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Sovereign Food Investments Limited - Unaudited Group Results For The Six Months
Ended 31 August 2005
SOVEREIGN FOOD INVESTMENTS LIMITED
(Registered in the Republic of South Africa)
(Registration number 1995/003990/06)
JSE code: SOV ISIN: ZAE000009221
("Sovereign" or "the Group")
HIGHLIGHTS
* EARNINGS PER SHARE UP 19%
* CASH GENERATED FROM OPERATIONS UP 30%
* INTERIM CAPITAL DISTRIBUTION OF 6,5 CENTS PER ORDINARY SHARE
UNAUDITED GROUP RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2005
INCOME STATEMENTS Unaudited Audited
Six months ended Year ended
31 August 28 February
2005 2004 2005
R"000 R"000 R"000
Revenue 183 949 179 410 367 380
Operating income 31 690 28 339 63 205
Depreciation 3 808 3 434 6 530
Net interest paid 3 904 4 894 8 966
Net operating income 23 978 20 011 47 709
Deferred taxation 6 970 6 045 12 111
Retained earnings for period 17 008 13 966 35 598
Weighted average number of shares
in issue ("000) 29 738 29 104 29 174
Earnings per share (cents) 57,2 48,0 122,0
Headline earnings per share (cents) 57,2 48,0 123,5
Capital distribution per share (cents)
- final prior year - - 35,0
Capital distribution per share
(cents)
- interim 6,5 5,0 -
Reconciliation between earnings and
headline earnings
Profit after taxation 17 008 13 966 35 598
Reconciling items:
Disposal of fixed assets - - 155
Taxation effect - - 289
Headline profit after taxation 17 008 13 966 36 042
BALANCE SHEETS Unaudited Audited
As at As at
31 August 28 February
2005 2004 2005
R"000 R"000 R"000
Assets
Non-current assets
Property, plant and equipment 156 585 134 646 140 536
Current assets 160 988 120 607 125 415
Cash and cash equivalents 79 145 38 372 46 790
Inventory and biological assets 46 286 49 739 54 169
Trade and other receivables 35 557 32 496 24 456
Total assets 317 573 255 253 265 951
Equity and liabilities
Equity 146 506 93 658 113 886
Interest bearing debt 81 374 81 262 75 903
Long-term portion 62 955 66 701 57 056
Short-term portion 18 419 14 561 18 847
Deferred taxation 45 843 32 806 38 872
Trade and other payables 43 850 47 527 37 290
Total equity and liabilities 317 573 255 253 265 951
CASH FLOW STATEMENTS Unaudited Audited
Six months ended Year ended
31 August 28 February
2005 2004 2005
R"000 R"000 R"000
Cash generated from operations
before working capital changes 31 751 28 478 63 563
Changes in working capital 5 221 (86) (3 925)
Cash generated from operating activities 36 972 28 392 59 638
Interest paid (3 904) (4 894) (8 966)
Capital distribution paid (10 297) (2 910) (4 365)
Net cash flow from operating activities 22 771 20 588 46 307
Net cash flows from investing in assets (6 181) (7 089) (11 267)
Net cash flows from issue of shares 25 617 - -
Net cash flows from debt repayment (9 852) (6 247) (17 073)
Net change in cash and cash equivalents 32 355 7 252 17 967
STATEMENTS OF CHANGES IN EQUITY
28 February Net profit for Treasury New shares
R"000 2005 period shares issued
Share capital 294 - - 31
Share premium 41 005 - - 25 586
Treasury shares (232) - 232 -
Share-based
payments 327 - - -
Retained earnings 72 492 17 008 - -
Total 113 886 17 008 232 25 617
Share-based Capital 31 August
R"000 payments distribution 2005
Share capital - - 325
Share premium - (10 297) 56 294
Treasury shares - - -
Share-based payments 60 - 387
Retained earnings - - 89 500
Total 60 (10 297) 146 506
29 February Net profit Treasury New shares
R"000 2004 for period shares issued
Share capital 291 - - -
Share premium 45 153 - - -
Treasury shares - - - -
Share-based payments 124 - - -
Retained earnings 36 895 13 966 - -
82 463 13 966 - -
Share-based Capital 31 August
R"000 payment distribution 2004
Share capital - - 291
Share premium - (2 910) 42 243
Treasury shares - - -
Share-based payments 139 - 263
Retained earnings - - 50 861
139 (2 910) 93 658
PERIOD UNDER REVIEW
The buoyant consumer environment in the country, combined with buying up from
consumers, ensured that demand for poultry remained firm. As a result, the
operating environment for the industry remained strong for the period under
review. Operating margins continued to improve and increased from 15.8% to
17.2%. Unit selling price inflation was negligible. A volume increase of 6% and
reduced feed prices enabled the Group to achieve a better result than the
corresponding period last year.
During the period the breeder operation was extensively restructured and this,
combined with expansion in the broiler division, has laid a very solid foun-
dation for good volume growth in the second half.
Due to robust demand, particularly from China and Russia, international
poultry prices remain extremely strong. As a result of this, import volumes
have not grown and have now started to decline.
Cash generated from operations increased by 30%, reflecting the strong
underlying fundamentals of the business.
PROSPECTS FOR THE REMAINDER OF THE FINANCIAL YEAR
Traditionally poultry prices are firmer in the second half of the year. Feed
prices will be lower than the first six-month period. Growth in volumes for the
full year is expected to be ahead of that achieved in the first six months.
ACCOUNTING POLICIES
These interim financial statements have been prepared in accordance with
International Accounting Standard ("IAS") 34, Interim Financial Reporting, and
are covered by International Financial Reporting Standard ("IFRS") 1 - First
time adoption of International Financial Reporting Standards.
SHARE-BASED PAYMENTS
The Group has changed its accounting policy with regard to share-based payments
to comply with IFRS 2. Costs associated with share-based awards under the share
option scheme are now charged to the income statement over the vesting periods.
Sovereign has not elected to apply IFRS 2 to share options granted prior to 7
November 2002 that had not yet vested by 1 March 2005.
TRANSITION TO IFRS
The Group"s financial statements for the year ending 28 February 2006 will be
the first annual financial statements that comply with IFRS.
Effect of transition to IFRS on the financial position of the Group
The effect of the transition to IFRS on the financial position of the Group is
as follows:
R"000 31 August 2004 28 February 2005 31 August 2005
Earnings
Earnings for period
as previously
stated/without the
effect
of IFRS 14 105 35 801 17 068
Effect of
share-based payments (139) (203) (60)
Restated earnings
for period 13 966 35 598 17 008
Retained earnings
Retained earnings
as previously
stated/without the
effect
of IFRS 51 124 72 819 89 887
Effect of
share-based payments (263) (327) (387)
Restated retained
earnings 50 861 72 492 89 500
Interim capital distribution
The board of directors has, in terms of a general authority granted to them at
the annual general meeting held on 23 June 2005, declared an interim capital
distribution out of share premium of 6,5 cents per ordinary share.
FINANCIAL EFFECTS OF THE INTERIM CAPITAL DISTRIBUTION
The pro forma effect of the 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%).
Last date to trade "cum" the interim capital
distribution Friday, 21 October 2005
Trading commences "ex" the interim capital
distribution Monday, 24 October 2005
Record date Friday, 28 October 2005
Date of payment Monday, 31 October 2005
Share certificates may not be dematerialised or rematerialised between Monday,
24 October 2005 and Friday, 28 October 2005, both dates inclusive.
The above dates are subject to change. Any changes will be released on SENS and
published in the South African press.
By order of the Board
R B Spanjaard M J Davis
Chairman Managing Director
Uitenhage
4 October 2005
Directorate
Chairman R B Spanjaard, Managing Director M J Davis, B R Cape*,
C Coombes, B A Spanjaard*, A H Vardy* (* Non-Executive)
Transfer secretaries
Computershare Investor Services 2004 (Proprietary) Limited
PO Box 61051
Marshalltown 2107, Gauteng
e-mail: info@sovfoods.co.za
Website: www.sovfoods.co.za
Date: 04/10/2005 02:00:21 PM Produced by the JSE SENS Department
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