| Tue 25 Sep 2007, 13:46 | | CFO - Country Foods Limited - Abridged prospectus |
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JSE
CFO
CFO - Country Foods Limited - Abridged prospectus
Country Foods Limited
(formerly Africa`s Best 346 Limited)
(Incorporated in the Republic of South Africa)
(Registration number 2005/018743/06)
(JSE code: CFO & ISIN: ZAE000105052)
("Country Foods" or "the company")
ABRIDGED PROSPECTUS
This abridged prospectus is not an invitation to the public to subscribe for
shares in Country Foods Limited ("Country Foods"), but is issued in
compliance with the Listings Requirements ("Listings Requirements") of the
JSE Limited ("JSE") for information purposes only. The information in this
abridged prospectus has been extracted from a full prospectus issued by
Country Foods on 21 September 2007 ("the detailed prospectus"), which is
available as set out in paragraph 8. At the date of listing the authorised
share capital of Country Foods comprises 500 million ordinary shares with a
par value of 0.1 cent each, of which, after a private placement of Country
Foods ordinary shares by way of an offer by the company for the subscription
of 30 000 000 ordinary shares at an issue price of 100 cents per ordinary
share in the share capital of Country Foods thereby raising R30 million
before expenses, 126 455 449 ordinary shares will be in issue.
Listing of Country Foods ordinary shares ("shares") on the JSE.
1. INCORPORATION AND HISTORY
1.1 Country Foods Limited was incorporated as a public company on 2 June
2005 with the name Africa`s Best 346 Limited and changed its name to
Country Foods Holding Limited on 29 September 2006 and again changed
its name to Country Foods Limited on 15 April 2007.
1.2 Edulis Mushroom (Pty) Limited ("Edulis") was incorporated 33 years ago
on 3 December 1974, when the Casaletti Family saw the opportunity to
commercialise wild mushrooms that grew in pine forests of South
Africa`s Eastern Highveld. Exclusive mushroom harvesting rights were
then negotiated with local Forestry Farmers in the areas of Amsterdam,
Lothair and Warburton in the Mpumalanga Province. At the same time
Edulis established its first processing facility in Amsterdam.
1.3 The operations of Country Mushrooms were established in 1986 by an
Italian family and two managers who left the employ of Denny Mushrooms,
one being Morris Gilbert, on the Wattlewood Farm near Kempton Park,
Gauteng.
1.4 In 1988 the proprietors of the Country Mushrooms business completed
construction of 22 growing rooms for cultivated mushrooms. In 1999 the
capacity was increased with the construction of a further five growing
rooms.
1.5 The business conducted by Fruitime was established on 1 October 1989 as
a manufacturer and distributor of a wide variety of fruit juices and
associated beverages. Fruitime Fruit Juices (Pty) Limited ("Fruitime")
was incorporated as a company on 2 June 1997 and acquired this
business. Fruitime secures the highest quality fruit juices from
Bronpro Processors (Pty) Limited in Mpumalanga through a supply
agreement at market related rates.
1.6 In 1994 the Edulis operations were regionalised with an international
marketing and distribution infrastructure to mainly supply
international wholesalers and/or distributors. Edulis thereafter
established processing facilities in Swaziland, Zimbabwe and Malawi.
Edulis has exclusive product off-take agreements with these operations.
1.7 The Country Mushrooms business was acquired by Abfood Products (Pty)
Limited (Registration number 1990/005362/07), Standard Bank Limited and
Morris Gilbert in 1996 from the Italian family. This was followed in
1997 by a management buy-out of Standard Bank Limited`s equity stake.
1.8 Country Mushrooms (Pty) Limited ("Country Mushrooms") was incorporated
on 10 September 2001 and between 2001 and 2004 Country Mushrooms
acquired the entire issued share capital of Mushroom Cordon Bleu (Pty)
Limited, an operation that was started in 1984. This cultivated
mushroom operation is situated on the Aalwyne Farm near Kempton Park
and has 19 growing rooms, with a production capacity of 22 500
kilograms brown and white mushrooms per week.
1.9 Forest Products International LLC ("Forest Products"), a New York
subsidiary of Edulis, was established in 2005 to distribute and market
its products in North America. This operation ensures the distribution
of luxury wild, exotic and processed products to wholesalers, hotels,
food services and restaurants. Approximately 30% of the products sold
by Forest Products in the USA are imported from Edulis in South Africa,
with the remaining 70% imported under distribution agreements from the
European Union ("EU") and the Far East.
1.10 Edulis Gourmet (Pty) Limited ("Edulis Gourmet") commenced operations in
December 2005 to distribute luxury food products as well as wild and
exotic mushrooms and truffles to the local market in South Africa to
supermarkets, hotels, restaurants and the food services industry.
Edulis Gourmet has recently become the exclusive distributor of
international brands such as Bonduelle of France, Faverger Chocolates
of Switzerland, Greci Foods, Urbani and Valsele of Italy. Edulis
Gourmet offers the majority of products required in the food services
industry.
1.11 The Midlands processing facility of Edulis with the name Midlands
Mushroom Farms (Pty) Limited ("Midlands"), which was incorporated on 27
May 2003 and funded by Edulis and strategic partners KERPEF for an
investment cost of R20 million, commenced operations in October 2006.
1.12 Country Foods acquired the entire issued share capital and all
shareholders` loan accounts of Edulis, Country Mushrooms and Fruitime
with effect from 30 September 2006 in "share for share" transactions.
2. NATURE OF THE COMPANY`S BUSINESS AND INDUSTRY
2.1 Edulis
2.1.1 Edulis has been a processor, distributor, exporter and importer of
mushrooms, fruits and vegetables since 1974, during which period
it has gained invaluable experience in cryogenic freezing,
dehydration and processing operations on a global basis.
2.1.2 Edulis exports approximately 90% of its processed products to the
EU and the ("United States of America") USA.
2.1.3 In addition to its own processing facilities, the group has
recently become the exclusive distributor and producer under
licence for some frozen and canned food brands in the EU.
2.1.4 Edulis has cryogenic freezing and processing operations in the
Midlands of KwaZulu-Natal, Mpumalanga and Swaziland.
2.1.5 In June 2007 the newly commissioned, state of the art processing
facility in Midlands, KwaZulu-Natal was awarded its Hazard
Analysis and Critical Control Point ("HACCP") certification which
will enable the group to increase the supply of finished value-
added products directly to supermarkets in South Africa, the EU
and the USA.
2.2 Country Mushrooms
2.2.1 Country Mushrooms is a grower, distributor and marketer of fresh
cultivated mushrooms and value-added processed mushroom products
and other fresh produce.
2.2.2 Country Mushrooms cultivates both white button and brown mushrooms
on the Wattlewood Farm and Aalwyne Farm, close to Kempton Park, in
Gauteng. The capacity of Country Mushrooms is 46 growing rooms,
with production of over 48 000 kilograms white and brown
cultivated mushrooms per week making it approximately the second
largest cultivated mushroom supplier in South Africa.
2.2.3 Country Mushrooms has a market share of 12% in South Africa and
has the capacity to increase its market share to 18% in fresh
cultivated mushroom sales.
2.3 Fruitime
2.3.1 Fruitime manufactures, markets and distributes a wide variety of
fruit juices and associated beverages to the supermarkets on a
national and regional basis.
2.3.2 Fruitime has strategically placed distributors throughout South
Africa to facilitate the distribution of the Fruitime range
nationally. Fruitime has extended its product range into the
bottled water sector and launched Aquatime still and sparkling
waters as well as an exciting range of flavoured sparkling waters.
2.3.3 Fruitime has constantly gained market share in a competitive
environment. With the commissioning of its new Elo Pak, long life
bottling plant, Fruitime is well placed to continue its growth
pattern.
2.3.4 Through Country Foods, Fruitime has obtained the exclusive rights
to brand its fruit juices and fruit flavoured drinks with the
names and logos of the South African Football Team (Bafana Bafana)
for the 2010 FIFA World Cup.
3. PROSPECTS
In the opinion of the directors of the company, based on experience and
market information available, the prospects of the group are good for
the following reasons:
3 1 Export opportunities
3.1.1 Through its network of associated offshore companies and
distributors, Country Foods is ideally positioned to increase its
range of exported products and continue to expand its direct sales
to supermarket chains.
3.1.2 The USA market, through the group`s New York subsidiary Forest
Products, provides significant growth opportunities to Country
Foods. The HACCP certification of Midlands will enable the group
to supply finished value-added products directly to supermarkets
in the EU and the USA.
3.1.3 Country Mushrooms owns farm land near Kempton Park, which is
ideally situated for the development of horticultural products.
With its close proximity to the OR Tambo airport and making use of
the Edulis international distribution network, the opportunity
exists to develop a horticultural range of off-season vegetables
and herbs for the local and international markets.
3.1.4 The commissioning of the Long Life Fruit Juice plant of Fruitime
will increase export opportunities to neighbouring countries, the
EU and the USA.
3.2 HACCP and EUREPGAP
In addition to full certification of the Midlands processing plant,
certification of all remaining processing facilities, are well under
way. HACCP and European Good Agricultural Practice ("EUREPGAP")
accreditation are expected for all Country Mushrooms facilities by the
end of July 2008 followed closely by the Edulis Mpumalanga facility.
This will enhance the corporate profile of the group.
4. SUMMARY OF HISTORICAL AND FORECAST INCOME STATEMENTS
The summarised historical and forecast financial information of Country
Foods for the period ended 31 March 2007, the financial years ending 30
September 2007 and 30 September 2008, the preparation of which is the
responsibility of the directors, are set out below. This financial
information must be read in conjunction with the independent reporting
accountants` report thereon reproduced in Annexures 3 and 12 of the
detailed prospectus.
4.1 Extracts from the historical and forecast income statements
Reviewed Forecast Forecast
31 March 30 30
2007 September September
6 months 2007 2008
R`000 12 months 12 months
R`000 R`000
Revenue 89 675 181 991 209 632
Gross profit 31 274 71 218 81 965
Other income - 731 465
Operating costs (15 136) (46 712) (50 923)
EBITDA 16 138 25 237 31 507
Depreciation (3 176) (5 238) (5 141)
Amortisation of (625) (1 237) (1 237)
intangible assets
Profit before interest 12 337 18 762 25 129
and taxation
Net interest paid (3 530) (4 607) (27)
Profit before taxation 8 807 14 155 25 102
Taxation (1 484) (2 088) (5 328)
Profit after taxation 7 323 12 067 19 774
Outside shareholders (1 690) (860) (1 707)
interest
Earnings attributable 5 633 11 207 18 067
to ordinary
shareholders
Reconciliation of
headline earnings:
Profit attributable to 5 633 11 207 18 067
ordinary shareholders
Profit on disposal of - - -
non-current assets
Headline earnings 5 633 11 207 18 067
attributable to
ordinary shareholders
Pro forma weighted 80 515 92 236 126 455
average shares in 928 364 449
issue on which
earnings are based
Pro forma earnings per 7.0 12.2 14.3
share (cents)
Pro forma headline 7.0 12.2 14.3
earnings per share
(cents)
Notes:
The assumptions upon which the forecast income statements are based are
set out in paragraph 12.1.3 of the detailed prospectus.
5. DIRECTORS, COMPANY SECRETARY AND REGISTERED OFFICE
5.1 Full names, ages, functions and business addresses of the board of
directors of Country Foods
Director Age Function Business address
Country Foods
Vusumuzi Isaiah 51 Non-executive 29 Pineslope Park
Zwane * Chairperson estate, Corner
Forrest and Strait
Roads, Lonehill,
2062
Johan Christiaan 48 Non-executive 202 Mackenzie
Fourie * Director Street, Brooklyn,
Pretoria, 0181
Roberto Gilberto 54 Chief 21 Central Street,
Casaletti Executive Houghton, 2198
Officer
Raymond Harold 60 Chief Wilkenhof,
Liversage Financial Brondal,
Officer Nelspruit, 1200
Pieter Bernardus 47 Director Aalwyne Farm,
Swanevelder Bapsfontein,
District
Bronkhorstpruit,
Bapsfontein, 1510
* Non-executive
All directors are South African citizens.
5.2 Company secretary and registered office are:
Loredana Alba Comuzio
21 Central Street
Houghton, 2198
(P O Box 1838, Houghton, 2041)
6. THE PLACEMENT
6.1 Salient features
6.1.1 The salient features of the private placement are as follows:
Offer price per ordinary share (cents) 100
Par value per ordinary share (cents) 0.1
Premium per ordinary share (cents) 99.9
Number of ordinary shares offered by the 30 000 000
company for subscription in terms of the
private placement
Issue consideration to be received by R30 million
the company before expenses
The opening and closing dates of the private placement are as
follows:
Opening date of the private Tuesday, 25 September
placement (09:00) 2007
Closing date of private placement Wednesday, 26 September
(12:00) 2007
Proposed listing date on ALTx Wednesday, 3 October 2007
(09:00)
Note:
These dates and times are subject to change at the discretion of the
company. Any changes will be released on SENS.
6.2 Country Foods holds irrevocable undertakings from various selected
investors to subscribe for 30 000 000 shares in terms of the private
placement, amounting to 100% of the private placement shares.
6.3 The private placement of 30 000 000 ordinary shares have been fully
allocated to the investors who have given irrevocable undertakings as
set out in paragraph 6.2 above.
6.4 The placement has not been underwritten and is not subject to a minimum
subscription, being achieved.
7. LISTING ON THE JSE
Subject to the required spread of public shareholders in terms of the
Listings Requirements being obtained pursuant to the private placement,
the JSE has approved the listing of 126 455 449 shares on ALTx with
effect from the commencement of business on Wednesday, 3 October 2007.
The shares will trade under the abbreviated name "Country" and the JSE
code "CFO" and ISIN: ZAE000105052.
8. COPIES OF THE PROSPECTUS
Copies of the prospectus, in English, may be obtained, during business
hours, from Tuesday, 25 September 2007, from the registered offices of
Country Foods, Exchange Sponsors (Pty) Limited and the transfer
secretaries, details of which are set out below:
- the registered office of the company - 21 Central Street,
Houghton, 2198;
- the offices of Exchange Sponsors (Pty) Limited - 39 First Road,
Hyde Park, 2196;
- the offices of Computershare Investor Services 2004 (Pty) Limited
- Ground Floor, 70 Marshall Street, Johannesburg, 2001.
Johannesburg
25 September 2007
Designated Adviser
Exchange Sponsors (Pty) Limited
Auditors and reporting accountants
KPMG Inc.
Attorneys
Fluxmans Inc.
Date: 25/09/2007 11:14:36 Produced by the JSE SENS Department.
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