| Mon 5 Oct 2009, 16:51 | | ZED - Zeder Investments Limited - Interim results for the six months ended 31 |
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ZED
ZED
ZED - Zeder Investments Limited - Interim results for the six months ended 31
August 2009
Zeder Investments Limited
Incorporated in the Republic of South Africa
(Registration number: 2006/019240/06)
Share code: ZED
ISIN: ZAE000088431
("Zeder" or "the company")
INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2009
- Recurring headline earnings - up 17,1%
- Recurring headline earnings per share - down 9,5%
- Headline earnings per share- down 20,4%
- Net asset value per share R2,30
Condensed income statement
for the six months ended 31 August 2009
Unaudited Audited
31-Aug 31-Aug 28-Feb
2009 2008 2009
Notes Rm Rm Rm
Income
Investment income 24,5 13,5 24,9
Fair value gains and losses on 12,7 18,2 20,5
financial instruments
Other operating income 0,5 7,3 7,4
Total income 37,7 39,0 52,8
Expenses
Management and other fees 3 (20,3) (17,0) (35,6)
Performance fee 3 (19,9)
Other (2,3) (2,4)
Total expenses (20,3) (19,3) (57,9)
Results of operating activities 17,4 19,7 (5,1)
Finance costs (0,5) (3,6)
Share of profits of associated 66,1 79,1 175,0
companies
Net income before tax 83,0 98,8 166,3
Taxation 4 (3,9) (5,2) 2,3
Net income of the group 79,1 93,6 168,6
Attributable to equity holders of 79,1 93,6 168,6
the company
Non-headline items 5 6,6 (10,5) (15,2)
Headline earnings 85,7 83,1 153,4
Earnings per share (cents)
- attributable/diluted attributable 10,1 15,4 27,7
- headline/diluted headline 10,9 13,7 25,2
Dividend per share (cents)
- final 7,0
Number of shares (million)
- in issue 978,1 611,3 611,3
- weighted average 784,7 606,6 609,0
Condensed statement of comprehensive
income
Net income of the group 79,1 93,6 168,6
Share of other comprehensive income of (2,8) 6,1
associated companies
Total comprehensive income for the period 76,3 93,6 174,7
Attributable to equity holders of the 76,3 93,6 174,7
company
Contribution to headline earnings
for the six months ended 31 August 2009
Unaudited
31-Aug 31-Aug 28-Feb
2009 2008 2009
Rm Rm Rm
Recurring headline earnings 74,8 63,9 148,7
Equity accounted earnings from associates 72,8 68,6 159,8
Investment and other income 19,9 9,5 20,2
Management fee (17,9) (14,2) (31,3)
Non-recurring headline earnings 10,9 19,2 4,7
Marked-to-market profits 10,9 15,6 18,6
Net underwriting fee (Pioneer & MGK) 3,6 3,6
Performance fee (17,5)
Total headline earnings 85,7 83,1 153,4
Statistics
Recurring HEPS (cents) 9,5 10,5 24,4
Condensed statement of financial position
at 31 August 2009
Unaudited Audited
31-Aug 31-Aug 28-Feb
2009 2008 2009
Notes Rm Rm Rm
Assets
Investment in associated companies 2 1 668,3 1 360,2 1 445,3
Financial assets
Equity securities 182,1 272,6 249,2
Loans and advances 38,7
Income tax receivable 4 1,5 2,8
Receivables 0,4 0,3 0,7
Cash and cash equivalents 425,0 42,6 27,9
Total assets 2 277,3 1 675,7 1 764,6
Equity
Ordinary shareholders` funds 2 250,4 1 644,4 1 725,4
Total equity 2 250,4 1 644,4 1 725,4
Liabilities
Deferred income tax 1,7 7,6
Income tax liabilities 4 6,7
Trade and other payables 25,2 17,0 39,2
Total liabilities 26,9 31,3 39,2
Total equity and liabilities 2 277,3 1 675,7 1 764,6
Net asset/tangible asset value per share 230,1 269,0 282,0
(cents)
Condensed statement of changes in owners` equity
for the six months ended 31 August 2009
Unaudited Audited
31-Aug 31-Aug 28-Feb
2009 2008 2009
Rm Rm Rm
Ordinary shareholders` equity at 1 725,4 1 566,4 1 566,4
beginning of period
Net shares issued 491,5 14,7 14,6
Total comprehensive income 76,3 93,6 174,7
Dividend paid (42,8) (30,3) (30,3)
Ordinary shareholders` equity at end of 2 250,4 1 644,4 1 725,4
period
Condensed statement of cash flows
for the six months ended 31 August 2009
Unaudited Audited
31-Aug 31-Aug 28-Feb
2009 2008 2009
Rm Rm Rm
Cash (utilized in) /generated from (9,0) (16,9) 16,1
operating activities
Taxation paid (0,8) (1,0) (1,8)
Net cash flow from operating (9,8) (17,9) 14,3
activities
Net cash flow from investment (80,4) (73,7) (120,6)
activities
Net cash flow from financing 487,3 (30,3) (30,3)
activities
Net increase/(decrease) in cash and 397,1 (121,9) (136,6)
cash equivalents
Cash and cash equivalents at 27,9 164,5 164,5
beginning of period
Cash and cash equivalents at end of 425,0 42,6 27,9
period
Notes to the condensed financial statements
for the six months ended 31 August 2009
1 Basis of presentation and accounting policies
The condensed interim consolidated financial statements have been
prepared in terms of IAS34 - Interim Financial Reporting and should be
read in conjunction with the annual financial statements for the year
ended 28 February 2009, which have been prepared in accordance with
IFRS. The accounting policies applied in the preparation of the
interim consolidated financial statements are consistent with those
used in the previous year, except for the standards noted below which
is effective for the financial year beginning 1 March 2009: IAS 1
(revised) - `Presentation of financial statements` and IFRS 8 -
`Operating Segments`. The adoption of these standards has no material
effect on the results, nor has it required any restatement of the
results.
2 Investment in associated companies
Unaudited Audited
31-Aug 31-Aug 28-Feb
2009 2008 2009
Rm Rm Rm
Carrying value
Unlisted 1 668,3 1 360,2 1 445,3
3 Management and performance fees
The management fee is calculated at 2% p.a. (exclusive of VAT) on the
net asset value of the group (excluding cash) at the end of every
month and 0,15% p.a. (exclusive of VAT) on the daily average cash
balances. The management fee is accrued at the end of every month. The
performance fee is calculated on the last day of the financial year at
10% p.a. on the outperformance of the group`s net asset value above
the equally weighted FTSE-JSE Beverage Total Return Index and FTSE-JSE
Food Producers Total Return Index over any financial year. The
performance fee is accrued at each year end.
4 Taxation
Taxation is provided on the net fair value adjustments to the
company`s investment portfolio, using an effective capital gains tax
rate of 14%. Other income is taxed at 28%, net of the apportioned
management and performance fee expenses.
5 Non-headline items
Unaudited Audited
31-Aug 31-Aug 28-Feb
2009 2008 2009
Rm Rm Rm
Non-headline items of associated 6,6 (10,5) (15,2)
companies (after tax)
6 Commitments and contingencies
The company did not have any capital commitments or contingencies at
31 August 2009.
7 Related-party transactions
The fee expenses were incurred with PSG Group Limited in terms of
agreements in place.
Commentary
Zeder raised R495 million by means of a rights offer at R1,35 per share during
the period under review. The offer was oversubscribed by more than 40%. Zeder`s
current cash at hand, together with a R300 million funding facility, will
provide it with the necessary resources to pursue attractive identified
investment opportunities.
Zeder invests in businesses that offer value and have strong management teams.
Its investment philosophy remains to add value to its underlying investments, to
provide them with capital where appropriate and to support management. Zeder
prefers not to be involved in its investments` operational decision making,
unless it is strategically required or the operations do not perform
satisfactorily.
KWV restructuring
The performance of KWV`s own operations has been unsatisfactory in the past. It
is an asset rich business with significant potential. However, it always formed
part of a larger group which had the luxury of an investment in the consistently
performing Distell. The following table sets out a simplified breakdown of the
old KWV Group`s financial results:
Year ended 30-Jun-09 30-Jun-08
Headline earnings
- Continuing own (R17,9 m) R31,0m
operations
- Distell R158,0m R153,8m
Equity
- Own operations R1 026,1m R839,3m
- Distell R710,9m R735,7m
Return on Equity
- Continuing own (1,7%) 3,7%
operations
- Distell 22,2% 20,9%
The inconsistent performance of KWV`s own operational business and some
corporate excesses necessitated a more business-like approach. Zeder as a large
shareholder opted to act in the best interest of all shareholders and drove the
split of KWV`s own business from the Distell investment. The restructuring of
the KWV Group consequently followed in terms of which its operational business
was unbundled to shareholders in August 2009. Shareholders of the old KWV Group
are now invested in two separate entities, namely:
- Capevin Holdings, with its core asset an effective interest of 15% in Distell;
and
- KWV Holdings, the operational entity and owner of the KWV operational
business.
These two companies operate independently, each with a newly elected board of
directors and chairman.
The advantages of the aforementioned unbundling include:
- A simplified group structure;
- The specific performance of KWV`s own operations will from now on be evaluated
separately;
- The full Distell dividend, via Capevin, will in future flow straight through
to shareholders; and
- The board of KWV Holdings has been reduced from 16 to 10 members with a new
chairman, Thys du Toit. In addition, the non-executive directors` fees have been
reduced by 70%.
We believe with the changes made KWV Holdings should become a company yielding a
satisfactory return on assets in future. It is currently undertaking a rights
offer to raise R150 million to reduce financial risk and provide the company
with a platform to pursue growth opportunities. Zeder has signalled its intent
as a long-term investor by underwriting the offer together with Vinpro on a
78:22 basis.
Kaap Agri
Zeder increased its stake in Kaap Agri to 35,7%. Both Kaap Agri`s own
operational business and its investment in Pioneer Foods are expected to deliver
attractive returns.
Results
Recurring headline earnings increased by 17,1% to R74,8 million. However,
recurring headline earnings per share decreased by 9,5% to 9,5 cents and
reportable headline earnings per share by 20,4% to 10,9 cents per share. This
was mainly attributable to the increased number of Zeder shares in issue after
its aforementioned rights offer together with disappointing results from KWV`s
own operational business having made a headline loss of R17,9 million from its
continuing operations for the year ended 30 June 2009.
Zeder presently equity accounts eight of its investments` headline earnings,
which amounted to R72,8 million (2008: R68,6 million) for the period under
review. Apart from KWV`s operational business, all of the associated companies
performed well amidst challenging economic conditions.
Subsequent to year-end, Zeder`s investment portfolio increased by 9% to R1,85
billion, with its investments in Kaap Agri and Capevin Holdings currently
representing approximately 75% of its portfolio. Zeder`s net asset value per
share was R2,30 as at 31 August 2009. The value per Zeder share at that date was
R1,91, calculated using unlisted market prices. The book value of Zeder`s
investments in associated companies is tested for potential impairment at each
reporting period. The directors are satisfied that the fair value of these
investments exceeds book value.
Prospects
We remain bullish about the agricultural and related sectors. Zeder therefore
continues to acquire related assets at a discount to its intrinsic value and, in
so doing, should grow Zeder`s recurring headline earnings and intrinsic value.
Directors
Wynand Greeff and George Eksteen were appointed to Zeder`s board as financial
director (effective 21 May 2009) and as a non-executive director (effective 1
September 2009), respectively.
Dividends
It is Zeder`s policy to only declare a final dividend at year-end.
On behalf of the Board
Jannie Mouton Antonie Jacobs
Chairman Chief executive officer
Stellenbosch
5 October 2009
Directors
JF Mouton (chairman), AE Jacobs*(CEO), CA Otto, WL Greeff*(FD),
MS du Pre le Roux+,GD Eksteen+, LP Retief+
(* executive, + independent non-executive)
Secretary and registered office
PSG Corporate Services (Pty) Ltd, 1st Floor, Ou Kollege,
35 Kerk Street, Stellenbosch, 7600 PO Box 7403, Stellenbosch, 7599
Transfer secretaries
Computershare Investor Services (Pty) Ltd, 70 Marshall Street, Johannesburg 2001
PO Box 61051, Marshalltown 2107 Tel 011 370 7700 Fax 011 688 7716
Sponsor
PSG Capital
Date: 05/10/2009 16:51:01 Produced by the JSE SENS Department.
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