| Wed 10 Sep 2003, 11:25 | | AUDITED ANNUAL RESULTS FOR THE YEAR ENDED 30 JUNE |
|
ANGLOVAAL INDUSTRIES LIMITED - AUDITED ANNUAL RESULTS FOR THE YEAR ENDED 30 JUNE
2003
Anglovaal Industries Limited
("AVI" or "the Group")
Registration number 1944/017201/06
Share code: AVI
ISIN: ZAE000030102
Audited results for the year ended 30 June 2003
- Turnover up 16% to R6,6 bn (R5,7bn) with volume growth of 6%
- Strong growth in operating profit, up 32% to R933 m (R706m)
- Operating margin has increased from 12,5% to 14,2%
- Headline earnings up 27% to R627 m (R496 m) after accounting for translation
losses of R76 m (gain of R41 m)
- Diluted headline earnings per share up 27% to 195,2 cents (153,9 cents)
- Cash generated from operations, up 27% to R1,3 bn as our operations continue
to focus on working capital efficiency
- Change in dividend policy to reduce dividend cover to 2,5 and introduce the
payment of an interim and final dividend, rather than a single annual payment
- Dividend per share up 51% to 80 cents (53 cents)
- Purchase of the House of Coffees and investment in the short life juice
category
Angus Band, Group Managing Director, commented:
"We have continued to grow AVI successfully in 2003, both organically and by
acquisition, with strong increases in revenues, cash and earnings. This has been
achieved in a challenging trading environment with high real interest rates
which adversely impacted consumer spending and a volatile Rand. I am confident
we can deliver a satisfactory performance next year with our balanced portfolio
and our focus on innovation and driving efficiencies across the group."
10 September 2003
Enquiries:
AVI
Angus Band, Group Managing Director
Tel: +27 11 779 2703
Robert Katzen, Group Financial Director
Tel: +27 11 779 2704
College Hill Investor Relations
Tel: +27 11 447 3030
Nicholas Williams
Tel: +27 83 607 0761
Alice Jordan
Tel: +27 83 448 2650
GROUP MANAGING DIRECTOR"S STATEMENT
Introduction
In a challenging trading environment, the Group has generated a very good
performance with headline earnings increasing by 27% to R627 million and
headline earnings per share up 26% to 196,1 cents. Strong cash flow remains a
feature of the Group and cash generated by operations increased by 27% to R1,3
billion.
After an excellent first half, trading conditions deteriorated somewhat in the
second half as predicted, as the stronger Rand and high interest rates impacted
on the general level of economic activity, with a consequent slowdown in
consumer demand. Managing the leads and lags of a volatile currency, distortions
in raw material costs and pressure from cheaper imports proved challenging for
management.
The year was further characterised by an uncertain world economy affected by
war, a downturn in the United States and European economies and the outbreak of
Severe Acute Respiratory Syndrome. AVI was not immune to these issues but the
Group"s management teams have responded very well and we are pleased to report
that Group volume growth for the year was 6%.
The strategic re-positioning of the Group reported on last year has begun to
show positive results with a number of small but important acquisitions
concluded, as well as a major push in respect of new product and process
innovation. Market shares have improved across most categories.
Highlights
Group turnover increased by 16% to R6,6 billion, driven by growth in Branded
Consumer Products and a strong performance from Packaging. Total foreign
turnover was R1,4 billion which represented 21% of Group turnover, unchanged
from the prior year notwithstanding the strengthening of the Rand.
Within the Branded Consumer Products segment, National Brands had an excellent
year with operating margins improving from 5,2% to 8,0% as a result of a much
improved performance from the snacks and coffee categories and good cost
containment. I&J"s operating margin declined from 16,8% to 14,3% as a result of
poor fishing and the impact of the exchange rate on export realisations although
this was softened by the substantial progress made in improving the
profitability of Alpesca. Cosmetics traded well but had to absorb increased
costs as a result of the SAP implementation, which limited the operating profit
growth. The Real Juice operation acquired in December 2002 contributed R31
million in turnover for the year and incurred an operating loss of some R9
million which was slightly worse than expected.
In the Packaging segment, strong glass volumes and efficiency gains contributed
to a material improvement in performance. The plastics division also showed
substantial improvement with the result that the Packaging segment"s margin
lifted from 18,3% to 21,8%. Logistics also had a good year driven by higher
realisations, cost control and further efficiency improvements.
AVI"s continued emphasis on operational efficiencies, together with the volume
growth, has resulted in the operating profit increasing by a healthy 32% to R933
million, with the operating margin lifting from 12,5% to 14,2%.
The Rand strength impacted substantially on profitability in the second half of
the financial year with both operating margins and volumes affected as the
Group"s relative competitiveness was eroded. Steps were taken to migrate into
more profitable markets but the impact of the improvement in the average
exchange rate was still material. The strength of the Rand at the balance sheet
date relative to the prior year together with an increase in foreign assets held
resulted in total net foreign currency translation losses charged to the income
statement of R76 million (2002: a translation gain of R41 million). This
included the valuation of fair value hedge positions on forward exchange
contracts. The year end Rand/$ rate was R7,43/$ (2002: R10,25/$).
Of these translation losses, R40 million (2002: a gain of R25 million) related
to the translation of integrated foreign operations which is disclosed in
financing income, consistent with the treatment in the prior year. Consequently,
the net investment income earned for the year shows a decline of 38% to R53
million notwithstanding that the level of cash reserves remained strong and the
interest rate environment was higher on average.
Translation losses charged directly to balance sheet reserves were R121 million
(2002: a gain of R66 million).
The Group"s effective tax rate of 25% is below that of last year (28%) and the
statutory rate of 30%. This is mainly attributable to the raising of a deferred
tax asset within National Brands of R26 million as a result of improved
profitability in a subsidiary which permitted the recognition of certain
assessed losses attributable to that company.
The results of the associates and joint ventures were disappointing with weak
performances from Simplot, I&J"s joint venture in Australia as well as Hangana,
its Namibian associate, which experienced poor fishing.
Cash generated from operations was up 27% to R1,3 billion. Working capital has
remained a focus area and the net working capital to sales ratio improved from
20% to 18%. Capital expenditure in the year amounted to R581 million of which
R322 million was classified as expansion capex with the main items being the two
new furnaces at Consol. The Group continues to maintain its production
facilities at world class standards and has also invested in new information
technology systems in both Cosmetics and Logistics. During the year the Group
spent R70 million on the purchase of 5,2 million AVI shares at an average price
of 1 337 cents per share. Notwithstanding this high level of capital
expenditure, the Group"s balance sheet remains sound with net cash resources at
year end of R884 million (2002: R729 million).
The AVI Group"s return on capital employed during the year was 19,7% compared to
18,3% in 2002 which compares to AVI"s internal benchmark of at least 1,2 times
its weighted average cost of capital, which is currently 12,7%.
The cosmetics operation, previously a division of National Brands, has been
incorporated as a subsidiary of AVI with effect from July 2003 and renamed
Indigo Cosmetics. The management changes effected early in the year at Consol
and at AVI"s corporate office have been successfully implemented.
The past year has seen the consolidation of the information technology service
function within AVI, in the newly created division, Avision, which provides all
hardware, software and IT support requirements in the Group. This is in line
with the Group"s strategy of improving service delivery and optimising synergies
across the divisions.
Strategy Overview
AVI remains focused on achieving and retaining market leadership, critical mass
and sustainable margins in branded consumer products and services. Innovation
continues to be a very important theme in driving organic growth and we have set
an internal target to achieve 15% of turnover from new products on a sustainable
basis.
Innovation is not limited to new products and the Group"s operational teams are
continuously finding ways to improve efficiencies and productivity. These
improvements have been a major contributor to the growth in operating margin
achieved in the year and have been particularly evident in Consol, the coffee
and snacks categories in National Brands, Alpesca and Vector.
Internationally, AVI"s acquisition strategy will continue to be concentrated on
growing the seafood business through I&J. The objective is to build access to
additional resources for established first world markets. The focus will remain
on white fish and selected premium value species such as shrimp and abalone.
Locally, the Group"s acquisition strategy has focused on consumer products and
services that we assess to be high growth categories and/or offer synergies with
existing businesses. For example, the world wide trend towards healthier
lifestyles motivated AVI to invest in the short-life juice category. The first
investment has been the acquisition of a 75% interest in The Real Juice Company.
Investment in this category has continued with the acquisition, after the year-
end, of Quali Juice, a short life juice business based in the Western Cape. This
acquisition is subject to regulatory approval.
The recent acquisition of House of Coffees by National Brands will not only
provide further growth opportunities in the "out of home" market for hot
beverages but also the opportunity to take advantage of the synergies with the
existing roast and ground coffee business.
AVI"s formula for success continues to be centered on its five key pillars -
people, innovation, growth, operating excellence and stakeholder value. By
maximising the potential of these elements, AVI aims to achieve sustained
performance.
Dividend
A final ordinary dividend of 80 cents a share for the year ended 30 June 2003
has been declared, up 51% on last year. This represents a dividend cover of 2,5
times. The reduction in cover from the previous policy of 3 times relative to
headline earnings is a result of continued strong cash flows from operations.
The board has also determined that it would be appropriate to commence with the
declaration of an interim dividend, with effect from the release of the interim
results in March 2004.
Appreciation
I am very grateful for the support of my fellow executives and all AVI staff and
for their continued commitment over the last year. I am proud to work with such
dedicated and professional people. The commendable results of the Group are
testimony to their skills and hard work.
Outlook
We have made substantial progress in the year both financially and operationally
and I have no doubt that this will continue into the new financial year. Current
trading remains subdued but we expect the impact of the personal tax reductions,
further interest rate cuts and lower inflation to start to lift consumer demand
in the second half of our financial year.
We remain excited about the number of expansion opportunities available to the
Group from acquisitions, innovation and the development of new markets. We are
confident that we have the resources in our people, our brands and our
facilities, as well as the balance sheet strength to support us in the
achievement of our objectives.
OPERATIONAL REVIEW
BRANDED CONSUMER PRODUCTS
This segment comprises National Brands, I&J, Indigo Cosmetics and, from December
2002, the Real Juice Company.
Branded Consumer Products contributed 64% to Group turnover and 47% to Group
operating profit.
National Brands
2003 2002
R"m R"m
Turnover 2 161 1 870
Operating profit 172 97
Capital expenditure 86 56
National Brands contributed 33% to Group turnover and 18% to Group operating
profit.
National Brands manufactures, markets and distributes leading South African
brands in tea, coffee, creamer, biscuits and snacks. The company has
manufacturing operations in Gauteng and KwaZulu Natal, employs some 2 200 people
and owns heritage brands such as Five Roses, Freshpak, Bakers, Pyotts, Frisco,
Ciro, Koffiehuis, Ellis Brown, Willards and Baker Street.
The year under review has been an excellent one with turnover up 16% to R2,2
billion and operating profit up 77% to R172 million. This was a result of an
improved performance across the entire business with coffee, snacks, Ciro
Alliances and biscuits showing a material growth in operating results. The
operating margin from continuing operations improved from 5,2% to 8,0%, driven
by volume growth of 4%, and sound cost management.
This performance was noteworthy as the buoyant trading environment reported for
the first six months of the financial year reversed during the third quarter and
weak consumer demand was experienced in almost all categories, with some
improvement only seen towards the end of the fourth quarter. The strength of the
Rand adversely impacted export sales in the second half.
Innovation continued to advance organic growth and now accounts for 15% of
turnover compared to 8% in 2002. Some of the recent innovations include Five
Roses Iced Tea, Five Roses Honeybush, Frisco Flavizz, Bakers Boudoir flavours,
Pyotts Vitasnack and Willards
S-cuts.
The coffee category achieved volume growth of 11%, with strong growth in premium
brewed coffee (Ciro), affordable convenience coffee (Frisco and Koffiehuis) as
well as creamer and a consequent improvement in market shares. The poor
performance of the category in 2002 was addressed by the re-launch of Frisco,
using new flavour bead technology, the introduction of new products such as
Frisco Flavizz and a significant improvement in service and efficiency levels
from the factory. As a result of these improvements operating profit more than
doubled.
Despite a difficult market and higher input costs in respect of potatoes, oil
and packaging, the snacks category reduced its operating loss by 51% from R62
million to R30 million. Volumes were flat but an improved sales mix, more stable
pricing and the outsourcing of a major portion of the sales and distribution
function contributed to the improved performance.
The tea category had a difficult year, largely as a result of slow total market
demand early in the year, following exchange rate-driven price increases last
year. As prices have declined, demand has recovered and trading in the last
quarter was good. Volumes were in line with the prior year but the operating
margin, although still healthy, declined slightly as a result of higher input
costs. The factory achieved HACCP accreditation during the year.
Biscuits continued to build off the strong base of the prior year with volumes
growing by 5% and operating profit by 18%. The focus on innovation has continued
to drive growth but the strength of the Rand has resulted in more cheap imports
and has also affected our competitiveness into Africa. A new automated baking
line has been commissioned at the Westmead plant for the manufacture of products
to compete with these imports. Both factories have achieved HACCP accreditation
as well as the American Institute of Baking accreditations which are crucial in
accessing overseas markets.
Ciro Alliances continued to consolidate its position in the food service market
and generated strong volume growth with an improved product and service mix.
Cost management was excellent and operating profit improved by 48%. The House of
Coffees, which was acquired in July 2003 for R79 million, will further
strengthen our position in food service and will be merged with Ciro, together
with National Brands" pure roast coffee business. This will create a focussed
roast and ground coffee operation servicing both the retail market, through the
National Brands network and the out-of-home consumption channel with a full
range of coffee and equipment.
The export initiative continued with volumes improving by 11% and with export
turnover now comprising 11% of total National Brands turnover (2002: 10%). The
bulk of the sales are derived from Africa, but promising initiatives have
commenced in the Middle East with biscuits and coffee and in the United Kingdom
and Hong Kong with biscuits.
During the year National Brands disposed of its salt business, Cerebos, for a
gross consideration of R40 million, effective September 2002.
Together with the drive towards higher operating margins and returns from growth
and operating efficiencies, National Brands has also focused on improving its
working capital management. As a result cash flow available from operations
increased from R56 million to
R293 million.
The new National Brands head office, built at a cost of R33 million, has allowed
the consolidation of marketing, sales and other support staff into one site in
order to foster greater communication and thereby drive innovation.
These initiatives have set a solid platform for continued growth into the
future.
Indigo Cosmetics
2003 2002
R"m R"m
Turnover 374 328
Operating profit 40 37
Capital expenditure 16 20
Indigo Cosmetics contributed 6% to Group turnover and 4% to Group operating
profit
Indigo Cosmetics manufactures, markets and distributes leading South African
cosmetics and toiletries brands for the mass market. The company owns the
Yardley and Lentheric trademarks in South Africa and holds the licence to
manufacture, market and distribute Coty products. Indigo Cosmetics employs 373
people and has a manufacturing operation in Cape Town.
Indigo"s turnover was up 14% to R374 million and operating profit grew by 9% to
R40 million. The growth in operating profit was less than turnover growth as a
result of the costs stemming from the installation of SAP which added R6 million
to the cost base with the efficiency and information benefits from this system
only anticipated in future years. The operating margin was 10,8% compared to
11,3% in 2002.
Turnover growth was evenly balanced between the licensed Coty business and the
owned trademarks of Yardley and Lentheric. Strong category growth was boosted by
several new products including Indigo"s first toiletries focused launch, Solo
Numbers. Overall our toiletry volumes grew by 19% and we are now a strong number
two in this market. The new fragrances launched in the Coty stable were
Kaleidoscope, Infinite Gravity and Whisper.
Yardley introduced a new skincare range based on a combination of science and
floral technology. The launch was the biggest in Yardley"s history in South
Africa and marks its entry into the skincare market. The range was primarily
developed in-house using international expertise in Europe as support. The new
Yardley Colour cosmetics range was launched in July 2003 and is being led by
Yardley Watercolours lipstick, an innovative new silicone formula.
Indigo"s relationship with Coty Inc remains strong. Permission was recently
given for Indigo to develop and locally manufacture male and female fragrances
for the House of Coty in South Africa, which is a tribute to Indigo"s innovation
and manufacturing capability. The licence with Coty was also renewed during the
year for a further five year term, ending in 2007.
Capital expenditure for the year amounted to R16 million. The major items were
permanent merchandising display units in retail stores and computer hardware and
software related to the SAP implementation.
Indigo remains an innovation driven business and there is an extremely exciting
new product pipeline for 2004.
I&J
2003 2002
R"m R"m
Turnover 1 647 1 484
Operating profit 235 250
Capital expenditure 153 139
I&J contributed 25% to Group turnover and 25% to Group operating profit
I&J is a vertically integrated seafood business. It is a multinational
operation, headquartered in Cape Town with processing operations in South
Africa, Argentina, Namibia and Australia. It has a sales organisation in Europe
and representation in Australia, the Pacific Rim, the United States, Europe and
Africa. The company employs a total of 4 726 people.
Following the exceptional results of the 2002 financial year, I&J"s earnings for
2003 were disappointing. The deterioration in operating performance was mainly
as a result of adverse fishing caused by unfavourable climatic conditions and
the appreciation of the Rand, which impacted negatively on the company"s export
realisations. Turnover grew by 11% to R1,6 billion. Demand remained firm,
despite the economic downturn in major international markets and although
volumes were down by 2%, this was mainly in low margin products. Operating
profit declined by 6% to R235 million and the operating margin declined from
16,8% to 14,3%.
I&J experienced poor fishing conditions throughout its operations. Catch rates
in the South African hake resource were particularly badly affected, resulting
in I&J"s trawling operations recording an increase in the under-recovery of
vessel operating costs of R30 million for the year.
Notwithstanding these operational difficulties, I&J has maintained a 59,5% value
share of the South African retail market, led by a 14% volume growth in the key
Light and Crispy range. Innovation remained a high priority with 33 new products
launched through the year. These included the development of I&J microwaveable
fish and chips - the first crispy microwave offering.
I&J"s foreign sales were maintained at some 69% of turnover. Due to customer
needs we have introduced a process to convert our European sales progressively
to Euros. This was completed by the end of the financial year. The mix of
currencies is now more balanced with the US dollar accounting for approximately
50% of the I&J group"s sales.
Alpesca, the Argentine operation, continued to show improvement and reported an
excellent set of results which assisted in mitigating the poor performance from
the South African operations. The positive performance was primarily because of
the strength of the shrimp operations. Turnover was R268 million compared to
R140 million in 2002 with operating profit improving from R2 million to R32
million. Although hake catches were disappointing, the quality has improved and
Alpesca is now achieving prices some 50% ahead of the average in Argentina. The
strength of both the Peso and the Rand did however negatively impact earnings.
During the year Alpesca leased a second processing plant in San Antonio Oeste,
280km north of Puerto Madryn, the location of its processing plant. The plant is
situated on the San Antonio tidal harbour, close to a deep-water harbour for
larger vessels. The lease of the facility included a 2 500 ton hake quota and a
2 500 ton quota of by-catch.
The results of I&J"s international joint ventures for the year were
disappointing. Simplot, the Australian joint venture, reported reduced profits
as a result of a very competitive retail sector, labour unrest and operational
difficulties in the processing facilities. Hangana, the Namibian associate,
performed well below its potential and recorded an operating loss for the year,
primarily because of poor catch rates. During the year, the Hangana fleet was
radically restructured with the sale of four smaller, unprofitable wetfish
trawlers and the acquisition of new trawlers including one freezer factory
trawler from I&J. The benefits of these changes should be seen in the coming
years.
During the year I&J commenced with the building of two new deep-sea wetfish
trawlers as part of the ongoing fleet upgrade process. The first of these
trawlers was delivered to South Africa in June and the second is anticipated
during the second quarter of the new financial year.
The company"s South African joint ventures with new quota holders, Igagasi and
Umsobomvu Fishing both yielded good returns for shareholders and must be seen as
encouraging models for similar joint ventures in the future.
Siphumelele, one of AVI"s empowerment partners in I&J, decided to divest during
the year. In order to facilitate this exit, AVI purchased the 10% of I&J owned
by Siphumelele, effective 19 April 2003. Negotiations are in progress to
introduce new partners into I&J.
The positive outcome of the Supreme Court Appeal on fishing quotas has sent a
clear message for stability in the fishing industry. The landmark judgement in
May of this year found that the government"s present system of allocating
fishing quotas is fair, reasonable and equitable. While this case is likely
still to go before the Constitutional Court, we are confident the matter will be
favourably resolved.
PACKAGING
Consol
2003 2002
R"m R"m
Turnover 1 937 1 576
Operating profit 422 288
Capital expenditure 307 88
Packaging contributed 30% to Group turnover and 45% to Group operating profit.
Consol manufactures and markets glass containers and plastic packaging. The
company employs 2 246 people and has manufacturing operations located in Gauteng
at Clayville, Wadeville and Pretoria and in the Cape at Bellville, Kuilsrivier
and Lansdowne.
Consol had an excellent year with good growth in glass container volumes and a
turnaround of the plastics business. Turnover for the year was up 23% to R1,9
billion, with volume accounting for 14% of the increase. The higher volumes
together with a favourable mix and improved factory efficiencies, lifted
operating profit by 46% to R422 million.
Glass selling price adjustments averaged 10%, compared to cost increases of 14%.
This shortfall between price and cost was covered by improved efficiencies and
the higher throughput. The pack-to-melt efficiency improved from 83,6% to 85,9%
in spite of a greater number of job and colour changes.
During the year there was strong volume growth from wine, beer, spirits and
food. Returnable soft drinks also provided significant growth but this was
offset by a decline in non-returnable soft drinks. Returnable glass volumes
accounted for 4% of the 15% total glass volume increase.
In anticipation of glass packaging volume growth, Consol announced in the
previous year that it had initiated plans to increase its production capacity.
In March 2003, the Wadeville No 3 furnace was commissioned, bringing on stream
an additional 12% or 55 000 tons of capacity, at a cost of R214 million. This is
the largest electrically fired furnace in the world. The selection of
electricity as the energy source is intended to strategically balance Consol"s
energy sources between electricity, gas, coal and petroleum based oils. The
capacity expansion also included the Pretoria No 4 furnace which was
commissioned in January 2003. The Pretoria facility is geared to speciality
glass and the new furnace provided a further 3% capacity at a cost of R33
million. Although all plants are running at full capacity, there is currently a
short term industry capacity deficit, largely caused by the collapse of a
competitor"s furnace, which is being bridged by imports.
The outlook for glass demand remains robust and Consol will continue to invest
in capacity to meet sustainable market needs. Accordingly, an additional
investment of R320 million has been approved to increase capacity by a further
50 000 tons which will be commissioned in the 2004 financial year. An increase
in capacity is also planned at the Bellville facility in 2005 to support the
growth in the wine export market.
At the Cape Town Bellville facility an electrostatic precipitator will be
commissioned in April 2004 at a cost of R30 million to bring stack emissions
within local and internationally benchmarked environmental requirements.
The first of two glass recycling processing plants, encompassing the latest
analytical infrared and magnetic valve technology to eliminate contaminants and
colour-sort cullet, has been ordered and will be commissioned at the Bellville
site in January 2004 at a capital cost of R15 million. This forms part of the
South African Glass Industry initiative to significantly improve glass recycling
volumes from current levels of 20% of consumption. This will be achieved through
a cost effective and efficient cleaning and colour sorting process, enabling the
waste glass collectors within both the formal and informal sector to collect and
deliver unsorted contaminated glass to the glass manufacturing industry for
further processing and recycling. Importantly this expands the supply chain
channels and removes current restrictive and costly quality requirements,
significantly increasing revenue for collectors from the post consumer waste
stream.
As a mark of Consol"s dedication to excellence, its Clayville operation was
honoured as the first glass factory to receive the Best Packaging Supplier award
from a leading multi national customer. The annual award is based on the four
key requirements of quality, service, price and innovation and is the result of
concerted efforts by the Consol team in conjunction with the customer in
reaching internationally recognised standards.
The plastics division achieved a satisfactory turnaround in operating profit.
This was driven by production efficiencies and the rationalisation of product
range, focusing on the more profitable market segments.
Cash flow available from Consol"s operations remained extremely strong at R419
million (2002: R321 million). Total capital expenditure for Consol for the year
was R307 million, with the most significant items being the new furnaces built
at Wadeville and Pretoria.
The outlook for Consol is positive as the glass franchise continues to grow.
LOGISTICS
Vector Logistics
2003 2002
R"m R"m
Turnover 365 328
Operating profit 49 35
Capital expenditure 16 29
Logistics contributed 6% to Group turnover and 5% to Group operating profit.
Vector Logistics is a specialist third party logistics provider, focused on the
frozen and chilled supply chain. Vector was incorporated as a stand alone
business on 1 July 2002 and has facilities throughout South Africa with its head
office in Durban and employs 1 530 people.
Vector delivered strong results with revenue increasing by 11% and operating
profit improving by 42% from R35 million to R49 million.
Although volumes were down by 3%, realisations were 14% ahead of last year. The
Multi-Temperature Contract Distribution business contributed approximately 3% to
revenue.
Trading conditions within the various food categories were mixed but
characterised by sharp changes in food pricing, which had a negative effect on
our volumes. The wholesale channel showed reasonable volume growth whilst the
retail and foodservice channels" performance declined. The contract catering
market continues to decline whilst the fast food franchise market was flat.
Apart from improved realisations, the focus on improving efficiencies and an
ongoing cost reduction drive helped to lift the performance of the division.
Some of the initiatives implemented during the year were better control of fuel,
satellite tracking and computerised vehicle routing, vehicle fleet re-sizing and
electronic data interface with one of Vector"s largest customers.
A major focus over the past year has been to develop additional customised
solutions to gain better penetration into a diverse customer base. This included
the creation of additional routes to market such as Vector Cold Storage
(providing increased primary storage facilities for principal customers) and
Vector In-store Solutions (a stand-alone retail field merchandising service).
In November 2002, the Pietermaritzburg MTCD depot won the Compass "Supplier of
the Year" award. Demand service levels and order fulfilment levels achieved at
the MTCD operations have exceeded industry standards. All the distribution
facilities were successfully audited against international standards by an
independent auditor appointed by one of our major global customers.
Capital expenditure for the year amounted to R16 million, including the
acquisition of a bulk cold store for R6,2 million. This new facility was
purchased to service the growing need of principals for increased primary
storage.
The warehouse management module of SAP was installed in Vector"s warehouses to
improve process control as well as productivity measurements. These systems will
become more important as legislation on food traceability becomes more
stringent.
Group income statements for the years ended 30 June
Increase/
2003 2002 (Decrease)
R"m R"m %
Turnover 6 564,2 5 657,4 16
Cost of sales 3 835,4 3 272,8
Gross profit 2 728,8 2 384,6
Selling and administrative
expenses 1 796,2 1 678,9
Operating profit 932,6 705,7 32
Income from investments 78,2 102,6 (24)
Profit before interest paid 1 010,8 808,3
Interest paid 25,5 17,9
Profit before capital items 985,3 790,4 25
Capital items 37,2 23,7
Profit before taxation 1 022,5 814,1 26
Taxation 250,2 227,7
Profit after taxation 772,3 586,4 32
Share of equity accounted
(losses)/earnings of
associated
companies and joint ventures (5,3) 28,5 (119)
767,0 614,9
Minority interests 105,9 105,4
Earnings attributable to
ordinary shareholders 661,1 509,5 30
-
Determination of
headline earnings
Earnings 661,1 509,5
Capital items, net of
taxation and minority
interests (33,9) (13,9)
Headline earnings 627,2 495,6 27
Headline earnings per
ordinary share - cents 1 196,1 155,7 26
Diluted headline
earnings per ordinary
share - cents 2 195,2 153,9 27
Earnings per ordinary
share - cents 1 206,6 160,1 29
Dividend per ordinary
share - cents 80,0 53,0 51
Notes:
1 Earnings and headline earnings per ordinary share are calculated on a weighted
average of 319 917 815 (2002: 318 250 725) ordinary shares in issue.
2 Diluted headline earnings per ordinary share are calculated on a weighted
average of 321 317 727 (2002: 321 946 593) ordinary shares, after taking account
of the relevant number of share options currently in issue.
Group balance sheets at 30 June
2003 2002
R"m R"m
ASSETS
Non-current assets
Property, plant and equipment 1 950,5 1 732,7
Intangible assets 93,5 108,8
Associated companies 17,9 23,9
Joint ventures 170,3 201,6
Other investments 187,1 241,1
Deferred taxation 92,6 105,6
2 511,9 2 413,7
Current assets
Inventories 860,0 744,7
Trade and other receivables 1 231,8 1 219,9
Cash and cash equivalents 986,9 850,3
3 078,7 2 814,9
TOTAL ASSETS 5 590,6 5 228,6
EQUITY AND LIABILITIES
Capital and reserves
Share capital 15,9 15,9
Share premium 105,3 164,3
Non-distributable reserves 47,4 168,7
Distributable reserves 2 888,7 2 397,8
Total shareholders" funds 3 057,3 2 746,7
Minority interests 397,9 526,6
Non-current liabilities
Interest bearing borrowings 71,8 56,5
Deferred taxation 107,7 78,7
Provisions 313,2 316,9
492,7 452,1
Current liabilities
Trade and other payables 1 435,5 1 243,6
Corporate taxation 175,9 194,9
Short-term borrowings 31,3 64,7
1 642,7 1 503,2
TOTAL EQUITY AND LIABILITIES 5 590,6 5 228,6
Group cash flow statements for the years ended 30 June
2003 2002
R"m R"m
Cash retained from operating
activities 854,5 602,1
Cash generated by operations 1 271,3 1 001,4
Cash flow from investments 103,3 48,5
Increase in working capital (15,4) (185,9)
Cash generated by operating
activities 1 359,2 864,0
Interest paid (25,5) (17,9)
Taxation paid (222,1) (104,6)
Cash available from operating
activities 1 111,6 741,5
Dividends paid (257,1) (139,4)
Investing activities (593,9) (472,0)
Property, plant and equipment
purchased
- to maintain operations (259,2) (270,5)
- to expand operations (322,0) (61,9)
(581,2) (332,4)
Proceeds from disposals 58,0 46,4
Net investment in property,
plant and equipment (523,2) (286,0)
Investments - net (acquisitions)/
disposals (70,7) (186,0)
- subsidiaries and businesses (144,9) (65,5)
associated companies and other
investments 74,2 (120,5)
Financing activities (42,7) (10,6)
Net (decrease)/increase in
shareholder funding (59,6) 1,0
Long-term borrowings - net 16,9 (11,6)
- raised 28,0 12,4
- repaid (11,1) (24,0)
Net increase in cash and cash
equivalents 217,9 119,5
Net cash and cash equivalents
at beginning of year 785,6 645,0
Net (decrease)/increase as a
result of the translation of
the cash equivalents of foreign
subsidiaries at beginning
of year (47,9) 21,1
Net cash and cash equivalents
at end of year 955,6 785,6
Short-term borrowings 31,3 64,7
Cash and cash equivalents 986,9 850,3
Group statements of changes in equity
Year ended 30 June 2003
Share Non-
capital distri- Distri-
and butable butable
premium reserves reserves Total
R"m R"m R"m R"m
Balance at beginning of year 180,2 168,7 2 397,8 2 746,7
Earnings for the year 661,1 661,1
Dividends paid during the year (170,2) (170,2)
490,9 490,9
Own ordinary shares acquired (69,5) (69,5)
Issue of ordinary shares 10,0 10,0
Issue of convertible redeemable
preference shares 0,5 0,5
Foreign currency translation
Differences (103,7) (103,7)
Cash flow hedging reserve (17,6) (17,6)
(59,0) (121,3) - (180,3)
Balance at end of year 121,2 47,4 2 888,7 3 057,3
Year ended 30 June 2002
Share Non-
capital distri- Distri-
and butable butable
premium reserves reserves Total
R"m R"m R"m R"m
Balance at beginning of year 178,6 114,8 2 162,4 2 455,8
Provision for post-retirement
medical aid at 1 July 2001 in
accordance with AC116 (revised) (164,9) (164,9)
178,6 114,8 1 997,5 2 290,9
Earnings for the year 509,5 509,5
Dividends paid during the year (121,0) (121,0)
388,5 388,5
Own ordinary shares acquired (6,2) (6,2)
Issue of ordinary shares 7,8 7,8
Foreign currency translation
differences 65,7 65,7
Inter-reserve transfer arising
on sale to minority interests (11,8) 11,8 -
1,6 53,9 11,8 67,3
Balance at end of year 180,2 168,7 2 397,8 2 746,7
Change in accounting policy
The 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 year.
During the year, the Company changed its accounting policy with respect to the
treatment of actuarial gains and losses arising on defined benefit obligations.
Actuarial gains and losses previously recognised as and when they arose, will
now be recognised using the 10 percent "corridor approach". The change removes
the volatility caused by annual actuarial gains and losses that may offset one
another in the long term. The directors believe that estimates of post-
employment benefit obligations are best viewed as a range around the actuarially
determined best estimate. The change in accounting policy did not have an
impact on the prior year disclosure as a result of the first time adoption of
AC116 (revised) - Employee Benefits in that year. In the current year the change
resulted in an unrecognised actuarial loss of R1.1 million.
Segmental performance for the years ended 30 June
Turnover
2003 2002 %
R"m R"m Change
Branded consumer products 4 213,6 3 682,8 14
Packaging 1 936,9 1 576,4 23
Logistics 364,9 327,8 11
Corporate 0,2 0,1 -
6 515,6 5 587,1 17
Discontinuing operations 48,6 70,3 (31)
6 564,2 5 657,4 16
Operating profit/(loss)
2003 2002 %
R"m R"m Change
Branded consumer products 439,0 383,6 14
Packaging 422,3 288,4 46
Logistics 49,3 34,8 42
Corporate* 19,9 (5,6) 455
930,5 701,2 33
Discontinuing operations 2,1 4,5 (53)
932,6 705,7 32
* includes insurance cell captive
Capital items for the years ended 30 June
2003 2002
R"m R"m
Net surplus on disposal and write down
of subsidiaries, other investments,
properties, vessels and plant and
equipment 44,1 59,1
Capital loss from an onerous lease
agreement in a subsidiary company - (24,7)
Goodwill amortisation (8,5) (6,3)
Surplus on disposal of mineral rights 1,6 -
Impairment of property, plant and equipment
of a subsidiary company - (4,4)
37,2 23,7
Attributable taxation (2,0) (4,8)
Attributable to minority interests (1,3) (5,0)
Net credit 33,9 13,9
Rationalisation and restructuring costs amounting to R9,9 million in the prior
year have been reallocated to operating expenses in order to comply with the
recently released Circular 7/2002 issued by the South African Institute of
Chartered Accountants with regard to headline earnings.
Dividend declaration
Notice is hereby given that a final ordinary dividend No. 59 of 80 cents per
share for the year ended 30 June 2003 has today been declared payable to holders
of ordinary shares. The salient dates relating to the payment of the dividend
are as follows:-
2003
Last day to trade cum div on the
JSE Securities Exchange S.A. ("JSE") Friday, 17 October
First trading day ex dividend on the JSE Monday, 20 October
Record date Friday, 24 October
Payment date Monday, 27 October
In accordance with the requirements of STRATE, no share certificates may be
dematerialised or rematerialised between Monday, 20 October 2003 and Friday, 24
October 2003.
Where applicable, dividends in respect of certificated shareholders will be
transferred electronically to shareholders" bank accounts on payment date. In
the absence of specific mandates, dividend cheques will be posted to
shareholders. Shareholders who hold dematerialised shares will have their
accounts at their Central Securities Depository Participant (CSDP) or broker
credited on Monday, 27 October 2003.
Report of the independent auditors
The unqualified report of KPMG Inc., the independent auditors, dated 9 September
2003 is available for inspection at the registered office of the Company.
Annual report
The annual financial statements for the year ended 30 June 2003 will be posted
to shareholders on or about Friday, 26 September 2003. The financial statements
will include the notice of the annual general meeting of shareholders to be
convened on Monday, 20 October 2003.
Sandton
10 September 2003
Date: 10/09/2003 07:30:31 AM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
