| Tue 25 May 2010, 17:15 | | RBW - Rainbow Chicken Limited - Abridged audited results for the year ended 31 |
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RBW
RBW
RBW - Rainbow Chicken Limited - Abridged audited results for the year ended 31
March 2010 and cash dividend declaration
RAINBOW CHICKEN LIMITED
("Rainbow" or "the Group" or "the company")
(Registration number 1966/004972/06)
JSE share code: RBW ISIN: ZAE000019063
ABRIDGED AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2010
AND CASH DIVIDEND DECLARATION
SALIENT FEATURES
Revenue UP 2,1%
Operating profit UP 22,6%
Headline earnings per share UP 9,9%
Total dividend per share UP 11,8%
BALANCE SHEET
31 March 31 March
R`000 2010 2009
Assets
Non-current assets
Property, plant and equipment 1 464 929 1 383 196
Goodwill 287 444 287 444
Deferred income tax assets 5 796
1 752 373 1 676 436
Current assets
Inventories 538 413 543 925
Biological assets 422 798 429 553
Trade and other receivables 1 154 647 987 503
Derivative financial instruments 6 295
Tax receivable 8 558 6 965
Cash and cash equivalents 539 067 528 084
2 663 483 2 502 325
Total assets 4 415 856 4 178 761
Equity
Capital and reserves 2 660 182 2 485 910
Liabilities
Non-current liabilities
Deferred income tax liabilities 320 322 243 709
Post-retirement medical obligation 94 670 85 655
414 992 329 364
Current liabilities
Trade and other payables 1 337 810 1 329 764
Provisions 17 500
Derivative financial instruments 1 004 16 223
Current income tax liabilities 1 868
1 340 682 1 363 487
Total liabilities 1 755 674 1 692 851
Total equity and liabilities 4 415 856 4 178 761
STATEMENT OF COMPREHENSIVE INCOME
Year ended Year ended
31 March 31 March
R`000 2010 2009
Revenue 6 952 789 6 811 448
Operating profit before non-recurring item and
depreciation 677 111 549 268
Legal disputes provision release 23 800
Operating profit before depreciation 677 111 573 068
Depreciation (157 425) (149 229)
Operating profit 519 686 423 839
Finance costs (900) (5 059)
Finance income 14 877 22 875
Profit before tax 533 663 441 655
Income tax expense (178 155) (124 203)
Profit for the year 355 508 317 452
Total comprehensive income for the year 355 508 317 452
Basic earnings per share (cents) 121,8 109,1
Basic earnings per share - diluted (cents) 121,0 109,1
HEADLINE EARNINGS
Profit for the year 355 508 317 452
(Profit)/loss on disposal of property, plant and
equipment (4 053) 1 376
Headline earnings 351 455 318 828
Legal disputes provision release (17 136)
Additional tax allowance (26 506)
Adjusted headline earnings 351 455 275 186
Headline earnings per share (cents) 120,4 109,6
Headline earnings per share - diluted (cents) 119,7 109,6
Adjusted headline earnings per share (cents) 120,4 94,6
Adjusted headline earnings per share - diluted (cents) 119,7 94,6
CASH FLOW INFORMATION
Operating profit 519 686 423 839
Non-cash items 144 636 176 732
Operating profit before working capital requirements 664 322 600 571
Working capital requirements (138 439) (6 037)
Cash generated by operations 525 883 594 534
Net finance income 13 977 17 816
Tax paid (95 471) (115 767)
Cash available from operating activities 444 389 496 583
Dividends paid (210 173) (197 755)
Net cash flows from investing activities (233 528) (290 131)
Net cash flows from financing activities 10 295 9 493
Net movement in cash and cash equivalents 10 983 18 190
Cash and cash equivalents at the beginning of the
year 528 084 509 894
Cash and cash equivalents at the end of the year 539 067 528 084
STATEMENT OF CHANGES IN EQUITY
Stated Share-based Retained
R`000 capital payments earnings Total
Balance at 1 April 2008 1 157 092 78 519 1 101 519 2 337 130
Total comprehensive income
for the year 317 452 317 452
Ordinary dividends paid (197 755) (197 755)
BEE share-based payments charge 3 383 3 383
Employee share option scheme:
Proceeds from shares issued 9 670 9 670
Value of employee services 16 030 16 030
Balance at 1 April 2009 1 166 762 97 932 1 221 216 2 485 910
Total comprehensive income
for the year 355 508 355 508
Ordinary dividends paid (210 173) (210 173)
BEE share-based payments charge 3 383 3 383
Employee share option scheme:
Proceeds from shares issued 10 295 10 295
Value of employee services 15 259 15 259
Balance at 31 March 2010 1 177 057 116 574 1 366 551 2 660 182
SUPPLEMENTARY INFORMATION
Year ended Year ended
31 March 31 March
R`000 2010 2009
Capital expenditure contracted and committed 99 216 92 694
Capital expenditure approved but not contracted 81 187 109 217
Contingencies 30 771 36 257
STATISTICS
Year ended Year ended
31 March 31 March
R`000 2010 2009
Ordinary shares in issue (000`s) 292 563 291 320
Weighted average ordinary shares in
issue (000`s) 291 918 290 904
Diluted weighted average ordinary
shares in issue (000`s) 293 694 290 904
Net asset value per share (cents) 909,3 853,3
Ordinary dividends per share:
Interim dividend paid (cents) 28,0 24,0
Final dividend declared/paid (cents) 48,0 44,0
Total dividends (cents) 76,0 68,0
COMMENTARY
BASIS OF PREPARATION
The financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRS), including IAS 34 (Interim Financial
Reporting) and in compliance with the Companies Act of South Africa of 1973 as
amended, and the Listings Requirements of the JSE Limited. The accounting
policies comply with IFRS and are consistent with those applied in the previous
year except for the standards noted below that became effective on 1 January
2009: IAS 1 (Presentation of Financial Statements (revised)), IFRS 7 (Financial
Instruments: Improving Disclosures about Financial Instruments) and IFRS 8
(Operating Segments). The adoption of these standards has no effect on the
results, nor has it required any restatement of the results.
OVERVIEW AND MARKET CONDITIONS
The results for the year ended 31 March 2010 reflect a headline earnings
increase of 10,2%, and adjusted for the non-recurring items in the previous
year, an increase of 27,7%.
South Africa`s recession officially ended in the third quarter of calendar 2009
and since then gross domestic product has shown nominal growth. The lower
interest rates will benefit consumers, however the impact of the near one
million job losses has been significant. Going forward household consumption
growth is expected to be positive again once the labour market stabilises, but
a return to the credit-led spending of the mid-decade is unlikely to
materialise.
Although global economic activity is improving, weak domestic demand
conditions, low business confidence and significant excess production capacity
suggest that it is unlikely that a return of private sector investment growth
will be seen in the short-term.
Feed raw material prices peaked at historically high levels during the 2009
financial year and remained volatile throughout 2010. With the exception of
soya, raw material prices reduced substantially during 2010, and the rand
strengthened against all major currencies. Taking full advantage of these lower
prices was difficult due to the rate at which the prices declined and Rainbow`s
forward procurement strategy. Going forward there is an opportunity for feed
costs to reduce further provided raw material prices remain at the current
lower levels.
The graph below depicts the feed cost increases for financial years since 2006.
Rainbow`s forward procurement and the 5,1% additional chicken volumes in 2010
contributed to the feed cost increasing by 1,4%.
FEED COST GROWTH.
SEE PRESS RELEASE FOR GRAPH
The local chicken market is estimated to have declined in rand value by 1% in
the past twelve months to R17,5 billion. This is as a result of a 2%
realisation decline, partly offset by a 1% volume growth. Total chicken imports
(excluding turkey and mechanically deboned meat) have increased by 29% over the
past twelve months.
REVIEW OF OPERATIONS
Brands
Rainbow`s brand strategy, which differentiates the company from its
competitors, has been effective in delivering an acceptable margin.
The last nine months of the financial year have seen significant pressure on
chicken realisations. More supply, in the form of substantially increased
output from local chicken producers as well as a higher level of imports,
together with consumer demand being under pressure, have driven realisations to
lower levels than the previous financial year.
Rainbow`s branded added value strategy has once again proved to be vital in
delivering consistent profit in these difficult economic times.
Retail added value performed well. Rainbow Polony continued to entrench its
market leadership position with the launch of Rainbow Family Polony, while
Rainbow Viennas showed good volume growth. The Rainbow Freezer to Fryer range
of burgers and steaklets has shown strong growth this year and has recently
become the market leading crumbed chicken brand in South Africa.
FoodSolutions has grown acceptably given the tight economy and the
consequential impact on discretionary purchases like fast food. The general
foodservice channel has contracted, leading to a decline in chicken purchases
while the Quick Service Restaurants have grown slowly.
Supply chain
Challenges in agricultural performance were experienced during the winter
months, particularly in the Cape. Overall agricultural performance has improved
in recent months. Genetic changes to the Cobb breed have resulted in improved
hatchability.
The processing plants and feed mills did well to manage costs down to an
acceptable level despite the impact of the electricity cost escalation and
above inflation wage settlement. The processing teams have again been
successful in improving yield through various initiatives conducted during the
year. Capital investment projects in the coming year will provide the plants
with greater flexibility and enable a more profitable product mix in the
future.
Rainbow`s farm to fork food safety and quality programme is on track to have
all facilities ISO 22 000 certified within the next year. Currently the feed
mills, processing plants and certain farms have achieved this internationally
recognised food safety certification standard.
Rainbow`s sustainability programme has brought focus to the issue of carbon
footprint and will continue to benefit the operations through reduced
electricity and coal consumption.
Current initiatives to further optimise the Rainbow Outbound Supply Chain
include the Sales and Operational Planning project, upgrade to the Roodepoort
operation and the lease of a large bulk storage facility in Midrand Gauteng,
thereby consolidating storage requirements. Opportunities to grow the external
(non-Rainbow) contribution of Vector`s business continue to be explored to
further leverage assets and business competencies.
FINANCIAL REVIEW
Revenue - Rm 2010 2009 % Var
Chicken 5 585,5 5 428,5 2,9
Feed 746,7 868,1 (14,0)
Services 620,6 514,8 20,6
Total revenue 6 952,8 6 811,4 2,1
Chicken revenue for the year was 2,9% higher than the same period of the
previous year.
Rainbow`s average price realisations decreased by 2,7% and volumes were 5,1%
higher.
Total revenue increased by a lower 2,1% to R7,0 billion (2009: R6,8 billion)
largely as a result of significantly lower feed selling prices and volumes sold
external to Rainbow.
The table below depicts headline EBIT from a statutory perspective and adjusted
for both a non-recurring item and unrealised gains or losses on financial
instruments used in the feed raw material procurement strategy. The
non-recurring item relates to a provision release in respect of the settlement
of certain legal disputes (R23,8 million) which occurred in 2009.
Reporting the financial effects of certain financial instruments used in the
feed raw material procurement strategy introduces volatility to the Group`s
financial results. For the year under review, the pre-tax impact on the Group`s
results of these unrealised positions is a positive impact of R51,6 million
(2009: R153,2 million negative).
2010 2009 % Var
Headline EBIT (Rm)
- Statutory 514,1 425,2 20,9
- Adjusted for non-recurring item 514,1 401,4 28,1
- Adjusted pre IAS 39 462,5 554,6 (16,6)
Headline EBIT margin (%)
- Statutory 7,4 6,2 1,2
- Adjusted for non-recurring item 7,4 5,9 1,5
- Adjusted pre IAS 39 6,7 8,1 (1,4)
The underlying (pre IAS 39) headline EBIT is adversely impacted by lower
chicken realisations and a lower contribution from the external feed business.
The increase in statutory headline EBIT margin is in line with the prospects
stated at the previous year-end and reflects the reversal of the prior year
feed raw material positions.
Net finance income decreased by R3,8 million due to lower average cash balances
and lower interest rates during the period.
The effective tax rate of 33,4% (2009: 28,1%) is higher mainly as a result of
the additional tax allowance of R26,5 million recognised in 2009.
Adjusted headline earnings (2009 adjusted for the two non-recurring items being
the legal settlement and additional tax allowance) increased by 27,7% to R351,5
million (2009: R275,2 million) with adjusted diluted headline earnings per
share increasing by 26,5% to 119,7 cents per share (2009: 94,6 cents per share)
Cash generated by operations decreased by 11,5% to R525,9 million (2009: R594,5
million) largely due to higher trade receivables (R227,5 million movement) as a
consequence of an additional trading week in the March month compared to the
previous year.
Capital expenditure was R251,4 million (2009: R293,1 million). A further amount
of R99,2 million (2009: R92,7 million) has been contracted and committed, but
not spent, whilst a further R81,2 million (2009: R109,2 million) has been
approved, but not contracted. The Group continues to follow a policy of
upgrading its facilities and funding normal levels of replacement capital
expenditure from its own resources.
Return on equity increased to 13,8% (2009: 13,2%).
OPERATING SEGMENTS
IFRS 8 (Operating Segments) requires management to disclose segment reporting
in line with how the business is managed. The company operates as a vertically
integrated chicken producer and is managed as a single segment. Additional
entity wide disclosure is reported in the financial statements.
PROSPECTS
Maize and soya prices are likely to remain at the lower levels with excellent
crops expected locally and in Argentina. The exchange rate is expected to
remain volatile, while feed prices are expected to decline but remain higher
than historical levels.
Chicken realisations are also expected to remain under pressure as a result of
sluggish domestic demand, additional local production capacity and the current
higher levels of imports.
Energy rate cost increases, driven largely by oil and the approved electricity
rate increase, are not expected to be fully recovered in chicken realisations.
DIRECTORATE
Mr NP Mageza and Mr JJ Durand were appointed as non-executive directors on 1
September 2009 and 26 March 2010 respectively.
AUDIT OPINION
The annual financial statements, from which the abridged Group results
contained herein are derived, have been audited by PricewaterhouseCoopers Inc.
Their unmodified Audit Reports on the annual financial statements and the
abridged Group results are available for inspection at the company`s registered
office.
CASH DIVIDEND DECLARATION
Notice is hereby given that on 25 May 2010 the Board declared a final dividend
(number 74) of 48,0 cents per ordinary share in respect of the year ended 31
March 2010 (2009: 44,0 cents).The total dividend for the year is 1,6 times
covered by fully diluted headline earnings per share (2009: 1,6 times). It is
The Board`s intention to restore the dividend cover range to between 2,0 and
2,5 times over a period of time.
The salient dates of the declaration and payment of this dividend are as
follows:
Last date to trade ordinary shares cum dividend Thursday, 10 June 2010
Ordinary shares trade ex dividend Friday, 11 June 2010
Record date Friday, 18 June 2010
Payment date Monday, 21 June 2010
Share certificates may not be dematerialised or rematerialised between Friday,
11 June 2010 and Friday, 18 June 2010 (both dates inclusive).
For and on behalf of the Board
MH Visser M Dally
Non-executive Chairman Chief Executive Officer
Durban
25 May 2010
Directors: MH Visser (Non-executive Chairman), M Dally (CEO)*, JJ Durand,
RH Field*, M Griessel, PR Louw, NP Mageza, JB Magwaza, MM Nhlanhla,
RV Smither, DW Vale, GC Zondi *Executive Directors
Company secretary: JMJ Maher
Registered office: Rainbow Chicken Limited, One The Boulevard, Westway Office
Park, Westville, 3629
Transfer secretaries: Computershare Investor Services (Proprietary) Limited, 70
Marshall Street, Johannesburg, 2001
Auditors: PricewaterhouseCoopers Inc
Sponsor: RAND MERCHANT BANK (a division of FirstRand Bank Limited)
Bankers: ABSA Bank Limited
Website: www.rainbowchicken.co.za
Date: 25/05/2010 17:15:11 Produced by the JSE SENS Department.
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