| Wed 15 Nov 2006, 17:30 | | Rainbow - Unaudited Results for the six months end |
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RBW
RBW
Rainbow - Unaudited Results for the six months ended 30 September 2006
Rainbow Chicken Limited
(Registration number 1966/004972/06)
JSE share code: RBW ISIN code: ZAE000019063
("Rainbow" or "the Group")
UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2006
* SALIENT FEATURES
* REVENUE UP 13.7%
* EBITDA UP 18.9%
* OPERATING PROFIT UP 20.0%
* HEADLINE EARNINGS UP 13.7%
* INTERIM DIVIDEND PER SHARE UP 17.6%
CONSOLIDATED BALANCE SHEET
30 Sept 30 Sept 31 March
R"000 2006 2005 2006
ASSETS
Non-current assets
Property, plant and 1 003 930 931 749 962 194
equipment
Trademarks 336 804 404
Goodwill 287 444 287 444 287 444
Deferred taxation 7 094
1 291 710 1 227 091 1 250 042
Current assets
Inventories 348 380 267 702 320 420
Biological assets 280 122 250 016 242 199
Trade and other 599 879 514 116 517 442
receivables
Derivative financial 15 622 22 187 19 790
instruments
Taxation receivable 11 303 1 513
Cash and cash equivalents 268 463 121 719 394 383
1 512 466 1 187 043 1 495 747
Total assets 2 804 176 2 414 134 2 745 789
EQUITY
Capital and reserves 1 666 776 1 385 613 1 595 901
LIABILITIES
Non-current liabilities
Deferred taxation 170 310 173 305 168 519
Post-retirement medical 72 138 67 489 69 683
obligation
Finance lease liability 116 512 116
242 564 241 306 238 318
Current liabilities
Trade and other payables 807 811 748 907 781 800
Provisions 39 283 20 676 30 771
Derivative financial 343 402
instruments
Finance lease liability 524 814 698
Taxation payable 47 218 16 475 97 899
894 836 787 215 911 570
Total liabilities 1 137 400 1 028 521 1 149 888
Total equity and 2 804 176 2 414 134 2 745 789
liabilities
STATEMENT OF CHANGES IN EQUITY
Stated Share-based Retained
R"000 capital payments earnings Total
Balance at 1 April 2005 1 105 959 8 391 172 356 1 286 706
Profit for the period
attributable
to the equity holders of 398 845 398 845
the Group
Ordinary dividends paid (105 273) (105 273)
Employee share option
scheme:
Proceeds from shares 9 788 9 788
issued
Value of employee 5 835 5 835
services
Balance at 1 April 2006 1 115 747 14 226 465 928 1 595 901
Profit for the period
attributable
to the equity holders of 171 032 171 032
the Group
Ordinary dividend paid (112 405) (112 405)
Employee share option
scheme:
Proceeds from shares 8 294 8 294
issued
Value of employee 3 954 3 954
services
Balance at 30 September 1 124 041 18 180 524 555 1 666 776
2006
CONSOLIDATED INCOME STATEMENT
Six months Six months
ended ended Year ended
30 Sept 30 Sept 31 March
R"000 2006 2005 2006
Revenue 2 177 770 1 915 245 4 101 454
Operating profit before depreciation 312 937 263 112 687 588
and amortisation
Depreciation and amortisation (56 010) (48 941) (109 744)
Operating profit 256 927 214 171 577 844
Finance costs (2 358) (1 470) (2 351)
Finance income 13 631 1 439 9 930
Profit before taxation 268 200 214 140 585 423
Taxation (97 168) (64 920) (186 578)
Profit for the period attributable to 171 032 149 220 398 845
the equity holders of the Group
CONSOLIDATED CASH FLOW INFORMATION
Operating profit before working 318 288 265 502 693 971
capital requirements
Working capital requirements (107 576) (13 292) (13 880)
Cash generated by operations 210 712 252 210 680 091
Net finance income/(costs) 11 273 (31) 7 579
Dividends paid (112 405) (58 009) (105 273)
Taxation paid (144 545) (53 204) (81 341)
Net cash flows from operating (34 965) 140 966 501 056
activities
Net cash flows from investing (99 075) (132 361) (221 367)
activities
Net cash flows from financing 8 120 7 107 8 687
activities
Net (decrease)/increase in cash and (125 920) 15 712 288 376
cash equivalents
Cash and cash equivalents at the 394 383 106 007 106 007
beginning of the period
Cash and cash equivalents at the end 268 463 121 719 394 383
of the period
SUPPLEMENTARY INFORMATION
Capital expenditure contracted and 151 346 69 653 102 590
committed
Capital expenditure approved but not 5 590 31 358 48 981
contracted
Contingent liabilities 48 466 35 984 36 914
STATISTICS
Ordinary shares (000"s) 281 738 277 343 279 222
in issue
Weighted average ordinary (000"s) 279 360 275 321 277 096
shares
in issue
Fully diluted weighted (000"s) 286 436 282 086 285 558
average ordinary shares in
issue
Basic earnings per share (cents) 61.2 54.2 143.9
Basic earnings per share - (cents) 59.7 52.9 139.7
diluted
Headline earnings per share (cents) 61.7 55.1 144.5
Headline earnings per share - (cents) 60.2 53.7 140.2
diluted
Net asset value per share (cents) 591.6 499.6 571.6
Ordinary dividends:
Interim dividend (cents) 20.0 17.0 17.0
declared/paid
Final dividend paid (cents) 40.0
HEADLINE EARNINGS
Six months Six months
ended ended Year ended
30 Sept 30 Sept 31 March
R"000 2006 2005 2006
Profit for the period attributable to
the
equity holders of the Group 171,032 149,220 398,845
Net asset impairment provision released (2,555) (2,185)
Loss on disposal of property, plant
and equipment 1,397 4,945 3,626
Headline earnings 172,429 151,610 400,286
BASIS OF PREPARATION
The financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRS), IAS 34 (Interim Financial Reporting) and
in compliance with the Companies Act of South Africa of 1973 and the Listings
Requirements of the JSE Limited.
The accounting policies are consistent with those of the previous financial
period, however they have been updated to include the following new standards,
interpretations and amendments which the Group adopted from 1 April 2006 - IFRS
4 (Financial Guarantee Contracts), International Financial Reporting
Interpretations Committee (IFRIC) 4 (Determining whether an arrangement contains
a lease), and amendments to IAS 19 (Employee Benefits) and IAS 39 (Financial
Instruments: Recognition and Measurement). There was no impact on the results
for the current or prior periods as a consequence of adopting these new
standards, interpretations and amendments.
OVERVIEW AND MARKET CONDITIONS
The Group"s results for the six months ended 30 September 2006 reflect headline
earnings growth of 13.7% compared to the same period of the previous year.
The South African economy grew at approximately 4%. The macro economic
environment has remained positive during the period despite marginally
increasing inflation and interest rates. Food inflation is beginning to be
impacted by increasing maize and fuel costs.
The weakening of the rand, together with higher international grain prices, led
to a 27% increase in local yellow maize prices since March 2006 with prices 68%
higher than September 2005. Indications are that plantings of maize for the
2006/7 season are expected to be significantly higher than the 2005/6 season.
The local chicken industry remains on high alert for Avian Influenza (AI). AI
outbreaks continue to be reported internationally. Rainbow and the local
industry at large, through the Southern African Poultry Association (SAPA) and
in co-operation with the National Department of Agriculture, continue to focus
on prevention through increased bio-security and stepped-up surveillance and
monitoring of flock health.
Notwithstanding the recently weakening rand, chicken import volumes have
remained high, having increased 77% during the period. The high level of imports
mostly impacts on channels that are not a strategic focus area for Rainbow. On
27 October 2006, the Minister of Trade and Industry approved the extension of
the anti-dumping duty against the USA for a further 5 years. Red meat prices
have increased significantly with the result that chicken still represents a
more affordable protein source.
REVIEW OF OPERATIONS
The Group continues to focus on its five strategic pillars, 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 results achieved in the period continue to reflect the benefits arising out
of this strategy.
Continued product innovation to meet consumer needs has been a feature of this
period, particularly in the Individually Quick Frozen (IQF) market where four
new products were launched during September under the Rainbow brand. A first
into the South African market is Rainbow Flavoured IQF Mixed Portions in three
flavours.
The new further processed products have performed well, and have had excellent
acceptance by the trade and consumers. The Easyserve and Easybraai range was
placed second in the prestigious "Food Review New Product of the Year"
competition. Rainbow has continued to actively support its brands via TV
advertising, in-store promotions and other point of sale activity.
Continued customer focus and building of strategic partnerships has led to a
strong performance in the Foodservice channel. Significant growth has been
driven by both key customers in the Quick Service Restaurant (QSR) sector and
new business generated from our strategy of improving product mix and expanding
our customer base.
Plans are in place to upgrade facilities within agriculture and feedmilling
which will enable further supply chain efficiencies and additional chicken
volume capacity.
Epol has performed well during the period, having recovered external volumes
which were lost due to the feed contamination issue in 2005. The raw material
procurement strategy has enabled Epol to be price competitive and the higher
external sales volumes have resulted in improved capacity utilisation.
Recovery of the feed contamination claim against the responsible supplier is
progressing and is in the hands of their insurers, but to date remains
outstanding.
Vector"s results for the period are in line with expectations. The new Multi-
Temperature Contract Distribution (MTCD) contracts with Spur and Nando"s are
progressing well. The major capital expansion projects are progressing in line
with planned timing, with all additional capacity expected to be operational by
November 2006. Vector has continued to invest in new technology, most recently
the roll out of a new fully integrated fleet management and supply chain
integrity control system.
Rainbow is currently leveraging the Vector SAP system to integrate Rainbow"s
outbound sales and distribution processes. The Group remains committed to
implementing an integrated Enterprise Resource Planning (ERP) system to
effectively manage the complex supply chain and are in the process of conducting
a systems strategy review. The finalised strategy will provide the direction to
allow effective planning and scoping for an extended ERP implementation roadmap.
FINANCIAL REVIEW
Revenue - Rm 2006 2005 %
Chicken 1 727.4 1 545.1 11.8
External sales - Cobb, Epol and Vector 450.4 370.1 21.7
Reported revenue 2 177.8 1 915.2 13.7
Chicken revenue for the six months was 11.8% higher than the same period of the
previous year. Rainbow"s average price realisation increased by 5.5%. Overall
chicken volumes increased by 6.3% with the QSR sector, targeted customers and
branded products (including the new further processed products) all showing
pleasing growth.
Group revenue increased by 13.7% to R2.2 billion (2005: R1.9 billion) benefiting
from Epol and Vector"s higher external volumes.
Headline EBITDA increased by 18.4% to R314.3 million (2005: R265.5 million),
reflecting the higher realisations and volumes as well as improved customer and
product mix. The headline EBITDA margin increased to 14.4% (2005: 13.9%).
As previously noted, reporting the financial effects of certain financial
instruments used in the feed raw material procurement strategy in accordance
with IAS39, introduces volatility to the Group"s financial results. The pre-
taxation impact of applying IAS39 on the Group"s results for the six month
period is a negative R34.1 million (2005: R25.8 million positive). The
underlying pre-IAS39 performance and margin continues to reflect an improving
trend.
2006 2005 % 2004 %
Headline EBIT (Rm)
pre-IAS39 292.4 190.8 53.2 135.0 41.3
post-IAS39 258.3 216.6 19.3 109.5 97.8
Headline EBIT margin (%)
pre-IAS39 13.4 10.0 3.4 6.8 3.2
post-IAS39 11.9 11.3 0.6 5.5 5.8
Taxation increased due to the higher operating profit and secondary tax on
companies paid on the significantly increased final dividend. As such the
effective taxation rate increased to 36.1% (2005: 30.3%). The 2005 effective
taxation rate was impacted by the deferred taxation release of R6.0m (2.8% rate
impact) due to the 1% taxation rate adjustment.
Net finance income increased by R11.3m due to the higher cash balances.
Headline earnings increased by 13.7% to R172.4 million (2005: R151.6 million)
with diluted headline earnings per share improving by 12.1% to 60.2 cents per
share (2005: 53.7 cents per share).
Cash generated by operations decreased by 16.5% to R210.7 million (2005: R252.2
million) as a result of working capital requirements increasing by R94.3m. Trade
receivables are higher in line with increased trading and the valuation of
inventories is impacted by the higher feed costs.
Capital expenditure was R99.3 million (2005: R141.1 million - including R64.7m
in respect of the Further Processing Plant). A further amount of R151.3 million
(2005: R69.7 million) has been contracted and committed, but not spent, whilst a
further R5.6 million (2005: R31.4 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 on a 12-month rolling basis increased to 27.6% (2005: 22.7%).
DIRECTORATE
There have been no changes to the directorate since the last reporting date.
PROSPECTS
Consumer spending is expected to remain positive over the next six months with
demand for chicken specifically as an affordable protein source also expected to
remain strong.
Maize prices are likely to remain at the current higher levels and together with
the weakened rand, it is expected that feed input costs will continue to
increase through to year end.
Earnings growth for the full year on both a pre- and post-IAS39 basis is likely
to be lower than the first six months.
DIVIDEND DECLARATION
Notice is hereby given that on 15 November 2006 the Board declared an interim
dividend (number 67) of 20.0 cents per ordinary share in respect of the six
months ended 30 September 2006 (2005: 17.0 cents).
The salient dates of the declaration and payment of this dividend are as
follows:
Last date to trade ordinary shares cum dividend Friday, 5 January 2007
Ordinary shares trade ex dividend Monday, 8 January 2007
Record date Friday, 12 January 2007
Payment date Monday, 15 January 2007
Share certificates may not be dematerialised or rematerialised between Monday, 8
January 2007 and Friday, 12 January 2007 (both dates inclusive).
For and on behalf of the Board
M H Visser M Dally Durban
Non-executive Chairman Chief Executive Officer 15 November 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, 3629
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: 15/11/2006 05:30:09 PM Produced by the JSE SENS Department
