| Wed 6 Mar 2002, 0:00 | | Anglovaal Industries Limited - Financial Results F |
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December 2001
Anglovaal Industries Limited
("AVI", "the Group")
ISIN code ZAE000030102
Share code : AVI
Financial results for the Six months to 31 December 2001
("the period")
* Turnover from continuing operations up 12%
* Operating profit from continuing operations up 24%
* Headline earnings up 26%
* Diluted headline earnings per share up 50%
Angus Band, Managing Director, commented:
"We are delighted with our performance which is attributable to increased
volumes across most of our divisions, higher export realisations and
improved operating efficiencies. While domestic trading conditions are
expected to weaken in the fourth quarter, we are well positioned to deliver
further earnings growth in the second half compared to the corresponding
2001 period."
Johannesburg 6 March 2002
Enquiries:
AVI
Angus Band, Group Managing Director
Tel: + 27 (0) 11 779 2703
Robert Katzen, Group Financial Director
Tel: + 27 (0) 11 779 2704
College Hill Investor Relations
Julia Kerr
Tel: + 27 (0) 11 447 3030
GROUP OVERVIEW
The Group has continued to deliver strong earnings growth, with headline
earnings increasing by 26%. Trading conditions were generally better than
those experienced in the comparative period and consequently most operations
showed volume growth and an improvement in operating performance.
Group turnover from continuing operations increased by 12% to R2,9bn, mainly
driven by increased exports of seafood, the acquisition of Alpesca S.A., and
improved biscuit sales within Branded Consumer Goods as well as further
volume growth in Glass Packaging.
This increase in turnover coupled with further efficiency gains within most
of the Group's operations resulted in a significant improvement in operating
profit from continuing operations which grew by 24% to R346m. Operating
margin from continuing operations increased from 10.8% to 11.9%.
Income from investments net of interest paid at R46m was higher than the
comparative period primarily as a result of accounting for foreign currency
translation gains of R22m in respect of the integrated foreign operations of
Irvin and Johnson (I&J). Other foreign currency gains totalling R65m
relating to the translation of the balance sheets of foreign entities have
been taken directly to non-distributable reserves.
The increase in Group headline earnings of 26% was boosted by the impact of
the share buy back programme, which resulted in a 16% reduction in the
weighted average number of shares in issue. As a result, diluted headline
earnings per share increased by 50% to 75,4 cents.
Net cash after long-term borrowings ended the period at R363m (2000: R453m)
after R440m was distributed to shareholders under the Group's programme to
improve capital efficiency.
In August, I&J completed the acquisition of an Argentinean based seafood
company, Alpesca S.A. in line with the Group's strategy to grow its
international white fish business. Nedan Oil Mills (Pty) Limited was sold
for R39m with effect from 1 July 2001.
OPERATIONAL REVIEW
SEGMENTAL
PERFORMANCE
- continuing
operations
Turnover Operating
profit
2001 2000 Change 2001 2000 Change
Rm Rm % Rm Rm %
Branded 1 920,2 1 716,9 12% 177,8 140,5 27%
Consumer Goods
Packaging 832,5 735,4 13% 145,9 120,9 21%
Distribution 157,1 135,2 16% 24,4 18,4 33%
Holding company - - (2,4) (1,4)
Total 2 909,8 2 587,5 12% 345,7 278,4 24%
Branded Consumer Goods
Turnover increased by 12% and operating profit by 27% with the operating
profit margin increasing from 8.2% to 9.3%. The Group continues to benefit
from the strong local market position of its brands and the strategy of
increasing exposure to international markets, underpinned by continuing
innovation in products and services.
National Brands Food and Cosmetics division
During the period turnover increased by 2% to R1,2bn as strong performances
from most categories were offset by a significant reduction in Snacks
turnover. Operating profit was R89m with the operating margin at 7.1% in
line with the comparative period.
Excluding Snacks, NBL Food experienced core volume growth of 6% resulting in
an increase in operating profit of 18%. The best performers were Biscuits,
which continues to benefit from further innovation and lower production
costs and Ciro Alliances, which also delivered exceptional results following
a strategic repositioning last year.
Snacks continues to incur operating losses as a result of a difficult market
and operating problems within the supply chain. Real progress has been made
in lifting factory performance following the consolidation of all
manufacturing at the Rosslyn plant and the change to a pre-sell sales
structure is also progressing well. The division is expected to end the year
with an operating loss in line with the prior year, although an improved
performance is anticipated in the second half.
Cosmetics achieved a 12% growth in turnover with Yardley and Coty increasing
by 11% and 18% respectively. Operating profit however increased by only 3%
as margins were affected by the cost of the additional infrastructure
necessary to sustain further innovation and development.
I&J Food division
During the period, the division, which now includes Alpesca S.A., grew
turnover by an impressive 36% to R681m and operating profit by 92% to R89m.
Volume growth for the period amounted to 2% and hard currency sales now
comprise 64% of total sales.
The depreciation of the Rand together with a 7% increase in average US$
prices positively impacted margins. The division's strategy of increasing
the retail sales mix of its value added products also played a significant
role in continuing the positive trend in operating margin which grew to
13.1% (2000: 9.3%).
Alpesca S.A. is performing ahead of expectations and is expected to
contribute positively to operating profit in the second half of the
financial year. The political and economic climate in Argentina remains
volatile but has not adversely affected operations.
In December 2001, the four-year hake quota rights for South African waters
were awarded and I&J has been allocated 45,431 tons, a reduction of 4.7%.
The conclusion of this process has brought some much-needed stability to the
industry and, together with the Alpesca acquisition, has had a major impact
in lifting the morale in our business.
The joint ventures in Namibia and Australia both delivered improved results.
Our investment in Namibia was recently given a major boost with the
allocation of 15-year hake fishing rights and the acquisition of a freezer
vessel which will significantly improve operational efficiencies.
Packaging
Turnover improved by 13% to R833m benefiting from improved volumes in the
Glass division and operating profit grew by 21% to R146m.
The Glass division's growth strategies, assisted by favourable summer
conditions and some export-led demand resulted in volume growth of 6%.
Glass markets performed largely in line with expectations and volumes were
excellent considering the lower demand for returnable containers in the
period.
Despite the implementation of a complex job and furnace colour change
programme necessary to support market requirements, glass factory
performances were in line with production standards and continue to meet or
exceed international benchmarks.
With all factories operating at effective capacity at peak demand the
investment of R200m in a new furnace, to be commissioned in January 2003,
was approved in December.
Results for the Plastics division were disappointing with both turnover and
operating margins under pressure. The impact of volume declines was
compounded by poor operating performances. Corrective action has been taken
and factory efficiencies have shown an improvement.
Distribution
Revenue grew by 16% as a result of improved realisations and a 7% volume
improvement, driven largely by increased chicken volumes.
Operating profit improved by 33% to R24m with the continued focus on
improving operating efficiencies, reducing costs through the introduction of
a computerised vehicle routing system and the customer rationalisation
programme adding to the impact of higher throughput.
The Multi Temperature Contract Distribution project was implemented in the
second quarter at three strategic sites. The progress achieved to date,
especially in respect of the value proposition delivered to customers, is
pleasing.
Group Prospects
Following sound fiscal management by Government, the 2002/2003 Budget has
provided significant tax relief to consumers. This should reduce the impact
that higher prices, primarily caused by the deterioration in the exchange
rate, will have on local demand. The strong improvement in export revenue is
likely to continue and within this overall environment the Group expects
material growth in earnings for the second half over the 2001 comparative
period. Trading to the end of February is in line with this expectation.
Electronic shareholder information
In order to continue to improve the extent and efficiency of communication
with investors, we are investigating the conversion of the medium of
communication away from paper-based to electronic, where possible.
For and on behalf of the board
Tony Ardington,Chairman 19 Impala Road
Angus Band,Managing Director
5 March 2002
Registered office
19 Impala Road
Chislehurston
Sandton
2196
website: www.avi.co.za
ISIN code ZAE000030102
GROUP INCOME STATEMENTS
Unaudited Audited
Half-year ended Year
ended
31 December Increase 30 June
/
2001 2000 (Decrease 2001
)
Rm Rm % Rm
Turnover 2,909.8 2,708.7 7 5,112.9
Continuing operations 2,909.8 2,587.5 12 4,905.1
Discontinued operations - 121.2 207.8
Operating profit 345.7 273.1 27 503.3
Continuing operations 345.7 278.4 24 509.8
Discontinued operations - (5.3) (6.5)
Other income 52.9 44.2 20 89.2
- dividends received 17.7 7.2 17.9
- interest, fees and other 35.2 37.0 71.3
financing income
398.6 317.3 26 592.5
Interest paid 6.7 15.3 (56) 27.5
391.9 302.0 30 565.0
Exceptional and capital (3.8) (3.4) (69.1)
items
Profit before taxation 388.1 298.6 30 495.9
Taxation 108.4 3.8 51.3
- normal 108.4 85.8 26 147.0
- deferred tax asset raised - (82.0) (95.7)
Profit after taxation 279.7 294.8 (5) 444.6
Share of retained earnings 11.2 5.5 104 5.6
of associates & joint
ventures
290.9 300.3 (3) 450.2
Minority interests 48.7 25.4 92 52.5
242.2 274.9 397.7
Preference dividend - 3.3 3.9
Earnings 242.2 271.6 (11) 393.8
Determination of headline
earnings
Earnings 242.2 271.6 393.8
Adjustments:-
Exceptional and capital
items, net of attributable
taxation credit and minority 0.8 3.2 63.6
interests
Amounts of a capital nature - - 2.5
included in operating profit
Deferred tax asset raised - (82.0) (95.7)
Headline earnings 243.0 192.8 26 364.2
Headline earnings per 76.4 51.8 47 101.1
ordinary share (cents) (note
1)
Diluted headline earnings 75.4 50.2 50 99.8
per ordinary share (cents)
(note 2)
Earnings per ordinary share 76.2 73.0 4 109.3
(cents) (note 1)
Diluted earnings per 75.2 70.7 6 107.9
ordinary share (cents)(note
2)
Notes:
Earnings and headline earnings per ordinary share are calculated on a
weighted average of 317 898 933 (2000: 372 148 226) ordinary
shares in issue.
Diluted earnings and diluted headline earnings per ordinary share are
calculated on a weighted average of 322 217 673
(2000: 384 145 458) ordinary shares, after taking
account of the relevant number of share options currently in issue.
GROUP BALANCE SHEETS
Unaudited Audite
31 December 30 Jun
2001
2001 2000
Rm
Rm Rm
ASSETS
Non-current assets
Property, plant and 1,683.2 1,580.8 1,
equipment
Goodwill 63.4 29.7 25
Investments in associates + 31.4 21.2 27
Investments in joint 162.2 141.8 12
ventures +
Other investments + 222.5 75.0 73
Deferred taxation 106.5 79.0 89
2,269.2 1,927.5 1,
Current assets
Inventories 682.6 677.9 67
Trade and other receivables 1,342.8 1,235.2 99
Cash and cash equivalents 491.3 619.6 68
2,516.7 2,532.7 2,
TOTAL ASSETS 4,785.9 4,460.2 4,
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shareholders' funds
Share capital and reserves 2,485.6 2,749.9 2,
Minority interests 473.0 377.5 35
Non-current liabilities
Interest - bearing 108.9 62.0 59
borrowings
Deferred taxation 84.2 146.3 13
Provision for post- 264.5 - -
retirement medical aid
457.6 208.3 19
Current liabilities
Trade and other payables 1,236.6 954.1 1,
Short-term borrowings 18.9 104.7 40
Corporate taxation 114.2 65.7 81
1,369.7 1,124.5 1,
TOTAL EQUITY AND LIABILITIES 4,785.9 4,460.2 4,
Number of ordinary shares in issue 318,629 365,142 316,5
to outside shareholders (thousands)
+ Associates, joint ventures and other investments comprise unlisted
investments which have been valued by the directors at not
less than their carrying value.
GROUP CASH FLOW STATEMENTS
Unaudited Audited
Half-year ended Year ended
31 December 30 June
2001 2000 2001
Rm Rm Rm
Operating activities
Cash generated by operations 471.2 398.2 767.1
Other income 22.8 40.9 87.6
(Increase)/decrease in (322.0) (237.4) 112.0
working capital
172.0 201.7 966.7
Interest paid (6.7) (15.3) (27.5)
Taxation paid (70.6) (12.3) (33.9)
Dividends paid (139.4) (117.3) (127.6)
Cash (utilised in)/retained from (44.7) 56.8 777.7
operating activities
Investing activities
Property, plant and equipment
- to maintain operations (73.0) (107.0) (240.6)
- to expand operations (51.6) (10.4) (34.0)
- disposals 3.8 15.9 32.1
(120.8) (101.5) (242.5)
Investments - net (19.8) (16.6) (22.1)
disposals/(acquisitions)
- subsidiaries 126.2 (16.6) (20.5)
- associated companies and (146.0) - (1.6)
other investments
Cash utilised in investing (140.6) (118.1) (264.6)
activities
Financing activities
Purchase of own ordinary - (93.2) (499.3)
shares
Redemption of preference - (64.5) (64.5)
shares
Purchase from minority (0.6) - (37.1)
interests
Proceeds from the issue of 5.3 5.5 7.3
shares
Net increase/(decrease) in 4.7 (152.2) (593.6)
shareholder funding
Long-term borrowings - net 8.0 (7.9) (10.8)
movement
Cash generated by/(utilised in) 12.7 (160.1) (604.4)
financing activities
Net decrease in cash and cash (172.6) (221.4) (91.3)
equivalents
Net cash and cash equivalents at 645.0 736.3 736.3
beginning of period
Net cash and cash equivalents 472.4 514.9 645.0
at end of period
Short-term borrowings 18.9 104.7 40.6
Cash and cash equivalents 491.3 619.6 685.6
STATEMENTS OF CHANGES IN EQUITY
Share Non-
Capital distribu Distribu
and table table
Half-year ended 31 December premium reserves reserves Total
2001
Rm Rm Rm Rm
At 30 June 2001, as 178.6 114.8 2,036.4 2,329.
previously reported
Adjusted for change in accounting
policies as detailed below:
* Accounting for dividends payable in 126.0 126.0
accordance with AC107 (revised)
At 30 June 2001, as restated 178.6 114.8 2,162.4 2,455.
* Provision for post-retirement medical (161.3) (161.3)
aid in accordance with AC116 (revised)
178.6 114.8 2,001.1 2,294.
Movements recognised through the income 121.2 121.2
statement:
Earnings per income 242.2 242.2
statement
Dividends paid (121.0) (121.0
Movements not recognised through the 5.3 52.8 11.8 69.9
income statement:
Issue of ordinary shares 5.3 5.3
Foreign currency translation 64.6 64.6
differences
Inter-reserve transfer arising on (11.8) 11.8 -
sale to minority interests
At 31 December 2001 183.9 167.6 2,134.1 2,485.
Share Non -
capital distrib Distribu Converti
and utable table ble
Half-year ended 31 December premium reserve reserves debentur Total
2000 s es
Rm Rm Rm Rm Rm
At 30 June 2000, as 522.4 110.9 1,767.9 210.5 2,611.
previously reported
Adjusted for change in accounting
policy as detailed below:
* Accounting for dividends payable 104.2 104.2
in accordance with AC107 (revised)
At 30 June 2000, as restated 522.4 110.9 1,872.1 210.5 2,715.
Movements recognised through the 170.5 170.5
income statement:
Earnings per income 274.9 274.9
statement
Dividends paid (104.4) (104.4
Movements not recognised through 58.3 15.7 (210.5) (136.5)
the income statement:
Conversion of debentures 210.5 (210.5) -
Issue of ordinary shares 5.5 5.5
Own shares purchased (93.2) (93.2)
Redemption of preference (64.5) (64.5)
shares
Foreign currency translation 15.7 15.7
differences
At 31 December 2000 580.7 126.6 2,042.6 - 2,749.
Changes in accounting policies
The interim results have been prepared in accordance with South African
Statements of Generally Accepted Accounting Practice. Other than as
stated below, there have been no changes effected to any accounting
policies during the six-month period covered by the interim results.
Provision for dividend
AC107 (revised) - Events after the balance sheet date - precludes the
raising of a provision for any dividends declared after the balance
sheet date. Dividends, including any applicable secondary tax on
companies (STC) charge, will now be accounted for as and when declared.
The adoption of AC107 (revised) has resulted in the Group adjusting the
opening balance of distributable reserves at 1 July 2001 by R126,0m,
reducing the headline earnings for the comparable interim period ended 31
December 2000 by R4,4m, and restating the headline earnings for the year
ended 30 June 2001 to reflect an increase of R1,3m, after accounting for
the applicable minority interests.
Post-retirement medical aid contributions
In accordance with the requirements of South African Statement of
Generally Accepted Accounting Practice - AC116 (revised) - Employee
benefits - the Group has recognised its obligation to fund certain post-
retirement benefits. These were previously accounted for on a cash paid
basis. The adoption of AC116 (revised) has resulted in the Group
recognising a provision of R256,0m as at 1 July 2001, being an
actuarially calculated liability of R280,5m net of pre-funding reserves
of R24,5m. This change has been accounted for by reducing the
distributable reserves at 1 July 2001 by R161,3m after deferred taxation
of R76,8m and accounting for minority interests of R17,9m. The charge to
Group headline earnings in the half-year ended 31December 2001 as a
result of the change in accounting policy amounts to R5,0m.
Prior year comparatives have not been restated, as it was not considered
practicable.
Exceptional and capital items
Half-year ended Year
ended
31 December 30 June
2001 2000 2001
Rm Rm Rm
Impairment of property, plant and equipment - - (40.0)
of a subsidiary company
Rationalisation and (9.8) (1.4) (24.2)
restructuring costs
Goodwill amortisation (3.8) (1.6) (6.2)
Net surplus/(deficit) on disposal and 9.8 (0.4) 1.3
write-down of investments, properties,
vessels and plant and equipment
(3.8) (3.4) (69.1)
Attributable taxation 2.9 - 3.6
credit
Attributable to minority 0.1 0.2 1.9
interests
Net charge (0.8) (3.2) (63.6)
Capital expenditure
Half-year ended Year
ended
31 December 30 June
2001 2000 2001
Rm Rm Rm
To maintain operations 73.0 107.0 240.6
To expand operations 51.6 10.4 34.0
124.6 117.4 274.6
Commitments for future capital
expenditure:
Contracted for 39.3 38.8 54.2
Authorised, but not 367.7 46.6 108.9
contracted for
407.0 85.4 163.1
The Group has sufficient available
resources to fund this expenditure.
Investments
Effective 1 July 2001, Nedan Oil Mills (Pty) Limited, a wholly owned
subsidiary of National Brands Limited, was sold to a management
consortium for a total consideration of R38.8m, the book value of this
investment at 30 June 2001.
Two of the Group's strategic empowerment partners completed the purchase
of 10 percent of the issued share capital of I&J with effect from 1
August 2001.
On 10 August 2001, I&J purchased 100 percent of the shares and
shareholder's loan in Alpesca S.A., one of the largest fishing companies
in Argentina. The final cost of the acquisition is subject to
arbitration, but should not exceed US$7m.
Commitments and contingent liabilities
At 31 December 2001, there were no commitments, other than operating
lease and other commitments entered into in the normal course of
business.
Contingent liabilities amounted to R28.7m (2000: R28.2m) in respect of
guarantees and R5.7m (2000: R9.7m) in connection with disputes with
South African Revenue Service relating to taxation issues in subsidiary
companies.
Certain Group companies have entered into forward exchange contracts in
the normal course of business.
-ENDS-
