| Tue 3 May 2005, 11:12 | | Audited Group Results For The Year |
|
Sovereign Food Investments Ltd - Audited Group Results For The Year Ended
28 February 2005
SOVEREIGN FOOD INVESTMENTS LTD
Incorporated in the Republic of South Africa
Registration Number 1995/003990/06
Share code: SOV
ISIN code: ZAE 000009221
Audited Group Results for the year ended
28 February 2005
HIGHLIGHTS
OPERATING MARGIN TO 17.3% FROM 6.9%
EARNINGS PER SHARE 122.7 CENTS PER SHARE UP 484%
PROPOSED FINAL CAPITAL DISTRIBUTION OF 35 CENTS PER ORDINARY SHARE
Income Statement
2005 2004
R`000 R`000
Revenue 367 380 331 138
Operating income 63 408 22 893
Depreciation 6 530 5 761
Net interest paid 8 966 8 652
Profit before taxation 47 912 8 480
Taxation 12 111 2 373
Profit after taxation 35 801 6 107
Retained earnings at beginning of year 37 018 30 911
As previously stated 37 018 45 187
Restatement - (14 276)
Retained earnings at end of year 72 819 37 018
Weighted average number of shares in issue (000`s) 29 174 29 103
Earnings per share (cents) 122,7 21,0
Headline earnings per share (cents) 124,2 22,3
Total capital distribution per share (cents) 40,0 10,0
Reconciliation between earnings and headline earnings
Profit after taxation 35 801 6 107
Reconciling items:
Disposal of fixed assets 155 (63)
Taxation effect 289 441
Headline profit after taxation 36 245 6 485
Balance Sheet
2005 2004
R`000 R`000
Assets
Non-current assets
Property, plant and equipment 140 536 115 261
Investments 8 794 6 346
Current assets 125 415 100 178
Cash and cash equivalents 46 790 31 120
Inventory 54 169 43 235
Trade and other receivables 24 456 25 823
Total assets 274 745 221 785
Equity and liabilities
Capital and reserves
Share capital and premium 41 067 45 444
Retained earnings 72 819 37 018
Shareholders` interest 113 886 82 462
Liabilities
Long term loans 84 697 77 742
Long term portion 65 850 63 759
Short term portion 18 847 13 983
Deferred taxation 38 872 26 761
Trade and other payables 37 290 34 820
Total equity and liabilities 274 745 221 785
Cash Flow Statement
2005 2004
R`000 R`000
Cash generated from operations
before working capital changes 63 563 22 830
Changes in working capital (3 925) 5 279
Cash generated from operating activities 59 638 28 109
Interest paid (8 966) (8 652)
Net cash flow from operating activities 50 672 19 457
Capital distribution paid (4 365) -
Net cash flow after capital distribution 46 307 19 457
Net cash flows from investing activities (11 560) (6 072)
Fixed assets acquired for cash (12 041) (7 570)
Proceeds on disposal of fixed assets 1 157 1 498
Investments acquired (676) -
Net cash flows from financing activities (17 073) (2 899)
Net increase in cash,
cash equivalents and investments 17 674 10 486
Cash, cash equivalents and investments
at the beginning of the year 37 466 26 980
Cash, cash equivalents and investments
at the end of the year 55 140 37 466
Statement of Changes in Equity
Prior Net
New Capital period profit
2004 shares distri- adjust- Treasury for the 2005
R`000 issued bution ment shares year R`000
Share capital 291 3 294
Share premium 45 153 217 (4 365) (232) 40 773
Retained
Earnings 37 018 - 35 801 72 819
Total 82 462 220 (4 365) - (232) 35 801 113 886
Statement of Changes in Equity
Prior Net
New Capital period profit
2003 shares distri- adjust- Treasury for the 2004
R`000 issued bution ment shares year R`000
Share capital 291 - 291
Share premium 45 153 - - 45 153
Retained
Earnings 45 187 (14 276) 6 107 37 018
Total 90 631 - - (14 276) - 6 107 82 462
RESTRUCTURE OF OPERATIONS
The results for the year to February 2005 reflect the impact of the restructure
of the Group undertaken over the past few years.
Prior to the period under review a detailed strategic review of the group was
undertaken. The concern of the Board was that, whilst the Group had been
extremely successful in achieving top line growth, significant margin erosion
had been experienced since the Group changed its` focus from being commodity
orientated to being focused on added value production. Although compound growth
in turnover for the past 12 years was in excess of 25% per annum, operating
margins had however almost halved over this period. This had resulted in
stagnation and even deterioration in profitability.
The conclusion of the abovementioned review was that, despite significant
successes in moving towards added value production, the Group`s inherent growth
profile ensured that the percentage of output going into added value production
was actually declining. This was mostly as a result of the demographic and
economic realities of the South African consumer. The Group`s cost base was
however orientated towards fulfilling its` added value strategy.
Based on the above review the decision was taken to revert to the commodity
orientated business model successfully employed by the Group until the mid
nineties. The effect of this strategy change resulted in operating margins
returning to acceptable levels.
RESULTS FOR THE PERIOD UNDER REVIEW
EBIDTA operating margin for the 12 months to February 2005 increased from 6.9%
to 17.3% due to the operational adjustments mentioned above.
The effect of this was to increase operating income from R22.9 million to R63.4
million. Earnings per share increased from 21,0 cents per share to 122,7 cents
per share. The Group generated cash of 173,7 cents per share from operating
activities. This enabled the Group to decrease gearing from 48.8% to 26.0%
despite spending R33.1 million on capital expenditure during the period.
INDUSTRY CONDITIONS
The poultry industry is a beneficiary of increased consumer spending power and
poultry meat is the protein of preference for the emerging consumer. This,
coupled with aggressive industry pricing due to vastly improved efficiencies,
has resulted in strong growth. Supply and demand have therefore remained
balanced despite industry expansion.
PROSPECTS
Expectations are for marginally lower poultry prices in the coming year due to
industry expansion although growth in consumer demand remains strong. Reduced
feed prices are expected to more than compensate for the reduced selling prices.
The operating environment for calendar 2005 therefore remains positive for the
poultry industry.
CAPITAL DISTRIBUTION
It is proposed that the Board of Directors declare a final capital distribution
out of share premium of 35 cents per ordinary share.
This declaration will be subject to the passing (and where applicable the
registration) of the special and ordinary resolutions at a General Meeting to be
held on Thursday, 23 June 2005.
If the resolutions are passed and registered, where applicable, and the proposal
is then accepted, the capital distribution will be payable to shareholders
recorded in the register of the Company as at Friday, 15 July 2005.
In compliance with the requirements of STRATE the following dates are
applicable:
Last date to trade `CUM` the capital distribution (`LDT`)
Friday, 8 July 2005
Trading commences `EX` the capital distribution Monday, 11 July 2005
Record date Friday, 15 July 2005
Date of payment Monday, 18 July 2005
Share certificates may not be dematerialised or rematerialised between Monday,
11 July 2005 and Friday, 15 July 2005, both dates inclusive.
ACCOUNTING POLICIES
The restatement of the opening retained earnings for the period ended 29
February 2004 of R14 276 154 relates to an adjustment to prior year deferred tax
provided on permanent timing differences as per the circular sent to
shareholders dated 3 November 2004.
The condensed consolidated annual 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
year. These results have been reviewed by the independent auditors, KPMG Inc.
Their unmodified review report dated 3 May 2005 is available for inspection at
the registered offices of the company.
By order of the Board
RB Spanjaard Chairman
MJB Davis Managing Director
3 May 2005
Sovereign Food Investments Limited
Registration number 1995/003990/06
e-mail: info@sovfoods.co.za
website: www.sovfoods.co.za
Transfer secretaries
Computershare Services Limited
PO Box 61051
Marshalltown 2107
Gauteng
Directorate
RB Spanjaard Chairman, MJB Davis Managing Director, BR Cape, C Coombes, BA
Spanjaard, AH Vardy
Sponsor
Java Capital (Pty) Ltd
Date: 03/05/2005 11:02:31 AM
Produced by the JSE SENS Department
