| Wed 24 May 2006, 17:15 | | Rainbow - Abridged Audited Group Results for the Y |
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RBW
RBW
Rainbow - Abridged Audited Group Results for the Year Ended 31 March 2006
RAINBOW CHICKEN LIMITED
("Rainbow" or "the Group")
(Registration number 1966/004972/06)
JSE share code: RBW
ISIN code: ZAE000019063
ABRIDGED AUDITED GROUP RESULTS FOR THE YEAR ENDED 31 MARCH 2006
SALIENT FEATURES
REVENUE
up 1.8%
HEADLINE EBITDA
up 86.9%
HEADLINE EARNINGS
up 89.7%
FULLY DILUTED HEADLINE EARNINGS PER SHARE
up 86.9%
CASH GENERATED BY OPERATIONS
up 69.1%
DIVIDEND PER SHARE
up 86.9%
CONSOLIDATED BALANCE SHEET
Restated
for IFRS
31 March 31 March
2006 2005
R"000 R"000
ASSETS
Non-current assets
Property, plant and equipment 962 194 850 318
Trademarks 404 1 205
Goodwill 287 444 287 444
Deferred taxation - 16 023
1 250 042 1 154 990
Current assets
Inventories 320 420 260 493
Biological assets 242 199 238 656
Trade and other receivables 517 442 425 883
Derivative financial instruments 19 790 178
Taxation receivable 1 513 15 799
Cash and cash equivalents 394 383 106 007
1 495 747 1 047 016
Total assets 2 745 789 2 202 006
EQUITY
Capital and reserves 1 595 901 1 286 706
LIABILITIES
Non-current liabilities
Deferred taxation 168 519 180 082
Post-retirement medical obligation 69 683 63 677
Finance lease liability 116 651
238 318 244 410
Current liabilities
Trade and other payables 781 800 626 653
Provisions 30 771 15 585
Finance lease liability 698 1 264
Derivative financial instruments 402 15 980
Taxation payable 97 899 11 408
911 570 670 890
Total liabilities 1 149 888 915 300
Total equity and liabilities 2 745 789 2 202 006
CONSOLIDATED INCOME STATEMENT
Restated
for IFRS
Year ended Year ended
31 March 31 March
2006 2005
R"000 R"000
Revenue 4 101 454 4 026 998
Operating profit before depreciation 687 588 393 298
and amortisation
Depreciation and amortisation (109 744) (78 036)
Operating profit 577 844 315 262
Finance costs (2 351) (1 126)
Finance income 9 930 28 146
Profit before taxation 585 423 342 282
Taxation (186 578) (111 959)
Profit for the year attributable to the 398 845 230 323
equity holders of the Group
CONSOLIDATED CASH FLOW INFORMATION
Restated
for IFRS
Year ended Year ended
31 March 31 March
2006 2005
R"000 R"000
Operating profit before working capital 693 971 374 109
requirements
Working capital requirements (13 880) 28 136
Cash generated by operations 680 091 402 245
Net finance income 7 579 27 020
Dividends paid (105 273) (83 435)
Taxation paid (81 341) (146 009)
Net cash flows from operating 501 056 199 821
activities
Net cash flows from investing (221 367) (581 570)
activities
Net cash flows from financing 8 687 5 470
activities
Net increase/(decrease) in cash and 288 376 (376 279)
cash equivalents
Cash and cash equivalents at the 106 007 482 286
beginning of the year
Cash and cash equivalents at the end of 394 383 106 007
the year
HEADLINE EARNINGS
Restated
for IFRS
Year ended Year ended
31 March 31 March
2006 2005
R"000 R"000
Profit for the year attributable to the
equity holders of the Group 398 845 230 323
Loss/(profit) on disposal of property, 3 626 (8 110)
plant & equipment
Net asset impairment provision release (2 186) (11 224)
Headline earnings 400 285 210 989
STATEMENT OF CHANGES IN EQUITY
Stated Share-based Retained
capital payments earnings Total
R"000 R"000 R"000 R"000
Balance at 1 April
2005
as previously 1 105 959 - 231 852 1 337 811
reported
IFRS adjustments:
Share-based payments - 8 391 (8 391) -
Property, plant and - - (50 278) (50 278)
equipment
Post-retirement - - (827) (827)
medical obligation
Balance at 1 April 1 105 959 8 391 172 356 1 286 706
2005 restated
Profit for the year - - 398 845 398 845
attributable to the
equity holders of
the Group
Ordinary dividends - - (105 273) (105 273)
paid
Employee share
option scheme:
Proceeds from shares 9 788 - - 9 788
issued
Value of employee - 5 835 - 5 835
services
Balance at 31 March 1 115 747 14 226 465 928 1 595 901
2006
SUPPLEMENTARY INFORMATION
Restated
for IFRS
Year ended Year ended
31 March 31 March
2006 2005
R"000 R"000
Capital expenditure contracted and 102 590 134 076
committed
Capital expenditure approved but 48 981 32 279
not contracted
Contingencies 36 914 38 290
STATISTICS
Ordinary shares in issue (000"s) 279 222 275 449
Weighted average ordinary shares (000"s) 277 096 273 387
in issue
Fully diluted weighted average (000"s) 285 558 281 275
ordinary shares in issue
Basic earnings per share (cents) 143.9 84.2
Basic earnings per share - diluted (cents) 139.7 81.9
Headline earnings per share (cents) 144.5 77.2
Headline earnings per share - (cents) 140.2 75.0
diluted
Net asset value per share (cents) 571.6 467.1
Ordinary dividends:
Interim dividend paid (cents) 17.0 9.5
Final dividend declared (cents) 40.0 21.0
BASIS OF PREPARATION
The financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRS) and in compliance with the Companies Act of
South Africa of 1973 and the Listings Requirements of the JSE Limited.
These are the Group"s first IFRS financial statements and comparative figures
have accordingly been restated. A separate Transition to IFRS report was
published on SENS on 1 November 2005. The disclosures required by IFRS 1 (First-
time Adoption of IFRS) reflecting the reconciliation from South African
Statements of Generally Accepted Accounting Practice (SA GAAP) to IFRS were set
out in the interim announcement published on 16 November 2005 and will be
repeated in the annual financial statements.
As previously noted, reporting the financial effects of certain financial
instruments, used in the feed raw material procurement strategy, in accordance
with IAS 39 (Financial Instruments: Recognition and Measurement) materially
impacts the Group"s financial results. The pre-taxation impact of applying IAS
39 on the Group"s results is a positive R63.5 million (2005: R18.3 million
negative).
OVERVIEW AND MARKET CONDITIONS
The Group"s results for the year ended 31 March 2006 reflect significant growth
with headline earnings up 89.7% compared to the previous year.
The South African economy has grown by 4.4%, the highest rate in decades.
Despite the higher oil price, the macro economic environment remained positive
during the year with further tax relief afforded by the fiscus, low inflation
and stable interest rates all contributing to increased consumer spending. The
local chicken industry has grown by an estimated 8% in volume.
The reduced planting and lower anticipated yields for the 2006 maize season have
resulted in a 63.0% increase in the 31 March year-on-year closing SAFEX price.
Rainbow remains comfortable with its overall raw material procurement positions
relative to the market and its competitors.
The local chicken industry remains on high alert for Avian Influenza (AI). AI
outbreaks internationally have more recently been reported in Asia, Europe and
in Africa as far south as Nigeria. Rainbow and the local industry at large,
through the Southern African Poultry Association (SAPA) and in co-operation with
the National Department of Agriculture, have focused on prevention through
increased bio-security and stepped-up surveillance and monitoring of flock
health.
The strength of the rand, increased domestic demand for chicken and
international developments relating to AI all contributed to imports of chicken
products increasing by 18.9% over the period. Extension of the anti-dumping
tariff on the USA is currently being reviewed and a ruling is expected in the
near future.
REVIEW OF OPERATIONS
The five pillars of the Group"s strategic direction are consumer insight
(consumers being the heart of our business), customer focus (creating win-win
partnerships), supply chain (delivering excellence), business investment
(investing for future growth) and our culture (doing things inspirationally).
The excellent results achieved in the current year reflect the benefits of this
strategy, and the operational board restructure which took place in May 2005
provided the platform for this success.
The significant plant upgrades in Rustenburg and Worcester and the Further
Processing Plant in Hammarsdale were all completed during the period under
review. These investments, totalling R222 million, are key to delivering on
Rainbow"s consumer and customer focused strategy and enabling further supply
chain efficiencies.
Investment continues to be made in understanding consumer demand. A significant
amount of research and development was conducted on preparing for the launch of
the new value added products out of the Further Processing Plant. This
culminated in trade launches during February 2006 at which 66 new retail and
foodservice products were introduced under the Farmer Brown, Rainbow and Rainbow
FoodSolutions brands.
Rainbow has continued to support and invest in its brands via TV advertising and
various consumer activations. The TV campaign has been particularly successful,
achieving an impressive 98.0% awareness amongst the target market.
Epol is a critical element of Rainbow"s overall cost chain. Its strategic
priorities are cost-effective procurement, milling efficiency, targeting
external business thus ensuring better capacity utilisation and optimising the
feed specification in relation to Rainbow"s Cobb breed to achieve the lowest
cost bird. The feed industry remains under pressure due to over-capacity, with
resultant pressure on margins. As a consequence, a decision has been taken to
close the Roodeport mill and consolidate inland volumes from the Rustenburg and
Pretoria mills.
Epol continues to recover external volumes lost as a result of the feed
contamination issue. In February 2006 Epol was awarded the ISO 22000
certification for all its sites, being the first operation in South Africa and
the first feedmilling operation in the world to achieve such accreditation.
Vector"s results for the year are in line with expectation. Progress continues
to be made in realising synergies between Rainbow and Vector through an aligned
business strategy. This is in particular evidenced in Rainbow"s improved
customer mix. The new contracts with Nando"s and Spur within Vector"s Multi
Temperature Contract Distribution (MTCD) business, as well as Willowton within
the traditional business, are progressing well. In addition, from January 2006,
Vector began servicing the balance of Rainbow"s volumes previously distributed
by a third party.
Whilst the Group remains committed to implementing an integrated Enterprise
Resource Planning (ERP) system to effectively manage the complex supply chain, a
decision was taken to revisit the proposed implementation to take account of
other business requirements. In the short-term, Rainbow will leverage the Vector
SAP system to integrate its outbound sales and distribution process to further
support the Group"s strategy. This will enable other opportunities to be pursued
in the short-term and further preparatory work to be performed in respect of an
extended ERP roll-out.
Recovery of the significant feed contamination claim against the responsible
supplier is progressing, but to date remains outstanding.
FINANCIAL REVIEW
A number of strategic initiatives have resulted in Rainbow"s strong performance.
These initiatives have enabled the Group to achieve a 14.0% increase in chicken
volumes in targeted customers and branded products, with reduced volumes to non-
strategic, unprofitable 3rd parties like reprocessors resulting in improved
customer and product mix. In addition, supply chain efficiencies were improved
further, Vector made a full year contribution and the feed raw material strategy
delivered lower feed input costs.
Chicken revenue for the year was 5.1% higher than the previous year (2005:
5.5%). Food inflation remains low with Rainbow"s average price realisation
growth of 2.0% resulting from improved product mix offset by lower contractual
foodservice pricing. Overall chicken volumes increased by 3.1%, with the
pleasing growth in sales to targeted customers and brands largely offset by the
reduction of supply to reprocessors.
Group revenue increased by 1.8% to R4.1 billion (2005: R4.0 billion). This lower
rate of increase is a function of Epol"s revenue to external customers being
impacted by the lower maize cost as well as lower but recovering volumes as a
consequence of the feed contamination issue.
Revenue - Rm 2006 2005 %
Chicken 3 447 3 281 5.1
External sales - Cobb, Epol and Vector 654 746 (12.3)
Reported revenue 4 101 4 027 1.8
Headline EBITDA increased by 86.9% to R688.1 million (2005: R368.2 million),
reflecting the improved customer and product mix, lower feed input cost and the
inclusion of Vector"s earnings for a full year. The headline EBITDA margin
increased to 16.8% (2005: 9.1%).
Taxation increased in line with the higher operating profit. The effective
taxation rate however reduced to 31.9% (2005: 32.7%) as a result of the 1%
taxation rate adjustment to the deferred taxation liability (R5.4 million).
Finance income reduced by 64.7% due to the acquisition of Vector in October
2004.
Headline earnings increased by 89.7% to R400.3 million (2005: R211.0 million)
with diluted headline earnings per share improving by 86.9% to 140.2 cents per
share (2005: 75.0 cents per share).
Cash generated by operations improved by 69.1% to R680.1 million (2005: R402.2
million) as a result of the overall improved performance of the Group and the
continued focus on managing working capital.
Capital expenditure was R234.4 million (2005: R200.0 million), which included
R64.7 million in respect of the Further Processing Plant. A further amount of
R102.6 million (2005: R134.1 million) has been contracted and committed, but not
spent, whilst a further R49.0 million (2005: R32.3 million) has been approved,
but not contracted. The Group continues to follow a policy of upgrading its
facilities and funding normal levels of replacement capital expenditure from its
own resources.
Return on equity increased to 27.7% (2005: 18.7%).
DIRECTORATE
Mr LJ Grobler and Mr WE Buhrmann resigned from the Board with effect from 30
June 2005 and 17 November 2005 respectively. The Board wishes to express its
appreciation for their contribution to the business. Mrs M Nhlanhla and Mr DG
Zwiegelaar were appointed as non-executive directors with effect from 19 July
2005 and 17 November 2005 respectively.
AUDIT OPINION
The annual financial statements, from which the abridged Group Results contained
herein are derived, have been audited by PricewaterhouseCoopers Inc. Their
unqualified Audit Reports on the annual financial statements and the abridged
Group Results are available for inspection at the company"s registered office.
PROSPECTS
Consumer spending is expected to remain positive. Demand for chicken
specifically as an affordable protein source is also expected to remain strong.
Maize prices are likely to remain at the current higher levels with the impact
on feed input costs only partly offset by the lower soya price.
Results for the period ahead will continue to be negatively impacted by the
investment cost associated with the Further Processing Plant while initial
capacity utilisation is relatively low. Returns will however be in line with
original expectation.
Capital expenditure in agriculture and feedmilling over the next few years is
expected to be higher than normal. This will enable further supply chain
efficiencies and additional chicken volume capacity.
Excluding any potential impact of IAS 39 (the required year end adjustment of
financial instruments used strategically in the forward procurement of feed),
the Group expects to report real earnings growth for the next financial year.
DIVIDEND DECLARATION
Notice is hereby given that on 24 May 2006 the Board declared a final dividend
(number 66) of 40.0 cents per ordinary share in respect of the twelve months
ended 31 March 2006 (2005: 21.0 cents). The total dividend for the year is 2.5
times covered by fully diluted headline earnings per share (2005: 2.5 times).
The salient dates of the declaration and payment of this dividend are as
follows:
Last date to trade ordinary shares cum Thursday, 15 June 2006
dividend
Ordinary shares trade ex dividend Monday, 19 June 2006
Record date Friday, 23 June 2006
Payment date Monday, 26 June 2006
Share certificates may not be dematerialised or rematerialised between Monday,
19 June 2006 and Friday, 23 June 2006 (both dates inclusive).
For and on behalf of the Board
M H Visser M Dally Durban
Non-executive Chairman Chief Executive Officer 24 May 2006
Directors: MH Visser (Non-executive chairman), M Dally (CEO)*,
RH Field*, M Griessel, JB Magwaza, M Nhlanhla, N Phillips,
DW Vale, DG Zwiegelaar
* Executive Directors
Company secretary: SB Heath
Registered office: Rainbow Chicken Limited, One the Boulevard, Westway Office
Park, Westville, 3630
Transfer secretaries: Computershare Investor Services 2004 (Proprietary)
Limited, 70 Marshall Street, Johannesburg 2001
Auditors: PricewaterhouseCoopers Inc
Sponsor: RAND MERCHANT BANK (a division of FirstRand Bank Limited)
Bankers: ABSA Bank Limited
Website: www.rainbowchicken.co.za
Date: 24/05/2006 05:15:09 PM Produced by the JSE SENS Department
