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AFGRI - UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2003
AFGRI LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1995/004030/06)
ISIN: ZAE000040549 Share code: AFR
Group at a glance
AFGRI is a leading South African agricultural services business offering a wide
range of physical and intellectual inputs to farmers, processors and users of
agricultural products. AFGRI also owns cotton, animal feed and seed processing
businesses and has a 50% share in Earlybird Farms, the second largest broiler
operation in South Africa. These services and businesses are mainly in South
Africa, with a presence in Zambia, Malawi and Australia.
AFGRI"s business is structured around the following pillars:
AFGRI PRODUCTS
AFGRI Products bridges the value chain between the producers and processors of
agricultural products. It manages the grading, handling and storage, trading and
hedging of agricultural products through its silo complexes and trading and risk
management businesses. Included in this pillar are AFGRI"s broiler, seed, cotton
and animal feed businesses.
AFGRI REQUISITES
AFGRI Requisites markets an extensive range of products and services, including
heavy and light duty agricultural equipment, spares and workshop services
through strategically placed outlets. AFGRI Requisites also houses AFGRI"s
precision farming business.
AFGRI CAPITAL
AFGRI Capital provides business, financial and risk management solutions to
farmers, traders and processors of agricultural products.
AFGRI SERVICES
AFGRI Services is a centre for developing agricultural excellence to assist
producers and processors of agricultural products in meeting the expectations of
retailers and consumers. It offers clients innovative and value-adding business
and logistical solutions in agronomy, horticulture, biotechnology and animal
production. This pillar is also involved in the processing of fresh fruit for
the local and international retail market.
Commentary
The directors are pleased to present the interim results for the six months
ended 31 August 2003 to AFGRI"s shareholders.
The past three years of restructuring, the introduction of new products and
services and the acquisition of Laeveld Korporatiewe Beleggings in the Lowveld
and Waltons Stores in Australia have made AFGRI more resilient and able to
manage the risks facing the business more effectively. As a result, the growth
in the half-year earnings is ahead of the targets set by AFGRI.
The past two years have produced good results for both producers and processors.
However, the current strong Rand, significantly lower commodity prices and
unusual weather conditions have set the scene for a tough year in agriculture.
AFGRI is managing these adverse conditions by fine-tuning its structure to
further improve service and reduce fixed overheads.
The reduced ground moisture and dam levels as well as commodity prices have
resulted in a slow first six months in retail and this has resulted in revenue
for AFGRI remaining static compared to the results of the previous year.
Since 28 February 2003 much time and effort have been spent on implementing
effective control systems in the Grain Trading Division as a result of the
previous losses in this area of the business. Significant inputs contributed to
defining a risk management environment, refining the AC133 valuation models and
embarking on the implementation of a new IT solution to more effectively manage
the business.
AFGRI is currently negotiating a joint venture with an international merchant
bank relating to the administration and management of the Southern African Grain
Trading Division. This agreement will introduce an expanded product range to
AFGRI"s customer base and limit AFGRI"s future exposure to this business.
Prior Interim Period results
As a consequence of the impact of the adoption of accounting statements AC133,
AC112 (reclassification of foreign subsidiaries) and the losses within AFGRI"s
Trading Division, which were detected during the last two months of the previous
financial year, the reported interim results for the period ended 31 August 2002
were adjusted. The effect of these adjustments reduced headline earnings per
share from 37,4 cents to 16,2 cents and net tangible asset value per share from
424,3 cents to 364,0 cents. Shareholders are referred to the trading update
announcement dated 18 September 2003, where the adjustments were set out in more
detail.
Prior year adjustment
AFGRI was one of the first companies to implement AC133, a particularly complex
and complicated accounting standard. Subsequent to the release of the results
for the year ended 28 February 2003, AFGRI has been able to refine and review
the AC133 valuation model and the information used to calculate the impact on
the results of 28 February 2003, in order to more accurately reflect the results
of the Grain Trading Division. This process led to the refinement of certain of
the assumptions made during the valuation process and information relating to
certain financial instruments as at 28 February 2003. The impact of these
revised assumptions and information on the results for the year ended 28
February 2003 led to the results being fundamentally incorrect and accordingly
these results require restatement in terms of South African Generally Accepted
Accounting Practice.
The results for the year ended 28 February 2003 have been restated and the
effect of the prior year adjustment was to reduce profit after tax by R63
million, headline earnings per share by 19,0 cents to 66,2 cents and net
tangible asset value per share by 19,4 cents to 371,9 cents.
Revenue unchanged
AFGRI"s revenue for the first six months has remained static over that of the
comparable period of the previous year. This is mainly the result of lower
commodity prices in the animal feed business and lower sales of cotton due to
the strong Rand.
These declines have been offset by increased revenue in the grain handling and
storage, broilers, Requisites and Capital businesses.
Headline earnings per share up 86,2%
Notwithstanding the slower growth in revenue, AFGRI"s HEPS increased by 86,2%,
based on the adjusted results for the corresponding period last year, mainly due
to the increased carry over grain stock in storage facilities, excellent results
by Animal Feed and Earlybird Farm and the fact that AFGRI"s Trading Division was
profitable for the current six-month reporting period. The Capital Division
achieved good results due to growth in the debtors" book.
The low maize price, unseasonal weather patterns and the strong Rand had a
negative impact on the results of the Requisites and Cotton Divisions.
Subsequent to the release of the trading update dated 18 September 2003 further
refinement of the assumptions and information used in the grain trading
valuation model, which related to the valuation as at 28 February 2003, were
made. As discussed above, the impact of these refinements together with the
adjustments already contained in the trading update required the restatement of
the prior year results. This adjustment resulted in a "substantial" increase in
HEPS for the six months ended 31 August 2003, based on the adjusted results for
the same period last year, and not a "material" increase as anticipated in the
trading update referred to above.
Dividend
AFGRI will pay an interim cash dividend of 15,2 cents per share, unchanged from
the previous interim dividend.
Prospects
Growth in the business activities of AFGRI"s customers during the period under
review has been slower than experienced in the corresponding period last year.
Notwithstanding the slower growth in revenue for the first half of the financial
year and taking into account the predicted normal weather patterns, the Board is
expecting a "material" (10% - 30%) increase in HEPS compared to the previous
year and a "substantial" (above 30%) increase in HEPS based on the restated
prior year results.
Directorate
During the period Mr M E King resigned from the Board of Directors.
By order of the Board
Mr P F Erasmus
(Non-executive Chairman)
Mr G A L Ebedes
(Executive Vice-chairman)
Mr J D Wright
(Managing Director)
Notice of interim dividend
Notice is hereby given that the directors of AFGRI have resolved to declare a
dividend of 15,2 cents per share for the interim period ended 31 August 2003.
The last day to trade cum the dividend will be Friday, 14 November 2003. The
shares of AFGRI will commence trading ex the dividend from the commencement of
business on Monday, 17 November 2003. The record date will be Friday, 21
November 2003. Payment will be made on Monday, 24 November 2003. There will be
no dematerialisation or rematerialisation of AFGRI shares between Monday, 17
November and Friday, 21 November 2003, both dates inclusive.
By order of the Board
Ms S L Reynolds
(Group Company Secretary)
29 October 2003
Johannesburg
Unaudited business segments
REVENUE
Six months Year
ended ended
31 August 28 February
(reviewed) (audited)
Actual Adjusted Adjusted
R millions 2003 2002 2003
Grain 140 121 413
Cotton 161 250 608
Animal feed and protein 1 040 1 037 2 163
Afgri Products 1 341 1 408 3 184
Afgri Requisites 1 046 1 003 2 728
Afgri Capital 95 70 199
Afgri Services 11 13 19
Other 4 2 -
Total 2 497 2 496 6 130
Unaudited business segments
OPERATING PROFIT
Six months Year
ended ended
31 August 28 February
(reviewed) (audited)
Actual Adjusted Adjusted
R millions 2003 2002 2003
Grain 80 (21) (51)
Cotton (12) 26 37
Animal feed and protein 44 22 111
Afgri Products 112 27 97
Afgri Requisites (18) 19 67
Afgri Capital 33 26 103
Afgri Services (3) 1 4
Other 4 1 8
Total 128 74 279
Unaudited business segments
NET ASSETS
Six months Year
ended ended
31 August 28 February
(reviewed) (audited)
Actual Adjusted Adjusted
R millions 2003 2002 2003
Grain 77 (235) 282
Cotton 346 306 253
Animal feed and protein 319 243 231
Afgri Products 742 314 766
Afgri Requisites 293 200 104
Afgri Capital 239 556 235
Afgri Services 28 8 19
Other (55) 142 144
Total 1 247 1 220 1 268
Notes
1. These business segments are presented after taking into account the pre-tax
headline earnings adjustments. The reason for this is to make the segmental
profit more comparable after adjustments for results from discontinued
operations and goodwill amortisation.
2. Operating profit is shown after the allocation of cost of capital based on
each division"s net assets. Prior year numbers for the interim and full year
periods have been adjusted to be comparable to the current interim period.
Unaudited Group balance sheet
Six months ended Year ended
31 August 28 February
(reviewed) (audited)
Actual Adjusted Adjusted
R millions Note 2003 2002 2003
ASSETS
Non-current assets 697 623 761
Property, plant and
equipment 3 500 431 517
Intangible assets 3 48 37 49
Interest in
associates 3 - 3
Investments available
for sale 15 15 16
AFGRI Limited Trust 52 42 58
Non-current assets 1 25 33
Deferred tax assets 78 73 85
Current assets 2 043 1 677 2 653
Inventories 729 558 699
Receivables and prepayments 583 619 814
Financial assets 46 - 213
Current tax assets 92 33 56
Cash and cash equivalents 593 467 871
Total assets 2 740 2 300 3 414
EQUITY AND LIABILITIES
Capital and reserves 1 247 1 220 1 268
Share capital 4 - - -
Share premium 52 26 52
Reserves 343 443 365
Retained earnings 973 851 964
Treasury shares (121) (100) (113)
Minority interests 1 1 1
Non-current
liabilities 53 80 79
Long-term debts 10 25 25
Deferred tax
liabilities 43 55 54
Current liabilities 1 439 999 2 066
Trade and other
payables 965 939 1 228
Financial liabilities 46 - 213
Bank overdraft and
short-term loans 428 60 625
Total equity and
liabilities 2 740 2 300 3 414
Net tangible asset
value per share (cents) 368 364 372
Unaudited Group income statement
Six months ended Year ended
31 August 28 February
(reviewed) (audited)
Actual Adjusted Adjusted
R millions Note 2003 2002 2003
Revenue 2 497 2 496 6 130
Operating profit 112 74 274
Dividend income 12 - 8
Operating profit
from continuing
operations 5 124 74 282
Loss from
discontinued
operations 6 (11) - (5)
Group operating
profit 113 74 277
Share of operating
results of
associates 2 - 2
Profit before tax 115 74 279
Tax (31) (20) (62)
Net profit from
ordinary activities 84 54 217
Weighted average
number of shares
in issue (millions) 326,8 330,8 328,3
Earnings per share
(cents) 25,8 16,2 66,0
Headline earnings
per share (cents) 7 30,1 16,2 66,2
Unaudited Group cash flow statement
Six months ended Year ended
31 August 28 February
(reviewed) (audited)
Actual Adjusted Adjusted
R millions 2003 2002 2003
Operating activities
Net operating profit 115 74 278
Changes in working capital (83) 161 155
Non-cash flow items 28 31 31
Dividends paid (75) (43) (92)
Tax paid (67) (31) (108)
Net cash (utilised in)/
generated from operating
activities (82) 192 264
Investing activities
Purchase of property,
plant and equipment (30) (64) (112)
Purchase of trademarks
and goodwill (1) - (2)
Proceeds from sale of
property, plant and
equipment 17 15 30
Acquisition of investments - (1) -
Disposal of investments and
loans repaid 38 70 90
Acquisition of shares in
subsidiaries and joint
ventures - - (203)
Net cash derived
from/(utilised in)
investing activities 24 20 (197)
Financing activities
Purchase of treasury shares (8) (51) (64)
Repayment of long-term
borrowings (15) (2) (5)
Net cash utilised in
financing activities (23) (53) (69)
Net (decrease)/increase in
cash and cash equivalents (81) 159 (2)
Movement in cash and cash
equivalents
Beginning of period 246 248 248
Net (decrease)/increase (81) 159 (2)
End of period 165 407 246
Unaudited Group statement of changes in equity
Share Share Retained Treasury
R millions capital premium Reserves earnings shares Total
Balance at
28 February
2002 (audited) - 26 459 950 (49) 1 386
Effect of
adopting AC133 - - - (110) - (110)
Effect of
reclassification
of foreign
businesses as
entities in
terms of AC112 - - (9) - - (9)
Adjusted balance
at 1 March
2002 - 26 450 840 (49) 1 267
Effect of
reclassification
of foreign
businesses as
entities in
terms of AC112 - - (7) - - (7)
Net profit - - - 54 - 54
Share
repurchase - - - - (51) (51)
Dividend
on shares - - - (43) - (43)
Balance at
31 August 2002
(reviewed) - 26 443 851 (100) 1 220
Net profit - - - 225 - 225
Issue of
shares - 26 - - - 26
Currency
translation
differences - - (62) - - (62)
Revaluation
differences
on cash flow
hedges - - (16) - - (16)
Dividend on
shares - - - (49) - (49)
Share
repurchase - - - - (13) (13)
Balance at
28 February
2003 (audited) - 52 365 1 027 (113) 1 331
Prior year
adjustment - - - (63) - (63)
Adjusted
balance at
28 February
2003 - 52 365 964 (113) 1 268
Net profit - - - 84 - 84
Currency
translation
differences - - (7) - - (7)
Revaluation
differences on
cash flow
hedges - - (15) - - (15)
Dividend on
shares - - - (75) - (75)
Share
repurchase - - - - (8) (8)
Balance at
31 August 2003
(reviewed) - 52 343 973 (121) 1 247
Unaudited notes to the Group interim results
1. Accounting policies
The consolidated interim financial statements are prepared in accordance with
and comply with South African Statements of Generally Accepted Accounting
Practice and with the requirements of the Companies Act. The consolidated
interim financial statements are prepared under the historical cost convention
as modified by the revaluation of available for sale securities, financial
assets and liabilities held for trading and all derivative contracts. The
principal accounting policies, which were adopted in the preparation of these
consolidated interim financial statements, correspond with those applied in the
latest annual financial statements.
2. Prior year adjustment
Shareholders are referred to the commentary above in this regard.
3. Property, plant and equipment and intangible assets
Property,
plant and Intangible
equipment assets
Rm Rm
Carrying value at 28 February 2003 517 49
Additions 30 1
Disposals (20) -
Depreciation/amortisation (27) (2)
Carrying value at 31 August 2003 500 48
4. Share capital
Number Rm Rm
31 August 31 August 31 August 31 August
2003 2002 2003 2002
Beginning of
interim period 327 760 551 334 368 042 - -
Treasury shares
purchased (1 758 737) (9 529 023) - -
Number of shares
with voting rights 326 001 814 324 839 019 - -
The treasury shares were purchased by a subsidiary in terms of a general
authorisation at an average price of R4,47 (2002: R5,37). At 31 August 2003 a
total of 26 260 696 treasury shares had been purchased by the subsidiary and are
disclosed as a reduction of equity in the "Statement of Changes to Equity".
5. Net profit is stated after taking into account the following:
31 August 31 August
2003 2002
Rm Rm
Net finance cost (36) (3)
Interest paid to independent third parties (65) (22)
Interest received from independent third
parties 19 19
Dividend income 12 -
Foreign exchange loss (2) -
Auditors" remuneration 1 1
Depreciation on property, plant and equipment 27 28
Amortisation of goodwill 1 -
Amortisation of trademarks 1 2
6. Discontinued operations
The loss of R11 million resulted from the closure of the cotton businesses in
Uganda and Swaziland.
7. Reconciliation of headline earnings per share
7.1 Interim period
31 August 31 August
2003 2002
Cents Cents
The headline earnings of the prior year
have been adjusted to conform to the
implementation of AC133, AC112 and
to account for the losses in the
Grain Trading Division.
A reconciliation of this is:
Headline earnings previously reported 37,4
Adjustments (21,2)
Adjusted headline earnings: 31 August 2002 16,2
Earnings 25,7 16,2
Loss from discontinued operations 3,4 -
Loss on sale of property, plant and equipment 0,5 -
Goodwill written off 0,5 -
Headline earnings 30,1 16,2
7.2 Prior year - Twelve months ended 28 February 2003
Cents
Headline earnings previously reported 85,2
Prior year adjustment (19,0)
Adjusted headline earnings: 28 February 2003 66,2
8. Agency agreements
8.1 Debtors administered on behalf
of third parties
AFGRI manages agri debtors on behalf
of the following third parties
31 August 31 August
2003 2002
Rm Rm
Land Bank 1 552 716
Wesbank 353 306
Rand Merchant Bank 504 -
ABSABank 50 -
2 459 1 022
These third parties pay management fees. AFGRI is liable for bad debts to a
maximum of between 5% and 10% of the value of debtors administered.
8.2 Commodities administered on behalf of third parties
The following is the value of commodities handled, stored and managed on behalf
of third parties.
31 August 31 August
2003 2002
Rm Rm
Rand Merchant Bank 312 2 770
ABSABank 176 248
Other commodity users 337 752
Producers 289 507
1 114 4 277
AFGRI receives a fee for the handling, grading, storing and administration of
these commodities. AFGRI has a right of first refusal to purchase R488 million
(2002: R3 018 million) of the commodities at market value.
9. Going concern
The Board is confident, after taking into account the current bank facilities,
its utilisation and the forecast results up to February 2004, that working
capital available to AFGRI is sufficient to meet its present requirements.
10. Corporate governance and JSE Securities Exchange South Africa (JSE)
compliance
The principles of corporate governance were adhered to. AFGRI complied with the
regulations of the JSE regarding the contents of the interim financial results.
11. Comparative numbers
Comparative numbers have been adjusted to conform with changes in the
presentation in the current interim period, mainly due to the adoption of AC133
and AC112.
INDEPENDENTAUDITREVIEW
Limited assurance report of the independent auditors to the directors of AFGRI
Limited regarding the unaudited interim financial statements in compliance with
par 3.23 of the Listings Requirements of the JSE.
We have reviewed the interim financial information of AFGRI Limited ("AFGRI
Group") for the six months ended 31 August 2003. The interim financial
information is the responsibility of the company"s directors. Our responsibility
is to report on the results of our review.
Our review was carried out in accordance with the guidelines laid down by The
South African Institute of Chartered Accountants. Our review consisted
principally of applying analytical procedures to the underlying financial data,
assessing the compliance with accounting policies, making enquiries of company
personnel responsible for financial and accounting matters and review of minutes
of meetings. The review excluded audit procedures, such as the test of controls
and verification of assets and liabilities, and was therefore substantially more
limited in scope than an audit where an audit opinion is expressed, performed in
accordance with South African Auditing Standards. It should be recognised that
our review did not constitute an audit and may not have necessarily revealed all
material facts.
Our review is not designed, and therefore cannot be relied upon to disclose any
irregularities, including fraud, which may exist.
Our review is not designed to, and therefore will not necessarily reveal
weaknesses in internal controls, errors in the accounting records or
misstatements of management estimates.
Based on our review, nothing has come to our attention that caused us to believe
that the attached interim financial information needs modification so as to
fairly present, in accordance with South African Statements of Generally
Accepted Accounting Practice, the financial position of the AFGRI Group at 31
August 2003 and the results of its operations for the six months then ended.
We have reviewed the profit forecast recorded herein in accordance with Section
5.140 of the JSE requirements and was conducted in accordance with the Audit and
Accounting Guide on profit forecasts and additional guidance issued by the South
African Institute of Chartered Accountants.
PricewaterhouseCoopers Inc
Registered Accountants and Auditors
Chartered Accountants (SA)
Johannesburg
29 October 2003
The signed copy of this review is available for inspection at the registered
office.
Business address and registered office:
33 Sloane Street, Knightsbridge Manor, Block B2, Bryanston.
Fax (011) 463-4139. Telephone (011) 706-7897
Group Company Secretary:
Ms S Reynolds, PO Box 3559, Cramerview 2060
Bankers:
ABSA Bank Limited; First National Bank Limited; Land and Agricultural Bank of SA
Limited; Nedcor Bank Limited and Standard Bank of SA Limited
Auditors:
PricewaterhouseCoopers Incorporated
Transfer secretaries:
Computershare Limited, Investor Services Division, 70 Marshall Street,
Johannesburg 2001. PO Box 1053, Johannesburg 2000.
Telephone (011) 370-5000
Sponsor:
Rand Merchant Bank Corporate Finance, 1 Merchant Place, cnr Fredman Drive and
Rivonia Road, Sandton 2196. POBox 786273, Sandton 2146
Directorate:
P F Erasmus* (Chairman) G A L Ebedes (Vice-chairman) A C Ball* J J
Claassen* N O Davies* J J Ferreira* I de W Goosen
E Gutierrez-Garcia* J T Jansen van Rensburg* F J van der Merwe* JD Wright
*Non-executive
THIS ANNOUNCEMENT IS AVAILABLE ON SENS AND AFGRI"S WEBSITE AT www.afgri.co.za
Date: 29/10/2003 03:01:12 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
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