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TBS
TIIH
Tiger Brands - Group Results and Dividend Declaration for the Year Ended
September 2006
Tiger Brands Limited
(Incorporated in the Republic of South Africa)
(Registration number 1944/017881/06)
Share code: TBS
ISIN code: ZAE000071080
("Tiger Brands" or "the Company")
Group results and dividend declaration for the year ended 30 September 2006
- Headline earnings per share up 22%
- Earnings per share up 56%
- Total dividend per share up 21%
The abridged result have been prepared in accordance with International
Financial Reporting Standards, IAS 34 - Interim Financial Reporting and the
Listings Requirements of the JSE Limited. The date of the Group"s transition
to IFRS is 1 October 2004 and these are the first results prepared under
IFRS. The condensed financial information has been reviewed by Ernst & Young
Registered Auditors Inc. whose unqualified review opinion is available for
inspection at the company"s registered office. It is anticipated that an
unqualified audit opinion will be issued once the detailed financial
statements have been finalised.
Group balance sheet
As at 30 September
2006 2005
Restated
Reviewed Audited
Rm Rm
ASSETS
Non-current assets 4 401,7 3 445,3
Property, plant and equipment 1 910,0 1 474,2
Goodwill and other intangibles 1 610,4 537,7
investments 736,7 1 268,7
Deferred taxation asset 144,6 164,7
Current assets 5 867,4 5 741,0
Inventories 2 208,2 1 922,4
Trade and other receivables 3 089,0 2 489,5
Cash and cash equivalents 570,2 1 329,1
Assets classified as held for sale 6,2 4,2
TOTAL ASSETS 10 275,3 9 190,5
EQUITY AND LIABILITIES
Capital and reserves 4 470,5 3 246,8
Ordinary share capital and share premium 828,6 761,2
Non-distributable reserves 513,7 777,4
Accumulated profits 4 554,2 3 173,7
Tiger Brands Limited shares
held by subsidiary (842,0) (842,0)
Tiger Brands Limited shares held
by empowerment trusts (662,0) (662,0)
Shared-based payment reserve 78,0 38,5
Minority interest 181,7 138,4
TOTAL EQUITY 4 652,2 3 385,2
Non-current liabilities 1 604,6 1 683,3
Deferred taxation liability 231,2 463,5
Provision for post-retirement medical aid 353,7 349,8
Long-term borrowings 911,7 762,0
Sea Harvest put option 108,0 108,0
Current liabilities 4 017,4 4 121,5
Trade and other payables 1 367,1 1 197,4
Shareholders for empowerment transaction - 723,5
Provisions and accruals 1 927,1 1 539,2
Taxation 131,2 267,3
Short-term borrowings 592,0 394,1
Liabilities classified as held for sale 1,1 0,5
TOTAL EQUITY AND LIABILITIES 10 275,3 9 190,5
Group income statement
Year ended 30 September
2006 2005
Change Restated
Notes Reviewed % Audited
Rm Rm
Revenue 1, 6 16 705,8 11 15 061,6
Turnover 6 16 513,9 13 14 639,2
Operating income before
abnormal items 2 2 665,7 16 2 301,5
Abnormal items 3 465,9 (106,5)
Operating income after
abnormal items 3 131,6 43 2 195,0
Interest paid (274,8) (50) (553,8)
Interest received 153,0 (60) 382,4
Dividend income 38,9 (3) 40,0
Income from associates 4 4,4 (94) 71,5
Profit before taxation 3 053,1 43 2 135,1
Taxation (730,2) 28 (570,2)
Profit for the year 2 322,9 48 1 564,9
Attributable to:
Ordinary shareholders 2 303,4 1 553,2
Minorities 19,5 11,7
2 322,9 1 564,9
Number of ordinary shares
in issue (000"s) 71 072* 169 685
*Includes 8 589 328 shares held
as treasury stock
(September 2005: 8 589 328)
and 5 896 183 shares owned
by staff empowerment entities
(September 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) 156 071 164 195
Headline earnings per
ordinary share (cents) 1 206,7 22 986,0
Diluted headline earnings
per ordinary share (cents) 175,7 22 966,1
Basic earnings per
ordinary share (cents) 1 475,9 56 945,9
Diluted basic earnings
per ordinary share (cents) 1 437,9 55 926,9
Dividends per ordinary share (cents) 603,0 21 500,0
Interim dividend declared 185,0 37 135,0
Final dividend declared 418,0 15 365,0
Reconciliation between profit
for the year and headline earnings
Profit attributable to
ordinary shareholders 2 303,4 48 1 553,2
Adjusted for:
Net loss on sale or discontinuation
of operations - 3,7
Net profit on sale of interest
in subsidiaries and joint ventures (346,7) (5,2)
(Profit)/loss on sale of property,
plant and equipment including
impairment charges (15,2) 7,5
(Reversal of impairment)/impairment
of investments, including net
(profit)/loss on sale (93,1) 65,9
Associates 42,1 (7,8)
Profit on sale of property,
plant and equipment (12,5) (6,5)
Impairment of property,
plant and equipment 54,6 -
Other - (1,3)
Other (7,2) 1,6
Headline earnings for the year 1 883,3 16 1 618,9
Abridged Group cash flow statement
Year ended 30 September
2006 2005
Reviewed Audited
Rm Rm
Cash operating profit 3 031,1 2 660,9
Working capital changes (333,0) (112,4)
Net financing costs (121,8) (171,4)
Dividends received 73,5 62,3
Taxation paid (865,8) (623,4)
Cash available from operations 1 784,0 1 816,0
Dividends paid (864,6) (677,1)
Net cash inflow from operating activities 919,4 1 138,9
Net cash (outflow)/inflow from
investing activities (1 302,5) 760,2
Net cash (outflow)/inflow before
financing activities (383,1) 1 899,1
Net cash outflow from financing
activities (286,8) (1 980,2)
Net decrease in cash and
cash equivalents (669,9)* (81,1)
*Includes a decrease of R89 million on short-term borrowings regarded as
cash and cash equivalents.
Segmental analysis
Year ended 30 September
Reviewed Audited
Restated
2006 2005 Change
Rm % Rm % %
Turnover (note 6)
BRANDED CONSUMER GOODS 11 245,7 68 10 110,4 69 11
Domestic Food 10 116,0 61 9 119,5 62 11
Grains 4 803,2 29 4 461,1 30 8
Milling and baking 3 594,1 22 3 320,1 22 8
Other Grains 1 209,1 7 1 141,0 8 6
Groceries 1 534,3 9 1 416,7 10 8
Snacks & Treats 1 129,4 7 920,3 6 23
Beverages 133,3 1 6,7 - N/A
Perishables 2 278,8 14 2 124,5 15 7
Out of Home 237,0 1 190,2 1 25
Consumer Healthcare 1 129,7 7 990,9 7 14
Personal 256,7 2 246,8 2 4
Babycare 388,5 2 330,8 2 17
Homecare 484,5 3 413,3 3 17
PHARMACEUTICALS 1 861,5 11 1 613,5 11 15
Prescription 917,5 5 756,3 5 21
OTC Medicines 624,8 4 559,3 4 12
Consumer Wellbeing 319,2 2 297,9 2 7
HOSPITAL PRODUCTS 913,4 6 661,5 4 38
EXPORTS 829,3 5 557,7 4 49
FISHING 1 664,0 10 1 696,1 12 (2)
TOTAL TURNOVER 16 513,9 100 14 639,2 100 13
Year ended 30 September
Reviewed Audited
Restated
2006 2005 Change
Rm % Rm % %
Operating income
(before abnormal items)
BRANDED CONSUMER GOODS 1 524, 9 57 1 220,4 53 25
Domestic Food 1 263,8 48 1 023,2 44 24
Grains 686,6 26 564,6 24 22
illing and baking 528,3 20 394,2 17 34
Other Grains 158,3 6 170,4 7 (7)
Groceries 242,4 9 197,3 9 23
Snacks & Treats 134,3 5 79,0 3 70
Beverages (1,4) - 1,4 - N/A
Perishables 175,0 7 160,7 7 9
Out of Home 26,9 1 20,2 1 33
Consumer Healthcare 261,1 9 197,2 9 32
Personal 80,8 3 66,3 3 22
Babycare 90,5 3 60,8 3 49
Homecare 89,8 3 70,1 3 28
PHARMACEUTICALS 796,9 30 708,5 30 12
Prescription 387,6 15 330,2 14 17
OTC Medicines 277,4 10 263,0 11 5
Consumer Wellbeing 131,9 5 115,3 5 14
HOSPITAL PRODUCTS 252,4 9 227,9 10 11
EXPORTS 44,9 2 18,1 1 148
FISHING 98,7 4 112,7 5 (12)
OTHER (52,1) (2) 13,9 1 N/A
TOTAL OPERATING INCOME
BEFORE ABNORMAL ITEMS 2 665,7 100 2 301,5 100 16
Statement of changes in equity
Shares
held
Share by sub-
capital Non- Share- sidiaries
and distri- Accu- based and em-
share butable mulated Mino- paymente powerment
premium reserves profits rities reserve trusts Total
Rm Rm Rm Rm Rm Rm Rm
Balance at
30 September
2005 - as
previously
reported 761,2 527,5 3 451,0 138,5 - (1 504,0) 3 374,2
IFRS
adjustments
(note 7) - 249,9 (277,3) (0,1) 38,5 - 11,0
Balance at
30 September
2005 - as
restated 761,2 777,4 3 173,7 138,4 38,5 (1 504,0) 3 385,2
Issue of share
capital and
premium 67,4 67,4
Fair value
adjustments
- investments 138,1 138,1
Fair value
adjustments
reversed on
investments
disposed (443,7) (443,7)
Foreign currency
translation
reserve
movement 12,3 12,3
Transfers
between reserves 32,3 (32,3) -
Movements in
reserves of
associates (25,7) (25,7)
Legal reserves
and other
movements 23,0 39,5 62,5
Net profit
for the year 2 303,4 19,5 2 322,9
Dividends on
ordinary shares (857,3) (9,0) (866,3)
Total dividends (937,0) (9,0) (946,0)
Less:
Dividends on
treasury shares 79,7 - 79,7
Arising on
changes in
and acquisition
of subsidiaries
and joint
ventures (33,3) 32,8 (0,5)
Balance at
30 September
2006 828,6 513,7 4 554,2 181,7 78,0 (1 504,0) 4 652,2
Balance at
30 September
2004 - as
previously
reported 778,0 454,5 2 969,1 132,1 - (236,3) 4 097,4
IFRS adjustments
(note 7) - 247,2 (264,7) - 25,9 - 8,4
Balance at
30 September
2004 - as
restated 778,0 701,7 2 704,4 132,1 25,9 (236,3) 4 105,8
Issue of share
capital and
premium 39,0 39,0
Distribution
in specie in
respect of
unbundling
of The Spar
Group Limited (55,8) 5,4 (386,9) (437,3)
Movement in
treasury
shares as a
result of
unbundling of
The Spar Group
Limited 44,3 44,3
Share buyback (650,0) (650,0)
Shares held
by empowerment
trusts (662,0) (662,0)
Fair value
adjustments
- investments 97,6 97,6
Fair value
adjustments to
investments
recognised
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 2,7 4,4 (0,1) 12,6 19,6
Net profit for
the year 1 553,2 11,7 1 564,9
Dividends on
ordinary shares (666,2) (5,3) (671,5)
Total dividends (684,8) (5,3) (690,1)
Less: Dividends
on treasury
shares 18,6 - 18,6
Balance at
30 September
2005 761,2 777,4 3 173,7 138,4 38,5 (1 504,0) 3 385,2
Notes
Year ended 30 September
2006 2005
Restated
Reviewed Audited
Rm Rm
1. Revenue
Turnover 16 513,9 14 639,2
Interest received 153,0 382,4
Dividend income 38,9 40,0
16 705,8 15 061,6
2. Operating income before abnormal items
Operating income before abnormal items is
reflected after charging:
Cost of sales 10 029,5 8 881,1
Sales and distribution expenses 2 349,8 2 049,9
Marketing expenses 590,5 549,1
Other operating expenses 878,4 857,6
Depreciation (included in cost of sales
and other operating expenses) 252,2 235,3
3. Abnormal items
Net loss on sale or discontinuation
of operations - (6,0)
Profit/(loss) on sale of property, plant
and equipment and intangibles, including
impairment charges 17,3 (12,4)
Net profit/(loss) on sale of interest
in subsidiaries and joint ventures 362,.4 (2,0)
Reversal of impairment/(impairment) of
investments, including profit/(loss)
on sale 109,5 (82,7)
Fair value adjustment -
Sea Harvest put option - (21,0)
Empowerment transaction costs 0,7 (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 (156,5) -
Other 2,6 (3,1)
Abnormal profit/(loss) before taxation 465,9 (106,5)
Taxation (5,6) 21,9
460,3 (84,6)
Minorities (3,1) 7,2
Abnormal profit/(loss)
attributable to shareholders
in Tiger Brands Limited 457,2 (77,4)
4. Income from associates
Normal trading 46,5 64,0
Abnormal items (42,1) 7,5
Profit on sale of property,
plant and equipment 12,5 7,5
Impairment of property,
plant and equipment (54,6) -
4,4 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 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.
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 IFRS 1 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 IFRS 2 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 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
reinstated.
- 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 and losses which
are now included in Other.
In accordance with Circular 09/06 issued by SAICA in May 2006, turnover and
expenses have been restated net of settlement discounts.
7. Reconciliation of SA GAAP to IFRS
Audited
September
2005
Rm
RECONCILIATION OF PROFIT FOR THE YEAR
As previously reported (SA GAAP) 1 565,3
IFRS adjustments (12,4)
IAS 16 - Property, Plant and Equipment 0,1
IAS 29 - Financial Reporting in
Hyperinflationary Economies 2,8
IAS 39 - Financial Instruments:
Recognition and Measurement 0,7
IFRS 5 - Non-current Assets Held for Sale 0,1
IFRS 2 - Share-based Payments (16,1)
Deferred tax 0,2
Minorities 0,1
As restated under IFRS 1 553,2
RECONCILIATION OF ORDINARY
SHAREHOLDERS" EQUITY Audited Audited
September September
2005 2004
Rm Rm
As previously reported (SA GAAP) 3 235,6 3 965,3
IFRS adjustments 24,1 22,5
IAS 16 - Property, Plant and Equipment 29,1 30,2
IAS 29 - Financial Reporting in
Hyperinflationary Economies (4,7) (7,3)
IAS 38 - Intangible Assets 0,3 0,3
IAS 39 - Financial Instruments:
Recognition and Measurement - (0,7)
IFRS 5 - Non-current Assets Held for Sale (0,6) -
Deferred tax (9,6) (9,0)
Minorities (3,3) (5,1)
As restated under IFRS 3 246,8 3 973,7
Other Group salient features
Year ended 30 September
2006 2005
Restated
Reviewed Audited
Rm Rm
Net worth per ordinary share (cents) 2 855 2 015
Net debt to equity (%) 20,1 (5,1)
Interest cover - net (times) 22,2 13,7
Current ratio (:1) 1,5 1,4
Capital expenditure 487,8 328,5
- replacement 264,1 139,8
- expansion 223,7 188,7
Capital commitments 546,0 267,1
- contracted 303,3 109,2
- approved 242,7 157,9
Capital commitments will be funded from
normal operating cash flows and the
utilisation of existing borrowing facilities.
Contingent liabilities
Guarantees and contingent liabilities 7,0 7,0
Carrying and fair value of investments 736,7 1 268,7
Listed 26,3 563,1
Unlisted 297,4 131,1
Associates 413,0 574,5
Commentary
OVERVIEW OF RESULTS
Tiger Brands achieved headline earnings of 1 207 cents per share for the
twelve months ended 30 September 2006, which is an increase of 22% on that
achieved in the previous year. Earnings per share increased by 56% to 1 476
cents per share.
The significant variance between the growth in "headline earnings per share"
and "earnings per share" is due to the inclusion, in attributable earnings,
of net abnormal profits of R466 million in 2006 compared to a net abnormal
charge of R107 million in the previous year. The large majority of these
abnormal amounts, being items of a non-trading nature, have been excluded
for the purposes of determining headline earnings per share. The abnormal
profits in 2006 arose mainly from the disposal of the company"s interests in
the Spanish fishing company Pescanova, the Indian edible oils company Agro-
Tech Foods and US-based sunflower seed processor Dahlgren, as well as the
recent sale of its 50% interest in the international malt joint venture C&T
Malt. These divestments are in line with the company"s strategic objective
of, where appropriate, owning the majority of the shares in and exercising
management control over its businesses, and focusing on branded fast-moving
consumer goods and healthcare products.
Turnover growth for the full year of 13% was significantly higher than the
9% recorded at the half year. The higher growth reflects the inclusion of
the enlarged deciduous fruit business (L&A Foods), as well as the turnover
of new acquisitions ClassiClean and Bromor Foods. The improved turnover
growth also resulted from the price increases implemented in the second half
of the year in response to significant cost pressures arising from higher
fuel prices, increasing international pricing for commodities, and the
depreciation of the rand.
The operating margin of 16,1% reflects a further improvement on the 15,7%
recorded in the prior year.
Operating income for the year rose by 16%. The reported rate of growth in
operating income is adversely affected by the inclusion, in 2006, of a net
charge of R52 million which is reflected under the heading of Other in the
accompanying segmental analysis. This compares with other income of R14
million recorded in the previous year, which is a year-on-year adverse
change of R66 million. Adjusting for this, operating income for the year
grew by 19%.
The adverse change under Other of R66 million relates primarily to a non
recurring gain in 2005 in respect of the partial settlement of the company"s
post-retirement medical aid obligations, and the first time inclusion in
2006 of the IFRS 2 share based payment expenses associated with the BEE
Staff Empowerment transaction concluded in September 2005. The costs
reflected under Other are anticipated to increase over the next two to three
years as further share participation rights are granted to the company"s
Black Managers in terms of the Staff Empowerment transaction.
Particularly good results were achieved in both the Domestic Food and
Consumer Healthcare categories. The turnover and operating income growth in
Hospital Products includes the benefit of the acquisition of The Scientific
Group. The Pharmaceuticals business reflects margin compression, with growth
in operating income for the full year of 12% being below the 15% reported
for the first six months. The results for Exports reflect the benefit of a
weaker rand in the latter part of the year. Whilst Fishing recorded
disappointing results, the performance in the second six months reflected an
operating profit of R88 million, representing a 28% increase compared to the
same period last year.
Net financing costs for the year decreased by R48 million to R83 million,
reflecting the impact of lower average debt levels. Whilst the company
enjoyed positive cash flows from the disposals referred to earlier, the
significant investments associated with the company"s Staff Empowerment
transaction (R724 million), acquisition activity (R1 369 million) and the
high levels of capital expenditure (R488 million), saw a net debt level of
R934 million at the end of the year compared with the net surplus cash
position of R173 million as at 30 September 2005.
Income from associates declined from R72 million in the previous year to R4
million in 2006. The underlying performance of associates is also distorted
by the inclusion of items of a non-trading nature in both the prior year and
the year under review. Excluding non-trading items, the underlying
contribution from associates reflects a decline from R64 million to R47
million. C&T Malt (50% owned), which was disposed of effective 11 September
2006, recorded an attributable loss in 2006 (after excluding items of a
capital nature) compared to an attributable profit in the previous year.
This disappointing performance reflected the continued difficult trading
conditions experienced as a result of both the backward integration and
consolidation in the global brewing industry. Empresas Carozzi (24% owned)
reported a modest increase in profits in Chilean peso terms. However, on
translation into rands, the results were positively impacted by the
strengthening of the Chilean peso.
The overall increase in headline earnings for the year of 16%, translated to
an increase of 22% at the headline earnings per share level. This was as a
result of a 5% decrease in the weighted average number of shares in issue,
arising principally from the treatment of shares held by the company"s
Empowerment Trusts as treasury shares with effect from October 2005.
REVIEW OF OPERATIONS
Branded Consumer Goods
There were some very good performances within Branded Consumer Goods where
turnover growth of 11% led to a 25% increase in operating income.
The Domestic Food business increased turnover by 11%. The price inflation
element of the increased turnover was 4%, compared to virtually no
inflationary growth at the half year. This change reflects an underlying
trend towards higher food prices due to a combination of increasing
commodity prices and a significant weakening in the rand, as well as local
cost pressures influenced in the main by fuel price increases and above
inflation wage settlements.
Within the Grains segment, the total growth in operating income of 22% was
driven by the Milling and baking business which grew operating income by
34%. Volume growth remained strong at Albany bakeries and was boosted by a
further product extension to the highly successful Albany Superior range.
The sorghum category also achieved excellent results with continued high
levels of volume growth being recorded. This was influenced by the
successful innovation of the Morvite range. Maize, which incurred a loss in
the prior year, was able to break even in the period under review. Milling
and baking"s results included the benefits of fair value adjustments in
respect of derivative positions held for the 2007 financial year. Other
grains (oat-based breakfast cereals, pulses and rice), whilst still
recording double-digit operating margins, reported a decline in operating
income of 7%. A significant profit improvement was achieved in breakfast
cereals where Jungle Oats enjoyed good volume growth on the back of brand
extensions and product innovations. This improvement was offset by a decline
in the profitability of the rice category. The significant increases in
world rice prices have resulted in a change in the relative pricing position
of rice compared to other carbohydrates. Management has taken a conscious
decision not to pass on the full raw material cost increases, in order to
protect the sustainability of earnings and preserve the brand equity of
Tastic and Aunt Caroline rice, in particular.
The Groceries business produced a 23% improvement in operating income off an
8% increase in turnover. This performance reflects the strength of the brand
portfolio, with excellent volume growth being recorded by Koo (baked beans,
fruit and vegetables), All Gold (tomato sauce) and Black Cat (peanut
butter). This growth has been assisted by optimal price management at the
point of sale and a continued strong focus on costs. The Pasta business,
which incurred a loss for the first six months, returned to profitability
for the full year. A major plant upgrade, which commenced earlier in the
year, should facilitate the full exploitation of the brand equity of Fatti"s
& Moni"s from October 2007 when the project is scheduled for completion.
The momentum in the Snacks & Treats business, evident in the company"s
interim results, has been sustained with a 70% improvement in operating
income off a 23% increase in turnover. This improvement was achieved in an
environment where there has been little or no reduction in the level of
sugar confectionery imports from South America despite a weaker rand. With
the benefits of a streamlined cost structure and continued high rates of
innovation, strong volume growth was experienced, particularly in Beacon
chocolate slabs, Jungle Energy Bars, Fizz Pops, Mmmallows, Maynards and
Sparkles.
The Beverages category includes the results of Bromor Foods (Pty) Limited,
with effect from 1 August 2006. The small operating loss recorded is
indicative of the highly seasonal nature of the business and includes
certain once-off costs relating to IT integration.
The Perishables portfolio reflects an increase in operating income of 9%.
The strong recovery in the profitability of DairyBelle continued. However,
this was at a slower pace than reported at the half year due to the
significant improvement in trading conditions experienced in the second half
of the previous financial year. This sustained recovery is largely due to
the continued success in growing the contribution from value-added products
and the improvement in the balance between milk supply and demand.
Enterprise reported a small decline in operating income, reflecting both the
impact of industrial action in the first quarter of the year, and rising
local and imported red meat prices in the second half of the year. Volume
growth was achieved, but margins were constrained as raw material cost
increases were not fully passed through
to customers.
The growth in operating income of 33% achieved by the Out of Home business
was driven by market share gains in the food service sector and the positive
performance of the newly acquired Hot Favourites business.
The Consumer Healthcare business grew turnover by 14%, which resulted in a
32% increase at the operating income level. The Babycare category delivered
the highest level of growth with a particularly good performance in
nutrition, where Purity Cream of Maize and Purity Cream of Mabele remain key
drivers of top-line growth. The Homecare category achieved satisfactory
volume growth, particularly in Pest care and Air care, with Doom and Airoma
performing well. ClassiClean"s contribution at an operating income level was
largely offset by investment in product reformulations and the cost of a
brand relaunch. The top-line
performance of the Personal care category does not fairly reflect the
underlying trend of the business, as a significant range rationalisation
took place during the year. There was an improvement in the performance of
the core brands such as Ingram"s Camphor Cream, Mousson, Dolly Varden and
Lemon Lite.
PHARMACEUTICALS As noted at the half year, the segmental disclosure has been
amended to align the reporting with the management structure. The
Prescription category includes all medicines classified as schedule 3 and
above. These include brands such as Myprodol, Adco-Simvastatin, Adco-Amoclav
and Adco-Zolpidem. This category also includes the Tender and Anti-
Retroviral businesses. 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 and Betapyn. The
Consumer Wellbeing category sells leading brands such as Panado, Bioplus,
Compral and Citro Soda.
The rate of growth of the Pharmaceuticals business slowed significantly in
the second half of the year, with operating income for the full year growing
by 12% off a 15% increase in turnover.
The Prescription category in particular remains challenging. Strong volume
growth of 26% was achieved, albeit at lower levels than at the half year.
Increased costs relating to the investment in Anti-Retroviral research and
development, and in enhanced management and IT capabilities, had an adverse
effect on operating income. However, significant dilution occurred at the
gross margin level where the costs of imported raw materials and products
have been impacted negatively by the depreciation of the rand. In certain
therapeutic classes, new generic competitors have accelerated the rate of
price deflation.
OTC medicines and Consumer Wellbeing performed reasonably well in relation
to market dynamics. Margins in OTC medicines declined as the cost of imports
rose in line with rand weakness. Despite the highly branded nature of these
categories, Single-Exit Pricing legislation has prevented the taking of any
price increases in products classified as schedule 1 and above.
HOSPITAL PRODUCTS The 11% increase in operating income for the year
represents a significant improvement on the increase of 2% recorded for the
first six months. The improvement was driven by a good contribution from The
Scientific Group and solid performances from intravenous fluids and Renal
Care.
EXPORTS With the local currency weakening significantly in the second half
of the year, operating income from the Export operations reflects an
improvement year on year of R27 million after recording a decline of R7
million in the first six months. The successful merger of Tiger"s deciduous
fruit interests with those of Ashton Canning, to form L&A Foods, is a key
factor behind this improved business performance. Other Exports mainly to
the rest of Africa remain a challenge, largely due to logistical issues and
the absence of the critical mass and distribution capabilities necessary to
build brand equity. The company remains focused on Zambia and Mozambique in
the short term.
FISHING The company"s fishing interests comprise Sea Harvest (74%) and
Oceana Group Limited (44%).
After a particularly disappointing first half at Sea Harvest, a concerted
effort by management and staff returned the business to profitability in the
second half, to record an operating profit for the year of R26 million. This
improved performance was influenced by firmer international pricing for hake
products, optimisation of sales mix, the benefits of a re-engineering
exercise undertaken at the processing plant at Saldanha Bay and a small
improvement in catch rates.
Proportionately consolidated Oceana, which is also listed on the JSE
Limited, reported a 6% increase in headline earnings per share for the year
ended 30 September 2006. Oceana"s results were separately published in the
press on 13 November 2006.
During the year under review, the initial and second allocations in respect
of Long Term Commercial Fishing Rights were awarded to industry
participants. This provides the fishing industry with much needed certainty
and stability which will facilitate longer-term strategic decision making.
OTHER The significant movement year on year on this line in the segmental
analysis has been commented on under the overview of results section. The
main items comprise the costs associated with share options granted to Tiger
Brands management and share participation rights awarded to Black Managers
in terms of the Staff Empowerment transaction concluded in September 2005.
These costs have been determined in accordance with IFRS 2 - Share-based
Payments. This segment also includes certain post retirement medical aid
costs and foreign currency translation profits and losses arising from
internal set-offs of export proceeds. These foreign currency translation
profits and losses were previously included under Exports. Comparative
figures have been restated accordingly.
ACQUISITIONS During the year under review, the Group made a number of
acquisitions. The acquisitions of the 74% interest in The Scientific Group
(Pty) Limited and of the Cape Town based Hot Favourites business were
effective from 1 October 2005 and 1 November 2005 respectively. The
Scientific Group is involved in Bio-Technology, Imaging, Hospital Equipment
and Medical Diagnostics. Brimstone Investment Corporation, a Black-owned
company, holds the remaining 26% interest in The Scientific Group. Hot
Favourites is a dedicated food service business that supplements the
company"s Out of Home business. The acquisition of the ClassiClean business,
which marked the company"s entry into the laundry care market, was effective
from 25 February 2006. The acquisition of the entire issued share capital of
Bromor Foods (Pty) Limited was effective from 1 August 2006. Bromor Foods
operates in the non-carbonated soft drink market and owns leading brands
such as Oros, Energade, Hall"s and Roses.
The acquisition from Nestl of its sugar confectionery portfolio in South
Africa was effective from 1 October 2006. This acquisition includes leading
brands such as Jelly Tots and Wilsons. During September 2006, it was
announced that agreement had been reached to acquire the entire shareholding
in Designer Group Holdings Limited. Designer Group is involved primarily in
the hair care, body care and deodorants categories, with brands such as
Protein Feed, Designer Notes, Perfect Touch and Skin Clinic. The Competition
Authorities have recently approved this transaction which is effective from
1 October 2006.
Sea Harvest has concluded an agreement to merge Sea Vuna (50% owned) with
Vuna Fishing. In terms of the transaction, Sea Harvest will acquire a 50%
interest in the merged company. This will increase Sea Harvest"s exposure to
the East Coast hake fishery. The acquisition is subject to the approval of
the Competition Authorities and a decision in this regard is expected
towards the end of the current calendar year.
BOARD OF DIRECTORS As shareholders have previously been advised, Mike Norris
and Haydn Franklin, both executive directors of the company, have elected to
take early retirement with effect from 31 March 2007. The Board acknowledges
the significant contributions made by both Mike and Haydn throughout their
distinguished careers at Tiger Brands.
FINAL DIVIDEND Based on the annual dividend cover of 2, a final dividend of
418 cents per share has been declared. This, together with the interim
dividend of 185 cents per share, brings the total dividend for the year to
603 cents per share (2005: 500 cents). This represents an increase of 21% on
last year"s total dividend of 500 cents per share.
OUTLOOK The Pharmaceuticals and Hospital Products businesses have been
significantly affected by the impact of the depreciation of the rand on the
cost of imported products and active pharmaceutical ingredients. In
addition, pharmaceutical margins have been under pressure since the
introduction of Single-Exit Pricing legislation some three years ago. This
has resulted in healthcare companies having to absorb the full effect of
cost increases since 2003. Healthcare companies will now receive some relief
as a result of the recent publication by the Department of Health of
guidelines which provide a mechanism for companies to apply for a price
increase. The proposed introduction of international benchmarking of
pharmaceutical prices is a complex matter and it is expected that the
benchmarking proposals, once finally determined, will only be effective from
July 2007. It is not possible to quantify the impact at this stage, but if
the benchmarking exercise is not implemented on a commercially sound basis,
the implications for the pharmaceutical industry may be material.
Taking the above factors into account, pharmaceutical margins are likely to
soften further in the year ahead. To ameliorate the impact of this, the
company will continue to focus on cost control and volume growth.
There are indications that the robust levels of growth in disposable incomes
and consumer expenditure over the past two to three years may be declining.
This, coupled with the need for price increases across the group"s Branded
Consumer Goods portfolio, indicates that organic growth levels may be lower
than those enjoyed in the year just ended.
Exports and Fishing should continue to benefit from the impact of the weaker
rand exchange rate relative to the average rand exchange rate in 2006.
The rate of increase in headline earnings per share is expected to be below
the growth achieved in 2006. Overall, however, it is anticipated that the
group will achieve another year of real earnings growth in 2007.
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
Lex van Vught Nick Dennis
Chairman Chief Executive Officer
14 November 2006
Declaration of ordinary dividend No 124
Notice is hereby given that a final dividend of 418 cents per ordinary share
has been declared in respect of the year ended 30 September 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, 5 January 2007
Shares commence trading ex dividend Monday, 8 January 2007
Record date Friday, 12 January 2007
Payment of dividend Monday, 15 January 2007
Shareholders in respect of the South African register will not be permitted
to dematerialise or rematerialise their shares between Monday,
8 January 2007 and Friday, 12 January 2007, both days inclusive.
By order of the Board
I W M Isdale
Secretary
Sandton
14 November 2006
(Registration number 1944/017881/06)
(Incorporated in the Republic of South Africa)
Share code: TBS ISIN: ZAE000071080
INDEPENDENT DIRECTORS:
LC van Vught (Chairman), BL Sibiya (Deputy Chairman), BH Adams, DDB Band,
SL Botha, BP Connellan, RMW Dunne (British), UPT Johnson, AC Nissen, GN
Padayachee
EXECUTIVE DIRECTORS:
N Dennis (Managing Director) (British), NP Doyle (Irish), MH Franklin, MC
Norris, CFH Vaux
COMPANY SECRETARY:
IWM 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
(PO Box 61051, Marshalltown, 2107, South Africa)
Telephone: (011) 370 5000
Sponsor: J.P.Morgan Equities Limited
Date: 14/11/2006 05:18:57 PM Produced by the JSE SENS Department
