Final Results
Tiger Brands Limited
(Registration number 1944/017881/06)
(Incorporated in the Republic of South Africa)
Share code: TBSP
ISIN: ZAE 000023578
Group results for the year ended 30 September 2002
The condensed financial statements included in this preliminary report have
been reviewed by KPMG Inc. and their unmodified review report is available for
inspection at the company's registered office.
The reviewed results for the twelve months ended 30 September 2002 are set out
below. This report has been prepared in accordance with the requirements of
Statements of South African Generally Accepted Accounting Practice. The
principles adopted herein are consistent, in all material respects, with those
applied in the most recently published annual financial statements, except as
disclosed in note 4.
Operating profit from continuing operations + 23%
Headline earnings per share + 36%
GROUP INCOME STATEMENT
Year ended
30 September
2002 2001 Change
Rm Rm %
Notes Reviewed Audited
Revenue 20,181.9 16,840.5 20
Continuing operations 20,071.3 16,506.7 22
Discontinued operations 110.6 333.8
Operating profit 1 2,032.7 1,665.5 22
Continuing operations 2,013.8 1,634.0 23
Discontinued operations 18.9 31.5
Income from investments 33.9 29.0
Profit from operations 2,066.6 1,694.5
Net financing costs (274.5) (389.7)
Profit before taxation and abnormal 1,792.1 1,304.8 37
items
Abnormal items 2 18.3 (40.4)
Profit before taxation 1,810.4 1,264.4
Income tax expense 577.8 386.4
Net profit after taxation and before 1,232.6 878.0 40
associates
Income from associates 177.1 121.9 45
Net profit after taxation 1,409.7 999.9 41
Minority interest and preference 49.6 30.5
dividends
Net profit for the year 1,360.1 969.4 40
Number of ordinary shares in issue 166,792 165,959
(000's)
Weighted average number of ordinary
shares
on which headline earnings and net 166,331 165,758
profit per share are based (000's)
Headline earnings per ordinary share 817 600 36
(cents)
Diluted headline earnings per 809 596 36
ordinary share (cents)
Net profit per ordinary share 818 585
(cents)
Dividends per ordinary share (cents) 290.0 213.0 36
Interim dividend paid 79.0 68.0
Final dividend declared post balance 211.0 145.0
sheet date
Reconciliation between net profit
and headline earnings
Rm Rm
Net profit for the year 1,360.1 969.4
Adjusted for:
Losses on sale or discontinuation of 35.6 24.0
operations, net
(Profits)/losses on sale of fixed (8.1) 26.9
assets, including impairment charge
on fixed properties
Net profit on sale of interest in (151.9) (33.1)
subsidiaries and joint ventures
Amount written off investments (Note 103.0 14.5
3)
Other, including associates 19.6 (7.0)
Headline earnings for the year 1,358.3 994.7 37
GROUP BALANCE SHEET
30 September
2002 2001
Rm Rm
Reviewed Audited
ASSETS
Non-current assets 4,109.9 3,730.2
Property, plant & equipment 1,454.3 1,413.7
Goodwill and other intangibles 44.0 30.9
Investments 2,333.8 2,047.4
Deferred tax asset 277.8 238.2
Current assets 6,408.9 6,083.0
Inventories 1,999.1 1,610.5
Accounts receivable 2,784.8 2,524.1
Cash and cash equivalents 1,625.0 1,948.4
TOTAL ASSETS 10,518.8 9,813.2
EQUITY AND LIABILITIES
Capital and reserves 2,728.8 1,710.3
Share capital and premium 696.4 664.6
Non-distributable reserves and accumulated profits 2,032.4 1,045.7
Minority interest 121.0 97.7
Total non-current liabilities 3,009.3 3,329.0
Deferred tax liability 294.0 206.6
Provision for post-retirement medical aid 359.9 322.6
obligations
Long-term borrowings 2,355.4 2,799.8
Total current liabilities 4,659.7 4,676.2
Short-term borrowings 835.3 1,223.3
Accounts payable 3,824.4 3,452.9
TOTAL EQUITY AND LIABILITIES 10,518.8 9,813.2
ABRIDGED CASH FLOW STATEMENT
Year ended
30 September
2002 2001
Rm Rm
Reviewed Audited
Cash operating profit 2,347.3 1,962.4
Working capital changes (438.4) (18.0)
Net interest paid (274.5) (399.2)
Dividends received 52.0 43.4
Taxation paid (378.7) (421.4)
Cash available from operations 1,307.7 1,167.2
Dividends paid (387.3) (390.9)
Net cash inflow from operating activities 920.4 776.3
Net cash (outflow)/inflow from investing activities (332.7) 74.6
Net cash inflow before financing activities 587.7 850.9
Net cash outflow from financing activities (915.6)* (125.7)
Net (decrease)/increase in cash and cash (327.9) 725.2
equivalents
*Including the early repayment of long-term debt amounting to R522.0 million.
Segmental analysis
Year ended Year ended
30 September 30 September
2002 2001 Change
Rm % Rm % %
Reviewed Audited
Revenue - continuing
operations
Food Brands 10,156.1 49 8,172.9 48 24
Dry Groceries 7,924.3 38 6,565.0 39 21
- Cereals & Beverages 4,679.3 23 3,746.3 22 25
- Culinary 2,353.0 11 2,025.9 12 16
- Confectionery 892.0 4 792.8 5 13
Perishables 2,231.8 11 1,607.9 9 39
Healthcare 2,107.1 10 1,850.3 11 14
- Pharmaceutical 900.9 5 805.4 5 12
- Consumer 687.6 3 601.0 4 14
- Critical Care 483.4 2 415.3 2 16
- International 35.2 0 28.6 0 23
Spar 8,345.3 41 7,075.4 41 18
Other 6.3 6.3
20,614.8 100 17,104.9 100 21
Less: Intragroup Revenue 543.5 598.2
20,071.3 16,506.7 22
Operating profit -
continuing operations
Food Brands 1,065.6 53 783.4 48 36
Dry Groceries 743.1 37 545.2 33 36
- Cereals & Beverages 443.5 22 287.2 18 54
- Culinary 225.4 11 186.1 11 21
- Confectionery 74.2 4 71.9 4 3
Perishables 322.5 16 238.2 15 35
Healthcare 702.6 35 646.2 40 9
- Pharmaceutical 425.5 21 395.5 25 8
- Consumer 133.5 7 111.9 7 19
- Critical Care 133.4 7 131.5 8 1
- International 10.2 0 7.3 0 40
Spar 293.3 15 233.4 14 26
Other (47.7) (3) (29.0) (2)
2,013.8 100 1,634.0 100 23
NOTES
Year ended
30 September
2002 2001
Rm Rm
Reviewed Audited
1. Operating profit
Operating profit is reflected after charging:
Cost of inventories utilised 14,478.4 11,678.3
Depreciation and amortisation 227.7 221.4
2. Abnormal items
Net loss on discontinued and disposed operations (35.1) (24.9)
Profit/(loss) on sale of land and buildings 4.5 (41.0)
including impairment charge on properties
Net profit on sale of interest in subsidiaries 173.3 38.4
and joint ventures
Amount written off investments (Note 3) (103.0) (14.5)
Other, including associates (21.4) 1.6
Abnormal profit/(loss) before taxation 18.3 (40.4)
Taxation 15.7 0.4
2.6 (40.8)
Outside shareholders' interest (0.6) 0.9
Abnormal profit/(loss) attributable to 3.2 (41.7)
shareholders in Tiger Brands Limited
3. Amount written off investments
This includes an amount of R89.1 million written off in 2002 in respect of the
Group's 6.3% shareholding in Aurora Foods Inc.. The carrying value of the
investment at 30 September 2002 is R31.7 million.
4. Changes in accounting policies
The following new accounting policies were adopted with effect from 1 October
2001:
- Provision for dividend
AC107 (revised) - Events after the balance sheet date - precludes the raising
of a provision for any dividends declared after the balance sheet date.
Dividends, including any applicable secondary tax on companies (STC) charge,
will now be accounted for in the period they are actually declared. The
adoption of AC107 (revised) has resulted in the Group increasing the opening
balance of distributable reserves at 1 October 2001 by R270.8 million and
restating the headline earnings for the year ended 30 September 2001 to reflect
an increase of R0.3 million. Presentation of dividends per share is not
affected by this change in policy.
- Post-retirement medical aid obligations
In accordance with the requirements of AC116 (revised) - Employee benefits -
the Group has recognised its obligation to fund certain post-retirement
benefits. These were previously accounted for on a cash paid basis. The
adoption of AC116 (revised) has resulted in the Group raising an additional
provision of R235.4 million as at 30 September 2001, being the full actuarially
calculated liability of R322.6 million less the amount partly provided as at 30
September 2001 of R87.2 million.
This change has been accounted for by reducing the distributable reserves at 30
September 2001 by R160.4 million after deferred taxation of R70.6 million and
accounting for minority interests of R4.4 million. Headline earnings for the
year ended 30 September 2001 have been restated to reflect a reduction of R12.2
million.
- Depreciation of buildings
In terms of AC135 - Investment property - all buildings owned by the Group are
now depreciated over their expected remaining useful life. Previously, only
specialised buildings were depreciated. The adoption of AC135 has resulted in
the Group reducing the opening balance of distributable reserves at 1 October
2001 by R68.9 million and decreasing the carrying value of fixed asset by R78.8
million. In addition, the headline earnings for the twelve months ended 30
September 2001 have been restated to reflect an earnings reduction of R7.0
million as a result of the additional depreciation.
- Provision for leave pay
In terms of AC116 (revised) - Employee benefits - the Group now provides for
leave pay on a total cost to company basis. Previously, leave pay was provided
for based on the gross salary of the employee. This change in accounting policy
has resulted in the Group reducing the opening balance of distributable
reserves at 1 October 2001 by R9.8 million. There was no effect on headline
earnings for the twelve months ended 30 September 2001.
OTHER GROUP SALIENT FEATURES
Year ended
30 September
2002 2001
Rm Rm
Reviewed Audited
Net worth per ordinary share (cents) 1,863 1,396
Net debt to equity (%) 54.9 114.8
Interest cover - net (times) 7.5 4.3
Current ratio (:1) 1.4 1.3
Capital expenditure (R million) 257.1 322.9
- expansion 145.9 128.0
- replacement 111.2 194.9
Capital commitments (R million) 125.9 122.4
- contracted 44.6 32.0
- approved 81.3 90.4
Capital commitments will be funded from normal
operating cash flows and the utilisation of
existing borrowing facilities.
Contingent liabilities
Guarantees and contingent liabilities* 605.5 479.8
* R435.4 million (2001: R318.8 million) comprises
contingencies in respect of head leases entered
into by the Spar group for which they have entered
into equivalent
sub-leases.
Market and directors' valuation of investments
Listed - market value 357.6 468.8
Unlisted - directors' valuation 2,355.3 2,185.8
STATEMENT OF CHANGES IN EQUITY
Share Non-
capital and distributable Accumulated
premium reserves profits Total
Rm Rm Rm Rm
Balance at 30 September 701.9 287.7 (9.9) 979.7
2000 (as previously
reported)
Prior year adjustment in 270.5 270.5
terms of AC107
Prior year adjustment in (61.9) (61.9)
terms of AC135
Prior year adjustment in (158.0) (158.0)
terms of AC116
Restated balance at 30 701.9 287.7 40.7 1,030.3
September 2000
Issue of share capital 12.4 12.4
and premium
Foreign currency 44.5 44.5
translation reserve
movement
Transfers between 34.5 (34.5) 0.0
reserves
Movements on associates 20.9 20.9
not taken to income
Prior year goodwill 238.1 238.1
written off on Lagap -
now realised
Deferred surplus on 5.6 5.6
revaluation of financial
instruments
Net profit for the year 969.4 969.4
Dividends on ordinary (353.5) (353.5)
shares
Distribution in specie in
respect of unbundling of
Astral Foods Limited (49.7) (207.7) (257.4)
Restated balance at 30 664.6 393.2 652.5 1,710.3
September 2001
Balance at 30 September 664.6 393.2 620.8 1,678.6
2001 (as previously
reported)
Prior year adjustment in 270.8 270.8
terms of AC107
Prior year adjustment in (68.9) (68.9)
terms of AC135
Prior year adjustment in (170.2) (170.2)
terms of AC116
Restated balance at 30 664.6 393.2 652.5 1,710.3
September 2001
Issue of share capital 31.8 31.8
and premium
Foreign currency (39.4) (39.4)
translation reserve
movement
Transfers between 164.7 (164.7) 0.0
reserves
Movements on associates 43.3 43.3
not taken to income
Prior year goodwill 1.3 1.3
Realised surplus on (5.6) (5.6)
revaluation of financial
instruments
Net profit for the year 1,360.1 1,360.1
Dividends on ordinary (373.0) (373.0)
shares
Balance at 30 September 696.4 556.2 1,476.2 2,728.8
2002
Comments
Tiger Brands achieved an increase of 36% in headline earnings per share to 817
cents for the twelve months ended 30 September 2002. This represents a
significant improvement on the performance at the half year.
The year under review was characterised by Tiger's continued progress towards a
branded, demand-driven organisation based on newly defined category structures.
Important steps were taken in synergising the Food business with the
consolidation of the brand development and customer management functions within
one location. Although benefits from the synergisation process have been
realised, these are being reinvested in the core brands. Material benefits from
the programme are only expected to be realised from 2004.
Results
Revenue and operating profit from continuing operations increased by 22% and
23% respectively, with the overall operating margin remaining virtually
unchanged at 10%. The effects of sharply higher grain prices were mitigated by
the benefits of an effective procurement programme, which resulted in the group
being able to source its grain requirements at below market prices.
Furthermore, the company has benefited significantly from the depreciation of
the Rand against the major currencies over the period, through enhanced profits
from exports and from the improved Rand contribution of the foreign associates.
In total, approximately 26% (2001: 21%) of profits were generated in foreign
currencies in 2002.
Net financing costs reduced by R115 million, or 30%, compared to the previous
year. This was due to a good operating cash flow performance and was assisted
by the cash proceeds of approximately R800 million raised from the sale of
non-core assets since March 2001.
The share of profits from associates showed a strong increase of 45%, with the
contribution from the group's foreign associates - ConAgra Malt and Empresas
Carozzi - benefiting from the higher Rand conversion of their profits.
Food Brands
Food Brands increased operating profit by 36% on a revenue increase of 24%.
This performance was achieved through a combination of currency related
benefits arising from exports, cost effective purchasing of grain raw materials
and overhead containment.
The Cereals & Beverages business performed particularly well under difficult
circumstances. The flour and bakery categories significantly increased their
operating profit, with the full benefits of the prior year's bakery
rationalisation being achieved. The bakery business enjoyed increased consumer
acceptance of its 'Superior' loaf which has a longer shelf-life and enhanced
nutrient value compared to the regular product. A good performance was achieved
by the pasta category, but the rice category, as a fully imported product, was
affected by sharply higher raw material prices. The maize business benefited
from effective procurement positions taken with regard to its raw material
requirements and from the leading brand 'Ace' increasing its market share. The
hot breakfast cereal category, represented by Jungle Oats, had a disappointing
year whilst the sorghum beverages business produced slightly lower profits due
to pressure on margins.
The Culinary business, which markets brands such as 'Koo', 'All Gold',
'Colmans' and 'Black Cat', increased operating profit by 21%. The introduction
of new products contributed to this sound performance. 'All Gold' tomato sauce
achieved a record market share despite heightened competitive activity in the
tomato sauce market. DairyBelle Cheese's new product, the convenient 'Easy
Slice' cheese, contributed to the performance of the category. Overall,
Culinary profits were strongly bolstered by currency related benefits from
canned fruit exports.
The Confectionery business achieved a 3% improvement in operating profit from a
13% increase in revenue in an extremely competitive sector. Growth has
continued to be driven by innovation, although profitability was affected by
increased marketing expenditure and new product launch costs. The business
successfully introduced the 'Fast Forward' energy bar during the period as well
as a number of other product innovations.
The Perishables business, which comprises the group's fishing interests (Sea
Harvest and Oceana) and the DairyBelle fresh milk operations, achieved an
operating profit increase of 35%. Oceana, which is a separately listed company,
achieved a 27% increase in headline earnings per share. Turnover rose by 29%
mainly due to a substantial increase in midwater pelagic volumes traded out of
Mauritania. Improved performances in most operations contributed to an
operating profit increase of 21%. Sea Harvest performed particularly well
despite a reduced hake quota and poor mid-winter fishing conditions. Export
revenues increased by 41% as a result of the weaker Rand and increased sales of
value-added products. The fresh milk business continued to disappoint and
recorded a loss for the year.
Healthcare Brands
Healthcare Brands achieved a 9% improvement in operating profit on a 14%
increase in revenue. A solid performance was achieved by the Consumer business
whilst improved results were recorded by Pharmaceuticals and Critical Care in
the second half of the year.
The Pharmaceuticals business includes key brands such as 'Myprodol', 'Synap
Forte', 'Corenza C', 'Pynstop' and 'Adco-Dol'. An 8% improvement in operating
profit was achieved on a 12% increase in revenue. The increased investment in
major brands and new product development exerted pressure on margins.
In the Consumer business a 14% growth in revenue translated to a 19% increase
in operating profit. This was achieved through a more focused investment in
marketing, with most major brands showing double digit volume growth. The
business markets brands such as 'Ingram's Camphor Cream', 'Panado', 'Compral',
'Purity' and 'Gill'.
The Critical Care business improved its performance in the second six months,
leaving operating profit marginally ahead of last year for the year as a whole.
This business is successfully moving away from an over-reliance on hospital
tender business in the intravenous solutions market to the provision of
complementary hospital products and services. Innovation accounted for 30% of
turnover for the full year.
Spar
Spar produced strong results with an increase in operating profit of 26% on
revenue growth of 18%. Spar continues to increase its market share and during
the year 60 new stores were opened, whilst 100 stores were refurbished.
Good progress was made in respect of two strategic goals aimed at enhancing
top-line growth. This related to the opening of 59 new 'Tops' liquor stores and
the substantial increase in Spar house brand sales.
Spar continues to focus on the fresh food and home meal replacement markets,
which are expected to make a growing contribution to future profits. Plans are
underway to increase warehouse capacity in two distribution centres in order to
improve service levels and drive growth.
Associates
Income from associates increased by 45% to R177 million as a consequence of
higher foreign currency earnings boosted by currency translation benefits
following the sharp depreciation in the value of the Rand. Excluding currency
translation benefits, the contribution from associates showed an improvement of
18%.
The international malted barley business ConAgra Malt (50% owned) and branded
food group Empresas Carozzi of Chile (24%) both improved their performances.
Enterprise Foods (50%) is involved locally in the manufacture and marketing of
chilled processed meats. The company experienced a significant increase in its
raw material input costs as a result of the depreciation of the Rand.
Notwithstanding the higher raw material costs and pressure on sales volumes,
operating profits were in line with the previous year.
Acquisition of Robertsons Homecare
Subsequent to the year end, the Competition Tribunal approved the acquisition
by Tiger Brands of Robertsons Homecare. The total purchase consideration
amounting to R325 million was paid on 13 November 2002. The purchase of the
business including the trademarks provides the company with an entry to
attractive new household markets. The Robertsons Homecare business has well
established leading brands in the insecticide and airfreshener markets. The
brands acquired include 'Doom', 'Fastkill', 'Airoma' and 'Peaceful Sleep'.
Changes in Accounting Policies.
Comparative figures have been restated as a result of the adoption of a number
of new accounting policies with effect from 1 October 2001. The overall effect
is that headline earnings for the year ended 30 September 2001 were reduced by
R18.9 million. (Refer note 4 for further details).
Provision for dividends and STC
In terms of accounting statement AC107 (revised), dividends, including any
applicable secondary tax on companies (STC) charges, are now accounted for in
the period that the dividends are actually declared. Therefore, the STC charge
included in the 2002 results relates to the final dividend in respect of the
2001 financial year and the interim dividend paid in July 2002.
Post-retirement medical aid obligations
In accordance with AC 116 (revised) the group recognises its obligation to fund
its post-retirement medical aid contributions over the expected working lives
of its employees.
Provision for leave pay
In terms of AC 116 (revised), the group calculates its provision for leave pay
on a total cost to company basis. Previously, the majority of operations
calculated the leave pay provision based on the gross salary cost.
Depreciation of investment properties
In terms of AC 135, all buildings owned by the group are now depreciated over
their expected remaining useful life.
Final dividend
The company has declared a final dividend of 211 cents per share, which brings
the total dividend for the year to 290 cents per share. The total dividend
represents an increase of 36 % over that of the previous year.
Annual Report
The annual report will be posted to shareholders in December.
Outlook
The exceptional growth in earnings achieved in 2002 means that the results for
2003 will be measured off a high base, with the prospects for real growth
largely dependent on the strength of the economy and some improvement in
consumer demand.
The company remains on course to achieve its long-term objective of delivering
profitable top-line growth for its shareholders. Tiger Brands will continue to
invest in its core brands and build for the future through an emphasis on
profitable top-line growth and an increased focus on innovation in products and
processes.
For and on behalf of the Board
R A WILLIAMS N DENNIS
Chairman Chief Executive Officer 20 November 2002
Directors:
Non-executive:
R A Williams (Chairman), B H Adams, D D B Band, B P Connellan,
D E Cooper, U P T Johnson, A C Nissen, G N Padayachee, I B Skosana,
J L van den Berg
Executive:
N Dennis (Chief Executive Officer) (British), M H Franklin,
J H McBain (British), M C Norris, R V Smither, C F H Vaux
Company secretary: I W M Isdale
Share registrars:
South Africa:
Computershare Investor Services Limited, 70 Marshall Street, Johannesburg, 2001
Postal address:
PO Box 1053, Johannesburg, 2000
United Kingdom:
Computershare Investor Services plc, PO Box 82, The Pavilions, Bridgewater
Road, Bristol, BS99 7NH
Registered office:
85 Bute Lane, Sandown, Sandton, South Africa
Postal address:
PO Box 78056, Sandton, 2146, South Africa
London office:
St James Corporate Services Limited, 6 St James's Place, London, SW1A 1NP
http://www.tigerbrands.com
Wednesday, 15th May 2024
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