| Wed 20 Nov 2002, 16:57 | | Rainbow Chicken Limited - Unaudited Group Results |
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Rainbow Chicken Limited - Unaudited Group Results for the six months
ended 30 September 2002
Rainbow Chicken Limited
Consolidated Balance Sheet
(Registration number 1966/004972/06)
Share code: RBW
ISIN: ZAE000019063
Unaudited Group Results for the six months ended 30 September 2002
Consolidated Balance Sheet
30 Sept 30 Sept 31 March
2002 2001 2002
R`000 R`000 R`000
ASSETS
Non-current assets
Trademarks, property, plant 551 010 563 977 556 107
and equipment
Current assets
Loans 1 703 816 434
Inventories 420 659 303 664 313 518
Trade and other receivables 401 326 289 481 329 744
Cash and balances with banks 45 749 8 700 70 406
Total current assets 869 437 602 661 714 102
Total assets 1 420 447 1 166 638 1 270 209
EQUITY AND LIABILITIES
Ordinary shareholders` equity 899 906 759 032 857 300
Preference share capital 500 500 500
Total shareholders` equity 900 406 759 532 857 800
Non-current liabilities
Deferred taxation 5 536 6 118 5 591
Post retirement medical 29 563 14 676 28 960
obligation
Interest bearing debt - long- 4 627 - 4 848
term
Total non-current liabilities 39 726 20 794 39 399
Current liabilities
Trade and other payables 414 458 353 175 319 648
Provisions 48 522 30 335 49 495
Interest bearing debt - short- 15 474 2 802 3 052
term
Taxation 1 861 - 815
Total current liabilities 480 315 386 312 373 010
Total equity and liabilities 1 420 447 1 166 638 1 270 209
Supplementary Information
Six months ended Year ended
30 Sept 30 Sept 31 March
2002 2001 2002
R`000 R`000 R`000
Capital expenditure 29 027 10 038 24 496
contracted and committed
Capital expenditure 18 566 12 425 15 140
approved but not
contracted
Contingent liabilities 62 726 26 376 62 726
Consolidated Income Statement
Six months ended Year ended
30 Sept 30 Sept 31 March
2002 2001 2002
R`000 R`000 R`000
Revenue 1 789 206 1 377 508 3 040 231
Operating profit before 115 712 73 149 208 825
depreciation and
amortisation
Depreciation and (42 563) (27 022) (51 997)
amortisation
Operating profit before 73 149 46 127 156 828
interest
Interest paid (1 001) (1 763) (3 567)
Profit before taxation 72 148 44 364 153 261
Taxation (5 436) 2 232 653
Profit for the period 66 712 46 596 153 914
Headline Earnings
Profit attributable to 66 681 46 565 153 852
ordinary shareholders
Loss/(profit) on 1 717 (1 229) 2 061
disposal of property,
plant and equipment
Net asset impairment 14 020 - (1 258)
provision
raised/(released)
Headline earnings 82 418 45 336 154 655
Consolidated Cash Flow Information
Operating profit before 117 429 70 177 209 628
working capital
requirements
Working capital (85 552) (42 185) (92 003)
requirements
Cash generated by 31 877 27 992 117 625
operations
Interest and taxation (5 446) (26) (4 864)
paid
Dividends paid (25 761) (31) (10 336)
Net cash flows from 670 27 935 102 425
operating activities
Net cash flows from (39 183) (28 240) (47 377)
investing activities
Net cash flows from 1.434 - 6 103
financing activities
Net (decrease)/increase (37 079) (305) 61 151
in cash and cash
equivalents
Cash and cash 67 354 6 203 6 203
equivalents at the
beginning of the period
Cash and cash 30 275 5 898 67 354
equivalents at the end
of the period
Net Cash (Gearing)
Six months ended Year ended
30 Sept 30 Sept 31 March
2002 2001 2002
R`000 R`000 R`000
Cash and balances with 45 749 8 700 70 406
banks
Interest bearing debt - (15 474) (2 802) (3 052)
short-term
Cash and cash equivalents 30 ,275 5 898 67 354
at the end of the period
Interest bearing debt - (4 627) - (4 848)
long-term
Net cash (gearing) 25 648 5 898 62 506
Statement of Changes in Equity
Stated Accumulated Consolidated
Capital Loss Total
R`000 R`000 R`000
Balance 1 April 2001 1 082 853 (370 386) 712 467
Retained income 46 565 46 565
Balance 30 September 2001 1 082 853 (323 821) 759 032
Retained income 97 013 97 013
Issue of shares 1 255 1 255
Balance 31 March 2002 1 084 108 (226 808) 857 300
Retained income for the 40 951 40 951
period
Profit for the period 66 712 66 712
Preference dividend paid (31) (31)
Attributable profit 66 681 66 681
Ordinary dividend paid (25 730) (25 730)
Issue of shares 1 655 1 655
Balance 30 September 2002 1 085 763 (185 857) 899 906
Statistics
Six months ended Year ended
30 Sept 30 Sept 31 March
2002 2001 2002
R`000 R`000 R`000
Number of ordinary (000`s) 258 595 256 119 256 837
shares in issue
Weighted average number (000`s) 257 333 256 119 256 299
of ordinary shares in
issue
Fully diluted weighted (000`s) 281 080 279 109 278 449
average ordinary shares
in issue
Basic earnings per (cents) 25.9 18.2 60.0
share#
Basic earnings per share (cents) 25.7 17.9 56.5
- diluted
Headline earnings per (cents) 32.0 17.7 60.3
share#
Headline earnings per (cents) 31.3 17.4 56.8
share - diluted
Net asset value per (cents) 348.0 296.4 333.8
share
Ordinary dividends:
Interim dividend (cents) 7.0 4.0 -
declared/paid
Final dividend paid (cents) - - 10.0
# Calculated using the weighted average number of ordinary shares in
issue.
Comments
ACCOUNTING POLICIES
The financial statements for the period under review are prepared on
the historical cost basis, in accordance with South African
Statements of Generally Accepted Accounting Practice and incorporates
accounting policies which are consistent in all respects with those
of the previous financial period.
INDUSTRY OPERATING ENVIRONMENT
The South African agriculture and food industry experienced moderate
growth during the past six months driven by both exports and an
improvement in local consumption. The demand specifically for chicken
has further benefited from its increasing competitiveness as a source
of protein. Whilst interest rates have hardened, this had not yet
significantly impacted on demand during the period under review.
In our annual report dated 15 May 2002, we advised that the chicken
industry had witnessed a feed cost increase of 25,0% to March 2002.
In addition, over the past six months since March a further increase
of some 16,0% has occurred mainly from the impact of earlier
increases which had been deferred through forward purchase contracts
which the industry had taken out during 2001. Maize trading levels
had in the interim stabilised at the new higher level, as had the
Rand: U.S. Dollar exchange rate.
Having to absorb additional feed cost increases over and above the
dramatic increases late in the previous year put further strain on
the chicken industry, especially as the trading environment was
further aggravated by an oversupply in the market for the greater
part of the past six months. Chicken realisations thus remained low
well into the period under review, only improving during August and
September. The industry was left largely dependent on production cost
efficiency improvements in order to sustain itself. The fact that
increased feed costs alone are estimated to have increased overall
chicken production costs by approximately 30% (2001: 10,0%) over the
past 12 months, has additionally required that highly capital
intensive investments be made to achieve some compensating
efficiencies and that working capital investment be increased
substantially.
Compounded by these and other cost pressures, the past six months
have regrettably witnessed a few competitor operations either having
to realign themselves with other chicken producers or being forced
into judicial management or insolvency.
Improved realisations over the past two months are consistent with a
seasonal price curve driven by consumer demand at this time of year,
reinforced by an ongoing substitution trend underpinning chicken as
the preferred, and by far, the lowest cost South African meat
protein.
GROUP TRADING RESULTS
Considering the adverse trading conditions outlined above, Rainbow
has shown a very encouraging performance. The Group strategy followed
over the past three years, of focussing on productivity and
efficiency, has been successfully implemented and is now contributing
materially to the Group`s performance.
Total Group revenue, including the impact of volume and mix
improvements in feedmilling, breeding and broiler operations,
increased by 29,9% (2001: 16,1%) for the first half of the year.
Headline earnings reflected growth of 81,9%, from R45,3 million to
R82,4 million for the respective six month periods.
The Group operating profit before interest and before recognition of
a trademark impairment amounted to R87,2 million (2001: R46,1
million), an increase of 89,2%. The Group has reviewed its valuation
of trademarks and recognised impairment losses amounting to a total
of R14,0 million (2001: Nil). After recognising the trademark
impairment, the Group operating profit before interest amounted to
R73,1 million (2001: R46,1 million) for the six months to September
2002, an improvement of 58,6%. Despite higher interest rates, the
reduction of interest bearing debt levels have reduced the interest
charge to R1,0 million (2001: R1,8 million).
Attributable profit amounted to R66,7 million (2001: R46,6 million),
an increase of 43,1%.
While these improvements are significant, both an operating margin
(before interest and trademark impairment) of 4,9% and headline
earnings of R82,4 million for the six months on a total asset base of
R1 420,4 million, indicate scope for further improvement before
adequate levels of return are achieved.
The Group committed a total of R87,4 million (2001: R50,7 million) to
capital expenditure during the period and expended a total of R39,9
million (2001: R30,5 million) during the period. The expenditure was
incurred largely to facilitate volume growth and to improve
efficiencies across the whole supply chain.
Rainbow continued to operate with fluctuating short-term core
borrowings for the period. Cash generated during the period from
operating profit before working capital requirements amounted to
R117,4 million (2001: R70,2 million) representing an improvement of
67,2% on the comparative period. However, driven in the main by feed
raw material price increases, the Group was required to invest an
additional R85,6 million (2001: R42,2 million) in working capital. As
a result the cash generated by operations only increased by R3,9
million, from 28,0 million in 2001 to R31,9 million in the current
year.
Despite the Group achieving positive cash and cash equivalents
amounting to R30,3 million at 30 September 2002 (2001: R5,9 million)
it, in addition to long-term interest bearing debt amounting to R4,6
million (2001: nil), is still operating with fluctuating short-term
core borrowings and will continue to incur interest costs for the
balance of the year.
Epol
The Group`s feed raw material procurement strategy, particularly
regarding forward purchase contracts, has been a significant factor
in hedging the Group against the dramatic recent raw material price
increases during the earlier part of the period under review.
Year-on-year Epol`s production volumes increased by 6,7% (2001: 5,2%
decrease) during the period, arising from streamlining its production
facilities, greater specialisation in a narrower product range and
significant improvement in feed performance.
Volume growth, compounded by feed raw material cost increases,
significantly increased Epol`s turnover, impacting the Group`s
revenue by 7,6% (2001: 1,9%). While Epol`s gross margins were reduced
under these pressures, the impact of the margin reduction was offset
by the volume increase and cost efficiency improvements.
Notwithstanding the challenging trading conditions Epol thus
performed well.
Cobb South Africa
Cobb South Africa is doing well and is performing above expectation.
Significant benefits have been experienced by both Rainbow and the
industry due to the introduction of the breed. Cobb South Africa
contributed more than 7,5% (2001: 1,0%) of the Group`s operating
profit earned for the six months to date. Investment in this project
is nearing completion and the total investment will amount to
approximately R30 million.
Rainbow Farms
Rainbow`s initial turnaround focus was mainly directed at
streamlining its supply chain and improving productivity. This
process has dramatically improved the Group`s performance and cost
efficiencies, and the last six months have seen many performance
levels to now be of world class standard.
The second phase of the Group strategy comprises a further
optimisation of performance through market repositioning, a change in
mix to produce more value added products, customer centred new
product development and the improvement of customer service levels.
This customer focussed strategy has resulted in Rainbow Farms`
prominence in the Quick Service Restaurant (QSR) sector, which now
includes most of the major national brands in our customer base.
Rainbow recently also started supporting some of its customers`
international operations. Major capital investments were made and
continue to be made in support of our QSR strategy. A similar process
has also commenced in other selected channels.
In meeting increased customer demand levels, the Group`s chicken
operations grew volumes by 8,8% (2001: 11,0%) which, although
inclusive of some increased capacity, mainly stemmed from an
optimisation of plant efficiency. Despite the earlier mentioned
dramatic feed cost increases, Rainbow was able to contain the overall
cost of production increase to 20,3% (2001: 1,2%). This was achieved
by limiting cost increases other than feed to an average of 6,9%
(2001: 4,6%). However, the oversupply situation in the market
previously mentioned inhibited chicken realisation increases, and
Rainbow`s recovery of costs through higher prices amounted to only
12,8% (2001: 10,5%) over the past six months.
PROSPECTS
Management`s main focus will still be directed at repositioning the
Group for growth through effective marketing and improved customer
service. The streamlining process to reduce costs and improve
efficiencies will also continue. The successful execution of this
strategy is dependent on the Group`s people skills and knowledge
management which will continue to be a key focus area.
Provided that interest rates do not rise unduly and significantly
inhibit consumer spending, balanced stock levels in the industry are
expected for the remainder of the financial year. Over and above
normal seasonal fluctuations and trends, slightly improved price
realisations are projected for the latter half of the year, while
additional significant cost pressures are not expected.
With the Group`s positioning and strategies outlined above, we expect
an improved performance in the second half of the financial year
compared to the same period last year. Profitability for the full
year is expected to be materially higher than in the previous year.
DIRECTORATE
We would like to welcome Mr J B Magwaza, Mr N P Mageza and Dr M
Griessel who were appointed as non-executive directors on 20 November
2002 and thank them for making themselves available.
DECLARATION OF ORDINARY DIVIDEND
Notice is hereby given that on 20 November 2002 the Board declared an
interim dividend (number 59) of 7,0 cents per ordinary share in
respect of the six months ended 30 September 2002 (2001: 4,0 cents).
The last date to trade cum dividend will be Friday, 3 January 2003
and trading will commence ex dividend from Monday, 6 January 2003.
The record date will be Friday, 10 January 2003 and the dividend will
be paid on Monday, 13 January 2003. Share certificates may not be
dematerialised or rematerialised between Monday, 6 January 2003 and
Friday, 10 January 2003 (both dates inclusive).
For and on behalf of the Board
S B HEATH
Group Secretary 20 November 2002
Enquiries regarding this report may be directed to Mr Y A Lakhnati
(telephone 031-7362548) or Mr M H Visser (telephone 021-8883331)
Please visit us at our Website www.rainbowchicken.co.za.
Directors:
M H Visser (Non-executive Chairman)
Y A Lakhnati (Chief Executive Officer)
W E Bhrmann, Dr M Griessel, L J Grobler, N J L Hancock, J Johnston,
D J Loch Davis, N P Mageza, J B Magwaza, S M Parsons, N Phillips
Registered office:
Rainbow Chicken Limited
1 Stanley Methven Road
Hammarsdale 3700
Transfer secretaries:
Computershare Investor Services Limited,
70 Marshall Street,
Johannesburg 2001
Sponsor:
Rand Merchant Bank Corporate Finance
Date: 20/11/2002 04:00:00 PM Produced by the JSE SENS Department
