| Mon 18 May 2009, 17:30 | | SOV - Sovereign - Audited Group Results for the year ended 28 February |
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SOV
SOV
SOV - Sovereign - Audited Group Results for the year ended 28 February
2009 and notice of annual general meeting
Sovereign Food Investments Limited
Incorporated in the Republic of South Africa
Registration number 1995/003990/06
JSE code: SOV
ISIN: ZAE 000009221,
("Sovereign" or "the Group" or "the Company")
Audited Group Results
for the year ended 28 February 2009 and notice of annual general meeting
Turnover up 56%
Volume growth up 47%
Strong recovery in second half
Income Statement
2009 2008
R`000 R`000
Revenue 909 121 581 232
Operating income 71 011 87 546
Depreciation 20 364 13 207
Net interest paid 56 173 10 912
(Loss)/profit before taxation (5 526) 63 427
Normal and deferred taxation (5 034) 16 711
(Loss)/profit after taxation (492) 46 716
Retained earnings at beginning of year 243 201 196 485
Retained earnings at end of year 242 709 243 201
Weighted average number of shares in issue
(000`s) 33 003 33 003
(Loss)/earnings per share (cents) (1,5) 141,6
Headline (loss)/earnings per share (cents) (1,5) 155,0
Diluted headline (loss)/earnings per share
(cents) (1,5) 153,3
Reconciliation between earnings and headline
earnings
(Loss)/profit after taxation (492) 46 716
Reconciling items:
Disposal of property, plant and equipment - 6 168
Taxation effect - (1 728)
Headline (loss)/profit after taxation (492) 51 156
Balance Sheet
2009 2008
R`000 R`000
Assets
Non-current assets
Property, plant and equipment 780 130 552 446
Current assets 320 427 259 240
Inventory 39 081 26 260
Biological assets 85 342 63 198
Trade and other receivables 113 325 44 628
Cash and cash equivalents 82 679 125 154
Total assets 1 100 557 811 686
Equity and liabilities
Capital and reserves
Share capital and premium 14 936 14 892
Non-distributable reserve 28 848 28 848
Retained earnings 242 709 243 201
Shareholders` interest 286 493 286 941
Liabilities
Long-term loans 548 966 316 740
Long-term portion 457 981 246 566
Short-term portion 90 985 70 174
Deferred taxation 97 062 98 619
Trade and other payables 168 036 109 386
Total equity and liabilities 1 100 557 811 686
Cash Flow Statement
2009 2008
R`000 R`000
Cash generated from operations before working
capital changes 71 056 87 546
Changes in working capital (45 012) 23 508
Cash generated from operating activities 26 044 111 054
Interest paid (56 173) (10 912)
Taxation received/(paid) 3 476 (8 131)
Net cash flow from operating activities (26 653) 92 011
Dividend paid - (20 297)
Net cash flow after dividend paid (26 653) 71 714
Net cash flows from investing in property, plant
and equipment (248 048) (265 552)
Net cash flows from debt raised 232 226 201 434
Net (decrease)/increase in cash and cash
equivalents (42 475) 7 596
Cash and cash equivalents at beginning of year 125 154 117 558
Cash and cash equivalents at end of year 82 679 125 154
Statement of Changes in Equity
Share Share Share Retained
2009 capital premium options NDR earnings Total
Opening
balance 330 14 305 257 28 848 243 201 286 941
Share
options - - 44 - - 44
Net profit
for the
year - - - - (492) (492)
Closing
balance 330 14 305 301 28 848 242 709 286 493
2008
Opening
balance 330 34 602 199 - 196 485 231 616
Dividend
paid - (20 297) - - - (20 297)
Share
options - - 58 - - 58
Revaluation
of land and
buildings - - - 28 848 - 28 848
Net profit
for the
year - - - - 46 716 46 716
Closing
balance 330 14 305 257 28 848 243 201 286 941
Commentary
Results for the period under review
The Group staged a strong recovery in the second half of the period
under review, which can be attributed to a strong operational
performance and an improved poultry market. This strong operational
performance in the second half offset the loss suffered due to the
unfavourable trading conditions during the first half of the period
under review.
The Group saw turnover for the year increase by 56% to just over R900
million, which was as a result of 47% volume growth and a firmer selling
price in the last six months of the year. Volume growth was especially
strong in the second half of the year under review with an increase in
volume of 62% over the previous comparable period.
The increase in volumes has come about as a result of a higher asset
base with R248 million being spent on property, plant and equipment
during the period under review. This capital expenditure has been funded
predominantly out of long-term liabilities resulting in total bank
funding increasing to R549 million at the end of the period from R317
million at the end of the previous period.
As the Group purchases forward its maize and other raw materials, it was
not able to take advantage of the relatively lower commodity prices in
the second half of the year and therefore its net feed cost was only 4%
lower in the second half of the year than in the first half of the year.
Net gearing, being total bank funding less cash on hand to shareholders
equity, has increased to 163% from 67% at the end of the previous
period. Finance charges increased to R56 million as a result of the
increase in debt.
The global financial crisis has impacted on the Group`s performance in
that the Group had to curtail certain planned capital expenditure during
the period under review as the Groups` bankers faced liquidity and
lending constraints. With that in mind, the Groups` bankers have shown
strong support for the Group during this financial crisis and the Group
expects to retain positive relationships with its bankers going forward.
Operations overview
The Groups` expansion plans, which began two years ago, are nearing
completion. Since the beginning of the expansion the Group has
constructed over 100 000 m2 of additional environmentally controlled
poultry housing, and has converted all of its older houses to be
environmentally controlled.
The R62 million state-of-the-art hatchery has reached its targeted first
phase production of just over 900 000 birds per week, with a capacity to
produce 2 000 000 birds per week in the long term.
Additional farming space has resulted in a volume increase of 47% over
that of the previous period, and this increased volume is being
processed in an abattoir, which has been upgraded with new killing and
evisceration equipment, two new production lines and a third high-
capacity spiral freezer.
The Group is nearing completion of its feedmill upgrade, which will have
the capacity of producing 20 000 tons of feed per month.
Industry conditions
Poultry imports have declined significantly due to a drop in global
production and firmer poultry prices. Pricing during the first three
months of calendar year 2009 increased by an average of 26% from the
previous corresponding period.
Maize and soya prices reduced sharply since June 2008 as a result of the
decline in international prices and the good local harvest; both are
currently trading at 52-week lows. It is expected that maize and soya
prices will continue to decrease due to harvest pressure over the next
three months.
Prospects
The Group will be able to utilise its expanded facilities for the full
year and accordingly expects to increase volumes significantly over the
period under review.
Consumer buying trends continue to show an increase in choosing poultry
as the cheapest source of protein and it is expected that pricing will
be up to 10% stronger in the forthcoming year.
The hedging position of the Group in respect of maize was completed at
the end of April 2009 allowing the Group to take advantage of the lower
maize prices. It is expected that the average price of feed will be
approximately 5% less in the forthcoming year.
In addition, non-feed cost on a per unit basis for the forthcoming year
is expected to be at the same level as the period under review.
The Group has committed itself to further capital expenditure of R60
million in the forthcoming year in order to complete the feedmill
upgrade, increase cold storage capacity, meet commitments in terms of
contractual land acquisition, and purchase equipment needed to meet
contractual customer contracts. This capital expenditure will all be
incurred in the first six months of the forthcoming year and will be
financed predominantly from cash resources and operational cash flows.
Despite the current economic challenges being experienced by the global
economy, the Group has a positive outlook for the year ahead. The Group
expects to reduce its debt: equity ratio to more conservative levels by
the end of the forthcoming year.
The Group`s shareholders are furthermore referred to the joint
announcement by Sovereign and Afgri Limited on 15 May 2009 in respect of
the proposed reverse listing of Afgri`s Food Division into Sovereign.
DIRECTORATE
Gerald Walter, Sales and Marketing Director, was appointed as an
executive director of the Group with effect from 23 September 2008.
Gerald was previously sales manager for one of the largest national
poultry producers and brings a wealth of industry experience to the
Group. In accordance with good corporate governance policies, Mark
Manley stepped down as an executive director but has remained as
director of the Group`s subsidiaries.
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the annual general meeting of the Company
will be held at 09:00 on Wednesday, 1 July 2009 at the registered
offices of the Company at Uitenhage, Eastern Cape.
Dividend
The Group has made a substantial investment in production capacity
during the year under review and this expansion is expected to enhance
the earnings in the future. Due to this expansion the directors consider
it prudent not to declare a dividend for the year under review.
Accounting policies
The condensed consolidated audited annual financial statements have been
prepared in accordance with International Financial Reporting Standards
and are consistent with those applied in previous years.
These results have been audited by the Group`s independent auditors, PKF
(PE) Inc. Their unqualified audit report, dated 21 April 2009, is
available for inspection at the registered offices of the Company.
By order of the board
CP Davies MJB Davis
Non-executive Chairman Chief Executive Officer
18 May 2009
Email: info@sovfoods.co.za
Transfer secretaries
Computershare Investor Services (Pty) Limited, PO Box 61051,
Marshalltown 2107, Gauteng
Sponsor
Barnard Jacobs Mellet Corporate Finance (Pty) Limited
Directorate
CP Davies* (Non-executive Chairman), MJB Davis (Chief Executive
Officer), C Coombes, MJ Hankinson*, KT Kweyama*, Prof PM Madi*, LM
Nyhonyha*, BJ van Rensburg, GG Walter
(*Non-executive)
www.sovfoods.co.za
Date: 18/05/2009 17:30:01 Produced by the JSE SENS Department.
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