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SOVEREIGN FOOD INVESTMENTS LTD - INTERIM RESULTS AND CAPITAL DISTRIBUTION
SOVEREIGN FOOD INVESTMENTS LTD
Incorporated in the Republic of South Africa
Registration Number 1995/003990/06
Share Code: SOV ISIN Number: ZAE000009221
(`Sovereign` or `the Group`)
UNAUDITED GROUP RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2004
HIGHLIGHTS
OPERATING INCOME UP 289%
EARNINGS PER SHARE 48,5 CENTS PER SHARE
CASH GENERATED FROM OPERATIONS 98,0 CENTS PER SHARE
PROPOSED INTERIM CAPITAL DISTRIBUTION OF 5,0 CENTS PER ORDINARY SHARE
Unaudited Audited
Six Months Year
Ended 31 August ended
28
February
2004 2003 2004
R`000 R`000 R`000
Income Statement
Revenue 179 410 158 724 331 138
Operating income 28 478 7 326 22 893
Depreciation 3 434 2 733 5 761
Net interest paid 4 894 4 415 8 652
Net operating income 20 150 178 8 480
Deferred taxation 6 045 - 1 218
Retained earnings for the 14 105 178 7 262
period
Weighted average number of 29,104 29,104 29,104
shares in issue (000`s)
Earnings per share (cents) 48,5 0,6 25,0
Headline earnings per share 48,5 0,6 26,3
(cents)
Capital distribution per
share (cents) - final prior - - 10,0
year
Proposed capital
distribution per share 5,0 - -
(cents) - interim
Reconciliation between
earnings and headline
earnings
Profit after taxation 14 105 178 7 262
Reconciling items:
Disposal of fixed assets - - (63)
Taxation effect - - 441
Headline profit after 14 105 178 7 640
taxation
Unaudited Audited
Six Months Year
Ended 31 August ended
28
February
2004 2003 2004
R`000 R`000 R`000
Balance Sheet
Assets
Non-current assets
Property, plant and 134 646 111 111 115 261
equipment
Current assets 120 607 92 739 100 178
Cash and cash 38 372 9 070 31 120
equivalents
Inventory 49 739 45 031 43 235
Trade and other 32 496 38 638 25 823
receivables
Total assets 255 253 203 850 215 439
Equity and liabilities
Capital and reserves
Share capital 291 291 291
Share premium 42 243 45 153 45 153
Distributable reserves 66 554 45 641 52 449
Shareholders` interest 109 088 91 085 97 893
Interest bearing debt 81 262 69 673 71 396
Long term portion 66 701 56 694 57 413
Short term portion 14 561 12 979 13 983
Deferred taxation 17 376 9 836 11 330
Trade and other payables 47 527 33 256 34 820
Total equity and 255 253 203 850 215 439
liabilities
Unaudited Audited
Six Months Year
Ended 31 August ended
28
February
2004 2003 2004
R`000 R`000 R`000
Cash Flow Statement
Cash generated from 28 478 7 326 22 830
operations before working
capital changes
Changes in working capital (86) (11 579) 5 279
Cash generated from 28 392 (4 253) 28 109
operating activities
Interest paid (4 894) (4 415) (8 652)
Capital distribution paid (2 910) - -
Net cash flow from 20 588 (8 668) 19 457
operating activities
Net cash flows from (7 089) (3 830) (6 072)
investing in fixed assets
Net cash flows from debt (6 247) (1 068) (4 899)
repayment
Net change in cash and cash 7 252 (13 566) 8 486
equivalents
Statement of changes in equity
February Net Capital August
2004 profit distribution 2004
R`000 for the R`000
period
Share capital 291 291
Share premium 45 153 (2 910) 42 243
Retained earnings 52 449 14 105 66 554
Total 97 893 14 105 (2 910) 109 088
Period under review and prospects
The past three years have entailed extensive work on restructuring the
operations of the company. The fruits of the restructuring strategies undertaken
over the past several years are now evident in the results for the period under
review. During the restructuring process, turnover has almost doubled and
significant improvements in operational efficiencies have been attained. The
process is however, ongoing, and there are significant improvements that still
need to be realised.
Since the middle of the 1990`s, the Group had a deliberate strategy to service
the non-commodity poultry market as protection against the cyclicality of
pricing in the commodity market. This necessitated a Group that was focused on
value added poultry and sales to niche retail outlets.
However, as the Group expanded, the growth in volumes for such products did not
keep up with the total output for the Group. The result of this was that the
Group paid an ever larger straddling penalty, as an increasing portion of its
output was sold into the commodity markets whilst its cost base and operations
were geared towards non-commodity products.
The Group took the decision in November 2003 to focus on the commodity market.
As was expected, the operating margin of the Group has been significantly
enhanced and has returned to levels comparable to those achieved before the
Group moved to value added production.
This expansion and restructuring process entailed an investment in working
capital and capital expenditure of approximately R70 million over the past
several years. The Group has used both earnings and debt to affect this, which
has resulted in an excellent return on equity. As the major part of the capital
program is now at an end, expectations are now for debt to decline over the next
several years.
Accounting Policies
The interim financial statements have been prepared in accordance with South
African Statements of Generally Accepted Accounting Practice and are consistent
with the accounting policies used in the previous period.
Proposed Interim Capital Distribution
The Board of Directors has proposed an interim capital distribution out of share
premium of 5,0 cents per ordinary share, subject to shareholder approval.
Financial effects of the proposed interim capital distribution
The pro forma effect of the proposed interim capital distribution on the
historical earnings, headline earnings, net asset value and net tangible asset
value per share of Sovereign is not significant (less than 3%).
Salient dates and times
A circular and notice of the general meeting of shareholders regarding the
proposed interim capital distribution will be posted to shareholders on or about
27 October 2004. Subject to the approval by the shareholders of the company
being obtained and in compliance with the requirements of STRATE the following
dates are applicable:
Forms of proxy for the general meeting of shareholders
To received by 10:00 Tuesday, 9 November 2004
General meeting of shareholders held at 10:00 Thursday, 11 November 2004
Results announcement published on SENS Thursday, 11 November 2004
Results announcement published in the press Friday, 12 November 2004
Last date to trade `CUM` the interim
capital distribution (`LDT`) Friday, 19 November 2004
Trading commences `EX` the interim
capital distribution Monday, 22 November 2004
Record date Friday, 26 November 2004
Date of payment Monday, 29 November 2004
Share certificates may not be dematerialised or rematerialised between Monday,
22 November 2004 and Friday, 26 November 2004, both dates inclusive.
The above dates and times are subject to change. Any changes will be published
on SENS and in the South African press.
By order of the Board
RB Spanjaard Chairman
MJ Davis Managing Director
6 October 2004
Sovereign Food Investments Limited Transfer secretaries
Registration number 1995/003990/06 Computershare Services Limited
e-mail: info@sovfoods.co.za PO Box 61051
Website: www.sovfoods.co.za Marshalltown 2107
Gauteng
Directorate
Chairman RB Spanjaard, Managing Director MJ Davis, B Cape*, C Coombes, BA
Spanjaard*, AH Vardy* (* Non Executive)
Date: 05/10/2004 05:15:12 PM Produced by the JSE SENS Department
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