| Thu 17 May 2001, 0:00 | | Tiger Brands Limited - Interim Report |
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INTERIM REPORT
Tiger Brands Limited Registration number 1994/017881/06) (Incorporated in
the Republic of South Africa)
Interim report to shareholders for the six months ended 31 March 2001
Repositioning for growth through the creation of a more market responsive
organisation
Headline earnings from continuing operations up 11%
The unaudited results for the six months ended 31 March 2001 are set out
below. This report has been prepared in accordance with the requirements of
Statements of South African Generally Accepted Accounting Practice. These
policies are consistent, in all material respects, with those applied in the
most recent published annual financial statements, except as disclosed in
note 3.
GROUP INCOME STATEMENT
Unaudited Audited
Six months ended Year ended
31 March 30 Sept
Notes 2001 2000* Change 2000*
Rm Rm % Rm
Revenue 8 539.2 8 238.7 4 16 246.5
Continuing
operations 8 472.1 7 659.1 11 15 438.9
Discontinued
operations 67.1 579.6 807.6
Operating
income 1 800.9 747.8 7 1 530.4
Continuing
operations 799.2 705.6 13 1 478.1
Discontinued
operations 1.7 42.2 52.3
Income from
associates 48.0 38.7 24 99.8
Income from
investments 11.3 21.4 33.1
Income from
operations 860.2 807.9 6 1 663.3
Net financing
costs (208.2) (89.9) (316.7)
Income before
taxation and
abnormal items 652.0 718.0 1 346.6
Abnormal
items 2 (70.7) (51.8) (53.6)
Income before
taxation 581.3 666.2 1 293.0
Income tax expense 185.0 223.8 344.0
Income after taxation 396.3 442.4 949.0
Minority interest 15.6 73.8 90.0
Dividends on
preference
shares 0.1
Income attributable
to ordinary
shareholders in
Tiger Brands
Limited 380.7 368.6 858.9
Number of ordinary
shares in
issue (000's) 165 744 165 594 165 643
Weighted average
number of ordinary
shares on which
headline earnings
and net income
per share are
based (000's) 165 688 165 504 165 563
Headline earnings
per ordinary
share (cents) 265.9 248.6 7 542.8
Net income per
ordinary share
(cents) 229.8 222.7 518.8
Dividends per
ordinary share
(cents) 68.0 60.8 192.1
Reconciliation between earnings and headline earnings
Rm Rm Rm
Income attributable
to ordinary
shareholders 380.7 368.6 858.9
Adjusted for:
Losses on sale
or discontinuation
of operations,
net 46.2 18.0 42.4
Profits on sale
of fixed assets,
net (10.8) (3.9) (4.2)
Losses on change
of interest in
subsidiaries,
associates and
other
investments 24.4 28.7 (5.0)
Other 6.6
Headline earnings
for the period 440.5 411.4 7 898.7
* Pro forma - excluding the unbundled Agri-Poultry interests
Pro forma in March and September 2000 based on the actual dividend cover
last year
GROUP BALANCE SHEET
Unaudited Audited
Six months ended Year ended
31 March 30 Sept
2001 2000* 2000*
Notes Rm Rm Rm
ASSETS
Non-current assets 3 454.9 2 802.2 3 411.6
Property, plant & equipment 1 494.4 1 613.6 1 551.6
Goodwill 47.6
Investments 1 760.6 1 084.3 1 716.1
Deferred tax asset 152.3 104.3 143.9
Current assets 5 307.0 6 290.1 4 999.7
Inventories 1 707.6 1 632.4 1 580.2
Accounts receivable 2 374.9 2 457.2 2 215.1
Bank and cash resources 1 224.5 2 200.5 1 204.4
TOTAL ASSETS 8 761.9 9 092.3 8 411.3
EQUITY AND LIABILITIES
Capital and reserves 1 081.0 532.7 610.4
Share capital and premium 656.5 650.1 652.2
Non-distributable reserves
and retained income 424.5 (117.4) (41.8)
Minority interest 78.0 261.5 119.1
Total non-current liabilities 3 884.7 208.5 3 086.9
Deferred tax liability 38.0 38.7 24.6
Long-term borrowings 3 846.7 169.8 3 062.3
Total current liabilities 3 718.2 8 089.6 4 594.9
Short-term liabilities 390.4 129.3 1 113.5
Accounts payable including
shareholders for dividend 3 327.8 3 960.3 3 481.4
TOTAL EQUITY AND LIABILITIES 8 761.9 9 092.3 8 411.3
* Pro forma - excluding the unbundled Agri-Poultry interests
GROUP CASH FLOW STATEMENT
Unaudited Audited
Six months ended Year ended
31 March 30 Sept
2001 2000* 2000*
Rm Rm Rm
Cash operating income 933.8 899.5 1 838.7
Working capital changes (201.7) 35.3 (160.1)
Net interest paid (208.2) (89.9) (283.4)
Dividends received 11.3 21.4 47.6
Taxation paid (370.6) (180.4) (475.8)
Cash available from operations 164.6 685.9 967.0
Dividends paid (251.6) (205.1) (319.2)
Net cash (outflow)/inflow from
operating activities (87.0) 480.8 647.8
Net cash inflow/(outflow) from
investing activities 92.1 (3 821.2) (4 721.5)
Net cash inflow/(outflow) before
financing activities 5.1 (3 340.4) (4 073.7)
Net cash inflow from financing
activities 15.0 3 275.2 3 004.6
Net increase/(decrease) in cash and
cash equivalents 20.1 (65.2) (1 069.1)
* Pro forma - excluding the unbundled Agri-Poultry interests
STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 31 MARCH 2001
Share Non dis-
capital and tributable Retained
premium reserves income Total
Rm Rm Rm Rm
Balance at
30 September 2000
(Pro forma) 652.2 287.7 (329.5) 610.4
Reversal of excess
provisions brought
forward 6.4 6.4
Restated balance at
the beginning of
the period 652.2 287.7 (323.1) 616.8
Issue of share capital
and premium 4.3 4.3
Foreign currency
translation reserve
movement (34.2) (34.2)
Transfers between
reserves 47.7 (47.7)
Prior year goodwill
written off -
now realised 226.1 226.1
Income attributable
to ordinary
shareholders 380.7 380.7
Dividends on ordinary
shares (112.7) (112.7)
Balance at
31 March 2001 656.5 301.2 123.8 1 081.0
NOTES Unaudited Audited
Six months ended Year ended
31 March 30 Sept
2001 2000* 2000*
Rm Rm Rm
1. Operating income
Operating income is reflected
after charging:
Cost of inventories utilised 5 448.0 5 084.3 10 445.5
Depreciation 109.2 111.0 237.4
2. Abnormal items
Net loss on discontinued
and disposed operations (46.2) (18.0) (42.0)
Profit/(loss) on sale of
land and buildings 0.1 (2.1)
Loss on change of interest in
subsidiaries, associates
and other investments (24.6) (33.8) (6.2)
Other (3.3)
Abnormal loss before taxation (70.7) (51.8) (53.6)
Taxation (7.8) (11.8)
(70.7) (44.0) (41.8)
Outside shareholders' interest 1.6 0.2
Abnormal loss attributable to
shareholders in Tiger Brands Limited (70.7) (45.6) (42.0)
3. Change in accounting policy
The company has changed its accounting policy for goodwill and other
intangible assets. Whereas goodwill and intangible assets were previously
written off to distributable reserves, they are now capitalised and
amortised over their useful lives in terms of AC 129.
OTHER GROUP SALIENT FEATURES
Unaudited Audited
Six months ended Year ended
31 March 30 Sept
2001 2000* 2000*
Net worth per ordinary share (cents) 750 684 401
Net debt: Total funding (%)Y 72.2 72.5 80.3
Interest cover - net (times) 3.9 8.6 4.9
Current ratio (:1) 1.4 0.8 1.1
Capital expenditure (R million) 107.7 125.2 212.2
- expansion 56.3 65.3 108.5
- replacement 51.4 59.9 103.7
Capital commitments (R million) 106.3 105.7 97.8
- contracted 26.3 48.7 38.5
- approved 80.0 57.0 59.3
Capital commitments will be funded by operating cash
flows and the utilisation of existing borrowing facilities.
Contingent liabilities
Guarantees and contingent
liabilities 160.8 233.5 79.8
Market and directors' valuation
of investments and loans
Listed - market value 287.2 175.7 241.3
Unlisted - directors' valuation 1 636.4 1 507.9 1 527.7
* Pro forma - excluding the unbundled Agri-Poultry interests
Y Total funding represents net debt plus interest of all shareholders
Segmental analysis
Unaudited Unaudited Audited
Six months ended Six months ended Year ended
31 March 31 March 30 Sept
2001 2000* Change 2000*
Rm % Rm % % Rm %
Revenue -
continuing
operations
Food
Brands 4 096.9 48 3 973.3 52 3 7 814.3 51
Dry
Groceries 2 996.2 35 2 952.7 39 1 5 825.4 38
- Cereals &
Beverages 1 802.5 21 1 818.8 24 (1) 3 603.2 24
- Culinary 833.9 10 793.9 10 5 1 570.9 10
- Confectionery 359.8 4 340.0 5 6 651.3 4
Perishables 1 100.7 13 1 020.6 13 8 1 988.9 13
- Fishing 686.4 8 602.7 8 14 1 210.5 8
- Dairy 414.3 5 417.9 5 (1) 778.4 5
Healthcare 917.2 11 819.3 11 12 1 724.6 11
- Pharmaceutical 423.5 5 409.8 5 3 813.4 5
- Consumer 246.2 3 188.5 3 31 455.1 3
- Critical Care &
other 247.5 3 221.0 3 12 456.1 3
Spar 3 458.0 41 2 866.5 37 21 5 898.4 38
Other 1.6
8 472.1 100 7 659.1 100 11 15 438.9 100
Operating income
- continuing
operations
Food Brands 334.2 42 290.3 41 15 617.2 42
Dry Groceries 214.9 27 188.7 27 14 405.6 27
- Cereals &
Beverages 100.1 13 92.7 13 8 200.6 14
- Culinary 81.2 10 67.0 10 21 141.8 9
- Confectionery 33.6 4 29.0 4 16 63.2 4
Perishables 119.3 15 101.6 14 17 211.6 15
- Fishing 102.3 13 79.5 11 29 186.5 13
- Dairy 17.0 2 22.1 3 (23) 25.1 2
Healthcare 322.6 40 313.7 44 3 614.2 41
- Pharmaceutical 201.6 25 200.4 28 1 387.3 26
- Consumer 59.7 7 52.8 7 13 99.9 7
- Critical Care
& other 61.3 8 60.5 9 1 127.0 9
Spar 125.5 16 102.8 15 22 203.5 14
Other 16.9 2 (1.2) 43.2 3
799.2 100 705.6 100 13 1 478.1 100
* Pro forma - excluding the unbundled Agri-Poultry interests
ordinary (interim) dividend number 113
Notice is hereby given that an interim dividend (number 113) of 68 cents per
share has been declared payable to shareholders who are registered in the
books of the company at the close of business on 22 June 2001.
The dividend is payable in the currency of the Republic of South Africa and
warrants in payment thereof dated 6 July 2001, will be posted to
shareholders by the company's transfer secretaries in South Africa and the
United Kingdom on or about 3 July 2001. Payments made by way of electronic
transfer will be made on 6 July 2001.
Registered shareholders paid from the United Kingdom will receive the United
Kingdom currency equivalent of the rand currency value of their dividends
(less appropriate taxes), the rate of exchange being determined on 25 June
2001.
By order of the Board
I W M Isdale
Group Company Secretary
17 May 2001
REVIEW OF OPERATIONS
In a difficult and static trading environment, Tiger Brands achieved an
increase of 7% in headline earnings per share for the 6 months ended 31
March 2001.
An important event during the period under review was the unbundling of
Tiger's Agri-Poultry interests into a separately listed entity called Astral
Foods Limited with effect from 1 October 2000. Consequent upon the
unbundling, Tiger Brands no longer has any shareholding or management
involvement in the newly listed Astral Foods. For comparative purposes,
Tiger's results for the 6 months to 31 March 2000 and the year ended 30
September 2000 are presented on a pro forma basis in order to provide
financial information which is relevant for the company after the
unbundling. Following the unbundling of Astral Foods, Tiger's future growth
strategy will focus on its core activities of Food Brands, Healthcare Brands
and Spar.
Repositioning for growth
Tiger has embarked upon a major change process which is geared to the
achievement of profitable top-line growth. The programme involves a total
restructure of the food and healthcare businesses which will result in the
creation of a synergised, demand-driven organisation. The businesses will be
structured according to newly defined consumer categories which will be
supported by designated functional structures covering brand development,
customer management, supply chain management, finance and administration,
information technology and organisational effectiveness.
It is anticipated that the new category-based structure, which will be
implemented over the course of the next 12 months, will not only result in
the creation of a more market responsive organisation, but will also realise
significant cost savings for the group. Benefits will start to materialise
from the 2002 financial year, although the full impact of the programme will
only be achieved from 2003.
Consistent with Tiger's strategy of focusing on its core activities, a
number of disposals have recently taken place. The Healthcare business,
during March 2001, disposed of its 100% interest in Lagap Pharmaceuticals -
a generics wholesaler based in the United Kingdom. The effective date of the
disposal was 1 January 2001. During the review period, Tiger reached
agreement for the sale to Nestl South Africa of its 49,9% interest in Pets
Products. This transaction has been referred by the Competition Commission
to the Competition Tribunal with a positive recommendation. Negotiations are
ongoing for the disposal of Tiger's 30% interest in the Jumbo Cash & Carry
joint venture.
Results
The turnover and operating income from continuing operations reflected
growth of 11% and 13% respectively, with ongoing operating margin improving
to 9,4% from 9,2%. Certain comparisons in the income statement continue to
be affected by the acquisition of the full ownership of Adcock Ingram during
December 1999. These are the net interest charge, which increased to R208
million from R90 million last year and the share of profit attributable to
outside shareholders, which showed a reduction of R58 million in the current
period.
Headline earnings from continuing operations reflected growth of 11%. This
compares favourably to the reported increase in earnings of 7% (which
includes the prior year earnings of discontinued operations).
Food Brands
Food Brands performed well, reflecting growth in operating income of 15% on
a 3% increase in turnover. Turnover growth of the core brands was higher at
5%. This pleasing result arises primarily from ongoing efficiencies as well
as a turnaround to profitability in the maize meal category. In parallel
with the implementation of the new category-based structure, various market
driven initiatives are taking place to improve top-line growth.
The Cereals and Beverages business recorded a satisfactory improvement in
operating income of 8%, influenced primarily by the maize meal and sorghum
malt categories. The recovery in maize meal was mainly due to the
utilisation of lower priced maize compared to the previous year together
with strong volume growth. The sorghum malt category produced an excellent
result benefiting from lower raw material costs and a good contribution from
the Mnanti brand.
The flour category reduced profits as a result of lower selling prices and
increased competitor activity. Bakeries recorded a loss for the period due
to adverse trading in the rural bakeries. In March 2001, 9 rural bakeries
were closed. The remaining bakeries, which operate in the urban areas are
now profitable. An amount of R46 million has been provided for the closure
of the rural bakeries and this is reflected as an abnormal charge in the
current period.
The rice category experienced a difficult trading period with premium brand
volumes marginally down on the prior year. Operating income also reflected a
decline due to the sales mix favouring the lower margin economy brands. The
pasta category achieved a good improvement in operating profit, benefiting
from satisfactory volume growth and lower durum wheat prices.
The Culinary business, comprising the former Langeberg operations, Colman
Foods (including babyfood) and the edible oil and margarine interests,
reflected operating income growth of 21% on turnover growth of 5%. This
result was mainly influenced by improved operating efficiencies.
The Confectionery business performed well with a 16% increase in operating
income. The ongoing rationalisation of the number of product lines resulted
in an overall decline in volumes, but an improvement in operating margin to
9,3% (2000: 8,5%) was achieved.
Perishables, which comprises the company's fishing interests (Sea Harvest
and Oceana) together with Dairybelle and the 50% interest in DairyMaid
Nestl , achieved a good result with operating income improving by 17%. Sea
Harvest recorded strong growth in operating profit with margins benefiting
from firm international demand for white fish and a favourable rand/dollar
exchange rate. The Oceana Group increased headline earnings per share by 17%
with good contributions from fish meal and oil, the Lucky Star brand, the
lobster operations and Commercial Cold Storage. At Dairybelle, the cheese
category performed in line with expectations, whilst the fresh milk
operation recorded lower profits as a result of a decline in margins across
most product lines.
Healthcare Brands (formerly Adcock Ingram)
Excluding discontinued operations, Healthcare Brands achieved a modest
increase of 3% in operating income on turnover growth of 12%. The strategic
initiatives referred to above, aimed at the creation of a synergised, demand
driven Healthcare business, will enable the business to achieve acceptable
levels of both top-line and operating income growth. The full impact of
these initiatives is likely to be felt only from the 2003 financial year,
although some benefits will start to flow through next year.
Pharmaceuticals' turnover was 3% higher than last year with operating income
increasing by 1%. Notwithstanding the low increase in turnover, operating
margins were generally maintained. Although the key pharmaceutical brands
have held market share, the growth in sales continues to be affected by the
lack of new products. During the period under review, the company has made
significant progress in rebuilding its new product pipeline by entering into
a number of new licence agreements. The new products arising from these
agreements should start to have a positive impact on growth from 2002.
The Consumer division achieved turnover growth of 31% due in part to a
strong performance by the major brands including Panado, Compral, Ingrams
Camphor Cream and Gill. The inclusion of the newly licensed consumer product
range from Bristol-Myers-Squibb (including Nice & Easy, Body on Tap, Herbal
Essences and the Mum range of deodorants) for the full 6 months this year
compared to only 3 months in the same period last year also had a positive
effect. Operating income increased by 13%, reflecting a reduction in the
operating margin from 28% to 24,2%. This was primarily due to the impact of
the new licensed products as well as an increased marketing spend.
Critical Care recorded turnover and operating income growth of 11% and 7%
respectively, with new product sales showing significant increases. The
operating margin was adversely affected by continuing price pressure in the
core business of intravenous solutions.
Spar
The Spar business recorded turnover growth of 21% together with operating
income growth of 22%. The results include the benefit of an additional
week's trading in the current period compared to the previous year. On a
comparable basis, Spar increased turnover and operating income by 15% and
13% respectively.
The business continues to benefit from new store growth, whilst market share
was further increased. The number of franchised stores in South Africa now
totals 671 compared to 658 at 30 September 2000.
During the period under review, Spar continued with its expansion in the
perishable sector of the market through its "fresh line" range and through
increased focus in the value-added home meal replacement area. It is
anticipated that this sector of the market will make a growing contribution
to Spar's results in the future.
Associates
Income from associates showed good growth, with a positive contribution from
ConAgra Malt compared to a loss incurred in the corresponding period last
year. Empresas Carozzi and Enterprise Foods also made good contributions.
DIVIDEND
Notwithstanding the impact of the unbundling of Astral Foods, the company
has declared an unchanged interim dividend of 68 cents per share.
Consequently, this has resulted in the dividend cover at the half year
reducing from 4,1 to 3,9 times.
PROSPECTS
The significant change process which is currently underway will only start
to have a positive impact on the results from the 2002 financial year.
It is expected that the rate of earnings growth in the second-half of the
year should approximate that achieved in the first six months.
For and on behalf of the Board
R A WILLIAMS N DENNIS
Chairman Managing Director 17 May 2001
http://www.tigerbrands.com
Directors
Messrs RAWilliams (Chairman), D E Cooper,
N Dennis (Managing Director) (British),B HAdams, D D B Band, B P Connellan,
M H Franklin, WRCHolmes, Ms W Y N Luhabe,
JHMcBain (British), A C Nissen, M C Norris, I B Skosana, R V Smither, J L
van den Berg, C F H Vaux
Company secretary
I W M Isdale
Registered office
85 Bute Lane, Sandown
Sandton, South Africa
Postal address:
POBox 78056
Sandton, 2146, South Africa
London office
St James Corporate
Services Limited
6 St James's Place
London
SW1A 1NP
Share transfer secretaries
South Africa:
Mercantile Registrars Limited
11 Diagonal Street
Johannesburg
2001
Postal address:
POBox 1053, Johannesburg, 2000
United Kingdom:
Computershare Services plc, POBox 82,
Caxton House
Redcliffe Way, Bristol, BS99 7NH
