| Thu 16 May 2002, 0:00 | | Tiger Brands Ltd - |
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Tiger Brands Ltd -
Tiger Brands Limited
(Registration number 1994/017881/06)
(Incorporated in the Republic of South Africa)
Share code: TBSP ISIN : ZAE 000023578Tiger Brands
Interim report to shareholders for the
six months ended 31 March 2002
Positioning for sustainable long term growth
The unaudited results for the six months ended 31 March 2002 are set out
below.
This report has been prepared in accordance with the requirements of
Statements of South African Generally Accepted Accounting Practice. The
principles adopted herein are consistent, in all material respects, with
those applied in the most recently 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 2002 2001 Change 2001
Rm Rm % Rm
As As
restated restated
Revenue 9,793.2 8,539.2 15 16,840.5
Continuing operations 9,793.2 8,320.4 18 16,639.1
Discontinued operations 218.8 201.4
Operating profit 1 851.9 784.7 9 1,665.1
Continuing operations 851.9 769.0 11 1,655.8
Discontinued operations 15.7 9.3
Income from investments 10.1 11.3 29
Profit from operations 862.0 796.0 1,694.1
Net financing costs (147.8) (205.2) (389.8)
Profit before taxation and
abnormal items 714.2 590.8 21 1,304.3
Abnormal items 2 33.7 (70.7) (40.4)
Profit before taxation 747.9 520.1 1,263.9
Income tax expense 249.0 197.6 386.2
Net profit after taxation and
before
associates 498.9 322.5 55 877.7
Income from associates 79.8 48.0 66 121.9
Net profit after taxation 578.7 370.5 56 999.6
Minority interest and
preference
dividends 25.0 15.4 30.5
Net profit for the period 553.7 355.1 56 969.1
Number of ordinary shares in issue 166,344 165,744 165,959
(000`s)
Weighted average number of
ordinary
shares on which headline
earnings
and net profit per share are based 166,176 165,688 165,758
(000`s)
Headline earnings per ordinary
share (cents) 306.3 250.4 22 599.9
Diluted headline earnings per
ordinary share (cents) 304.3 248.9 22 595.9
Net profit per ordinary share 333.2 214.3 584.6
(cents)
Dividends per ordinary share 79.0 68.0 213.0
(cents)
Reconciliation between net profit
and headline earnings
Rm Rm Rm
Net profit for the period 553.7 355.1 969.1
Adjusted for:
Losses on sale or discontinuation
of
operations, net 46.2 24
Losses/(profits) on sale of fixed
assets,
including impairment charge
on fixed properties 27.4 (10.8) 26.9
(Profits)/losses on change of
interest
in subsidiaries and other (84.1) 24.4 (18.6)
investments
Other including associates 12.0 (7.0)
Headline earnings for the 509.0 414.9 23 994.4
period
GROUP BALANCE SHEET
Unaudited A
31-Mar
2002 2001
Rm Rm
As restated As re
ASSETS
Non-current assets 4,194.4 3,486.0 3
Property, plant & equipment 1,410.9 1,420.1 1
Goodwill and other intangibles 43.0 47.6
Investments 2,480.0 1,760.6 2
Deferred tax asset 260.5 257.7
Current assets 5,939.2 5,391.2 6
Inventories 1,703.0 1,707.6 1
Accounts receivable 2,900.7 2,374.9 2
Bank and cash resources 1,335.5 1,308.7 1
TOTAL ASSETS 10,133.6 8,877.2 9
EQUITY AND LIABILITIES
Capital and reserves 2,085.9 979.5 1
Share capital and premium 678.9 656.5
Non-distributable reserves and retained income 1,407.0 323.0 1
Minority interest 119.5 73.7
Total non-current liabilities 3,134.6 4,382.1 3
Deferred tax liability 251.2 213.1
Provision for post-retirement medical aid 347.4 322.3
Long-term borrowings 2,536.0 3,846.7 2
Total current liabilities 4,793.6 3,441.9 4
Short-term borrowings 1,082.9 390.4 1
Accounts payable 3,710.7 3,051.5 3
TOTAL EQUITY AND LIABILITIES 10,133.6 8,877.2 9
ABRIDGED CASH FLOW STATEMENT
Unaudited Audite
Six months ended Year ende
31 March 30 Sep
2002 2001
Rm Rm
As restated
rest
Cash operating profit 979.7 933.8 1,96
Working capital changes (259.4) (201.7) (1
Net interest paid (147.7) (208.2) (39
Dividends received 10.1 11.3
Taxation paid (248.9) (370.6) (42
Cash available from operations 333.8 164.6 1,16
Dividends paid (253.0) (251.6) (39
Net cash inflow/(outflow) from operating activities 80.8 (87.0) 7
Net cash (outflow)/inflow from investing activities (60.0) 92.1
Net cash inflow before financing activities 20.8 5.1 8
Net cash (outflow)/inflow from financing activities (633.7)* 15.0 (1
Net (decrease)/increase in cash and cash equivalents (612.9) 20.1 7
* Including the early repayment of long-term debt amounting to R522.0
million
Segmental analysis
Unaudited Unaudited Audited
Six months endedSix months ended Year ended
31 March 31 March 30 Sept
2002 2001 Change 2001
Rm % Rm % % Rm %
Revenue -
continuing operations
Food Brands 4,929.8 48 4,113.6 48 20 8,172.9 47
Dry Groceries 3,765.1 36 3,242.2 38 16 6,565.0 38
- Cereals & Beverages 2,150.6 21 1,871.2 22 15 3,746.3 21
- Culinary 1,161.7 11 965.3 11 20 2,025.9 12
- Confectionery 452.8 4 405.7 5 12 792.8 5
Perishables 1,164.7 12 871.4 10 34 1,607.9 9
Healthcare 1,078.3 11 969.4 11 11 1,982.2 11
- Pharmaceutical 463.4 5 423.5 5 9 863.1 5
- Consumer 370.7 4 327.4 4 13 676.2 4
- Critical Care & other 244.2 2 218.5 2 12 442.9 2
Spar 4,105.6 41 3,527.5 41 16 7,075.4 41
Other 1.7 1.6 137.3 1
10,115.4 100 8,612.1 100 17 17,367.8 100
Less: Intragroup Revenue 322.2 291.7 728.7
9,793.2 8,320.4 16,639.1
Operating profit -
continuing operations
Food Brands 380.0 45 305.0 40 25 783.5 47
Dry Groceries 237.3 28 206.6 27 15 545.3 33
- Cereals & Beverages 107.1 13 94.6 12 13 287.2 18
- Culinary 94.7 11 80.3 11 18 186.2 11
- Confectionery 35.5 4 31.7 4 12 71.9 4
Perishables 142.7 17 98.4 13 45 238.2 14
Healthcare 345.4 41 326.9 42 6 668.6 41
- Pharmaceutical 213.8 25 201.6 26 6 412.2 25
- Consumer 78.0 9 68.2 9 14 134.1 8
- Critical Care & other 53.6 7 57.1 7 (6) 122.3 8
Spar 140.5 16 122.2 16 15 233.3 14
Other (14.0) (2) 14.9 2 (29.6) (2)
851.9 100 769.0 100 11 1,655.80 100
NOTES
Unaudited Audited
Six months ended Year ended
31 March 30 Sept
2002 2001 2001
Rm Rm Rm
1. Operating profit
Operating profit is reflected after charging:
Cost of inventories utilised 6,561.4 5,448.0 11,678.3
Depreciation 105.4 113.4 220.0
2. Abnormal items
Net loss on discontinued and disposed operations (46.2) (24.9)
Profit/(loss) on sale of land and buildings including
impairment charge on properties (30.0) 0.1 (41.0)
Profit/(loss) on change of interest in subsidiaries
and other investments 84.6 (24.6) 23.9
Other, including associates (20.9) 1.6
Abnormal profit/(loss) before taxation 33.7 (70.7) (40.4)
Taxation (6.3) 0.4
40.0 (70.7) (40.8)
Outside shareholders` interest 0.9
Abnormal profit/(loss) attributable to shareholders
in Tiger Brands Limited 40.0 (70.7) (41.7)
3. Changes in accounting policies
The following new accounting policies have been adopted with effect from 1
October 2001:
- 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 in the period they are actually declared.
The adoption of AC107 (revised) has resulted in the Group increasing the
opening balance of distributable reserves at 1 October 2001 by R270.7
million, decreasing the headline earnings for the comparable interim period
ended 31 March 2001 by R15.9 million, and restating the headline earnings
for the year ended 30 September 2001 to reflect an increase of R0.1
million. Presentation of dividends per share is not affected by this change
in policy.
- Post-retirement medical aid contributions
In accordance with the requirements of 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 raising an additional
provision of R246.7 million as at 30 September 2001, being the full
actuarially calculated liability of R333.9 million less the amount partly
provided as at 30 September 2001 of R87.2 million.
This charge has been accounted for by reducing the distributable reserves
at 30 September 2001 by R168.5 million after deferred taxation of R73.8
million and accounting for minority interest of R4.4 million. The reduction
in Group headline earnings for the half-year ended 31 March 2001 as a
result of the change in accounting policy amounts to R6.2 million. Headline
earnings for the year ended 30 September 2001 have been restated to reflect
a reduction of R12.0 million.
- Depreciation of buildings
In terms of AC135 - Investment property - all buildings owned by the Group
are now depreciated over their expected remaining useful life. Previously,
only specialised buildings were depreciated. The adoption of AC135 has
resulted in the Group reducing the opening balance of distributable
reserves at 1 October 2001 by R69.2 million and decreasing the carrying
value of fixed assets by R78.9 million. In addition, the headline earnings
for the half year ended 31 March 2001, and the twelve months ended 30
September 2001 have been restated to reflect earnings reductions of R3.5
million and R7.3 million respectively as a result of the additional
depreciation.
OTHER GROUP SALIENT FEATURES
Unaudited Audited
Six months ended Year ende
31 March 30 Sept
2002 2001 2001
As restated As restat
Net worth per ordinary share (cents) 1,537 689 1,397
Net debt: Total funding (%) * 50.9 73.5 53.3
Interest cover - net (times) 5.8 3.9 4.3
Current ratio (:1) 1.2 1.6 1.3
Capital expenditure (R million) 107.2 107.7 322.9
- expansion 50.9 56.3 128.0
- replacement 56.3 51.4 194.9
Capital commitments (R million) 95.8 106.3 122.4
- contracted 38.4 26.3 32.0
- approved 57.4 80.0 90.4
Capital commitments will be funded by operating
cash flows and the utilisation of existing
borrowing facilities.
Contingent liabilities
Guarantees and contingent liabilities 598.2 467.8 549.5
Market and directors` valuation of investments
Listed - market value 552.0 287.2 468.8
Unlisted - directors` valuation 2,397.8 1,636.4 2,185.80
* Total funding represents net debt plus interest of all shareholders
Statement of changes in equity
Share Non-dis-
capital and tributable Retained
premium reserves income Total
Rm Rm Rm Rm
Balance at 30 September 2001 (as 664.6 393.2 620.8 1,678.6
previously reported)
Prior year adjustment in terms of 270.7 270.7
AC107
Prior year adjustment in terms of (69.2) (69.2)
AC135
Prior year adjustment in terms of (168.5) (168.5)
AC116
Restated balance at the beginning 664.6 393.2 653.8 1,711.6
of the period
Issue of share capital and 14.3 14.3
premium
Foreign currency translation 45.8 45.8
reserve movement
Transfers between reserves 79.3 (79.3)
Prior year goodwill written off - 1.8 1.8
now realised
Net profit for the period 553.7 553.7
Dividends on ordinary shares (241.3) (241.3)
Balance at 31 March 2002 678.9 518.3 888.7 2,085.9
Balance at 30 September 2000 (as 701.9 287.7 (94.7) 894.9
previously reported)
Adjustment to reverse excess 6.4 6.4
provisions
Prior year adjustment in terms of 270.2 270.2
AC107
Prior year adjustment in terms of (62.0) (62)
AC135
Prior year adjustment in terms of (156.5) (156.5)
AC116
Restated balance at the beginning 701.9 287.7 (36.6) 953.0
of the period
Issue of share capital and 4.3 4.3
premium
Foreign currency translation (34.2) (34.2)
reserve movement
Transfers between reserves 47.7 (47.7)
Prior year goodwill written off - 226.1 226.1
now realised
Net profit for the period 355.1 355.1
Dividends on ordinary shares (240.1) (240.1)
Provision for post-retirement (27.3) (27.3)
medical aid relating to Astral
Foods Limited
Distribution in specie in respect (49.7) (207.7) (257.4)
of the unbundling of Astral Foods
Limited
Balance at 31 March 2001 (as 656.5 301.2 21.8 979.5
restated)
Balance at 30 September 2000 (as 701.9 287.7 (94.7) 894.9
previously reported)
Adjustment to reverse excess 84.8 84.8
provisions
Prior year adjustment in terms of 270.2 270.2
AC107
Prior year adjustment in terms of (62) (62.0)
AC135
Prior year adjustment in terms of (156.5) (156.5)
AC116
Restated balance at the beginning 701.9 287.7 41.8 1,031.40
of the period
Issue of share capital and 12.4 12.4
premium
Foreign currency translation 44.5 44.5
reserve movement
Transfers between reserves 34.5 (34.5)
Movements in associates not taken 20.9 20.9
to income
Prior year goodwill written off - 238.1 238.1
now realised
Deferred surplus on revaluation of financial 5.6 5.6
instruments
Net profit for the year 969.1 969.1
Dividends on ordinary shares (353.0) (353.0)
Distribution in specie in respect (49.7) (207.7) (257.4)
of the unbundling of Astral Foods
Limited
Balance at 30 September 2001 (as 664.6 393.2 653.8 1,711.60
restated)
REVIEW OF OPERATIONS
Tiger Brands achieved a strong increase in headline earnings per share of
22% for the six months ended 31 March 2002. This result, has been
favourably influenced by the exchange rate benefits arising from the
depreciation of the Rand against the major currencies during the period
under review.
Vision 2004
As reported last year, Tiger Brands is engaged in a major change process
which has as its objective the achievement of sustainable top-line growth
through the creation of a market-driven, synergised organisation. Progress
has been made in both Food Brands and Healthcare, where redefined food and
healthcare product categories have been created to drive future growth.
These categories are supported by designated functional structures covering
brand development, customer management, the supply chain and commercial
management.
The company is well set to achieve its vision. Some benefits are already
being realised but material benefits will only be achieved from 2004.
Results
Total revenue and operating income grew by 15% and 9% respectively, with
revenue and operating income from continuing operations increasing by 18%
and 11%. The overall operating margin from continuing operations fell to
8,7% (2001: 9,2%), largely influenced by sharply higher raw material input
costs in the Cereals business and an increased investment in major brands
in Healthcare.
Net cash flow from operations improved to R334 million (R165 million) for
the period under review. The improved cash flow performance, together with
cash proceeds of R703 million realised from the disposal of non-core
businesses (since March 2001), gave rise to a reduction of R57 million in
finance charges and an improvement in the interest cover ratio to 5,8 times
(2001: 3,9).
Given the company`s strong cash position and the current interest rate
differential between short-term deposit rates and Tiger`s fixed cost of
debt, an early repayment of R522 million was effected, in March 2002, on
the company`s long-term borrowings.
The benefits of the company`s strategy of spreading risk through selected
international investments were particularly evident in the strong
performance from associate companies which increased their contribution to
group earnings by 66%. Although the foreign associates - ConAgra Malt and
Empresas Carozzi - are performing well, their contribution was
significantly enhanced by the higher rand conversion of their proifts.
The lower interest costs, currency benefits arising from exports and the
increased share of profits from associates have contributed significantly
to the 22% growth in headline earnings per share.
Food Brands
Food Brands recorded a strong operating profit improvement of 25% on a
revenue increase of 20%. This growth was achieved notwithstanding a
significant increase in raw material costs in the Cereals business.
Overall, the results were enhanced by strong performances in the Culinary
and Fishing businesses as a result of significant currency related benefits
arising from exports. Excluding exports, operating profit for the food
categories showed no growth compared with the prior year. The comparative
performance of Cereals was also favourably affected by the closure, during
the prior year, of the loss making bakeries.
The Cereals and Beverages business achieved a 13% increase in operating
income under difficult circumstances. Reduced profitability in the wheat
milling operations, caused mainly by lower volumes and pressure on margins,
was more than offset by a significant turnaround in the profitability of
the bakery business. The bakeries enjoyed good volume growth on a
comparable basis. Although maize milling margins came under severe pressure
as a result of significant raw material price increases following the
weakening of the Rand, the company was able to limit the margin decline
through sound procurement policies. The hot breakfast cereal category,
Jungle, disappointed but a pleasing improvement was achieved in the pasta
category. The rice category achieved a small increase in operating profit
despite lower sales volumes and pressure on margins.
The Culinary business, which markets leading brands such as All Gold, Koo,
Black Cat and Colmans, recorded an operating profit increase of 18%. The
fruit and vegetables category was adversely affected by poor yields caused
by the inferior quality of the deciduous crop, whilst the condiments and
ingredients business performed below expectation. An otherwise
disappointing performance by the Culinary business was bolstered by
currency related benefits arising from exports.
The Confectionery business achieved a satisfactory increase in both revenue
and operating profit. Growth has been largely driven through product
innovation which now accounts for in excess of 20% of sales.
The Perishables business, which comprises the company`s fishing interests
(Sea Harvest and Oceana) and the fresh milk operations, performed
particularly well, increasing operating profit by 45%. Sea Harvest recorded
strong profit growth as a result of significantly higher Rand realisations
and a favourable sales mix in favour of value added products. Costs were
adversely impacted by reduced catch rates caused by poor fishing
conditions.
Separately listed Oceana increased headline earnings per share by 27% with
operating profit improving by 25%. There were particularly good
contributions from the lobster, horse mackerel and hake operations, whilst
the trading activities benefited from strong international markets and the
weak Rand.
The fresh milk operations recorded a loss for the period.
Healthcare Brands
Healthcare Brands achieved a 6% increase in operating profit on sales
growth of 11%. A good performance by the Consumer business was tempered by
modest growth in Pharmaceuticals and a small decline in profit in the
Critical Care division.
In Pharmaceuticals, an increased investment in major brands and new product
development gave rise to a reduction in the operating margin. The focus on
major brands and new products forms part of an overall strategy to position
the business for future growth. Allowing for the increased level of
investment, trading margins have otherwise been maintained. During the
period, there were encouraging performances from key brands such as
"Myprodol", "Synap Forte", "Corenza C", "Lentogesic", "Pynstop" and "Adco-
Dol".
The Consumer business enjoyed excellent growth from core products such as
"Ingrams Camphor Cream", "Panado", "Compral", "Elizabeth Anne" and "Gill".
Critical Care margins were negatively affected by the loss of tender sales
and pricing pressures in the core intravenous solutions business. However,
the overall performance benefited from strong growth in Renal and Blood
products, Sterilabs Services and from the National Renal Care joint
venture.
Spar
Spar produced good results, increasing sales revenue and operating profit
by 16% and 15% respectively. This was achieved notwithstanding an
additional week`s trading included in the prior period. On a comparable
basis, revenue and operating profit increased by 22% and 24% respectively.
During the six months, there was a net addition of thirty in the number of
Spar outlets and overall market share was further increased. A further
forty stores were also upgraded. The store upgrade programme reflects an
increased emphasis on fresh food and home meal replacement. Sales of Spar
house brands continue to be buoyant.
Associates
Income from associates reflected an increase of 66% compared to the same
period last year. Excluding currency translation benefits, the contribution
from associates showed an improvement of 24%. Both ConAgra Malt and
Empresas Carozzi improved their performances considerably compared to the
previous year. Enterprise Foods` contribution was well below last year due
to significant price increases in imported raw materials caused by the
depreciation of the Rand.
The results of Jumbo Cash & Carry were equity accounted up to 1 April 2001,
being the effective date of sale in the previous year.
Changes in Accounting Policies
Comparative figures have been restated as a result of the adoption of a
number of new accounting policies with effect from 1 October 2001. The
overall effect is that headline earnings for the half year ended 31 March
2001 were reduced by R25.6 million, whilst headline earnings for the twelve
months ended 30 September 2001 were decreased by R19.2 million.
- Provision for dividends and STC
In terms of accounting statement AC 107 (revised), dividends, including any
applicable secondary tax on companies (STC) charges, are now accounted for
in the period that the dividends are actually declared. Therefore, the STC
charge included in the half year results relates to the final dividend in
respect of the previous financial year.
- Post-retirement medical aid contributions
In accordance with AC 116 (revised), the Group recognises its obligation to
fund its post-retirement medical aid contributions over the expected
working lives of its employees.
- Investment properties
In terms of AC 135, all buildings owned by the Group are now depreciated
over their expected remaining useful life.
Dividend
The company has declared an interim dividend of 79 cents per share, which
represents an increase of 16% over 2001. In view of the extraordinary
benefits arising from the depreciation of the Rand, it has been determined
that the rate of increase in the interim dividend be below the growth in
headline earnings per share.
Prospects
Tiger Brands is expected to perform at current trading levels for the
remainder of the year. The benefits to the income from associates and from
exports caused by the depreciation of the Rand are not likely to be
repeated in the second six months.
Whilst the rate of earnings growth for the full year is expected to be
satisfactory, it will not match the increase achieved in the first six
months.
For and on behalf of the Board
A WILLIAMS N DENNIS
Chairman Chief Executive Officer16 May 2002
Directors: R A Williams (Chairman), N Dennis* (Chief Executive Officer)
(British),
B H Adams, D D B Band, B P Connellan, D E Cooper, M H Franklin*, U P T
Johnson, J H McBain* (British), A C Nissen, M C Norris*, G N Padayachee, I
B Skosana,
R V Smither*, J L van den Berg, C F H Vaux* * Exexcutive
Director
Company secretary: I W M Isdale
Share registrars:
South Africa:
Computershare Investor Services Limited, 11 Diagonal Street, Johannesburg,
2001
Postal address:
PO Box 1053, Johannesburg 2000
United Kingdom:
Computershare Investor Services PLC, PO Box 82, The Pavilions, Bridgewater
Street, Bristol, BS99 7NH
Registered office:
85 Bute Lane, Sandown Sandton, South Africa
Postal address:
PO Box 78056, Sandton, 2146, South Africa
London office:
St James Corporate Services Limited, 6 St James`s Place London SW1A 1NP
http://www.tigerbrands.com
