| Mon 4 Oct 2010, 17:00 | | ZED - Zeder Investments Limited - Unaudited interim results for the six months |
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ZED
ZED
ZED - Zeder Investments Limited - Unaudited interim results for the six months
ended 31 August 2010
Zeder Investments Limited
(Incorporated in the Republic of South Africa)
Registration number: 2006/019240/06
JSE share code: ZED
ISIN number: ZAE000088431
("Zeder" or "the company" or "the group")
Unaudited interim results
for the six months ended 31 August 2010
- Recurring headline earnings per share up 24,5%
- Intrinsic value per share increased to R2,78
- Headline earnings per share down 14,7%
Condensed group income statement
for the six months ended 31 August 2010
Unaudited Audited
31 Aug 31 Aug 28 Feb
2010 2009 2010
Notes Rm Rm Rm
Income
Investment income 13,0 24,5 41,2
Fair value gains and losses on 4,3 12,7 15,2
financial instruments
Other operating income 0,4 0,5 1,1
Total income 17,7 37,7 57,5
Expenses
Management fee 2 (26,2) (20,3) (40,7)
Other (0,1)
Total expenses (26,2) (20,3) (40,8)
Results of operating activities (8,5) 17,4 16,7
Finance costs (0,2) (0,5) (0,6)
Share of profits of associated 106,9 66,1 128,5
companies
Loss on dilution of interest in (17,5)
associated company
Profit before taxation 98,2 83,0 127,1
Taxation 3 (1,7) (3,9) (3,5)
Net profit for the period 96,5 79,1 123,6
Attributable to equity holders of the 96,5 79,1 123,6
company
Non-headline items
Loss on dilution of interest in 17,5
associated company
Interest in adjustments of associated (5,6) 6,6 10,9
companies, net of taxation
Headline earnings 90,9 85,7 152,0
Earnings per share (cents)
- attributable (basic and diluted) 9,9 10,1 14,0
- headline (basic and diluted) 9,3 10,9 17,3
Number of shares (million)
- in issue 978,1 978,1 978,1
- weighted average 978,1 784,7 880,6
Condensed group statement of comprehensive income
for the six months ended 31 August 2010
Unaudited Audited
31 Aug 31 Aug 28 Feb
2010 2009 2010
Rm Rm Rm
Net profit for the period 96,5 79,1 123,6
Other comprehensive income for the period, (8,3) (2,8) (15,8)
net of taxation
Share of other comprehensive income of (8,7) (2,8) (16,9)
associated companies
Other equity movements of associated 0,4 1,1
companies
Step acquisition from equity securities to
investment in associated companies
Reversal of previous fair value gains after (0,4)
taxation on equity securities
Revaluation of assets and liabilities of 0,4
associated companies
Total comprehensive income for the period 88,2 76,3 107,8
Condensed group statement of financial position
at 31 August 2010
Unaudited Audited
31 Aug 31 Aug 28 Feb
2010 2009 2010
Notes Rm Rm Rm
Assets
Investment in associated companies 2 127,9 1 668,3 1 967,8
Equity securities 232,8 182,1 215,2
Current income tax receivable 3 0,2 1,5 0,2
Receivables and prepayments 3,3 0,4
Cash and cash equivalents 1,8 425,0 121,6
Total assets 2 366,0 2 277,3 2 304,8
Equity
Ordinary shareholders` funds 2 331,1 2 250,4 2 282,0
Total equity 2 331,1 2 250,4 2 282,0
Liabilities
Deferred income tax 3 3,4 1,7 1,7
Borrowings 4,0
Trade and other payables 27,5 25,2 21,1
Total liabilities 34,9 26,9 22,8
Total equity and liabilities 2 366,0 2 277,3 2 304,8
Net asset/tangible asset value per 238,3 230,1 233,3
share (cents)
Condensed group statement of changes in equity
for the six months ended 31 August 2010
Unaudited Audited
31 Aug 31 Aug 28 Feb
2010 2009 2010
Rm Rm Rm
Ordinary shareholders` equity at beginning 2 282,0 1 725,4 1 725,4
of period
Shares issued 491,5 491,6
Total comprehensive income for the period 88,2 76,3 107,8
Dividend paid (39,1) (42,8) (42,8)
Ordinary shareholders` equity at end of 2 331,1 2 250,4 2 282,0
period
Condensed group statement of cash flows
for the six months ended 31 August 2010
Unaudited Audited
31 Aug 31 Aug 28 Feb
2010 2009 2010
Rm Rm Rm
Net cash flow from operating activities 7,5 (9,8) 21,9
Net cash flow from investing activities (92,2) (80,4) (376,9)
Net cash flow from financing activities (35,1) 487,3 448,7
Net (decrease)/increase in cash and cash (119,8) 397,1 93,7
equivalents
Cash and cash equivalents at beginning of 121,6 27,9 27,9
period
Cash and cash equivalents at end of period 1,8 425,0 121,6
Segmental reporting - Recurring headline earnings
for the six months ended 31 August 2010
Unaudited Audited
31 Aug 31 Aug 28 Feb
2010 2009 2010
Rm Rm Rm
Recurring earnings 145,9 89,7 236,2
- Food and Agri 120,6 81,8 190,3
- Beverages 25,3 7,9 45,9
Net interest and other income 5,9 13,1 16,5
Management fee (26,2) (20,3) (40,7)
Taxation (1,1) (2,1) (3,9)
Recurring headline earnings 124,5 80,4 208,1
Non-recurring headline earnings (after tax) (33,6) 5,3 (56,1)
- Food and Agri
Investments marked to market (32,3) 5,3 (12,2)
One-off items:
- Pioneer Foods penalty provision (1,3) (43,9)
Headline earnings 90,9 85,7 152,0
Non-headline items 5,6 (6,6) (28,4)
Attributable earnings 96,5 79,1 123,6
Recurring headline earnings per share 12,7 10,2 23,6
(cents)
Segmental income (note 6)
- Food and Agri 81,7 93,0 124,6
- Beverages 40,8 1,5 26,9
122,5 94,5 151,5
Notes to the condensed group financial statements
1.Basis of presentation and accounting policies
The condensed interim group financial statements have been prepared in
accordance with IAS 34 - Interim Financial Reporting and should be read in
conjunction with the annual financial statements for the year ended 28 February
2010, which have been prepared in accordance with International Financial
Reporting Standards (IFRS). The accounting policies applied in the preparation
of these interim group financial statements are consistent with those used in
the previous year, except for the following revised standards which are
effective for the financial year beginning 1 March 2010:
- IFRS 3 Revised - Business Combinations
- IAS 27 Revised - Consolidated and Separate Financial Statements
The adoption of these standards had no material effect on the results, nor has
it required any restatement of previously reported results.
2. Management fee
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 group`s daily average cash balance. The management fee
is accrued at the end of every month. The performance fee, when applicable, 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 the end of the year.
No performance fee was payable for the year ended 28 February 2010.
3. 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.
4. Commitments and contingencies
Pioneer Foods and the Competition Commission are engaged in ongoing negotiations
to settle the bread, milling and other matters. Pioneer Foods has indicated that
the settlement amount will exceed the provision previously made (R350 million),
and believes that the settlement may be finalised within the next few weeks.
Zeder has fully accounted for its portion of the R350 million provision.
5. Related-party transactions
The management fee expense was incurred with PSG Group in terms of an existing
management agreement; and the borrowings amount was payable to PSG Group.
6. Segmental income
Segmental income comprises dividends received and fair value gains/(losses)
relating to equity investments, as well as income from associated companies
(including loss on dilution of investment in associated company), after tax, as
per the income statement.
Commentary
Results
In the spirit of consistent, clear and unambiguous communication to
stakeholders, management introduced the recurring headline earnings concept as
the predominant measure of Zeder`s financial performance a few years ago. At the
time, recurring headline earnings was defined as reportable headline earnings in
terms of accounting standards, excluding any marked-to-market movements and one-
off items.
During the past year we revisited and fine-tuned this methodology by now
measuring recurring headline earnings on a see-through basis. Zeder`s recurring
headline earnings is the sum of its effective interest in each of its underlying
investees, regardless of its percentage shareholding. The result is that
investments in which Zeder holds less than 20% and are usually not allowed to
equity account in terms of accounting standards, are now included in the
calculation of our consolidated recurring headline earnings. This method of
calculation was already applied for the year ended 28 February 2010. This
provides management and investors with a more realistic and simple way of
evaluating Zeder`s financial performance.
Having applied the aforesaid principles to the prior year interim figures,
Zeder`s recurring headline earnings per share for the six months ended 31 August
2009 amounted to 10,2 cents per share as opposed to the 9,5 cents per share
previously reported in terms of the old methodology.
Recurring headline earnings increased by 54,9% to R124,5 million and recurring
headline earnings per share by 24,5% to 12,7 cents per share. However, headline
earnings per share decreased by 14,7% to 9,3 cents and attributable earnings per
share by 2,0% to 9,9 cents. All the `per share` analyses were affected by the
increased number of Zeder shares in issue after the rights offer in June 2009.
At end February 2010, Zeder had R121,6 million cash on hand from the
aforementioned rights offer. During the period under review Zeder utilised this
available resource, together with dividends received, to increase Zeder`s stake
in existing investments. A R300 million funding facility will provide Zeder with
the means necessary to pursue attractive identified investment opportunities in
future.
Kaap Agri/Pioneer Foods
Zeder maintained its interest of 41,3% in Kaap Agri, with both Kaap Agri`s own
operations and its investment in Pioneer Foods expected to deliver attractive
results.
Pioneer Foods has indicated that the Competition Commission settlement amount
will exceed the R350 million provision previously made, and believes that the
settlement may be finalised within the next few weeks. For more information,
refer to the company`s most recent announcement in this regard, dated 21
September 2010.
KWV
KWV recently reported their first set of annual financial results since the
unbundling of KWV`s operational assets and activities from the indirect
investment in Distell. These results confirmed a turnaround in the performance
of KWV; for the year ended 30 June 2010 KWV`s headline earnings from continuing
operations increased from a loss of R30,3 million to a profit of R51,3 million.
KWV`s board of directors declared a maiden ordinary dividend of R18,5 million as
well as a special dividend of R4,8 million, based on the profit on sale of non-
core assets.
Zeder increased its stake in KWV from 31,3% to 35,3% during the period under
review.
Capevin Holdings
Capevin Holdings, with its core asset an effective interest of 14,9% in Distell,
continues to be an attractive investment vehicle trading at a discount to its
intrinsic value.
Zeder increased its stake in Capevin Holdings from 37,0% to 38,3% during the
period under review.
In a challenging trading environment, with consumers seeking lower-priced
options, Distell succeeded in maintaining its share of consumer spending.
However, benefits derived from improved throughput and better operating
efficiencies were insufficient to protect margins and profitability, and
consequently Distell`s operating profit for the year ended June 2010 declined by
1,2% while headline earnings declined by 1,0% to R943,6 million.
During the period under review, Zeder received R13,3 million in dividends from
Capevin Holdings, with a further R15,3 million received subsequent to the
reporting date.
Capespan
Zeder increased its stake in Capespan from 14,6% to 21,7% during the period
under review.
The global economic conditions have not returned to normality and the continued
strength of the rand had a negative impact on the performance of Capespan.
Capespan continues to focus on growing its revenue and footprint, especially in
the Far Eastern markets.
Market value of investments
31 Aug 2010 28 Feb 2010
Company % Interest Value (Rm) % Interest Value (Rm)
Kaap Agri 41,3% 813,6 41,3% 812,8
KWV Holdings 35,3% 249,2 31,3% 214,6
Capevin Holdings 38,3% 585,2 37,0% 552,5
MGK 26,7% 27,3 26,7% 27,3
Agricol 25,1% 24,1 20,3% 10,1
Capespan 21,7% 81,8 14,6% 54,5
Suidwes 19,0% 55,5 18,4% 53,4
NWK 8,0% 46,4 7,4% 42,1
OVK 9,2% 28,0 9,2% 27,3
Other 182,8 171,0
Total investments 2 093,9 1 965,6
Cash and cash 1,8 121,6
equivalents
Other net liabilities (31,4) (20,9)
Total market value 2 064,3 2 066,3
Shares in issue 978,1 978,1
(million)
Market value of 2,11 2,11
investments per share
(rand)
Intrinsic value per 2,78 2,68
share (rand)
Notes:
- All the investments are unlisted, and the market value of the investments
are based on the over-the-counter traded prices of the respective
companies.
- The intrinsic value per share is calculated based on the see-through values
of Distell and Pioneer Foods, at Capevin Holdings and Kaap Agri
respectively.
Prospects
We remain optimistic about the agricultural and related sectors, and will
continue to invest in entities trading at attractive values.
Dividend
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
4 October 2010
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
Sponsor
PSG Capital
Date: 04/10/2010 17:00:01 Produced by the JSE SENS Department.
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