| Mon 3 Oct 2011, 17:30 | | 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 2011
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 2011
Recurring headline earnings per share up 2,7% to 13,1 cents
Headline earnings per share down 5,1% to 8,8 cents
Sum-of-the-parts value per share up 1,3% to R2,77
Condensed group income statement
for the six months ended 31 August 2011
Unaudited Unaudited Audited
31 Aug 31 Aug 28 Feb
2011 2010 2011
Notes R`m R`m R`m
Income
Investment income 8,3 13,0 22,8
Net fair value gains on financial 13,1 4,3 32,0
instruments
Other operating income 0,3 0,4 0,8
Total income 21,7 17,7 55,6
Expenses
Management fee 2 (21,7) (26,2) (53,2)
Other expenses (0,2) (0,2)
Total expenses (21,9) (26,2) (53,4)
Share of profits of associated 88,7 106,9 199,8
companies
Results of operating activities 88,5 98,4 202,0
Finance costs (1,8) (0,2) (2,4)
Gain on disposal of investment in 81,3
associated company
Profit before taxation 86,7 98,2 280,9
Taxation 3 (2,5) (1,7) (21,8)
Net profit for the period 84,2 96,5 259,1
Attributable to equity holders of the 84,2 96,5 259,1
company
Non-headline items, net of taxation
Interest in non-headline items of 2,1 (5,6) (10,1)
associated companies
Gain on disposal of investment in (65,6)
associated company
Impairment of investment in 1,4
associated company
Headline earnings 86,3 90,9 184,8
Earnings per share (cents)
Attributable (basic and diluted) 8,6 9,9 26,5
Headline (basic and diluted) 8,8 9,3 18,9
Recurring headline (basic and 13,1 12,7 27,1
diluted)
Number of shares in issue and 978,1 978,1 978,1
weighted average (million)
Condensed group statement of comprehensive income
for the six months ended 31 August 2011
Unaudited Unaudited Audited
31 Aug 31 Aug 28 Feb
2011 2010 2011
R`m R`m R`m
Attributable to equity holders of the
company
Net profit for the period 84,2 96,5 259,1
Share of other comprehensive income/(loss) 5,0 (8,7) 8,4
of associated companies
Other equity movements of associated (13,8) 0,4 1,3
companies
Disposal of investment in associated company 10,1
Total comprehensive income for the period 75,4 88,2 278,9
Condensed group statement of financial position
at 31 August 2011
Unaudited Unaudited Audited
31 Aug 31 Aug 28 Feb
2011 2010 2011
Notes R`m R`m R`m
Assets
Non-current assets 2 581,7 2 360,7 2 350,3
Investment in associated companies 2 304,7 2 127,9 2 143,6
Equity securities 277,0 232,8 206,7
Current assets 23,1 5,3 207,6
Trade and other receivables 7,7 3,3 1,6
Current income tax receivable 0,2
Cash and cash equivalents 15,4 1,8 206,0
Total assets 2 604,8 2 366,0 2 557,9
Equity and liabilities
Ordinary shareholders` equity 2 558,1 2 331,1 2 521,8
Non-current liabilities
Deferred income tax 3 7,7 3,4 5,9
Current liabilities 39,0 31,5 30,2
Borrowings 10,1 4,0
Trade and other payables 28,6 27,5 30,2
Current income tax payable 0,3
Total liabilities 46,7 34,9 36,1
Total equity and liabilities 2 604,8 2 366,0 2 557,9
Net asset/tangible asset value per 261,5 238,3 257,8
share (cents)
Condensed group statement of changes in equity
for the six months ended 31 August 2011
Unaudited Unaudited Audited
31 Aug 31 Aug 28 Feb
2011 2010 2011
R`m R`m R`m
Ordinary shareholders` equity at beginning 2 521,8 2 282,0 2 282,0
of period
Total comprehensive income for the period 75,4 88,2 278,9
Dividend paid (39,1) (39,1) (39,1)
Ordinary shareholders` equity at end of 2 558,1 2 331,1 2 521,8
period
Condensed group statement of cash flows
for the six months ended 31 August 2011
Unaudited Unaudited Audited
31 Aug 31 Aug 28 Feb
2011 2010 2011
R`m R`m R`m
Net cash flow from operating activities 26,8 7,5 27,0
Net cash flow from investment activities (188,4) (92,2) 96,5
Net cash flow from financing activities (29,0) (35,1) (39,1)
Net (decrease)/increase in cash and cash (190,6) (119,8) 84,4
equivalents
Cash and cash equivalents at beginning of 206,0 121,6 121,6
period
Cash and cash equivalents at end of period 15,4 1,8 206,0
Condensed group segmental report
for the six months ended 31 August 2011
Unaudited Unaudited Audited
31 Aug 31 Aug 28 Feb
2011 2010 2011
R`m R`m R`m
Recurring earnings 146,2 145,9 316,8
- Food and agri 130,2 120,6 256,5
- Beverages 16,0 25,3 60,3
Net interest and other income and expenses 4,0 5,9 1,1
Management fee (21,7) (26,2) (53,2)
Taxation (0,7) (1,1)
Recurring headline earnings (refer note 6) 127,8 124,5 264,7
Non-recurring headline earnings, net of (41,5) (33,6) (79,9)
taxation (refer note 6)
Recurring earnings adjustment (food and (20,0) (32,3) (28,3)
agri), net of taxation
One-off items
- Pioneer Foods/Competition Commission (20,6) (1,3) (40,5)
settlement
- Other (0,9) (11,1)
Headline earnings 86,3 90,9 184,8
Non-headline items, net of taxation (2,1) 5,6 74,3
Attributable earnings 84,2 96,5 259,1
Recurring headline earnings per share 13,1 12,7 27,1
(cents)
Segmental income reconciliation to
investment income:
Segmental income (refer note 6) 107,5 122,5 333,2
- Food and agri 91,5 81,7 188,7
- Beverages 16,0 40,8 144,5
Share of profits of associated companies (88,7) (106,9) (199,8)
included
- Food and agri (72,7) (66,1) (136,6)
- Beverages (16,0) (40,8) (63,2)
Gain on disposal of investment in associated (81,3)
company included - beverages
Net fair value gains on financial (13,1) (4,3) (32,0)
instruments included - food and agri
Interest income not included - unallocated 2,6 1,7 2,7
Investment income 8,3 13,0 22,8
Dividend income - food and agri 5,7 11,3 20,1
Interest income - unallocated 2,6 1,7 2,7
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
2011, which have been prepared in accordance with International Financial
Reporting Standards (IFRS); including the AC 500 standards; the requirements of
the South African Companies Act of 2008, as amended, and the Listings
Requirements of the JSE Limited. The accounting policies applied in the
preparation of these condensed interim group financial statements are consistent
with those used in the previous financial year. No new standards,
interpretations or amendments, which are relevant to the group`s operations,
became effective during the period.
Results of operating activities, as presented in the condensed group income
statement, include share of profits of associated companies as a significant
part of Zeder`s business activity is performed through associated companies. The
comparatives have been presented on a consistent basis.
2. Management fee
A management fee is payable to PSG Group Limited ("PSG Group"), Zeder`s ultimate
holding company, in terms of a management agreement. In accordance with the
management agreement, PSG Group provides all investment, administrative,
advisory, financial and corporate services to Zeder.
Management fees payable consist of a base fee and a performance fee element. The
base 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 base 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 equity portfolio
above the equally weighted FTSE-JSE Beverage Total Return Index (TRI041) and the
FTSE-JSE Food Producers Total Return Index (TRI043) over any financial year. No
performance fee was payable for the year ended 28 February 2011.
3. Taxation
Deferred income tax is provided for on fair value adjustments to the group`s
equity investment portfolio, using an effective capital gains tax rate of 14%.
Taxable income is subjected to normal taxation at a rate of 28%.
4. Commitments and contingencies
The group have no capital commitments or contingent liabilities.
The Distell Group Limited group ("Distell") received an assessment from the
South African Revenue Service for additional employees tax relating to Distell`s
share incentive scheme. Distell obtained legal and tax specialist opinions on
this matter, which indicated that no provision is necessary and are in the
process of formalising an objection to this assessment. Zeder`s interest,
through its shareholding in Capevin Holdings Limited, in the amount that is at
risk is R3,1m (excluding penalties and interest).
5. Related-party transactions and balances
The management fee expense (refer note 2) was incurred with PSG Group, in terms
of the existing management agreement, with the amount payable included under
trade and other payables.
Borrowings relate to a loan from PSG Corporate Services (Proprietary) Limited
("PSG Corporate Services"), a fellow PSG Group subsidiary. During the period
under review, PSG Corporate Services, through its corporate finance arm,
provided additional professional services to the amount of R3,1m (including
VAT), which were capitalised against investments in associated companies.
6. Segmental reporting
The group is organised into two reportable segments, namely food and agri, and
beverages. These segments represent the major associate and equity investments
of the group. Both segments operate mainly in the Republic of South Africa.
Recurring headline earnings is calculated on a see-through basis. Zeder`s
recurring headline earnings is the sum of its effective interest in that of each
of its underlying investments, regardless of its percentage shareholding. The
result is that equity investments which Zeder does not equity account in terms
of accounting standards, are included in the calculation of recurring headline
earnings.
Non-recurring headline earnings include equity securities` see-through recurring
headline earnings and the related net fair value gains/losses and investment
income (as recognised in the income statement). Associated companies` one-off
gains/losses are excluded from recurring headline earnings and included in non-
recurring headline earnings.
Segmental income comprises dividends received and fair value gains and losses
relating to equity securities, as well as income from associated companies and
gains on disposal of interests in associated companies, as per the income
statement.
UNAUDITED CONDENSED FINANCIAL STATEMENTS
These condensed financial statements were compiled under the supervision of
Zeder`s financial director, Mr WL Greeff, who is a Chartered Accountant (SA).
COMMENTARY
RESULTS
Zeder invested a further R194,3m to increase its shareholding in existing
investments during the period under review. Its investment portfolio now amounts
to R2,7bn of which Kaap Agri and Capevin Holdings represent 70,8% (28 Feb 2011:
78,5%).
We believe the two key benchmarks to measure Zeder`s performance by are growth
in its recurring headline earnings per share and sum-of-the-parts ("SOTP") value
per share, which increased by 2,7% and 1,3% respectively.
Zeder`s recurring headline earnings is the sum of its effective interest in that
of each of its underlying investments, regardless of its percentage
shareholding. The result is that investments in which Zeder holds less than 20%
and are generally not equity accountable in terms of accounting standards, are
included in the calculation of our consolidated recurring headline earnings.
This provides management and investors with a more realistic and simplistic way
of evaluating Zeder`s earnings performance.
Zeder`s two largest indirect investments, namely Distell and Pioneer Foods, have
shown little or no earnings growth. Zeder`s recurring headline earnings and
recurring headline earnings per share consequently increased by a modest 2,7% to
R127,8m and 13,1 cents respectively.
Headline earnings per share decreased by 5,1% to 8,8 cents, and attributable
earnings per share by 12,7% to 8,6 cents.
Pioneer Foods` results were negatively affected also as a result of the delayed
price increase in the implementation of the gross profit reductions as agreed
with the Competition Commission as part of the settlement reached in November
2010. The negative impact of same on Zeder`s headline earnings was R20,6m.
Zeder`s SOTP value per share, calculated using the quoted market prices for all
over-the-counter ("OTC") traded unlisted investments, increased by 1,3% to R2,77
since year-end. The SOTP value is analysed in the table below:
31 Aug 2011 28 Feb 2011
Company Interest R`m Interest R`m
(%) (%)
Kaap Agri 44,5 1 342,8 43,9 1 270,4
Capevin Holdings 39,8 588,3 39,5 691,3
Capespan 39,0 285,8 22,7 84,7
Suidwes 23,4 80,8 21,8 76,1
NWK 8,9 61,1 8,8 57,9
OVK 9,6 35,9 9,3 29,0
MGK 26,7 27,3 26,7 27,3
Agricol 25,1 27,1 25,1 27,1
Other 277,6 234,6
Total investments 2 726,7 2 498,4
Cash and cash equivalents 15,4 206,0
Other net liabilities (31,3) (28,6)
SOTP value 2 710,8 2 675,8
Shares in issue (m) 978,1 978,1
SOTP value per share (R) 2,77 2,74
Kaap Agri/Pioneer Foods
Zeder marginally increased its interest in Kaap Agri to 44,5% during the period
under review. Kaap Agri continues to grow by establishing new operating outlets.
Newly opened branches place Kaap Agri in a favourable position to expand its
activities beyond its traditional areas of operation and client base.
An increase in costs, associated with the above-mentioned expansions, caused
headline earnings from Kaap Agri`s own operations to decline by 2,8% for the 6
months ended 31 March 2011.
Kaap Agri has a 31,1% economic interest in Pioneer Foods and recently announced
that its own operational business will be split from its Pioneer Foods interest.
Subsequent to the split, Zeder will be invested in two entities; one housing
Kaap Agri`s own operational business and the other the Pioneer Foods interest.
Substantial value is expected to be unlocked in both of these entities.
Pioneer Foods recently released a trading statement indicating an anticipated
decrease in its headline earnings for the year ended 30 September 2011
(excluding the effect of the aforementioned Competition Commission settlement).
Volatile economic conditions, rising input costs and uncertain consumer spending
patterns have lead to a challenging trading environment.
Capevin Holdings
Capevin Holdings, with its core asset an effective interest of 14,8% in Distell,
reported a 2,3% increase in headline earnings per share for the year ended 30
June 2011. Distell remains a consistent performer amidst tough economic
conditions.
Subsequent to year-end, Zeder increased its interest in Capevin Holdings to
39,8% and accordingly now has an effective interest of 5,9% in Distell.
Capevin Holdings is underpinned by an attractive dividend yield in excess of 5%.
Capespan
During the period under review, Zeder made an offer to acquire the entire issued
share capital of Capespan at R2,25 per share in cash. Through the offer and
market purchases, Zeder has to date managed to increase its shareholding in
Capespan from 22,7% to more than 40%.
Capespan turned a headline loss of R2,2m for the six months ended 30 June 2010
into a headline profit of R17,2m for the six months ended 30 June 2011. The
increase can be attributed to a significant improvement in the operating profits
of both the fruit and logistics divisions. The improvement in the logistics
division is as a result of increased non-fruit activities in Capespan`s port
terminal operations.
The company continues to focus on growing its revenue and footprint of its core
business. This, combined with the focus on disposing of non-core assets, will
bring greater clarity and focus to improving Capespan`s balance sheet.
Other investments
The rest of our investment portfolio delivered mixed results. We believe
shareholder value can be created through increased tradability of these shares
once share restrictions and holding structures had been relaxed.
PROSPECTS
We continue to believe that the agriculture, food and beverage sectors offer
rewarding long-term investment opportunities.
DIVIDEND
It is Zeder`s policy to only declare a final dividend at year-end.
Signed on behalf of the board of directors
JF Mouton AE Jacobs
Chairman Chief Executive Officer
Stellenbosch
3 October 2011
Directors:
JF Mouton** (Chairman), AE Jacobs* (CEO), CA Otto**, WL Greeff* (FD), MS du Pre
le Roux+, GD Eksteen+, LP Retief+
(* executive, ** non-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: 03/10/2011 17:30:02 Produced by the JSE SENS Department.
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