| Mon 13 Mar 2006, 7:30 | | AVI Limited - Interim results for the six months e |
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AVI
AVI
AVI Limited - Interim results for the six months ended 31 December 2005
AVI Limited
(Registration number 1944/017201/06)
Share code: AVI
ISIN: ZAE000049433
("AVI" or "the Group")
INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2005
KEY FEATURES
- Revenue from continuing operations up 16% to R2.9bn
- Operating profit from continuing operations up 16% to R290m
- Headline earnings per share from continuing operations up 19% to
60.8 cents per share
- Interim dividend declared - 20 cents per share
Enquiries
Simon Crutchley Tel: +(27) 11 779 2706
Chief executive officer
Rob Katzen Tel: +(27) 11 779 2704
Group financial director
Sam Denoon-Stevens Tel: +(27) 11 779 2721
Investor relations officer
GROUP OVERVIEW
Following the significant restructuring of the Group that was completed last
year, which comprised the sale of Vector Logistics (Pty) Limited and the
unbundling of Consol Limited, AVI continues to make progress on strengthening
its focus on branded consumer products with two transactions completed in
the six month period to December. The acquisition of A&D Spitz (Pty) Limited
("Spitz") was finalised effective 2 July 2005 and the disposal of
Irvin & Johnson Holding Company"s ("I&J") commodity pelagic operation was
completed in November following the sale of the remaining vessels. The results
of the pelagic operation have accordingly been disclosed as "discontinued
operations".
Group revenue from continuing operations increased by 16% assisted by the
inclusion of Spitz. On a like-for-like basis turnover from continuing
operations was constrained by deflationary pressure on selling prices with an
increase of 7% supported by good volume growth in most categories.
The operating margin from continuing operations of 10.0% was in line with that
achieved in the comparable period. Excluding the impact of the Spitz
acquisition, Group margins on a like-for-like basis declined to 8.2% (2004:
10.0%). This decline is largely attributable to the poor performance of I&J and
a worse than anticipated performance from the fresh-to-market brands.
Notwithstanding continued strong operating cash flows, net financing costs
from continuing operations have increased to R15m (2004: R8m) as a result of
the ultilisation of cash resources in respect of the acquisition of Spitz.
The capital items reported under continuing operations consist mainly of an
impairment of the shrimp fishing rights in our Argentine fishing operations,
Alpesca, as a result of continued restricted access to some fishing areas. In
discontinued operations the capital items relate to the profit on sale of the
pelagic vessels.
The effective rate of taxation on continuing operations has remained above the
official rate of taxation due to the STC charge on the dividends paid. This
has been affected by the increase in the Group"s annual dividend payout
ratio to 50% which was effective for the final dividend payment made in
October 2005.
The Group"s headline earnings per share for continuing operations increased by
19% to 60.8 cents (2004: 51.1 cents).
Whilst net borrowings have increased, gearing remains low and the Group has
substantial capacity to raise additional finance should acquisition
opportunities arise.
Cash flow from continuing operations has remained strong. Free cash flow was in
line with the prior period after taking account of continued investment in the
Group"s manufacturing operations with R50m spent on maintenance projects (2004:
R41m).
The Group also continued to invest in new capacity with R47m spent on expansion.
The major area of expansion expenditure was the biscuit category where a new
baking line was installed which will support our innovation initiatives.
SEGMENTAL REVIEW - CONTINUING OPERATIONS
Six months ended 31 December
Revenue Operating profit
2005 2004 2005 2004
Rm Rm % Rm Rm %
change change
Food brands 2 396 2 237 7 202 223 (9)
Groceries 1 391 1 313 6 187 172 9
Frozen foods 775 709 9 16 39 (59)
Fresh-to-market 230 215 7 (1) 12 (108)
Semi-Durable
Brands 479 264 82 96 27 251
Beauty 262 264 (1) 27 27 0
Footwear 217 69 -
Corporate 16 0 (8) 0
Total 2 891 2 501 16 290 250 16
FOOD BRANDS
Groceries
National Brands Limited ("NBL") maintained good performance across most
Categories despite the ongoing deflationary pressure on selling prices,
posting an increase in revenue of 6%. In particular the biscuit brands
performed ahead of expectation. Willards, the snack food brand, continues
to make progress posting an operating profit ahead of expectations against
a loss for the prior period. Overall operating profit increased by 9% to
R187m (2004: R172m).
Costs remained well controlled assisted by the impact of the strong Rand.
However, a significant increase in raw coffee bean prices resulted in costs
increasing, notwithstanding the strength of the Rand. This has affected the
performance of both the coffee category as well as our out-of-home operation,
which has a significant coffee component.
Frozen Foods
Revenue from I&J"s continuing operations grew by 9% to R775m (2004: R709m)
assisted by strong demand for the I&J brand locally and additional hake quota
in Alpesca. Despite the revenue gains, operating profit declined by 59% to
R16m (2004: R39m). Low catch rates and the ongoing prevalence of small fish
in the South African hake fishery increased the costs of catching and
constrained the sale of premium margin products into key export markets.
This, coupled with the increase in fuel costs, substantially reduced the
profitability of the South African operations.
Alpesca was affected by an unexpected labour dispute in September which
constrained production for six weeks affecting both cost recoveries and the
sales of value-added products. The Argentine government"s continued moratorium
on shrimp fishing, to encourage the renewal of the resource, also forced the
shrimp fleet to stand idle resulting in a substantial under-recovery of fixed
overheads.
The announcement of the allocation of Long Term Rights ("LTR") for the South
African fishery was made in January 2006. I&J retained 97% of its 2005 hake
quota. This has coincided with a 5% reduction in the hake Total Allowable
Catch which brings the total reduction for the calendar year 2006 to 8%. The
finalisation of these rights will allow I&J to align its structure to the
current fishing conditions experienced in the South African hake fishery.
Fresh-to-Market
Denny Mushrooms (Pty) Limited ("Denny"), invested substantially in the
development of a new marketing strategy around the Denny brand in the fresh
mushroom category increasing market share from 51% to 53% notwithstanding a
general increase in supply
The increase in supply of fresh mushrooms, combined with an increase in imported
canned product from China at extremely low prices supported by the strength of
the Rand has resulted in significant price deflation which has
negatively impacted on operating results.
The Real Beverage Company (Pty) Limited ("RBC"), had a very difficult and
disappointing six months. A revision to the brand strategy implemented in
the prior year negatively impacted on revenue and together with a
substantial increase in costs, largely because of a change to the
distribution strategy, resulted in RBC posting an unanticipated
operating loss for the period.
SEMI-DURABLE BRANDS
Beauty
Revenue reported by Indigo Cosmetics (Pty) Limited ("Indigo") declined by
1% following a planned reduction of exports to Australia.
The local business, including exports into Africa, has shown only marginal
volume growth as a result of a more competitive trading environment but has
benefited from a 2% price increase, the first such increase in three years. In
addition, a buoyant festive season within cosmetics and fragrances helped
drive growth. While costs were well controlled, advertising and promotional
spend was higher than turnover growth for the period. Operating profit was
in line with that achieved in the prior period.
Footwear
The Spitz business performed ahead of expectation for the six months. Revenue
was up 53% when compared to the same period in the prior year, and on a like-
for-like basis (excluding the six stores that were opened since the
acquisition), the increase was 33%. This exciting growth has been driven by
our three leading brands, Carvela, Lacoste and Kurt Geiger. Operating profit
improved by 57% with operating margins remaining in line with the same period
in the previous financial year.
DISCONTINUED OPERATIONS
I&J has completed the sale of the remaining pelagic vessels at a profit of R10m.
This concludes the disposal of the pelagic operation, which was reclassified as
a discontinued operation in the 2005 financial year.
DIVIDEND
Notice is hereby given that an interim ordinary dividend no.63 of 20 cents per
share for the half year ended 31 December 2005 has today been declared payable
to holders of ordinary shares. The salient dates relating to the payment of the
dividend are as follows:
Last day to trade cum dividend
on the JSE Friday, 31 March 2006
First trading day
ex dividend on the JSE Monday, 3 April 2006
Record date Friday, 7 April 2006
Payment date Monday, 10 April 2006
In accordance with the requirements of STRATE, no share certificates may be
dematerialised or rematerialised between Monday 3 April 2006 and Friday
7 April 2006, both days inclusive.
Where applicable, dividends in respect of certificated shareholders will be
transferred electronically to shareholders" bank accounts on payment date. In
the absence of specific mandates, dividend cheques will be posted to
shareholders. Shareholders who hold dematerialised shares will have their
accounts at their Central Securities Depository Participant ("CSDP") or broker
credited on Monday 10 April 2006.
BLACK ECONOMIC EMPOWERMENT
AVI is committed to transformation at all levels. In this regard, the Group is
in the process of finalising a BEE equity structure which will further the
transformation of the ownership of the Group. The proposed structure is
expected to be presented to shareholders within the current financial year.
OUTLOOK
We believe the outlook for local consumer spending remains sound
notwithstanding indications that the growth in consumer spending may stabilise
through this calendar year.
Consequently, our operating performance expectations for the second semester
generally remain positive save for material concerns regarding I&J. In the
first two months of the current quarter, the landed cost of fish in the South
African fishery has substantially exceeded that of the prior year as a result
of lower catch rates and escalating energy costs. As a result, I&J"s earnings
for the second semester to date show a material decline when compared to the
prior year. Whilst the performance of the South African fishery is volatile, on
the assumption that current fishing conditions prevail through the second
semester, I&J earnings for the full year will be substantially lower than the
prior year.
Given the traditional bias of AVI"s financial performance to the first
semester, the current performance of I&J, a comparatively higher tax rate and
an increase in interest payable following the acquisition of Spitz, AVI"s
headline earnings growth for the financial year is expected to be well below
that achieved in the six months ended 31 December 2005.
Angus Band Simon Crutchley
Non-Executive Chairman CEO
13 March 2005
CONDENSED GROUP BALANCE SHEETS
Unaudited Unaudited Audited
restated*
At 31 December At 31 December At 30 June
2005 2004 2005
Rm Rm Rm
ASSETS
Non-current assets
Property, plant and equipment 1 152,4 1 075,6 1 143,2
Intangible assets 999,5 424,5 420,8
Investments 245,5 264,9 252,6
Deferred tax asset 99,7 74,9 102,0
2 497,1 1 839,9 1 918,6
Current assets
Non-current assets held
for resale 9,9 - -
Inventories 530,3 468,1 488,0
Trade and other receivables 1 053,1 928,2 781,9
Cash and cash equivalents 288,8 235,2 432,0
Assets of discontinued
operations** - 2 038,1 58,1
1 882,1 3 669,6 1 760,0
Total assets 4 379,2 5 509,5 3 678,6
EQUITY AND LIABILITIES
Capital and reserves
Share capital, share
premium, reserves
and retained earnings 2 208,7 3 357,3 2 166,4
Minority interests (4,5) 63,8 (2,9)
Total equity 2 204,2 3 421,1 2 163,5
Non-current liabilities
Interest-bearing borrowings 426,7 139,7 112,4
Deferred taxation 169,4 111,8 134,3
Provisions 275,2 269,5 268,4
871,3 521,0 515,1
Current liabilitiies
Trade and other payables 930,5 819,1 873,2
Corporate taxation 80,8 58,2 35,7
Short-term borrowings 292,4 147,7 78,5
Liabilities of
discontinued operations** - 542,4 12,6
1 303,7 1 567,4 1 000,0
Total equity and liabilities 4 379,2 5 509,5 3 678,6
Notes:
* see supplementary note 4.
** discontinued operations at 31 December 2004 were Consol Limited ("Consol")
and the I&J Pelagic operation. Shares in Consol were unbundled to
shareholders in February 2005 and the I&J Pelagic operating assets were
sold and operations halted during the six months ended December 2005.
CONDENSED GROUP INCOME STATEMENTS
Unaudited Unaudited Audited
restated*
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2005 2004 Change 2005
Rm Rm % Rm
CONTINUING OPERATIONS
Revenue 2 890,5 2 500,7 16 4 790,4
Operating profit before
capital items 289,7 250,4 16 469,1
Income from investments 10,3 13,9 (26) 30,9
Finance costs (25,6) (22,3) (15) (39,6)
Share of equity accounted
earnings of joint ventures 1,6 (1,8) 1,2
Capital items (7,5) 1,2 (21,8)
Profit before taxation 268,5 241,4 11 439,8
Taxation 89,4 83,6 (7) 124,7
Profit from continuing
operations 179,1 157,8 13 315,1
DISCONTINUED OPERATIONS**
Revenue 12,2 1 463,1 1 794,9
Operating profit before
capital items (2,1) 301,6 371,4
Income from investments - 3,4 10,8
Finance costs - (0,6) (4,2)
Capital items 10,4 20,3 18,5
Profit before taxation 8,3 324,7 396,5
Taxation - 108,5 120,8
Profit from discontinued
operations 8,3 216,2 275,7
Profit before net gain on
disposal of discontinued
operation 187,4 374,0 (50) 590,8
Gain on disposal of
discontinued operation - 311,1 (100) 300,5
Profit for the period 187,4 685,1 (73) 891,3
Attributable to:
Equity holders of AVI 189,0 665,7 (72) 873,5
Minority interests (1,6) 19,4 (108) 17,8
187,4 685,1 (73) 891,3
Earnings per share from
continuing operations
(cents)# 57,9 151,0 (62) 198,6
Diluted earnings per
share from continuing
operations (cents)@ 57,4 149,3 (62) 196,1
Notes:
* see supplementary note 4.
** discontinued operations during the six months ended 31 December 2004 were
Consol Limited ("Consol"), Vector Logistics (Pty) Limited ("Vector") and the
I&J Pelagic operation. Vector was disposed of during December 2004, shares
in Consol were unbundled to shareholders in February 2005 and the I&J
Pelagic operating assets were sold and operations halted during the six
months ended December 2005.
# earnings per share is calculated on a weighted average of 312 214 234
(2004: 310 326 004 and 30 June 2005 311 590 025) ordinary shares in issue.
@ Diluted earnings per share is calculated on a weighted average of
314 687 152 (2004: 314 024 908 and 30 June 2005 315 536 786) ordinary
shares in issue.
CONDENSED GROUP CASH FLOW STATEMENTS
Unaudited Unaudited Audited
restated*
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2005 2004 Change 2005
Rm Rm % Rm
CONTINUING OPERATIONS
Operating activities
Cash generated by operations 371,2 363,7 2 631,6
Cash flow from investments 10,3 13,3 23) 30,9
Decrease/(increase) in
working capital (185,8) (168,7) 10 16,3
Cash generated by
operating activities 195,7 208,3 (6) 678,8
Interest paid (15,7) (18,9) 17 (39,6)
Taxation paid (82,8) (101,0) (18) (170,0)
Cash available from
operating activities 97,2 88,4 10 469,2
Dividends paid (115,7) (167,8) (31) (167,9)
Cash retained from
operating activities (18,5) (79,4) (77) 301,3
Investing activities
Property, plant and
equipment acquired (97,4) (88,6) 10 (207,1)
Proceeds from disposals 2,1 (0,2) 6,6
Net investment in property,
plant and equipment (95,3) (88,8) 7 (200,5)
Intangible assets purchased (1,6) - (0,1)
Investments - net
(acquisitions)/disposals (246,6) (188,5) 31 (193,9)
(343,5) (277,3) 24 (394,5)
FINANCING ACTIVITIES
Net increase/(decrease)
in shareholder funding 5,1 9,2 (45) (213,5)
Long term borrowings
- net movement 5,1 (57,8) (109) (101,4)
10,2 (48,6) (121) (314,9)
DISCONTINUED OPERATIONS**
Cash flows from
operating activities (49,8) 205,3 (124) 335,0
Cash flows from
investing activities 33,1 (99,0) 133 (131,1)
(16,7) 106,3 (116) 203,9
Acquisition of minority
equity interest in discontinued
operation - (526,4) (100) (526,4)
Cash flow from disposal
of discontinued operation - 368,1 (100) 505,8
Decrease in net cash and
cash equivalents (368,5) (457,3) (19) (224,8)
Net cash and cash equivalents
at beginning of period 370,2 602,1 (39) 602,1
1,7 144,8 (99) 377,3
Translation of cash equivalents
of foreign
subsidiaries at beginning
of year (5,3) (9,0) (41) (7,1)
Net cash and cash equivalents
at end of period (3,6) 135,8 (103) 370,2
Short-term borrowings 292,4 147,7 98 78,5
Cash and cash equivalents at
end of period 288,8 283,5 2 448,7
Attributable to:
Continued operations 288,8 235,2 23 432,0
Discontinued operations - 48,3 (100) 16,7
288,8 283,5 2 448,7
Notes:
* see supplementary note 4.
** discontinued operations during the six months ended 31 December 2004 were
Consol Limited ("Consol"), Vector Logistics (Pty) Limited ("Vector") and the
I&J Pelagic operation. Vector was disposed of during December 2004, shares
in Consol were unbundled to shareholders in February 2005 and the I&J
Pelagic operating assets were sold and operations halted during the six
months ended December 2005.
CONDENSED GROUP STATEMENTS OF CHANGES IN EQUITY
Share
capital and Treasury Retained
premium shares Reserves earnings
Rm Rm Rm Rm
Six months ended
31 December 2005
Balance at 1 July 2005 15,9 (51,7) (22,3) 2 227,2
Earnings for the period 189,0
Dividends paid (115,4)
Issue of ordinary shares 2,6
Disposal of own ordinary
shares by Share Trusts
(net) 5,6
Foreign currency
translation
differences (41,2)
Cash flow hedging reserve 1,4
Share based payments 3,3
Balance at
31 December 2005 18,5 (46,1) (58,8) 2 300,8
Six months ended
31 December 2004
Balance at 1 July 2004 317,9 (342,4) (11,0) 3 163,4
Earnings for the period 665,7
Dividends paid (167,5)
Issue of ordinary shares 7,8
Net
(acquisition)/disposal
of minority"s equity
interests
in subsidiaries
Disposal of own ordinary
shares by Share Trusts
(net) 1,4
Foreign currency
translation
differences (29,4)
Cash flow hedging reserve (13,0)
Share based payments 1,3
Balance at
31 December 2004 325,7 (341,0) (52,1) 3 661,6
Premium on
minority
equity Minority Total
transactions Total interests equity
Rm Rm Rm Rm
Six months ended
31 December 2005
Balance at 1 July 2005 (2,7) 2 166,4 (2,9) 2 163,5
Earnings for the period 189,0 (1,6) 187,4
Dividends paid (3,0) (118,4) (118,4)
Issue of ordinary shares 2,6 2,6
Disposal of own ordinary
shares by Share Trusts
(net) 5,6 5,6
Foreign currency
translation
differences (41,2) (41,2)
Cash flow hedging reserve 1,4 1,4
Share based payments 3,3 3,3
Balance at
31 December 2005 (5,7) 2 208,7 (4,5) 2 204,2
Six months ended
31 December 2004
Balance at 1 July 2004 - 3 127,9 309,8 3 437,7
Earnings for the period 665,7 19,4 685,1
Dividends paid (167,5) (3,1) (170,6)
Issue of ordinary shares 7,8 7,8
Net
(acquisition)/disposal
of minority"s equity
interests
in subsidiaries (236,9) (236,9) (261,2) (498,1)
Disposal of own ordinary
shares by Share Trusts
(net) 1,4 1,4
Foreign currency
translation
differences (29,4) (1,0) (30,4)
Cash flow hedging reserve (13,0) (0,1) (13,1)
Share based payments 1,3 1,3
Balance at
31 December 2004 (236,9) 3 357,3 63,8 3 421,1
Share
capital and Treasury Retained
premium shares Reserves earnings
Rm Rm Rm Rm
Year ended 30 June 2005
Balance at 1 July 2004 317,9 (342,4) (11,0) 3 163,4
Earnings for the year 873,5
Dividends paid (167,5)
Issue of ordinary shares 8,0 (8,0)
Acquisition of minority
interests in Consol
Limited
Acquisition of minority
interests in Irvin and
Johnson Holding Company
(Pty) Limited
Unbundling of subsidiary
company, Consol Limited (106,7) (4,3) (1 384,5)
Capital repayment of
64 cents per ordinary
share (201,8)
Acquisition of own
ordinary
shares by Share Trusts
(net) (11,6)
Own ordinary shares
acquired
from wholly-owned
subsidiary
company and subsequently
cancelled (1,4) 310,3 (308,9)
Redemption of
convertible
redeemable preference
shares (0,1)
Foreign currency
translation
differences 33,2
Cash flow hedging
reserve 9,7
Share based payments 1,3
Transfer between
reserves (51,2) 51,2
Other movements
Balance at 30 June 2005 15,9 (51,7) (22,3) 2 227,2
Premium on
minority
equity Minority Total
transactions Total interests equity
Rm Rm Rm Rm
Year ended 30 June
2005
Balance at 1 July
2004 - 3 127,9 309,8 3 437,7
Earnings for the year 873,5 17,8 891,3
Dividends paid (167,5) (3,2) (170,7)
Issue of ordinary
shares - -
Acquisition of
minority
interests in Consol
Limited (213,5) (213,5) (312,9) (526,4)
Acquisition of
minority
interests in Irvin
and
Johnson Holding
Company
(Pty) Limited (2,7) (2,7) - (2,7)
Unbundling of
subsidiary
company, Consol
Limited 213,5 (1 282,0) (20,9) (1 302,9)
Capital repayment of
64 cents per
ordinary share (201,8) (201,8)
Acquisition of own
ordinary
shares by Share
Trusts (net) (11,6) (11,6)
Own ordinary shares
acquired
from wholly-owned
subsidiary
company and
subsequently
cancelled - -
Redemption of
convertible
redeemable preference
shares (0,1) (0,1)
Foreign currency
translation
differences 33,2 33,2
Cash flow hedging
reserve 9,7 0,1 9,8
Share based payments 1,3 1,3
Transfer between
reserves - -
Other movements - 6,4 6,4
Balance at 30 June
2005 (2,7) 2 166,4 (2,9) 2 163,5
SUPPLEMENTARY NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 31 DECEMBER 2005
AVI Limited (the "Company") is a South African registered company. The
condensed consolidated financial statements of the Company comprise the
Company and its subsidiaries (together referred to as the "Group") and the
Group"s interest in associates and jointly controlled entities.
1. Statement of compliance
The condensed consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards ("IFRS") and
the interpretations adopted by the International Accounting Standards Board
("IASB") and the requirements of the South African Companies Act.
2. Basis of preparation
The annual financial statements are prepared in millions of South African
Rands ("Rm") on the historical cost basis, except for certain financial and
equity instruments recognised at fair value.
The preparation of financial statements in conformity with IFRS requires
management to make judgements, estimates and assumptions that may affect the
application of policies and reported amounts of assets, liabilities, income
and expenses. The estimates and associated assumptions are based on
historical experience and various other factors that are believed to be
reasonable under the circumstances, the results of which form the basis of
making the judgments about carrying values of assets and liabilities that
are not readily apparent from other sources.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision only affects that period, or in the
period of the revision and future periods if the revision affects both
current and future periods.
The accounting policies have been applied consistently to the periods
presented in these consolidated financial statements.
The accounting policies have been applied consistently by all Group
entities.
Unaudited Unaudited Audited
restated*
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2005 2004 Change 2005
Rm Rm % Rm
3. Determination of
headline earnings
Profit for the
period attributable
to equity holders of AVI 189,0 665,7 (72) 873,5
Total capital items
included in earnings 1,2 330,0 (100) 300,2
Net gain on disposal
of discontinued operation - 311,1 (100) 300,5
Net surplus on disposal
of investments, properties,
vessels and plant and equipment 3,2 21,5 (85) 15,2
Impairment of goodwill - - (18,5)
Impairment of fishing rights (6,3) - -
Taxation attributable to
capital items 4,3 (2,6) (265) 0,2
Minority interest in
capital items - - 2,8
Headline earnings 187,8 335,7 (44) 573,3
Attributable to:
Continuing operations 189,9 158,6 20 337,2
Discontinued operations (2,1) 177,1 (101) 236,1
187,8 335,7 (44) 573,3
Headline earnings per
ordinary share (cents)# 60,1 108,2 (44) 184,0
Continuing operations ( cents) 60,8 51,1 19 108,2
Discontinued operations (cents) (0,7) 57,1 (101) 75,8
Diluted headline earnings
per ordinary share (cents)@ 59,6 106,9 (44) 181,7
Continuing operations ( cents) 60,3 50,5 19 106,9
Discontinued operations (cents) (0,7) 56,4 (101) 74,8
* See supplementary note 4.
# Headline earnings per share is calculated on a weighted average of
312 214 234 (2004: 310 326 004 and 30 June 2005 311 590 025) ordinary
shares in issue.
@ Diluted headline earnings per share is calculated on a weighted average of
314 687 152 (2004: 314 024 908 and 30 June 2005 315 536 786) ordinary
shares in issue.
4. Restated results for six months ended 31 December 2004
The results for the six months ended 31 December 2004 have been restated as
follows:
- the I&J Pelagic operation has been re-classified from a continuing
operation to a discontinued operation in line with the decision taken in
the second half of the 2005 financial year.
- the accounting policy for recognising disposals of shares to the Black
Economic Empowerment "BEE" minorities in I&J has been changed as outlined
in note 5 below.
- revenue has been reduced to take account of rebates that were
previously classified as selling costs by Denny Mushrooms (Pty) Ltd and
The Real Beverage Company (Pty) Ltd.
The table below summarises the effect of these restatements on results for
the six months ended December 2004:
I&J Pelagic BEE Revenue
minorities classification Total
Rm Rm Rm Rm
Revenue - - (12,8) (12,8)
Continuing operations (25,5) - (12,8) (38,3)
Discontinued operations 25,5 - - 25,5
Operating profit before
capital items - - - -
Continuing operations 11,0 - - 11,0
Discontinued operations (11,0) - - (11,0)
Headline earnings - (3,6) - (3,6)
Continuing operations 11,0 (3,6) - 7,4
Discontinued operations (11,0) - - (11,0)
The balance sheet has been restated for the above changes, as well as the
effect of applying the straight-line basis of accounting for operating
leases with fixed escalation payments, as required by Circular 7/2005 -
Operating leases. Compliance with Circular 7/2005 resulted in the
recognition of a non-current liability of R16,2 million at 1 July 2003
representing the difference between lease payments made to date and the
straight line charges recognised in the income statement. The change in the
liability at 31 December 2004 was not significant and was not adjusted in
the financial statements.
5. Accounting recognition of the disposal of shares in Irvin & Johnson Holding
Company (Pty) Limited ("I&J") to BEE partners
The effective direct BEE shareholding in I&J is 25%. Notwithstanding that
the BEE shareholders have beneficial ownership and voting control over their
25% shareholdings, the accounting recognition in the Group"s consolidated
financial statements of the disposal of shares to the BEE companies requires
deferral until the redemption of the preference shares subscribed for to
finance the purchase of such shares as the shares in I&J serve as security
for the cumulative liability on the preference shares.
This resulted in a change in the Group"s accounting policy to recognising
such transactions only upon full redemption of preference share funding
investments. Previously such transactions were recognised upon entering into
the respective agreements. The comparative results and financial position
for the six months ended 31 December 2004 have been restated to conform with
this change in accounting policy.
6. Investment activity
The Company acquired control of A&D Spitz (Pty) Limited ("Spitz") effective 2
July 2005. The initial payment of R255,3 million for 60% of the equity
shares was made on 13 August 2005. The terms of an agreement between the
shareholders make it highly probable that the remaining 40% will be
purchased with effect from July 2007 with the purchase price determined
following the preparation of audited financial statements for the year ended
30 June 2007 in terms of a specific formula.
Consequently the transaction has been accounted for as a 100% acquisition of
Spitz, with payment for 40% of the equity shares deferred until July 2007.At
31 December 2005 the deferred contingent purchase consideration for the
remaining 40% of the equity shares was estimated at R315,3 million.
7. Commitments
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2005 2004 2005
Rm Rm Rm
Capital expenditure commitments for
property, plant and equipment 114.8 105.2 67.8
Contracted for 71.3 42.2 34.2
Authorised but not contracted for 43.5 63.0 33.6
Investments in subsidiaries
- contracted for - - 257.7
It is anticipated that this expenditure will be financed by cash resources,
cash generated from activities and existing borrowing facilities. Other
contractual commitments have been entered into in the normal course of
business.
8. Contingent liabilities
The South African Revenue Service ("SARS") has issued assessments on a foreign
subsidiary in respect of the tax years 1998 through 2004 on which the taxes
assessed by SARS amount to R49.4 million. The total amount in terms of the
assessments, including penalties and interest, is R229.7 million. The 2005 tax
year has not yet been assessed.
The Company has filed a notice of appeal against the 1998 to 2003 assessments.
The issues in dispute are of a complex nature and it is anticipated that the
matter will remain unresolved for an extended period.
Sponsor
Standard Bank
Date: 13/03/2006 07:30:21 AM Produced by the JSE SENS Department
