| Wed 17 May 2006, 17:09 | | Tiger Brands Limited - Group Results and Dividend |
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TBS
TIIH
Tiger Brands Limited - Group Results and Dividend Declaration for the Six Months
Ended 31 March 2006
Tiger Brands Limited
(Registration number 1944/017881/06)
(Incorporated in the Republic of South Africa)
Share code: TBS ISIN: ZAE000071080
Group Results and Dividend Declaration for the six months ended 31 March 2006
* Turnover up 9%
* Operating income before abnormal items up 16%
* Headline earnings per share up 25%
* Interim dividend per share up 37%
Group income statement
Unaudited Audited
Six months Year
ended ended
31 March 30 Sept
2006 2005 2005
Restated Change Restated
Notes Rm Rm % Rm
Revenue 1.6 8 094,1 7 571,4 7 15 198,3
Turnover 6 8 011,9 7 363,7 9 14 775,9
Operating income
before abnormal
items 2 1 206,0 1 042,5 16 2 301,5
Abnormal items 3 355,5 (29,7) (106,5)
Operating income
after abnormal items 1 561,5 1 012,8 54 2 195,0
Interest paid (120,3) (267,5) 55 (553,8)
Interest received 65,5 190,5 (66) 382,4
Dividend income 16,7 17,2 (3) 40,0
(Loss)/income from
associates 4 (27,7) 37,3 71,5
Profit before
taxation 1 495,7 990,3 51 2 135,1
Taxation (332,9) (289,0) 15 (570,2)
Profit for the
period/year 1 162,8 701,3 66 1 564,9
Attributable to:
Ordinary shareholders 1 164,4 700,3 1 553,2
Minorities (1,6) 1,0 11,7
1 162,8 701,3 1 564,9
Number of ordinary
shares in issue (000"s) 170 356* 169 298 169 685
*Includes 8 589 328
shares held as
treasury stock
(March 2005: 5 116 330)
and 5 896 183 shares
owned by staff
empowerment entities
(March 2005: Nil)
Weighted average number
of ordinary shares
(net of treasury and
empowerment shares) on
which headline earnings
and basic earnings per
share are based (000"s) 155 962 165 467 164 195
Headline earnings per
ordinary share (cents) 526,2 419,7 25 986,0
Diluted headline
earnings per ordinary
share (cents) 511,8 412,9 24 966,1
Basic earnings per
ordinary share (cents) 746,6 423,2 76 945,9
Diluted basic earnings
per ordinary share
(cents) 726,1 416,4 74 926,9
Dividends per ordinary
share (cents) 185,0 135,0 37 500,0
Interim dividend
declared 185,0 135,0 37 135,0
Final dividend declared - - 365,0
Reconciliation between
profit for the
period/year and
headline earnings
Profit attributable to
ordinary shareholders 1 164,4 700,3 66 1 553,2
Adjusted for:
Net loss on sale or
discontinuation of
operations - 4,1 3,7
Net profit on sale of
interest in
subsidiaries and
joint ventures (330,1) - (5,2)
(Profit)/loss on sale
of property, plant and
equipment, including
impairment charges (7,7) 13,9 7,5
(Reversal of impairment)/
impairment of
investments, including
net (profit)/loss on
sale (48,0) (15,7) 65,9
Associates 42,1 (8,1) (7,8)
Profit on sale of
property, plant and
equipment (12,5) (7,1) (6,5)
Impairment of fixed
assets 54,6 - -
Other - (1,0) (1,3)
Other - - 1,6
Headline earnings for
the period/year 820,7 694,5 18 1 618,9
Group balance sheet
Audited
Unaudited as at
as at 31 March 30 Sept
2006 2005 2005
Restated Restated
Rm Rm Rm
ASSETS
Non-current assets 3 096,3 4 496,1 3 445,3
Property, plant and equipment 1 600,3 1 417,5 1 474,2
Goodwill and other intangibles 624,7 464,0 537,7
Investments 700,8 2 434,0 1 268,7
Deferred taxation asset 170,5 180,6 164,7
Current assets 5 697,5 6 206,2 5 741,0
Inventories 2 215,8 1 970,3 1 922,4
Trade and other receivables 2 653,2 2 521,0 2 489,5
Cash and cash equivalents 828,5 1 714,9 1 329,1
Assets classified as held
for sale 4,6 4,2 4,2
TOTAL ASSETS 8 798,4 10 706,5 9 190,5
EQUITY AND LIABILITIES
Capital and reserves 3 575,1 3 601,3 3 246,8
Ordinary share capital and
share premium 791,8 749,7 761,2
Non-distributable reserves 493,6 711,7 777,4
Accumulated profits 3 738,2 2 537,7 3 173,7
Tiger Brands Limited shares
held by subsidiary (842,0) (430,7) (842,0)
Tiger Brands Limited shares held
by empowerment trusts (662,0) - (662,0)
Shared-based payment reserve 55,5 32,9 38,5
Minority interest 165,3 128,2 138,4
TOTAL EQUITY 3 740,4 3 729,5 3 385,2
Non-current liabilities 1 713,1 2 193,8 1 683,3
Deferred taxation liability 301,1 536,8 463,5
Provision for post-retirement
medical aid 357,0 394,2 349,8
Long-term borrowings 934,7 1 168,8 762,0
Provision for Sea Harvest
put option 120,3 94,0 108,0
Current liabilities 3 344,4 4 782,8 4 121,5
Trade and other payables 2 988,0 2 680,1 2 736,6
Shareholders for empowerment
transaction - - 723,5
Taxation 195,4 279,7 267,3
Short-term borrowings 161,0 1 823,0 394,1
Liabilities classified as held
for sale 0,5 0,4 0,5
TOTAL EQUITY AND LIABILTIES 8 798,4 10 706,5 9 190,5
Abridged Group cash flow statement
Unaudited Audited
Six months ended Year ended
31 March 30 Sept
2006 2005 2005
Rm Rm Rm
Cash operating profit 1 353,9 1 176,2 2 660,9
Working capital changes (200,9) (216,2) (112,4)
Net financing costs (54,8) (77,0) (171,4)
Dividends received 18,6 23,1 62,3
Taxation paid (413,0) (256,4) (623,4)
Cash available from operations 703,8 649,7 1 816,0
Dividends paid (566,9) (451,1) (677,1)
Net cash inflow from operating
activities 136,9 198,6 1 138,9
Net cash inflow/(outfow) from
investing activities 111,1 (146,3) 760,2
Net cash inflow before financing
activities 248,0 52,3 1 899,1
Net cash outflow on BEE
transaction (723,5) - -
Net cash (outflow)/inflow from
financing activities (25,2) 429,1 (1 980,2)
Net (decrease)/increase in cash
and cash equivalents (500,7)* 481,4 (81,1)
*Includes a decrease of R117 million on short-term borrowings regarded as cash
and cash equivalents.
Statement of changes in equity
Share Non-
capital and distributable Accumulated
premium reserves profits
Rm Rm Rm
Balance at
30 September 2005 -
as previously reported 761,2 527,5 3 451,0
IFRS adjustments (note 7) - 249,9 (277,3)
Balance at
30 September 2005 -
as restated 761,2 777,4 3 173,7
Issue of share capital
and premium 30,6
Fair value adjustments -
investments (321,9)
Foreign currency
translation reserve
movement (7,6)
Transfers between reserves 41,7 (41,7)
Movements in reserves of
associates 2,0
Legal reserves and other
movements 2,0 8,7
Net profit for the period 1 164,4
Dividends on ordinary shares (566,9)
Total dividends (620,4)
Less: Dividends on treasury
shares 53,5
Arising on acquisition of
subsidiaries
Balance at 31 March 2006 791,8 493,6 3 738,2
Balance at
30 September 2004
- as previously reported 778,0 454,5 2 969,1
IFRS adjustments (note 7) - 247,2 (264,7)
Balance at 30 September 2004
- as restated 778,0 701,7 2 704,4
Issue of share capital and
premium 27,5
Distribution in specie in
respect of unbundling of
The Spar Group Limited (55,8) 5,7 (387,3)
Movement in treasury shares
as a result of unbundling
of The Spar Group Limited
Share buy back
Fair value adjustments -
investments 17,4
Foreign currency translation
reserve movement (1,0)
Transfers between reserves 31,9 (31,9)
Impairment charge for
associate C&T Malt taken
against previously revalued
amounts (20,8)
Movements in reserves of
associates (23,2)
Legal reserves and other
movements (1,3)
Net profit for the period 700,3
Dividends on ordinary shares (446,5)
Total dividends (456,1)
Less: Dividends on treasury
shares 9,6
Balance at 31 March 2005 749,7 711,7 2 537,7
Statement of changes in equity (continued)
Shares
held by
subsidiaries
and Share-based
enpowerment payment
trusts reserve Minorities Total
Rm Rm Rm Rm
Balance at
30 September 2005 -
as previously reported (1 504,0) - 138,5 3 374,2
IFRS adjustments
(note 7) - 38,5 (0.1) 11,0
Balance at
30 September 2005 -
as restated (1 504,0) 38,5 138,4 3 385,2
Issue of share capital
and premium 30,6
Fair value adjustments -
investments (321,9)
Foreign currency
translation reserve
movement (7,6)
Transfers between reserves -
Movements in reserves of
associates 2,0
Legal reserves and other
movements 17,0 27,7
Net profit for the period (1,6) 1 162,8
Dividends on ordinary
shares (7,9) (574,8)
Total dividends (7,9) (628,3)
Less: Dividends on
treasury shares 53,5
Arising on acquisition
of subsidiaries 36,4 36,4
Balance at 31 March 2006 (1 504,0) 55,5 165,3 3 740,4
Balance at
30 September 2004 -
as previously reported (236,3) - 132,1 4 097,4
IFRS adjustments
(note 7) - 25,9 - 8,4
Balance at
30 September 2004 -
as restated (236,3) 25,9 132,1 4,105,8
Issue of share capital
and premium 27,5
Distribution in specie
in respect of unbundling
of The Spar Group Limited (437,4)
Movement in treasury
shares as a result of
unbundling of The Spar
Group Limited 44,3 44,3
Share buy back (238,7) (238,7)
Fair value adjustments -
investments 17,4
Foreign currency
translation reserve
movement (1,0)
Transfers between reserves -
Impairment charge for
associate C&T Malt taken
against previously
revalued amounts (20,8)
Movements in reserves
of associates (23,2)
Legal reserves and
other movements 7,0 (0,1) 5,6
Net profit for the period 1,0 701,3
Dividends on ordinary
shares (4,8) (451,3)
Total dividends (4,8) (460,9)
Less: Dividends on
treasury shares 9,6
Balance at
31 March 2005 (430,7) 32,9 128,2 3 729,5
Segmental analysis
Audited
Unaudited Year ended
Six months ended 31 March 30 September
2006 2005 2005
%
Rm % Rm % Change Rm %
Turnover (note 6)
BRANDED CONSUMER
GOODS 5 612,5 70 5 239,4 72 7 10 220,8 69
Domestic Food 5 003,6 62 4 687,0 64 7 9 221,0 62
Grains 2 364,3 30 2 290,5 31 3 4 515,8 31
- Milling and
baking 1 723,3 22 1 699,4 23 1 3 359,9 23
- Other Grains 641,0 8 591,1 8 8 1 155,9 8
Groceries 818,9 10 774,2 11 6 1 455,2 10
Snacks and Treats 553,9 7 453,9 6 22 931,7 6
Perishables 1 149,4 14 1 071,4 15 7 2 124,9 14
Out of Home 117,1 1 97,0 1 21 193,4 1
Consumer
Healthcare 608,9 8 552,4 8 10 999,8 7
Personal 121,2 2 117,8 2 3 251,4 2
Babycare 189,4 2 158,6 2 19 326,9 2
Homecare 298,3 4 276,0 4 8 421,5 3
PHARMACEUTICALS 868,6 11 732,0 10 19 1 639,7 11
Prescription 440,2 5 348,5 5 26 765,7 5
OTC Medicines 284,4 4 247,7 3 15 559,3 4
Consumer
Wellbeing 144,0 2 135,8 2 6 314,7 2
HOSPITAL PRODUCTS 450,5 6 327,3 4 38 661,5 4
EXPORTS 290,8 3 253,8 3 15 557,7 5
FISHING 789,5 10 811,2 11 (3) 1 696,2 11
TOTAL TURNOVER 8 011,9 100 7 363,7 100 9 14 775,9 100
OPERATING INCOME
(before abnormal
items)
BRANDED CONSUMER
GOODS 728,9 60 565,4 55 29 1 220,4 53
Domestic Food 585,9 48 462,6 45 27 1 023,2 44
Grains 300,9 25 248,3 24 21 564,6 24
- Milling and
baking 213,5 18 152,8 15 40 394,2 17
- Other Grains 87,4 7 95,5 9 (8) 170,4 7
Groceries 121,3 10 100,6 10 21 198,7 9
Snacks and Treats 61,3 5 34,8 3 76 79,0 3
Perishables 87,6 7 68,8 7 27 160,7 7
Out of Home 14,8 1 10,1 1 47 20,2 1
Consumer
Healthcare 143,0 12 102,8 10 39 197,2 9
Personal 34,7 3 27,3 3 27 66,3 3
Babycare 44,8 4 29,9 3 50 60,8 3
Homecare 63,5 5 45,6 4 39 70,1 3
PHARMACEUTICALS 377,9 32 329,6 31 15 708,6 30
Prescription 185,8 15 161,3 15 15 341,4 15
OTC Medicines 127,8 11 115,1 11 11 251,9 10
Consumer
Wellbeing 64,3 6 53,2 5 21 115,3 5
HOSPITAL PRODUCTS 113,6 10 111,2 11 2 227,8 10
EXPORTS (7,1) (1) (0,1) 0 18,1 1
FISHING 11,2 1 44,2 4 (75) 112,7 5
OTHER (18,5) (2) (7,8) (1) 13,9 1
TOTAL OPERATING
INCOME BEFORE
ABNORMAL ITEMS 1 206,0 100 1 042,5 100 16 2 301,5 100
Notes
Unaudited Audited
Six months Year
ended ended
31 March 30 Sept
2006 2005 2005
Restated Restated
Rm Rm Rm
1. Revenue
Turnover 8 011,9 7 363,7 14 775,9
Interest received 65,5 190,5 382,4
Dividend income 16,7 17,2 40,0
8 094,1 7 571,4 15 198,3
2. Operating income before abnormal
items
Operating income before abnormal
items is reflected after charging:
Cost of sales 4 893,4 4 559,3 8 883,7
Sales and distribution expenses 1 169,6 1 051,4 2 139,2
Marketing expenses 261,0 269,9 570,5
Other operating expenses 481,9 440,6 881,0
Depreciation (included in cost of
sales and other operating expenses) 121,8 113,2 235,3
3. Abnormal items
Net loss on sale or discontinuation
of operations - (9,8) (6,0)
Profit/(loss) on sale of fixed
assets and intangibles, including
impairment charges 6,9 (21,7) (12,4)
Net profit/(loss) on sale of
interest in subsidiaries and
joint ventures 330,1 - (2,0)
Reversal of impairment/(impairment)
of investments, including
profit/(loss) on sale 48,0 8,8 (82,7)
Fair value adjustment -
Sea Harvest put option (12,3) (7,0) (21,0)
Empowerment transaction costs - - (69,4)
Endowment policy - adjustment to
maturity value - - 90,1
Pension fund surplus apportionment 129,9 - -
Provision in respect of utilisation
of pension fund surplus (142,8) - -
Other (4,2) - (3,1)
Abnormal profit/(loss) before
taxation 355,6 (29,7) (106,5)
Taxation 5,8 4,1 21,9
361,4 (25,6) (84,6)
Minorities - 2,3 7,2
Abnormal profit/(loss) attributable
to shareholders in Tiger Brands
Limited 361,4 (23,3) (77,4)
4. (Loss)/income from associates
Normal trading 14,4 30,1 64,0
Abnormal items (42,1) 7,2 7,5
Profit on sale of property, plant
and equipment 12,5 7,2 7,5
Impairment of property, plant
and equipment (54,6) - -
(27,7) 37,3 71,5
5 Change in accounting policy and adjustments on adoption of IFRS
In accordance with the Listing Requirements of the JSE Limited, Tiger Brands
Limited has adopted International Financial Reporting Standards (IFRS) with
effect from 1 October 2005. The date of first transition to IFRS is 1 October
2004 and, consequently, comparative information for the six months ended 31
March 2005 and the year ended 30 September 2005, which was originally reported
in accordance with South African Statements of Generally Accepted Accounting
Practice (SA GAAP), has been restated in accordance with IFRS and IFRIC
interpretations. The restatements in respect of the year ended 30 September 2005
and the opening balance sheet at 1 October 2004 have been audited by Ernst &
Young. Further interpretations by standard setting authorities may require
further adjustments to restated figures when results for the year ending 30
September 2006 are published.
The disclosures required by IFRS 1 (First-time Adoption of International
Financial Reporting Standards), showing the effects of the changes in accounting
policies from SA GAAP to IFRS, which are not material, are presented under the
heading "Reconciliation of SA GAAP to IFRS" (see note 7).
The Group"s transitional elections in terms of IFRS1 are as follows:
- The Group has elected to transfer all foreign currency translation reserves at
30 September 2004 to distributable reserves.
- Share-based payments: The provisions of IFRS2 have been applied only to share
options granted on or after 7 November 2002. Costs of equity settled share-based
payments are recognised as an expense in the income statement, with a
corresponding credit to a share-based payment reserve which is included in
equity.
- Business combinations: The Group has elected not to retrospectively apply the
requirements of IFRS 3 in respect of business combinations that occurred prior
to 1 October 2004. As a result, the carrying amount of goodwill at 30 September
2004 is the amortised amount at that date less any impairment. Previously
amortised goodwill eliminated against reserves has not been re-instated.
- Property, Plant and Equipment: A first time adopter may elect to use the fair
value of individual property, plant and equipment at transition date as the
deemed cost. The Group has elected to continue accounting on the historical cost
basis rather than using the fair value of individual property, plant and
equipment at transition date as the deemed cost.
6. Changes to comparative figures
Turnover and certain expenses have been restated for the Consumer Healthcare,
Pharmaceuticals and Hospital Products businesses to ensure consistent and
appropriate treatment across the Group in respect of certain marketing and
distribution allowances. There has been no impact on operating income for any of
these businesses. The results of exports have been restated to exclude foreign
currency translation profits which are now included in other.
7. Reconciliation of SA GAAP to IFRS
Unaudited Audited
Six months Year
ended ended
31 March 30 September
2005 2005
Rm Rm
RECONCILIATION OF PROFIT FOR
THE PERIOD/YEAR
As previously reported (SA GAAP) 704,3 1 565,3
IFRS adjustments (4,1) (12,4)
IAS 16 - Property, Plant and
Equipment (0,5) 0,1
IAS 29 - Financial Reporting in
Hyperinflationary Economies 1,9 2,8
IAS 39 - Financial Instruments:
Recognition and Measurement 1,4 0,7
IFRS 5 - Non-current Assets Held
for Sale 0,1 0,1
IFRS 2 - Share based payments (7,0) (16,1)
Deferred tax 0,1 0,2
Minorities 0,0 0,1
As restated under IFRS 700,3 1 553,2
RECONCILIATION OF ordinary
shareholders" eqUity Unaudited Audited Audited
as at As at As at
31 March 30 Sept 30 Sept
2005 2005 2004
Rm Rm Rm
As previously reported (SA GAAP) 3 600,2 3 235,6 3 965,3
IFRS adjustments 14,5 24,1 22,5
IAS 16 - Property, Plant and
Equipment 19,5 29,1 30,2
IAS 29 - Financial Reporting in
Hyperinflationary Economies (5,6) (4,7) (7,3)
IAS 38 - Intangible Assets 0,3 0,3 0,3
IAS 39 - Financial Instruments:
Recognition and Measurement 0,7 - (0,7)
IFRS 5 - Non-current Assets Held
for Sale (0,4) (0,6) -
Deferred Tax (6,2) (9,6) (9,0)
Minorities (7,2) (3,3) (5,1)
As restated under IFRS 3 601,3 3 246,8 3 973,7
Other group salient features
Unaudited Audited
Six months Year
ended ended
31 March 30 Sept
2006 2005 2005
Net worth per ordinary
share (cents) 2 294 2 193 2 015
Net debt to equity (%) 7,1 34,2 (5,1)
Interest cover - net (times) 22,3 13,8 13,7
Current ratio (:1) 1,7 1,3 1,4
Capital expenditure (R million) 209,3 120,5 328,5
- expansion 76,9 30,1 139,8
- replacement 132,4 90,4 188,7
Capital commitments (R million) 502,1 130,5 267,1
- contracted 148,3 72,1 109,2
- approved 353,8 58,4 157,9
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 8,5 7,0
Carrying and Fair value of
investments (R million) 700,8 2 434,0 1 268,7
Listed 27,3 447,8 563,1
Unlisted 86,8 1 366,6 131,1
Associates 586,7 619,6 574,5
The abridged interim results have been prepared in accordance with International
Financial Reporting Standards, IAS34-Interim Financial Reporting and the listing
requirements of the JSE Limited.
The date of the Group"s transition to IFRS is 1 October 2004 and these are the
first interim results prepared under IFRS.
Tiger Brands achieved an increase in headline earnings per share of 25% for the
six months ended 31 March 2006 compared to the corresponding period last year,
with earnings per share increasing by 76%..
These results have been achieved in an environment where selling prices for the
company"s products have, on average, shown negligible growth.
The difference between the 25% growth in headline earnings per share and 76%
growth in earnings per share is due largely to abnormal profits of R330m arising
from the disposal in the period under review of the company"s interests in the
Spanish fishing company Pescanova and the Indian edible oils company Agro-Tech
Foods.
Overview of Results
Demand for the company"s products, whilst strong, has shown some softening in
the rate of growth when compared with the corresponding period last year. Given
the negligible price inflation across the company"s wide basket of leading food
and healthcare brands, the 9% increase in turnover is attributable to organic
growth coupled with the successful integration of the recently acquired
businesses of Donmed Pharmaceuticals, Vita-Thion, The Scientific Group,
ClassiClean and Hot Favourites. The merger of Tiger"s deciduous fruit interests
with those of Ashton Canning, to create L&A Foods (Pty) Ltd, had a further
positive effect on turnover.
The benefits of organic and acquisitive growth were further enhanced at the
operating income level by the ongoing focus on operational efficiencies,
productivity and cost reduction. There was an increase of 16% in total
operating income, with the operating margin improving to 15.1% compared to 14.2%
in the same period last year.
Particularly good results were achieved by the Domestic Food and Consumer
Healthcare businesses. The Pharmaceuticals business produced a solid
performance, with scheduled medicines experiencing significant price deflation
in the period under review. These results were partly offset by a disappointing
performance from Fishing and a loss recorded by the Export operations.
A net borrowing level of R267m at 31 March 2006 reflects a R440m cash
utilisation compared to the net surplus cash position of R173m reported at 30
September 2005.
In the period under review the company experienced significant cash outflows in
respect of its BEE empowerment transaction (R724m), capital expenditure and
acquisitions (R320m), tax payments (R413m) and the 2005 final dividend payment
(R567m). However, a combination of the group"s strong cash generating
capability and the cash proceeds of R383 million generated from the sales of
Pescanova and Agro-Tech Foods, contained the movement in net debt levels.
Net financing costs reduced as a result of lower average debt levels and the
repayment of certain higher cost debt in September 2005. Interest cover has
accordingly improved from 13.8 times in March 2005 to 22.3 times in the current
period.
Income from associates declined from a profit of R37m in the comparative period
to a loss of R28m in the period under review. The underlying performance of
associates is distorted by the inclusion of items of a capital nature in both
the comparative period and the period under review. Excluding capital items,
the underlying contribution from associates reflects a decline from R30m to
R14m. Whilst Empressas Carozzi"s (24% owned) contribution in Chilean pesos was
below the prior period as a result of slower growth in Chile, the contribution
in rands reflected an increase as a result of the stronger peso. C&T Malt (50%
owned) recorded an attributable loss in the current period (after excluding
items of a capital nature) compared to an attributable profit in 2005. This
performance reflects the continued difficult trading conditions being
experienced as a result of both backward integration and consolidation in the
global brewing industry.
Review of Operations
Branded Consumer Goods (BCG)
There were some strong performances within BCG where turnover growth of 7%
translated into a 29% growth in operating income.
Domestic Food increased operating income by 27% off a turnover increase of 7%.
Turnover included a negligible price increase component, with price deflation
being experienced in certain categories.
Within the Grains segment, the growth in operating income of 21% was largely
driven by a 40% increase in Millbake, where continued strong volume growth at
Albany and reduced losses in Maize, were the major contributors to the
improvement. The 8% decline in operating income recorded by Other Grains (oat
based breakfast cereals, pulses and rice) reflects a conscious execution of
strategy aimed at sustaining continued market share growth. The Rice business
was able to grow volumes and market share in a category where total volumes
declined. With world rice prices having risen significantly over the past two
years, this decline in operating income is largely attributable to management"s
decision not to fully pass on increases in the cost of imported rice as a result
of a change in the relative price positioning of rice compared to other
carbohydrates. The Breakfast category recorded satisfactory levels of volume
growth with the relaunch of the Jungle Oatso Easy range being particularly
successful.
The Groceries business recorded a 21% improvement in operating income off a 6%
increase in turnover. The combination of effective price management at the
point of sale, and a continued focus on costs, were key contributors to this
performance. Koo baked beans, All Gold tomato sauce and Black Cat peanut butter
enjoyed significant volume increases. There were also pleasing volume growths
in the Koo canned fruit and vegetable ranges, as well as in All Gold tomato
products.
The performance of the Pasta category was disappointing, reflecting a decline in
sales volumes as a result of recurring plant interruptions. Operating income
was also negatively impacted by the need to import more expensive pasta in order
to service the market whilst completing major plant maintenance.
The significant recovery in the results of the Snacks & Treats business noted in
the prior year has been sustained in the current period. Operating income of
R61m reflected an increase of 76%, with turnover increasing by 22%. The improved
results reflect the benefits of the significant restructuring of the business
which has lowered costs without impacting on its innovation capabilities. A
combination of high levels of innovation, and a more relevant value proposition,
has resulted in double digit growth in both the Chocolate and Sugar
confectionery categories. Particularly good growth was experienced in Beacon
chocolate slabs, Jungle Energy Bars, Fizz Pops, Mmmallows, Maynards and
Sparkles. The competitive environment, particularly in respect of imports from
South America, remains largely unchanged.
Within the Perishables portfolio, the results of Enterprise reflect an improved
second quarter, with good volume growth, after a poor first quarter which was
negatively impacted by an industrial dispute. Competition in this category has
intensified over the past year. The recovery in DairyBelle"s profitability,
which commenced in the second half of the previous financial year, has been
sustained in the period under review. Sales realisations were firmer as a
result of a better balance between supply and demand. Volume growth in yoghurts
and value added cheese products was strong in the current period.
The Consumer Healthcare business grew operating income by 39% off a 10% increase
in turnover. The growth in operating income was positively impacted by a
partial deferral of the planned marketing spend to the second half of the year.
Baby Care saw strong volume growth in both the nutrition and wellbeing
categories, with Purity Cream of Maize and Cream of Mabela delivering excellent
volume growth in the baby cereals category. A new Purity infant formula range
was launched in March and was well accepted by customers. The Home Care
category continued to grow volumes with good performances from Doom and Airoma
in particular. Personal Care remains a challenging and competitive category. A
good performance in body care (Ingram"s Camphor Cream, Mousson and Dolly Varden)
was partly offset by disappointing performances in both face and hair care.
Pharmaceuticals
In order to align reporting with the management structure and provide clarity
and greater transparency, segmental disclosure for the Pharmaceuticals business
has been amended with a consequential revision to comparatives. Given that
Adcock Ingram is a branded generics business, the newly created Prescription
category now includes all medicines classified as Schedule 3 and above. These
include brands such as Myprodol, Adco-Simvastatin, Adco-Amoclay and Adco-
Zolpidem. This category also includes the Tender and Anti-Retroviral sub
categories. OTC Medicines comprise brands primarily sold through the pharmacy
channel, being predominantly Schedule 0 - 2 medicines. These include brands
such as Vita-Thion, Syndol, Corenza C, Inteflora and Betapyn. The results of
this category were previously reported within Branded Medicines.
The Prescription category grew operating income by 15% compared to a 26%
increase in turnover. The results reflect the successful integration of the
Donmed Pharmaceuticals acquisition and excellent levels of organic volume
growth. The lower increase at the operating income level, relative to turnover,
was largely due to significant selling price deflation, research & development
expenditure on Anti-Retrovirals and the investment in enhancing management depth
to facilitate future growth.
Excluding the positive impact of newly acquired Vita-Thion, volume growth in the
OTC category was good, with particularly strong performances from Adco-dol,
Synap Forte and Corenza C.
The Consumer Wellbeing category benefited from good performances from Panado,
Bioplus, Compral and Citro Soda. The growth in operating income was favourably
influenced by the slower phasing of advertising spend relative to the
comparative period.
Hospital Products
The Hospital Products business continued to operate in a challenging and
competitive environment. A reduction in blood collections and the loss of an
agency in the second half of last year continued to have an adverse impact in
this reporting period. However, blood transfusion volumes are starting to
recover, whilst the sales of the Cardinal glove range have improved
significantly. The Scientific Group is being successfully integrated and whilst
not a significant contributor to operating income in the current period, is
expected to meet expectations with an improved contribution in the second half
of the year.
Exports
With rand strength persisting, the results recorded by the Export operations
were disappointing. Operating losses of R7m were incurred compared to a
breakeven position in the comparative period. (Prior year results have been
restated to exclude the foreign currency translation profits which are now
included under Other in the accompanying segmental analysis). The merger of
Tiger"s Deciduous Fruit interests with those of Ashton Canning has yielded the
anticipated benefits, but the operating results were affected by the continued
strength of the rand, the deterioration in foreign currency denominated pricing
and a poor peach crop.
Fishing
The company"s fishing interests comprise Sea Harvest (74%) and Oceana Group
Limited (39%).
Sea Harvest achieved disappointing results, incurring an operating loss of R9.6m
for the half-year. Sales volumes were adversely affected by the extremely poor
catch rates of the wet fish trawler fleet, whilst exports were
disproportionately impacted by the shortage of product. Overhead costs were
negatively influenced by a significant increase in fuel prices.
Proportionately consolidated Oceana, which is separately listed on the JSE
Limited, reported a 14% increase in headline earnings per share for the six
months ended
31 March 2006. Turnover decreased by 3% whilst operating profit before abnormal
items was in line with last year. The overall results from Midwater and Deepsea
Fishing, together with those of the Cold Storage division, were substantially
higher than last year. However, these good results were offset by a poor
performance from Inshore Fishing as a result of significantly lower landings of
pilchard and industrial fish.
During the period under review, initial allocations of Long Term Commercial
Fishing Rights were awarded to industry participants. These allocations are
subject to the outcome of a process of appeals which are currently being lodged
by various parties. The Minister is expected to hand down his decisions in the
near future.
Other
This line item in the segmental analysis includes the costs associated with
share options granted to Tiger Brands management and vesting rights awarded to
Black Managers in terms of the recent Staff Empowerment transaction. The costs
have been determined in accordance with IFRS 2 - Share-based Payments. Also
included in this line item are foreign currency translation profits and losses
arising in the Export operations. These profits and losses were previously
included under Exports. Comparative figures have been restated accordingly.
Acquisitions
During the period under review, the Group made a number of acquisitions. The
acquisition of the 74% interest in The Scientific Group (Pty) Ltd and of the
Cape Town-based Hot Favourites business were effective from 1 October 2005 and 1
November 2005 respectively. The Scientific Group (Pty) Ltd is involved in Bio-
technology, Imaging, Hospital Equipment and Medical Diagnostics. Brimstone
Investment Corporation, a Black owned company, holds the remaining 26% in The
Scientific Group. Hot Favourites is a dedicated food service business that
supplements the Out of Home business. The acquisition of the ClassiClean
business, which marks the Group"s entry into the laundry care market, was
effective 25 February 2006.
During April 2006, it was announced that agreements had been reached to acquire
from Cadbury Schweppes all the issued shares of Bromor Foods (Pty) Ltd and to
acquire from Nestle, its sugar confectionery portfolio in South Africa. Both
these acquisitions are subject to the approval of the Competition authorities,
decisions in respect of which are expected towards the end of the current
financial year.
Board of Directors
As shareholders have previously been advised, Robbie Williams retired as a
director and Chairman of the company at the conclusion of the annual general
meeting of shareholders held on 23 February 2006. With effect from that date,
Lex van Vught was appointed Chairman of the Company and Bheki Sibiya the Deputy
Chairman. Roy Smither, an executive director of the company, elected to take
early retirement with effect from 31 March 2006 and consequently resigned from
the Board.
Richard Dunne has been appointed a non-executive director of the company with
effect from 1 June 2006. He is a senior partner in a major accounting firm from
which he will be retiring on 31 May 2006.
Noel Doyle, the Chief Financial Officer, has been appointed as an executive
director with effect from 1 June 2006.
Jan van den Berg, who has been a non-executive director of the company since
1990 and having reached the board retirement age, will be retiring on 1 June
2006. The board appreciates the significant contribution made by Jan during his
term of office as a non-executive director.
Interim Dividend
In line with the previously stated intention to correct the historical imbalance
between the interim and final dividend relative to headline earnings per share,
the Board has decided to declare an interim dividend of 185 cents per share.
This represents an increase of 37% on the interim dividend declared last year of
135 cents per share.
The Board considers that an annual dividend cover of 2.0 times is at an
appropriate level and does not anticipate any further change in the annual cover
ratio.
Prospects
Domestic economic indicators remain positive, although there are signs of some
gradual weakening. The rate of increase in headline earnings per share for the
full year ending 30 September 2006, whilst likely to be below the rate of
increase reported at the half year, is nevertheless expected to reflect good
growth in real terms.
For and on behalf of the Board
Lex van Vught Nick Dennis
Chairman Chief Executive Officer
17 May 2006
Declaration of ordinary dividend number 123
Notice is hereby given that an interim dividend of 185 cents per share has been
declared in respect of the half year ended
31 March 2006.
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, 7 July 2006
Shares commence trading ex-dividend Monday, 10 July 2006
Record date Friday, 14 July 2006
Payment of dividend -
South Africa and United Kingdom Monday, 17 July 2006
Shareholders will not be permitted to dematerialise/rematerialise their shares
between Monday, 10 July 2006 and Friday, 14 July 2006, both days inclusive.
By order of the Board
I W M Isdale
Secretary
Sandton
17 May 2006
Directors:
Independent directors: L van Vught (Chairman), B L Sibiya (Deputy Chairman), B H
Adams, D D B Band, S L Botha,
B P Connellan, U P T Johnson, A C Nissen, G N Padayachee, J L van den Berg
Executive directors: N Dennis (Chief Executive Officer) (British), M H Franklin,
M C Norris, 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
Sponsor: J.P.Morgan Equities Limited
Date: 17/05/2006 05:13:59 PM Produced by the JSE SENS Department
