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Afgri - Audited consolidated financial results for the year ended 28 February
2005
Afgri limited
(Incorporated in the Republic of South Africa)
(Registration number 1995/004030/06)
ISIN number ZAE000040549
Share code AFR
(`AFGRI` or `the Company`)
AUDITED CONSOLIDATED FINANCIAL RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2005
Successfully concluded a BEE transaction of R502 million
Dividend and distributions of 140,2 cents per share
Revenue up 6%
Earnings per share down 28%
Headline earnings per share down 39%
Cash generated by operating activities R169 million
Audited Group balance sheet
Year ended Year ended Year ended
28 February 29 February 29 February
Actual Pro forma Actual
2005 2004 2004
Note Rm Rm Rm
ASSETS
Non-current assets 942 808 708
Property, plant and
equipment 2 517 517 517
Intangible assets 2 91 65 65
Interest in associates 20 4 4
Available-for-sale
investments 96 17 17
Non-current assets 121 123 23
Deferred tax assets 97 82 82
Current assets 2 771 2 091 2 125
Inventories 1 081 588 588
Biological assets - 37 37
Receivables and
prepayments 10 919 852 852
Financial assets 36 22 22
Current tax assets 122 87 87
Cash and cash
equivalents 613 505 539
Total assets 3 713 2 899 2 833
EQUITY AND LIABILITIES
Capital and reserves 947 957 1 380
Share capital 3 - - -
Share premium - - 89
Reserves 287 372 372
Retained earnings 874 800 1 134
Treasury shares (155) (122) (122)
Incentive trust shares (59) (93) (93)
Minority interest 514 502 -
Non-current liabilities 37 64 64
Long-term debt 17 8 8
Deferred tax
liabilities 20 56 56
Current liabilities 2 215 1 376 1 389
Trade and other
payables 1 735 1 001 1 001
Financial liabilities 24 22 22
Provisions 23 23 23
Current tax liabilities 8 25 38
Bank overdraft and 425 305 305
short-term loans
Total equity and
liabilities 3 713 2 899 2 833
Net tangible asset
value per share(cents) 262 268 395
Year ended Year ended Year ended
28 February 29 February 29 February
Actual Pro forma Actual
2005 2004 2004
Audited Group income
statement
Revenue 6 247 5 914 5 914
Cost of goods and
services (5 316) (4 888) (4 837)
Gross profit 931 1 026 1 077
Dividend income 32 33 33
Other operating
expenses (762) (668) (719)
Share of operating
profits of associates 3 2 2
Operating profit from
operations 4 204 393 393
Net profit on disposal
of shares in joint
ventures 46 - -
Loss from discontinued
operations 7 (23) (23) (23)
Minority interest (13) (46) -
Profit before tax 214 324 370
Tax (65) (117) (96)
Net profit for the year 149 207 274
Weighted average number
of shares in issue (`m) 331,1 328,0 328,0
Earnings per share
(cents) 45,2 62,9 83,5
Headline earnings per
share (cents) 8 44,5 73,3 93,9
Year ended Year ended Year ended
28 February 29 February 29 February
Actual Pro forma Actual
2005 2004 2004
Audited Group cash flow
statement
Operating activities
Net operating profit 214 370
Changes in working
capital (20) (129)
Other non-cash flow
items (25) 63
Cash generated by
operating activities 169 304
Dividends paid (137) (115)
Tax paid (92) (86)
Net cash (utilised (60) 103
in)/generated from
operating activities
Investing activities
Purchase of property,
plant and equipment (125) (87)
Purchase of intangible
assets (42) (22)
Proceeds from sale of
property, plant and
equipment 55 42
Acquisition of
investments (1) (21)
Proceeds on disposal of
investments and loans
repaid 1 12
Acquisition of shares
in subsidiaries and
joint ventures (95) (22)
Proceeds on disposal of
share in joint ventures 216 -
Net cash generated
from/(utilised in)
investing activities 9 (98)
Financing activities
Net proceeds on BEE
disposal 6 -
Proceeds on BEE
disposal 502 -
Special dividend (272) -
distribution
Special capital
distribution (89) -
Collateral investment
made (100) -
Secondary tax on
special dividend (35) -
Purchase of treasury
shares (33) (9)
Proceeds on disposal of
incentive trust shares 34 12
Repayment of long-term
borrowings (2) (19)
Net cash generated
from/(utilised in)
financing activities 5 (16)
Net decrease in cash
and cash equivalents (46) (11)
Movement in cash and
cash equivalents
Beginning of year 235 246
Net decrease (46) (11)
End of year 189 235
Declaration of final dividend
Notice is hereby given that the Directors of AFGRI have declared a final
dividend of 9,7 cents per share for the year ended 28 February 2005. The
following dates will, in accordance with STRATE`s settlement procedures, be
applicable to the final dividend:
Last day to trade cum dividend Friday, 17 June 2005
Trading ex dividend commences Monday, 20 June 2005
Record date Friday, 24 June 2005
Dividend payment date Monday, 27 June 2005
No dematerialisation or rematerialisation of AFGRI share certificates may take
place between Monday, 20 June 2005 and Friday, 24 June 2005, both dates
inclusive.
By order of the Board
Ms SL Reynolds
Group Company Secretary
17 May 2005
Johannesburg
Audited business segment results
28 February 2005
Headline earnings
Audited business segment results
28 February 2005 Headline earnings
R millions Revenue before tax Assets Liabilities
AFGRI Services 3 968 161 1 890 974
Requisites 3 260 (122) 1 086 681
Financial Services 421 56 574 244
Logistics Services 287 227 230 49
AFGRI Products 2 269 59 1 104 531
Foods and Seed 193 (5) 220 127
Cotton 338 (49) 517 140
Animal Feed and Protein 1 738 113 367 264
Other - - 719 747
Consolidated 6 237 220 3 713 2 252
Capital
Expenditure Depreciation Amortisation Impairments
AFGRI Services 30 24 6 19
Requisites 19 11 3 9
Financial Services 1 - 2 10
Logistics Services 10 13 1 -
AFGRI Products 87 31 3 3
Foods and Seed 23 5 - 3
Cotton 10 7 3 -
Animal Feed and Protein 54 19 - -
Other 8 2 - 10
Consolidated 125 57 9 32
29 February 2004
(adjusted after restructuring) Headline earnings
R millions Revenue before tax Assets Liabilities
AFGRI Services 3 177 216 1 448 715
Requisites 2 668 4 802 453
Financial Services 299 71 467 199
Logistics Services 210 141 179 63
AFGRI Products 2 736 142 1 032 405
Foods and Seed 129 3 66 57
Cotton 514 (2) 348 27
Animal Feed and Protein 2 093 141 618 321
Other 1 - 352 333
Consolidated 5 914 358 2 832 1 453
Capital
Expenditure Depreciation Amortisation
AFGRI Services 29 15 3
Requisites 16 8 1
Financial Services - - 2
Logistics Services 13 7 -
AFGRI Products 56 38 3
Foods and Seed 18 5 -
Cotton 8 6 3
Animal Feed and Protein 30 27 -
Other 2 2 -
Consolidated 87 55 6
Notes to the business segment results
1 The business segment results 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 the profit/(loss) of discontinued
operations, disposal of businesses and assets and amortisation of goodwill.
2 Revenue from discontinued operations is not included in the segmental
revenue. Headline earnings before tax is shown after the allocation of cost of
capital based on each division`s net assets.
3 To remain in touch with and to service the changing needs of its customers,
AFGRI restructured into two pillars - AFGRI Services and AFGRI Products. The
AFGRI Services pillar will house the Group`s Commercial, Financial and Logistics
businesses and the AFGRI Products pillar the Group`s value-added processing
businesses. The Products pillar is divided into three business segments, namely
Foods and Seed, Cotton and Animal Feed and Protein.
4 The segmental analysis of the previous financial year has been restated to be
comparable to the current business model and to take cognisance of the BEE
portion on a pro forma basis.
5 Segment assets include property, plant and equipment, intangible assets,
other investments, inventories, receivables and cash equivalents. Segment
liabilities include all operating liabilities, short-term borrowings and non-
current liabilities. Tax liabilities are included in the segment `Other`.
Capital expenditure comprises additions to property, plant and equipment.
6 The Group sold its investment in Pioneer Foods Limited after year-end and the
investment has been fair valued in terms of the Group`s accounting policy. A
fair value gain of R67 million is included in the operating profit of the
Logistics business through which the investment originally was created.
Audited Group statement of changes in equity
Share Share Reserves Retained Treasury Incentive Total
Capital premium earnings shares trust
shares
Rm Rm Rm Rm Rm Rm Rm
Balance 2003 - 52 365 1 039 (113) (68) 1 275
Fundamental
error - - - (63) - - (63)
Adjusted
balance 2003 - 52 365 976 (113) (68) 1 212
Net profit - - - 274 - - 274
Issue of
shares
- share
incentive
trust - 37 - - - (37) -
Currency
translation
differences - - (8) - - - (8)
Valuation
differences
on cash flow
hedges - - 15 - - - 15
Normal
dividends
paid in 2004 - - - (116) - - (116)
Disposal of
incentive
shares - - - - - 12 12
Purchase of
treasury
shares - - - - (9) - (9)
Balance 2004 - 89 372 1 134 (122) (93) 1380
Net profit - - - 149 - - 149
Currency
translation
differences - - (85) - - - (85)
Special
distribution
paid in 2005 - (89) - (272) - - (361)
Normal
dividends
paid in 2005 - - - (137) - - (137)
Disposal of
incentive
shares - - - - - 34 34
Purchase of
treasury
shares - - - - (33) - (33)
Balance 2005 287 874 (155) (59) 947
Notes to the Audited Group results
1 Accounting policies
The consolidated annual 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 (Act 61 of 1973), as amended
(`the Act`). The consolidated annual 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 the
derivative contracts. The principal accounting policies, which were adopted in
the preparation of these consolidated annual financial statements, correspond
with those applied in the latest annual financial statements.
2 Property, plant and equipment and intangible assets
Property, plant
and equipment Intangible assets
Rm Rm
Carrying value 1 March 2004 517 65
Additions 125 42
Disposals at book value (51) -
Foreign currency differences (9) -
Impairments (9) (23)
Depreciation/Amortisation (57) (9)
Purchase of subsidiaries/
joint ventures 128 16
Disposal of joint ventures (127) -
Carrying value 28 February 2005 517 91
3 Share capital
Share capital consists of ordinary shares with a nominal value of 0,001 cents
each.
Number Rm Rm28 February 2005
29 February 2004 28 February 2005 29 February 2004
Beginning of
year 333 100 796 327 760 551 - -
Shares issued
to share
incentive trust - 7 252 490 - -
Treasury shares
purchased (6 194 431) (1 912 245) - -
Number of shares
with voting
rights 326 906 365 333 100 796 - -
The treasury shares were purchased by a subsidiary in terms of a general
authorisation at an average price of R5,44 (2004: R4,70). At 28 February 2005 a
total of 32 608 635 treasury shares had been purchased by the subsidiary and are
disclosed as a reduction of equity in the `Statement of Changes in Equity`.
4 Net profit is stated after taking into account the following:
28 February 2005 29 February 2004
Rm Rm
Net profit on disposal of property,
plant and equipment 4 6
Net finance cost (6) (39)
Interest paid to independent
third parties (80) (113)
Interest received from independent
third parties 42 41
Dividend income 32 33
Foreign currency losses (12) (14)
Interest paid to Landbank legal
right of offset
(refer note 10) (167) (51)
Auditors` remuneration (6) (4)
Depreciation on property,
plant and equipment (57) (55)
Amortisation/Impairment of goodwill (14) (3)
Amortisation/Impairment of trademarks and
development costs (18) (3)
Staff costs (571) (516)
5 Directors` remuneration
28 February 2005 29 February 2004
Rm Rm
Non-executive
- As directors 0,7 0,6
- Other services 2,5 0,3
- As members of sub-committees 0,3 0,2
3,5 1,1
Executive
- Basic salaries and allowances 3,3 5,7
- Bonus payments 4,2 2,6
- Company contributions 1,0 1,2
8,5 9,5
6 Share options of directors
Executive Directors are allocated share options on approval by the Board to link
them to the net worth of the Company and to retain executive personnel. These
options are exercised in terms of a deferred share option scheme. The following
are the unimplemented contracts of executive and former executive Directors.
Balance Contracts Balance
29 February 2004 implemented 28 February 2005
Number Number Number
JD Wright (Executive) 5 500 000 (2 100 000) 3 400 000
I de W Goosen
(Executive) 3 321 200 (1 373 460) 1 947 740
GAL Ebedes
(Former executive) 2 600 000 (1 200 000) 1 400 000
11 421 200 (4 673 460) 6 747 740
No share options have been allocated to Directors during the year ended 28
February 2005.
7 Discontinued operations
The loss from discontinued operations of R23 million, resulted from the disposal
of the 100% shareholding in ANB Vet and the closure of the AFGRI Fresh Cut
businesses. The loss in the previous year of R23 million resulted from the
closure of the Cotton businesses in Uganda and Swaziland.
8 Reconciliation of headline earnings per share
28 February 2005 29 February 2004
Cents Cents
Earnings 45,2 62,9
Loss from discontinued operations 7,8 6,7
Impairment of assets 3,8 -
Goodwill written off 4,9 1,2
(Profit)/Loss on disposal of assets (17,2) 2,5
Headline earnings 44,5 73,3
The headline earnings of the prior year have
been adjusted taking into account
the pro forma effect of the BEE transaction
and once-off STC.
Headline earnings previously reported 93,9
BEE and STC effect (20,6)
Pro forma headline earnings for 2004 73,3
9 Agency agreements
The Group manages agri debtors on behalf of third parties to the amount of R563
million (2004: R666 million).
Management fees are paid by these third parties. The Group is liable for bad
debts to a maximum of between 5% and 10% of the value of debtors administered.
The value of commodities handled, stored and managed on behalf of third parties
amounts to R1 210 million (2004: R1 096 million).
The Group receives a fee for the handling, grading, storing and administration
of these commodities. The Group has a right of first refusal to purchase R299
million (2004: R336 million) of the commodities at market value.
10 Receivables
Included in receivables are the following receivables which have been financed
through the Landbank:
28 February 2005 29 February 2004
Rm Rm
Liability - Landbank (2 513) (2 000)
Asset - Trade receivables 2 488 2 009
Net (25) 9
The above asset and liability have been offset and the net amount disclosed in
the balance sheet as there is a legally enforceable right to set-off the
recognised amounts and the intention is to realise the asset and settle the
liability simultaneously. The Group`s liability for bad debts is limited to a
maximum of 10% of the gross trade receivables financed through the Landbank. The
net interest income from this structure is included in the operating profit of
AFGRI Financial Services.
11 Corporate governance and JSE Securities Exchange South Africa (`JSE`)
compliance
The principles of corporate governance were adhered to. The Group complied with
the JSE Listings Requirements regarding the contents of the annual financial
results.
12 Going concern
The Board is confident that, after taking into account the current bank
facilities, its utilisation thereof and the budgeted profit for the year ending
28 February 2006, the working capital available to the Group will be sufficient
to meet its present requirements.
13 Auditors
The financial statements have been audited by PricewaterhouseCoopers Inc and a
copy of their unqualified report is available for inspection at the registered
office of the Company.
Comments
The Directors of AFGRI present the consolidated annual financial results of
AFGRI Limited (`the Group`) for the financial year ended 28 February 2005. The
past financial year for the Group was challenging on an operational level, yet
exciting with the conclusion and implementation of the Black Economic
Empowerment (`BEE`) deal. The results were heavily influenced by extremely low
agricultural commodity prices and the continuing strength of the South African
currency.
Operational Review
Revenue
Revenue increased by 5,6% to R6,2 billion (2004: R5,9 billion) mostly due to an
increase in revenue of 24,9% in the AFGRI Services pillar. As a reflection of
conditions in the agricultural sector generally as well as the lost revenue with
the disposal of the broiler business, revenue was sharply down by 17,1% in the
AFGRI Products pillar. Hardest hit was Cotton with low commodity prices and a
strong Rand. Overall low product prices severely impeded the spending of the
Group`s customer base.
Operating profit
Operating profit was sharply down in the Requisites business. This reflects the
intense pressure on margins in what has been one of the most difficult periods
in the agricultural sector in recent years. The strengthening of the South
African currency and the decrease in the international agricultural commodity
prices has negatively impacted earnings in the Cotton division.
The improved results of the Logistics Services division which includes the
Handling & Storage, Logistics and Trading businesses were as a result of the
Group`s milldoor contracts and higher throughput. Animal Feeds and the Group`s
Australian business also performed well. The Group`s interest in Pioneer Foods
Limited resulted in a fair value gain which largely replaced the lost income
resulting from the sale of the interest in Earlybird Farm (Proprietary) Limited.
Headline earnings per share
Headline earnings of 44,5 cents per share declined by 39,3% compared to the pro
forma headline earnings of the previous year.
The actual effective date of the BEE transaction was 1 December 2004, and
consequently impacted on the current year`s results for a three- month period.
Adjusting the 2004 pro forma earnings to give effect to the transaction for only
three months and the once-off STC charge of R35 million on the special
distribution, the adjusted pro forma earnings and headline earnings per share
are 62,9 and 73,3 cents per share, respectively.
Net cash at year-end R189 million positive
The Group generated R77 million after-tax cash. The proceeds from the disposal
of a 26,77% undivided interest in the business of AFGRI Operations, to Agri
Sizwe Empowerment Trust (`Sizwe`) for R501,6 million was utilised for dividend
payments of R361,3 million, secondary tax of R34,5 million and a collateral
investment of R100 million.
Dividend
For the year under review the Group will pay a final dividend of 9,7 cents per
share. Together with the interim dividend of 18,3 cents per share and a special
distribution of 112,2 cents per share, the total dividend for the 2005 year will
be 140,2 cents per share.
Acquisitions And Major Investments
The Group concluded the acquisition of Natalagri, the KwaZulu-Natal based co-
operative, which was purchased for a consideration of R29 million, on approval
by the Competition Tribunal with effect from 1 July 2004. Although Natalagri is
not yet profitable, it has been recapitalised and will be restored to
profitability in the near future.
The Group also expanded its current business through further investments of
approximately R70 million in facility upgrades, a lemon oil business in the
Lowveld, new technology, a shrimp feed plant and a joint venture with the
Eastern Cape Agricultural Co-operative Limited in an animal feed plant.
Disposals
The Group`s 50% shareholding in Earlybird Farm (Proprietary) Limited was sold to
Astral Foods Limited for a cash consideration of R250 million and a cash
dividend of R25 million declared by Earlybird Farm. The Competition Tribunal
approved the transaction unconditionally and the Earlybird Farm results were
included in the Group`s results up to the effective date of 31 August 2004. The
Group also sold its 49% shareholding in the Western Cape commodity trading
business, Bester Voer en Graanbeurs (Proprietary) Limited.
BEE
The Group concluded and implemented a BEE transaction with effect from 1
December 2004. The salient features of the transaction were:
- The disposal by AFGRI Operations Limited, a wholly owned subsidiary of AFGRI
Limited, of a 26,77% undivided interest in its operations and net assets to
Sizwe for a cash consideration of R501,6 million; and
- The appointment of two Sizwe Directors to the AFGRI Operations Limited board
and two Sizwe Directors to the AFGRI Limited board.
Prospects
Earnings, specifically in the areas of cotton, imported equipment, spares and
chemicals proved to be vulnerable to a strong Rand and lower agricultural
commodity prices. The Group is remodeling its businesses in these areas to
reduce its vulnerability. Better winter plantings are expected as a result of
improved soil moisture levels, but the large carry over stock of maize and the
resultant lower commodity prices are expected to impact the Group`s retail and
finance businesses in the coming year. The Group`s other diversified activities
should have a positive influence on the Group`s profitability. Management is
confident that the Group will return to real earnings growth in the coming year.
Annual Report
The annual report will be posted to shareholders and will be available on the
Group`s website on 31 May 2005.
Directorate
During the year Messrs AC Ball and E Gutierrez-Garcia resigned as Directors of
the Board and Mr MM Moloele and Ms KL Thoka were appointed in terms of the BEE
transaction. Mr CA Apsey was appointed as a non-executive Director with effect
from 1 April 2005 and on 15 April 2005 Mr DM Sewela was appointed as an
alternate to Mr I de W Goosen. Mr MM Moloele was appointed joint deputy chairman
with effect from 17 May 2005.
By order of the Board
Mr PF Erasmus Mr JD Wright
(Non-Executive Chairman) (Managing Director)
Business address and registered office
33 Sloane Street
Knightsbridge Manor Block B2 Bryanston
Fax (011) 463 4139
Tel (011) 706 7897
Group Company Secretary
Ms SL Reynolds
PO Box 3559 Cramerview 2060
Bankers
ABSA Bank Limited
First National Bank Limited
Land and Agricultural Bank of SA Limited Nedcor Bank Limited
Standard Bank of SA Limited
Auditors
PricewaterhouseCoopers Incorporated
Transfer secretaries
Computershare Investor Services 2004 (Proprietary) Limited
70 Marshall Street Johannesburg 2001
PO Box 61051 Marshalltown 2107
Tel (011) 370 5320
Sponsor
Rand Merchant Bank (A division of First Rand Bank Limited)
Corporate Finance
1 Merchant Place
Cnr Fredman Drive and Rivonia Road
Sandton 2196
PO Box 786273
Sandton 2146
Directorate
Non-executive
CA Apsey (57) BSc, MBA
PF Erasmus Chairman (61) BSc Agric
GAL Ebedes (57) BSc Agric
JJ Claassen (55)
NO Davies (69) CA(SA)
JJ Ferreira (52) BSc (Hons) (Civ Eng)
JT Jansen van Rensburg (59)
MM Moloele (49) Dipl Business Management
KL Thoka (41) BAdmin, Hons (BA), MBA
FJ van der Merwe (47) LLB, MA
Executive
JD Wright (47) BAcc, CA(SA)
I de W Goosen (57) BCom, CA(SA)
JH Mooney (56) (alternate to JD Wright)
DM Sewela (39) (alternate to I de W Goosen)
THIS ANNOUNCEMENT IS AVAILABLE ON SENS AND AFGRI`S WEBSITE AT
www.afgri.co.za
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