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CFO
CFO
CFO - Country Foods Limited - Unaudited interim results for the six months ended
31 March 2008
Country Foods Limited
Incorporated in the Republic of South Africa
(Registration number 2005/018743/06)
Share code: CFO ISIN: ZAE000105052
("Country Foods" or "the company" or "the Group")
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2008
Income statements
Unaudited Reviewed Audited
six six months year
months ended ended
ended 31 March 30
31 March 2007 September
2008 R`000 (1) 2007
R`000 R`000
Revenue 87 148 89 675 171 370
Cost of sales (52 912) (53 360) (111 014)
Gross profit 34 236 36 315 60 356
Other income 7 412 - 5 053
Operating costs (32 181) (20 175) (33 526)
Earnings before interest, tax, 9 467 31 883
depreciation and amortisation 16 140
("EBITDA")
Depreciation and amortisation (3 726) (3 802) (7 755)
Profit before finance costs 5 741 12 338 24 128
Net finance costs (4 017) (3 530) (6 623)
Profit before taxation 1 724 8 808 17 505
Income tax expense (730) (1 485) (4 392)
Profit for the period 994 7 323 13 113
Attributable to:
Equity holders of the 219 5 632 11 498
Group
Minority interests 775 1 691 1 615
Profit for the period 994 7 323 13 113
Reconciliation of headline
earnings:
Earnings attributable to 219 11 498
equity holders of the Group 5 632
Adjusted for:
(Profit)/Loss on sale of - (94)
property, plant and equipment -
Headline earnings attributable 219 11 404
to ordinary shareholders 5 632
Weighted average shares in 128 289 80 516 92 236
issue (`000)
Shares in issue at period end 131 955 92 585 126 455
(`000)
Earnings per share (cents) 0.17 7.0 12.5
Headline earnings per share 0.17 7.0 12.4
(cents)
Note: (1) To ensure that the results are comparable between periods the income
statement for the six months ended 31 March 2007 has been restated for
consistency by reallocating certain expenses from cost of sales to operating
expenses.
Balance sheets
Unaudited Audited
six Reviewed year
months six ended
ended months 30
31 March ended September
2008 31 March 2007
R`000 2007 R`000
R`000
ASSETS
Non-current assets 117 325 117 327 112 788
Property, plant and equipment 51 515 55 210 52 724
Other investment 19 3 19
Loans to related companies - 4 901 -
Loans receivable 3 920 1 070 -
Trade receivables 3 105 2 700 4 949
Intangible assets (2.1)(2.2) 56 022 50 641 52 506
Deferred tax assets 2 744 2 802 2 590
Current assets 119 479 76 540 114 012
Inventories 39 310 18 145 23 658
Loans receivable 2 101 - 1 055
Trade receivables 54 002 36 412 52 942
Other receivables 11 760 18 080 15 571
Cash and cash equivalents 12 306 3 903 20 786
Total assets 236 804 193 867 226 800
EQUITY
Equity attributable to equity 131 778 125 753
holders of the company 91 122
Ordinary share capital and 88 833 54 633 83 464
premium
Non-distributable reserve 588 216 151
Retained earnings 42 357 36 273 42 138
Minority interest 2 125 2 782 2 706
Total equity 133 903 93 904 128 459
Non-current liabilities 29 234 48 837 43 311
Interest-bearing borrowings 12 347 14 058 19 259
Loans from related companies - 16 771 1 815
Non-interest bearing 3 560 5 827 7 884
borrowings
Deferred taxation liability 13 327 12 181 14 353
(2.1)
Current liabilities 73 667 51 126 55 030
Trade and other payables 39 157 22 799 37 564
Short-term borrowings - 2 770 -
Current portion of interest- 13 451 6 299 10 391
bearing borrowings
Taxation payable 5 039 3 236 5 745
Bank overdraft 16 020 16 022 1 330
Total equity and liabilities 236 804 193 867 226 800
Number of shares in issue 131 955 92 585 126 455
(`000)
Net asset value per share 99.9 98.4 99.4
(cents)
Net tangible asset value per 57.4 43.7 57.9
share (cents)
Note: The balance sheet at 31 March 2007 has been restated for the following
adjustments:
(2.1) Recognition of the deferred tax liability amounting to R2 010 832 of
Country Mushrooms (Proprietary) Limited at acquisition, and the resultant impact
on the goodwill recognised in terms of the business combination.
(2.2) A reclassification adjustment to reflect the acquisition of exclusive
rights of distribution of fresh mushrooms from Edulis Zimbabwe. The amount of
R10 518 370 has been reclassified as an intangible asset.
Statements of changes in equity
Shar Non- Retain Total
e distribu ed equit
capi Share table earnin Minori y
tal premium reserves gs ty R`000
R`00 R`000 R`000 R`000 intere
0 st
R`000
Share
premium
R`000
Minori
ty
intere
st
R`000
Balance at 31 March 313 216 36 273 93
2007 54 350 2 782 934
Foreign currency - (65) - (65)
translation reserve - -
movement
Shares issued - cost 33 - - - 33
of acquisition 33 145 178
Share issue expenses - (4 377) - - - (4
377)
Transactions 33 (65) - 28
recognised directly 28 768 - 736
in equity
Profit for the - - - 5 865 (76) 5 789
period
Balance at 30 346 151 42 138 128
September 2007 83 118 2 706 459
Foreign currency - 437 - 437
translation reserve - -
movement
Acquisition of - - - -
subsidiaries
Acquisition of (1 (1
minority interest 356) 356)
Shares issued - cost 5 5 500
of acquisition 5 495
Share issue expenses - (131) - - - (131)
Transactions 5 437 - 4 449
recognised directly 5 364 (1
in equity 356)
Profit for the - - - 219 775 994
period
Balance at 31 March 351 588 42 357 133
2008 88 482 2 125 903
Cash flow statements
Unaudited Audited
six Reviewed year
months six months ended
ended ended 30
31 March 31 March September
2008 2007 2007
R`000 R`000 R`000
Cash (outflow)/inflow from (11 291) (1 111) 2 618
operating activities
Cash utilised by investing ( 2 325) (8 946) (9 194)
activities
Cash (outflow)/inflow from (9 554) 14 931 43 025
financing activities
(Decrease)/Increase in cash (23 170) 36 449
and cash equivalents 4 874
Cash on acquisition of - 177 177
subsidiary company
Cash and cash equivalents at 19 456 (17 170) (17 170)
beginning of the period
Cash and cash equivalents at (3 714) (12 119) 19 456
end of the period
Segment reports
Unaudited Audited
six Reviewed year ended
months six months 30
ended ended September
31 March 31 March 2007
2008 2007 R`000
R`000 R`000
By geographical segments
Revenue
Local
Mushrooms 25 372 26 209 50 663
Beverages 33 712 34 489 60 036
Other 8 794 - 3 356
Foreign
Mushrooms 19 270 28 977 57 315
87 148 89 675 171 370
Assets and liabilities
Local
Non-current assets 104 913 116 760 100 026
Current assets 93 820 68 943 93 345
Liabilities (85 466) (94 407) (84 432)
113 267 91 296 108 939
Foreign
Non-current assets 12 412 567 12 762
Current assets 25 659 7 597 20 667
Liabilities (17 435) (5 556) (13 909)
20 636 2 608 19 520
By lines of business
Revenue
Mushrooms - wild and exotic 21 267 32 535 63 078
Mushrooms - cultivated 23 375 22 651 44 900
Beverages 33 712 34 489 60 036
Other 8 794 - 3 356
87 148 89 675 171 370
Profit for the period
Mushrooms - wild and exotic 1 334 2 830 7 731
Mushrooms - cultivated (290) 1 284 1 967
Beverages 377 1 518 1 973
Other (1202) - (173)
219 5 632 11 498
OVERVIEW
The directors of Country Foods present the unaudited results for
the six months ended 31 March 2008 ("2008 interims").
Country Foods is a holding company of wholly-owned subsidiaries
that operate in the niche, high quality value-added food and
beverage product markets, through its subsidiaries Edulis Mushrooms
(Proprietary) Limited ("Edulis"), Country Mushrooms (Proprietary)
Limited ("Country Mushrooms") and Fruitime Fruit Juices
(Proprietary) Limited ("Fruitime").
The first six months of operation in the current financial year
have proven to be particularly challenging. The end of March is the
highest point of the wild mushroom harvesting and processing
season, resulting in a peak in inventory and receivables.
Performance of the local operating subsidiaries has produced
results well below expectations. A combination of production
downtime, caused by power outages, as well as adverse weather
conditions have contributed to the under performance of the
operating subsidiaries. While demand for the Group`s products has
remained strong under softer market conditions, the lower
production volumes have impacted on the interim results.
Action has been taken to avoid downtime and production losses due
to power outages, by acquiring and commissioning standby power
generators for the Country Mushrooms and Fruitime operations. In
addition, further rationalisation and consolidation of the
distribution operations and shared infrastructure will produce
costs savings in the second half of the current financial year. The
recent acquisition of wholesale and distributor, Mediterranean Fish
Centre ("The Mediterranean"), will further contribute to the
integration of the sales and distribution operations of the Group
and promote greater market penetration for the Group`s products.
Although the acquisition of The Mediterranean operations has taken
longer than anticipated to complete, the application to the
Competition Commission was successfully completed but the section
34 process had to run in the prescribed period. The consolidation
of The Mediterranean operations and infrastructure in the last
quarter of the current financial year is expected to contribute to
the profitability for the year and in the longer term to the
strength of the Group.
We are also pleased to report that, at this time, production
volumes at Country Mushrooms and Fruitime have returned to budgeted
levels. The offshore subsidiaries have shown good progress and will
continue to contribute to the revenues of Edulis during the second
half of the current financial year.
FINANCIAL RESULTS
Group revenue for the six month period was R87.1 million (2007:
R89.7 million). EBITDA decreased to R9.5 million (2007: R16.1
million).
Headline earnings and profit attributable to equity holders of the
Group decreased by almost 100% for the same period in the previous
year to R0.2 million (2007: R5.6 million). Headline earnings per
share decreased by almost 100% to 0.17 cent (2007: 7.0 cents).
BASIS OF PREPARATION
Statement of compliance
The 2008 interims comprise a balance sheet at 31 March 2008, an
income statement, a statement of changes in equity and a summarised
cash flow statement for the six months ended 31 March 2008. The
2008 interims have been prepared in accordance with the recognition
and measurement criteria of International Financial Reporting
Standards ("IFRS"), the presentation and disclosure requirements of
IAS 34, Interim Financial Reporting and the Companies Act 61, 1974
as amended. The Interim Financial Reporting is in compliance with
the Listings Requirements of the JSE Limited.
The accounting policies followed are consistent with those used in
the annual financial statements for the year ended 30 September
2007.
These 2008 interims have not been audited or reviewed by the
company`s auditors, KPMG Inc. The 2008 interims do not need to be
audited or reviewed by the auditors but the board has decided to
ask KPMG to start the review of the 2008 interims by the second
week of August 2008 and an announcement will be released on SENS
reconciling any changes that were made as a result of the review or
stating that no reconciliation is required.
Basis of measurement
The 2008 interims have been prepared on the historical cost basis
except for certain financial instruments measured at fair value.
PROSPECTS
Country Food`s local subsidiaries are expected to make a slow
recovery in the months ahead, under difficult climatic and market
conditions. The benefits of rationalising production and
distribution operations will contribute to the recovery and the
overseas operations will continue to grow and make a contribution
to the Group`s profits.
The Group will also actively pursue acquisitions compatible with
its growth and expansion strategies. The recent acquisition of The
Mediterranean will contribute to both revenue and the bottom line
and facilitate greater market penetration for all of the Group`s
products.
SUBSEQUENT EVENTS
The directors are not aware of any matter or circumstance arising
since the end of the period, which significantly affects the
financial position of the Group or the results of its operations as
presented in these results other than that mentioned hereunder.
DIVIDEND POLICY
Initially all earnings generated by the Group will be utilised to
fund future growth and acquisitions. The company will periodically
reconsider its cash position with the intention to distribute
dividends to shareholders as soon as prevailing circumstances
allow.
Accordingly, in line with Group policy, no dividend has been
declared for the interim period.
STATEMENT ON GOING CONCERN
The 2008 interims have been prepared on the going-concern basis
since the directors have every reason to believe that the company
has adequate resources in place to continue in operation for the
foreseeable future.
CHANGES TO THE BOARD OF DIRECTORS
Appointments:
Mr PJ Makosholo was appointed as a non-executive director with
effect from 8 February 2008.
Mr TM Heslop was appointed as the Executive Financial Director with
effect from 10 April 2008.
Resignations:
Mr RL Liversage resigned as the Executive Financial Director with
effect from 9 April 2008.
Mr JC Fourie resigned as a non-executive director of the company
with effect from 9 April 2008.
The Board wishes to thank the out-going directors for their support
and contribution and look forward to working together with new
directors for the future success of the company.
APPRECIATION
Our sincere appreciation is extended to all of our employees for
their efforts and performance. And a note of thanks to all our
board members for their invaluable input and guidance.
To all our shareholders, a special thank you for your continued
support. Your loyalty and confidence in our Group is greatly
appreciated.
On behalf of the Board
RG Casaletti TM
Heslop
Chief Executive Officer Financial
Director
30 June 2008
CORPORATE INFORMATION
Non executive directors: VI Zwane (Chairman), PJ Makosholo
Executive directors: RG Casaletti (Chief Executive Officer); TM Heslop
(Financial Director); PB Swanevelder
Company secretary: Premium Corporate Consulting Services (Proprietary) Limited
Registration number: 2005/018743/06
Registered address: 40 Electron Avenue, Isando
Postal address: PO Box 1078, Jukskei Park, 2153
Telephone: (011) 974 4043
Facsimile: (011) 974 5378
Transfer secretaries: Computershare Investor Services (Proprietary) Limited
(PO Box 61061, Marshalltown, 2107)
Designated Adviser: Merchant Sponsors (Proprietary) Limited
(PO Box 41480, Craighall, 2024)
Date: 30/06/2008 12:06:01 Produced by the JSE SENS Department.
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