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SOV
SOV
SOV - Sovereign Food Investments - Unaudited Group Results for the six months
ended 31 August 2009 and further cautionary announcement
Sovereign Food Investments Limited
Incorporated in the Republic of South Africa, Registration number 1995/003990/06
JSE code: SOV & ISIN: ZAE000009221, ("Sovereign" or "the Group")
Unaudited Group Results for the six months ended 31 August 2009 and further
cautionary announcement
- 419% increase in profit before interest and taxation
- 168% increase in earnings per share to 70,5 cents per share
- 49% increase in turnover
- 18% reduction in net gearing
Income Statement
Unaudited Audited
six months
ended 31 August
year ended
28 February
2009 2008 2009
R`000 R`000 R`000
Revenue 544 968 365 246 909 121
Operating income/(loss) 77 637 (11 657) 71 011
Depreciation 12 022 8 916 20 364
Profit/(loss) before interest
and taxation 65 615 (20 573) 50 647
Net interest paid 33 375 22 304 56 173
Net operating income/(loss) 32 240 (42 877) (5 526)
Normal and deferred taxation 8 991 (8 531) (5 034)
Retained earnings/(accumulated
loss) for the period 23 249 (34 346) (492)
Weighted average number of
shares in issue (000`s) 33 003 33 003 33 003
Earnings/(loss) per share
(cents) 70,5 (104,1) (1,5)
Headline earnings/(loss) per
share (cents) 70,5 (104,1) (1,5)
Diluted earnings/(loss) per
share (cents) 70,3 (102,9) (1,5)
Diluted headline
earnings/(loss) per share
(cents) 70,3 (102,9) (1,5)
Reconciliation between
earnings/(loss) and headline
earnings/(loss)
Earnings/(loss) after taxation 23 249 (34 346) (492)
Reconciling items: - - -
Headline earnings/(loss) after
taxation 23 249 (34 346) (492)
Balance Sheet
Unaudited Audited
six months
ended 31 August
year ended
28 February
2009 2008 2009
R`000 R`000 R`000
Assets
Non-current assets
Property, plant and equipment 813 587 703 729 780 130
Current assets 313 345 267 459 320 427
Cash and cash equivalents 104 510 50 914 82 679
Inventory and biological
assets 121 015 118 747 124 423
Trade and other receivables 87 820 97 798 113 325
Total assets 1 126 932 971 188 1 100 557
Equity and liabilities
Capital and reserves
Equity 309 503 252 595 286 493
Interest-bearing debt 536 830 479 931 548 966
Long-term portion 446 406 362 074 457 981
Short-term portion 90 424 117 857 90 985
Deferred taxation 106 054 93 564 97 062
Trade and other payables 174 545 145 098 168 036
Total equity and liabilities 1 126 932 971 188 1 100 557
Cash Flow Statement
Unaudited Audited
six months
ended 31 August
year ended
28 February
2009 2008 2009
R`000 R`000 R`000
Cash generated/(utilised)
from operations before
working capital changes 77 637 (11 657) 71 056
Changes in working capital 35 422 (46 747) (45 012)
Cash generated/(utilised)
from operating activities 113 059 (58 404) 26 044
Net interest paid (33 375) (22 304) (56 173)
Taxation received/(paid) - 3 476 3 476
Net cash flows from
operating activities 79 684 (77 232) (26 653)
Net cash flows from
investing in property, plant
and equipment (45 479) (160 252) (248 048)
Net cash flows from debt
(repaid)/raised (12 374) 163 244 232 226
Net increase/(decrease) in
cash and cash equivalents 21 831 (74 240) (42 475)
Cash and cash equivalents at
beginning of period 82 679 125 154 125 154
Cash and cash equivalents at
end of period 104 510 50 914 82 679
Statement of Changes in Equity
Net
profit Share-
28 February for the based 31 August
2009 period payments 2009
R`000 R`000 R`000 R`000
Share capital 330 - - 330
Share premium 14 305 - - 14 305
Share-based
payments 301 - (239) 62
Revaluation
reserve 28 848 - - 28 848
Retained earnings 242 709 23 249 - 265 958
Total 286 493 23 249 (239) 309 503
Net
loss Share-
28 February for the based 31 August
2008 period payments 2008
R`000 R`000 R`000 R`000
Share capital 330 - - 330
Share premium 14 305 - - 14 305
Share-based
payments 257 - - 257
Revaluation
reserve 28 848 - - 28 848
Retained earnings 243 201 (34 346) - 208 855
Total 286 941 (34 346) - 252 595
Commentary
Results for the period under review
The Group experienced a return to profitability during the period under review
with turnover increasing 49% on the back of a 30% increase in volumes and a 15%
increase in poultry prices. Total production costs fell 5% per kg sold and as a
result profit before interest and taxation increased 419% to R65,6 million from
a loss of R20,6 million for the six months ended 31 August 2008.
Feed costs fell 6% per kg sold as a result of lower commodity prices and
improved production efficiencies. Non-feed costs fell 3% as a result of the cost
reduction initiatives undertaken by the Group.
Due to the expansion over the past two years, finance costs have increased 15%
per kg sold. However, the Group has a significant portion of its debt with
floating rates and therefore the decline in interest rates during the period
under review has had a positive impact on the amount of finance charges paid.
Working capital has been well managed and despite an increase in turnover, the
Group experienced a 52% reduction in net working capital utilised as at 31
August 2009 to R34 million from R71 million at the end of the comparative
period.
As a result of the Group`s improved performance, net gearing has fallen to 140%
from 170% for the comparative period.
Industry conditions
National poultry prices declined from the first quarter to the second quarter of
the period under review as the increased strength of the Rand led to increases
in import volumes. However, national and international grain and protein prices
have declined since February 2009 as a result of large international crops and a
reduction in the international demand for grains and proteins.
Prospects
While the Group expects a recovery in poultry prices and a reduction in input
costs due to lower grain and protein prices, the strengthening of the Rand will
continue to be of importance for the remainder of the year.
Accounting policies
The condensed consolidated interim financial statements have been prepared in
accordance with International Financial Reporting Standards ("IFRS") and comply
with the requirements of International Accounting Standard 34 - Interim
Financial Reporting. The accounting policies are consistent with those applied
by the Group for the year ended 28 February 2009.
These results have not been reviewed or reported on by the Group`s auditors.
Interim dividend
In accordance with the Group`s intention to improve its gearing position, the
Board of Directors of Sovereign ("the Board") considers it prudent not to
propose an interim dividend for the period under review.
Further cautionary announcement
Shareholders are referred to the cautionary announcement dated 4 September 2009
and are advised that the Group remains involved in discussions which, if
successfully concluded, may have a material effect on the price of the company`s
securities.
Accordingly, shareholders are advised to continue to exercise caution when
dealing in the company`s shares until a further announcement is made.
By order of the Board
CP Davies MJB Davis
Non-executive Chairman Chief Executive Officer
29 September 2009
e-mail: 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* (Chairman), MJ Hankinson*, KT Kweyama*, PM Madi*, LM Nyhonyha*, MJB
Davis, C Coombes, BJ van Rensburg, GG Walter (*Non-Executive)
www.sovfoods.co.za
Date: 29/09/2009 17:17:01 Produced by the JSE SENS Department.
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