| Thu 24 Nov 2005, 16:50 | | Tiger Brands Limited - Tiger Brands Results As At |
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Tiger Brands Limited - Tiger Brands Results As At 30 September
TIGER BRANDS LIMITED
(Registration number 1944/017881/06)
(Incorporated in the Republic of South Africa)
Share code: TBS ISIN: ZAE000071080
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
This report has been prepared using the same principles as contained in
accounting statement AC 127 - 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 7 and 8, and comply with the requirements of Statements of South African
Generally Accepted Accounting Practice. The pro forma figures for the year ended
30 September 2004 exclude the results of The Spar Group Limited which was
unbundled and separately listed on the JSE Limited on 18 October 2004. The
auditors of the Group have provided a factual findings report on the pro forma
figures in terms of paragraph 8.48b of the JSE Limited listing requirements.
This report is available for inspection. The results for the year ended 2005
have been reviewed by Ernst & Young auditors and their unqualified review
opinion is open for inspection.
GROUP RESULTS AND DIVIDEND DECLARATION
The reviewed results for the year ended 30 September 2005 are set out herein
- Headline earnings per share up 34%
- Operating income from continuing operations up 19%
- Total dividend per share up 35%
GROUP INCOME STATEMENT
Year ended 30 September
2005 2004 2004
Pro forma Actual
Reviewed Unaudited Change Audited
Notes Rm Rm % Rm
Revenue 1 15 373,5 14 691,8 5 25 829,4
Turnover 14 951,1 14 295,9 5 25 421,5
Continuing operations 14 951,1 14 047,7 6 13 188,1
The Spar Group Limited 11 985,2
Discontinued operations 248,2 248,2
Operating income before
amortisation of
intangibles 2 2 321,1 1 952,4 19 2 369,6
Continuing operations 2 321,1 1 950,0 19 1 950,0
The Spar Group Limited 417,2
Discontinued operations 2,4 2,4
Amortisation of
intangibles 3 - (27,1) (39,4)
Operating income before
abnormal items 2 321,1 1 925,3 21 2 330,2
Abnormal items 4 (113,1) (156,2) (145,1)
Income from operating
activities 2 208,0 1 769,1 25 2 185,1
Interest paid (553,8) (576,8) (579,9)
Interest received 382,4 356,9 368,9
Dividend income 40,0 39,0 39,0
Income from associates 5 71,0 40,1 40,1
Profit before taxation 2 147,6 1 628,3 32 2 053,2
Income tax expense (570,5) (526,1) (659,0)
Net profit after
taxation 1 577,1 1 102,2 43 1 394,2
Minority interest (11,8) (19,1) (19,1)
Net profit for the year 1 565,3 1 083,1 45 1 375,1
Number of ordinary
shares in issue (000"s) 169 685* 168 764 168 764
*Includes 8 589 328 shares
held as treasury stock
(September 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) 164 195 167 567 167 567
Headline earnings per
ordinary share (cents) 995,3 745,2 34 914,7
Diluted headline
earnings per ordinary
share (cents) 975,4 737,3 32 905,5
Basic earnings per
ordinary share (cents) 953,3 646,4 47 820,6
Diluted basic earnings
per ordinary share
(cents) 934,1 639,9 46 812,4
Dividends per ordinary
share (cents) 500,0 370,0 35 370,0
Interim dividend declared 135,0 100,0 35 100,0
Final dividend declared
post year-end 365,0 270,0 35 270,0
Reconciliation between
net profit and
headline earnings Rm Rm Rm
Net profit for the year 1 565,3 1 083,1 1 375,1
Adjusted for:
Loss/(profit) on sale
or closure of
operations, net 3,0 (13,3) (13,3)
Net loss/(profit) on
sale of fixed assets
and intangibles,
including impairment
charges 10,4 10,4 (9,8)
Net profit on sale of
interest in subsidiaries
and joint ventures (5,4) (19,2) (19,2)
Impairment of investments,
including net profit
on sale 67,1 170,4 170,4
Goodwill amortisation - 15,1 27,4
Associates (7,8) 1,4 1,4
Profit on sale of
property, plant and
equipment (6,5) - -
Other (1,3) 1,4 1,4
Other 1,8 0,8 0,8
Headline earnings for
the year 1 634,4 1 248,7 31 1 532,8
GROUP BALANCE SHEET
As at 30 September
2005 2004 2004
Pro forma Actual
Reviewed Unaudited Audited
Rm Rm Rm
ASSETS
Non-current assets 3 430,3 4 471,5 5 000,7
Property, plant and equipment 1 453,0 1 415,5 1 711,0
Goodwill and intangible assets 537,7 469,1 715,9
Investments 1 274,5 2 386,7 2 367,0
Deferred taxation asset 165,1 200,2 206,8
Current assets 5 743,2 6 040,9 7 256,7
Inventories 1 924,6 2 011,1 2 346,3
Trade and other receivables 2 489,5 2 403,1 3 590,4
Cash and cash equivalents 1 329,1 1 626,7 1 320,0
TOTAL ASSETS 9 173,5 10 512,4 12 257,4
EQUITY AND LIABILITIES
Capital and reserves 3 235,6 3 572,4 3 965,3
Ordinary share capital and premium 761,2 722,2 778,0
Non-distributable reserves and
accumulated profits 3 978,5 3 042,2 3 423,6
Tiger Brands Limited shares held by
subsidiary (842,0) (192,0) (236,3)
Tiger Brands Limited shares held by
empowerment trusts (see note 6) (662,1) - -
Minority interest 138,5 132,1 132,1
Non-current liabilities 1 677,5 2 233,5 2 272,2
Deferred taxation liability 457,7 492,5 492,5
Provision for post-retirement
medical aid 349,8 379,9 416,8
Long-term borrowings 762,0 1 274,1 1 275,9
Provision for Sea Harvest put option 108,0 87,0 87,0
Current liabilities 4 121,9 4 574,4 5 887,8
Accounts payable, provisions
and accruals 2 736,9 2 816,7 4 124,1
Shareholders for empowerment
transaction (see note 6) 723,6 - -
Taxation 267,3 287,2 292,4
Short-term borrowings 394,1 1 470,5 1 471,3
TOTAL EQUITY AND LIABILITIES 9 173,5 10 512,4 12 257,4
OVERVIEW OF RESULTS
Tiger Brands achieved headline earnings of 995,3 cents per share for the twelve
months ended 30 September 2005, which is an increase of 34% on that achieved in
the previous year. Earnings per share increased by 47% to 953,3 cents per share.
As a result of the decision to further impair the carrying value of the
investment in associate company C&T Malt, the earnings per share increase is
lower than that reflected in the trading statement update issued on 1 November
2005, which indicated an increase of between 50% and 55%.
The results for the year are compared to the pro forma results for the twelve
months ended 30 September 2004. The pro forma results exclude those of The Spar
Group Limited which was unbundled and separately listed on the JSE Limited on 18
October 2004. In the year under review, Spar was excluded with effect from 1
October 2004.
Turnover growth in the second six months was not as strong as in the first half
of the year as a result of downward pressure on pricing together with a slowing
down in volume growth. The stronger performance at the operating income level in
the second six months, compared to the first half, was impacted by a significant
improvement in the results of Maize, Snacks & Treats, DairyBelle and Fishing.
For the year as a whole, selling prices for the company"s products have, on
average, shown no increase.
Turnover from continuing operations rose by 6% to R15 billion with operating
income increasing by 19% to R2,3 billion. The operating margin from continuing
operations improved significantly to 15,5% from 13,9% in the prior year, largely
driven by good volume growth and improved operating efficiencies.
The strong increase in operating income was influenced by good growth in
Domestic Food, Consumer Healthcare and Pharmaceuticals. Hospital Products
achieved a satisfactory increase in operating income, whilst Exports showed
continued improvement, albeit off a low base. The Group"s Fishing businesses
produced disappointing results with both Sea Harvest and Oceana Group Limited
recording lower levels of profitability.
The income statement reflects a net abnormal charge of R113,1 million. This
includes the impairment of fishing vessels (R32,3 million) and unlisted
investments (R90,3 million); a charge of R69,4 million in respect of the Staff
Empowerment transaction approved by shareholders in September 2005; and a fair
value adjustment of R21,0 million in respect of the Sea Harvest put option
(which is dealt with more fully in note 8 to the accompanying results). These
items are partly offset by a fair value gain of R90,1 million arising on the
maturity of an investment in a five-year endowment policy.
Cash available from operations of R1,82 billion (2004: R2,13 billion) reflects a
decline of R312 million from the previous year. This decline is largely due to a
working capital outflow of R112 million compared to an inflow of R129 million in
the previous year, and the inclusion in the prior year of dividends of R383
million from Spar. Cash operating profit rose by 17% from R2,27 billion to R2,66
billion.
Proceeds of R1,33 billion arising from the maturity of a five-year guaranteed
linked endowment policy were received during the year and applied to the
reduction of fixed-interest debt. This resulted in the Group having a net cash
balance on hand of R173 million at 30 September 2005 compared to net borrowings
of R1,12 billion at 30 September 2004.
The Group repurchased an additional 5,973 million of its shares at a cost of
R650 million. Cumulatively, the Group has now repurchased 8,589 million shares
at an aggregate cost of R842 million, equating to 5,1% of the total shares in
issue. This translates to an average cost of R98 per share. These shares are
held as treasury stock.
ASSOCIATES
The contribution from associates of R71,0 million represents a significant
increase on the prior year"s earnings of R40,1 million. The growth in earnings
reported does not reflect the underlying trading performance of the associates
but results from the non-recurrence of significant restructuring costs incurred
by C&T Malt in the prior year, and the inclusion in 2005 of capital profits made
by C&T Malt. In addition the elimination of goodwill amortisation costs from the
results of Empresas Carozzi, due to the change in accounting policy reflected in
note 7 of this announcement, had a positive impact. Earnings were further
positively impacted by the decline in losses attributable to Namfish (34,5% held
by Sea Harvest) following the provisional liquidation in February 2005 of its
two main trading subsidiaries. After eliminating the above distortions, income
from associates reflects an underlying decline of R17 million which is
attributable to a disappointing performance from C&T Malt.
Empresas Carozzi (held 24%) continued to perform well. Notwithstanding a higher
effective tax rate and the negative impact of a strong Chilean peso on its
export sales in South America, it was able to maintain its contribution to
Tiger"s earnings.
Difficult trading conditions continued to be experienced by C&T Malt (held 50%),
where backward integration and consolidation in the brewing industry continues
to place significant pressure on pricing. This was exacerbated by the loss of
a significant supply contract. These factors resulted in the decision to further
impair the carrying value of the investment.
REVIEW OF OPERATIONS
FMCG (Fast Moving Consumer Goods)
Domestic Food and Consumer Healthcare
There were good performances within FMCG where turnover growth of 5% translated
to a 20% growth in operating income. Domestic Food"s operating income exceeded
R1 billion, reflecting growth of 19% compared to a 5% growth in turnover.
Within Milling & Baking, the Wheat Milling, Baking and Sorghum businesses
continued to do well. Ongoing capital investment by Albany bakeries in product
development assisted volume growth. In addition, the Randfontein Bakery was
recommissioned in order to meet increased demand. The Wheat Milling business
(Golden Cloud) grew both volume and market share, helped by the success of
Albany. Sorghum-based products showed good growth and there was a positive
market response to the launch of the new flavoured Morvite range which generated
significant volume growth and margin enhancement.
The commissioning of maize degerminators at the Randfontein mill, and cost
savings arising from the closure of both the Pietermaritzburg and Polokwane
maize milling operations, resulted in Maize Milling (Ace) generating a small
operating profit in the second half of the year. However, the Maize Milling
business incurred a loss for the twelve months ended 30 September 2005. Trading
conditions remain challenging and the company continues to explore options to
limit its exposure to maize.
Within Other Grains, the Rice business (Tastic, Aunt Caroline) experienced a
slowdown in both volume and profit growth in the second half of the year as the
cost of raw rice increased. Pricing was also impacted by the decline in maize
prices which led to a fall in rice consumption, particularly at the bottom end
of the market. Despite increased competitor activity, the Rice business grew its
market share and launched several new products including the Tastic Authentic
Curry Range.
The Breakfast category (Jungle), recorded a decrease in operating income despite
good volume growth. This was largely due to an increased investment in product
innovation which is expected to generate a significant increase in operating
income in the year ahead.
In the Groceries category, good volume growth was experienced in a climate of
price deflation. Strengthened brand equity, together with effective price
management, resulted in market share gains in all key market segments and
contributed to a 25% increase in operating income. The Pasta category (Fatti"s &
Moni"s), which was successfully integrated into the Grocery business this past
year, recorded a significant improvement in both sales volumes and
profitability. Two consecutive years of double digit volume increases in canned
baked beans (Koo), underpinned profit growth in the Canned Fruit & Vegetable
category. A record market share for All Gold tomato sauce and improved
procurement of peanuts (Black Cat), resulted in good performances from the
Condiments & Ingredients and Spreads categories.
After excluding the prior year"s restructuring costs of R20 million, the Snacks
& Treats business (Beacon) achieved a 56% increase in operating income on an 8%
increase in turnover. The Chocolate category enjoyed a substantially improved
performance, benefiting from a high level of innovation which was favourably
received by the market. The strategy of leveraging core brands across the Tiger
Brands Group led to the successful launch of the Jungle Energy Bar. In sugar
confectionery, the high volume of imports by industry participants continued,
placing further pressure on selling prices. New product innovations and ongoing
cost reduction initiatives resulted in the Sugar Confectionery category
achieving volume growth, with the Mmallows, Smoothies, Maynards and Sparkles
brands performing well.
The Perishables business (Enterprise and DairyBelle) recorded a 7% growth in
operating income on a 10% growth in turnover. DairyBelle benefited from new
product introductions, particularly in the Yoghurt and Sliced Cheese categories.
The results of the more commoditised Fresh and Bulk Cheese categories improved
in the latter part of the year and this was a significant contributor to the
improvement in the full year"s result compared to the decrease in profits at the
half year. Enterprise continued to show significant volume growth. The
Enterprise brand entered the Frozen Prepared Meals category with a number of
value- added products, whilst the repositioning of the Like-it-Lean brand led to
innovation in the Perishable Meals and Core Chilled Processed Meat categories.
Notwithstanding the strong volume growth, margins have come under pressure as a
result of increased capacity within the industry over the past two years.
The Out of Home category, which includes turnover to specific customers in the
food service and tender markets, increased operating income by 15% on a 7%
increase in turnover. The business has focused in the past year on developing
specific product offerings for the food service industry. In addition, an
agreement has been concluded to acquire Hot Favourites, a dedicated food service
business. This is subject to Competition Commission approval. Both of these
initiatives are expected to generate growth in the forthcoming year.
Consumer Healthcare increased operating income by 28% off a 12% increase in
turnover. The Personal Care category remains highly competitive, and turnover
growth was driven by good sales volumes, particularly from Ingram"s Camphor
Cream and Lemon Lite. Babycare"s growth in operating income of 31% benefited
from good performances in both the Nutrition and Wellbeing segments. The Purity
and Elizabeth Anne"s brands remain the key growth engines.
The Homecare category retained its market leadership in pest control (Doom,
Fastkill, Dyrange) and achieved meaningful cost savings as a result of the
commissioning of a new aerosol plant at the Isando manufacturing facility. The
Air Care (Airoma) and Sanitary Care (Jeyes and ICU) categories benefited from
new product introductions.
PHARMACEUTICALS
The Pharmaceuticals division increased operating income by 23% on a 25% increase
in turnover.
Within Pharmaceuticals, the Branded Medicines business, which comprises the
Prescription, OTC (Schedule 2), Tender and Antiretroviral (ARV) categories, grew
operating income by 20%. The results include expenditure of R14,4 million in
respect of the development of ARV molecules following the dissolution in the
prior year of the joint venture with Ranbaxy. Branded Medicines benefited from
excellent performances in the Prescription category, where increased critical
mass in the Cardiovascular category (Zildem, Vascard and Burinex) and strong
results in the Pain and Respiratory segments (Myprodol, Macaine, Lotem) were
achieved. Growth in OTC (Schedule 2) volumes was also good, with particularly
strong performances from Synap Forte, Pynstop, Inteflora, Dilinct and Corenza C.
The acquisition of the Donmed Pharmaceuticals business, which has enhanced the
company"s presence in the Women"s Health and Psychiatry Therapeutic categories,
was effective 1 August 2005. On 1 September 2005, the company acquired the
rights to Vita-Thion, a leading brand in the energy tonic market.
The Generic Medicines category also had an excellent year, with a turnover
increase of 35% well ahead of market growth. The turnover growth was driven by
the introduction of new products and the strong performances of core brands such
as Adco-Simvastatin, Adco-Dol, Alcophyllex, Adco-Amoclav BD and Adco-Zolpidem.
The benefits of additional investment in the brand equity of Adco Generics, and
increased expenditure on Research & Development, are reflected in the 47% growth
in operating income.
The category previously classified as OTC medicines (Schedule 0 and 1) is now
called Consumer Wellbeing. This change is reflective of the customer channels
through which the business operates. The category is extremely competitive, with
relatively low rates of innovation. The Panado and Citro Soda brands produced
good results. Overall growth in operating income of 6% was negatively impacted
by higher levels of Research & Development expenditure.
HOSPITAL PRODUCTS
The Hospital Products business achieved modest growth in turnover and operating
income. The business operates in an environment where prices of registered
products have been reduced to 2003 levels as a result of the introduction of
single exit pricing. In addition, there is intense competition from imported
products in the intravenous solutions and medical disposables markets.
The focus on new product introductions and cost containment continued, and good
growth was achieved in the Infusion Pumps business, Wound Care and Ostomy,
Nebulising Solutions, Kidney Dialysis and Medical Diagnostics businesses.
Subsequent to the year-end, the company expanded its interest in the hospital
products sector through the acquisition of a 74% shareholding in The Scientific
Group (Pty) Limited. A strategic empowerment partner, Brimstone Investment
Corporation, retained its 26% interest in this business. The Scientific Group
has a strong presence in the bio-technology, imaging, hospital equipment and
diagnostics markets.
EXPORTS
The Export operations (excluding Fishing) increased operating income from R16,0
million to R18,1 million. Significantly better performances from Mozambique and
Zambia contributed to this result.
Improvements in internal efficiencies in the Deciduous Fruit business were
offset by a decline in sales volumes and realisations due to the resumption of
normal levels of supply from Greece into the European market.
Following the recent approval by the Competition Tribunal of the joint venture
between Tiger"s Deciduous Fruit business and Ashton Canning Company, a new
company called Langeberg & Ashton Foods (Pty) Limited commenced trading on 1
November 2005. The benefits of the joint venture will not be fully realised
until the 2007 financial year as a result of the initial once-off merger costs
and the fact that a significant portion of the forthcoming season"s fruit
production will only be sold in 2007.
FISHING
The company"s fishing interests comprise Sea Harvest (74%) and Oceana Group
Limited (40%). At Sea Harvest, despite the initiation of several cost-saving and
revenue-enhancing initiatives, including engine conversions to lower cost fuel
blends and the development of new products and export markets for smaller fish,
operating income declined significantly. The business continues to be adversely
impacted by poor fishing conditions, a disproportionate ratio of low value
smaller fish, and high fuel prices.
Oceana, which is separately listed on the JSE Limited, enjoyed an improved
second half performance. However, for the full year the company reported a
16% reduction in operating income and a 24% decline in headline earnings per
share. The lower profits were mainly the result of difficult fishing conditions
in most industry sectors, competitive market conditions, the strong rand and the
costs of closure of the Namibian hake operations. The Cold Storage division
achieved substantially higher profits than in the previous year.
Both companies submitted applications for Long-term Commercial Fishing Rights
and the allocation process is expected to be completed by the end of the 2005
calendar year.
FINAL DIVIDEND
In line with the revised annual dividend cover of 2.0 times, which was
communicated with the interim results for the six months ended 31 March 2005, a
final dividend of 365 cents per share (2004: 270 cents) has been declared. This,
together with the interim dividend of 135 cents per share, brings the total
dividend for the year to 500 cents per share (2004: 370 cents). This represents
a 35% increase on last year"s total dividend of 370 cents, which was based on
the results including those of Spar.
OUTLOOK
Whilst the economy remains in a growth phase, there are indications of a
slowdown in consumer expenditure in the areas in which Tiger Brands operates.
However, with its strong portfolio of brands and recent and planned levels of
investment, the Group should continue to perform well and is expected to deliver
real earnings growth in the year ahead, albeit at a lower rate than that
achieved for the year ended 30 September 2005.
BOARD OF DIRECTORS
The Chairman, Mr Robbie Williams, has advised the Board of his intention to
retire subsequent to the annual general meeting of shareholders in February
2006. The Board is pleased to announce that Mr Lex van Vught will succeed Mr
Robbie Williams as Chairman and that Mr Bheki Sibiya will be appointed Deputy
Chairman of the Board.
It was recently announced that Mr Roy Smither, an executive director of Tiger
Brands, had advised the company of his intention to take early retirement with
effect from 31 March 2006.
ANNUAL REPORT
The annual report will be posted to certificated shareholders and those
shareholders with dematerialised shares, who have requested a copy of the annual
report through their CSDPs, during December. Salient features of the annual
report will be available on the company"s website (www.tigerbrands.com) shortly
after the annual report is posted.
For and on behalf of the Board
R A Williams N Dennis
Chairman Chief Executive Officer 24 November 2005
DECLARATION OF ORDINARY DIVIDEND NUMBER 122
Notice is hereby given that a final dividend of 365 cents per ordinary share has
been declared in respect of the year ended 30 September 2005.
In compliance with the requirements of STRATE, the electronic settlement and
custody system used by the JSE Limited, the company has determined the following
salient dates for the payment of the dividend:
Last day to trade cum dividend Friday, 6 January 2006
Shares commence trading ex dividend Monday, 9 January 2006
Record date Friday, 13 January 2006
Payment of dividend - South Africa
and United Kingdom Monday, 16 January 2006
Shareholders will not be permitted to dematerialise or rematerialise their
shares between Monday, 9 January 2006 and Friday, 13 January 2006, both days
inclusive.
By order of the Board
I W M Isdale Sandton
Secretary 24 November 2005
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
(PO Box 61051, Marshalltown, 2107, South Africa)
Telephone: (011) 370-5000
ABRIDGED CASH FLOW STATEMENT
Year ended 30 September
2005 2004 2004
Pro forma Actual
Reviewed Unaudited Audited
Rm Rm Rm
Cash operating profit 2 660,9 2 271,8 2 729,3
Working capital changes (112,4) 128,8 169,0
Net interest paid (171,4) (219,9) (211,0)
Dividend income 62,3 60,6 60,6
Dividends received from The Spar
Group Ltd 383,2
Taxation paid (623,4) (496,7) (678,5)
Cash available from operations 1 816,0 2 127,8 2 069,4
Dividends paid (677,1) (533,9) (533,9)
Net cash inflow from operating
activities 1 138,9 1 593,9 1 535,5
Net cash inflow/(outflow) from
investing activities 760,2 (587,8) (863,5)
Net cash inflow before financing
activities 1 899,1 1 006,1 672,0
Net cash outflow from financing
activities (1 980,2) (732,1) (434,7)
Net (decrease)/increase in cash
and cash equivalents* (81,1) 274,0 237,3
*Includes an increase of R90,2 million in short term borrowings regarded as cash
and cash equivalents and exchange rate changes.
NOTES
Year ended 30 September
2005 2004 2004
Pro forma Actual
Reviewed Unaudited Audited
Rm Rm Rm
1. Revenue
Turnover 14 951,1 14 295,9 25 421,5
Interest received 382,4 356,9 368,9
Dividend income 40,0 39,0 39,0
15 373,5 14 691,8 25 829,4
2. Operating income
Operating income before amortisation
of intangibles is reflected after
charging:
Cost of sales 8 884,4 8 919,8 19 093,5
Sales and distribution expenses 2 288,5 2 028,6 2 159,0
Marketing expenses 592,2 528,6 567,7
Other operating expenses 864,9 866,5 1 231,7
Depreciation (included in cost of
sales and other operating expenses) 231,1 229,7 271,4
3. Amortisation of intangibles
Goodwill 15,1 27,4
Trademarks and other intangible
assets 12,0 12,0
27,1 39,4
4. Abnormal items
(Loss)/profit on sale or closure
of operations, net (6,0) 13,4 13,4
(Loss)/profit on sale of fixed
assets and intangibles, including
impairment charges (16,8) 4,7 6,4
Net (loss)/profit on sale of
interest in subsidiaries and
joint ventures (2,0) 14,1 26,2
Impairment of investments, including
net profit on sale (84,9) (161,9) (164,9)
Fair value adjustment - Sea Harvest
put option (see note 8) (21,0) (21,0) (21,0)
Empowerment transaction costs
(see note 6) (69,4)
Endowment policy - adjustment to
maturity value 90,1
Other (3,1) (5,5) (5,2)
Abnormal loss before taxation (113,1) (156,2) (145,1)
Taxation 21,9 (2,3) (2,3)
(91,2) (158,5) (147,4)
Outside shareholders" interest 7,2 (2,9) (2,9)
Abnormal loss attributable to
shareholders in Tiger Brands Limited (84,0) (161,4) (150,3)
5. Income from associates
Normal trading 64,7 42,6 42,6
Abnormal items 6,3 (2,5) (2,5)
Profit on sale of property, plant
and equipment 6,3
Other (2,5) (2,5)
71,0 40,1 40,1
6. BEE transaction
On 19 September 2005, shareholders approved a Scheme of Arrangement (section 311
of the Companies Act) in terms of which Tiger Brands would facilitate the
acquisition of a 4% direct ownership interest in its issued ordinary share
capital by a broad base of staff employed within the Group. The Court Order
sanctioning the Scheme was registered by the Registrar of Companies on 29
September 2005,being the effective date of acquisition of the Scheme shares.
The total value of the staff empowerment transaction is R723,6million, based on
the closing price of the company"s shares on the JSE Limited on 13 July 2005
of R112 per share. The transaction was implemented on 17 October 2005 through
a number of trusts and a special purpose vehicle. The total value of the
transaction has been reflected as a creditor under current liabilities in the
group balance sheet as at 30 September 2005. The acquisition of 5896183 Tiger
Brands shares by the Black Managers Trust and the Thusani Trust in terms of the
Scheme, at an aggregate cost of R662,1 million has been shown as a deduction
from equity in the group balance sheet as at 30 September 2005.
The cost of the Tiger Brands shares acquired by the General Staff Trust (547733
shares), together with the total expenses of the BEE transaction, is reflected
as an abnormal item of R69,4million in the group income statement (see note 4
above).
7. 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 30
September 2005, no indications of impairment existed. In terms of the
transitional provisions of this statement, changes are done prospectively with
no prior year adjustments.
8. 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 raised a liability of R108,0million at 30 September
2005 to reflect their best estimate of the company"s potential exposure. Of this
amount, R21,0million relates to the current year, 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 Brands" 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 intends to exercise its 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 30 September
2004. A summary of the financial effects of the adjustments is reflected in the
table hereunder:
Net profit for Basic earnings Headline earnings
the year per share per share
Before After Before After Before After
(Rm) (Rm) (cents) (cents) (cents) (cents)
12 months to
30 September 2003 -
actual 1 259,9 1 193,9 754,0 713,2 778,2 737,5
12 months to
30 September 2004 -
actual 1 396,1 1 375,1 833,2 820,6 927,3 914,7
12 months to
30 September 2004 -
pro forma 1 104,1 1 083,1 658,9 646,4 757,7 745,2
OTHER GROUP SALIENT FEATURES
Year ended 30 September
2005 2004 2004
Pro forma Actual
Reviewed Unaudited Audited
Net worth per ordinary share (cents) 2 419 2 158 2 395
Net (cash)/debt to equity (%) (5,1) 30,2 34,8
Interest cover - net (times) 13,8 8,9 11,2
Current ratio (:1) 1,4 1,3 1,2
Capital expenditure (R million) 328,5 373,2 424,9
- expansion 139,8 252,5 273,5
- replacement 188,7 120,7 151,4
Capital commitments (R million) 267,1 175,5 180,7
- contracted 109,2 61,9 66,0
- approved 157,9 113,6 114,7
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 7,0 2,5 1 005,3*
*September 2004: R807,7 million related to contingencies in respect of head
leases entered into by the Spar group for which they had 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) 1 274,5 2 386,7 2 367,0
Listed 563,1 440,9 396,6
Unlisted 131,1 1 311,1 1 335,7
Associates 580,3 634,7 634,7
Fair valuation of investments
(R million) 1 274,5 2 400,2 2 380,5
Listed - market value 563,1 440,9 396,6
Unlisted - directors" valuation 131,1 1 311,1 1 335,7
Associates - directors" valuation 580,3 648,2 648,2
SEGMENTAL ANALYSIS
Year ended 30 September
2005 2004*
Actual
Reviewed Audited Change
Rm % Rm % %
TURNOVER - Continuing
operations
FMCG - DOMESTIC 10 282,9 69 9 771,1 69 5
Domestic Food 9 221,1 62 8 821,7 62 5
Grains 4 515,8 30 4 479,0 31 1
- Milling and Baking+ 3 359,9 22 3 435,7 24 (2)
- Other Grains 1 155,9 8 1 043,3 7 11
Groceries 1 455,2 10 1 366,3 10 7
Snacks & Treats 931,8 7 862,4 6 8
Perishables 2 124,9 14 1 932,9 14 10
Out of Home 193,4 1 181,1 1 7
Consumer Healthcare 1 061,8 7 949,4 7 12
Personal 264,7 2 247,2 2 7
Babycare 347,1 2 281,4 2 23
Homecare 450,0 3 420,8 3 7
PHARMACEUTICALS 1 752,9 12 1 406,0 10 25
Branded Medicines 927,2 7 729,6 5 27
Generic Medicines 505,5 3 373,6 3 35
Consumer Wellbeing# 320,2 2 302,8 2 6
HOSPITAL PRODUCTS 661,6 4 638,4 5 4
EXPORTS 557,5 4 604,3 4 (8)
FISHING 1 696,2 11 1 627,9 12 4
14 951,1 100 14 047,7 100 6
Less: Intragroup revenue 859,6
14,951,1 13 188,1
Spar 11 985,2
14 951,1 25 173,3
OPERATING INCOME
(before amortisation of
intangible assets)
- Continuing operations
FMCG - DOMESTIC 1 219,1 53 1 014,4 51 20
Domestic Food 1 021,9 44 859,8 43 19
Grains 563,9 24 502,7 24 12
- Milling and Baking+ 393,5 17 333,9 15 18
- Other Grains 170,4 7 168,8 9 1
Groceries 198,7 9 159,4 8 25
Snacks & Treats 78,4 3 30,4 2 158
Perishables 160,7 7 149,7 8 7
Out of Home 20,2 1 17,6 1 15
Consumer Healthcare 197,2 9 154,6 8 28
Personal 66,3 3 56,8 3 17
Babycare 60,8 3 46,5 2 31
Homecare 70,1 3 51,3 3 37
PHARMACEUTICALS 708,5 30 576,3 30 23
Branded Medicines 421,6 18 350,1 18 20
Generic Medicines 171,6 7 117,0 6 47
Consumer Wellbeing# 115,3 5 109,2 6 6
HOSPITAL PRODUCTS 227,8 10 209,6 11 9
EXPORTS 18,1 1 16,0 1 13
FISHING 119,5 5 150,8 8 (21)
OTHER 28,1 1 (17,1) (1)
2 321,1 100 1 950,0 100 19
Spar 417,2
2 321,1 2 367,2
+Comprises Maize milling, Wheat milling and baking, sorghum beverages and malt-
based breakfast cereals
Comprises Rice and oat-based breakfast cereals
#Previously OTC Medicines
*Certain figures in 2004 have been reallocated between segments to conform with
the new segmental reporting format implemented with effect from 1 October 2004
STATEMENT OF CHANGES IN EQUITY
Shares
held by
Share subsdiaries
capital Non- and em-
and distributable Accumulated powerment
premium reserves profits trusts Total
Rm Rm Rm Rm Rm
Balance at 30
September 2004 -
as previously
reported 778,0 454,5 3 056,1 (236,3) 4 052,3
Fair value
adjustment -
Sea Harvest
put option
(see note 8) (87,0) (87,0)
Balance at 30
September 2004 -
as adjusted 778,0 454,5 2 969,1 (236,3) 3 965,3
Distribution in
specie in respect
of unbundling of
The Spar Group
Ltd (55,8) 5,4 (386,9) (437,3)
Movement in
treasury shares
as a result of
unbundling of
The Spar Group
Ltd 44,3 44,3
Issue of share
capital and
premium 39,0 39,0
Share buyback (650,0) (650,0)
Shares held by
empowerment
trusts
(see note 6) (662,1) (662,1)
Fair value
adjustments -
investments 97,6 97,6
Fair value
adjustments
to investments
recognised in
income statement 16,2 16,2
Foreign currency
translation
reserve
movement (7,2) (7,2)
Transfers between
reserves 35,2 (35,2)
Impairment charge
for associate
C&T Malt taken
against
previously
revalued amounts (27,7) (27,7)
Movements in
reserves of
associates (46,5) (46,5)
Legal reserves
and other
movements 4,9 4,9
Net profit for
the year 1 565,3 1 565,3
Dividends on
ordinary shares (666,2) (666,2)
Total dividends (684,8) (684,8)
Less: Dividends
on treasury
shares 18,6 18,6
Balance at
30 September
2005 761,2 527,5 3 451,0 (1 504,1) 3 235,6
Balance at
30 September
2003 -as
previously
reported 721,4 378,8 2 231,0 3 331,2
Fair value
adjustment -
Sea Harvest
put option
(see note 8) (66,0) (66,0)
Balance at
30 September
2003 - as
adjusted 721,4 378,8 2 165,0 3 265,2
Issue of share
