| Mon 21 May 2012, 7:05 | | PFG - Pioneer Food Group Limited - Unaudited condensed consolidated interim |
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PFG
PFG
PFG - Pioneer Food Group Limited - Unaudited condensed consolidated interim
financial statements for the six months ended 31 March 2012
Pioneer Food Group Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1996/017676/06)
(Tax registration number: 9834/695/71/1)
(Share code: PFG)
(ISIN code: ZAE000118279)
("Pioneer Foods" or "the Group" or "the Company")
Unaudited condensed consolidated interim financial statements for the six months
ended 31 March 2012
Pioneer Foods salient features
Revenue R9 billion up 11%
Interim gross dividend per listed ordinary share 44 cents (2011: 40 cents)
After the figures for the reporting period were adjusted by R160.7 million for a
once-off share-based payment charge on the B-BBEE equity transaction:
Adjusted operating profit (before items of a capital nature) R628 million down
5%
Adjusted headline earnings R397 million down 6%
Adjusted headline earnings per share 221 cents down 7%
Group Managing Director Andre Hanekom commented:
"The volume decline of 6% in our product basket for the six months under review
reflects the continuing strain of the consumer, with inflationary cost pressures
persisting.
The resultant 17% increase in selling prices was not sufficient to recover cost
and meant our margins contracted over the corresponding period.
We are maintaining our diligent focus on cost control and efficiency gains to
improve our margins and continuing to invest judiciously in growth assets to
meet the anticipated recovery in demand as the economic environment improves."
Enquiries
Pioneer Foods: +27 21 807 5100
Andre Hanekom +27 82 808 3549, ahanekom@pioneerfoods.co.za
Leon Cronje +27 82 801 7772, lcronje@pioneerfoods.co.za
CapitalVoice: Johannes van Niekerk +27 82 921 9110
Commentary
Group revenue increased by 11% to R9.2 billion, with volumes declining by some
6% and selling prices increasing by some 17% on average over the comparative
period.
Results for the reporting period have been substantially impacted by the R161
million once-off non-cash flow cost of the second-phase BEE transaction
concluded in the reporting period. As a result, headline earnings declined by
44% to R236 million.
Adjusted headline earnings, excluding the impact of the R161 million, declined
by 6% to R397 million or 221 cents per share. Adjusted operating profit, before
items of a capital nature, declined by 5% to R628 million, with the Group
operating profit margin contracting from 7.9% to 6.8%.
The investment in working capital increased by R511 million since the previous
year-end. The impact of the substantially higher raw material prices on
inventory at the reporting date was R117 million, buffered to an extent by lower
stock volumes. Price inflation primarily caused debtors to increase by R104
million, whereas timing differences in settlements resulted in a decrease of
R290 million in creditors.
In addition to the increased working capital investment, the second payment of
R217 million in terms of the Competition Commission settlement was made. This
limited the net cash generated from operations to R37 million for the reporting
period.
Net cash applied in investment activities, largely relating to fixed assets,
amounted to R324 million. The Group debt benefited from the R546 million cash
received from the third-party financier and participants of the BEE transaction.
Effective net interest-bearing debt was R813 million at reporting date or 14% of
equity. However, in terms of IFRS, the cumulative debt of the BEE parties of
R450 million due to the third-party financier is consolidated into the Group`s
accounts and results in reported net interest-bearing debt being R1 263 million
or 21% of equity.
Sasko
The Sasko segment delivered a financial performance marginally ahead of the
corresponding period. Volumes sold were in general weaker compared to the
previous period due to unsustainable volume growth in the wheaten and bread
product categories during the gross profit sacrifice period of the previous
year.
In addition, the significant price inflation within the maize meal product
category contributed to weaker demand. It should, however, be noted that
national maize meal consumption remains at a relatively high level when compared
to a few years ago.
Pasta volumes improved off a low base, but performance remained constrained
given the continued exposure to increased imports of lower-cost products. Rice
consumption in general benefited from the availability of competitively priced
raw material from India, but with a negative impact on category profitability.
Operating cost pressure from increased electricity and distribution costs
remained a concern during the reporting period. Rigorous cost management,
effective selling price strategies and focused service delivery remain core to
all management activities.
During the reporting period the Board approved the project for a new bakery in
KwaZulu-Natal. This bakery will replace the existing 40 year old bakery in
Stanger, currently operating at capacity. This project will create additional
capacity and improved efficiencies to enable increased market participation in
the growing KwaZulu-Natal urban and semi-urban markets. The bakery is being
built at Shakaskraal, north of Durban, and the total project cost will amount to
R500 million. The bakery is expected to be fully operational at the end of 2013.
The Group`s milling, poultry and distribution businesses in neighbouring African
countries experienced macro trading dynamics similar to those in South Africa,
resulting in a very competitive market environment and constrained performance.
Sales and distribution of the Group`s product basket in Namibia and Botswana
continued to grow.?Additional wheat milling capacity was commissioned in Namibia
and improved and expanded distribution warehousing capability became operational
in Botswana. Approval by the Botswana Competition Authority was granted for the
integration and expansion into broiler chicken rearing and production through
the establishment of a joint venture with an existing operator in Botswana.
Agri Business
The financial performance of this segment was severely impacted by unprecedented
high maize prices, increasing by more than 60%, which could only be partially
recovered in final product pricing.
The feeds business managed to maintain current margins in spite of the higher
raw material prices. Increased distribution costs are, however, a concern.
From an operational point of view, Nulaid continued to perform well with
satisfactory on-farm performance and improving feed conversion ratios. Although
selling prices increased significantly, it was not sufficient to recover the
substantial increase in the cost of feed, energy and distribution.
Tydstroom was severely impacted by the record high maize prices. Sales volumes
increased by 12% mainly in Gauteng. Selling prices increased by 8% in a
competitive price environment, but were not sufficient to recover the higher
input costs already mentioned.
Efforts to improve operational efficiencies throughout the value chain continue.
Bokomo Foods
The breakfast cereals business posted a sustained profit contribution, excluding
intentionally higher marketing spend for the launch of Weet-Bix Bites, Nature`s
Source Bites and Smurf Otees, delivering market share gains in the respective
sub-categories.
The sales of dried fruit products are materially down in line with last year`s
small vine fruit crop, but stronger international sales prices contributed to
improved operating profit, despite the lower volumes. This year`s vine fruit
crop is of a very good quality, but still smaller than an average crop.
The baking ingredients, desserts, flavours and vinegar businesses all improved
sales volumes and operational performance year on year.
The launch of Moir`s biscuits was successful and the extension of the product
offering in the sweet and savoury biscuit category is proceeding to expectation.
Financial performance is, however, constrained by start-up costs and increased
marketing spend in excess of R20 million.
The UK cereal business showed good revenue growth, but operating profit was
impacted by substantial raw material price increases which could not be fully
recovered from the market.
The business of Heinz Foods SA continued its positive overall contribution to
the Group results and achieved good volume growth. During the reporting period
it exited the chilled foods category to allow for the full utilisation of this
inland facility for the production of its frozen food product offering. New
innovative microwavable product offerings were launched in the frozen product
category. The Wellington`s product range continued to deliver positive sales
growth.
Ceres Beverages
The good volume growth and satisfactory financial results achieved in all
product categories in the first quarter of the reporting period was almost
reversed during the second quarter as volumes declined in the ready-to-drink
categories due to consumers migrating to cheaper products, particularly to the
concentrate mixture category.
This decline in volumes as well as the significant increases in the cost of
fruit concentrates, fuel and energy had a negative impact on the overall
profitability of Ceres Beverages during the reporting period.
The commissioning of the new Wadeville plant is progressing well and the plant
will be fully operational by the end of the financial year. Benefits from
improved service levels and distribution savings by producing closer to the
inland market are expected to outweigh the start-up costs of the plant and is
expected to be realised as from the 2013 financial year.
Volumes in the fruit concentrate mixture category showed good growth as
consumers supported these products as more affordable alternatives to the ready-
to-drink products. Although the turnaround strategy implemented in this category
was successful, it remains a fiercely competitive category.
Volumes in the Pepsi range of products continued to grow in a very competitive
pricing environment.
The beverages category worldwide is under pressure due to the constrained
spending power of the consumer. The profitability of Ceres Beverages will be
influenced by the ability to recover the high input costs from the consumer, not
only per specific product category, but also against other beverages. Double
digit price increases have, subsequent to the reporting period, been implemented
in certain categories in the marketplace to recover the increased input costs.
The key focus areas remain operational efficiencies and margin management.
Prospects
We continue to negotiate shifting consumption patterns, volatile commodity
prices and inflationary cost pressures with diligent price and volume management
to protect margins without sacrificing quality for the benefit of the consumer.
Our judicious and disciplined investment for future growth in our core
operations is testimony to our belief that disposable income will increase and
consumer spend will normalise over the medium term as the economic environment
improves.
Interim dividend
A gross interim dividend of 44 cents (2011: 40 cents) per share has been
approved by the Board. The applicable dates are as follows:
Last date of trading cum dividend: Friday, 29 June 2012
Trading ex dividend commences: Monday, 2 July 2012
Record date: Friday, 6 July 2012
Dividend payable: Monday, 9 July 2012
A gross interim dividend of 13.2 cents (2011: 12.0 cents) per class A ordinary
share, being 30% of the gross interim dividend payable to ordinary shareholders
in terms of the rules of the relevant employee scheme, will be paid during July
2012.
Share certificates may not be dematerialised or materialised between Monday, 2
July 2012, and Friday, 6 July 2012, both days inclusive.
By order of the Board
ZL Combi WA Hanekom
Chairman Managing Director
Paarl, 17 May 2012
Group statement of comprehensive income
Unaudited Audited
Six months ended Year ended
31 March 30 September
2012 2011 2011
R`m R`m R`m
Revenue 9 193.2 8 308.3 16 853.1
Cost of goods sold (6 538.1) (5 698.8) (11 804.1)
Gross profit 2 655.1 2 609.5 5 049.0
Other income and gains/(losses) - net 135.6 144.7 291.7
Other expenses (2 323.5) (2 096.2) (4 149.4)
Excluding once-off share-based
payment charge on B-BBEE
equity transaction (2 162.8) (2 096.2) (4 149.4)
Once-off share-based payment charge
on B-BBEE equity
transaction (160.7) - -
Items of a capital nature (2.1) 8.5 (0.8)
Operating profit 465.1 666.5 1 190.5
Investment income 9.0 10.8 19.2
Finance costs (70.4) (59.0) (160.0)
Share of profit of associated 0.2 0.8 0.3
companies
Profit before income tax 403.9 619.1 1 050.0
Income tax expense (169.2) (188.2) (319.9)
Profit for the period 234.7 430.9 730.1
Other comprehensive (loss)/income for (13.4) 17.1 63.8
the period
Net fair value adjustments to cash (9.6) 12.3 36.7
flow hedging reserve
For the period 37.7 72.6 118.6
Current income tax effect (10.5) (22.1) (40.2)
Deferred income tax effect (0.1) 1.8 7.0
Reclassified to profit or loss (51.0) (55.6) (67.6)
Current income tax effect 16.8 22.1 36.2
Deferred income tax effect (2.5) (6.5) (17.3)
Net fair value adjustments on 5.8 3.1 1.9
available-for-sale financial assets
For the period 6.3 4.3 3.9
Deferred income tax effect (0.1) (0.5) (0.3)
Reclassified to profit or loss (0.4) (0.7) (1.7)
Movement on foreign currency (9.6) 1.7 25.2
translation reserve
Total comprehensive income for the 221.3 448.0 793.9
period
Profit for the period attributable
to:
Owners of the parent 233.7 430.1 728.8
Non-controlling interest 1.0 0.8 1.3
234.7 430.9 730.1
Total comprehensive income for the
period attributable to:
Owners of the parent 220.3 447.2 792.6
Non-controlling interest 1.0 0.8 1.3
221.3 448.0 793.9
Headline earnings reconciliation
Unaudited Audited
Six months ended Year ended
31 March 30 September
2012 2011 2011
R`m R`m R`m
Reconciliation between profit
attributable to owners of the parent
and headline earnings
Profit attributable to owners of the 233.7 430.1 728.8
parent
Remeasurement of items of a capital 2.1 (8.5) 0.8
nature
Net loss/(profit) on disposal of 2.6 (7.8) (5.4)
property, plant, equipment and
intangible assets
Net profit on disposal of available-for-(0.5) (0.7) (1.7)
sale financial assets
Impairment of property, plant, - - 7.9
equipment and intangible assets
Tax effect on remeasurement of items of - 0.1 (3.4)
a capital nature
Headline earnings 235.8 421.7 726.2
Once-off share-based payment charge on 160.7 - -
B-BBEE equity transaction
Adjusted headline earnings 396.5 421.7 726.2
Number of issued ordinary shares 219.5 201.2 201.2
(million)
Number of issued treasury shares:
- held by subsidiary (million) 18.0 18.0 18.0
- held by share incentive trust 3.2 4.5 3.9
(million)
- held by B-BBEE equity transaction 18.1 - -
participants (million)
Number of issued class A ordinary 8.7 10.0 9.3
shares (million)
Weighted average number of ordinary 179.4 178.1 178.4
shares (million)
Earnings per ordinary share (cents):
- basic 130.2 241.5 408.4
- diluted 127.9 235.9 399.7
- headline 131.4 236.8 407.0
- adjusted headline 221.0 236.8 407.0
- diluted headline 129.0 231.4 398.3
Gross dividend per ordinary share 44.0 40.0 80.0
(cents)
Gross dividend per class A ordinary 13.2 12.0 24.0
share (cents)
Net asset value per ordinary share 3 265.5 2 916.2 3 059.7
(cents)
Debt to equity ratio (%) 21.5 22.5 13.8
Group statement of cash flows
Unaudited Audited
Six months ended Year ended
31 March 30 September
2012 2011 2011
R`m R`m R`m
Net cash profit from operating 786.6 875.2 1 563.3
activities
Cash effect from hedging activities (22.6) - 14.2
Working capital changes (510.6) (877.6) (446.8)
Accrual for Competition Commission (216.7) (66.7) (66.7)
penalties paid
Net cash generated/(utilised) from 36.7 (69.1) 1 064.0
operations
Income tax paid (135.7) (144.7) (261.5)
Net cash flow from operating activities (99.0) (213.8) 802.5
Net cash flow from investment (324.4) (491.6) (933.4)
activities
Property, plant, equipment and
intangible assets
- additions (233.4) (288.5) (613.0)
- replacements (95.1) (76.0) (201.6)
- proceeds on disposal 7.0 31.9 33.7
Business combinations (10.0) (167.2) (171.2)
Proceeds on disposal of and changes in (1.9) (2.6) (3.6)
available-for-sale financial assets and
loans
Interest received 8.4 10.4 18.1
Dividends received 0.6 0.4 1.1
Dividends received from associates - - 3.1
Net cash flow from financing activities 286.8 (140.3) (232.3)
Proceeds from borrowings - third-party 449.7 - -
finance of B-BBEE equity transaction
Repayments of other borrowings (109.7) (77.1) (11.9)
Net contribution by participants to B- 93.2 - -
BBEE equity transaction
Treasury shares - share incentive trust 6.7 5.4 11.8
Share schemes transactions (17.2) (1.3) (20.9)
Interest paid (64.0) (67.3) (139.6)
Dividends paid (71.9) - (71.7)
Net cash, cash equivalents and bank (11.3) - -
overdrafts from business combinations
Net decrease in cash, cash equivalents (147.9) (845.7) (363.2)
and bank overdrafts
Net cash, cash equivalents and bank 345.7 708.9 708.9
overdrafts at beginning of the period
Net cash, cash equivalents and bank 197.8 (136.8) 345.7
overdrafts at end of the period
Group statement of financial position
Unaudited Audited
31 March 30 September
2012 2011 2011
R`m R`m R`m
Assets
Property, plant and equipment 4 372.0 3 892.3 4 192.3
Goodwill 264.5 262.4 265.1
Other intangible assets 464.7 466.9 467.4
Biological assets 16.8 16.8 16.8
Investments in associates and loans to 27.8 29.8 29.9
joint ventures
Available-for-sale financial assets 50.4 43.5 43.6
Trade and other receivables 19.8 21.8 20.0
Deferred income tax 2.6 4.4 2.6
Non-current assets 5 218.6 4 737.9 5 037.7
Current assets 5 156.5 4 721.8 4 825.3
Inventories 2 430.7 2 315.6 2 313.4
Biological assets 223.5 202.6 210.1
Derivative financial instruments 9.8 1.6 14.1
Trade and other receivables 1 951.5 1 965.2 1 836.1
Current income tax 8.9 7.8 11.2
Cash and cash equivalents 532.1 229.0 440.4
Total assets 10 375.1 9 459.7 9 863.0
Equity and liabilities
Capital and reserves attributable to owners 5 884.5 5 211.0 5 488.3
of the parent
Share capital 21.9 20.1 20.1
Share premium 2 170.3 1 205.4 1 186.7
Treasury shares (1 212.9) (226.7) (220.3)
Other reserves 356.3 54.4 115.2
Retained earnings 4 548.9 4 157.8 4 386.6
Non-controlling interest 8.5 7.3 7.5
Total equity 5 893.0 5 218.3 5 495.8
Non-current liabilities 2 080.5 1 897.4 1 891.0
Borrowings
B-BBEE equity transaction third-party 449.7 - -
finance
Other 745.3 888.2 849.0
Provisions for other liabilities and 117.2 112.7 113.3
charges
Accrual for Competition Commission - 196.9 202.1
penalties
Share-based payment liability 141.4 134.8 146.0
Deferred income tax 626.9 564.8 580.6
Current liabilities 2 401.6 2 344.0 2 476.2
Trade and other payables 1 581.8 1 557.2 1 871.5
Current income tax 5.9 19.0 22.1
Derivative financial instruments 0.2 36.0 10.4
Borrowings 599.8 515.0 348.4
Loan from joint venture 3.5 6.4 7.9
Accrual for Competition Commission 209.9 209.9 215.5
penalties
Dividends payable 0.5 0.5 0.4
Total equity and liabilities 10 375.1 9 459.7 9 863.0
Group statement of changes in equity
Unaudited Audited
Six months ended Year ended
31 March 30 September
2012 2011 2011
R`m R`m R`m
Share capital, share premium and 979.3 998.8 986.5
treasury shares
Opening balance 986.5 998.6 998.6
Cost to issue ordinary shares to (3.2) - -
participants in B-BBEE equity
transaction
Movement in treasury shares 6.7 5.4 11.8
Ordinary shares issued - share 7.9 0.4 2.6
appreciation rights
Employee share scheme - repurchase of (18.6) (5.6) (26.5)
shares
Other reserves 356.3 54.4 115.2
Opening balance 115.2 28.3 28.3
Contribution by participants to B-BBEE 96.4 - -
equity transaction
Once-off share-based payment charge on 160.7 - -
B-BBEE equity transaction
Transfers from retained earnings 1.3 0.2 0.4
Equity compensation reserve 5.5 6.6 15.0
transactions
Ordinary shares issued - share (7.9) (0.4) (2.6)
appreciation rights
Deferred income tax on share-based (1.5) 2.6 10.3
payments
Other comprehensive (loss)/income for (13.4) 17.1 63.8
the period
Retained earnings 4 548.9 4 157.8 4 386.6
Opening balance 4 386.6 3 724.5 3 724.5
Profit for the period 233.7 430.1 728.8
Dividends paid (72.0) - (71.6)
Transfers to other reserves (1.3) (0.2) (0.4)
Management share incentive scheme - 2.0 3.4 5.4
disposal of shares
Employee share scheme - transfer tax (0.1) - (0.1)
on share transactions
Non-controlling interest 8.5 7.3 7.5
Opening balance 7.5 6.5 6.5
Dividend paid - - (0.3)
Profit for the period 1.0 0.8 1.3
Total equity 5 893.0 5 218.3 5 495.8
Group segment report
Unaudited Audited
Six months ended Year ended
31 March 30 September
2012 2011 2011
R`m R`m R`m
Segment revenue
Sasko 4 824.1 4 341.5 9 054.6
Agri Business 1 498.7 1 272.8 2 714.6
Bokomo Foods 1 468.3 1 396.2 2 760.3
Ceres Beverages 1 549.0 1 420.4 2 577.4
9 340.1 8 430.9 17 106.9
Less: Internal revenue (146.9) (122.6) (253.8)
Total 9 193.2 8 308.3 16 853.1
Segment results (operating profit
before items
of a capital nature)
Sasko 456.6 394.7 857.5
Agri Business 14.3 82.3 109.2
Bokomo Foods 119.5 119.0 216.4
Ceres Beverages 85.7 121.7 132.0
Unallocated (208.9) (59.7) (123.8)
Excluding once-off share-based
payment charge on B-BBEE
equity transaction (48.2) (59.7) (123.8)
Once-off share-based payment charge
on B-BBEE
equity transaction (160.7) - -
Total 467.2 658.0 1 191.3
Excluding once-off share-based
payment charge on B-BBEE
equity transaction 627.9 658.0 1 191.3
Once-off share-based payment charge
on B-BBEE
equity transaction (160.7) - -
Reconciliation of operating profit
(before items of a capital nature) to
profit before income tax
Operating profit before items of a 467.2 658.0 1 191.3
capital nature
Adjusted for:
Remeasurement of items of a capital (2.1) 8.5 (0.8)
nature
Interest income 8.4 10.4 18.1
Dividends received 0.6 0.4 1.1
Finance costs (70.4) (59.0) (160.0)
Share of profit of associated 0.2 0.8 0.3
companies
Profit before income tax 403.9 619.1 1 050.0
Notes to the condensed consolidated interim financial statements
1. Basis of preparation
These unaudited interim results of the Group for the six months ended 31 March
2012 have been prepared in accordance with International Financial Reporting
Standards ("IFRS"), the Listings Requirements of the JSE Limited and the
Companies Act of South Africa, Act 71 of 2008. These condensed consolidated
interim financial statements comply with the requirements of IAS 34 - Interim
Financial Reporting.
2. Accounting policies
These condensed consolidated interim financial statements incorporate accounting
policies that are consistent with those applied in the Group`s annual financial
statements for the year ended 30 September 2011 and with those of previous
financial years, except for the adoption of the following amendments to
published standards and interpretations that became effective for the current
reporting period beginning on 1 October 2011:
Amendments to IFRS 1 - First time adoption on hyperinflation and fixed dates
Amendment to IFRS 7 - Financial Instruments: Disclosures - Transfer of financial
assets
Amendment to IAS 24 - Related party disclosures
Improvements to IFRSs (Issued May 2010)
Amendments to IFRIC 14 - Pre-payments of a Minimum Funding Requirement
The adoption of these amendments to standards and interpretations did not have
any material impact on the Group`s results and cash flows for the six months
ended 31 March 2012 and the financial position at 31 March 2012.
3. Share capital
During the six months under review the following share transactions occurred:
Unaudited Audited
Six months ended Year ended
31 March 30
September
2012 2011 2011
Number of listed issued and
fully paid ordinary shares
At beginning of period 201 236 929 201 191 970 201 191 970
Shares issued in terms of
employee share appreciation
rights scheme 129 480 6 783 44 959
Shares issued to participants 18 091 661 - -
of the BEE equity transaction
At end of period 219 458 070 201 198 753 201 236 929
129,480 (30 September 2011:
44,959 and 31 March 2011:
6,783) listed ordinary shares
of 10 cents each were issued at
an average of R61.11 (30
September 2011: R58.06 and 31
March 2011: R53.39) per share
in terms of the employee share
appreciation rights scheme.
18,091,661 listed ordinary
shares of 10 cents each were
issued at R55.14 and R58.04
respectively to the BEE
strategic partners and BEE
directors in terms of the BEE
equity transaction.
Number of treasury shares held
by the share incentive trust
At beginning of period 3 881 401 5 111 905 5 111 905
Movement in shares (688 189) (588 275) (1 230 504)
At end of period 3 193 212 4 523 630 3 881 401
Proceeds on the sale of
treasury shares by the share
incentive trust (R`000) 9 222 9 865 18 661
Number of treasury shares held
by broad-based BEE transaction
participants
Shares issued to participants 18 091 661 - -
of the BEE equity transaction
At end of period 18 091 661 - -
Number of treasury shares held
by a subsidiary
At beginning and end of 17 982 056 17 982 056 17 982 056
period
Number of unlisted class A
ordinary shares
At beginning of period 9 294 530 10 408 650 10 408 650
Shares bought back and (631 120) (386 400) (1 114 120)
cancelled
At end of period 8 663 410 10 022 250 9 294 530
Purchase consideration paid
for unlisted class A
ordinary shares bought back 18 649 5 603 26 526
(R`000)
4. Broad-based black economic empowerment ("B-BBEE") equity transaction
The Company concluded a B-BBEE transaction with its employees in 2006 which
effectively equated to 10% black ownership of the Group at the time. During
December 2011 Pioneer Foods announced the second phase of its B-BBEE strategy
and proposed to broaden black ownership in the Group by means of a specific
issue of ordinary shares to strategic BEE partners, current and former black
directors (collectively, "BEE Investors") and a perpetual BEE Trust ("BEE
Trust") founded by the Company.
The transaction, insofar as it related to the specific issue of ordinary shares
to BEE Investors, has been effectively implemented. In this regard 18,091,661
Pioneer Foods ordinary shares have been issued to the BEE Investors and were
listed on 19 March 2012 on the JSE. Implementation of the remainder of the
transaction relating to the issuing of 10,599,988 Pioneer Foods ordinary shares
to the BEE Trust only became effective after the reporting date. These shares
were issued and listed on the JSE on 26 April 2012. Following the implementation
of the transaction the BEE Investors and the BEE Trust acquired direct equity
interests in the Group of approximately 8.5% and 5.0% respectively, after
adjusting for the treasury shares (17,982,056) held by a Group subsidiary.
In terms of the transaction, 17,488,631 ordinary shares were issued to strategic
BEE partners at a subscription price of R55.14 per share and 603,030 ordinary
shares to current and former black directors of the Company at a subscription
price of R58.04 per share. The subscription price for these share issues was
mainly financed by Pioneer Foods` wholly owned subsidiary, Pioneer Foods (Pty)
Limited, and by third-party funding from FirstRand Bank Limited ("RMB"). The
strategic BEE partners contributed 10% of the subscription price. The current
and former black directors of the Company did not contribute to the subscription
price.
As a result, Pioneer Foods received net cash of R546 million after the initial
contribution for the subscription price from the strategic BEE partners and the
financiers of the transaction. For the first seven years these newly listed
shares will be treated as treasury shares in terms of IFRS accounting
principles, with a minimal impact on earnings or earnings per share. The
exception is the recognition of the once-off non-cash flow share-based payment
charge in terms of IFRS that amounted to R161 million.
For further detail relating to the transaction, stakeholders are referred to the
Company`s circular to shareholders dated 19 January 2012 and to the Company`s
subsequent SENS announcements regarding the transaction.
5. Borrowings
RMB provided the third-party funding amounting to R449,679,606 for the specific
issue of ordinary shares to BEE Investors as part of the B-BBEE equity
transaction. This financial assistance occurred via separate BEE special purpose
vehicles ("SPVs") for each BEE investor. The results and financial positions of
these SPVs are consolidated with those of the Group in terms of IFRS. The
Group`s non-current borrowings therefore increased with the amount of the third-
party funding.
No other material new borrowings were concluded during the period under review.
Other changes in borrowings mainly reflect repayments made in terms of
agreements. Short-term borrowings fluctuate in accordance with changing working
capital needs.
6. Events after the reporting date
6.1 Dividend
The Board approved a gross interim dividend of 44.0 cents (2011: gross interim
dividend of 40.0 cents and a gross final dividend of 40.0 cents) per ordinary
share. This will approximately amount to R96,561,551 (2011: final of R80,517,477
and interim of R80,487,571) depending on the exact number of ordinary shares
issued at the record date. In addition, the 10,599,988 Pioneer Foods shares
issued to the BEE Trust during April 2012, will receive 20% of the dividend
payable, i.e. 8.8 cents per share, amounting to R932,799.
The Board approved a gross interim dividend of 13.2 cents per class A ordinary
share (2011: gross interim dividend of 12.0 cents and a gross final dividend of
12.0 cents), being 30% of the dividend payable to ordinary shareholders in terms
of the rules of the relevant employee scheme. This will approximately amount to
R1,143,570 (2011: final of R1,063,566 and interim of R1,148,381) depending on
the exact number of ordinary shares issued at the record date.
Additional information disclosed:
These dividends are declared from income reserves and qualify as a dividend as
defined in the Income Tax Act, Act 58 of 1962.
Dividends will be paid net of dividend tax of 15%, to be withheld and paid to
the South African Revenue Service by the Company. Such tax must be withheld
unless beneficial owners of the dividend have provided the necessary documentary
proof to the relevant regulated intermediary that they are exempt therefrom, or
entitled to a reduced rate as a result of the double taxation agreement between
South Africa and the country of domicile of such owner.
The total credits for secondary tax on companies ("STC") utilised as part of
this declaration amount to R277,160 and represent 0.11614 cents per share based
on the total number of ordinary and class A ordinary shares in issue at the date
of this declaration. The net dividend amounts to 37.41742 cents per ordinary
share and 11.23742 cents per class A ordinary share for shareholders liable to
pay the new dividend tax. The net dividend amounts to 44.0 cents per ordinary
share and 13.2 cents per class A ordinary share for shareholders exempt from
paying the new dividend tax.
The number of issued ordinary shares and issued class A shares is 230,059,695
and 8,584,520 respectively as at the date of this declaration.
6.2 Other material events
The remainder of the B-BBEE equity transaction relating to the issue of
10,599,988 Pioneer Foods shares to the BEE Trust only became effective after the
reporting date. These shares were issued and listed on the JSE on 26 April 2012.
There have been no other material events requiring disclosure after the
reporting date and up to the date of approval of the condensed consolidated
interim financial statements by the Board.
7. Business combinations
During the period under review the following business was acquired and all
assets and liabilities relating to this acquisition have been accounted for on
an acquisition basis:
Unaudited
Six months
ended
31 March 2012
Purchase consideration - settled in cash (R`m)
Philadelphia Chick Breeders (Pty) Limited (on 29 February 2012) 10.0
The assets and liabilities acquired of this business can be summarised as
follows:
Fair value (R`m)
Property, plant and equipment 28.4
Inventories 0.6
Current biological assets 7.7
Trade and other receivables 5.3
Non-current borrowings (17.8)
Bank overdrafts (11.3)
Trade and other payables (2.2)
Deferred income tax (0.7)
Purchase consideration - settled in cash 10.0
Carrying value
The carrying amounts of the assets and liabilities in the accounting records of
the legal entity acquired are equal to the fair values except for property,
plant and equipment. The fair value exceeds the carrying value by R11.8 million
and as a result a deferred income tax credit of R3.3 million has been provided
for on this excess.
The contribution of this business since acquisition (R`m):
Revenue 4.3
Operating loss before finance cost and income tax 0.1
The pro forma contribution of this business for the full reporting period of six
months assuming the acquisition was at the beginning of the reporting period
(R`m):
Revenue 25.8
Operating loss before finance cost and income tax 0.6
8. Contingent liabilities
8.1 Land claims
Regional Land Claims Commissioners acknowledged claims against the land of a
Group company in terms of the provisions of sections 2 and 11 of the Restitution
of Land Rights Act of 1994 (as amended), during 2007.
The valuations of the Commissioners were accepted for the two farms involved and
negotiations with the Commissioners regarding the proposed sale for R10.5
million are ongoing. The impact of discontinuing production at these two units
is immaterial.
It is not anticipated that any material transactions will arise from these land
claims.
8.2 Dispute with egg contract producers
As previously reported, six contract egg producers are proceeding with their
claims in the Western Cape High Court: Cape Town.
Pioneer Foods filed pleas to all these claims and in four of these claims
counterclaims have been filed to recover damages suffered by Pioneer Foods as a
result of breach of contract by the contract producers.
One of these matters has been set down for trial in the Cape High Court from
Monday, 30 July 2012.
Management remains convinced, based on legal advice regarding the merits of the
claims against the Group, that the Group will not incur any material liability
in respect of this matter.
8.3 Dispute with broiler farms and breeder farms
Several breeder farms and broiler farms (five in total) have previously filed
claims against Pioneer Foods for the alleged breach of the terms of their supply
agreements with Pioneer Foods. One of these entities, Philadelphia Chick
Breeders (Pty) Limited, has been acquired during the reporting period.
Only letters of demand have been received thus far and these claims should
eventually be finalised by means of arbitration. Although a date for the
arbitration has not yet been finalised the arbitration will in all likelihood
take place in the latter part of 2012.
Based on legal advice regarding the merits of this claim and at this early stage
of the proceedings, management is convinced that the Group will not incur any
material liability in respect of these matters.
8.4 Guarantees
The Group had guarantees in issue of R55.7 million (30 September 2011: R75.9
million) as at 31 March 2012, primarily for loans by third parties to contracted
suppliers.
As part of the financial assistance provided by RMB to BEE Investors in terms of
the B-BBEE equity transaction, Pioneer Foods (Pty) Limited provided RMB with a
guarantee amounting to R100 million.
9. Future capital commitments
Capital expenditure approved by the Board and contracted for amounts to R522.9
million (30 September 2011: R608.0 million). Capital expenditure approved by the
Board, but not contracted for yet, amount to R206.5 million (30 September 2011:
R163.9 million). Capital commitments of joint ventures amount to R9.1 million
(30 September 2011: R29.2 million).
10. Preparation of financial statements
These condensed consolidated interim financial statements have been prepared
under the supervision of LR Cronje, CA(SA), group financial director.
11. Audit
These results have not been audited or reviewed by the external auditors.
Directors:
ZL Combi (Chairman), WA Hanekom (Managing)*, LR Cronje*, TA Carstens*, MM du
Toit, AE Jacobs,
Prof ASM Karaan, NS Mjoli-Mncube, AH Sangqu, G Pretorius, LP Retief (*
Executive)
Company secretary:
J Jacobs
E-mail: jjacobs3@pioneerfoods.co.za
Registered address: 32 Market Street, Paarl, 7646
PO Box 20, Huguenot, 7645, South Africa
Tel: 021 807 5100
Fax: 021 807 5280
E-mail: info@pioneerfoods.co.za
Transfer secretaries:
Computershare Investor Services (Pty) Limited
PO Box 61051, Marshalltown, 2107,South Africa
Tel: 011 370 5000
Fax: 011 688 5209
Sponsor:
PSG Capital (Pty) Limited
PO Box 7403, Stellenbosch, 7599, South Africa
Tel: 021 887 9602
Fax: 021 887 9624
Date: 21/05/2012 07:05:09 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
