| Wed 31 Oct 2001, 0:00 | | Otk Holdings Limited - Reviewed Interim Results Fo |
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August 2001
OTK Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1995/004030/06)
ISIN number: ZAE000029690 Share code: OTK
Highlights
Revenue increases by 17%
Operating profit increases by 27%
Headline earnings per share increase by 20,3%
Return on average shareholders' equity equals 17%
Chairman's and executive directors' joint statement
OVERVIEW
Six months have elapsed since OTK disposed of its under-performing assets
and restructured and refocused its core businesses. The impact of these
changes is already reflected in the increase in revenue and comparable
earnings.
For comparative purposes, OTK's results for the six months to 31 August 2000
and the year ended 28 February 2001 are restated on a pro forma basis to
provide information that is comparable for the restructured business and
recognising the sale of the debtors' book.
Topline growth in real terms is one of the key growth drivers and current
revenue (excluding businesses sold) increased by 17% compared to the
previous period.
Operating profit (after adjusting for non-trading items) increased by 27%.
Headline earnings per share increased by 20,3% from 25,9 cents per share to
31,2 cents per share, taking into account the increased weighted number of
shares in issue.
ACQUISITIONS
During the period under review, OTK acquired the remaining 50% of the Animal
Feed manufacturer, Nolko (Pty) Ltd, and the business of Techniland (Pty)
Ltd, an operation providing farmers with leading edge precision farming
technologies.
These acquisitions are in line with OTK's strategy to grow its core business
and provide world-class service to farmers.
OTK also acquired the remaining 50% of Cotton Seed Processors (Pty) Ltd, the
oil extraction plant in Potgietersrus. This business was subsequently
restructured and is now trading profitably.
VISION
OTK is now a service driven organisation leveraging intellectual capital to
optimise profitability for selected customer groups within the agricultural
value chain. Its area of operation is South Africa and selected countries in
the remainder of sub-Saharan Africa.
To achieve this strategic vision, OTK's business has been structured into
four operational pillars, each lead by management with outstanding track
records.
The four pillars are Agri Finance, Agri Products, Agri Requisites and the
newly created Scientific Agricultural Services. Scientific Agricultural
Services will have at its disposal leading edge global technologies enabling
OTK to achieve growth in its customer base.
DIVIDEND
The directors of OTK have resolved to declare an interim dividend of 9,85
cents per share. The last day to trade cum the dividend and the last day to
register transfer of certificated securities in order to participate in the
dividend will be Friday, 16 November 2001.
A special distribution of 245c per share was paid during the six months
under review.
The dividend cover has been decreased from 4 to 3 times.
OPERATIONAL REVIEW
Agri products
Product TradingOTK has become a major buyer and seller of all grains. Its
physical stock position has grown significantly. The resultant risk from the
increased volumes is hedged on SAFEX. The growth in trading has occurred
both nationally and a selected basis in sub-Saharan Africa. OTK is now a
leading player in product trading in the African sub-continent. The
increased trading activity was preceded by the introduction of improved
internal controls and world-class risk management techniques.
Product Handling and StorageThis division is involved in the handling and
storage of cereals and oilseeds for clients through an infrastructure of 57
silos with a capacity of 3,5 million tons.
The summer grain crop received up to 31 August 2001 was 32,4% lower than the
previous year. It was, however, delivered earlier than the previous year,
which resulted in improved storage revenue for OTK and benefited farmers by
earlier cash flow and improved prices.
Silo capacity utilisation will increase in the second half of the financial
year by leveraging OTK's significant growth in its physical stock position.
This better utilisation will ensure that profits will at least be maintained
in the last six months of the current financial year, when compared to the
prior year.
CottonThis operation is involved in the ginning of cotton in South Africa
and Zambia. Margins were fixed at the beginning of the season and this,
together with improved productivity and ginning yields at the group's six
gins, resulted in good profits despite the fact that the world cotton price
is at an all time low.
BroilersOTK is involved in the production of dressed poultry products
through its 50% shareholding in Earlybird Farm. Increased volumes, higher
margins and improved productivity resulted in excellent results for the six
months.
SeedOTK Seed cultivates, processes, packs, distributes and markets a range
of seed varieties. Aggressive early season marketing resulted in increased
volumes and better than expected results. Current demand for the new season
is excellent.
Animal FeedsOTK Feeds manufactures, markets and distributes animal feed
through four processing facilities in Gauteng and the Free State. Increased
volumes and margins, as well as savings in both operational and transport
expenses, resulted in improved performance. The acquisition of the remaining
50% of Nolko also contributed positively.
Agri Requisites
This operation provides farmers with requisites through its infrastructure
of 54 stores.
Increased focus has been placed on improved customer service, efficient
purchasing and the introduction of a national cost effective key account
management and distribution programme. This creates a sound base for
sustainable growth.
Agri Finance
The finance operation provides business solutions for selected customer
groups in the agricultural value chain. A flexible product aimed at farmer
groups and innovative insurance alternatives have been introduced with
outstanding success. Applications for credit have doubled since last year,
many of which were received from farmers in production areas not previously
serviced by OTK.
Improved credit control, a strict credit policy and sound management ensure
continued low risk exposure.
The current improvement in profitability is attributable to the growth in
the debtors book and improved margins on insurance.
This operation acts as OTK's bankers and is responsible for corporate cash
management.
Scientific agricultural services
This new division was established during the period under review with the
aim of providing leading edge scientific advice to farmers. The
implementation of world-class precision farming technologies will enable
farmers to reduce the cost of crop production significantly. It is
anticipated that this pillar will contribute significantly towards OTK's
future profitability.
PROSPECTS
OTK continues to seek opportunities for growth and expansion. Exciting
opportunities for acquisitions, joint ventures and alliances are currently
being investigated.
Operational efficiencies and effectiveness are continually improved and we
are well on target to achieve our financial objectives for the full year.
By order of the Board
P F Erasmus G A L Ebedes
Chairman Managing Director
31 October 2001
Johannesburg
NOTICE OF INTERIM DIVIDEND
Notice is hereby given that the directors of OTK Holdings Limited ("OTK")
have resolved to declare a dividend of 9,85 cents per share for the interim
period ended 31 August 2001. The last day to trade cum the dividend and the
last day to register transfer of certificated securities in order to
participate in the dividend will be Friday, 16November 2001. The shares of
OTK will commence trading ex the dividend from the commencement of business
on Monday, 19 November 2001. The record date will be Friday, 23 November
2001. Payment will be made on Monday, 26 November 2001. On this date, where
so mandated, dividends will be transferred electronically to shareholder
bank accounts. Alternatively, cheques will be posted to shareholders on the
same day. There will be no dematerialisation or rematerialisation between
Monday, 12 November and Friday, 23 November 2001 both dates inclusive.
By order of the Board
Mrs R Cronje
Group Company Secretary
31 October 2001
Johannesburg
Group balance sheet
Six months ended Year ended
31 August 28 February
(reviewed) (reviewed)
Actual Pro forma Pro forma
R millions 2001 2000 2001
ASSETS
Non-current assets 604 596 576
Property, plant and equipment 368 413 405
Intangible assets 18 21 20
Cost of control 2 - -
Investments 15 26 25
Loans 149 76 76
Deferred tax assets 52 60 50
Current assets 1 733 1 534 1 630
Inventory 442 733 466
Trade and other receivables 855 455 793
Cash and cash equivalents 436 346 371
Total assets 2 337 2 130 2 206
EQUITY AND LIABILITIES
Capital and reserves 1 261 1 096 1 128
Issued capital - - -
Share premium 26 - -
Reserves 459 459 459
Accumulated profits 776 637 669
Non-current liabilities 55 70 56
Long-term loans 10 8 10
Deferred tax liabilities 45 62 46
Current liabilities 1 021 964 1 022
Trade and other payables 779 665 695
Distribution to shareholders 33 35 37
Current tax liabilities 34 (25) 32
Bank overdraft and short-term loans 175 289 258
Total equity and liabilities 2 337 2 130 2 206
Net tangible asset value
per share (cents) 358 331 326
Group income statement
Six months ended Year ended
31 August 28 February
(reviewed) (reviewed)
Actual Pro forma Pro forma
R millions 2001 2000 2001
Revenue 1 823 1 768 4 094
Profit before tax 136 86 218
Tax 37 31 93
Net profit 99 55 125
Weighted average number of shares
issued ('m) 336,5 324,2 323,5
Earnings per share (cents) 29,7 16,8 38,6
Headline earnings per share (cents) 31,2 25,9 60,0
Group cash flow statement
Six months ended Year ended
31 August 28 February
(reviewed) (reviewed)
Actual Pro forma Pro forma
R millions 2001 2000 2001
Operating activities
Operating profit 136 86 218
Changes in working capital 98 804 743
Adjustment for non-cash items 30 54 80
Dividends paid (37) - -
Tax paid (34) (76) (118)
Net cash derived from operating
activities 193 868 923
Investing activities
Purchase of property, plant and
equipment (32) (42) (81)
Proceeds from sale of property,
plant and equipment 56 37 57
Acquisition of investments (65) (30) (30)
Proceeds from disposal of
investments 35 71 76
Acquisition of shares in
subsidiaries and joint venture (10) (1) (1)
Net cash (utilised in)/derived
from investing activities (16) 35 21
Financing activities
Capital distribution - (858) (893)
Repurchase of shares (net cost) (25) (6) (6)
Repayment of long-term borrowing (5) (2) -
Net cash utilised in financing
activities (30) (866) (899)
Increase in cash and cash
equivalents 147 37 45
Movement in cash and cash equivalents
Beginning of period 114 69 69
Increase 147 37 45
End of period 261 106 114
Segmental information
Operating Net
Revenue profit* assets
Six Year Six Year Six Year
months ended months ended months ended
ended ended ended
31 Au- 28 Fe- 31 Au- 28 Fe- 31 Au- 28 Fe-
gust bruary gust bruary gust bruary
(re- (au- (re- (re- (re- (re-
viewed) dited) viewed) viewed) viewed) viewed)
R millions 2001 2001 2001 2001 2001 2001
Agri Products 1 058 1 979 112 221 611 498
Agri Requisites 698 1 613 15 26 202 126
Agri Finance 58 62 20 29 431 397
Scientific
Agricultural
Services - - - - - -
Other 9 440 (3) 9 17 107
Total 1 823 4 094 144 285 1 261 1 128
*The operating profit is shown after taking into account the pre-tax
headline earnings adjustments. The reason for this is to make the segmental
profit more comparable after the restructuring of the Group, which includes
the sale of certain businesses.
The comparative figures for the six months ended 31 August 2000 are not
disclosed because the businesses are not comparable on a segmental basis,
after the restructuring of the Group, which includes the sale of certain
businesses.
Group statement of changes in equity
Accu-
Issued Share mulated
capi- pre- Reser- pro-
R millions tal mium ves fits Total
Balance 29 February 2000 (audited) 7 639 459 747 1 852
Net profit - - - 55 55
Repurchase of shares - - - (6) (6)
Special capital distribution (7) (666) - (159) (832)
Capital distribution - (35) - - (35)
Issue of shares - share incentive
trust - 62 - - 62
Balance 31 August 2000 (pro forma) - - 459 637 1 096
Net profit - - - 69 69
Dividend on shares - - - (37) (37)
Balance 28 February 2001 (pro forma) - - 459 669 1 128
Pro forma adjustment in net profit
recorded in 2001 - - - 66 66
Balance 28 February 2001 (audited) - - 459 735 1 194
Net profit - - - 99 99
Repurchase of shares - - - (25) (25)
Dividend on shares - - - (33) (33)
Issue of shares - share incentive
trust - 26 - - 26
Balance 31 August 2001 (reviewed) - 26 459 776 1 261
Notes to the group interim results
1. The pro forma balance sheet is based on the assumption that the sale of
debtors that took place on 28 February 2001 as well as the distribution to
shareholders of 245 cents per share that took place on 12 April 2001, 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 per share
Six months ended Year ended
31 August 28 February
(reviewed) (reviewed)
Actual Pro forma Pro forma
2001 2000 2001
Earnings (cents) 29,7 16,8 38,6
Loss on disposal:
Subsidiary business - 9,1 9,1
Restructuring costs 1,5 - 7,1
Tax on special distribution - - 3,7
Cost on sale of debtors - - 1,7
Profit on disposal
(assets/investments) - - (0,2)
Headline earnings (cents) 31,2 25,9 60,0
4. Accounting policies
The consolidated interim financial statements are prepared in accordance
with and comply with South African Statements of General Accepted Accounting
Practice and with the requirements of the Companies Act. The consolidated
interim financial statements are prepared under the historical cost
convention. The principal accounting policies which were adopted in the
preparation of these consolidated interim financial statements, correspond
with those applied in the latest annual financial statements.
5. Comparative numbers
The comparative numbers were adjusted to be comparable with the current
period. Adjustments were made to interest income in terms of the sale of
certain debtors to financial institutions, the distribution to shareholders
of 245 cents per share as well as the restructuring of OTK which include the
sale of business units.
6. Corporate governance and JSE Securities Exchange SA compliance
The principles of corporate governance were adhered to in all material
instances. The group and the company complied with the regulations of the
JSE Securities Exchange SA regarding the content of the interim financial
results.
7. Share capital
7.1 Number in issue (ordinary shares)
Beginning of year 339 695 567
Issued to share incentive scheme 7 304 433
End of interim period 347 000 000
7.2 Other changes during the interim period
Shares repurchased by a subsidiary
in terms of a general authorisation at
an average price of R3,87 each 7 449 500
8. Share premium R'm
Balance beginning of year -
Premium on shares issued to share incentive scheme 26
Balance end of interim period 26
9. Property, plant and equipment R'm
(Movement in book value)
Book value beginning of year 405
Acquisitions of assets in subsidiaries 15
Additions of plant, property and equipment 32
Book value on disposal of property, plant
and equipment (including businesses) (57)
Depreciation (27)
Book value end of interim period 368
10. Notes to the cash flow statement R'm
(Acquisition of shares in subsidiaries)
Property, plant and equipment (15)
Inventories (9)
Trade and other debtors (11)
Trade and other creditors 26
Cost of control (2)
Deferred tax (4)
Long-term liabilities 5
Net cash flow on acquisition (10)
Independent audit review
Limited assurance report of the independent auditors to the directors of OTK
Holdings Limited Group regarding the unaudited interim financial statements
in compliance with par 3.23 of the Listings Requirements of the JSE
Securities Exchange SA.
We have reviewed the interim financial information of OTK Holdings Limited
Group ("OTK Group") for the six months ended 31 August 2001. The interim
financial information is the responsibility of the company's directors. Our
responsibility is to report on the results of our review.
Our review was carried out in accordance with the guidelines laid down by
The South African Institute of Chartered Accountants. Our review consisted
principally of applying analytical procedures to the underlying financial
data, assessing the compliance with accounting policies, making enquiries of
company personnel responsible for financial and accounting matters and
review of minutes of meetings. The review excluded audit procedures, such as
the test of controls and verification of assets and liabilities, and was
therefore substantially more limited in scope than an audit where an audit
opinion is expressed, performed in accordance with South African Auditing
Standards. It should be recognised that our review did not constitute an
audit and may not have necessarily revealed all material facts.
Our review is not designed, and therefore cannot be relied upon to disclose
any irregularities, including fraud, which may exist.
Our review is not designed to, and therefore will not necessarily reveal
weaknesses in internal controls, errors in the accounting records or
misstatements of management estimates.
Based on our review, nothing has come to our attention that caused us to
believe that the attached interim financial information needs modification
so as to fairly present, in accordance with South African Statements of
Generally Accepted Accounting Practice, the financial position of the OTK
Group at 31 August 2001 and the results of its operations for the six months
then ended.
PricewaterhouseCoopers Inc
Registered Accountants and Auditors
Chartered Accountants (SA)
Johannesburg
31 October 2001
Business address and registered office
Cnr Eeufees and Kleynhans Street, Bethal 2310
Fax (017) 624 1470 Telephone (017) 624 1000
Company Secretary
Mrs RCronj
PO Box 3559, Cramerview 2060
Bankers ABSA Bank Limited
First National Bank Limited
Standard Bank of SA Limited
Auditors
PricewaterhouseCoopers Incorporated
Transfer secretaries
Mercantile Registrars Limited,
11 Diagonal Street, Johannesburg 2001
P O Box 1053, Johannesburg 2000
Telephone (011) 370 5000
THIS ANNOUNCEMENT IS AVAILABLE ON SENS AND OTK'S WEBSITE AT
www.otk.co.za
Directorate: P F Erasmus*# (Chairman) GAL Ebedes A C Ball*
J J Claassen*# N O Davies* C A du Toit J J Ferreira*#
I de W Goosen E Gutierrez-Garcia* J T Jansen van Rensburg*#
M E King* S C Marais (Dr)* B M Moshal* F J van der Merwe*
J D Wright (Alternate director: J H Mooney)
Executive Committee: GAL Ebedes (Managing Director) C A du Toit (Managing
Director, Earlybird Farm) I de W Goosen (Financial Director), J D Wright
(Deputy Managing Director),
R B Potash (Chief Executive Officer, Agri Finance),
A H Visagie (Chief Executive Officer, Agri Requisites)
L Wolthers (Chief Executive Officer, Agri Products)
B Roosendaal (Chief Executive Officer, Scientific Agricultural Services)
*Non-executive #Independent
