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AFR
AFR
AFR - AFGRI Limited - Reviewed condensed consolidated interim financial
results for the six months ended 31 august 2007
AFGRI LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1995/004030/06)
ISIN number: ZAE000040549 & Share code: AFR
This announcement is available on SENS and AFGRI`s website at
www.afgri.co.za
REVIEWED CONDENSED CONSOLIDATED INTERIM FINANCIAL RESULTS FOR THE SIX
MONTHS ENDED 31 AUGUST 2007
Total sales up 16,7%
Headline earnings per share including R 20 million tax benefit
up 18,9%
Dividend declared up 14,8%
Group balance sheet
(R`millions) Note Six months Six months Year ended
ended ended 28 February
31 August 31 August (audited)
(reviewed) (reviewed) 2007
2007 2006
ASSETS
Non-current assets 1 585 1 596 1 478
Property, plant and equipment 2 1 059 984 1 018
Intangible assets 2 213 179 171
Investments in associates 5 8 7
Available for sale financial - 4 -
assets
Financial receivables 165 277 152
Deferred income tax assets 143 144 130
Current assets 5 942 4 885 5 642
Inventories 1 141 1 079 1 049
Trade and other receivables 1 354 978 896
Trade receivables financed by 5 2 439 2 118 2 724
Land Bank
Derivative financial 56 14 176
instruments
Current income tax assets 80 109 95
Cash and cash equivalents and 872 587 702
cash collateral deposits
Cash collateral deposits 329 333 397
Cash and cash equivalents 543 254 305
Total assets 7 527 6 481 7 120
EQUITY
Capital and reserves 1 256 1 198 1 231
attributable to equity holders
Share capital - - -
Treasury shares (155) (155) (155)
Incentive trust shares (149) (114) (151)
Share premium - - -
Fair value and other reserves 22 29 10
Retained earnings 1 538 1 438 1 527
Minority interests 573 554 589
Total equity 1 829 1 752 1 820
LIABILITIES
Non-current liabilities 297 323 299
Borrowings 112 128 109
Deferred income tax liabilities 170 181 178
Provisions for other 15 14 12
liabilities and charges
Current liabilities 5 401 4 406 5 001
Trade and other payables 1 702 1 667 1 680
Derivative financial 200 23 146
instruments
Current income tax liabilities - 19 20
Short-term borrowings and bank 962 524 462
overdrafts
Land Bank borrowings to finance 5 2 537 2 173 2 693
trade receivables
Total liabilities 5 698 4 729 5 300
Total equity and liabilities 7 527 6 481 7 120
Net asset value per share 368 351 361
attributable to equity holders
(cents)
Group income statement
(R`millions) Note Six months Six months Year ended
ended ended 28 February
31 August 31 August (audited)
(reviewed) (reviewed) 2007
2007 2006
Continuing operations
Sales of goods and services 3 052 2 572 6 124
Interest on trade receivables 165 125 246
financed by Land Bank
Interest earned on other 21 17 66
trade receivables
Total sales 3 238 2 714 6 436
Cost of sales (2 508) (2 003) (4 743)
Gross profit 730 711 1 693
Other operating income 46 52 91
Other operating expenses (490) (494) (1 112)
Operating profit 286 269 672
Negative goodwill from - 46 47
business combinations
Share of losses of associates (1) (1) 1
Finance costs 3 (197) (150) (307)
Profit before income tax 88 164 413
Income tax credit/(expense) 8 (15) (69)
Profit for the period from 96 149 344
continuing operations
Discontinued operations:
Loss for the period from - (49) (68)
discontinued operations
Profit for the period 96 100 276
Profit for the period
attributable to:
Equity holders of the Company 74 68 190
Minority interest 19 29 79
- BEE partners
- Other minorities 3 3 7
Profit for the period 96 100 276
Weighted average number of 316,3 316,8 317,2
shares in issue (`m)
Diluted weighted average 341,2 341,2 341,2
number of shares in issue
(`m)
Earnings per share from 23,3 34,0 76,3
continuing operations (cents)
Earnings per share from - (12,1) (16,4)
discontinued operations
(cents)
Earnings per share from all 23,3 21,9 59,9
operations (cents)
Diluted earnings per share 21,6 31,5 70,9
from continuing operations
(cents)
Diluted earnings per share - (11,2) (51,2)
from discontinued operations
(cents)
Diluted earnings per share 21,6 20,3 55,7
from all operations (cents)
Headline earnings per share 22,7 19,2 65,2
from continuing operations
(cents)
Headline earnings per share - (0,1) (3,0)
from discontinued operations
(cents)
Headline earnings per share 4 22,7 19,1 62,2
from all operations (cents)
Diluted headline earnings per 21,0 17,8 60,6
share from continuing
operations (cents)
Diluted headline earnings per - (0,1) (2,8)
share from discontinued
operations (cents)
Diluted headline earnings per 21,0 17,7 57,8
share from all operations
(cents)
Group cash flow statement
(R`millions) Six months Six months Year ended
ended ended 28 February
31 August 31 August (audited)
(reviewed) (reviewed) 2007
2007 2006
Operating activities
Net profit before tax 50 90 338
Changes in working capital (235) 107 333
Other non-cash flow items 24 (12) (41)
Tax paid (18) (10) (25)
Net cash (utilised in)/generated from (179) 175 605
operating activities
Net cash utilised in investing (10) (12) (212)
activities
Net cash utilised in financing (89) (110) (236)
activities
Net (decrease)/increase in cash (278) 53 157
and cash equivalents
Cash and cash equivalents at (141) (323) (298)
beginning of year
Cash and cash equivalents at end of (419) (270) (141)
period
Cash guarantee deposits 329 333 396
Cash and cash equivalents and cash (90) 63 255
collateral deposits
Group statement of changes in equity
(R`millions) Share Share Fair value Retained Treasury
capital premium and other earnings shares
reserves
Adjusted balance - 73 8 1 370 (155)
28 February 2006
(audited)
Net profit - - - 68 -
Currency translation - - 17 - -
differences
Fair valuing of cash - - 1 - -
flow hedges
Disposal of incentive - - - - -
shares
Capital distribution - (73) - - -
Payment to minorities - - - - -
Minorities with business - - - - -
combinations
Share-based payments - - 3 - -
Balance 31 August 2006 - - 29 1 438 (155)
(reviewed)
Net profit - - - 122 -
Payment to minorities - - - - -
Currency translation - - (22) - -
differences
Fair valuing of cash - - (1) - -
flow hedges
Share-based payments - - 4 - -
Dividend paid - - - (33) -
Purchase of incentive - - - - -
shares
Disposal of incentive - - - - -
shares
Balance 28 February 2007 - - 10 1 527 (155)
(audited)
Net profit - - - 74 -
Net minority payment and - - - - -
acquired
Currency translation - - 6 - -
differences
Fair valuing of cash - - 1 - -
flow hedges
Share-based payments - - 5 - -
Dividends paid - - - (63) -
Disposal of incentive - - - - -
shares
Balance 31 August 2007 - - 22 1 538 (155)
(reviewed)
Retained earnings 1 350
comprises:
- Distributable reserves
- Self insurance reserve 188
Group statement of changes in equity (continued)
(R`millions) Incentive BEE Other Total
trust partners minorit-
shares ies
Adjusted balance (122) 531 - 1 705
28 February 2006 (audited)
Net profit - 29 3 100
Currency translation differences - - - 17
Fair valuing of cash flow hedges - - - 1
Disposal of incentive shares 8 - - 8
Capital distribution - - - (73)
Payment to minorities - (27) - (27)
Minorities with business - - 18 18
combinations
Share-based payments - - - 3
Balance 31 August 2006 (114) 533 21 1 752
(reviewed)
Net profit - 50 4 176
Payment to minorities - (19) - (19)
Currency translation differences - - - (22)
Fair valuing of cash flow hedges - - - (1)
Share-based payments - - - 4
Dividend paid - - - (33)
Purchase of incentive shares (64) - - (64)
Disposal of incentive shares 27 - - 27
Balance 28 February 2007 (151) 564 25 1 820
(audited)
Net profit - 19 3 96
Net minority payment and - (32) (6) (38)
acquired
Currency translation differences - - - 6
Fair valuing of cash flow hedges - - - 1
Share-based payments - - - 5
Dividends paid - - - (63)
Disposal of incentive shares 2 - - 2
Balance 31 August 2007 (149) 551 22 1 829
(reviewed)
Retained earnings comprises:
- Distributable reserves
- Self insurance reserve
Business segment results
Six months ended 31 August 2007
(reviewed)
(R`millions) Sales Headline Net Headline Assets Liabil-
operating interest operating ities
profit & profit
before dividends after
interest and interest
dividends and
dividends
AFGRI Services 2 123 51 (23) 28 5 405 3 939
Producer Services
Primary inputs 366 (7) (7) (14) 554 325
Retail 1 287 12 (9) 3 858 363
Financial Services 373 16 (5) 11 3 644 3 205
Logistics Services 97 30 (2) 28 349 46
AFGRI Products 1 115 63 (7) 56 1 270 642
Foods 206 1 (1) - 307 123
Protein 909 62 (6) 56 963 519
Other - - - - 852 1 117
Continuing 3 238 114 (30) 84 7 527 5 698
operations
Discontinued - - - - - -
operations
Consolidated 3 238 114 (30) 84 7 527 5 698
Capital Deprec- Amorti-
expend-iture iation sation
AFGRI Services 49 11 1
Producer Services
Primary inputs 1 1 1
Retail 38 7 -
Financial Services 1 1 -
Logistics Services 9 2 -
AFGRI Products 36 19 5
Foods 3 4 -
Protein 33 15 5
Other - - 2
Continuing 85 30 8
operations
Discontinued - - -
operations
Consolidated 85 30 8
Six months ended 31 August 2006
(reviewed)
(R`millions) Sales Headline Net Headline Assets
Liabil-
operating interest operating ities
profit & profit
before dividends after
interest interest
and and
dividends dividends
AFGRI Services 1 889 76 (19) 57 4 605 3 436
Producer Services
Primary inputs 299 (15) (4) (19) 284 150
Retail 1 187 3 (6) (3) 939 503
Financial Services 279 30 (8) 22 3 051 2 733
Logistics Services 124 58 (1) 57 331 50
AFGRI Products 822 62 (6) 56 983 482
Foods 182 12 (1) 11 251 80
Protein 640 50 (5) 45 732 402
Other 3 - - - 467 594
Continuing 2 714 138 (25) 113 6 055 4 512
operations
Discontinued 61 (15) (3) (18) 426 217
operations
Consolidated 2 775 123 (28) 95 6 481 4 729
Capital Deprec- Amorti-
expend- iation sation
iture
AFGRI Services 40 19 4
Producer Services
Primary inputs 7 - 1
Retail 25 13 2
Financial Services 8 1 1
Logistics Services - 5 -
AFGRI Products 16 9 2
Foods 3 2 -
Protein 13 7 2
Other 1 2 2
Continuing 57 30 8
operations
Discontinued 3 1 -
operations
Consolidated 60 31 8
Note A:
The pre-tax business segment results are presented after taking into
account the pre-tax headline earnings adjustments before allocation of the
minority (including BEE) share in profits. Operating profit after net
interest and dividends is shown after the allocation of cost of capital
based on each division`s net assets.
Note B:
Although the interest paid to Land Bank for the financing of debtors is
disclosed as finance cost in the income statement, it is disclosed as cost
of sales in the business segment results and thus included in headline
operating profit before interest. The increase/decrease in Land Bank
interest paid relates directly to the interest received on the related
debtors book and the net margin provides a better comparison of operating
profit. The reconciliation of net interest and dividends per the business
segment results and the finance cost per the income statement is as
follows:
(R`millions) 31 August 2007 31 August 2006
Finance cost per income statement (197) (150)
- refer note 3
Land Bank interest disclosed as cost 137 99
of sales in business segment results
Finance cost excluding Land (60) (51)
Bank interest
Dividend income and interest received 30 26
- included in other operating income
Net interest and dividends per (30) (25)
business segment results
Note C:
The reconciliation of operating profit per the income statement with
business segment headline operating profit before interest and dividends
from continuing operations is as follows:
(R`millions) 31 August 2007 31 August 2006
Operating profit per income statement 286 269
Negative goodwill from business - 46
combinations
Share of losses of associates (1) (1)
Interest income and dividends disclosed as (30) (26)
net interest - refer note B
Land Bank interest paid disclosed as cost (137) (99)
of sales - refer note B
Headline earnings adjustments before tax (4) (51)
Headline operating profit before interest 114 138
and dividends per business segment results
Notes to the Group interim results
1. Basis of preparation and accounting policies
These condensed consolidated interim financial statements have been
prepared in accordance with IAS 34 and the South African Companies Act,
(Act 61 of 1973), as amended ("Companies Act") and under the historical
cost convention, as modified by the revaluation of available-for-sale
financial assets and financial liabilities (including derivative
instruments) at fair value through profit or loss. The accounting policies
conform to International Financial Reporting Standards and are consistent
with those applied in the corresponding prior period.
2. Property, plant and equipment and
intangible assets
(R`millions) Property, Intangible
plant and assets
equipment
Carrying value beginning of year 1 018 171
Additions 80 49
Disposals at book value (4) -
Foreign currency differences 2 1
Depreciation/amortisation (30) (8)
Purchase of subsidiaries 1 -
Net sale of subsidiary (8) -
Carrying value end of interim period 1 059 213
3. Finance costs
(R`millions) 31 August 2007 31 August 2006
Interest paid on Land Bank (137) (99)
borrowings
Other interest paid to financial (60) (51)
institutions
Finance cost - Continued operations (197) (150)
(per income statement)
Finance cost - Discontinued - (3)
operations
Finance cost - Total (197) (153)
4. Reconciliation of headline earnings
per share
(Cents) 31 August 2007 31 August 2006
Earnings 23,3 21,9
Loss from discontinued operations - 10,6
Impairment of assets - (0,4)
Negative goodwill - (10,7)
Profit on disposal of assets (0,6) (0,9)
Headline earnings previously 22,7 20,5
reported
Impact of SAICA Circular 8/2007 - - (1,4)
operating losses from discontinued
operations
Headline earnings 22,7 19,1
5. Trade receivables financed by the
Land Bank
The only security for the liability is the trade receivables and there is
a legally enforceable right to set-off and the intention and practice are
to settle the liability simultaneously with the asset realising. The Group
bears the risk for the first 10% of losses on these debtors, but for no
losses thereafter, which are for the risk of the Land Bank.
(R`millions) 31 August 2007 31 August 2006
Asset - Trade receivables 2 439 2 118
Liability - Land Bank (2 537) (2 173)
The net (liability)/asset is due to the daily set-off and timing
differences on the last day of the month.
6. Agency agreements
The Group manages agri debtors on behalf of third party financial
institutions to the amount of R745 million (2006: R608 million).
Management fees are paid by these third parties. The Group is liable for
bad debts to a maximum of between 5% and 10% of the value of debtors
administered.
The Group receives a fee for the handling, grading, storing and
administration of commodities on behalf of third parties. The value of
these commodities is R2 394 million (2006: R2 013 million).
7. Corporate governance and JSE Limited (JSE) compliance
The principles of corporate governance were adhered to. The Group complied
with the JSE Listing Requirements regarding the contents of the interim
financial results.
8. Change in year-end
The board of directors has resolved to change the year-end of the Group
from 28 February to 30 June. This will align the Group`s year-end with the
major (summer) grain season. The necessary approvals will be obtained to
extend the current year-end from 28 February 2008 to the sixteen months
ending 30 June 2008. An interim report will be prepared for the six months
ending 28 February 2008.
9. Interim review
The 31 August 2007 condensed consolidated interim financial statements
were reviewed by the Group`s external auditors, PricewaterhouseCoopers
Inc, in accordance with the guidelines laid down by International
Standards for Review Engagements 2410 and their review opinion is
available for inspection at the Group`s registered office.
Commentary
The directors of AFGRI Limited ("AFGRI") present the condensed consolidated
interim financial results of the AFGRI group of companies for the six
months ended 31 August 2007. Including a once-off tax benefit the
consolidated interim headline earnings show an improvement over the same
period for the prior financial year.
The first half of AFGRI`s financial year is traditionally slow and this was
further impacted by drought conditions for the second half of the growing
season (December 2006 to May 2007) resulting in lower yields and a summer
grain crop that was marginally down on the previous year`s depressed crop.
The drought also had a negative effect on winter wheat plantings. Trading
conditions were difficult for the Producer, Financial and Logistics
Services businesses. Ongoing operational improvements within the Producer
Services business and a strong performance by the Protein business were the
mainstay of the financial performance for the first half of the 2008 year.
Operational review
Revenue
Sales from continuing operations increased by 19,3% compared to the same
period in the prior year. The main contributors to this increase are
Products (35,6%) as a result of increased raw material prices and volumes,
Financial Services (33,7%) as a result of increased interest rates and a
larger debtors book and Producer Services (11,2%) on the back of higher
equipment and primary input sales. Despite maintaining market share in the
grain storage business the Logistics Services business had a 21,8% decline
in sales due to lower grain volumes as a result of the drought.
Headline earnings
Headline earnings per share for the period under review are 22,7 cents,
18,9% higher than that achieved for the comparative prior year period.
Diluted headline earnings per share are 21,0 cents, 18,6% higher than the
comparative prior year period. Headline earnings include a R20,0 million
once-off recognition of a foreign deferred tax asset.
Segmental headline operating profit after dividends and interest
The Producer Services business is traditionally slow for the first half of
the year and this year it also had to contend with a weak winter grain
planting season in South Africa as well as the continuing drought in
Western Australia. Despite this its operating profit, assisted by ongoing
operational improvements and an increased market share for John Deere
equipment, improved by 50,0% for the period under review compared to the
prior year.
The Protein businesses operating profit for the period under review
increased by 24,4% over the prior year as a result of increased sales
volumes and effective raw material procurement.
Margins in the Foods businesses were under pressure due to higher raw
material costs but the impact on profitability was reduced by a 13,2%
increase in sales, driven by volumes, which resulted in the business
breaking even.
The Financial and Logistical Services businesses were adversely affected by
the drought and two years of small maize crops and as a result operating
profit reduced by 50,0% compared to the prior year.
The increased cost of funding, higher levels of provisioning, higher than
expected carry costs and physical availability of strategically located
grain has further impacted on the results of these businesses. The Zambian
business performed to expectation.
Cash utilised in operating activities - R179 million
During the period under review AFGRI utilised R179 million cash in
operational activities. This compares to the generation of R175 million for
the same period in the prior year and was mainly due to working capital
levels been built up in anticipation of increased summer plantings. The net
cash position, after including cash collateral deposits, is a negative R90
million compared to a net positive R63 million at 31 August 2006.
Directors
During the period the following directors resigned or were not available
for re-election:
PF Erasmus (Chairman); GAL Ebedes (Joint Vice-Chairman) and DM Sewela
(Executive)
The following directors were re-elected at the annual general meeting in
June 2007:
DD de Beer; JPR Mbau; MM Moloele and KL Thoka
During July 2007 the following appintments were made:
DD de Beer as Chairman; JJ Claassen as Joint Vice-Chairman and JPR Mbau as
Joint Vice-Chairman
Prospects
Despite maintaining market share in the grain storage business an
improvement in Logistical Services results can only be expected when the
new crop is received in the new year. Higher grain prices and the excellent
recent and forecast rainfall are resulting in increased summer season grain
plantings. This together with effective raw material procurement and
further margin improvements in Producer Services, should result in a
satisfactory second half performance for the Group.
By order of the Board
DD de Beer JD Wright
(Non-Executive Chairman) (Managing Director)
7 November 2007
Declaration of interim dividend
Notice is hereby given that the directors of AFGRI have declared an interim
dividend of 11,65 cents per share for the interim period ended 31 August
2007. In accordance with settlement procedures of STRATE, the following
dates will apply to the interim dividend:
Last day to trade cum the dividend Friday, 7 December 2007
Trading ex dividend commence Monday, 10 December 2007
Record date Friday, 14 December 2007
Dividend payment date Tuesday, 18 December 2007
There will be no dematerialisation or rematerialisation of AFGRI shares
between 10 December 2007 and 14 December 2007, both dates inclusive.
By order of the Board
SL Reynolds
Group Company Secretary
Johannesburg
Directorate
Non-executive
DD de Beer (67), CA(SA), Chairman; CA Apsey (60), BSc, MBA; JJ Claassen
(57), Joint Vice-Chairman; JJ Ferreira (54), BSc (Hons) (Civ Eng); JPR
Mbau (56), Diploma in Banking and Business Management,
Joint Vice-Chairman; MM Moloele (52), Dipl. Business Management; KL Thoka
(44), BAdmin, Hons (B&A), MBA; FJ van der Merwe (50), LLB, MA
Executive JD Wright (49), BAcc, CA(SA); I de W Goosen (59), BCom,CA(SA)
Alternate JH Mooney (60), BCom, CA(SA)
Business address and registered office: 33 Sloane Street, Knightsbridge
Manor, Block B2, Bryanston, Tel (+27 11) 549-0600, Fax (+27 11) 463-4139
Company Secretary: Ms SL Reynolds, PO Box 3559, Cramerview, 2060 Bankers:
ABSA Bank Limited, FirstRand Bank Limited, Land and Agricultural
Development Bank of SA Limited, Nedcor Bank Limited, Standard Bank of SA
Limited Auditors: PricewaterhouseCoopers Incorporated Transfer
secretaries: Computershare Investor Services 2004 (Proprietary) Limited, 70
Marshall Street,
Johannesburg, 2001, PO Box 61051, Marshalltown, 2107, Tel (+27 11) 370-5320
Sponsor: Rand Merchant Bank, (a division of FirstRand Bank Limited), 1
Merchant Place, Cnr Fredman Drive and Rivonia Road, Sandton, 2196, PO Box
786273, Sandton, 2146
Date: 07/11/2007 11:45:01 Produced by the JSE SENS Department.
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