| Mon 19 Nov 2007, 17:03 | | TBS - Tiger brands - Group results and declaration |
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TBS
TIIH
TBS - Tiger brands - Group results and declaration of capital reduction
and final dividend for the year ended 30 September 2007
TIGER BRANDS LIMITED
(Registration number 1944/017881/06)
(Incorporated in the Republic of South Africa)
Share code: TBS ISIN: ZAE000071080
TIGER BRANDS
Adding value to life
GROUP RESULTS AND DECLARATION OF CAPITAL REDUCTION
AND FINAL DIVIDEND
for the year ended 30 September 2007
6% Headline earnings per share
Introduction
The abridged results have been prepared in accordance with International
Financial Reporting Standards, IAS 34 - Interim Financial Reporting - and the
listing requirements of the JSE Limited.
The condensed financial information has been reviewed by Ernst & Young, whose
unqualified review opinion is available for inspection at the Company`s
registered office. It is anticipated that an unqualified audit opinion will be
issued once the detailed financial statements have been finalised.
Commentary
Tiger Brands achieved headline earnings per share ("HEPS") of 1 283,0 cents for
the twelve months ended 30 September 2007, which is an increase of 6% on that
achieved in the prior year. Earnings per share ("EPS") declined by 3% to 1 425,7
cents per share.
Headline earnings for the year ended 30 September 2007 have been adversely
impacted by the inclusion of the cost of the settlement reached with the
Competition Commission as a consequence of contraventions of the Competition Act
in the Company`s baking and milling businesses, and by the provision for the
estimated costs associated with the planned unbundling of the Company`s
Healthcare Interests. Excluding the effect of these two items, headline earnings
per share reflects a 15% improvement to 1 382,9 cents, compared to that achieved
in the prior year.
The difference between the percentage change in HEPS and EPS is due to the
inclusion in 2006, in attributable earnings, of net abnormal profits of some
R4660m, primarily relating to the disposal of various offshore investments. In
2007, net abnormal profits which have been included in attributable earnings,
but excluded for HEPS purposes, are at a significantly lower level of some
R269,0m. These profits primarily comprise the gain on disposal of the Company`s
dairy business, less the costs of impairment of licence rights previously
capitalised.
SETTLEMENT WITH COMPETITION COMMISSION
As announced on 12 November 2007, an agreement was reached with the Competition
Commission relating to contraventions of the Competition Act by the Company`s
baking and milling operations. In terms of this agreement, the Company has
agreed to pay an administrative penalty of R98,8m. The agreement is required to
be referred to the Competition Tribunal in terms of the Competition Act.
The amount of R98,8m has been fully provided for and disclosed under abnormal
items in 2007.
The Company immediately initiated an independent investigation when the matter
was first brought to its attention in February 2007. The findings of the
investigation were fully disclosed to the Competition Commission as soon as they
became known. The investigation revealed evidence of interactions between a
number of Tiger`s employees and some of its competitors, which amounted to
contraventions of the Competition Act. Following the results of the
investigation, the Company proactively engaged with the Commission in resolving
the matter. An independent firm of economists, Econometrix, found no evidence of
abnormal pricing to customers as a consequence of the discussions that had taken
place with some competitors. The Company sincerely regrets that this has taken
place.
OVERVIEW OF RESULTS
On 6 November 2007, the Company announced its intention to unbundle its
Healthcare Interests. The process is expected to be completed by 31 March 2008.
As a consequence of this decision, and in terms of IFRS 5, the results of the
Healthcare Interests are required to be disclosed as a discontinued operation in
the Group income statement, whilst the related assets and liabilities are
classified in the Group balance sheet as assets and liabilities held for sale.
Similarly, the results of the dairy business, which was disposed of with effect
from 1 May 2007, have also been disclosed as a discontinued operation in the
Group income statement. Reference in the commentary below to continuing
operations relates only to the Company`s FMCG business.
Turnover growth from continuing operations for the year of 28% is slightly lower
than the 33% recorded at the half year. This decline reflects some slowing down
in the rate of raw material cost increases in the Maize milling business, as
well as the impact of the inclusion of two months of turnover for Bromor Foods
in the prior year (Bromor Foods was acquired effective 1 August 2006). In
addition, the strong growth in export turnover recorded in the first half of
2007, due to an improvement in product shipment rates relative to the first half
of 2006, has resulted in export turnover in the second half of 2007 representing
a smaller proportion of the total full year figure than it did in 2006.
The operating profit margin from continuing operations of 13,9% (2006: 12,4%) is
consistent with that recorded for the six months to 31 March 2007.
As was anticipated at the half year, the strong full year growth in operating
income of 43% is lower than the 61% reported in the first half. This is due to
the recoveries in the second half of 2006 in the performances of Maize, Fishing
and Exports. Whilst favourably impacted by the acquisitions of Bromor Foods, The
Designer Group and the Nestle sugar confectionery business, the results of the
FMCG business reflect very strong levels of organic growth, particularly in
Grains, Groceries and Snacks & Treats, and a sustained improvement in Fishing
and Exports.
Abnormal items have reduced by R271,5m compared to the prior year, resulting in
a net abnormal profit of R203,6m in 2007. The prior year largely consisted of a
net profit on disposal of certain offshore investments, and a credit arising
from impairment reversals. The current year composition predominantly reflects
the profit on disposal of the Company`s dairy business of R302,5m and the
release to income of R26,6m relating to a fair value adjustment of the Company`s
obligations in respect of the Sea Harvest put option. This was partially offset
by the settlement in favour of the Competition Authorities of R98,8m and the
estimated costs relating to the unbundling of the Company`s Healthcare interests
of R58,4m.
Net financing costs from continuing operations increased by R62,5m to R77,9m,
reflecting the significant recent acquisition activity, the increased capital
expenditure levels over the past two years and higher levels of working capital
throughout the past twelve months. The increase in working capital levels was
primarily due to higher raw material costs and a planned increase in stock
holdings to meet demand. Notwithstanding the significant increase in financing
costs, net interest cover from continuing operations remained at a healthy level
of 29,3 times (2006: 104,2 times) The increased share of income attributable to
minorities is indicative of the improved levels of profitability in both the
Fishing and Deciduous Fruit businesses.
The sharp increase of R52,7m in the contribution from associates is distorted by
the capital losses of R42,1m incurred in the previous year, which related to C&T
Malt. Excluding these capital items, income from associates increased from
R46,5m last year to R57,1m in the year under review. This improvement reflects
the non-recurrence of trading losses at C&T Malt (the Group`s interest in C&T
Malt was disposed of in September 2006) and an improved contribution from
Chilean based Empresas Carozzi.
The increase in the taxation charge of 52% is significantly higher than the rate
of increase in profit before taxation of 19%. This is largely due to the impact
of abnormal items which decreased from a net abnormal profit of R475,1m in 2006
to a profit of R203,6m in 2007. The bulk of these abnormal items, in both years,
have no tax effect.
Discontinued operations comprise the profit after tax attributable to the dairy
business, determined from the commencement of the 2007 financial year to the
date of its disposal on 1 May 2007, as well as the profit attributable to the
Company`s Healthcare interests, for the full year ended 30 September 2007.
REVIEW OF OPERATIONS
FMCG
There were some very strong performances in FMCG, where the levels of underlying
consumer demand remained broadly in line with that experienced in the first six
months of the financial year. The trend of increasing cost push inflation, which
was largely contained to the Grains business in the first half of the year, has
now extended to all categories as the full inflationary impact of increasing raw
material, labour and distribution costs has resulted in price increases in some
categories for the first time in three years.
DOMESTIC FOOD increased turnover and operating income by 29% and 33%
respectively. Excluding the impact of the acquisitions of Bromor and the Nestle
sugar confectionery business, turnover reflected an increase of 16% and
operating income an increase of 22%.
Within the Grains segment, the growth in operating income was largely due to an
exceptional performance in Maize, arising from the supply/demand dynamics of
April 2007`s poor local crop, an improved year at Albany, where market share
gains were made in a fast growing market segment, and a solid contribution from
Rice which sustained its positive first half performance.
The Oats category returned to profitability in the second half of the year
following the completion of the major capital upgrade to its manufacturing
facility in Maitland. The results from Sorghum beverages were disappointing with
both volumes and margins coming under pressure.
The Groceries business recorded a 23% improvement in operating income off a 15%
increase in turnover. A relentless focus on production efficiencies and cost
containment, helped to maintain the customer value proposition of the key Koo
and All Gold brands in the face of considerable input cost pressures. The baked
beans and tomato sauce categories were major contributors to the growth
achieved. As reported at the half year, Pasta supply remained constrained
pending the commissioning of a new plant at the end of November 2007.
Notwithstanding supply constraints, Pasta profitability improved. This was
driven by the improved performance of the Fatti`s & Moni`s brand, which
benefited from the non-recurrence of major plant maintenance costs incurred in
the prior year and the resultant importation of expensive finished product over
that period.
Boosted by the successful integration of the Nestle sugar confectionery
business, Snacks & Treats grew operating income by 54% off an increase in
turnover of 25%. Organic growth remained strong. Assisted by the strong
performances of the Beacon, Maynards, Mmmallows and Jungle brands, confectionery
turnover, excluding the impact of the acquisition, rose by 16%.
The Beverages business enjoyed continued market share gains together with double
digit volume growth. This has reinforced the market leading positions of brands
such as Energade, Oros, Hall`s and Roses. Results were negatively affected by
once-off restructuring costs of R12,0m and by the impact of a five week
industrial strike at its manufacturing facilities in May 2007.
The results from Value Added Meat Products were disappointing, with operating
income declining by 19% despite an increase in turnover of 12%. With a general
surplus of manufacturing capacity in the industry, the division was unable to
recover the very significant raw material cost increases experienced during the
course of the year.
The Out of Home business recorded a decrease of 20% in operating income despite
increasing turnover by 5%. In addition to the supply constraints in Oats and
Pasta referred to at the half year, there were significant start up costs
associated with the establishment of a Hot Favourites pre-prepared meal facility
in Gauteng.
Consumer Healthcare saw operating income grow by 47%, with turnover increasing
by 42%. Excluding the impact of the Designer Group acquisition, which was
earnings enhancing in its first year, operating income and turnover grew by 21%
and 17% respectively. In addition to the good contribution from the Designer
Group acquisition, Personal Care benefited from the revitalisation of its key
Ingram`s, Dolly Varden and Lemon Lite brands. Babycare continued its strong
growth momentum, with its market leading positions enhanced by the installation
of additional cereals capacity. Homecare, which posted a modest growth of 7% in
operating income, was negatively affected by the poor pest season where brands
such as Doom, Dyrange and Fastkill were impacted by a very dry Summer.
ClassiClean, which was acquired in 2006, has been successfully integrated into
the Consumer Healthcare business. It performed in line with expectations.
Exports achieved a very significant improvement on the prior year, with
operating income increasing by R69,1m to R104,2m. FMCG exports benefited from
the addition of Beverages to its portfolio following the Bromor Foods
acquisition, and from a narrower country focus, with Mozambique being a major
contributor to growth. However, the primary contributor to both absolute
profitability and growth was Langeberg & Ashton Foods, the Deciduous Fruit
business, where profits were enhanced by a better peach crop, firmer
international pricing, and the benefits of a weaker rand - particularly in the
first six months of the year.
FISHING
The Company`s fishing interests comprise Sea Harvest (74% held) and Oceana Group
Limited (45% held).
Proportionately consolidated Oceana, which is listed on the JSE Limited,
reported a 44% increase in headline earnings per share for the year ended 30
September 2007. Oceana`s results were separately published on 9 November 2007.
Oceana is currently trading under a cautionary announcement.
Sea Harvest`s results reflected a continuation of the benefits of sales channel
and product optimisation, whilst also benefiting from a focus on the
beneficiation of smaller fish, improved global pricing and a weaker rand. The
improvement in profitability was achieved in the face of continued disappointing
catch rates and size mix in respect of Hake.
OTHER
The main items included under this heading comprise the IFRS 2 accounting
charges associated with share options granted to Tiger Brands management, and
share participation rights awarded to Black Managers in terms of the Staff
Empowerment transaction concluded in September 2005, as well as certain foreign
currency translation profits and losses. The increase over the prior year is
primarily attributable to higher IFRS 2 accounting charges.
DISPOSAL OF DAIRYBELLE BUSINESS
The dairy business was disposed of with effect from 1 May 2007. DairyBelle is
reflected in the income statement as a discontinued operation and comparative
figures have been restated where appropriate.
HEALTHCARE
The results achieved by the Company`s Healthcare Interests, which are disclosed
under discontinued operations in line with the requirements of IFRS 5, are
reflective of the highly competitive nature of the pharmaceutical industry. The
Pharmaceutical business has experienced both margin and market share erosion due
to the extremely competitive trading environment and the inability to pass on
cost increases as a result of the combined impact of the regulatory and
competitive trading environments. The results for 2007 were also adversely
affected by high levels of customer demand in September 2006, ahead of an
anticipated price increase in October 2006, and a reduction in stockholdings in
the wholesale value chain following the merger of two of the major
pharmaceutical wholesalers during the 2007 financial year.
Hospital Products recorded lower profits in most categories, with the exception
of transfusion therapies. The performance reflects the highly competitive
environment where margins have been constrained in both the Private and Public
sectors. Profitability was also negatively impacted by a R15,0m increase in
depreciation as a result of the purchase and installation of new infusion pumps
in line with the requirements of the international principal.
UNBUNDLING OF HEALTHCARE INTERESTS
As announced on 6 November 2007, following a detailed evaluation of all
available options with regard to the separation of the Company`s Healthcare
Interests, the Board of Tiger Brands will be recommending to Shareholders that
an unbundling and separate listing of the Healthcare Interests will best serve
the interests of Shareholders.
The Company is now proceeding with the formalities relating to the unbundling,
including the finalisation of legalities with principals, and expects to
complete the unbundling and separate listing of Adcock Ingram on the JSE by 31
March 2008. As referred to earlier, the expected costs of the unbundling,
amounting to R58,4m, have been fully provided for as at 30 September 2007.
FINAL CAPITAL DISTRIBUTION OUT OF SHARE PREMIUM AND FINAL DIVIDEND
At the meeting of shareholders of the Company held on 27 June 2007, the
directors were authorised to make a payment to shareholders out of share
premium, in lieu of the final dividend or part thereof, for the year ended 30
September 2007. Pursuant to this authority, the directors have decided to
declare a final capital distribution and a final dividend for the year ended 30
September 2007, amounting in aggregate to 660 cents per share, comprising a
final capital distribution out of share premiums of 290 cents per share and a
final cash dividend of 157 cents per share out of distributable reserves.
The Company`s stated policy of paying an annual dividend/distribution based on a
headline earnings cover of 2 times remains in place. However, given the abnormal
nature of the Healthcare unbundling costs, the Board has decided to exclude such
costs in the calculation of the aforesaid final capital distribution and final
dividend to shareholders.
The combined capital distributions out of share premium for the year ended 30
September 2007 (interim of 213 cents and final of 290 cents per share), together
with the final dividend of 157 cents per share, will therefore amount to, in
aggregate, a total payment to shareholders of 660 cents per share (2006: 603
cents per share). The total payment of 660 cents per share represents an
increase of 9,5% on the prior year`s total dividend of 603 cents per share.
Shareholders are referred to the more detailed announcement relating to the
capital distribution and final dividend that has been issued today.
OUTLOOK
The FMCG business faces a number of challenges in the coming year, with the
likelihood of a second year of significant cost push inflation in respect of raw
material inputs. Domestic economic indicators also point to continued pressure
on consumption expenditure. The prospect of a stronger rand on average in 2008
will have a negative impact on the Group`s earnings from Exports and Fishing.
Nonetheless, headline earnings per share is expected to show growth in real
terms in the year ahead.
The performance of the Pharmaceutical business is expected to stabilise during
2008. However, there remains uncertainty surrounding the timing of the award of
the State`s Anti-retroviral tender, as well as the timing of the next Single
Exit Price increase. With regard to the proposed introduction of International
Benchmarking of pharmaceutical prices in South Africa, there remains
considerable uncertainty as to the exact scope and timing of the process.
Hospital Products should return to profit growth in the year ahead.
ANNUAL REPORT
The annual report will be posted to certificated shareholders and those
shareholders with dematerialised shares who have requested a copy of the annual
report through their CSDP`s, during December 2007. Salient features of the
annual report will be available on the Company`s website (www.tigerbrands.com)
shortly after the annual report is posted.
For and on behalf of the Board
Lex van Vught Nick Dennis
Chairman Chief Executive Officer
19 November 2007
INCOME STATEMENT
Year ended 30 September
2007 Change 2006
Notes Reviewed % Audited
Continuing operations
Revenue 1 16 476,5 29 12 802,7
Turnover 16 209,9 28 12 623,2
Operating income before 2 2 245,7 43 1 565,1
abnormal items
Abnormal items 3 203,6 (57) 475,1
Operating income after 2 449,3 20 2 040,2
abnormal items
Interest paid (305,1) 96 (156,0)
Interest received 227,2 62 140,6
Dividend income 39,4 1 38,9
Income from associates 4 57,1 N/A 4,4
Profit before taxation 2 467,9 19 2 068,1
Taxation (741,4) 52 (489,3)
Profit for the year from 1 726,5 9 1 578,8
continuing operations
Discontinued operations 5
Profit after tax for the 33,9 41,5
year - DairyBelle business
Profit after tax for the 531,9 702,6
year - Healthcare business
PROFIT FOR THE YEAR 2 292,3 2 322,9
Attributable to:
Ordinary shareholders 2 242,8 (3) 2 303,4
Minorities 49,5 19,5
2 292,3 2 322,9
Number of ordinary shares in 172 347 171 072
issue (000`s)
Includes 8 589 328 shares
held as treasury stock (Sep
2006: 8 589 328) and 5 896
183 shares owned by staff
empowerment entities (Sep
2006: 5 896 183)
Weighted average number of
ordinary shares (net of
treasury and empowerment
shares) on which headline
earnings and basic earnings 157 311 156 071
per share are based (000`s)
Headline earnings per 1 283,0 6 1 206,7
ordinary share (cents)
Diluted headline earnings 1 261,7 7 1 175,7
per ordinary share (cents)
Basic earnings per ordinary 1 425,7 (3) 1 475,9
share (cents)
Diluted basic earnings per 1 402,0 (2) 1 437,9
ordinary share (cents)
Distributions and dividends 660,0 9 603,0
per ordinary share (cents)
Capital distribution 213,0 -
declared 24 May 2007
Interim dividend declared - 185,0
Capital distribution 290,0 -
declared 19 November 2007
Final dividend declared 157,0 418,0
Headline earnings per 878,0 19 737,9
ordinary share (cents) - for
continuing operations
Diluted headline earnings 863,4 20 719,0
per ordinary share (cents)
for continuing operations
Basic earnings per ordinary 1 070,9 7 1 005,2
share (cents) for continuing
operations
Diluted basic earnings per 1 053,1 8 979,3
ordinary share (cents) for
continuing operations
Headline earnings per 405,0 (14) 468,8
ordinary share (cents) - for
discontinuing operations
Diluted headline earnings 398,3 (13) 456,7
per ordinary share (cents)
for discontinued operations
Basic earnings per ordinary 354,8 (25) 470,7
share (cents) for
discontinued operations
Diluted basic earnings per 348,9 (24) 458,6
ordinary share (cents) for
discontinued operations
Reconciliation between
profit for the year and
headline earnings
Profit attributable to 2 242,8 2 303,4
ordinary shareholders
Adjusted for:
Net profit on sale of
interest in subsidiaries and
joint ventures (270,6) (346,7)
Loss/(profit) on sale of 64,4 (15,2)
property, plant and
equipment, including
impairment charges on
intangibles
Reversal of impairment of (14,4) (93,1)
investments, including net
profit on sale
Associates (2,4) 42,1
Profit on sale of property, (2,4) (12,5)
plant and equipment
Impairment of property, - 54,6
plant and equipment
Other (1,5) (7,2)
Headline earnings for the 2 018,3 7 1 883,3
year
Reconciliation between
profit for the year and
headline earnings -
Discontinued operations
Profit attributable to 558,1 734,6
ordinary shareholders
Adjusted for:
Loss/(profit) on sale of 79,0 1,0
property, plant and
equipment, including
impairment charges on
intangibles
Negative goodwill - (4,0)
Headline earnings for the 637,1 (13) 731,6
year
BALANCE SHEET
As at 30 September
2007 Change 2006
Notes Reviewed % Audited
ASSETS
Non-current assets 4 528,4 3 4 401,7
Property, plant and 8 1 915,7 - 1 910,0
equipment
Goodwill and other 1 770,7 10 1 610,4
intangibles
Investments 727,6 (1) 736,7
Deferred taxation asset 114,4 (21) 144,6
Current assets 5 767,2 (2) 5 867,4
Inventories 2 488,1 13 2 208,2
Trade and other receivables 2 789,2 (10) 3 089,0
Cash and cash equivalents 489,9 (14) 570,2
Assets classified as held 5 1 724,8 N/A 6,2
for sale
TOTAL ASSETS 12 020,4 17 10 275,3
EQUITY AND LIABILITIES
Capital and reserves 5 785,0 4 470,5
Ordinary share capital and 536,9 (35) 828,6
share premium
Non-distributable reserves 526,5 2 513,7
Accumulated profits 6 074,8 33 4 554,2
Tiger Brands Limited shares (823,6) (2) (842,0)
held by subsidiary
Tiger Brands Limited shares (649,5) (2) (662,0)
held by empowerment trusts
Shared-based payments 119,9 54 78,0
reserve
Minority interest 213,6 18 181,7
TOTAL EQUITY 5 998,6 29 4 652,2
Non-current liabilities 1 041,0 (35) 1 604,6
Deferred taxation liability 272,3 18 231,2
Provision for post- 322,4 (9) 353,7
retirement medical aid
Long-term borrowings 364,9 (60) 911,7
Provision for Sea Harvest 81,4 (25) 108,0
put option
Current liabilities 3 589,6 (11) 4 017,4
Trade and other payables 3 358,5 2 3 294,2
Taxation 182,5 39 131,2
Short term borrowings 48,6 (92) 592,0
Liabilities classified as 5 1 391,2 N/A 1,1
held for sale
TOTAL EQUITY AND 12 020,4 17 10 275,3
LIABILITIES
SEGMENTAL ANALYSIS
Year ended 30 September
2007
Rm %
Turnover
FMCG - CONTINUING OPERATIONS 16 209,9 82
Domestic Food 11 713,9 59
Grains 5 918,3 30
Milling and baking 4 518,2 23
Other Grains 1 400,1 7
Groceries 1 762,8 9
Snacks and Treats 1 412,7 7
Beverages 1 010,2 5
Value Added Meat Products 1 360,0 7
Out of Home 249,9 1
Consumer Healthcare 1 602,0 8
Personal 596,5 3
Babycare 450,7 2
Homecare 554,8 3
Exports 1 105,4 6
Fishing 1 923,9 10
OTHER INTERGROUP SALES - FMCG (135,3) (1)
DISCONTINUED OPERATIONS 3 556,9 18
HEALTHCARE 2 878,9 15
Pharmaceuticals 1 865,8 10
Prescription 908,9 5
OTC Medicines 956,9 5
Hospital products 1 013,1 5
DairyBelle 678,0 3
INTER-SEGMENT
SALES - HEALTHCARE
TO CONSUMER (61,5) -
TOTAL TURNOVER 19 705,3 100
Year ended 30 September
2007
Rm %
Operating income before abnormal items
FMCG - CONTINUING OPERATIONS 2 245,7 69
Domestic Food 1 601,5 49
Grains 894,4 27
Milling and baking 724,3 22
Other Grains 170,1 5
Groceries 299,2 9
Snacks and Treats 206,3 6
Beverages 83,8 3
Value Added Meat Products 96,4 3
Out of Home 21,4 1
Consumer Healthcare 382,7 12
Personal 171,7 5
Babycare 114,8 4
Homecare 96,2 3
Exports 104,2 3
Fishing 198,0 6
Other - FMCG (40,7) (1)
DISCONTINUED OPERATIONS 993,2 31
HEALTHCARE 972,8 30
Pharmaceuticals 727,1 22
Prescription 323,9 10
OTC Medicines 403,2 12
Hospital products 245,7 8
DairyBelle 35,9 1
Other - Healthcare (15,5) 0
TOTAL OPERATING INCOME BEFORE ABNORMAL 3 238,9 100
ITEMS
SEGMENTAL ANALYSIS (continued)
Year ended
30 September
2006 %
Rm % Change
Turnover
FMCG - CONTINUING OPERATIONS 12 623,2 77 28
Domestic Food 9 106,5 54 29
Grains 4 854,5 29 22
Milling and baking 3 645,4 22 24
Other Grains 1 209,1 7 16
Groceries 1 534,3 9 15
Snacks and Treats 1 129,4 7 25
Beverages 133,3 1 N/A
Value Added Meat Products 1 218,0 7 12
Out of Home 237,0 1 5
Consumer Healthcare 1 129,7 7 42
Personal 256,7 2 132
Babycare 388,5 2 16
Homecare 484,5 3 15
Exports 774,3 5 43
Fishing 1 664,0 11 16
OTHER INTERGROUP SALES - FMCG (51,3) - 164
DISCONTINUED OPERATIONS 3 890,7 23 (9)
HEALTHCARE 2 829,9 17 2
Pharmaceuticals 1 874,2 11 -
Prescription 923,9 6 (2)
OTC Medicines 950,3 5 1
Hospital products 955,7 6 6
DairyBelle 1 060,8 6 (36)
INTER-SEGMENT
SALES - HEALTHCARE
TO CONSUMER -
TOTAL TURNOVER 16 513,9 100 19
2006 %
Rm % Change
Operating income before abnormal items
FMCG - CONTINUING OPERATIONS 1 565,1 59 43
Domestic Food 1 208,3 45 33
Grains 686,6 26 30
Milling and baking 528,3 20 37
Other Grains 158,3 6 7
Groceries 242,4 9 23
Snacks and Treats 134,3 5 54
Beverages (1,4) - N/A
Value Added Meat Products 119,5 4 (19)
Out of Home 26,9 1 (20)
Consumer Healthcare 261,1 10 47
Personal 80,8 3 113
Babycare 90,5 4 27
Homecare 89,8 3 7
Exports 35,1 1 197
Fishing 98,7 4 101
Other - FMCG (38,1) (1) (7)
DISCONTINUED OPERATIONS 1 100,6 41 (10)
HEALTHCARE 1 059,1 40 (8)
Pharmaceuticals 796,8 30 (9)
Prescription 387,5 15 (16)
OTC Medicines 409,3 15 (1)
Hospital products 262,3 10 (6)
DairyBelle 55,5 2 (35)
Other - Healthcare (14,0) (1) (11)
TOTAL OPERATING INCOME BEFORE ABNORMAL 2 665,7 100 22
ITEMS
ABRIDGED CASH FLOW STATEMENT
(INCLUDING HEALTHCARE) Year ended 30 September
2007 2006
Reviewed Audited
Rm Rm
Cash operating profit 3 745,8 3 031,1
Working capital changes (806,8) (333,0)
Net financing costs (187,6) (121,8)
Dividends received 58,3 73,5
Taxation paid (904,0) (865,8)
Cash available from operations 1 905,7 1 784,0
Dividends paid (1 000,0) (864,6)
Net cash inflow from operating 905,7 919,4
activities
Net cash outflow from investing (783,8) (1 302,5)
activities
Net cash inflow/(outflow) before 121,9 (383,1)
financing activities
Net cash outflow on BEE transactions - (795,0)
Net cash (outflow)/inflow from financing (141,5) 508,2
activities
Net decrease in cash and cash (19,6)* (669,9)
equivalents
* Includes an increase of R22,6m on short-term borrowings regarded as cash and
cash equivalents
OTHER GROUP SALIENT FEATURES
(INCLUDING HEALTHCARE) Reviewed Audited
Year ended Year ended
30 September 30 September
2007 2006
Net worth per ordinary share (cents) 3 665 2 855
Net debt to equity (%) 12,1 20,1
Interest cover - net (times) 17,5 22,2
Current ratio (:1) 1,5 1,5
Capital expenditure (R million) 597,6 487,8
- replacement 302,5 264,1
- expansion 295,1 223,7
Capital commitments (R million) 534,4 761,0
- contracted 197,2 303,3
- approved 337,2 457,7
Capital commitments will be funded
from normal operating cash flows and
the
utilisation of existing borrowing
facilities.
Contingent liabilities (R million)
Guarantees and contingent 41,0 24,7
liabilities
Carrying and fair value of 727,6 736,7
investments (R million)*
Listed 31,8 26,3
Unlisted 264,3 297,4
Associates 431,5 413,0
*Excludes discontinued operations.
STATEMENT OF CHANGES IN EQUITY
Share Non- Accu- Share-
capital Distribut- mulated Based
and able payment
premium reserves profits reserve
Rm Rm Rm Rm
Balance at 30 September 761,2 777,4 3 173,7 38,5
2005
Issue of share capital 67,4
and premium
Fair value adjustments - 138,1
investments
Fair value adjustments (443,7)
to investments
recognised in income
statement
Foreign currency 12,3
translation reserve
movement
Transfers between 32,3 (32,3)
reserves
Movements in reserves of (25,7)
associates
Other reserve movements 23,0 39,5
Net profit for the 2 303,4
period
Dividends on ordinary (857,3)
shares
Total dividends (937,0)
Less: Dividends on 79,7
treasury shares
Arising on changes in (33,3)
and acquisition of
subsidiaries and joint
ventures
Balance at 30 September 828,6 513,7 4 554,2 78,0
2006
Balance at 30 September 828,6 513,7 4 554,2 78,0
2006
Issue of share capital 75,3
and premium
Capital distribution out (367,0)
of share premium -
interim
Fair value adjustments (13,8)
recognised in equity
Foreign currency (10,9)
translation reserve
movement
Transfers between 37,5 (37,5)
reserves
Other reserve movements 41,9
Net profit for the 2 242,5
period
Dividends on ordinary (656,3)
shares
Total dividends (715,9)
Less: Dividends on 59,6
treasury shares
Goodwill adjustment - (17,7)
IFRS 3
Arising on changes in (10,4)
and acquisition of
subsidiaries and joint
ventures
Balance at 30 September 536,9 526,5 6 074,8 119,9
2007
STATEMENT OF CHANGES IN EQUITY (continued)
Shares
held by
subsidiary
and
empowerment
trusts Minorities Total
Rm Rm Rm
Balance at 30 September 2005 (1 504,0) 138,4 3 385,2
Issue of share capital and 67,4
premium
Fair value adjustments - 138,1
investments
Fair value adjustments to (443,7)
investments recognised in
income statement
Foreign currency translation 12,3
reserve movement
Transfers between reserves -
Movements in reserves of (25,7)
associates
Other reserve movements 62,5
Net profit for the period 19,5 2 322,9
Dividends on ordinary shares (9,0) (866,3)
Total dividends (9,0) (946,0)
Less: Dividends on 79,7
treasury shares
Arising on changes in and 32,8 (0,5)
acquisition of subsidiaries
and joint ventures
Balance at 30 September 2006 (1 504,0) 181,7 4 652,2
Balance at 30 September 2006 (1 504,0) 181,7 4 652,2
Issue of share capital and 75,3
premium
Capital distribution out of 30,9 (336,1)
share premium - interim
Fair value adjustments (13,8)
recognised in equity
Foreign currency translation (10,9)
reserve movement
Transfers between reserves -
Other reserve movements 41,9
Net profit for the period 50,0 2 292,5
Dividends on ordinary shares (18,1) (674,4)
Total dividends (18,1) (734,0)
Less: Dividends on 59,6
treasury shares
Goodwill adjustment - IFRS 3 (17,7)
Arising on changes in and (10,4)
acquisition of subsidiaries
and joint ventures
Balance at 30 September 2007 (1 473,1) 213,6 5 998,6
NOTES
Year ended
30
September
2007 2006
Reviewed Audited
Rm Rm
1 Revenue
Turnover 16 209,9 12 623,2
Interest received 227,2 140,6
Dividend income 39,4 38,9
16 476,5 12 802,7
2 Operating income
Operating income before abnormal
items is reflected after charging:
Cost of sales 10 303,4 8 149,8
Sales and distribution expenses 2 277,0 1 816,3
Marketing expenses 483,3 421,8
Other operating expenses 900,5 670,2
Depreciation (included in cost of 263,3 201,5
sales and other operating
expenses)
3 Abnormal items
Profit on sale of property, plant
and equipment, including
impairment charges
and reversals 51,5 124,9
Net profit on sale of interest in 305,2 362,4
subsidiaries and associates
Fair value adjustment - Sea 26,6 -
Harvest put option
Provision in respect of (20,4) (26,6)
utilisation of pension fund
surplus
Competition commission penalty (98,8) -
Provision for Healthcare (58,4) -
unbundling costs
Other (2,1) 14,4
Abnormal profit before taxation 203,6 475,1
Taxation (37,3) (6,1)
166,3 469,0
Minorities (6,7) (3,1)
Abnormal income attributable to 159,6 465,9
shareholders in Tiger Brands
Limited
4 Income from associates
Normal trading 57,1 46,5
Abnormal items - (42,1)
Profit on sale of property, - 12,5
plant and equipment
Impairment of property, - (54,6)
plant and equipment
57,1 4,4
5 Discontinued operations
Healthcare
In April 2007, the Board of Tiger Brands took an in-principle
decision to divest of its Healthcare interests. This followed a
detailed strategic review of the Company`s Healthcare business,
which resulted in the Board concluding that Tiger Brands was best
positioned to maximise shareholder value in the future by focusing
on its core FMCG operations. The Company thereafter embarked on a
process which entailed evaluating all available options with
regard to the separation of its Healthcare interests, including a
potential sale or unbundling.
On 6 November 2007, Tiger Brands publicly announced its decision
to unbundle its Healthcare Interests. The Healthcare Interests to
be unbundled comprise the two major divisions, namely a
pharmaceutical division selling a range of both prescription and
OTC
products, and a hospital products and services division. The
unbundling is expected to be completed by 31 March 2008 and as at
30 September 2007, final discussions relating to the unbundling
were in progress. The Healthcare Interests have been classified as
a disposal group as at 30 September 2007.
Healthcare
The results of the Healthcare 2007 2006
business for the year are
presented below:
Turnover 2 878,9 2 829,9
Operating income before abnormal 957,3 1 045,1
items
Abnormal item (53,1) (10,1)
Interest paid (117,6) (118,6)
Interest received 7,7 11,8
Profit before tax from a 794,3 928,2
discontinued operation
Taxation (262,4) (225,6)
Profit for the year from a 531,9 702,6
discontinued operation
The major classes of assets and liabilities of the Healthcare
business classified as held for sale as at 30 September 2007 are
as follows:
Assets
Property, plant and equipment 260,0
Goodwill and other intangibles 234,8
Investments 28,8
Deferred taxation asset 16,9
Cash and cash equivalents 83,3
Inventory 433,0
Trade and other receivables 668,0
Assets classified as held for sale 1 724,8
Liabilities
Interest-bearing liabilities (long 886,2
and short-term borrowings)
Deferred taxation liability 7,2
Provision for post-retirement 12,8
medical aid
Trade and other payables 476,8
Taxation 8,2
Liabilities directly associated 1 391,2
with assets classified as held for
sale
Net assets directly associated 333,6
with disposal group
Accumulated profits
The accumulated reserves that will be released upon the unbundling
is R699,0m
DairyBelle
DairyBelle was disposed of effective 1 May
2007.
6 Changes in accounting policies
The accounting policies adopted are consistent with those of the
previous financial year except as follows:
The Group has adopted the following new IFRIC interpretation
during the period under review.
- IFRIC 4 - Determining whether an Arrangement contains a Lease.
The Group adopted IFRIC Interpretation 4 as of 1 January 2006.
IFRIC 4 provides guidance in determining whether arrangements
contain a lease to which lease accounting must be applied. This
change in accounting policy has not had a significant impact on
the Group as at 30 September 2007 or 30 September 2006.
Consequently, no adjustments have been made to previously reported
figures.
The Group has adopted the following new Circular issued by South
African Institute of Chartered Accountants under the year in
review:
- Circular 8/2007 - Headline Earnings
The Group adopted Circular 8/2007 issued in July 2007, as of 1
October 2006. Circular 8/2007 sets out the new rules for
determining Headline Earnings and replaces the previous Circular
7/2002 in its entirety. Due to immateriality no adjustments have
been made to the Headline Earnings for the financial year ended 30
September 2006.
7 Business combinations
7.1 The Designer Group (Pty) Limited
On 1 October 2006, the Group acquired 100% of the issued share
capital of The Designer Group (Pty) Limited, an unlisted company
based in South Africa specialising in the manufacture and
distribution of personal care products.
The fair value of the identifiable assets and liabilities of The
Designer Group (Pty) Limited as at the date of acquisition were:
Rm Rm
Recognised Carrying
on
acquisition value
Property, plant and equipment
16,7 16,7
Intangible assets 33,1 10,7
Deposits, cash and cash equivalents 9,1 9,1
Debtors 40,9 40,9
Inventories 44,8 44,8
144,6 122,2
Long-term borrowings (3,7) (3,7)
Short-term borrowings (3,4) (3,4)
Creditors and provisions (39,0) (39,0)
Receiver of Revenue (0,2) (0,2)
Deferred taxation liability (3,7) (3,7)
(50,0) (50,0)
Fair value of net assets 94,6 72,2
Goodwill arising on acquisition 300,4 -
395,0 72,2
Of the total purchase consideration of R395.0m, payment of R40,0m
has been deferred, partly to October 2007 and the balance to March
2008.
This deferred portion of the purchase price, which has been fully
provided for in the Group balance sheet, is subject to the
achievement of certain performance conditions. These conditions
were met and a payment of R15,0m was made in October 2007. The
remaining R25m is payable in March 2008. The initial cash cost of
acquisition of R355,0m was funded from internal cash resources.
Cash outflow on acquisition:
Net cash acquired with the subsidiary (9,1)
Cash paid to sellers 355,0
Net cash outflow 345,9
From the date of acquisition, The Designer Group (Pty) Limited has
contributed R275,9m to revenue from continuing operations and
R65,9m to Group operating income after amortisation.
The significant factors that contributed to the recognition of
goodwill include, but are not limited to, expected economies of
scale in connection with Tiger`s existing operations and the
benefits of acquiring an established business with an assembled
workforce.
7.2 Nestle Confectionery business
On 1 October 2006, the Group acquired the sugar confectionery
business of Nestle South Africa, a company incorporated in South
Africa, specialising in the manufacturing and distribution of food
products.
The fair value of the identifiable assets and liabilities of the
Nestle confectionery business at the date of acquisition were:
Rm Rm
Recognised Carrying
on
acquisition value
Property, plant and equipment 7,5 7,5
Trademarks 120,0 120,0
Inventories 12,1 12,1
Fair value of net assets
139,6
Related capital cost 0,4
Cash paid to seller 140,0
The total cost of the acquisition was R140,0m and was funded from
internal cash resources.
From the date of acquisition, the Nestle confectionery business
has contributed R103,7m to revenue from continuing operations and
R41,4m to Group operating income after amortisation.
7.3 Soyatech (Pty) Limited
On 3 December 2006, the Group acquired the property, plant and
equipment of Soyatech (Pty) Limited, an unlisted company based in
South Africa specialising in the production and distribution of
ready-prepared meals.
The fair value of the identifiable assets as at the date of
acquisition were:
Rm Rm
Recognised Carrying
on
acquisition value
Property, plant and equipment 14,0 14,0
Fair value of net assets 14,0 14,0
The total cost of the acquisition was R14,0m and was funded from
internal cash resources.
From the date of acquisition, the assets acquired of Soyatech
(Pty) Limited have contributed a loss before interest and tax of
R5,3m with a contribution to revenue of R5,4m.
8 Property, plant and equipment
The additions for the year amounted to R597,6m (Sep 2006: R487,8m)
and the net book value of disposals totalled R23,6m (Sep 2006:
R64,1m).
9 Impairment of intangibles
Included in abnormal items from discontinued operations, is the
impairment of an intangible asset relating to the distribution
rights of certain pharmaceutical products in South Africa acquired
from an overseas principal.
The impairment amounts to R64m and is primarily attributable to
the reassessment of the useful life of the intangible asset, which
had been previously assessed as having an indefinite useful life.
DIVIDEND DECLARATION AND CAPITAL REDUCTION
Declaration by Tiger Brands Limited of distribution of capital out of share
premium final dividend in respect of the year ended 30 September 2007
At the meeting of shareholders held on 27 June 2007, the directors were
authorised to make a payment to shareholders of capital out of share premium, in
lieu of the final dividend, or part thereof, for the year ended 30 September
2007. Pursuant to this authority, the directors have declared a final
distribution of capital and a final dividend for the year ended 30 September
2007, in aggregate amounting to 447 cents per ordinary share, to Tiger Brands
shareholders recorded in the register on Friday, 4 January 2008, comprising a
capital distribution of 290 cents per share out of share premium and a final
dividend of 157 cents per share out of distributable reserves.
In compliance with the requirements of Strate, the electronic settlement and
custody system used by the JSE Limited, the Company has determined the following
salient dates for the payment of both the distribution of capital out of share
premium ("the distribution") and the payment of the final dividend out of
distributable reserves:
Last day to trade cum the
distribution & dividend Friday, 4 January 2008
Shares commence trading ex the
distribution & dividend Monday, 7 January 2008
Record date Friday, 11 January 2008
Payment date Monday,14 January 2008
Tiger Brands ordinary shareholders will not be permitted to
dematerialise/rematerialise their shares between Monday, 7 January 2008 and
Friday, 11 January 2008, both days inclusive.
The illustrative pro forma effects of the distribution of capital out of share
premium set out below have been prepared to assist Tiger Brands shareholders in
assessing the impact of the distribution of capital out of share premium on the
Net Asset Value per share ("NAV") and Tangible Net Asset Value per share
("TNAV"). The material assumptions are set out in the notes following the table.
The pro forma financial effects are the responsibility of the directors and are
provided for illustrative purposes only.
Actual Distribu- Pro forma
before the tion of after the
Distribu- capital Distribu-
tion out tion of
of capital of share Capital out
out of share premium(ii) of share
premium(i) premium
Assets 573,1 (457,8) 115,3
Cash and cash
equivalents(iii)
(R million)
Equity and liabilities
Equity attributable to 5 785,0 (457,8) 5 327,2
ordinary shareholders(iv)
(R million)
NAV(v) (cents per share) 3 664,5 (290,0) 3 374,5
TNAV(v) (cents per share) 2 394,1 (290,0) 2 104,1
Notes:
(i) As per the published reviewed results of Tiger Brands for the year ended 30
September 2007.
(ii) Adjustments to cash and cash equivalents and equity attributable to
ordinary shareholders were made on the assumption that the distribution of
capital out of share premium to shareholders of 290 cents per share was paid on
30 September 2007.
(iii) Including the cash and cash equivalents of the Healthcare Interests.
(iv) Equity attributable to ordinary shareholders comprises the following line
items:
Actual Distribu- Pro forma
before the tion of after the
distribution capital out distribution
of capital of share of capital
out of share premium(ii) out of share
premium(i) premium
R million R million R million
Ordinary share capital 17,2 17,2
Share premium 519,7 (499,8) 19,9
Non-distributable 526,5 526,5
reserves
Accumulated profits 6 074,8 6 074,8
Tiger Brands Limited (823,6) 24,9 (798,7)
shares held by subsidiary
Tiger Brands Limited
shares held by
empowerment trusts (649,5) 17,1 (632,4)
Share-based payment 119,9 119,9
reserve
Total equity attributable 5 785,0 (457,8) 5 327,2
to ordinary shareholders
(v) the calculation of NAV per share and TNAV per share as at 30 September 2007
has been based on 157 861 765 ordinary shares in issue (which excludes treasury
shares held by a wholly-owned subsidiary of Tiger Brands, as well as shares held
by certain empowerment trusts which are consolidated for accounting purposes.
Tiger Brands shareholders should take note that certain amendments to the Income
Tax Act have been proposed which will impact on the tax implications of a
distribution of capital made by a company out of its share premium account.
Tiger Brands ordinary shareholders are, therefore, advised to consult their tax
advisors with regard to how they may be impacted by any of the proposed changes.
On behalf of the Board
I W M Isdale Sandton
Group Secretary 19 November 2007
TIGER BRANDS LIMITED
(Registration number 1944/017881/06)
(Incorporated in the Republic of South Africa)
Share code: TBS ISIN: ZAE000071080
Directors:
Independent directors: L C van Vught (Chairman),
B L Sibiya (Deputy Chairman), D D B Band, S L Botha, B P Connellan, R M W Dunne
(British), U P T Johnson,
K D K Mokhele, A C Nissen, G N Padayachee, A C Parker
Executive directors: N Dennis (Chief Executive Officer) (British), N P Doyle
(Irish), C F H Vaux
Company secretary: I W M Isdale
Registered office: 3010 William Nicol Drive, Bryanston,
Sandton, 2021
Postal address: PO Box 78056, Sandton, 2146, South Africa
Share registrars: Computershare Investor Services 2004 (Pty) Limited, 70
Marshall Street, Johannesburg, 2001
Postal address: PO Box 61051, Marshalltown, 2107, South Africa. Telephone: (011)
370 5000
Date: 19/11/2007 17:03:14 Produced by the JSE SENS Department.
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