| Mon 25 Feb 2008, 7:01 | | TON - Tongaat - Audited Results And Final Dividend Declaration - for the year |
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TON
THGL
TON - Tongaat - Audited Results And Final Dividend Declaration - for the year
ended 31 December 2007
Tongaat Hulett Limited
(formerly The Tongaat-Hulett Group Limited)
Registration number: 1892/000610/06
JSE share code: TON
ISIN: ZAE000096541
AUDITED RESULTS AND FINAL DIVIDEND DECLARATION
for the year ended 31 December 2007
- Profit from Tongaat Hulett continuing operations of R838 million (2006: R726
million)
- Once-off BEE and corporate structuring costs of R370 million and STC cost of
R56 million
- Headline earnings of R61 million - affected by corporate structuring
transactions
- Annual dividend of 310 cents per share
COMMENTARY
In a challenging 2007, Tongaat Hulett continued to grow profit from operations
and to build its competitive position as an agri-processing business which
includes integrated components of land management, property development and
agriculture. The unbundling of Hulamin, black economic empowerment equity
participation and Tongaat Hulett share buy-back transactions were completed in
2007.
Tongaat Hulett`s profit from continuing operations in 2007 increased by 15% to a
record R838 million (2006: R726 million).
Operating profit from property developments increased by 32% to R428 million
(2006: R325 million). In addition, capital profit of R48 million (2006: R26
million) was realised. 83 hectares of developable land were sold in Umhlanga
Ridgeside, Izinga, Kindlewood, Ilala Ridge, Umhlanga Ridge Town Centre,
RiverHorse Valley Business Estate, Briardene and Zimbali Coastal Resort. Late in
2007 the Umhlanga Ridgeside development framework plan (140 hectares) was
approved. Tongaat Hulett`s land and property development processes, together
with the ongoing growth of Durban, are resulting in Tongaat Hulett`s prime
development land of some 14 000 hectares continuing to increase in importance
and value.
Profit from sugar operations was R360 million (2006: R356 million), with the
Zimbabwean operations being accounted for on a dividend received basis only.
Total sugar production in 2007 was 1,119 million tons (2006: 1,067 million tons,
before the acquisition of Hippo Valley). The five operations in Mozambique,
Zimbabwe and Swaziland contributed R176 million (2006: R99 million) to profit
from operations.
In Mozambique, the R1,3 billion expansion projects at Xinavane and Mafambisse
are progressing well, with land preparation of 2 692 hectares having been
completed. The impact of the expansion project activities on current operations
continues to be managed. Sugar production in 2007 at Xinavane was 67 000 tons
(2006: 65 000 tons) while at Mafambisse production at 41 000 tons remained
unchanged from 2006. Average export price realisations increased by 27% in 2007
and continue to be optimised in attractive target markets, with access to Europe
in terms of Least Developed Countries status and Everything-But-Arms agreements.
In Zimbabwe, the integration of Triangle and Hippo Valley is advancing well,
incorporating the 50,35% shareholding in Hippo Valley and with an increasing
ability to capitalise on synergies between these operations. In 2007, under
extremely difficult circumstances, sugar production was 349 000 tons (including
156 000 tons from Hippo Valley). Triangle produced 240 000 tons in 2006. The
business is presently contending, inter alia, with the extreme effects of
hyperinflation, a distorted low domestic sugar price, exchange rate movements
and foreign currency shortages in Zimbabwe. Dividends of R53 million were
received from Triangle Sugar (2006: R61 million).
In Swaziland, Tambankulu Estates produced a record raw sugar equivalent of 58
000 tons (2006: 55 000 tons), with the sucrose yield exceeding 18 tons per
hectare.
In South Africa, adverse weather and growing conditions contributed to a
reduction in sugar production to 604 000 tons (2006: 666 000 tons). The small
2006 and 2007 crops resulted in lower export sales volumes in 2007 and an
increased cost per ton of sugar produced. Raw sugar export volumes from South
Africa reduced to 245 000 tons (2006: 316 000 tons) and were sold at an
effective world sugar price of 11,8 US c/lb (2006: 12,8 US c/lb) at an average
R7,12/US dollar (2006: R6,56/US dollar). South African domestic sales were 460
000 tons (2006: 469 000 tons).
Profit from starch operations was R105 million in 2007 (2006: R96 million).
Margins remained under pressure with maize input costs being at import parity
levels for a significant portion of the year. The last quarter saw improvements
in international starch and glucose margins as markets responded to higher raw
material costs. Sales volumes in the domestic market grew by 6% driven by strong
growth across the alcoholic beverage, coffee and creamer, confectionery, mining
and prepared foods sectors. Capacity optimisation and efficiencies at operations
improved during the second half of 2007 as equipment upgrades and reliability
initiatives started to yield benefits.
Pursuant to the listing and unbundling of Hulamin, Tongaat Hulett`s 50% share in
Hulamin was fair valued through the income statement by R3,348 billion in June
2007 and thereafter unbundled as a distribution in specie. Hulamin`s net profit
(which does not include the valuation gain) for the period up to the unbundling
is reflected as a discontinued operation.
The corporate transactions concluded by Tongaat Hulett in 2007 also included a
25% BEE equity participation and a return of capital to shareholders by way of a
share buy-back. The cost of the 18% (strategic partners, infrastructure and cane
communities) BEE equity participation was measured and recognised at the grant
date in June 2007, resulting in a once-off IFRS 2 cost of R320 million being
charged to the income statement. The IFRS 2 costs relating to the 7% BEE
employee transaction will be amortised over five years and commenced in the
second half of 2007 with a cost of R13 million having been recorded. Once-off
transaction related costs of R50 million have also been brought to account. The
share buy-back, totalling R506 million including STC, was implemented in July
2007. The once-off BEE and transaction costs are not tax deductible.
Net finance costs were R119 million. The R88 million net finance income in 2006
in the Tongaat Hulett segment of the income statement includes finance income
related to the Hulamin finance structure while the Hulamin discontinued
operation segment includes finance costs. Finance costs in 2007 were affected by
higher net borrowings and higher interest rates.
Net borrowings, after taking into account cash, as disclosed on the consolidated
balance sheet reflect a balance of R991 million. It includes normal cash flow
movements during the year, dividends paid and the impact of the share buy-back.
The balance sheet also reflects the consolidation of the debt in the BEE equity
participation entities, as required by International Financial Reporting
Standards. This BEE debt does not have recourse to Tongaat Hulett and will
effectively be equity settled.
Taking the aforementioned into account, attributable net profit totalled R3,457
billion. Headline earnings were R61 million, which includes the once-off
transaction costs and BEE IFRS 2 costs and excludes the Hulamin fair valuation.
The 2006 headline earnings of R703 million included the Hulamin contribution for
a full year.
The Board has declared a final dividend of 160 cents per share, which brings the
total annual dividend to 310 cents per share for the new Tongaat Hulett.
OUTLOOK
As the business moves forward, there are a number of relevant current factors
and actions underway. Exchange rate movements will impact on local pricing and
costs, as well as Tongaat Hulett`s exports. Substantial cane expansions in
Mozambique will be completed to enable sugar production above 260 000 tons in
2009. The South African sugar operations` focus includes new cane procurement
initiatives, together with ongoing drives to increase competitiveness on costs,
efficiencies and yields. The small 2007 crop will affect the results in the
first half of 2008. A reasonable 2008 sugar crop in South Africa and higher
international sugar prices would have significant benefits for results in the
second half of 2008. Electricity cogeneration supply agreements are likely to be
concluded during the year. The attention in Zimbabwe will be on restoring local
prices to regional equivalents and on building towards full available capacity
utilisation of 600 000 tons per annum, with particular emphasis on working with
and increasing supplies of cane from outgrowers.
Going into 2008 with a limited stock of unconditional developable land, the
immediate focus is on being able to proceed with Zimbali Lakes, Sibaya at
Umdloti, Umhlanga Ridge Town Centre residential precincts and to accelerate the
planning process in respect of Cornubia at Mt Edgecombe North, Shongweni and the
land surrounding the new international airport. The development process around
this new airport at La Mercy, Tongaat, will highlight the increasing value of
land in that area.
Higher international maize prices coupled with improved local planting
intentions and good early season growing conditions have resulted in local maize
prices moving closer to export parity levels, which should benefit the starch
operation during the second half of 2008.
Overall, sustained growth in profit from operations is expected in the 2008 year
and this, together with the non recurrence of the significant once-off corporate
structuring costs incurred in 2007, should lead to a considerable increase in
headline earnings.
For and on behalf of the Board
C M L Savage P H Staude
Chairman Chief Executive Officer
Amanzimnyama
Tongaat, KwaZulu-Natal
21 February 2008
DIVIDEND DECLARATION
Notice is hereby given that the Board has declared a final divided (number 161)
of 160 cents per share for the year ended 31 December 2007 to shareholders
recorded in the register at the close of business on Thursday 20 March 2007.
The salient dates of the declaration and payment of this final dividend are as
follows:
Last date to trade ordinary
shares "CUM" dividend Thursday 13 March 2008
Ordinary shares trade "EX" dividend Friday 14 March 2008
Record date Thursday 20 March 2008
Payment date Thursday 27 March 2008
Share certificates may not be dematerialised or re-materialised, nor may
transfers between registers take place between Friday 14 March 2008 and Thursday
20 March 2008, both days inclusive.
The dividend is declared in the currency of the Republic of South Africa.
Dividends paid by the United Kingdom transfer secretaries will be paid in
British currency at the rate of exchange ruling at the close of business on
Thursday 13 March 2008.
For and on behalf of the Board
M M L Mokoka
Company Secretary
Amanzimnyama
Tongaat, KwaZulu-Natal
22 February 2008
INCOME STATEMENT
Condensed consolidated 2007 2006
Rmillion Restated
Note (note 2)
Revenue - continuing operations 6 395 5 110
Profit from Tongaat Hulett
operations 838 726
Capital profit on land 48 26
BEE IFRS 2 charge and
transaction costs 1 (383)
Exchange rate translation
(loss)/gain (1) 57
Fair value adjustment of
investment in Hulamin 2 3 348
Operating profit after corporate
transactions 3 850 809
Share of associate company`s loss (4)
Net financing (costs)/income 3 (119) 88
Profit before tax 3 731 893
Tax 4 (288) (238)
Net profit after tax 3 443 655
Discontinued operation
Hulamin unbundling 42 69
Net profit for the year 3 485 724
Attributable to:
Shareholders 3 457 723
Minority interest 28 1
3 485 724
Headline earnings attributable
to shareholders 61 703
Earnings per share (cents)
Net profit per share
Basic 3 292,8 685,3
Diluted 3 220,7 667,8
Headline earnings per share
Basic 58,1 666,4
Diluted 56,8 649,4
Annual dividend per share (cents) 310,0 550,0
Interim paid 150,0 200,0
Final declared 160,0 350,0
Currency conversion
Rand/US dollar average 7,05 6,77
Rand/US dollar closing 6,84 7,00
Rand/GB pound closing 13,61 13,73
HEADLINE EARNINGS
Profit attributable to shareholders 3 457 723
Less after tax effect of:
Surplus on disposal of property,
plant and equipment (48) (21)
Estate closure costs 1
Reversal of fair value adjustment
of Hulamin (3 348)
Headline earnings 61 703
BALANCE SHEET
Condensed consolidated 2007 2006
Rmillion
ASSETS
Non-current assets
Property, plant and equipment 3 210 4 270
Growing crops 353 212
Long-term receivable 203 203
Goodwill 42 21
Intangible assets 6 14
Investments 267 320
4 081 5 040
Current assets 3 546 4 016
Inventories 1 331 1 595
Trade and other receivables 1 742 1 879
Derivative instruments 12 33
Tax 65
Cash and cash equivalents 396 509
TOTAL ASSETS 7 627 9 056
EQUITY AND LIABILITIES
Capital and reserves
Share capital 138 107
Share premium 1 517 932
BEE held consolidation shares (1 053)
Retained income 1 796 3 868
Other reserves 337 50
Shareholders` interest 2 735 4 957
Minority interests in subsidiaries 223 76
Equity 2 958 5 033
Non-current liabilities 2 156 1 401
Deferred tax 673 1 055
Long-term borrowings 410 49
Non-recourse equity-settled BEE borrowings 812
Provisions 261 297
Current liabilities 2 513 2 622
Trade and other payables (note 8) 1 494 1 388
Short-term borrowings 977 1 174
Derivative instruments 2 16
Tax 40 44
TOTAL EQUITY AND LIABILITIES 7 627 9 056
Number of shares (000)
- in issue 103 005 106 591
- weighted average (basic) 104 987 105 497
- weighted average (diluted) 107 337 108 261
STATEMENT OF CHANGES IN EQUITY
Condensed consolidated 2007 2006
Rmillion
Balance at beginning of year 4 957 4 613
Net profit 3 457 723
Reallocation of minority interest (7)
Dividends paid (531) (506)
Share capital issued - ordinary 49 106
Share capital issued - B ordinary shares 227
Share capital issued - A preferred
ordinary shares 839
Repurchase of ordinary shares (450)
BEE held consolidation shares (1 053)
Share issue expenses (9)
Share-based payment charge 374 22
Settlement of share-based payment awards (81)
Movement in hedge reserve (1)
Foreign currency translation 19
Distribution in specie on unbundling
of Hulamin (5 056)
Shareholders` interest 2 735 4 957
Minority interests in subsidiaries 223 76
Balance at beginning of year 76 75
Share of profit 28 1
Reallocation of minority interest 7
Dividends paid to minorities (20)
Equity contribution by BEE minorities 18
Consolidation of subsidiaries 129
Hulamin unbundling (19)
Foreign currency translation 4
Equity 2 958 5 033
CASH FLOW STATEMENT
Condensed consolidated 2007 2006
Rmillion
Operating profit 3 850 1 020
Profit on disposal of property,
plant and equipment (48) (45)
Non-cash items:
Depreciation 222 272
Corporate transactions (3 011)
Other non-cash items (43) (59)
Tax payments (293) (152)
Change in working capital (175) (407)
Cash flow from operations 502 629
Net financing costs (119) (23)
Cash flow from operating activities 383 606
Expenditure on property, plant and equipment:
New (516) (281)
Replacement (193) (163)
Major plant overhaul costs capitalised (46) (38)
Expenditure on intangible assets (4) (3)
Movement on growing crops (14) 7
Proceeds on disposal of property,
plant and equipment 58 78
Investments (2) (257)
Net cash flow before dividends and
financing activities (334) (51)
Dividends paid (551) (506)
Net cash flow before financing activities (885) (557)
Borrowings raised 712 358
Non-recourse equity-settled BEE borrowings 812
Hedges of foreign loans 19
Shares issued 49 106
Equity contribution by BEE minorities 18
Share repurchase (450)
Settlement of share-based payment awards (73)
Share issue expenses (9)
Net increase/(decrease) in cash
and cash equivalents 174 (74)
Balance at beginning of year 509 526
Subsidiaries consolidated 46
Hulamin unbundling (347)
Foreign exchange adjustment 15
Exchange rate translation (loss)/gain (1) 57
Cash and cash equivalents at end of year 396 509
SEGMENTAL ANALYSIS
Condensed consolidated Revenue Operating Total Total
R million Profit Assets Liabilities
2007
Tongaat Hulett Starch 1 679 105 1 658 317
Tongaat Hulett 892 428 1 671 699
Developments
Tongaat Hulett Sugar 3 824 307 4 260 193
Triangle dividend 53
Centrally accounted (55) 38 1 932
costs
Profit from Tongaat 6 395 838 7 627 3 141
Hulett operations
Capital profit on land 48
BEE equity and corporate (383) 815
structuring transactions
Exchange rate (1)
translation loss
Fair value adjustment of 3 348
investment in Hulamin
Consolidated total 6 395 3 850 7 627 3 956
2006 Restated (note 2)
Tongaat Hulett Starch 1 316 96 1 530 250
Tongaat Hulett 598 325 1 199 368
Developments
Tongaat Hulett Sugar 3 196 295 2 733 379
Triangle dividend 61
Centrally accounted (51) 513 1 314
costs
Profit from Tongaat 5 110 726 5 975 2 311
Hulett operations
Capital profit on land 26
Exchange rate 57
translation gain
Continuing operations 5 110 809 5 975 2 311
Discontinued operation 2 738 211 3 081 613
Hulamin unbundling
Consolidated total 7 848 1 020 9 056 2 924
Condensed consolidated Capital Capital Depreciation
R million Employed Expenditure
2007
Tongaat Hulett Starch 1 340 76 91
Tongaat Hulett 948 8 1
Developments
Tongaat Hulett Sugar 3 807 671 130
Triangle dividend
Centrally accounted (5)
costs
Profit from Tongaat 6 090 755 222
Hulett operations
Capital profit on land
BEE equity and corporate
structuring transactions
Exchange rate
translation loss
Fair value adjustment in
Hulamin
Consolidated total 6 090 755 222
2006 Restated (note 2)
Tongaat Hulett Starch 1 280 101 89
Tongaat Hulett 838 2 1
Developments
Tongaat Hulett Sugar 2 376 262 96
Triangle dividend
Centrally accounted 506
costs
Profit from Tongaat 5 000 365 186
Hulett operations
Capital profit on land
Exchange rate
translation gain
Continuing operations 5 000 365 186
Discontinued operation 2 608 117 86
Hulamin unbundling
Consolidated total 7 608 482 272
NOTES
1. BEE IFRS 2 charge and transaction costs
A once-off R320 million IFRS 2 charge has been brought to account in respect of
the facilitation of the 18% BEE equity participation transaction as well as a
R13 million IFRS 2 charge in respect of the 7% BEE employee share ownership
plans. Advisory and other transaction related costs of R50 million have been
brought to account.
2. Hulamin unbundling and restatement of comparatives
Pursuant to the listing and unbundling of Hulamin at the end of June 2007,
Tongaat Hulett`s 50 percent investment in Hulamin was fair valued through the
income statement by R3,348 billion and thereafter unbundled as a distribution in
specie. Comparative figures in the income statement and segmental analysis have
been restated to reflect Hulamin as a discontinued operation, as required by
IFRS 5 Non-current Assets Held for Sale and Discontinued Operations.
3. Net financing (costs)/income
Interest paid (208) (38)
Interest capitalised 15
Financial instrument income 104
Interest received 74 22
(119) 88
4. Tax
Normal (98) (85)
Deferred (63) (90)
Secondary tax on companies (127) (63)
(288) (238)
5. Capital expenditure commitments
Contracted 539 169
Approved but not contracted 796 640
1 335 809
6. Operating lease commitments 23 45
7. Guarantees and contingent liabilities 35 79
8. Trade and other payables
Included in trade and other payables is the maize obligation (interest bearing)
of R163 million (2006: R130 million).
9. Audited results
The consolidated financial statements for the year ended 31 December 2007 have
been audited by Deloitte & Touche. Their unqualified audit opinion is available
for inspection at the registered office of the company.
10. Basis of preparation
The audited financial statements for the year ended 31 December 2007, from which
these condensed financial statements were derived, have been prepared in
accordance with the accounting policies which fully comply with International
Financial Reporting Standards and IAS 34 Interim Financial Reporting and are
consistent with those applied in the previous year. Tongaat Hulett continues to
account for its Zimbabwean operations on a dividend received basis.
CORPORATE INFORMATION
Tongaat Hulett Limited
(formerly The Tongaat-Hulett Group Limited)
Registration No.: 1892/000610/06 JSE share code: TON ISN: ZAE000096541
Directorate: C M L Savage (Chairman), P H Staude (Chief Executive Officer)*, P M
Baum, E le R Bradley, B G Dunlop*, J John, J B Magwaza, M Mia, M H Munro*, T H
Nyasulu, C B Sibisi, R H J Stevens, JG Williams.
*Executive directors
Registered office: Amanzimnyama Hill Road, Tongaat, KwaZulu-Natal. P O Box 3,
Tongaat 4400
Telephone: +27 32 439 4019, Facsimile: +27 32 945 3333
Transfer secretaries: Computershare Investor Services (2004) (Pty) Limited
Telephone: +27 11 370 7700
Sponsor: Investec Bank Limited
Telephone: +27 11 286 7000
www.tongaat.co.za e-mail: info@tongaat.co.za
Date: 25/02/2008 07:01:17 Produced by the JSE SENS Department.
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