Interim Results

Tiger Brands Ld 16 May 2002 Tiger Brands Limited (Registration number 1994/017881/06) (Incorporated in the Republic of South Africa) Share code: TBSP ISIN : ZAE 000023578Tiger Brands Interim report to shareholders for the six months ended 31 March 2002 Positioning for sustainable long term growth The unaudited results for the six months ended 31 March 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 3. GROUP INCOME STATEMENT Unaudited Audited Six months ended Year ended 31 March 30 Sept Notes 2002 2001 Change 2001 Rm Rm % Rm As restated As restated Revenue 9,793.2 8,539.2 15 16,840.5 Continuing operations 9,793.2 8,320.4 18 16,639.1 Discontinued operations 218.8 201.4 Operating profit 1 851.9 784.7 9 1,665.1 Continuing operations 851.9 769.0 11 1,655.8 Discontinued operations 15.7 9.3 Income from investments 10.1 11.3 29 Profit from operations 862.0 796.0 1,694.1 Net financing costs (147.8) (205.2) (389.8) Profit before taxation and abnormal items 714.2 590.8 21 1,304.3 Abnormal items 2 33.7 (70.7) (40.4) Profit before taxation 747.9 520.1 1,263.9 Income tax expense 249.0 197.6 386.2 Net profit after taxation and before associates 498.9 322.5 55 877.7 Income from associates 79.8 48.0 66 121.9 Net profit after taxation 578.7 370.5 56 999.6 Minority interest and preference dividends 25.0 15.4 30.5 Net profit for the period 553.7 355.1 56 969.1 Number of ordinary shares in issue (000's) 166,344 165,744 165,959 Weighted average number of ordinary shares on which headline earnings and net profit per share are based (000's) 166,176 165,688 165,758 Headline earnings per ordinary share (cents) 306.3 250.4 22 599.9 Diluted headline earnings per ordinary share (cents) 304.3 248.9 22 595.9 Net profit per ordinary share (cents) 333.2 214.3 584.6 Dividends per ordinary share (cents) 79.0 68.0 213.0 Reconciliation between net profit and headline earnings Rm Rm Rm Net profit for the period 553.7 355.1 969.1 Adjusted for: Losses on sale or discontinuation of operations, net 46.2 24 Losses/(profits) on sale of fixed assets, including impairment charge on fixed properties 27.4 (10.8) 26.9 (Profits)/losses on change of interest in subsidiaries and other investments (84.1) 24.4 (18.6) Other including associates 12.0 (7.0) Headline earnings for the period 509.0 414.9 23 994.4 GROUP BALANCE SHEET Unaudited Audited 31-Mar 30-Sep 2002 2001 2001 Rm Rm Rm As restated As restated ASSETS Non-current assets 4,194.4 3,486.0 3,752.5 Property, plant & equipment 1,410.9 1,420.1 1,413.7 Goodwill and other intangibles 43.0 47.6 30.9 Investments 2,480.0 1,760.6 2,047.4 Deferred tax asset 260.5 257.7 260.5 Current assets 5,939.2 5,391.2 6,083.0 Inventories 1,703.0 1,707.6 1,610.5 Accounts receivable 2,900.7 2,374.9 2,524.1 Bank and cash resources 1,335.5 1,308.7 1,948.4 TOTAL ASSETS 10,133.6 8,877.2 9,835.5 EQUITY AND LIABILITIES Capital and reserves 2,085.9 979.5 1,711.6 Share capital and premium 678.9 656.5 664.6 Non-distributable reserves and retained income 1,407.0 323.0 1,047.0 Minority interest 119.5 73.7 106.1 Total non-current liabilities 3,134.6 4,382.1 3,366.7 Deferred tax liability 251.2 213.1 233.0 Provision for post-retirement medical aid 347.4 322.3 333.9 Long-term borrowings 2,536.0 3,846.7 2,799.8 Total current liabilities 4,793.6 3,441.9 4,651.1 Short-term borrowings 1,082.9 390.4 1,223.3 Accounts payable 3,710.7 3,051.5 3,427.8 TOTAL EQUITY AND LIABILITIES 10,133.6 8,877.2 9,835.5 ABRIDGED CASH FLOW STATEMENT Unaudited Audited Six months ended Year ended 31 March 30 Sept 2002 2001 2001 Rm Rm Rm As restated As restated Cash operating profit 979.7 933.8 1,962.40 Working capital changes (259.4) (201.7) (18.0) Net interest paid (147.7) (208.2) (399.2) Dividends received 10.1 11.3 43.4 Taxation paid (248.9) (370.6) (421.4) Cash available from operations 333.8 164.6 1,167.20 Dividends paid (253.0) (251.6) (390.9) Net cash inflow/(outflow) from operating activities 80.8 (87.0) 776.3 Net cash (outflow)/inflow from investing activities (60.0) 92.1 74.6 Net cash inflow before financing activities 20.8 5.1 850.9 Net cash (outflow)/inflow from financing activities (633.7)* 15.0 (125.7) Net (decrease)/increase in cash and cash equivalents (612.9) 20.1 725.2 * Including the early repayment of long-term debt amounting to R522.0 million Segmental analysis Unaudited Unaudited Audited Six months ended Six months ended Year ended 31 March 31 March 30 Sept 2002 2001 Change 2001 Rm % Rm % % Rm % Revenue - continuing operations Food Brands 4,929.8 48 4,113.6 48 20 8,172.9 47 Dry Groceries 3,765.1 36 3,242.2 38 16 6,565.0 38 - Cereals & Beverages 2,150.6 21 1,871.2 22 15 3,746.3 21 - Culinary 1,161.7 11 965.3 11 20 2,025.9 12 - Confectionery 452.8 4 405.7 5 12 792.8 5 Perishables 1,164.7 12 871.4 10 34 1,607.9 9 Healthcare 1,078.3 11 969.4 11 11 1,982.2 11 - Pharmaceutical 463.4 5 423.5 5 9 863.1 5 - Consumer 370.7 4 327.4 4 13 676.2 4 - Critical Care & other 244.2 2 218.5 2 12 442.9 2 Spar 4,105.6 41 3,527.5 41 16 7,075.4 41 Other 1.7 1.6 137.3 1 10,115.4 100 8,612.1 100 17 17,367.8 100 Less: Intragroup Revenue 322.2 291.7 728.7 9,793.2 8,320.4 16,639.1 Operating profit - continuing operations Food Brands 380.0 45 305.0 40 25 783.5 47 Dry Groceries 237.3 28 206.6 27 15 545.3 33 - Cereals & Beverages 107.1 13 94.6 12 13 287.2 18 - Culinary 94.7 11 80.3 11 18 186.2 11 - Confectionery 35.5 4 31.7 4 12 71.9 4 Perishables 142.7 17 98.4 13 45 238.2 14 Healthcare 345.4 41 326.9 42 6 668.6 41 - Pharmaceutical 213.8 25 201.6 26 6 412.2 25 - Consumer 78.0 9 68.2 9 14 134.1 8 - Critical Care & other 53.6 7 57.1 7 (6) 122.3 8 Spar 140.5 16 122.2 16 15 233.3 14 Other (14.0) (2) 14.9 2 (29.6) (2) 851.9 100 769.0 100 11 1,655.80 100 NOTES Unaudited Audited Six months ended Year ended 31 March 30 Sept 2002 2001 2001 Rm Rm Rm 1. Operating profit Operating profit is reflected after charging: Cost of inventories utilised 6,561.4 5,448.0 11,678.3 Depreciation 105.4 113.4 220.0 2. Abnormal items Net loss on discontinued and disposed operations (46.2) (24.9) Profit/(loss) on sale of land and buildings including impairment charge on properties (30.0) 0.1 (41.0) Profit/(loss) on change of interest in subsidiaries and other investments 84.6 (24.6) 23.9 Other, including associates (20.9) 1.6 Abnormal profit/(loss) before taxation 33.7 (70.7) (40.4) Taxation (6.3) 0.4 40.0 (70.7) (40.8) Outside shareholders' interest 0.9 Abnormal profit/(loss) attributable to shareholders in Tiger Brands Limited 40.0 (70.7) (41.7) 3. Changes in accounting policies The following new accounting policies have been 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 R270.7 million, decreasing the headline earnings for the comparable interim period ended 31 March 2001 by R15.9 million, and restating the headline earnings for the year ended 30 September 2001 to reflect an increase of R0.1 million. Presentation of dividends per share is not affected by this change in policy. - Post-retirement medical aid contributions 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 R246.7 million as at 30 September 2001, being the full actuarially calculated liability of R333.9 million less the amount partly provided as at 30 September 2001 of R87.2 million. This charge has been accounted for by reducing the distributable reserves at 30 September 2001 by R168.5 million after deferred taxation of R73.8 million and accounting for minority interest of R4.4 million. The reduction in Group headline earnings for the half-year ended 31 March 2001 as a result of the change in accounting policy amounts to R6.2 million. Headline earnings for the year ended 30 September 2001 have been restated to reflect a reduction of R12.0 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 R69.2 million and decreasing the carrying value of fixed assets by R78.9 million. In addition, the headline earnings for the half year ended 31 March 2001, and the twelve months ended 30 September 2001 have been restated to reflect earnings reductions of R3.5 million and R7.3 million respectively as a result of the additional depreciation. OTHER GROUP SALIENT FEATURES Unaudited Audited Six months ended Year ended 31 March 30 Sept 2002 2001 2001 As restated As restated Net worth per ordinary share (cents) 1,537 689 1,397 Net debt: Total funding (%) * 50.9 73.5 53.3 Interest cover - net (times) 5.8 3.9 4.3 Current ratio (:1) 1.2 1.6 1.3 Capital expenditure (R million) 107.2 107.7 322.9 - expansion 50.9 56.3 128.0 - replacement 56.3 51.4 194.9 Capital commitments (R million) 95.8 106.3 122.4 - contracted 38.4 26.3 32.0 - approved 57.4 80.0 90.4 Capital commitments will be funded by operating cash flows and the utilisation of existing borrowing facilities. Contingent liabilities Guarantees and contingent liabilities 598.2 467.8 549.5 Market and directors' valuation of investments Listed - market value 552.0 287.2 468.8 Unlisted - directors' valuation 2,397.8 1,636.4 2,185.80 * Total funding represents net debt plus interest of all shareholders Statement of changes in equity Share Non-dis- capital and tributable Retained premium reserves income Total Rm Rm Rm Rm Balance at 30 September 2001 (as previously 664.6 393.2 620.8 1,678.6 reported) Prior year adjustment in terms of AC107 270.7 270.7 Prior year adjustment in terms of AC135 (69.2) (69.2) Prior year adjustment in terms of AC116 (168.5) (168.5) Restated balance at the beginning of the period 664.6 393.2 653.8 1,711.6 Issue of share capital and premium 14.3 14.3 Foreign currency translation reserve movement 45.8 45.8 Transfers between reserves 79.3 (79.3) Prior year goodwill written off - now realised 1.8 1.8 Net profit for the period 553.7 553.7 Dividends on ordinary shares (241.3) (241.3) Balance at 31 March 2002 678.9 518.3 888.7 2,085.9 Balance at 30 September 2000 (as previously 701.9 287.7 (94.7) 894.9 reported) Adjustment to reverse excess provisions 6.4 6.4 Prior year adjustment in terms of AC107 270.2 270.2 Prior year adjustment in terms of AC135 (62.0) (62) Prior year adjustment in terms of AC116 (156.5) (156.5) Restated balance at the beginning of the period 701.9 287.7 (36.6) 953.0 Issue of share capital and premium 4.3 4.3 Foreign currency translation reserve movement (34.2) (34.2) Transfers between reserves 47.7 (47.7) Prior year goodwill written off - now realised 226.1 226.1 Net profit for the period 355.1 355.1 Dividends on ordinary shares (240.1) (240.1) Provision for post-retirement medical aid relating (27.3) (27.3) to Astral Foods Limited Distribution in specie in respect of the unbundling (49.7) (207.7) (257.4) of Astral Foods Limited Balance at 31 March 2001 (as restated) 656.5 301.2 21.8 979.5 Balance at 30 September 2000 (as previously 701.9 287.7 (94.7) 894.9 reported) Adjustment to reverse excess provisions 84.8 84.8 Prior year adjustment in terms of AC107 270.2 270.2 Prior year adjustment in terms of AC135 (62) (62.0) Prior year adjustment in terms of AC116 (156.5) (156.5) Restated balance at the beginning of the period 701.9 287.7 41.8 1,031.40 Issue of share capital and premium 12.4 12.4 Foreign currency translation reserve movement 44.5 44.5 Transfers between reserves 34.5 (34.5) Movements in associates not taken to income 20.9 20.9 Prior year goodwill written off - now realised 238.1 238.1 Deferred surplus on revaluation of financial instruments 5.6 5.6 Net profit for the year 969.1 969.1 Dividends on ordinary shares (353.0) (353.0) Distribution in specie in respect of the unbundling (49.7) (207.7) (257.4) of Astral Foods Limited Balance at 30 September 2001 (as restated) 664.6 393.2 653.8 1,711.60 REVIEW OF OPERATIONS Tiger Brands achieved a strong increase in headline earnings per share of 22% for the six months ended 31 March 2002. This result, has been favourably influenced by the exchange rate benefits arising from the depreciation of the Rand against the major currencies during the period under review. Vision 2004 As reported last year, Tiger Brands is engaged in a major change process which has as its objective the achievement of sustainable top-line growth through the creation of a market-driven, synergised organisation. Progress has been made in both Food Brands and Healthcare, where redefined food and healthcare product categories have been created to drive future growth. These categories are supported by designated functional structures covering brand development, customer management, the supply chain and commercial management. The company is well set to achieve its vision. Some benefits are already being realised but material benefits will only be achieved from 2004. Results Total revenue and operating income grew by 15% and 9% respectively, with revenue and operating income from continuing operations increasing by 18% and 11%. The overall operating margin from continuing operations fell to 8,7% (2001: 9,2%), largely influenced by sharply higher raw material input costs in the Cereals business and an increased investment in major brands in Healthcare. Net cash flow from operations improved to R334 million (R165 million) for the period under review. The improved cash flow performance, together with cash proceeds of R703 million realised from the disposal of non-core businesses (since March 2001), gave rise to a reduction of R57 million in finance charges and an improvement in the interest cover ratio to 5,8 times (2001: 3,9). Given the company's strong cash position and the current interest rate differential between short-term deposit rates and Tiger's fixed cost of debt, an early repayment of R522 million was effected, in March 2002, on the company's long-term borrowings. The benefits of the company's strategy of spreading risk through selected international investments were particularly evident in the strong performance from associate companies which increased their contribution to group earnings by 66%. Although the foreign associates - ConAgra Malt and Empresas Carozzi - are performing well, their contribution was significantly enhanced by the higher rand conversion of their proifts. The lower interest costs, currency benefits arising from exports and the increased share of profits from associates have contributed significantly to the 22% growth in headline earnings per share. Food Brands Food Brands recorded a strong operating profit improvement of 25% on a revenue increase of 20%. This growth was achieved notwithstanding a significant increase in raw material costs in the Cereals business. Overall, the results were enhanced by strong performances in the Culinary and Fishing businesses as a result of significant currency related benefits arising from exports. Excluding exports, operating profit for the food categories showed no growth compared with the prior year. The comparative performance of Cereals was also favourably affected by the closure, during the prior year, of the loss making bakeries. The Cereals and Beverages business achieved a 13% increase in operating income under difficult circumstances. Reduced profitability in the wheat milling operations, caused mainly by lower volumes and pressure on margins, was more than offset by a significant turnaround in the profitability of the bakery business. The bakeries enjoyed good volume growth on a comparable basis. Although maize milling margins came under severe pressure as a result of significant raw material price increases following the weakening of the Rand, the company was able to limit the margin decline through sound procurement policies. The hot breakfast cereal category, Jungle, disappointed but a pleasing improvement was achieved in the pasta category. The rice category achieved a small increase in operating profit despite lower sales volumes and pressure on margins. The Culinary business, which markets leading brands such as All Gold, Koo, Black Cat and Colmans, recorded an operating profit increase of 18%. The fruit and vegetables category was adversely affected by poor yields caused by the inferior quality of the deciduous crop, whilst the condiments and ingredients business performed below expectation. An otherwise disappointing performance by the Culinary business was bolstered by currency related benefits arising from exports. The Confectionery business achieved a satisfactory increase in both revenue and operating profit. Growth has been largely driven through product innovation which now accounts for in excess of 20% of sales. The Perishables business, which comprises the company's fishing interests (Sea Harvest and Oceana) and the fresh milk operations, performed particularly well, increasing operating profit by 45%. Sea Harvest recorded strong profit growth as a result of significantly higher Rand realisations and a favourable sales mix in favour of value added products. Costs were adversely impacted by reduced catch rates caused by poor fishing conditions. Separately listed Oceana increased headline earnings per share by 27% with operating profit improving by 25%. There were particularly good contributions from the lobster, horse mackerel and hake operations, whilst the trading activities benefited from strong international markets and the weak Rand. The fresh milk operations recorded a loss for the period. Healthcare Brands Healthcare Brands achieved a 6% increase in operating profit on sales growth of 11%. A good performance by the Consumer business was tempered by modest growth in Pharmaceuticals and a small decline in profit in the Critical Care division. In Pharmaceuticals, an increased investment in major brands and new product development gave rise to a reduction in the operating margin. The focus on major brands and new products forms part of an overall strategy to position the business for future growth. Allowing for the increased level of investment, trading margins have otherwise been maintained. During the period, there were encouraging performances from key brands such as 'Myprodol', 'Synap Forte', 'Corenza C', 'Lentogesic', 'Pynstop' and 'Adco-Dol'. The Consumer business enjoyed excellent growth from core products such as 'Ingrams Camphor Cream', 'Panado', 'Compral', 'Elizabeth Anne' and 'Gill'. Critical Care margins were negatively affected by the loss of tender sales and pricing pressures in the core intravenous solutions business. However, the overall performance benefited from strong growth in Renal and Blood products, Sterilabs Services and from the National Renal Care joint venture. Spar Spar produced good results, increasing sales revenue and operating profit by 16% and 15% respectively. This was achieved notwithstanding an additional week's trading included in the prior period. On a comparable basis, revenue and operating profit increased by 22% and 24% respectively. During the six months, there was a net addition of thirty in the number of Spar outlets and overall market share was further increased. A further forty stores were also upgraded. The store upgrade programme reflects an increased emphasis on fresh food and home meal replacement. Sales of Spar house brands continue to be buoyant. Associates Income from associates reflected an increase of 66% compared to the same period last year. Excluding currency translation benefits, the contribution from associates showed an improvement of 24%. Both ConAgra Malt and Empresas Carozzi improved their performances considerably compared to the previous year. Enterprise Foods' contribution was well below last year due to significant price increases in imported raw materials caused by the depreciation of the Rand. The results of Jumbo Cash & Carry were equity accounted up to 1 April 2001, being the effective date of sale in the previous year. 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 half year ended 31 March 2001 were reduced by R25.6 million, whilst headline earnings for the twelve months ended 30 September 2001 were decreased by R19.2 million. - Provision for dividends and STC In terms of accounting statement AC 107 (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 half year results relates to the final dividend in respect of the previous financial year. - Post-retirement medical aid contributions 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. - Investment properties In terms of AC 135, all buildings owned by the Group are now depreciated over their expected remaining useful life. Dividend The company has declared an interim dividend of 79 cents per share, which represents an increase of 16% over 2001. In view of the extraordinary benefits arising from the depreciation of the Rand, it has been determined that the rate of increase in the interim dividend be below the growth in headline earnings per share. Prospects Tiger Brands is expected to perform at current trading levels for the remainder of the year. The benefits to the income from associates and from exports caused by the depreciation of the Rand are not likely to be repeated in the second six months. Whilst the rate of earnings growth for the full year is expected to be satisfactory, it will not match the increase achieved in the first six months. For and on behalf of the Board A WILLIAMS N DENNIS Chairman Chief Executive Officer 16 May 2002 Directors: R A Williams (Chairman), N Dennis* (Chief Executive Officer) (British), B H Adams, D D B Band, B P Connellan, D E Cooper, M H Franklin*, U P T Johnson, J H McBain* (British), A C Nissen, M C Norris*, G N Padayachee, I B Skosana, R V Smither*, J L van den Berg, C F H Vaux* * Exexcutive Director Company secretary: I W M Isdale Share registrars: South Africa: Computershare Investor Services Limited, 11 Diagonal Street, Johannesburg, 2001 Postal address: PO Box 1053, Johannesburg 2000 United Kingdom: Computershare Investor Services PLC, PO Box 82, The Pavilions, Bridgwater 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's Corporate Services Limited, 6 St James's Place London SW1A 1NP http://www.tigerbrands.com Tiger Brands Limited (Incorporated in the Republic of South Africa) (Registration number 1944/017881/06) Share code:TBSP ISIN: ZAE000023578 Dividend Declarations Ordinary dividend no. 115 Notice is hereby given that an interim dividend of 79,0 cents per Ordinary share has been declared in respect of the six months ended 31 March 2002. In compliance with the requirements of STRATE, the electronic settlement and custody system used by the JSE Securities Exchange South Africa, the company has determined the following salient dates for the payment of the dividend: Last day to trade cum-dividend Friday, 28 June 2002 Shares commence trading ex-dividend Monday, 1 July 2002 Record date Friday, 5 July 2002 Payment of dividend - South Africa and United Kingdom Monday, 8 July 2002 The interim dividend will be converted at the ruling GBP/ZAR exchange rate at close of business on Friday, 28 June 2002 for the shareholders registered in the United Kingdom. Shareholders in respect of the South African register will not be permitted to dematerialise/ rematerialise their shares between Monday, 24 June 2002 and Friday, 5 July 2002, both days inclusive. Preference dividend no. 116 Notice is hereby given that dividend number 116 at the rate of 5,5% per annum, equivalent to 5,5 cents per share, in respect of the six months ended 30 June 2002 has been declared. In compliance with the requirements of STRATE, the electronic settlement and custody system used by the JSE Securities Exchange South Africa, the company has determined the following salient dates for the payment of the dividend: Last day to trade cum-dividend Friday, 26 July 2002 Shares commence trading ex-dividend Monday, 29 July 2002 Record date Friday, 2 August 2002 Payment of dividend Monday, 5 August 2002 Preference shareholders will not be permitted to dematerialise/rematerialise their preference shares between Monday, 22 July 2002 and Friday, 2 August 2002, both days inclusive. By order of the board I W M Isdale Sandton Company secretary 16 May 2002 Registered office 85 Bute Lane, Sandown Sandton, South Africa Postal address: PO Box 78056 Sandton, 2146, South Africa London office St James's Corporate Services Limited 6 St James's Place London SW1A 1NP Share transfer secretaries South Africa: Mercantile Registrars Limited 11 Diagonal Street Johannesburg 2001 Postal address: PO Box 1053, Johannesburg, 2000 United Kingdom: Computershare Investor Services plc, PO Box 82 The Pavilions Bridgwater Road Bristol, BS99 7NH This information is provided by RNS The company news service from the London Stock Exchange

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