| Wed 18 May 2005, 17:44 | | Tiger Brands - Group Results And Dividend Declarat |
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Tiger Brands Limited
Registration number 1944/017881/06
(Incorporated in the Republic of South Africa)
Share code: TBS
ISIN: ZAE000023560
Group Results and Dividend Declaration for the six months ended 31 March 2005
- Revenue from continuing operations +8%
- Operating income +15%
- Headline earnings per share +29%
- Interim dividend per share +35%
GROUP INCOME STATEMENT
Unaudited
Six months ended Audited
31 March Year ended
Notes 2005 2004 2004 30 September 2004
Pro forma Change Actual Pro forma Actual
Rm Rm % Rm Rm Rm
Revenue 7 459,6 7 069,3 6 12 719,4 14 295,9 25 421,5
Continuing
operations 7 459,6 6 916,6 8 6 493,1 14 047,7 13 188,1
The Spar
Group Limited - - 6 073,6 - 11 985,2
Discontinued
operations - 152,7 152,7 248,2 248,2
Operating income
before
amortisation
of
intangibles 1 1 048,6 915,1 15 1 130,6 1 952,4 2 369,6
Continuing
operations 1 048,6 913,9 15 913,9 1 950,0 1 950,0
The Spar
Group Limited - - 215,5 - 417,2
Discontinued
operations - 1,2 1,2 2,4 2,4
Amortisation
of
intangibles 2 - (12,2) (17,9) (27,1) (39,4)
Operating
income before
abnormal
items 1 048,6 902,9 1 112,7 1 925,3 2 330,2
Abnormal
items 3 (31,0) (140,8) (139,9) (156,2) (145,1)
Income from
operating
activities 1 017,6 762,1 34 972,8 1 769,1 2 185,1
Income from
investments 17,2 16,8 16,8 39,0 39,0
Net financing
costs (77,1) (112,7) (109,1) (219,9) (211,0)
Profit before
taxation 957,7 666,2 44 880,5 1 588,2 2 013,1
Income tax
expense (289,3) (264,2) (333,2) (526,1) (659,0)
Net profit
after
taxation 668,4 402,0 66 547,3 1 062,1 1 354,1
Income from
associates 4 36,9 11,5 11,5 40,1 40,1
Minority
interest (1,0) (6,9) (6,9) (19,1) (19,1)
Net profit
for the
period 704,3 406,6 73 551,9 1 083,1 1 375,1
Number of
ordinary shares
in issue
(000's) 169 298*168 160 168 160 168 764* 168 764*
* Includes
5 116 330 shares
held as treasury
stock (Sept 2004:
2 616 118)
Weighted average
number of
ordinary shares
(net of treasury
shares) on
which headline
earnings and
basic earnings
per share are
based (000's) 165 467 167 861 167 861 167 567 167 567
Headline
earnings per
ordinary share
(cents) 422,6 326,9 29 416,1 745,2 914,7
Diluted
headline
earnings per
ordinary share
(cents) 415,8 324,2 28 412,7 737,7 905,5
Basic earnings
per ordinary
share (cents) 425,6 242,2 76 328,8 646,4 820,6
Diluted basic
earnings per
ordinary share
(cents) 418,7 240,2 74 326,1 639,9 812,4
Dividends per
ordinary share
(cents) 135 100,0 35 100,0 370,0 370,0
Interim
dividend
declared 135 100,0 35 100,0 100,0 100,0
Final
dividend
declared 270,0 270,0
Reconciliation
between net profit
and headline
earnings Rm Rm Rm Rm Rm
Net profit for
the period 704,3 406,6 551,9 1 083,1 1 375,1
Adjusted for:
Loss/(profit)
on sale or
closure of
operations,
net 4,2 9,0 9,0 (13,3) (13,3)
Net loss/(profit)
on sale of
fixed assets
and intangibles,
including
impairment
charges 13,5 (17,2) (18,4) 10,4 (9,8)
Net profit
on sale of
interest in
subsidiaries
and joint
ventures - - - (19,2) (19,2)
Write-down
of investments,
including
(profit)/loss
on sale (14,6) 140,9 140,9 170,4 170,4
Goodwill
amortisation - 7,9 13,6 15,1 27,4
Associates (8,1) 1,5 1,5 1,4 1,4
(Profit)/loss
on sale of
property, plant
and equipment (7,1) 1,2 1,2 - -
Other (1,0) 0,3 0,3 1,4 1,4
Other - - - 0,8 0,8
Headline
earnings for
the period 699,3 548,7 27 698,5 1 248,7 1 532,8
GROUP BALANCE SHEET
Unaudited As at
as at 31 March 30 September 2004
2005 2004 2004 Unaudited Audited
Pro forma Actual Pro forma Actual
Rm Rm Rm Rm Rm
ASSETS
Non-current assets 4 491,7 4 211,3 4 836,3 4 471,5 5 000,7
Property, plant and
equipment 1 396,8 1 376,2 1 695,8 1 415,5 1 711,0
Goodwill and
intangible assets 464,0 456,1 712,0 469,1 715,9
Investments 2 450,1 2 213,6 2 256,3 2 386,7 2 367,0
Deferred taxation
asset 180,8 165,4 172,2 200,2 206,8
Current assets 6 207,3 5 794,1 7 114,3 6 040,9 7 256,7
Cash and cash
equivalents 1 714,9 1 134,8 1 040,1 1 626,7 1 320,0
Trade and other
receivables 2 520,9 2 493,2 3 516,1 2 403,1 3 590,4
Inventories 1 971,5 2 166,1 2 558,1 2 011,1 2 346,3
TOTAL ASSETS 10 699, 10 005,4 11 950,6 10 512,4 12 257,4
EQUITY AND LIABILITIES
Capital and reserves 3 600,2 2 812,1 3 485,8 3 572,4 3 965,3
Ordinary share
capital and premium 749,7 694,0 749,6 722,2 778,0
Tiger Brands Limited
shares held by
subsidiary (430,7) - - (192,0) (236,3)
Non-distributable
reserves and
accumulated profits 3 281,2 2 118,1 2 736,2 3 042,2 3 423,6
Minority interest 128,3 138,2 138,2 132,1 132,1
Total non-current
liabilities 2 093,5 3 171,8 3 218,3 2 146,5 2 185,2
Deferred taxation
liability 530,5 450,6 450,6 492,5 492,5
Provision for
post-retirement
medical aid 394,2 384,8 419,0 379,9 416,8
Long-term borrowings 1 168,8 2 336,4 2 348,7 1 274,1 1 275,9
Total current
liabilities 4 877,0 3 883,3 5 108,3 4 661,4 5 974,8
Accounts payable,
provisions and
accruals 2 774,2 3 076,5 4 272,2 2 903,7 4 211,1
Taxation 279,8 161,3 190,6 287,2 292,4
Short-term
borrowings 1 823,0 645,5 645,5 1 470,5 1 471,3
TOTAL EQUITY AND
LIABILITIES 10 699,0 10 005,4 11 950,6 10 512,4 12 257,4
STATEMENT OF CHANGES IN EQUITY
Share Non- Accumu-
capital and distributable lated
premium reserves profits Total
Rm Rm Rm Rm
Balance at
30 September 2004 -
as previously reported 541,7 454,5 3 056,1 4 052,3
Fair value adjustment -
Sea Harvest Put option
(note 6) (87,0) (87,0)
Balance at 30 September
2004 - as adjusted 541,7 454,5 2 969,1 3 965,3
Distribution in specie
in respect of unbundling
of The Spar Group
Limited (55,8) 5,7 (387,3) (437,4)
Movement in treasury
shares as a result of
unbundling of The Spar
Group Limited 44,3 44,3
Issue of share capital
and premium 27,5 27,5
Share buy-back (238,7) (238,7)
Fair value adjustments
- investments 17,4 17,4
Foreign currency
translation reserve
movement (1,0) (1,0)
Transfers between
reserves 31,9 (31,9)
Impairment charge for
associate C&T Malt taken
against previously
revalued amounts (20,8) (20,8)
Movements in reserves
of associates (12,7) (12,7)
Legal reserves and
other movements (1,5) (1,5)
Net profit for the
period 704,3 704,3
Dividends on ordinary
shares (446,5) (446,5)
Balance at
31 March 2005 319,0 475,0 2 806,2 3 600,2
Balance at
30 September 2003 -
as previously reported 721.4 378,7 2 236,7 3 336,8
Fair value adjustment -
Sea Harvest Put option
(note 6) (66,0) (66,0)
Balance at
30 September 2003 -
as adjusted 721,4 378,7 2 170,7 3 270,8
Issue of share capital
and premium 28,2 28,2
Fair value adjustments
- investments 44,1 44,1
Foreign currency
translation reserve
movement (20,7) (20,7)
Transfers between
reserves 14,4 (14,4)
Movements in reserves
of associates (34,0) (34,0)
Net profit for the
period 551,9 551,9
Dividends on ordinary
shares (354,5) (354,5)
Balance at
31 March 2004 749,6 382,5 2 353,7 3 485,8
ABRIDGED CASH FLOW STATEMENT
Unaudited As at
as at 31 March 30 September 2004
2005 2004 2004 Unaudited Audited
Pro forma Actual Pro forma Actual
Rm Rm Rm Rm Rm
Cash operating
profit 1 176,2 1 070,6 1 308,4 2 271,8 2 729,3
Working capital
changes (216,2) (16,7) (0,6) 128,8 169,0
Net financing
costs (59,9) (95,9) (92,3) (181,0) (172,0)
Dividends received
from associates 6,0 4,0 4,0 21,6 21,6
Dividends received
from The Spar
Group Limited 383,2
Taxation paid (256,4) (323,6) (417,4) (496,7) (678,5)
Cash available
from operations 649,7 638,4 802,1 2 127,7 2 069,4
Dividends paid (451,1) (358,4) (358,4) (533,9) (533,9)
Net cash inflow
from operating
activities 198,6 280,0 443,7 1 593,8 1 535,5
Net cash outflow
from investing
activities (146,3) (241,7) (536,3) (587,8) (863,5)
Net cash
inflow/(outflow)
before financing
activities 52,3 38,3 (92,6) 1 006,0 672,0
Net cash
inflow/(outflow)
from financing
activities 429,1 124,2 123,8 (732,1) (434,7)
Net increase in
cash and cash
equivalents 481,4 162,5 31,2 273,9 237,3
SEGMENTAL ANALYSIS
Unaudited Audited
Six months ended Year ended
2005 31 March 2004* 30 September
2004*
Change
Rm % Rm % % Rm %
REVENUE -
Continuing
operations
FMCG - DOMESTIC 5 271,8 71 4 881,0 71 8 9 771,1 69
Domestic Food 4 686,9 63 4 363,1 63 7 8 821,7 62
Grains 2 290,3 31 2 151,3 31 6 4 479,0 31
- Milling and
baking# 1 699,3 23 1 655,4 24 3 3 435,7 24
- Other Grains+ 591,0 8 495,9 7 19 1 043,3 7
Groceries 774,2 10 700,0 10 11 1 366,3 10
Snacks and
Treats 454,0 7 454,6 7 - 862,4 6
Perishables 1 071,4 14 967,1 14 11 1 932,9 14
Out of Home 97,0 1 90,1 1 8 181,1 1
Consumer
Healthcare 584,9 8 517,9 8 13 949,4 7
Personal 122,0 2 116,7 2 5 247,2 2
Babycare 169,5 2 139,2 2 22 281,4 2
Homecare 293,4 4 262,0 4 12 420,8 3
PHARMACEUTICALS 792,7 11 641,3 9 24 1 406,0 10
Branded
Medicines 412,6 6 338,3 5 22 729,6 5
Generic
Medicines 228,3 3 159,0 2 44 373,6 3
OTC Medicines 151,8 2 144,0 2 5 302,8 2
HOSPITAL
PRODUCTS 330,0 4 316,8 5 4 638,4 5
EXPORTS 253,9 3 305,0 4 (17) 604,3 4
FISHING 811,2 11 772,5 11 5 1 627,9 12
7 459,6 100 6 916,6 100 8 14 047,7 100
Less: Intragroup
revenue - 423,5 859,6
7 459,6 6 493,1 15 13 188,1
Spar - 6 073,6 11 985,2
7 459,6 12 566,7 25 173,3
OPERATING INCOME
(before amortisation
of intangible assets)
- Continuing operations
FMCG - DOMESTIC 564,6 54 507,4 56 11 1 014,4 51
Domestic Food 461,3 44 421,8 46 9 859,8 43
Grains 247,0 24 234,9 26 5 502,7 24
- Milling and
baking# 152,2 15 147,2 16 3 333,9 15
- Other Grains+ 94,8 9 87,7 10 8 168,8 9
Groceries 100,6 9 70,7 8 42 155,8 8
Snacks and
Treats 34,8 3 16,4 2 112 30,4 2
Perishables 68,8 7 90,0 9 (24) 149,7 8
Out of Home 10,1 1 9,8 1 3 21,2 1
Consumer
Healthcare 103,3 10 85,6 10 21 154,6 8
Personal 27,3 3 23,7 3 15 56,8 3
Babycare 30,5 3 23,4 3 30 46,5 2
Homecare 45,5 4 38,5 4 18 51,3 3
PHARMACEUTICALS 329,6 31 256,3 28 29 576,3 30
Branded
Medicines 198,0 19 161,4 18 23 350,1 18
Generic
Medicines 78,4 7 48,3 5 62 117,0 6
OTC Medicines 53,2 5 46,6 5 14 109,2 6
HOSPITAL
PRODUCTS 111,2 11 92,8 10 20 209,6 11
EXPORTS 5,6 1 (14,7) (2) >100 15,0 1
FISHING 45,1 4 80,5 9 (44) 150,8 8
OTHER (7,5) (1) (8,4) (1) 11 (16,1) (1)
Continuing
operations 1 048,6 100 913,9 100 15 1 950,0 100
Spar - 215,5 417,2
1 048,6 1 129,4 2 367,2
#Comprises maize milling, wheat milling and baking, sorghum beverages and malt-
based breakfast cereals
+Comprises rice and oat-based breakfast cereals
*Certain figures in 2004 have been reallocated between segments to conform with
the new segmental reporting format implemented with effect from 1 October 2004.
OTHER GROUP SALIENT FEATURES
Unaudited
Six months ended Year ended
31 March 30 September 2004
2005 2004 2004 Unaudited Audited
Pro forma Actual Pro forma Actual
Rm Rm Rm Rm Rm
Net worth per
ordinary share
(cents) 2 193 1 676 2 077 2 158 2 395
Net debt to
equity (%) 34,2 62,6 53,9 30,2 34,8
Interest cover -
net (times) 13,8 8,2 10,4 8,9 11,2
Current ratio (:1) 1,3 1,5 1,4 1,3 1,2
Capital expenditure
(R million) 120,5 180,1 206,9 373,2 424,9
- expansion 30,1 117,7 128,0 120,7 151,4
- replacement 90,4 62,4 78,9 252,5 273,5
Capital commitments
(R million) 130,5 87,0 101,5 175,5 180,8
- contracted 72,1 46,1 53,5 61,9 66,1
- approved 58,4 40,9 48,0 113,6 114,7
Capital commitments will be funded from normal operating cash flows and the
utilisation of existing borrowing facilities.
Contingent liabilities (R million)
Guarantees and
contingent
liabilities 8,5 3,2 813,9* 2,5 1 005,3*
* 31 March 2004: R559,2 million (Sept 2004: R807,7 million) comprises
contingencies in respect of head leases entered into by the Spar Group for which
they have entered into equivalent sub-leases. Following the unbundling of The
Spar Group Limited in October 2004, these amounts are no longer reflected as
contingent liabilities. The aforesaid head leases were without recourse to Tiger
Brands Limited.
Carrying value of
investments
(R million) 2 450,1 2 213,6 2 256,3 2 386,7 2 367,0
Listed 447,8 374,8 374,8 440,9 396,6
Unlisted 1 366,6 1 233,7 1 276,4 1 311,1 1 335,7
Associates 635,7 605,1 605,1 634,7 634,7
Fair valuation of
investments
(R million) 2 450,1 2 220,6 2 263,3 2 400,2 2 380,5
Listed - market
value 447,8 374,8 374,8 440,9 396,6
Unlisted - directors'
valuation 1 366,6 1 233,7 1 276,4 1 311,1 1 335,7
Associates -
directors'
valuation 635,7 612,1 612,1 648,2 648,2
NOTES
Unaudited
Six months ended Year ended
31 March 30 September 2004
2005 2004 2004 Unaudited Auditedl
Pro forma Actual Pro forma Actual
Rm Rm Rm Rm Rm
1. OPERATING INCOME
Operating income
before amortisation
of intangibles
is reflected after
charging:
Cost of sales 4 560,0 4 458,4 9 609,6 8 919,8 19 093,5
Sales and
distribution
expenses 1 118,2 982,7 1 038,2 2 028,6 2 159,0
Marketing expenses 298,4 251,8 268,8 528,6 567,7
Other operating
expenses 434,4 461,4 672,2 865,5 1 231,8
Depreciation
(included in cost
of sales and other
operating expenses) 113,2 104,4 125,3 229,7 271,4
2. AMORTISATION OF
INTANGIBLES
Goodwill - 7,9 13,6 15,1 27,4
Trademarks and
other intangible
assets - 4,3 4,3 12,0 12,0
- 12,2 17,9 27,1 39,4
3. ABNORMAL ITEMS
(Loss)/profit on
sale or
closure of
operations, net (10,1) (11,7) (11,7) 13,4 13,4
(Loss)/profit on
sale of fixed assets
and intangibles,
including impairment
charges (21,2) 23,9 24,8 4,7 6,4
Net profit on sale
of interest in
subsidiaries and
joint ventures - - - 14,1 26,2
Write-down of
investments,
including
profit/(loss)
on sale 7,3 (142,2) (142,2) (161,9) (164,9)
Fair value
adjustment - See
Haverst put option
(see note 6) (7,0) (6,0) (6,0) (21,00) (21,0)
Other - (4,8) (4,8) (5,5) (5,2)
Abnormal loss
before taxation (31,0) (140,8) (139,9) (156,2) (145,1)
Taxation 4,4 2,6 2,6 (2,3) (2,3)
(26,6) (138,2) (137,3) (158,5) (147,4)
Outside shareholders'
interest 2,2 (2,2) (2,2) (2,9) (2,9)
Abnormal loss
attributable to
shareholders in
Tiger Brands
Limited (24,4) (140,4) (139,5) (161,4) (150,3)
4. INCOME FROM
ASSOCIATES
Normal trading 28,6 12,7 12,7 42,6 42,6
Abnormal items 8,3 (1,2) (1,2) (2,5) (2,5)
Profit/(Loss)
on sale of property,
plant and
equipment 8,3 (1,2) (1,2) - -
Other - - - (2,5) (2,5)
36,9 11,5 11,5 40,1 40,1
5. CHANGE IN ACCOUNTING POLICY
With effect from 1 October 2004, the Group has changed its accounting policy
with regards to intangible assets. These assets are now accounted for in terms
of AC 129 revised - Intangible Assets - and are therefore not amortised but
subject to impairment tests. All the intangible assets (including goodwill)
have indefinite useful lives and are therefore no longer amortised. As at 31
March 2005, no indications of impairment existed. In terms of the transitional
provisions of this statement, changes are done prospectively with no prior year
adjustments.
6. CHANGES TO COMPARATIVE FIGURES
During 2001, Tiger Brands granted a put option in favour of Brimequity (a 50/50
partnership between Brimstone Investment Corporation Limited ("Brimstone") and
Coronation Capital) in respect of Brimequity's 22% shareholding in Sea Harvest.
The duration of this put option was extended in December 2003 following the
purchase by Brimstone of Coronation's effective 11% interest in Sea Harvest,
thus increasing Brimstone's shareholding to 22%. As a result of the difficult
fishing conditions experienced over the last few years, compounded by the
strengthening of the rand and the uncertainty over future quota rights, this put
option has resulted in a potential exposure for Tiger Brands should the option
be exercised by Brimstone within the period allowed for in terms of the Sea
Harvest shareholders' agreement (i.e. between 8 December 2006 and 8 December
2009).
The financial consequences of this exposure should have been recognised in the
2003 and 2004 financial years in terms of the provisions of AC 133 - Financial
Instruments: Recognition and Measurement.
Notwithstanding the significant difficulties in measuring the value of the
option, the directors have determined to raise a liability of R94,0million at 31
March 2005 to reflect their best estimate of the company's potential exposure.
Of this amount, R7,0 million relates to the current reporting period,
R21,0million to the year ended 30 September 2004 and R66,0million to the year
ended 30 September 2003. However, it is to be noted that this assessment of
Tiger's exposure does not take into account the impact of improvements in
fishing conditions in the future and any significant weakness in the rand
exchange rate. Finally, there are no indications at this stage that Brimstone
intend to exercise their rights in terms of the Sea Harvest shareholders'
agreement regarding the put option.
As a consequence of the above fair value adjustments, it has been necessary to
restate the results for the years ended 30 September 2003 and September 2004. In
addition, the results for the half-year ended 31 March 2004 have also been
restated. A summary of the financial effects of the adjustments is reflected in
the table hereunder:
Net profit Basic Headline
for the earnings earnings
period per share per share
Before After Before After Before After
Period (Rm) (Rm) (cents) (cents) (cents) (cents)
12 months to
30 Sept 2003 -
actual 1 257,8 1 191,8 752,7 713,2 777,0 737,5
6 months to
31 March 2004 -
actual 557,9 551,9 332,4 328,8 419,7 416,1
6 months to
31 March 2004 -
pro forma 412,6 406,6 245,8 242,2 330,5 326,9
12 months to
30 Sept 2004 -
actual 1 396,1 1 375,1 833,2 820,6 927,3 914,7
12 months to
30 Sept 2004 -
pro forma 1 104,1 1 083,1 658,9 646,4 757,7 745,2
6 months to
31 March 2005 -
actual 711,3 704,3 429,9 425,6 426,8 422,6
THE UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2005 ARE SET OUT HEREIN.
This report has been prepared using the same principles as contained in
accounting statement AC127 - Interim Financial Reporting. The principles adopted
herein are consistent, in all material respects, with those applied in the most
recently published annual financial statements, except as disclosed in notes 5
and 6, and comply with the requirements of Statements of South African Generally
Accepted Accounting Practice. The pro forma figures for the six months ended 31
March 2004 and 12 months ended 30 September 2004 exclude the results of The Spar
Group Limited which was unbundled and separately listed on the JSE Securities
Exchange South Africa on 18 October 2004. The auditors of the company have
provided a factual findings report on the proforma figures in terms of paragraph
8.48b of the JSE Securities Exchange South Africa Listing Requirements. This
report is available for inspection.
Tiger Brands achieved an increase of 29% in headline earnings per share for the
six months ended 31 March 2005 compared to the corresponding period last year,
with earnings per share increasing by 76%. These earnings increases are in line
with the forecasts provided in a trading statement issued on 31 March 2005.
In addition to showing the actual comparative figures for the six months ended
31 March 2004 and the 12 months ended 30 September 2004, comparatives for both
periods in 2004 are also presented on a pro forma basis, excluding Spar which
was unbundled and separately listed on the JSE Securities Exchange on 18 October
2004. Consequently, the comments on the results for the period under review are
based on the company's performance relative to the pro forma figures. In the
current reporting period, Spar has been derecognised with effect from 1 October
2004.
These results have been achieved in an environment where selling prices for the
company's products have, on average, shown no growth. However, the strength of
the company's brands have enabled the group to generate good volume growth
against a background of improved domestic demand. In addition, the continued
focus on cost containment and operational efficiencies has provided significant
operational leverage. This was further enhanced at the earnings level by lower
financing costs and a significant increase in the contribution from associates.
In March 2004, the company's investment in associate company C&T Malt was
impaired by R137,2million. The impairment charge was excluded for the purposes
of determining headline earnings per share for the six months ended 31 March
2004. This is the main reason for the disparity between the 29% growth in
headline earnings per share and 76% growth in earnings per share for the current
reporting period.
OVERVIEW OF RESULTS
Consumer demand over the period has shown sustained growth and the increase in
revenue from continuing operations of 8% is largely volume driven and reflects
the strength of Tiger's wide basket of leading food and health brands. The group
has also continued to invest significant amounts in marketing and research and
development, thereby sustaining the level of innovation in the business. The
ongoing drive for continuous improvement, with its concomitant focus on cost
containment and operational efficiencies, has contributed to the achievement of
a 15% increase in operating income from continuing operations. Operating margins
consequently improved to 14,1% compared to 13,2% in the same period last year.
Particularly good results were achieved by the Groceries, Consumer Healthcare,
Pharmaceuticals and Hospital Products businesses. The Groceries and Consumer
Healthcare businesses experienced high levels of demand, whilst the performances
of Pharmaceuticals - particularly Generic Medicines - and the Hospital Products
business benefited from new product introductions in the prior year. The
strength of the rand continues to pose challenges for the group's Export
division. The turnaround in performance in this division was due to lower
translation losses on monetary assets as a result of reduced levels of exchange
rate volatility and improved operating efficiencies.
Poor performances by both Maize (included within the Milling and Baking segment)
and Fishing held back the overall growth in operating income.
The reduction in net financing costs is indicative of the strong cash generating
capability of the company. Notwithstanding the utilisation of R216,2million
(2004: R16,7million) to fund increased working capital requirements, cash
available from operations of R649,7million was slightly higher than that for the
corresponding period last year (R638,4million).
The company has continued with its general repurchase of shares announced last
year. In the six months to 31 March 2005 a further 2500212 shares were
repurchased at an aggregate cost of R238,7million. Cumulatively, the company has
now repurchased 5116330 shares at an aggregate cost of R475,0million, equating
to 3,0% of the shares in issue. This translates to an average cost of R92,84 per
share. The shares are held as treasury stock.
Net debt has declined from R1427,2million at September 2004 to R1276,9million at
March 2005. There has also been a further improvement in the interest cover
ratio from 8,2 times at March 2004 to 13,8 times in the current period.
ASSOCIATES
Income from associates at R36,9million represents a significant increase on the
prior year comparative of R11,5million. This increase was influenced by the
inclusion of a capital profit of R7,1million arising on the disposal of fixed
assets in 2005 and the non-recurrence of restructuring costs incurred in 2004
relating to C&T Malt.
C&T Malt (held 50%), which produces malted barley for the brewing industry,
continues to experience difficult trading conditions with both backward
integration and consolidation in the brewing industry placing significant
pressure on pricing. Remedial actions taken in the prior year should result in
greater stability of earnings in the short term.
Empresas Carozzi (held 24%) continued to perform well and notwithstanding a
higher effective tax rate and the strengthening of the rand against the Chilean
peso, the earnings attributable to Tiger Brands showed a good improvement on the
prior year.
The Namibian fishing company Namfish (34,5% held by Sea Harvest) continued to
experience difficulties and, in February 2005, the two main trading subsidiaries
of Namfish were placed under provisional liquidation. No further losses are
anticipated and all significant exposures have been provided for.
REVIEW OF OPERATIONS
FMCG (Domestic Food and Consumer Healthcare)
The FMCG business experienced good performances in most categories, except for
Maize milling and DairyBelle. Overall, revenue was 8% ahead of last year with
operating income reflecting growth of 11%.
Domestic Food increased operating income by 9% off revenue growth of 7%. Revenue
growth was achieved in an environment of significant price deflation in maize,
wheat and pasta products.
Within Milling and baking, good performances were recorded by the wheat milling,
baking and sorghum businesses. Albany achieved good volume and profit growth
with its differentiated Superior loaf and, in particular, the success of its
Best of Both variant which was launched in the second half of last year. The
wheat milling business (Golden Cloud) benefited from volume growth and ongoing
operating efficiencies. The successful launch of a flavoured Morvite range
continued the positive momentum in the sorghum-based products category.
The Maize business produced poor results, incurring a loss for the current six
months. The steady decline in maize pricing saw margins being compressed as a
consequence of the activities of small-scale millers who enter the market during
times of lower maize prices. The maize milling section of the Pietermaritzburg
mill has been closed, thereby reducing the company's exposure to maize milling.
In addition, the installation of degerminators at the Randfontein maize mill has
improved quality and yields. This should see a return to profitability in maize
milling in the second half of the year.
Volume growth across all segments of the rice business contributed to the
increased level of operating income in the Other Grains category. The benefit of
higher volumes was partially offset by a margin decline arising from the higher
US dollar cost of rice. The Breakfast category recorded a decline in operating
income mainly as a result of higher raw material costs and an increased
investment in new product development and marketing. Nevertheless, there was
good volume growth, driven by the continued success of the Jungle Energy Crunch
muesli product.
The Groceries category produced excellent results with revenue growth of 11%
translating to a 42% increase in operating income. This was primarily due to a
strong focus on costs, more favourable procurement positions in peanuts and
durum wheat, and market development activities aimed at maximising the high
level of brand equity that exists within this portfolio (Koo, All Gold, Fatti's
& Moni's, Black Cat and Colmans). Strong volume growth in baked beans led to
increased profitability in the Fruit and Vegetables category. Favourable peanut
procurement and good growth in peanut butter sales volumes (Black Cat) resulted
in improved profitability in the spreads category. In Condiments and Ingredients
there was further volume growth in All Gold tomato sauce. The Pasta category
(Fatti's & Moni's) recorded a significant increase in both sales volumes and
profitability.
Excluding restructuring costs of R13,8million incurred in the prior year, the
Snacks and Treats business (Beacon) achieved a 15% improvement in operating
income. Sales volume growth was achieved in both the chocolate and sugar
confectionery categories. Whilst the various internal initiatives implemented
last year have had a positive impact on the results, sugar confectionery margins
have declined and remain under pressure as a result of the increased levels of
low-priced sugar confectionery being imported from Brazil. The situation is
further aggravated by the continued difficulties being experienced by Government
in enforcing existing tariff structures.
Within the Perishables portfolio, Enterprise showed good volume growth. A
combination of higher costs of imported raw materials and additional industry
capacity coming on stream has, however, seen margins contract. DairyBelle has
made significant progress in its migration towards the value-added end of the
market and the launch of its multipack yoghurt range has been particularly
successful. The business, however, has suffered a significant decrease in
profitability due to operating margins in both bulk cheese and UHT milk
declining as a result of raw milk surpluses.
In the Personal Care category Ingram's Camphor Cream performed well. Babycare
continued to benefit from high levels of innovation, with Purity and Elizabeth
Anne's remaining the growth engines of this category. Homecare performed well,
with particularly good results from the pest control category (Doom, Fastkill
and Peaceful Sleep).
PHARMACEUTICALS
(Previously Regulated Healthcare)
Pharmaceuticals, which now includes OTC medicines previously managed as part of
the Consumer Healthcare portfolio, grew revenue by 24% with an increase in
operating income of 29%. The strong revenue growth is partly due to the
continued success of new products launched in the prior year and a more focused
sales structure.
The growth in Branded Medicines was spearheaded by excellent performances from
Myprodol, Corenza C, Inteflora and Vascard. The strong growth in Generic
Medicines was largely due to the continued success of products which have
recently been brought to the market, including Adco-Simvastatin, Adco-Dol, Adco-
Amoclav and Alcophyllex. Within the OTC Medicines category, good performances
from Panado, Citro-Soda and Freshen helped to offset disappointing results from
Bioplus and Compral.
Concerns previously expressed, regarding the ongoing delays in securing new
product registrations, remain. The timing of the issuing of future registrations
will have a bearing on the growth prospects of both Branded and Generic
Medicines.
An agreement has been concluded to acquire the business of Donmed
Pharmaceuticals which represents Organon (a Dutch-based ethical pharmaceutical
company). Products such as Remeron, Livifem and Oestradiol will enhance the
company's presence in the women's health and psychiatry therapeutic classes. The
acquisition is subject to appropriate approval in terms of the Competition Act.
HOSPITAL PRODUCTS
Hospital Products recorded growth in operating income of 20% off an increase in
revenue of 4%. With intense pricing pressure from both the public sector and
private medical funders on its core intravenous solutions business, there is
continued focus on cost containment and on bringing higher margin value-added
products to the market. Hospital pharmaceuticals, wound management and renal
care all achieved significant growth in revenue.
EXPORTS
The Export operations (excluding Fishing) made a profit of R5,6million compared
to an operating loss of R14,7million in the previous year. The principal factor
in this turnaround was the significantly lower level of currency translation
losses on foreign monetary assets arising from reduced exchange rate volatility.
Further improvements in internal efficiencies in the deciduous fruit business
were countered by a decline in sales volumes and lower selling prices as a
result of the resumption of normal levels of supply of deciduous fruit from
Greece into the European market.
Agreement in principle has been reached to form a joint venture between Tiger's
deciduous fruit business and Ashton Canning Company (Pty) Ltd. This merger
should unlock significant synergies. The joint venture, which is subject to the
conclusion of appropriate agreements and approval in terms of the Competition
Act, will result in Tiger Brands owning 66,7% of the merged operation. It is
intended that the new company be operational for the next fruit processing
season which commences towards the end of the 2005 calendar year.
FISHING
The company's fishing interests comprise Sea Harvest (74%) and Oceana (41%). Sea
Harvest's contribution to operating income declined markedly. Results were
negatively impacted by the combination of rand strength affecting export
realisations, and poor fishing conditions resulting in a disproportionate ratio
of low- value smaller fish. Although significant progress has been made in
enhancing the beneficiation and realisations of the smaller fish, the benefits
have been eroded by the rising costs of fuel.
Proportionately consolidated Oceana, which is separately listed on the JSE
Securities Exchange, reported a 51% decline in operating income and 57% decline
in headline earnings per share off a 7% increase in revenue. Good performances
from Glenryck UK and the Cold Storage and Logistics businesses were more than
offset by the impact of rand strength, delays in the catching of lobster due to
late moulting, and a late start to the pilchard fishing season. Selling prices
for Namibian horse mackerel were at low levels which, together with poor fishing
in South Africa, led to a reduced profit contribution from the midwater and deep
sea fishing operations. The fishmeal operations recorded a loss for the six
months mainly due to lower sales volumes and prices.
A draft policy for the allocation of Long-term Commercial Fishing Rights was
issued in March. Comments on the draft policy have been submitted to the
Department of Environmental Affairs and Tourism by Sea Harvest and Oceana.
Concerns raised highlight the potential significant negative impact both on the
South African fishing industry and on employment opportunities in the industry.
The final policy is expected to be issued shortly and the allocation process for
long-term rights is expected to be completed by the end of the calendar year.
REMUNERATION COMMITTEE
Bheki Sibiya, an independent non-executive director of Tiger Brands Limited, has
been appointed as a member of the Remuneration Committee.
INTERIM DIVIDEND
Consistent with the Board's stated intention to reduce, over time, the company's
dividend cover ratio, it has been decided to declare an interim dividend of 135
cents per share. This is based on a reduction in the dividend cover for the full
year to 2,0 times (2004: 2,5 times). The interim dividend declared has also been
adjusted to partially correct the historic imbalance between the interim and
final dividend relative to headline earnings per share. This realignment process
commenced last year.
The Board considers that the new annual cover of 2,0 times is now at an
appropriate level and, as such, it does not anticipate any further reduction in
the annual cover ratio.
The interim dividend of 135 cents per share represents an increase of 35% on
last year's interim dividend of 100 cents per share. It should be noted that
last year's interim dividend was based on the headline earnings of the group
inclusive of Spar.
PROSPECTS
Whilst local economic indicators remain favourable, there has nevertheless been
a slowdown in the rate of growth from the first quarter to the second quarter
relative to the same periods last year.
The rate of increase in headline earnings per share for the full year ending 30
September 2005, whilst likely to be below that reported at the half-year, is
nevertheless expected to reflect good growth in real terms.
For and on behalf of the Board
R A Williams N Dennis
Chairman Chief Executive Officer
18 May 2005
DECLARATION OF ORDINARY DIVIDEND NUMBER 121
Notice is hereby given that an interim dividend of 135 cents per ordinary share
has been declared in respect of the half-year ended 31 March 2005.
In compliance with the requirements of STRATE, the electronic settlement and
custody system used by the JSE Securities Exchange South Africa, the company has
determined the following salient dates for the payment of the dividend:
Last day to trade cum dividend Friday, 1 July 2005
Shares commence trading ex dividend Monday, 4 July 2005
Record date Friday, 8 July 2005
Payment of dividend Monday, 11 July 2005
Shareholders will not be permitted to dematerialise/rematerialise their shares
between Monday, 4 July 2005 and Friday, 8 July 2005, both days inclusive.
By order of the Board
I W M Isdale Sandton
Secretary 18 May 2005
DIRECTORS:
Independent directors: R A Williams (Chairman), B H Adams, D D B Band, S L
Botha, B P Connellan, U P T Johnson, A C Nissen, G N Padayachee, B L Sibiya, J L
van den Berg, L C van Vught
Executive: N Dennis (Chief Executive Officer) (British), M H Franklin, M C
Norris, R V Smither, C F H Vaux
Company secretary: I W M Isdale
Registered office: 3010 William Nicol Drive, Bryanston, Sandton
Postal address:
PO Box 78056, Sandton, 2146, South Africa
Share registrars:
Computershare Investor Services 2004 (Pty) Limited
70 Marshall Street, Johannesburg, 2001
Postal address:
PO Box 61051, Marshalltown, 2107, South Africa
Website address: http://www.tigerbrands.com
Sponsor: JP Morgan Equities Limited
Date: 18/05/2005 05:15:59 PM Produced by the JSE SENS Department
