| Wed 21 Nov 2007, 17:10 | | RBW - Rainbow - Unaudited results for the six mont |
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RBW
RBW
RBW - Rainbow - Unaudited results for the six months ended 30 September 2007
and cash dividend declaration
RAINBOW CHICKEN LIMITED
("Rainbow" or "the Group")
(Registration number 1966/004972/06)
JSE share code: RBW & ISIN code: ZAE000019063
UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2007 AND CASH DIVIDEND
DECLARATION
SALIENT FEATURES REVENUE UP 31.9%
OPERATING PROFIT UP 22.9%
OPERATING MARGIN DOWN BY 1.0% TO 10.9%
DILUTED HEADLINE EARNINGS PER SHARE UP 18.1%
DIVIDEND PER SHARE UP 20.0%
CONSOLIDATED BALANCE SHEET
30 Sept 30 Sept 31 March
R`000 2007 2006 2007
ASSETS
Non-current assets
Property, plant and equipment 1 103 468 1 003 930 1 054 124
Trademarks 336
Goodwill 287 444 287 444 287 444
Deferred taxation 15 285 15 285
1 406 197 1 291 710 1 356 853
Current assets
Inventories 482 122 348 380 409 356
Biological assets 336 451 280 122 269 278
Trade and other receivables 757 823 599 879 464 539
Derivative financial 36 394 15 622 2 969
instruments
Taxation receivable 2 246
Cash and cash equivalents 556 624 268 463 590 336
2 169 414 1 512 466 1 738 724
Total assets 3 575 611 2 804 176 3 095 577
EQUITY
Capital and reserves 2 028 074 1 666 776 1 920 889
LIABILITIES
Non-current liabilities
Deferred taxation 186 876 170 310 179 606
Post-retirement medical 78 647 72 138 75 535
obligation
Finance lease liability 116
265 523 242 564 255 141
Current liabilities
Trade and other payables 1 178 533 807 811 834 153
Provisions 41 025 39 283 40 687
Derivative financial 16 970
instruments
Finance lease liability 176 524 389
Taxation payable 62 280 47 218 27 348
1 282 014 894 836 919 547
Total liabilities 1 547 537 1 137 400 1 174 688
Total equity and liabilities 3 575 611 2 804 176 3 095 577
CONSOLIDATED INCOME STATEMENT
Six months Six months
ended ended Year ended
30 Sept 30 Sept 31 March
R`000 2007 2006 2007
Revenue 2 871 448 2 177 770 4 730 363
Operating profit before 380 908 312 937 772 315
depreciation and amortisation
Depreciation and amortisation (65 211) (56 010) (118 181)
Operating profit 315 697 256 927 654 134
Finance costs (1 144) (2 358) (2 714)
Finance income 14 604 13 631 25 179
Profit before taxation 329 157 268 200 676 599
Taxation (118 630) (97 168) (202 354)
Profit for the period 210 527 171 032 474 245
attributable to the equity
holders of the Group
HEADLINE EARNINGS
Six months Six months
ended ended Year ended
30 Sept 30 Sept 31 March
R`000 2007 2006 2007
Profit for the period 210 527 171 032 474 245
attributable to the equity
holders of the Group
Net asset impairment provision (1 914)
released
(Profit)/loss on disposal of (300) 1 397 2 759
property, plant and equipment
Headline earnings 208 313 172 429 477 004
STATEMENT OF CHANGES IN EQUITY
Stated Share-based Retained
R`000 capital payments earnings Total
Balance at 1 April 2006 1 115 747 14 226 465 928 1 595 901
Profit for the period 474 245 474 245
attributable to the equity
holders of the Group
Ordinary dividends paid (168 (168 817)
817)
Employee share option
scheme:
Proceeds from shares 11 538 11 538
issued
Value of employee services 8 022 8 022
Balance at 1 April 2007 1 127 285 22 248 771 356 1 920 889
Profit for the period 210 527 210 527
attributable to the equity
holders of the Group
Ordinary dividend paid (139 202) (139 202)
Employee share option
scheme:
Proceeds from shares 29 806 29 806
issued
Value of employee services 6 054 6 054
Balance at 30 September 1 157 091 28 302 842 681 2 028 074
2007
CONSOLIDATED CASH FLOW INFORMATION
Six months Six months
ended ended Year ended
30 Sept 30 Sept 31 March
R`000 2007 2006 2007
Operating profit before working 384 457 318 288 783 096
capital requirements
Working capital requirements (135 788) (107 576) 38 398
Cash generated by operations 248 669 210 712 821 494
Net finance income 13 460 11 273 22 465
Taxation paid (74 181) (144 545) (277 836)
Cash available from operating 187 948 77 440 566 123
activities
Dividends paid (139 202) (112 405) (168 817)
Net cash flows from investing (112 051) (99 075) (212 466)
activities
Net cash flows from financing 29 593 8 120 11 113
activities
Net (decrease)/increase in cash and (33 712) (125 920) 195 953
cash equivalents
Cash and cash equivalents at the 590 336 394 383 394 383
beginning of the period
Cash and cash equivalents at the end 556 624 268 463 590 336
of the period
SUPPLEMENTARY INFORMATION
Capital expenditure 188 045 151 346 76 008
contracted and committed
Capital expenditure 66 141 5 590 81 685
approved but not contracted
Contingent liabilities 53 802 48 466 56 950
STATISTICS
Ordinary shares in issue (000`s) 290 004 281 738 282 712
Weighted average ordinary (000`s) 287 898 279 360 281 393
shares in issue
Diluted weighted average (000`s) 293 136 286 436 290 118
ordinary shares in issue
Basic earnings per share (cents) 73.1 61.2 168.5
Basic earnings per share - (cents) 71.8 59.7 163.5
diluted
Headline earnings per share (cents) 72.4 61.7 169.5
Headline earnings per share (cents) 71.1 60.2 164.4
- diluted
Net asset value per share (cents) 699.3 591.6 679.5
Ordinary dividends:
Interim dividends (cents) 24.0 20.0 20.0
declared/paid
Final dividend paid (cents) 48.0
BASIS OF PREPARATION
The unaudited results have been prepared in accordance with IAS 34 (Interim
Financial Reporting) and in compliance with the Companies Act of South Africa,
Act 61 of 1973, as amended and the Listings Requirements of the JSE Limited.
The accounting policies are consistent with those of the previous financial
period and comply with International Financial Reporting Standards (IFRS).
OVERVIEW AND MARKET CONDITIONS
The Group`s results for the six months ended 30 September 2007 reflect
headline earnings growth of 20.8% compared to the same period of the previous
year.
The South African economy continues to grow at approximately 5%. Strong
underlying fixed investment in the public and private sectors means solid GDP
growth should continue despite current weaknesses in the consumer sector.
Secondary inflation impacts are being felt by virtue of the continuing higher
food and energy prices which resulted in the Monetary Policy Committee (MPC)
imposing further interest rate hikes to contain inflationary pressures.
Consumer demand will be impacted by these factors.
Higher international grain prices driven by low international stock levels and
increased ethanol production in the US, compounded by the 2006/07 local crop
being drought affected, have led to local yellow maize prices being 52% higher
than September 2006. Indications are that local plantings of maize for the
2007/08 season are expected to be 5% higher than the 2006/07 season. This
together with an expectation of improved yields with better weather and
growing conditions is reflected in lower futures pricing.
The local chicken industry remains on high alert for Avian Influenza (AI). AI
outbreaks continue to be reported internationally. Rainbow and the local
industry at large, through the Southern African Poultry Association (SAPA) and
in co-operation with the National Department of Agriculture, continue to focus
on prevention through increased bio-security and stepped-up surveillance and
monitoring of flock health.
Although chicken import volumes are 24% down on last year, they are still at
historical highs, being 44% higher than the 5-year average. The recent lower
chicken imports appear to be mostly a function of Brazilian exports finding
more profitable markets than South Africa. Imported chicken mostly impacts on
channels that are not a strategic focus area for Rainbow. Red meat prices have
remained high with the result that chicken still represents a more affordable
protein source.
REVIEW OF OPERATIONS
Rainbow has continued to focus on its key strategic initiatives centred around
its consumers and customers. Investment in the supply chain continues to be
made to supply strategic customers with the desired product mix.
From a marketing perspective, this period saw the consolidation of the further
processed category innovations launched in April 2006. Some sub-categories
have performed exceptionally well with Rainbow Simply Chicken Polony and
Viennas having captured substantial volume share in their respective
categories. Their "100% Grade A Rainbow Chicken" positioning has been well
accepted by consumers and the brand looks set to grow further volume share.
An active year of further innovation, across all of South Africa`s income
groups, is planned. This will be supported by a full suite of marketing
activity, across the three vital consumer touchpoints of advertising, in-store
impact and product quality.
The Foodservice channel performed well as a consequence of significant
investment in partnerships with strategic customers who have grown solidly.
This strategy is being reinforced to position Rainbow FoodSolutions as the
outstanding service oriented brand.
Vector continues to extend its service offering successfully. The Multi-
Temperature Contract Distribution (MTCD) model with Spur and Nando`s and the
Vector Cold Storage (VCS) facilities are performing well. A new business unit,
Vector Primary Transport, was successfully launched in August 2007 following
the recent award of the McCain primary transport contract. Rainbow`s primary
transport, which was previously outsourced, will be performed in-house by
Vector.
Agriculture experienced a challenged winter period this year. Despite this and
the higher than normal incidence of disease in the industry, agricultural
performance was slightly improved on last year. This can be attributed to the
continued investment in upgrading facilities and good husbandry practice.
Epol has performed well during the period, despite significant cost increases
in maize, soya, freight and fuel. Other operating costs have been well managed
and external business utilising excess capacity has grown by 13%. The long raw
material procurement strategy has contributed to deferring some of the cost
pressures in the rising market. The next six months poses the most significant
challenge in sourcing reasonably priced raw materials until the new season`s
local crop is harvested. Considering the state of the international market, it
is unlikely local prices will ease meaningfully before then.
Recovery of the feed contamination claim against the responsible supplier is
progressing and is in the hands of their insurers, but to date remains
unresolved.
FINANCIAL REVIEW
Revenue - Rm 2007 2006 %
Chicken 2 217.3 1 727.4 28.4
External sales - Cobb, Epol and Vector 654.1 450.4 45.2
Reported revenue 2 871.4 2 177.8 31.9
Chicken revenue for the six months was 28.4% higher than the same period of
the previous year. Rainbow`s average price realisation, including mix
improvement, increased by 16.7%. Overall chicken volumes increased by 11.7%,
including 5 extra trading days (4% effect), with the Quick Service Restaurants
(QSR) sector, targeted customers and branded products all showing pleasing
growth.
Group revenue increased by 31.9% to R2.9 billion (2006: R2.2 billion) largely
a function of the higher chicken and feed realisations and Epol and Vector`s
higher external volumes.
Headline EBITDA increased by 20.5% to R378.7 million (2006: R314.3 million),
reflecting the higher revenue and improved customer and product mix. The
headline EBITDA margin decreased to 13.2% (2006: 14.4%). This decline was
referred to in the previous prospects statement at year end and reflects the
higher feed raw material costs not being entirely recovered in chicken
pricing.
As previously noted, reporting the financial effects of certain financial
instruments used in the feed raw material procurement strategy in accordance
with IAS39 (Financial Instruments: Recognition and Measurement) introduces
volatility to the Group`s financial results. For this reporting period
however, the pre-taxation impact of applying IAS39 on the Group`s results is
similar to last year, being a negative R31.5 million (2006: R34.1 million
negative).
2007 2006 %
Headline EBIT (Rm)
- pre IAS39 344.7 292.4 17.9
- post IAS39 313.2 258.3 21.3
Headline EBIT margin (%)
- pre IAS39 12.0 13.4 (1.4)
- post IAS39 10.9 11.9 (1.0)
The effective taxation rate is 36.0% (2006: 36.1%).
Net finance income increased by R2.2m due to the higher cash balances.
Headline earnings increased by 20.8% to R208.3 million (2006: R172.4 million)
with diluted headline earnings per share improving by 18.1% to 71.1 cents per
share (2006: 60.2 cents per share).
Cash generated by operations increased by 18.0% to R248.7 million (2006:
R210.7 million) in line with the improved trading results. Trade receivables
are higher in line with increased trading and the valuation of inventories is
impacted by the higher feed costs.
Capital expenditure was R116.4 million (2006: R99.3 million). A further amount
of R188.0 million (2006: R151.3 million) has been contracted and committed,
but not spent, whilst a further R66.1 million (2006: R5.6 million) has been
approved, but not contracted. The Group continues to follow a policy of
upgrading its facilities and funding normal levels of replacement capital
expenditure from its own resources.
Return on equity on a 12-month rolling basis increased to 27.8% (2006: 27.6%).
PROSPECTS
Consumer spending is expected to soften over the next six months as a
consequence of the higher inflation and interest rate environment although the
impact on chicken consumption is likely to be limited.
Maize and soya prices are likely to remain at the current higher levels
translating into higher feed input costs for the balance of the financial
year.
Earnings growth for the full year on a pre- and post-IAS39 basis is expected
to be lower than the first six months.
DIRECTORATE
There have been no changes to the directorate since the last reporting date,
however with effect from 1 August 2007 John Maher was appointed as Company
Secretary.
DIVIDEND DECLARATION
Notice is hereby given that on 21 November 2007 the Board declared an interim
cash dividend (number 69) of 24.0 cents per ordinary share in respect of the
six months ended 30 September 2007 (2006: 20.0 cents).
The salient dates of the declaration and payment of this dividend are as
follows:
Last date to trade ordinary shares cum Friday, 4 January 2008
dividend
Ordinary shares trade ex dividend Monday, 7 January 2008
Record date Friday, 11 January 2008
Payment date Monday, 14 January 2008
Share certificates may not be dematerialised or rematerialised between Monday,
7 January 2008 and Friday, 11 January 2008 (both dates inclusive).
For and on behalf of the Board
M H Visser M Dally Durban
Non-executive Chairman Chief Executive Officer 21 November 2007
Directors: MH Visser (Non-executive Chairman), M Dally (CEO)*, RH Field*, M
Griessel, JB Magwaza, M Nhlanhla, DW Vale, DG Zwiegelaar
* Executive Directors
Company secretary: JMJ Maher
Registered office: Rainbow Chicken Limited, One the Boulevard, Westway Office
Park,
Westville, 3629
Transfer secretaries:
Computershare Investor Services 2004 (Proprietary) Limited,
70 Marshall Street, Johannesburg 2001
Auditors: PricewaterhouseCoopers Inc
Sponsor: RAND MERCHANT BANK (a division of FirstRand Bank Limited)
Bankers: ABSA Bank Limited
Website: www.rainbowchicken.co.za
Date: 21/11/2007 17:10:01 Produced by the JSE SENS Department.
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