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AFR
AFR
AFR - Afgri Limited - Reviewed Condensed Consolidated Second Interim Financial
Results For The Twelve Months Ended 29 February 2008
AFGRI LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1995/004030/06)
ISIN number: ZAE000040549 Share code: AFR
REVIEWED CONDENSED CONSOLIDATED SECOND INTERIM FINANCIAL RESULTS FOR THE TWELVE
MONTHS ENDED 29 FEBRUARY 2008
Total sales up 20,0%
Headline earnings per share up 10,3%
Total taxation reduced by 65% (including once-off R20 million benefit)
Loss from discontinued operations R14 million (prior year R69 million)
Dividend declared up by 9,3%
Group income statement (R`millions)
Note Reviewed Audited
Second Year ended
interim 28 February
12 months 2007
ended 29
February
2008
Continuing operations
Sales of goods and services 7 309 6 077
Interest on trade receivables financed by 363 246
banks
Interest earned on other trade 119 66
receivables
Total sales 7 791 6 389
Cost of sales (5 979) (4 700)
Gross profit 1 812 1 689
Other operating income 100 91
Other operating expenses (1 138) (1 108)
Operating profit 774 672
Negative goodwill from business 1 47
combinations
Share of (losses)/profits of associates (1) 1
Finance costs 3 (443) (305)
Profit before income tax 331 415
Income tax expenses (29) (70)
Profit for the twelve months from 302 345
continuing operations
Discontinued operations
Loss for the twelve months from 9 (14) (69)
discontinued operations
Profit for the twelve months 288 276
Profit for the twelve months attributable
to:
Equity holders of the Company 212 190
Minority interest - BEE partners 73 79
- Other minorities 3 7
Profit for the twelve months 288 276
Weighted average number of shares in 316,8 317,2
issue (millions)
Diluted weighted average number of shares 341,2 341,2
in issue (millions)
Earnings per share from continuing 70,1 76,3
operations (cents)
Earnings per share from discontinued (3,4) (16,4)
operations (cents)
Earnings per share from all operations 66,7 59,9
(cents)
Diluted earnings per share from 65,1 70,9
continuing operations (cents)
Diluted earnings per share from (3,1) (15,2)
discontinued operations (cents)
Diluted earnings per share from all 62,0 55,7
operations (cents)
Headline earnings per share from 69,5 65,2
continuing operations (cents)
Headline earnings per share from (1,0) (3,1)
discontinued operations (cents)
Headline earnings per share from all 4 68,5 62,1
operations (cents)
Diluted headline earnings per share from 64,5 60,6
continuing operations (cents)
Diluted headline earnings per share from (0,9) (2,9)
discontinued operations (cents)
Diluted headline earnings per share from 63,6 57,7
all operations (cents)
Group balance sheet (R`millions)
Note Reviewed Audited
29 February 28 February
2008 2007
ASSETS
Non-current assets 1 656 1 478
Property, plant and equipment 2 1 093 1 018
Goodwill 2 31 26
Other intangible assets 2 214 145
Investments in associates 6 7
Financial receivables 160 152
Deferred income tax assets 152 130
Current assets 6 842 5 642
Inventories 991 1 010
Biological assets 78 39
Trade and other receivables 901 896
Trade receivables financed by Land Bank 5 2 698 2 724
Trade receivables financed by other banks 5 1 130 --
Derivative financial instruments 144 176
Current income tax assets 17 95
Cash and cash equivalents and cash 883 702
collateral deposits
Cash collateral deposits 420 397
Cash and cash equivalents 463 305
Non-current assets classified as held for 9 22 -
sale
Total assets 8 520 7 120
EQUITY
Capital and reserves attributable to 1 431 1 231
equity holders
Share capital - -
Treasury shares (155) (155)
Incentive trust shares (121) (151)
Share premium - -
Fair value and other reserves 68 10
Retained earnings 1 639 1 527
Minority interests 616 589
Total equity 2 047 1 820
LIABILITIES
Non-current liabilities 290 299
Borrowings 123 109
Deferred income tax liabilities 167 178
Provisions for other liabilities and - 12
charges
Current liabilities 6 183 5 001
Trade and other payables 1 724 1 680
Derivative financial instruments 70 146
Current income tax liabilities 12 20
Short-term borrowings - 16
Call loans and bank overdrafts 549 446
Land Bank borrowings to finance trade 5 2 698 2 693
receivables
Other bank borrowings to finance trade 5 1 130 -
receivables
Total liabilities 6 473 5 300
Total equity and liabilities 8 520 7 120
Net asset value per share attributable to 419 361
equity holders (cents)
Group cash flow statement (R`millions)
Note Reviewed Audited
Second Year ended
interim 28 February
12 months 2007
ended 29
February
2008
Operating activities
Net profit before tax 307 338
Changes in working capital (1 090) 333
Other non-cash flow items (2) (41)
Tax received/(paid) 14 (25)
Net cash (utilised in)/generated from (771) 605
operating activities
Net cash utilised in investing activities (188) (212)
Net cash generated from/(utilised in) 5 1 014 (236)
financing activities
Net increase in cash and cash equivalents 55 157
Cash and cash equivalents at the (141) (298)
beginning of year
Cash and cash equivalents at the end of (86) (141)
the twelve months
Cash collateral deposits 420 397
Cash and cash equivalents and cash 334 256
collateral deposits
Group statement of changes in equity (R`millions)
Share Share Fair value
capital premium and other
reserves
Adjusted balance 28 February 2006 - 73 8
(audited)
Net profit - - -
Currency translation differences - - (5)
Disposal of incentive shares - - -
Shares purchased by share incentive - - -
trust
Capital distribution - (73) -
Dividends paid - - -
Payment to BEE partners - - -
Minorities with business combinations - - -
Share-based payments - - 7
Balance 28 February 2007 (audited) - - 10
Net profit - - -
Payment to BEE partners and minorities - - -
movement
Currency translation differences - - 47
Fair valuing of cash flow hedges - - 2
Share-based payments - - 9
Dividends paid - - -
Disposal of incentive shares - - -
Balance 29 February 2008 (reviewed) - - 68
Group statement of changes in equity
(R`millions) continued
Retained Treasury Incentive
earnings shares trust
shares
Adjusted balance 28 February 2006 1 370 (155) (122)
(audited)
Net profit 190 - -
Currency translation differences - - -
Disposal of incentive shares - - 35
Shares purchased by share incentive - - (64)
trust
Capital distribution - - -
Dividends paid (33) - -
Payment to BEE partners - - -
Minorities with business combinations - - -
Share-based payments - - -
Balance 28 February 2007 (audited) 1 527 (155) (151)
Net profit 212 - -
Payment to BEE partners and minorities - - -
movement
Currency translation differences - - -
Fair valuing of cash flow hedges - - -
Share-based payments - - -
Dividends paid (100) - -
Disposal of incentive shares - - 30
Balance 29 February 2008 (reviewed) 1 639 (155) (121)
Group statement of changes in equity
(R`millions) continued
BEE Other Total
partners minorities
Adjusted balance 28 February 2006 531 - 1 705
(audited)
Net profit 79 7 276
Currency translation differences - - (5)
Disposal of incentive shares - - 35
Shares purchased by share incentive - - (64)
trust
Capital distribution - - (73)
Dividends paid - - (33)
Payment to BEE partners (46) - (46)
Minorities with business combinations - 18 18
Share-based payments - - 7
Balance 28 February 2007 (audited 564 25 1 820
Net profit 73 3 288
Payment to BEE partners and minorities (44) (5) (49)
movement
Currency translation differences - - 47
Fair valuing of cash flow hedges - - 2
Share-based payments - - 9
Dividends paid - - (100)
Disposal of incentive shares - - 30
Balance 29 February 2008 (reviewed) 593 23 2 047
Business segment results (R`millions)
Twelve months ended 29 February 2008
(reviewed)
Sales Headline Net
operating interest
profit and
before dividends
interest
and
dividends
AFGRI Services 5 422 213 (29)
Producer Services
Primary inputs 1 378 40 (17)
Retail 2 923 39 (15)
Financial Services 920 62 7
Logistics Services 201 72 (4)
AFGRI Products 2 368 161 (19)
Foods 393 18 (3)
Protein 1 975 143 (16)
Other 1 - -
Continuing operations 7 791 374 (48)
Discontinued operations 47 (8) 4
Consolidated 7 838 366 (44)
Capital expenditure Depreciation
AFGRI Services 84
Producer Services
Primary inputs 6
Retail 57
Financial Services 2
Logistics Services 19
AFGRI Products 88
Foods 6
Protein 82
Other 1
Continuing operations 173
Discontinued operations 2
Consolidated 175
Year ended 28 February 2007 (audited)
AFGRI Services 4 669 241 (13)
Producer Services
Primary inputs 1 133 30 (8)
Retail 2 646 25 (11)
Financial Services 657 73 6
Logistics Services 233 113 -
AFGRI Products 1 719 145 (9)
Foods 326 16 (2)
Protein 1 393 129 (7)
Other 1 - -
Continuing operations 6 389 386 (22)
Discontinued operations 141 (16) (4)
Consolidated 6 530 370 (26)
Capital expenditure Depreciation
AFGRI Services 95
Producer Services
Primary inputs 10
Retail 78
Financial Services 6
Logistics Services 1
AFGRI Products 41
Foods 9
Protein 32
Other 1
Continuing operations 137
Discontinued operations -
Consolidated 137
Twelve months ended 29 February 2008 (reviewed)
Headline Assets Liabilities
operating
profit
after
interest
and
dividends
AFGRI Services 184 6 691 (5 216)
Producer Services
Primary inputs 23 378 (223)
Retail 24 1 075 (561)
Financial Services 69 4 925 (4 400)
Logistics Services 68 313 (32)
AFGRI Products 142 1 217 (674)
Foods 15 222 (116)
Protein 127 995 (558)
Other - 546 (583)
Continuing operations 326 8 454 (6 473)
Discontinued operations (4) 66 -
Consolidated 322 8 520 (6 473)
Amortisation
AFGRI Services 23 8
Producer Services
Primary inputs 3 4
Retail 11 3
Financial Services 1 1
Logistics Services 8 -
AFGRI Products 36 2
Foods 6 -
Protein 30 2
Other - 3
Continuing operations 59 13
Discontinued operations 1 -
Consolidated 60 13
Year ended 28 February 2007 (audited)
AFGRI Services 228 5 483 (4 243)
Producer Services
Primary inputs 22 266 (150)
Retail 14 930 (526)
Financial Services 79 3 975 (3 529)
Logistics Services 113 312 (38)
AFGRI Products 136 969 (487)
Foods 14 130 (36)
Protein 122 839 (451)
Other - 521 (511)
Continuing operations 364 6 973 (5 241)
Discontinued operations (20) 147 (59)
Consolidated 344 7 120 (5 300)
Amortisation
AFGRI Services 24 5
Producer Services
Primary inputs 4 2
Retail 6 2
Financial Services 4 1
Logistics Services 10 -
AFGRI Products 33 6
Foods 5 -
Protein 28 6
Other 3 3
Continuing operations 60 14
Discontinued operations - -
Consolidated 60 14
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 profits after net interest and
dividends are shown after the allocation of cost of capital based on each
division`s net assets.
Note B:
Although the interest paid to Land Bank and other banks 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 is thus included in headline
operating profit before interest. The increase/decrease in Land Bank and other
banks` 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) 29 February 28 February
2008 2007
Finance cost per income statement - refer note (443) (305)
3
Land Bank interest disclosed as cost of sales 290 199
in business segment results
Other banks` interest disclosed as cost of 14 -
sales in business segment results
Finance cost excluding Land Bank and other (139) (106)
banks` interest
Discontinued interest (4) (5)
Interest on cash guarantee deposits included in 24 16
other operating income
Dividend income and interest received -
included in other
operating income and other operating expenses 75 69
Net interest and dividends per business segment (44) (26)
results
Note C:
The reconciliation of operating profit per the
income statement with business segment headline
operating profit before interest and dividends
is as follows:
Operating profit per income statement 774 672
Negative goodwill from business combinations 1 47
Share of (losses)/profits of associates (1) 1
Discontinued loss before interest (16) (69)
Interest on cash guarantee deposits included in (24) (16)
other operating income - refer note B
Interest income and dividends disclosed as net (75) (69)
interest - refer note B
Land Bank interest paid disclosed as cost of (290) (199)
sales - refer note B
Other banks` interest paid disclosed as cost of (14) -
sales - refer note B
Headline earnings adjustments before tax 11 3
Headline operating profit before interest and 366 370
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 financial instruments) at fair value through
profit or loss and fair value of biological assets. 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, intangible assets and goodwill
Property, plant and Intangible assets and
equipment goodwill
(R`millions) 29 February 28 February 29 February 28 February
2008 2007 2008 2007
Carrying value 1 018 710 171 105
beginning of year
Additions 174 137 93 25
Disposals at book value (30) (37) (1) (2)
Foreign currency 10 13 3 2
differences
Depreciation/ (61) (60) (13) (14)
amortisation
Purchase of 12 257 - 65
subsidiaries
Net sale of subsidiary (23) (2) - (4)
(including assets held
for sale)
Impairment (7) - (8) (6)
Carrying value end of 1 093 1 018 245 171
second interim period
3. Finance costs
(R`millions) 29 February 28 February
2008 2007
Interest paid on Land Bank borrowings (290) (199)
Interest paid on other banks` borrowings (14) -
used to finance debtors
Other interest paid to financial (139) (106)
institutions
Finance cost - Continuing operations (per (443) (305)
income statement)
Finance cost - Discontinued operations (4) (5)
Finance cost - Total (447) (310)
4. Reconciliation of headline earnings per
share (cents)
Earnings 66,7 59,9
Loss from discontinued operations 2,4 15,9
Impairment of assets 0,1 1,3
Negative goodwill (0,1) (10,9)
Profit on disposal of assets (0,6) (1,1)
Headline earnings previously reported 68,5 65,1
Impact of SAICA Circular 8/2007 - operating - (3,0)
losses from discontinued operations
Headline earnings 68,5 62,1
5. Trade receivables financed by the Land Bank
(R`millions)
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.
Asset - Trade receivables 2 698 2 724
Liability - Land Bank 2 698 2 693
Trade receivables financed by other banks
(R`millions)
The opportunity to grow the debtors
financing business combined with the
strategy to diversify funding lines and
generate capacity for further growth
resulted in the need for alternative
financing structures. As a result, new
general working capital facilities were
negotiated with other banks. The Group
bears a 100% risk on these facilities, but
is in the process of restructuring the
facilities to reduce the cost of funding,
the risk and the reliance on individual
lenders. The interim general facilities are
treated as a financing activity on the cash
flow statement.
Asset - Trade receivables 1 130 -
Liability - other banks 1 130 -
6. Agency agreements
The Group manages agri debtors on behalf of third party financial
institutions to the amount of R920 million (2007: R633 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 R1 441 million (2007: R1 622 million).
7. Corporate governance and JSE Limited (JSE) compliance
The principles of good corporate governance were adhered to. The Group
complied with the JSE Listings 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 have
been obtained to extend the current year-end from 29 February 2008 to
30 June 2008. This second interim report is for the twelve months
ended 29 February 2008.
9. Discontinued operations
The Citrifruit operation is in the process of being sold and is
disclosed as an asset held for sale. The comparative reclassification
between continuing and discontinued operations in the Income Statement
and Business Segment Results has been made.
10. Interim review
The 29 February 2008 condensed consolidated second interim financial
statements were reviewed by the Group`s external auditors,
PricewaterhouseCoopers Inc, in accordance with the guidelines laid
down by the International Standards for Review Engagements 2410 and
their review opinion is available for inspection at the Group`s
registered office.
Declaration of second interim dividend
Notice is hereby given that the directors of AFGRI have declared a second
interim dividend of 21,70 cents per share for the period ended 29 February 2008.
In accordance with settlement procedures of STRATE, the following dates will
apply to the second interim dividend:
Last day to trade cum the dividend Friday, 20 June 2008
Trading ex dividend commences Monday, 23 June 2008
Record date Friday, 27 June 2008
Dividend payment date Monday, 30 June 2008
There will be no dematerialisation or rematerialisation of AFGRI shares between
23 June 2008 and 27 June 2008, both dates inclusive.
By order of the Board
SL Reynolds
Group Company Secretary
Johannesburg
Commentary
The directors of AFGRI Limited ("AFGRI") present the condensed consolidated
interim financial results of the AFGRI group of companies for the twelve months
ended 29 February 2008. The consolidated interim headline earnings show a 10,3%
improvement over the same period for the prior financial year.
AFGRI`s performance for the twelve months ended 29 February 2008 was impacted by
the drought conditions of the 2007 growing season resulting in lower yields and
a small crop for a second consecutive year in a row. Low carry-in silo stock
levels, a smaller crop and tighter interest margins impacted negatively on
trading conditions for the Financial and Logistics Services businesses. Above
average plantings and good rain in the second half of the year helped the
Producer Services business improve on its prior year`s excellent performance.
Increased volumes and improved operational efficiencies enabled the Protein
business to improve on its prior year`s profitability whilst the Foods business
performed in line with the prior year.
Operational review
Revenue
Sales from continuing operations increased by 21,9% compared to the same period
in the prior year. The main contributors to this increase are Protein (41,8%)
and Foods (20,6%) as a result of increased raw material prices and volumes,
Financial Services (40,0%) due to increased interest rates and a larger debtors`
book and Producer Services (13,8%) on the back of higher equipment and primary
input sales. This was offset by a 13,7% decline in sales in the Logistics
Services business due to lower grain volumes as a result of the drought and low
carry-in stock. Despite the decline in sales this business maintained its market
share.
Headline earnings
Headline earnings per share for the period under review are 68,5 cents, 10,3%
higher than that achieved for the comparative prior year period. Diluted
headline earnings per share are 63,6 cents, 10,2% higher than the comparative
prior year period. As indicated in the six months` interim results, headline
earnings include a R20 million once-off recognition of a foreign deferred tax
asset. The prior year headline earnings included a once-off foreign exchange
gain of R16 million.
Segmental headline operating profit after dividends received and interest
Continuing operations:
The Producer Services business reported a good first six months. Above average
spending as a result of the good rains in the second six months, combined with
operational improvements, led to a 71,5% and 4,5% improvement in retail and
primary inputs` respective profits for the twelve months under review compared
to the prior year.
Increased selling prices and volumes combined with effective procurement and
operational efficiencies in the Animal Feeds business, saw the Protein division
improve profits over that of the prior year by 4,1%, despite the negative impact
of feed costs and lower selling prices in the Broiler industry.
Improved procurement and operational yields in the Foods business led to a 7,1%
increase in profitability over last year.
The Financial Services business was positively impacted by the larger debtors`
book and improved performance in Africa. Profits improved by 43,8% excluding the
effects of a prior year once-off foreign exchange gain of R31 million.
The Logistics Services business was adversely affected by the drought which
resulted in two years of low maize crops. As a result profit reduced by 39,8%
compared to the prior year.
Net increase in cash collateral deposits, cash and cash equivalents - R78
million (2007: R171 million)
During the period AFGRI arranged new funding lines in excess of R1,1 billion to
fund the growth in its debtor financing business. This is in line with the
Group`s strategy to diversify funding. Significant progress has been made in
restructuring funding to reduce the cost of financing and the dependence on
individual lenders.
The positive net cash position, after including cash collateral deposits, is
R334 million compared to R256 million at 28 February 2007.
Change to the board of directors and year-end
Dr MI Mogari joined the AFGRI board of directors as an executive director, with
effect from 1 February 2008.
The Financial Director, Mr I de W Goosen, having reached the mandatory
retirement age, is leaving the company on 31 May 2008.
As reflected by these results the company changed its year-end from February to
June. Refer note 8.
Prospects
Higher grain prices and the excellent summer rains have resulted in increased
grain plantings and a much larger anticipated crop which is expected to have a
positive impact on the Logistics Services business. This, together with
continued good performances from Producer Services and Animal Feeds, should
result in a satisfactory final four months of the 16 months` period ending 30
June 2008.
By order of the Board
DD de Beer (Non-Executive Chairman)
JD Wright (Managing Director)
7 May 2008
Administration
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 Limited, Standard Bank of SA Limited, The Hongkong and Shanghai
Banking Corporation Limited Auditors: PricewaterhouseCoopers Incorporated
Transfer secretaries: Computershare Investor Services (Proprietary) Limited, 70
Marshall Street, Johannesburg, 2001, PO Box 61051, Marshalltown, 2107, Tel (+27
11) 370-5000 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
Directorate
Non-executive: DD de Beer, CA(SA), Chairman; CA Apsey, BSc, MBA; JJ Claassen,
Joint Vice-Chairman; JJ Ferreira, BSc (Hons) (Civ Eng); JPR Mbau, Diploma in
Banking and Business Management, Joint Vice-Chairman; MM Moloele, Diploma in
Business Management; KL Thoka, BAdmin, Hons (B&A), MBA; FJ van der Merwe, LLB,
MA Executive: JD Wright, BAcc, CA(SA); I de W Goosen, BCom,CA(SA), MI Mogari
(Dr) MBChB, BSc(Med)(Hons), CPFA, EDP Alternate: JH Mooney, BCom, CA(SA)
This announcement is available on sens and afgri`s website at www.afgri.co.za
Date: 07/05/2008 12:00:08 Produced by the JSE SENS Department.
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