to farmer producers in order to secure supply lines. The risks
attached to these practices are not commensurate with the margins earned.
Following a review of the budgets and prospects in late 2006 and as part of the
restructuring process mentioned in the Interim review, the decision was taken to
close this business, which was the largest contributor to turnover and employed
a high number of total staff.
The exceptional costs incurred in closing this business were
R 1,8 Million. It was also considered prudent to make an exceptional bad debt
provision of R 3,7 Million in respect of seasonal loans and other financial
inducements granted to farmer suppliers, many of which were a legacy of the past
and settlement of which is now questionable. In some instances and where
appropriate, legal action has been instituted to recover the outstanding loans.
The decision to close down the activities of this section of the division also
results in the write off of goodwill amounting to R 26,3 million attributed to
this business. The goodwill arose at the time Intertrading was listed in 1998
but has no material effect on the intrinsic net asset value of the company.
Subtropical Fruit
The subtropical business which relates mainly to avocados and litchis also
experienced a decline in volumes in the year under review. While there was a
substantial decline in avocados, volumes of litchis increased as a result of a
seasonal delay in the Madagascar crop arriving in European markets.
The fundamentals of this business remain sound, as the business is not subject
to the same risks as those in the citrus and grape divisions.
Airfreight Division
Sky services benefited from the resumption of ostrich meat exports but this came
too late in the financial year to fully compensate for the losses reported in
the first half of the year. Fish volumes suffered from the abnormally low
catches but export flower volumes out of the Cape are becoming a significant
part of the business.
Agrilink, the division that exports fresh produce by air, had a reasonable year
with good volumes achieved and a meaningful profit contribution.
Post Balance Sheet Events
Macadamias
As announced on 2nd May 2007, a conditional offer to purchase Intertrading`s
macadamia nut interests was accepted by your directors and a Circular in this
regard will shortly be sent to all shareholders.
The rationale for the disposal is that the international market for macadamia
nuts has weakened considerably over the past few years as the short supply
situation has been met by increased production coupled with little growth in
consumer demand or consumption. Macadamia nuts are now becoming a commodity.
This trend is forecast to continue in the next decade as production of macadamia
nuts increase due to continuing worldwide plantings of trees. As a consequence
processing costs and commissions will be squeezed caused by increasing buyer
pressure for lower prices.
In the light of these circumstances and in particular that Intertrading does not
have control of its processing facilities and therefore lacks a competitive
edge, your directors decided to accept the offer from a syndicate led by
Intertrading`s fifty percent partner in the processing facilities who is also a
producer, to acquire the entire macadamia nut interests. The non-current assets
and liabilities of this business at 28 February 2007 were R12,797 Million and R
2,537 Million respectively.
Directorate and Staff
Leon Weirich passed away in January 2007. Leon was a recent but valuable member
of the board of directors and his contribution will be sorely missed.
Tribute must be paid to the Intertrading management and staff for their loyalty
and hard work during this difficult year.
Prospects
The group has been through several years of attrition and is now leaner than it
has been for many years. Although the strong rand of recent years has had a
negative impact on group results there has undoubtedly been an increase in the
risk as a result of chasing down more volume in commodity markets to cover
costs. Intertrading is not of the scale to trade in commodity type markets and
its efforts will now be redirected into sectors where size does not matter and
where there is a competitive advantage. The group is actively seeking
opportunities to increase its businesses through acquisitions in fields that are
complimentary to its present businesses and capable of delivering sustainable
earnings.
Dividends
Owing to the poor performance of the group no dividend has been recommended in
respect of the financial year ended 28th February 2007.
Basis of presentation and accounting policies
The results for the year ended 28 February 2007 and comparative information,
have been prepared in terms of International Financial Reporting Standards
(IFRS). The results also comply with IAS (Interim Financial Reporting) and
relevant sections of the South African Company`s Act 1973 as amended.
The accounting policies applied in the preparation of the results for the year
ended 28 February 2007 are consistent with those adopted in the financial
statements for the year ended 28 February 2006.
By order of the board
C Jousse G F M van Rooyen
(Acting Chairman) (Managing Director)
Woodmead 30 May 2007
Registered office Transfer secretaries
Block 3 Computershare Investor
Harrowdene Office Park Services 2004
Western Service Road (Pty) Limited
Woodmead, 2148 70 Marshall Street
(PO Box 100 Johannesburg, 2001
Woodlands, 2080) (PO Box 61051
Marshalltown, 2107)
Directors
Non-executive:
C Jousse (Acting Chairman), J Azoulay, H Weirich, G G Burelli
Executive: G F M van Rooyen (Managing Director), C J Hull (Group Financial
Director), B Julicher
www.intertrading.co.za
Date: 31/05/2007 10:01:01 Produced by the JSE SENS Department.
