| Thu 22 Feb 2001, 0:00 | | Avi - Interim Results |
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Anglovaal Industries Limited
("Anglovaal", "AVI", "the Group" or "the Company")
Financial results for the Six months to 31 December 2000
* Operating profit from continuing operations a 16%
* Turnover a 7%
* Profit before tax a 26%
* Diluted headline earnings per share a 15%
* Net cash resources a to R453m
* R400m pro-rata share repurchase announced
Angus Band, Managing Director, commented:
"In spite of difficult market conditions and the year-on-year impact of Y2K,
AVI has performed well, lifting profit before tax by 26%. The Group will
continue to benefit from its focus on operating efficiencies and should achieve
a material improvement in headline earnings in the full year."
22 February 2001
Enquiries:
Anglovaal Industries
Angus Band, Managing Director Tel: 011 779 2703
Robert Katzen, Group Financial Director Tel: 011 779 2704
College Hill Johannesburg Tel: 011 447 3030
Tom Allison
Julia Kerr
Oliver Foster
Performance Review
The Group continued to make good progress, raising operating profit from
continuing operations by 16% to R273,1m on a 7% increase in turnover, with the
operating margin improving to 7,6% from 7,0%. Trading conditions remained
difficult as changes in consumer spending patterns, compounded by the impact of
the fuel price increase, caused volume declines in a number of categories. The
solid improvement in operating performance was achieved after absorbing
significant increases in cost as a result of the deterioration in the exchange
rate and the increase in the oil price and was largely attributable to an
ongoing focus on operating efficiency.
The improvement in net investment income, following the substantial increase in
the net cash position of the Group, also assisted in increasing profit before
tax by 26% to R298,6m. Headline earnings increased by 16% to R197,2m after an
increase in the effective tax rate to 26,6% from 20,4% as a result of the
raising of deferred taxation in National Brands Limited.
Strong operational cash flows and the proceeds from the sale of the prepared
vegetable and French fry division increased net cash to R453m (1999: R61 m).
This was achieved after applying a further R93,2m to the purchase of 3,2% of
the Company's shares and R64,5m to redeem the variable rate preference shares
as part of a programme to improve the efficiency of the Company's capital
structure.
Divisional Operating Performance
Segmental Analysis
Half year ended 31 December
Turnover from continuing Operating profit/(loss)
operations from continuing operations
2000 1999 2000 1999
R'm R'm R'm R'm
Fast moving consumer
goods 1686,4 1532,4 139,4 127,5
Distribution 1034,2 962,9 18,5 9,5
Packaging 735,4 707,9 120,8 99,0
Ingredients 151,7 166,6 (4,2) 1,7
Holding company - - (1,4) (2,2)
Total 3 607,7 3 369,8 273,1 235,5
Fast Moving Consumer Goods (FMCG)
The Group's FMCG businesses achieved a satisfactory increase in turnover of
10,1% to R1 686,4m primarily as a result of improved realisations from I&J's
seafood division and the inclusion of sales from Baker Street Snacks and Coty
cosmetics. Operating profit increased by 9,3% to R139,4m with solid
improvements from the I&J core seafood division and the NBL food division,
reduced by losses from international fishing.
I&J Seafood and Prepared Foods
Turnover grew by 16,8% to R500,8m. Core seafood operations continued to show
sound results increasing operating profit by 14,2% in spite of higher fuel
prices and the purchases to offset quota reductions. Disappointing results
during the period from certain international fishing operations, as a result of
poor catch rates, more than offset the performance from the core business,
reducing total operating profit to R46,4m (1999: R51,1m).
NBL Food and Cosmetics
Divisional turnover grew by 7,4% to R1 185,5m with operating profit improving
by 21,7% to R92,9m.
Although food volumes were disappointing, the division achieved turnover growth
from continuing operations of 4,3%. The impact of a lower cost structure and
better procurement contributed to a strong improvement in operating profit from
the food division. The positive trend in operating margin in this division has
continued, reaching 7,1% in the current period (1999:5,6%). The acquisition of
Baker Street Snacks is contributing positively to operating profit.
Retail sales of cosmetics were generally depressed causing retailers to focus
on reducing stock levels, as the difficult economic conditions finally spilled
over into this market. Although the business recorded sales growth of 32%, the
integration of Coty has been complex and as a result operating profit was in
line with the prior year.
Distribution
I&J Distribution
The customer division achieved turnover growth of 7% to R1 034,2m
notwithstanding a volume decline of 1% mainly as a result of a planned
reduction of unprofitable product lines cushioned by improved chicken volumes.
The focus for this division has been the reorganisation of its business model
to improve efficiency, customer service and reduce costs. Although the process
of improvement is not yet complete, and returns are still below required rates,
good progress has been made and this has underpinned strong operating profit
growth to R18,5 m, after absorbing sharp increases in transport costs.
Packaging
Turnover grew by 3,9% to R735,4m with growth in the alcohol fruit beverage and
wine categories compensating for a decline in beer and the impact of pre
millennium stocking in 1999. Consol continued its ongoing focus on growing
market share, improving capacity utilisation and reducing cost in both the
glass and plastics divisions, which resulted in an improvement in operating
profit of 22%. Substantial work continues to be invested in securing and
leveraging glass's position as the packaging of choice for premium and
innovative consumer brands.
While turnover from the plastics division increased by only 5%, operating
profit doubled as the rigorous re-structuring of the plastics division
continued to prove successful. This restructuring has been completed and the
plastics division now consists of three focused operating units, all of which
are profitable.
Ingredients
NBL Ingredients
Turnover declined by 9% and the division incurred an operating loss of R4,2m
(1999: profit R1,7m) as the impact of the difficult international market
conditions for palm oil complexes continued. In order to reposition this
business in the face of the current market conditions, a major restructuring
and retrenchment exercise was completed during December. It is expected that
this restructuring, will assist the business to return to profitability by the
end of the financial year.
Group Prospects
The Group will continue to benefit from its focus on operating efficiencies and
should achieve a material improvement in headline earnings in the full year.
Capital Structure
With the additional share purchases, the capital structure has been further
refined by the conversion of the listed unsecured automatically convertible
subordinated debentures, effective 1 July 2000. In addition, the convertible
preference shares were converted effective September 2000, and these events
have finally aligned the economic and voting interests of our shareholders.
Shareholders are referred to the announcement published simultaneously with
these results relating to the proposed pro-rata share buy back.
For and on behalf of the board Registered office
B E Hersov Chairman 19 Impala Road
AWB Band Managing director Chislehurston
Sandton
2196
21 February 2001 website: www.avi.co.za
Directors: BE Hersov* DMS, Hon. LL.D -Chairman-, RB Savage* -Deputy Chairman-,
AWB Band -Managing Director-, AJ Ardington*, CJ Brimacombe*, SL Crutchley, AR
Evans*, B de L Figaji*, RC Gordon, PM Goss*, JR Hersov*, PR Jordi, RS Katzen,
CB Sampson, BT Wood*
Company Secretary: JR Taylor
* Non executive
Key Financial Statements
Group income statements
Unaudited Audited
Half-year ended Year ended
31 December Increase / 30 June
2000 1999 (Decrease) 2000
Rm Rm % Rm
Turnover 3,607.7 3,387.0 7 6,401.9
Continuing operations 3,607.7 3,369.8 7 6,382.5
Discontinued
operations - 17.2 19.4
Operating profit 273.1 230.6 18 402.9
Continuing operations 273.1 235.5 16 419.5
Discontinued operations - (4.9) (16.6)
Other income 44.2 37.4 18 76.5
- dividends received 7.2 5.1 10.6
- interest and
fees received 37.0 32.3 65.9
317.3 268.0 18 479.4
Interest paid 15.3 27.4 (44) 51.0
302.0 240.6 26 428.4
Exceptional items (3.4) (2.8) (53.8)
Profit before taxation 298.6 237.8 26 374.6
Taxation 1.6 (39.8) (44.2)
- normal (80.4) (39.8) (102) (44.2)
- deferred tax
asset (note 1) 82.0 - -
Profit after taxation 300.2 198.0 52 330.4
Share of retained earnings
of associates & joint
ventures 5.5 3.6 53 11.9
305.7 201.6 52 342.3
Minority interests 26.4 20.6 38.1
279.3 181.0 304.2
Preference dividend 3.3 3.8 7.1
Earnings 276.0 177.2 56 297.1
Determination of headline
earnings
Earnings 276.0 177.2 297.1
Adjustments: -
Exceptional items, net
of attributable taxation
credit and minority
interests 3.2 (6.8) 4.4
Deferred tax
asset (note 1 ) (82.0) - -
Headline earnings 197.2 170.4 16 301.5
Earnings per ordinary
share (cents) (note 2) 74.2 52.9 40 88.8
Diluted earnings per
ordinary share
(cents)(note 3) 71.8 46.6 54 78.4
Diluted headline earnings
per ordinary
share (cents) (note 3) 51.3 44.8 15 79.6
Notes:
1. Following the return to sustainable profitability by National Brands
Limited, and in accordance with South African Statement of Generally Accepted
Accounting Practice AC102, it was appropriate to raise a deferred tax asset of
R82,0 million, effective 1 July 2000, in order to recognise the tax losses
available for utilisation in that company. In order to provide meaningful
information the credit of R82,0 million arising in the income statement has
been excluded from headline earnings.
2. Earnings per ordinary share are calculated on a weighted average of
372,148,226 (1999: 335,021,099) ordinary shares in issue.
3. Diluted earnings and diluted headline earnings per ordinary share are
calculated on a weighted average of 384,145,458 ordinary shares (1999:
388,577,331 ordinary shares), after taking account of NIL (1999: 2,005,737)
convertible preference shares, NIL (1999: 40,018,390) compulsorily convertible
subordinated debentures and 11,997,232 (1999: 11,532,105) share options
currently in issue.
Group balance sheets
Unaudited Audited
31 December 30 June
2000 1999 2000
Rm Rm Rm
ASSETS
Non-current assets
Property, plant and equipment 1,580.8 1,695.7 1,582.1
Intangible assets 29.7 - -
Investments in associates + 21.2 20.3 21.4
Investments in joint
ventures + 141.8 103.7 125.6
Other investments + 75.0 66.4 71.8
Deferred taxation 79.0 7.2 16.3
1,927.5 1,893.3 1,817.2
Current assets
Inventories 677.9 793.9 687.0
Trade and other receivables 1,235.2 1,276.9 978.6
Cash and cash equivalents 619.6 418.9 760.3
2,532.7 2,489.7 2,425.9
TOTAL ASSETS 4,460.2 4,383.0 4,243.1
EQUITY AND LIABILITIES
Capital and reserves
Share capital and reserves 2,749.9 2,388.8 2,401.2
Convertible debentures - 210.5 210.5
Total shareholders' funds 2,749.9 2,599.3 2,611.7
Minority interests 377.5 330.1 350.0
Non-current liabilities
Interest - bearing borrowings 62.0 175.0 65.7
Deferred taxation 146.3 141.8 139.5
208.3 316.8 205.2
Current liabilities
Trade and other payables 954.1 944.2 935.0
Short-term borrowings 104.7 183.0 24.0
Corporate taxation 65.7 9.6 17.4
Shareholders for dividend - - 99.8
1,124.5 1,136.8 1,076.2
TOTAL EQUITY AND LIABILITIES 4,460.2 4,383.0 4,243.1
Number of ordinary shares
in issue to outside
shareholders (thousands) 365,142 335,021 332,721
+ Associates, joint ventures and other investments comprise unlisted
investments which have been valued by the directors at not less than their
carrying value.
Group cash flow statements
Unaudited Audited
Half-year ended Year ended
31 December 30 June
2000 1999 2000
Rm Rm Rm
Cash retained from
/(utilised by) operating
activities 56.8 (23.2) 518.4
Cash generated by operations 398.2 352.7 598.5
Other income 40.9 39.2 69.8
(Increase)/decrease in net
current assets (237.4) (282.8) 27.2
201.7 109.1 695.5
Interest paid (15.3) (27.4) (51.0)
Taxation (paid)/refunded (12.3) 14.7 (3.2)
Dividends paid (117.3) (119.6) (122.9)
Investing activities (118.1) (244.7) (165.2)
Fixed assets (101.5) (52.5) (241.6)
- to maintain operations (107.0) (87.3) (193.8)
- to expand operations (10.4) (3.2) (109.4)
- disposals 15.9 38.0 61.6
Investments - net
(acquisitions) / disposals (16.6) (192.2) 76.4
- subsidiaries and
businesses (16.6) (190.1) 93.2
- associated companies and
other investments - (2.1) (16.8)
Financing activities (160.1) 18.8 (101.9)
Purchase of own ordinary shares (93.2) - (13.9)
Redemption of preference shares (64.5) - -
Redemption of debentures - (21.8) (21.8)
Proceeds from the issue
of shares 5.5 0.6 0.6
Net decrease in shareholder
funding (152.2) (21.2) (35.1)
Long-term borrowings - net
movement (7.9) 40.0 (66.8)
Net (decrease)/increase in
cash and cash equivalents (221.4) (249.1) 251.3
Net cash and cash equivalents
at beginning of period 736.3 485.0 485.0
Net cash and cash equivalents
at end of period 514.9 235.9 736.3
Statement of changes in equity
Share Non-
capital and distributable Distributable Convertible
premium reserves reserves debentures Total
Rm Rm Rm Rm Rm
At 1 July 2000 522.4 110.9 1,767.9 210.5 2,611.7
Earnings before
dividends paid 279.3 279.3
Dividends paid (4.6) (4.6)
Conversion
of debentures 210.5 (210.5) -
Shares issued,
net of costs 5.5 5.5
Own shares
purchased (93.2) (93.2)
Redemption of
preference
shares (64.5) (64.5)
Foreign
currency
translation
differences 15.7 - 15.7
At 31 December
2000 580.7 126.6 2,042.6 - 2,749.9
Half-year ended 31 December 1999
Automatically
Share Non - convertible
capital and distributable Distributable subordinated
premium reserves reserves debentures Total
Rm Rm Rm Rm Rm
At 1 July 1999
(Pro forma) 536.3 108.4 1,566.6 210.5 2,421.8
Earnings
before
dividends
paid 181.0 181.0
Preference
dividend paid (3.8) (3.8)
Foreign currency
translation
differences 0.3 - 0.3
Inter-reserve
transfer (0.6) 0.6 -
At 31 December
1999 536.3 108.1 1,744.4 210.5 2,599.3
The retained earnings of associated companies and joint ventures, which were
previously reflected as non-distributable reserves, are now included in
distributable reserves.
Accounting policies
The interim results have been prepared in accordance with South African
Statements of Generally Accepted Accounting Practice. Other than as stated
below, there have been no changes effected to any accounting policies during
the six-month period.
Revaluation of properties
With effect from 1 July 1999 the Group changed its policy from carrying
properties at valuation and reverted to carrying properties at depreciated
historical cost. The originally published Group balance sheet for the
comparable period at 31 December 1999 has been adjusted to reflect the effect
of this change in policy as follows:
Rm
Property, plant and equipment reduced by 408.0
Non-distributable reserves reduced by (245.1)
Distributable reserves reduced by (88.6)
Minority interests reduced by (67.9)
Deferred taxation reduced by (6.4)
The originally published earnings for the comparable half-year have been
reduced by R1,3 million to give effect to this change in policy.
Intangible assets
In accordance with the South African Statements of Generally Accepted
Accounting Practice AC129 - Intangible Assets - and AC131 - Business
Combinations - the Group has changed its accounting policy for goodwill and
other intangible assets
Accordingly, with effect from 1 July 2000, any goodwill arising on the
acquisition of investments in subsidiaries, businesses, joint ventures or
associates is stated at cost less accumulated amortisation. Goodwill is
amortised through the income statement over its estimated useful life or a
maximum period of 20 years.
Other intangible assets acquired by the Group are stated at cost less
accumulated amortisation and impairment losses. The assets are amortised over
their estimated useful lives or a maximum of 20 years. Expenditure on
internally generated goodwill and brands is recognised in the income statement
as incurred.
Exceptional items
Half-year ended Year ended
31 December 30 June
2000 1999 2000
Rm Rm Rm
Net (deficit)/surplus on
disposal and write-down of
investments, subsidiaries,
properties, vessels and plant
and equipment (0.4) 36.9 33.1
Goodwill amortisation (1.6) (7.9) (2.4)
Rationalisation and
restructuring costs (1.4) (31.8) (88.8)
Other - - 4.3
(3.4) (2.8) (53.8)
Attributable taxation credit - 9.4 40.9
Attributable to minority
interests 0.2 0.2 2.7
(3.2) 6.8 (10.2)
Amounts of a revenue nature - - 5.8
Net (charge)/ credit (3.2) 6.8 (4.4)
Investments
With effect from 1 July 2000 National Brands Limited acquired the entire issued
share capital of Baker Street Snacks (Pty) Limited. Goodwill of R31,3 million
arising on this acquisition will be amortised through the income statement over
a period of 10 years.
Capital expenditure
Half-year ended Year ended
31 December 30 June
2000 1999 2000
Rm Rm Rm
To maintain operations 107.0 87.3 193.8
To expand operations 10.4 3.2 109.4
117.4 90.5 303.2
Commitments for future
capital expenditure:
Contracted for 38.8 47.1 97.1
Authorised, but not
contracted for 46.6 98.1 39.2
85.4 145.2 136.3
The Group has sufficient
resources available to
fund this expenditure.
Commitments and contingent liabilities
At 31 December 2000 there were no commitments, other than operating lease and
other commitments entered into in the normal course of business. Contingent
liabilities amounted to R37,9 million (1999 - R41,0 million) in respect of
guarantees and a challenge by South African Revenue Service on a sale and
leaseback transaction in a subsidiary company, against which assessment an
objection has been lodged.
Certain Group companies have entered into forward exchange contracts in the
normal course of business.
