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Tiger Brands Limited - Group Results For The Year Ended 30 September
Release Date: 20/11/2002 16:33:43 Code(s): TBS
Tiger Brands Limited - Group results for the year ended 30 September
2002
Tiger Brands Limited
(Registration number 1944/017881/06)
(Incorporated in the Republic of South Africa)
Ordinary Share Code: TBS
ISIN : ZAE000023560
Preference Share code: TBSP
ISIN: ZAE000023578
Group results for the year ended 30 September 2002
The condensed financial statements included in this preliminary
report have been reviewed by KPMG Inc. and their unmodified review
report is available for inspection at the company`s registered
office.
The reviewed results for the twelve months ended 30 September 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 4.
- Operating profit from continuing operations + 23%
- Headline earnings per share + 36%
GROUP INCOME STATEMENT
Year ended
30 September
2002 2001 Change
Rm Rm %
Notes Reviewed Audited
Revenue 20,181.9 16,840.5 20
Continuing operations 20,071.3 16,506.7 22
Discontinued operations 110.6 333.8
Operating profit 1 2,032.7 1,665.5 22
Continuing operations 2,013.8 1,634.0 23
Discontinued operations 18.9 31.5
Income from investments 33.9 29.0
Profit from operations 2,066.6 1,694.5
Net financing costs (274.5) (389.7)
Profit before taxation and 1,792.1 1,304.8 37
abnormal items
Abnormal items 2 18.3 (40.4)
Profit before taxation 1,810.4 1,264.4
Income tax expense 577.8 386.4
Net profit after taxation and 1,232.6 878.0 40
before associates
Income from associates 177.1 121.9 45
Net profit after taxation 1,409.7 999.9 41
Minority interest and 49.6 30.5
preference dividends
Net profit for the year 1,360.1 969.4 40
Number of ordinary shares in 166,792 165,959
issue (000`s)
Weighted average number of
ordinary shares
on which headline earnings and 166,331 165,758
net profit per share are based
(000`s)
Headline earnings per ordinary 817 600 36
share (cents)
Diluted headline earnings per 809 596 36
ordinary share (cents)
Net profit per ordinary share 818 585
(cents)
Dividends per ordinary share 290.0 213.0 36
(cents)
Interim dividend paid 79.0 68.0
Final dividend declared post 211.0 145.0
balance sheet date
Reconciliation between net
profit and headline earnings
Rm Rm
Net profit for the year 1,360.1 969.4
Adjusted for:
Losses on sale or 35.6 24.0
discontinuation of operations,
net
(Profits)/losses on sale of (8.1) 26.9
fixed assets, including
impairment charge on fixed
properties
Net profit on sale of interest (151.9) (33.1)
in subsidiaries and joint
ventures
Amount written off investments 103.0 14.5
(Note 3)
Other, including associates 19.6 (7.0)
Headline earnings for the year 1,358.3 994.7 37
GROUP BALANCE SHEET
30 September
2002 2001
Rm Rm
Reviewed Audited
ASSETS
Non-current assets 4,109.9 3,730.2
Property, plant & equipment 1,454.3 1,413.7
Goodwill and other intangibles 44.0 30.9
Investments 2,333.8 2,047.4
Deferred tax asset 277.8 238.2
Current assets 6,408.9 6,083.0
Inventories 1,999.1 1,610.5
Accounts receivable 2,784.8 2,524.1
Cash and cash equivalents 1,625.0 1,948.4
TOTAL ASSETS 10,518.8 9,813.2
EQUITY AND LIABILITIES
Capital and reserves 2,728.8 1,710.3
Share capital and premium 696.4 664.6
Non-distributable reserves and accumulated 2,032.4 1,045.7
profits
Minority interest 121.0 97.7
Total non-current liabilities 3,009.3 3,329.0
Deferred tax liability 294.0 206.6
Provision for post-retirement medical aid 359.9 322.6
obligations
Long-term borrowings 2,355.4 2,799.8
Total current liabilities 4,659.7 4,676.2
Short-term borrowings 835.3 1,223.3
Accounts payable 3,824.4 3,452.9
TOTAL EQUITY AND LIABILITIES 10,518.8 9,813.2
ABRIDGED CASH FLOW STATEMENT
Year ended
30 September
2002 2001
Rm Rm
Reviewed Audited
Cash operating profit 2,347.3 1,962.4
Working capital changes (438.4) (18.0)
Net interest paid (274.5) (399.2)
Dividends received 52.0 43.4
Taxation paid (378.7) (421.4)
Cash available from operations 1,307.7 1,167.2
Dividends paid (387.3) (390.9)
Net cash inflow from operating activities 920.4 776.3
Net cash (outflow)/inflow from investing (332.7) 74.6
activities
Net cash inflow before financing activities 587.7 850.9
Net cash outflow from financing activities (915.6)* (125.7)
Net (decrease)/increase in cash and cash (327.9) 725.2
equivalents
*Including the early repayment of long-term debt amounting to R522.0
million.
Segmental analysis
Year ended Year ended
30 September 30 September
2002 2001 Change
Rm % Rm % %
Reviewed Audited
Revenue - continuing
operations
Food Brands 10,156.1 49 8,172.9 48 24
Dry Groceries 7,924.3 38 6,565.0 39 21
- Cereals & Beverages 4,679.3 23 3,746.3 22 25
- Culinary 2,353.0 11 2,025.9 12 16
- Confectionery 892.0 4 792.8 5 13
Perishables 2,231.8 11 1,607.9 9 39
Healthcare 2,107.1 10 1,850.3 11 14
- Pharmaceutical 900.9 5 805.4 5 12
- Consumer 687.6 3 601.0 4 14
- Critical Care 483.4 2 415.3 2 16
- International 35.2 0 28.6 0 23
Spar 8,345.3 41 7,075.4 41 18
Other 6.3 6.3
20,614.8 100 17,104.9 100 21
Less: Intragroup Revenue 543.5 598.2
20,071.3 16,506.7 22
Operating profit -
continuing operations
Food Brands 1,065.6 53 783.4 48 36
Dry Groceries 743.1 37 545.2 33 36
- Cereals & Beverages 443.5 22 287.2 18 54
- Culinary 225.4 11 186.1 11 21
- Confectionery 74.2 4 71.9 4 3
Perishables 322.5 16 238.2 15 35
Healthcare 702.6 35 646.2 40 9
- Pharmaceutical 425.5 21 395.5 25 8
- Consumer 133.5 7 111.9 7 19
- Critical Care 133.4 7 131.5 8 1
- International 10.2 0 7.3 0 40
Spar 293.3 15 233.4 14 26
Other (47.7) (3) (29.0) (2)
2,013.8 100 1,634.0 100 23
NOTES
Year ended
30 September
2002 2001
Rm Rm
Reviewed Audited
1. Operating profit
Operating profit is reflected after
charging:
Cost of inventories utilized 14,478.4 11,678.3
Depreciation and amortisation 227.7 221.4
2. Abnormal items
Net loss on discontinued and disposed (35.1) (24.9)
operations
Profit/(loss) on sale of land and buildings 4.5 (41.0)
including impairment charge on properties
Net profit on sale of interest in 173.3 38.4
subsidiaries and joint ventures
Amount written off investments (Note 3) (103.0) (14.5)
Other, including associates (21.4) 1.6
Abnormal profit/(loss) before taxation 18.3 (40.4)
Taxation 15.7 0.4
2.6 (40.8)
Outside shareholders` interest (0.6) 0.9
Abnormal profit/(loss) attributable to 3.2 (41.7)
shareholders in Tiger Brands Limited
3. Amount written off investments
This includes an amount of R89.1 million written off in 2002 in
respect of the Group`s 6.3% shareholding in Aurora Foods Inc.. The
carrying value of the investment at 30 September 2002 is R31.7
million.
4. Changes in accounting policies
The following new accounting policies were 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 R270.8 million and restating the headline
earnings for the year ended 30 September 2001 to reflect an increase
of R0.3 million. Presentation of dividends per share is not affected
by this change in policy.
- Post-retirement medical aid obligations
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 R235.4 million as at 30
September 2001, being the full actuarially calculated liability of
R322.6 million less the amount partly provided as at 30 September
2001 of R87.2 million.
This change has been accounted for by reducing the distributable
reserves at 30 September 2001 by R160.4 million after deferred
taxation of R70.6 million and accounting for minority interests of
R4.4 million. Headline earnings for the year ended 30 September 2001
have been restated to reflect a reduction of R12.2 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 R68.9 million and
decreasing the carrying value of fixed asset by R78.8 million. In
addition, the headline earnings for the twelve months ended 30
September 2001 have been restated to reflect an earnings reduction of
R7.0 million as a result of the additional depreciation.
- Provision for leave pay
In terms of AC116 (revised) - Employee benefits - the Group now
provides for leave pay on a total cost to company basis. Previously,
leave pay was provided for based on the gross salary of the employee.
This change in accounting policy has resulted in the Group reducing
the opening balance of distributable reserves at 1 October 2001 by
R9.8 million. There was no effect on headline earnings for the twelve
months ended 30 September 2001.
OTHER GROUP SALIENT FEATURES
Year ended
30 September
2002 2001
Rm Rm
Reviewed Audited
Net worth per ordinary share (cents) 1,863 1,396
Net debt to equity (%) 54.9 114.8
Interest cover - net (times) 7.5 4.3
Current ratio (:1) 1.4 1.3
Capital expenditure (R million) 257.1 322.9
- expansion 145.9 128.0
- replacement 111.2 194.9
Capital commitments (R million) 125.9 122.4
- contracted 44.6 32.0
- approved 81.3 90.4
Capital commitments will be funded from
normal operating cash flows and the
utilisation of existing borrowing
facilities.
Contingent liabilities
Guarantees and contingent liabilities* 605.5 479.8
* R435.4 million (2001: R318.8 million)
comprises contingencies in respect of head
leases entered into by the Spar group for
which they have entered into equivalent
sub-leases.
Market and directors` valuation of
investments
Listed - market value 357.6 468.8
Unlisted - directors` valuation 2,355.3 2,185.8
STATEMENT OF CHANGES IN EQUITY
Share Non-
capital distributable Accumulated
and
Premium reserves profits Total
Rm Rm Rm Rm
Balance at 30 701.9 287.7 (9.9) 979.7
September 2000 (as
previously reported)
Prior year adjustment 270.5 270.5
in terms of AC107
Prior year adjustment (61.9) (61.9)
in terms of AC135
Prior year adjustment (158.0) (158.0)
in terms of AC116
Restated balance at 701.9 287.7 40.7 1,030.3
30 September 2000
Issue of share 12.4 12.4
capital and premium
Foreign currency 44.5 44.5
translation reserve
movement
Transfers between 34.5 (34.5) 0.0
reserves
Movements on 20.9 20.9
associates not taken
to income
Prior year goodwill 238.1 238.1
written off on Lagap
- now realised
Deferred surplus on 5.6 5.6
revaluation of
financial instruments
Net profit for the 969.4 969.4
year
Dividends on ordinary (353.5) (353.5)
shares
Distribution in
specie in respect of
unbundling of
Astral Foods Limited (49.7) (207.7) (257.4)
Restated balance at 664.6 393.2 652.5 1,710.3
30 September 2001
Balance at 30 664.6 393.2 620.8 1,678.6
September 2001 (as
previously reported)
Prior year adjustment 270.8 270.8
in terms of AC107
Prior year adjustment (68.9) (68.9)
in terms of AC135
Prior year adjustment (170.2) (170.2)
in terms of AC116
Restated balance at 664.6 393.2 652.5 1,710.3
30 September 2001
Issue of share 31.8 31.8
capital and premium
Foreign currency (39.4) (39.4)
translation reserve
movement
Transfers between 164.7 (164.7) 0.0
reserves
Movements on 43.3 43.3
associates not taken
to income
Prior year goodwill 1.3 1.3
Realised surplus on (5.6) (5.6)
revaluation of
financial instruments
Net profit for the 1,360.1 1,360.1
year
Dividends on ordinary (373.0) (373.0)
shares
Balance at 30 696.4 556.2 1,476.2 2,728.8
September 2002
Comments
Tiger Brands achieved an increase of 36% in headline earnings per
share to 817 cents for the twelve months ended 30 September 2002.
This represents a significant improvement on the performance at the
half year.
The year under review was characterised by Tiger`s continued progress
towards a branded, demand-driven organisation based on newly defined
category structures. Important steps were taken in synergising the
Food business with the consolidation of the brand development and
customer management functions within one location. Although benefits
from the synergisation process have been realised, these are being
reinvested in the core brands. Material benefits from the programme
are only expected to be realised from 2004.
Results
Revenue and operating profit from continuing operations increased by
22% and 23% respectively, with the overall operating margin remaining
virtually unchanged at 10%. The effects of sharply higher grain
prices were mitigated by the benefits of an effective procurement
programme, which resulted in the group being able to source its grain
requirements at below market prices. Furthermore, the company has
benefited significantly from the depreciation of the Rand against the
major currencies over the period, through enhanced profits from
exports and from the improved Rand contribution of the foreign
associates. In total, approximately 26% (2001: 21%) of profits were
generated in foreign currencies in 2002.
Net financing costs reduced by R115 million, or 30%, compared to the
previous year. This was due to a good operating cash flow performance
and was assisted by the cash proceeds of approximately R800 million
raised from the sale of non-core assets since March 2001.
The share of profits from associates showed a strong increase of 45%,
with the contribution from the group`s foreign associates - ConAgra
Malt and Empresas Carozzi - benefiting from the higher Rand
conversion of their profits.
Food Brands
Food Brands increased operating profit by 36% on a revenue increase
of 24%. This performance was achieved through a combination of
currency related benefits arising from exports, cost effective
purchasing of grain raw materials and overhead containment.
The Cereals & Beverages business performed particularly well under
difficult circumstances. The flour and bakery categories
significantly increased their operating profit, with the full
benefits of the prior year`s bakery rationalisation being achieved.
The bakery business enjoyed increased consumer acceptance of its
"Superior" loaf which has a longer shelf-life and enhanced nutrient
value compared to the regular product. A good performance was
achieved by the pasta category, but the rice category, as a fully
imported product, was affected by sharply higher raw material prices.
The maize business benefited from effective procurement positions
taken with regard to its raw material requirements and from the
leading brand "Ace" increasing its market share. The hot breakfast
cereal category, represented by Jungle Oats, had a disappointing year
whilst the sorghum beverages business produced slightly lower profits
due to pressure on margins.
The Culinary business, which markets brands such as "Koo", "All
Gold", "Colmans" and "Black Cat", increased operating profit by 21%.
The introduction of new products contributed to this sound
performance. "All Gold" tomato sauce achieved a record market share
despite heightened competitive activity in the tomato sauce market.
DairyBelle Cheese`s new product, the convenient "Easy Slice" cheese,
contributed to the performance of the category. Overall, Culinary
profits were strongly bolstered by currency related benefits from
canned fruit exports.
The Confectionery business achieved a 3% improvement in operating
profit from a 13% increase in revenue in an extremely competitive
sector. Growth has continued to be driven by innovation, although
profitability was affected by increased marketing expenditure and new
product launch costs. The business successfully introduced the "Fast
Forward" energy bar during the period as well as a number of other
product innovations.
The Perishables business, which comprises the group`s fishing
interests (Sea Harvest and Oceana) and the DairyBelle fresh milk
operations, achieved an operating profit increase of 35%. Oceana,
which is a separately listed company, achieved a 27% increase in
headline earnings per share. Turnover rose by 29% mainly due to a
substantial increase in midwater pelagic volumes traded out of
Mauritania. Improved performances in most operations contributed to
an operating profit increase of 21%. Sea Harvest performed
particularly well despite a reduced hake quota and poor mid-winter
fishing conditions. Export revenues increased by 41% as a result of
the weaker Rand and increased sales of value-added products. The
fresh milk business continued to disappoint and recorded a loss for
the year.
Healthcare Brands
Healthcare Brands achieved a 9% improvement in operating profit on a
14% increase in revenue. A solid performance was achieved by the
Consumer business whilst improved results were recorded by
Pharmaceuticals and Critical Care in the second half of the year.
The Pharmaceuticals business includes key brands such as "Myprodol",
"Synap Forte", "Corenza C", "Pynstop" and "Adco-Dol". An 8%
improvement in operating profit was achieved on a 12% increase in
revenue. The increased investment in major brands and new product
development exerted pressure on margins.
In the Consumer business a 14% growth in revenue translated to a 19%
increase in operating profit. This was achieved through a more
focused investment in marketing, with most major brands showing
double digit volume growth. The business markets brands such as
"Ingram`s Camphor Cream", "Panado", "Compral", "Purity" and "Gill".
The Critical Care business improved its performance in the second six
months, leaving operating profit marginally ahead of last year for
the year as a whole. This business is successfully moving away from
an over-reliance on hospital tender business in the intravenous
solutions market to the provision of complementary hospital products
and services. Innovation accounted for 30% of turnover for the full
year.
Spar
Spar produced strong results with an increase in operating profit of
26% on revenue growth of 18%. Spar continues to increase its market
share and during the year 60 new stores were opened, whilst 100
stores were refurbished.
Good progress was made in respect of two strategic goals aimed at
enhancing top-line growth. This related to the opening of 59 new
"Tops" liquor stores and the substantial increase in Spar house brand
sales.
Spar continues to focus on the fresh food and home meal replacement
markets, which are expected to make a growing contribution to future
profits. Plans are underway to increase warehouse capacity in two
distribution centres in order to improve service levels and drive
growth.
Associates
Income from associates increased by 45% to R177 million as a
consequence of higher foreign currency earnings boosted by currency
translation benefits following the sharp depreciation in the value of
the Rand. Excluding currency translation benefits, the contribution
from associates showed an improvement of 18%.
The international malted barley business ConAgra Malt (50% owned) and
branded food group Empresas Carozzi of Chile (24%) both improved
their performances.
Enterprise Foods (50%) is involved locally in the manufacture and
marketing of chilled processed meats. The company experienced a
significant increase in its raw material input costs as a result of
the depreciation of the Rand. Notwithstanding the higher raw material
costs and pressure on sales volumes, operating profits were in line
with the previous year.
Acquisition of Robertsons Homecare
Subsequent to the year end, the Competition Tribunal approved the
acquisition by Tiger Brands of Robertsons Homecare. The total
purchase consideration amounting to R325 million was paid on 13
November 2002. The purchase of the business including the trademarks
provides the company with an entry to attractive new household
markets. The Robertsons Homecare business has well established
leading brands in the insecticide and airfreshener markets. The
brands acquired include "Doom", "Fastkill", "Airoma" and "Peaceful
Sleep".
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 year ended 30
September 2001 were reduced by R18.9 million. (Refer note 4 for
further details).
Provision for dividends and STC
In terms of accounting statement AC107 (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 2002 results
relates to the final dividend in respect of the 2001 financial year
and the interim dividend paid in July 2002.
Post-retirement medical aid obligations
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.
Provision for leave pay
In terms of AC 116 (revised), the group calculates its provision for
leave pay on a total cost to company basis. Previously, the majority
of operations calculated the leave pay provision based on the gross
salary cost.
Depreciation of investment properties
In terms of AC 135, all buildings owned by the group are now
depreciated over their expected remaining useful life.
Final dividend
The company has declared a final dividend of 211 cents per share,
which brings the total dividend for the year to 290 cents per share.
The total dividend represents an increase of 36 % over that of the
previous year.
Annual Report
The annual report will be posted to shareholders in December.
Outlook
The exceptional growth in earnings achieved in 2002 means that the
results for 2003 will be measured off a high base, with the prospects
for real growth largely dependent on the strength of the economy and
some improvement in consumer demand.
The company remains on course to achieve its long-term objective of
delivering profitable top-line growth for its shareholders. Tiger
Brands will continue to invest in its core brands and build for the
future through an emphasis on profitable top-line growth and an
increased focus on innovation in products and processes.
For and on behalf of the Board
R A WILLIAMS N DENNIS
Chairman Chief Executive Officer 20 November 2002
Directors:
Non-executive:
R A Williams (Chairman), B H Adams, D D B Band, B P Connellan,
D E Cooper, U P T Johnson, A C Nissen, G N Padayachee, I B Skosana,
J L van den Berg
Executive:
N Dennis (Chief Executive Officer) (British), M H Franklin,
J H McBain (British), M C Norris, R V Smither, C F H Vaux
Company secretary: I W M Isdale
Share registrars:
South Africa:
Computershare Investor Services Limited, 70 Marshall Street,
Johannesburg, 2001
Postal address:
PO Box 1053, Johannesburg, 2000
United Kingdom:
Computershare Investor Services plc, PO Box 82, The Pavilions,
Bridgewater Road, 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
Date: 20/11/2002 04:33:02 PM Produced by the JSE SENS Department
