| Wed 18 Apr 2001, 0:00 | | Otk Holdings Limited - Results For The Year Ended |
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OTK Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1995/004030/06)
Results for the year ended 28 February 2001
Highlights
Revenue increases by 13,2%
Headline earnings per share increase by 5,1%
Distributions declared to shareholders of 266,6 cents per share
This announcement is available on OTK's website at www.otk.co.za
Group balance sheet1
Actual Pro forma Actual
2001 2001 2000
R000 R000 R000
ASSETS
Non-current assets 644 246 575 874 625 268
Property, plant and equipment 405 480 405 480 447 658
Intangible assets 19 746 19 746 36 881
Investments 24 821 24 821 26 069
OTK Holdings Trust 105 926 37 554 47 800
Other financial assets 38 326 38 326 6 683
Deferred tax assets 49 947 49 947 60 177
Current assets 2 459 903 1 629 591 2 141 973
Inventories 465 495 465 495 682 283
Trade and other receivables 1 713 754 792 654 1 276 198
Cash and cash equivalents 280 654 371 442 183 492
Total assets 3 104 149 2 205 465 2 767 241
EQUITY AND LIABILITIES
Capital and reserves 1 194 464 1 128 034 1 851 186
Issued capital 3 3 6 491
Share premium - - 639 430
Reserves 458 905 458 905 458 905
Accumulated profits 735 556 669 126 746 360
Non-current liabilities 55 297 55 297 67 830
Long-term liabilities 9 689 9 689 9 923
Deferred tax liabilities 45 608 45 608 57 907
Current liabilities 1 854 388 1 022 134 848 225
Trade and other payables 727 743 727 743 708 251
Shareholders for distribution 868 941 36 687 25 958
Short-term borrowings 257 704 257 704 114 016
Total equity and liabilities 3 104 149 2 205 465 2 767 241
Net tangible asset value per share (cents) 346 326 559
Group income statement2
Revenue 4 189 312 4 094 411 3 701 282
Operating profit 195 540 195 540 209 242
Net debtors' finance income 129 158 34 259 99 968
Net finance (cost)/income (12 230) (12 230) 11 558
Profit before tax 312 468 217 569 320 768
Tax 121 217 92 748 60 337
Net profit 191 251 124 821 260 431
Weighted average number
of shares issued (000) 323 517 323 517 334 240
Earnings per share (cents)3 59,1 38,6 77,9
Headline earnings per share (cents)3 80,5 60,0 76,6
Group cash flow statement
2001 2000
R000 R000
Operating activities
Cash generated from operations 324 697 309 210
Changes in working capital (206 169) (440 848)
Adjustment for non-cash flow items 80 528 79 277
Investment income 13 462 74 888
Interest paid (25 692) (63 330)
Dividends and interest paid on combined units - (103 436)
Tax paid (118 394) (77 030)
Net cash generated from/
(utilised in) operating activities 68 432 (221 269)
Investing activities
Purchase of property, plant and equipment (71 184) (185 792)
Purchase of trademarks - (11 924)
Proceeds on disposal of property, plant
and equipment 44 634 12 703
Proceeds on disposal of trademarks 2 271 -
Acquisition of investments (28 262) (35 783)
Disposal of investments 4 984 -
Acquisition of shares in subsidiaries
and joint ventures - (23 341)
Net cash utilised in investing activities (47 557) (244 137)
Financing activities
Proceeds from issue of combined units - 34 317
Share repurchase (6 155) (55 871)
Capital distribution (61 013) -
(Repayment of)/proceeds from long-term borrowings (233) 5 811
Net cash utilised in financing activities (67 401) (15 743)
Net decrease in cash and cash equivalents (46 526) (481 149)
Movement in cash and cash equivalents
Beginning of year 69 476 550 625
Net decrease (46 526) (481 149)
End of year 22 950 69 476
Notes to the Group results
1 The pro forma balance sheet is based on the assumption that the sale of
debtors and the distribution to shareholders of 245 cents per share that took
place on 28 February 2001 and 12 April 2001 respectively, had taken place on 1
March 2000.
2 The pro forma income statement illustrates the effect of Note 1 and the net
interest lost on the debtors sold, had the transaction taken effect on 1 March
2000.
3 Reconciliation of headline earnings.
Actual Pro forma Actual
F2001 F2001 F2000
Earnings (cents) 59,1 38,6 77,9
Loss on disposal: Subsidiary business 9,1 9,1 -
Personnel restructuring costs 7,1 7,1 -
Tax on special distribution 3,7 3,7 -
Cost on sale of debtors 1,7 1,7 -
Profit on disposal (assets/investments) (0,2) (0,2) (1,3)
Headline earnings (cents) 80,5 60,0 76,6
4 Accounting policies
Accounting policies and calculation methods were consistently applied in
accordance with those of previous annual financial statements, except for the
change in the accounting policy in the valuation of merchandise. The effect of
the change is immaterial.
Group statement of changes in equity
Combined Share Share Accumalated
Units capital premium Reserves profits Total
R000 R000 R000 R000 R000 R000
Balance 28 February
1999 635 794 - 57 639 460 864 539 104 1 693 401
Net profit - - - - 260 431 260 431
Transfer from non-
distributable
reserve - - - (1 959) 1 959 -
Issue of combined
units on
acquisition
of entity 18 398 - 15 919 - - 34 317
Transfer of
Shares (3 389) 3 389 - - - -
Conversion of
Debentures (650 803) 3 390 647 413 - - -
Share repurchase - (288) (55 583) - - (55 871)
Capital
Distribution - - (25 958) - - (25 958)
Dividends and
interest on
combined units - - - - (55 134) (55 134)
Balance 29
February 2000 - 6 491 639 430 458 905 746 360 1 851 186
Net profit - - - - 191 251 191 251Issue
of
shares to share
incentive scheme - 303 61 875 - - 62 178
Capital distribution - - (35 055) - - (35 055)
Dividend on shares - - - - (36 687) (36 687)
Share repurchase - - - - (6 155) (6 155)
Special capital
Distribution - (6 791) (666 250) - (159 213) (832 254)
Balance 28
February 2001 - 3 - 458 905 735 556 1 194 464
Segmental analysis
Operating profit Assets and liabilities
and net debtor Trademarks/
Revenue financing income Depreciation amortisation
Assets Liabilities
Rm Rm Rm Rm Rm Rm
Grain 2001 269 115 9 - 437 (159)
2000 233 94 14 - 338 (121)
Cotton 2001 425 44 6 3 326 (50)
2000 479 31 4 3 342 (66)
Retail 2001 1 687 118 5 - 1 091 (184)
2000 1 468 108 5 - 921 (276)
Staples 2001 419 1 7 - 206 (51)
2000 443 24 9 - 260 (70)
Animal
Feeds 2001 1 389 47 30 - 431 (202)
and Protein 2000 1 078 52 29 3 515 (121)
Other 2001 - - 4 - 613 (1 208)
2000 - - 5 - 391 (194)
TOTAL 2001 4 189 325 61 3 3 104 (1 854)
2000 3 701 309 66 6 2 767 (848)
Audit report of the independent auditors on the Group annual financial
statements
We have audited the Group annual financial statements of OTK Holdings Limited,
from which these results were extracted, for the year ended 28 February 2001.
The financial statements are the responsibility of the Company's directors.
Our responsibility is to express an opinion on the financial statements based
on our audit.
Scope
We conducted our audit in accordance with statements of South African Auditing
Standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance that the financial statements are free of material
misstatement. An audit includes:
l examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements;
l assessing the accounting principles used and significant estimates made by
management; and
l evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
Audit opinion
In our opinion, the Group annual financial statements, from which these results
were extracted, fairly present, in all material respects, the financial
position of the Group at 28 February 2001 and the results of its operations and
cash flows for the year then ended, in accordance with South African Statements
of Generally Accepted Accounting Practice, and in the manner required by the
Companies Act in South Africa.
PricewaterhouseCoopers Inc
Registered Accountants and Auditors
Chartered Accountants (SA)
Johannesburg
18 April 2001
Comments
Profile
OTK is South Africa's leading agri business with extensive activities in the
Republic's eastern and northern provinces, as well as in Zambia, Swaziland and
Mogambique. The various activities of the Group are in the grain, cotton,
retail, staples, animal feeds and protein businesses.
Restructuring
The past year was one of momentous change for OTK. The Board was reconstituted
and new managing and deputy managing directors were appointed. A new business
vision, aimed at transforming OTK from a regionally-bound agricultural company
into a world-class national agri business was developed. The executive
directors simultaneously developed a new business model aimed at exiting
strategically flawed investments and fixing those which offer strong growth
prospects and acceptable returns on capital. Considerable progress has already
been made in implementing this new business model. The red meat and egg
businesses have been sold and the balance sheet restructured through the sale
of the interest-bearing debt to Wesbank and the Land Bank as announced to
shareholders on 2 April 2001.
This yielded a cash distribution of 245 cents per share that was paid to
shareholders registered in OTK's share register on Friday, 6 April 2001.
The Group embarked on an extensive personnel restructuring programme in
February 2001 which resulted in the total workforce being reduced by 1 300
people.
Group commentary
Revenue increased by 13,2% compared to the previous year. This was due to the
growth in retail, increased revenue from grain due to increased silo capacity
utilisation and additional revenue from animal feeds and broilers.
An increase in net debtor financing income was achieved for the year compared
to the previous year but the Group's profitability was negatively affected by
the inclusion of non-recurring expenses ie personnel restructuring costs, a
loss on the sale of Eggbert Eggs and cost on sale of debtors.
The Group's cash has decreased by R46 million due to capital expenditure and
the repurchase of shares. This and the seasonal fluctuation in cash flow,
resulted in an interest cost compared to interest revenue last year.
Acquisitions and interest on combined units, resulted in non-recurring tax
benefits in the previous year. The current year's tax was increased by the
once-off STC on the special cash distribution of 245 cents per share to
shareholders. As a result, the effective tax rate increased from 18,8% to 38,8%
Headline earnings per share at 80,5 cents increased by 5,1% compared to the
previous year.
DIVISIONAL COMMENTARY
Grain
The main services/products of this division consist of handling, grading,
storage and trading of agri products.
Fifty-eight silo complexes, of which some are ideally placed to service the
Maputo corridor, are invaluable key assets.
The higher crop volume and resultant increased silo capacity utilisation and
increased trading activities resulted in a good increase in profit and revenue.
Cotton
The cotton division is involved in the financing, ginning and marketing of
cotton and cotton seed. The division achieved improved results due to an
increase in world cotton prices and cost savings from rationalisations effected
during the previous year. Revenue decreased due to lower plantings.
Retail
This division consists of 51 strategically placed retail outlets. The business
procures and supplies farmer requisites and mechanisation equipment, and
provides maintenance in these areas.
The rationalisation of SOK's operations, as well as an increase in the
intensity of the division's marketing activities, resulted in retail performing
well. Although interest rates decreased, the increase in debtor financing
contributed to an increase in operating profits.
Staples
This division processes, packs and distributes food and sundry products.
Although the staples division grew market share, low returns for staples in the
South African retail food market resulted in a poor performance. Negotiations
to exit this business are in the process of finalisation.
Animal Feeds and Protein
The division is made up of the Animal Feeds business and OTK's 50% of Earlybird
which is a joint venture with Astral Foods.
The feed business has excellent assets strategically located in close proximity
to the prime maize and soya growing areas. Feed is a key livestock farmer
requisite and OTK has excellent intellectual capital to enable farmers to
optimise returns on their animal protein products.
This area is a growth sector for OTK and acquisitions will be considered.
The non-performing Eggbert Eggs and red meat business were exited for a gross
proceeds of R61 million and the net loss on these disposals were fully
accounted for in the results.
Good results were achieved by the broiler operation.
Connie du Toit was appointed Managing Director of Earlybird in November and
already significant improvements in profitability have been achieved.
Innovative new products are under development and Earlybird's prospects for
F2002 are good.
Prospects
The new strategy and structure are starting to realise significant all-round
performance and financial benefits, which will further add to shareholder
wealth during F2002.
Annual report
The annual report will be posted to shareholders and be available on OTK's
website by 11 June 2001.
Capital distribution
A cash capital distribution of 10,8 cents per share was paid to shareholders
registered in OTK's share register on Wednesday, 15 November 2000.
Dividend
A cash dividend of 10,8 cents per share will accrue to shareholders registered
in OTK's share register on Friday, 15 June 2001. The transfer and share
registers will therefore be closed from 16 June 2001 to 19 June 2001, both days
inclusive.
Cheques in respect of the cash dividend will be posted to shareholders
concerned, on or about Friday, 6 July 2001.
For and on behalf of the Board
PF Erasmus GAL Ebedes
Chairman Managing Director
19 April 2001
Johannesburg
Registered office
24 Eeufees Street Bethal 2310 PO Box 100 Bethal 2310
Transfer secretaries
Mercantile Registrars Limited 11 Diagonal Street Johannesburg 2001
PO Box 1053 Johannesburg 2000
Directors
PF Erasmus (Chairman)
GAL Ebedes (Managing)
JD Wright (Deputy Managing)
AC Ball JJ Claassen NO Davies
CA du Toit JJ Ferreira EG Garcia
I de W Goosen ME King SC Marais
BM Moshal JTJ van Rensburg
FJ van der Merwe
