| Wed 19 May 2004, 17:44 | | AUDITED GROUP RESULTS FOR THE YEAR |
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Release Date: 19/05/2004 17:30:02 Code(s): RBW
RAINBOW CHICKEN LIMITED - ABRIDGED AUDITED GROUP RESULTS FOR THE YEAR ENDED 31
MARCH 2004
Rainbow Chicken Limited
(Registration number 1966/004972/06)
JSE Share code: RBW ISIN: ZAE000019063
Abridged Audited Group Results for the year ended 31 March 2004
Highlights
- Solid operating performance
- Comparative figures restated in respect of deferred tax
% change
* Revenue 2,2
* Operating profit before depreciation and amortisation 17,9
* Attributable profit 40,6
* Headline earnings 24,0
* Fully diluted headline earnings per share (cents) 21,1
* Dividends per share (cents) 20,8
Consolidated Balance Sheet
Restated
31 March 2004 1 March 2003
R"000 R"000
ASSETS
Non-current assets
Trademarks, property, plant and equipment 591 958 570 783
Current assets
Loans 138 162
Inventories 244 823 208 311
Biological assets 216 672 213 527
Trade and other receivables 295 939 361 798
Taxation - 662
Cash and cash equivalents 482 286 290 758
Total current assets 1 239 858 1 075 218
Total assets 1 831 816 1 646 001
EQUITY AND LIABILITIES
Capital and reserves 1 181 625 974 740
Preference share capital 500 500
Total shareholders" equity 1 182 125 975 240
Non-current liabilities
Interest bearing debt - long-term 1 694 3 469
Post retirement medical obligation 33 596 30 131
Deferred taxation 165 201 89 533
Total non-current liabilities 200 491 123 133
Current liabilities
Trade and other payables 348 510 463 382
Provisions 50 843 80 673
Derivative liabilities 3 970 -
Taxation 44 381 -
Interest bearing debt - short-term 1 496 3 573
Total current liabilities 449 200 547 628
Total equity and liabilities 1 831 816 1 646 001
Supplementary Information
Restated
Year ended Year ended
31 March 2004 31 March 2003
R"000 R"000
Capital expenditure contracted and committed 33 570 30 568
Capital expenditure approved but not contracted 159 413 18 162
Contingent liabilities 46 048 18 027
Consolidated Income Statement
Revenue 3 830 032 3 748 520
Operating profit before depreciation
and amortisation 366 967 311 121
Depreciation and amortisation (63 742) (59 159)
Trademark impairment - (21 064)
Operating profit before interest and taxation 303 225 230 898
Net interest received 37 181 13 554
Profit before taxation 340 406 244 452
Taxation (112 764) (82 549)
Profit after taxation 227 642 161 903
Preference dividends (62) (62)
Attributable profit 227 580 161 841
Headline Earnings
Profit attributable to ordinary shareholders 227 580 161 841
(Profit)/loss on disposal of property,
plant & equipment (122) 3 712
Net asset impairment provision raised - 17 883
Headline earnings 227 458 183 436
Consolidated Cash Flow Information
Operating profit before working
capital requirements 366 845 311 652
Working capital requirements (57 054) 35 981
Cash generated by operations 309 791 347 633
Net interest received 37 181 13 554
Taxation paid (8 249) (6 745)
Dividends paid (66 839) (44 117)
Net cash flows from operating activities 271 884 310 325
Net cash flows from investing activities (84 795) (95 430)
Net cash flows from financing activities 4 439 5 457
Net increase in cash and cash equivalents 191 528 220 352
Cash and cash equivalents at the beginning
of the year 290 758 70 406
Cash and cash equivalents at the end of the year 482 286 290 758
Statement of Changes in Equity
Retained
income/
(accumulated Consolidated
Stated capital loss) total
R"000 R"000 R"000
Balance at 1 April 2002
as previously reported 1 084 108 (226 808) 857 300
Deferred taxation adjustment (6 661) (6 661)
Balance at 1 April 2002 restated 1 084 108 (233 469) 850 639
Retained income for the year restated 117 786 117 786
Issue of shares 6 315 6 315
Balance at 1 April 2003 restated 1 090 423 (115 683) 974 740
Change in accounting policy - AC133 37 791 37 791
Retained income for the year 160 803 160 803
Attributable profit 227 580 227 580
Ordinary dividends paid (66 777) (66 777)
Issue of shares 8 291 8 291
Balance at 31 March 2004 1 098 714 82 911 1 181 625
Statistics
Restated
Year ended Year ended
31 March 31 March
2004 2003
Number of ordinary shares
in issue (000"s) 269 384 262 709
Weighted average number of
ordinary shares in issue (000"s) 266 973 259 106
Fully diluted weighted average
ordinary shares in issue $ (000"s) 286 055 282 702
Basic earnings per share # (cents) 85,2 62,5
Basic earnings per share - diluted (cents) 80,8 59,1
Headline earnings per share # (cents) 85,2 70,8
Headline earnings per share
- diluted (cents) 80,8 66,7
Net asset value per share (cents) 438,6 371,0
Ordinary dividends:
Interim dividend paid (cents) 8,0 7,0
Final dividend declared (cents) 21,0 17,0
Total (cents) 29,0 24,0
$ The dilution is attributed to share options issued to the Rainbow Share
Incentive Trust. The notional benefit of the share options is R3,564million.
# Calculated using the weighted average number of ordinary shares in issue
BASIS OF PREPARATION
The financial statements have been prepared in accordance with South African
Statements of Generally Accepted Accounting Practice and incorporate accounting
policies which, with the exception of accounting for financial instruments as
set out below, are consistent with those of the previous financial period.
Change in Accounting Policy - AC 133 - Financial Instruments: Recognition and
Measurement
As reported in our interim announcement at 30 September 2003, with effect from 1
April 2003 the Group applied "AC 133 - Financial Instruments: Recognition and
Measurement".
Due to the fact that the comparative figures are not restated under the
transitional provisions of AC 133, certain items are not directly comparable on
a line-for-line basis with that of prior financial periods.
As mentioned in the interim announcement, the Group remains concerned about
reporting the financial effects of only certain financial instruments in
accordance with AC 133 in that it could substantially distort the Group"s
financial results and create inappropriate volatility.
The impact of applying AC 133 on the Group"s full year results is two-fold:
firstly, an after taxation increase in opening retained income of R37,8 million
(pre-taxation: R54,0 million), reflected as a transitional adjustment in the
statement of changes in equity; and secondly, a current year negative earnings
impact on headline earnings of R25,1 million (pre-taxation: R35,8 million). The
financial review commentary that follows is based on the reported results which
are net of the latter negative impact.
Restatement of Comparative Figures in respect of Deferred Taxation
In reviewing the current year deferred taxation liability, it was found that the
liabilities raised in the financial years ending 31 March 2002 and 31 March 2003
were incorrect. To ensure compliance with Accounting Statements dealing with
income taxes and disclosure (AC 102 and AC 103), the comparative figures have
been restated to recognise a deferred taxation liability in respect of non-
recoupable development allowances on farming buildings, which had previously not
been appropriately provided for.
The change requires restatement of the prior year opening reserves by R6,7
million in respect of the 2002 year, the deferred taxation charge by R91,7
million in respect of the 2003 year and consequently, the deferred taxation
liability of R98,4 million in 2003. On the 2003 income statement, pre tax profit
is unaffected, but after tax, attributable profit and headline earnings were
overstated to the extent of the deferred tax charge of R91,7 million. The
restatement has no past or future impact on operating profit or cash flow.
The effect of the restatement of the 2003 comparative figures in respect of
deferred taxation is as follows:
Prior year
Prior year as previously
R"m restated reported
Impact on income statement:
Profit before taxation 244,5 244,5
Taxation (82,6) 9,2
Profit after taxation 161,9 253,7
Preference dividends (0,1) (0,1)
Attributable profit 161,8 253,6
Headline Earnings
Profit attributable to ordinary shareholders 161,8 253,6
Loss on disposal of property, plant & equipment 3,7 3,7
Net asset impairment provision raised 17,9 17,9
Headline earnings 183,4 275,2
Statistics
Headline earnings per share (cents) 70,8 106,2
Fully diluted headline earnings per share (cents) 66,7 99,2
Net asset value per share (cents) 371,0 408,5
Impact on balance sheet:
Accumulated loss 115,7 17,2
Deferred taxation liability (asset) 89,5 (8,9)
OVERVIEW AND MARKET CONDITIONS
The Group produced pleasing operating results for the year ended 31 March 2004,
especially against the backdrop of the strong growth recorded in 2003.
Macro economic conditions improved gradually throughout the review period as
interest rates decreased and the rand strengthened. Consumer confidence and
spending were more buoyant in the second half of the year resulting in chicken
consumption growth of approximately 5% for the financial year.
The outbreak of high pathogenic Avian Influenza (AI) in Asia in January 2004 led
to international poultry shortages and some price strengthening. The disease
appears to be largely contained, but not yet eliminated. It is anticipated that
it will take between twelve and eighteen months for the global industry to fully
recover. Imported products, however, continued to hold a domestic market share
of approximately 12% for most of the year.
Feed raw material prices, particularly maize, softened significantly with the
year-on-year closing SAFEX price for yellow maize approximately 26% lower at the
end of the financial year. This translated into a feed cost reduction of 10,2%.
Notwithstanding other considerable cost increases, chicken price realisations
fell on the back of the lower feed price, by 1,7% (2003: 16,5% increase).
FINANCIAL REVIEW
Revenue increased by 2,2% to R3,8 billion (2003: R3,7 billion), despite 5 fewer
trading days in the current year (impact 2,0%). A reduction in price
realisations in the feed operations, due to lower maize prices, resulted in a
5,0% decline in feed revenues. This was, however, compensated by higher volumes
from all operations.
Revenue - R"m 2004 2003 %
Chicken 3 109 2 982 4,3
Feed 1 862 1 960 (5,0)
Total gross revenue 4 971 4 942 0,6
Less inter-group revenue (1 141) (1 193) (4,4)
Reported revenue 3 830 3 749 2,2
EBITDA increased by 17,9% to R367,0 million (2003: R311,1 million), benefiting
from solid volume growth, stable realisations and further improvements in
operating efficiencies. The EBITDA margin has increased to 9,6% (2003: 8,3%).
Improved cash generation and higher cash balances held within the Group resulted
in a substantial increase in net interest received to R37,2 million (2003: R13,6
million).
Profit before taxation increased by 39,3% to R340,4 million (2003: R244,5
million) benefiting from the higher operating profit and interest earnings.
Taxation increased to R112,8 million (2003: R82,6 million) with the effective
taxation rate remaining largely stable at 33,1% (2003: 33,8%) The Group has
utilised all its assessed losses in the current financial year.
Attributable earnings increased by 40,6% to R227,6 million (2003: R161,8
million).
Headline earnings increased by 24,0% to R227,5 million (2003: R183,4 million)
with diluted headline earnings per share improving by 21,1% to 80,8 cents per
share (2003: 66,7 cents per share).
Cash generated by operations amounted to R309,8 million (2003: R347,6 million),
resulting in an increase in the cash balance to R482,3 million (2003: R290,8
million). Working capital requirements increased by R57,1 million (2003:
reduction of R36,0 million), largely due to the reduction in liabilities
attributed to the utilisation of the onerous maize contracts in the amount of
R31,7 million provided for last year.
Capital expenditure was R87,0 million (2003: R114,2 million). A further amount
of R33,6 million (2003: R30,6 million) had been contracted and committed, but
not spent, whilst R159,4 million (2003: R18,2 million), R150,0 million of which
is referred to under prospects below, had been approved, but not contracted. The
Group remains committed to upgrading its facilities and funding normal levels of
replacement capital expenditure from its own resources.
Return on equity increased to 21,1% (2003: 17,7%), benefiting from the
improvement in the Group"s underlying performance.
REVIEW OF OPERATIONS
The Group continued to focus on its five year strategic objectives of supply
chain optimisation, product decommoditisation, route to market and market
management initiatives. Extensive market and consumer research, directed at
meeting customer requirements, was undertaken with a view to evaluating
strategic opportunities and creating a solid brand platform from which the Group
expects to benefit over the long-term.
The chicken operation, which remains the biggest volume producer in South Africa
with 3,7 million birds per week, continues to trade in an oversupplied market.
Nevertheless, volume growth of 6,0% (2003: 6,6%) was achieved mainly through
improved production processes and further efficiency improvements. However, the
1,7% decline in realisations on the back of lower feed prices, resulted in
revenues only increasing by 4,3%. Chicken margins remained flat on an annualised
basis, despite an improvement in the second half of the financial year.
Product development was a key focus within foodservice, resulting in improved
customer relations. The Group continued to grow its value added product range
and successfully tested various new products.
Exports were pursued through strategic customers as they expanded
internationally. Having been recognised on an international basis as a
competitive quality producer, demand for certain products internationally is
steadily on the increase, but is being hampered by the strong rand.
The performance of the Group"s feed operation, Epol, was driven by cost
effective procurement and capacity utilisation which, together with a better
product mix, led to an improved margin contribution. Feed revenues decreased by
5,0% as a result of the 13,0% decline in the rand per ton feed price. Volumes,
however, increased by 8,0% (2003: 2,3% decrease).
The Group"s pedigree breeding operation, Cobb SA, achieved improved margins as a
result of the good breed performance. Revenues increased by 19,1% (2003: 80,3%).
PROSPECTS
The Group"s consolidation and market management processes are now well underway
which, together with a very strong cash position, have set the foundation to
pursue strategic investment opportunities in order to grow the business and
improve profitability. Subsequent to the year-end, an amount of R150,0 million
has been approved by the Board for a Further Processing plant, which will
produce value added and convenience products. The project is scheduled for the
new financial year, but will only be completed in the year thereafter. The bulk
of the cash expenditure will, however, be incurred during the course of the
financial year ending 31 March 2005. The investment will impact negatively on
interest earned, but will generate improved earnings following commissioning.
The Group is currently also evaluating other strategic investment opportunities.
Interest rates are expected to firm only during the latter half of the new
financial year and consumer spending is therefore expected to remain fairly
positive over this period. Should the rand remain strong against the US dollar,
feed raw material input costs are likely to remain fairly stable - subject to
normal seasonal trends.
The higher international poultry prices and the recently increased tariff on
offal are not expected to significantly reduce the level of imports into South
Africa. These factors should, however, to some extent offset import price
advantages provided by the stronger rand.
The current levels of chicken realisations, stability of both the rand and maize
prices, and buoyant consumer spending patterns should have a positive impact on
the Group"s performance during the first half of the new financial year compared
to the same period in the previous year.
The directors expect that the Group will generate another year of solid
operating performance growth for the upcoming financial year. However, as the
Group now operates off a higher base, year-on-year earnings improvements are not
expected to be at the same pace achieved in recent years.
DIRECTORATE
Messrs SM Parsons and NJL Hancock resigned from the Board with effect from 12
September 2003 and 10 March 2004 respectively. The Board wishes to express its
sincere appreciation to these directors for their valuable contribution during
the tenure of their appointments.
DIVIDEND DECLARATION
Notice is hereby given that on 19 May 2004 the Board declared a final dividend
(number 62) of 21,0 cents per ordinary share in respect of the financial year
ended 31 March 2004 (2003: 17,0 cents). Having paid an interim ordinary dividend
of 8,0 cents per ordinary share on Monday, 12 January 2004, the above
declaration brings the total ordinary dividend declared in respect of the year
ended 31 March 2004 to 29,0 cents per share (2003: 24,0 cents), resulting in a
fully diluted headline earnings per share dividend cover of 2,8 times (2003: 2,8
times).
The last date to trade cum dividend will be Friday, 18 June 2004 and trading
will commence ex dividend from Monday, 21 June 2004. The record date will be
Friday, 25 June 2004 and the dividend will be paid on Monday, 28 June 2004.
Share certificates may not be dematerialised or rematerialised between Monday,
21 June 2004 and Friday, 25 June 2004 (both dates inclusive).
For and on behalf of the Board
M H Visser M Dally
Non-executive Chairman Chief Executive Officer
19 May 2004
Directors: MH Visser (Non-executive chairman), M Dally (CEO), WE Buhrmann, M
Griessel, LJ Grobler (CFO), DJ Loch Davis, NP Mageza, JB Magwaza, N Phillips
Registered office: Rainbow Chicken Limited, 1 Stanley Methven Road, Hammarsdale,
3700.
Transfer secretaries: Computershare Limited, 70 Marshall Street, Johannesburg
2001.
Auditors: Deloitte & Touche
Sponsor: Rand Merchant Bank (a division of FirstRand Bank Limited) Corporate
Finance
Bankers: ABSA Bank Limited
Website: www.rainbowchicken.co.za
Date: 19/05/2004 05:30:16 PM Produced by the JSE SENS Department
