Interim Results & Div Dec

Tiger Brands Ld 17 May 2001 Tiger Brands Limited (Registration number 1994/017881/06) (Incorporated in the Republic of South Africa) Interim report to shareholders for the six months ended 31 March 2001 Repositioning for growth through the creation of a more market responsive organisation Headline earnings from continuing operations up 11% The unaudited results for the six months ended 31 March 2001 are set out below. This report has been prepared in accordance with the requirements of Statements of South African Generally Accepted Accounting Practice. These policies are consistent, in all material respects, with those applied in the most recent 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 2001 2000* Change 2000* Rm Rm % Rm Revenue 8 539.2 8 238.7 4 16 246.5 Continuing operations 8 472.1 7 659.1 11 15 438.9 Discontinued operations 67.1 579.6 807.6 Operating income 1 800.9 747.8 7 1 530.4 Continuing operations 799.2 705.6 13 1 478.1 Discontinued operations 1.7 42.2 52.3 Income from associates 48.0 38.7 24 99.8 Income from investments 11.3 21.4 33.1 Income from operations 860.2 807.9 6 1 663.3 Net financing costs (208.2) (89.9) (316.7) Income before taxation and abnormal items 652.0 718.0 1 346.6 Abnormal items 2 (70.7) (51.8) (53.6) Income before taxation 581.3 666.2 1 293.0 Income tax expense 185.0 223.8 344.0 Income after taxation 396.3 442.4 949.0 Minority interest 15.6 73.8 90.0 Dividends on preference shares 0.1 Income attributable to ordinary shareholders in Tiger Brands Limited 380.7 368.6 858.9 Number of ordinary shares in issue (000's) 165 744 165 594 165 643 Weighted average number of ordinary shares on which headline earnings and net income per share are based (000's) 165 688 165 504 165 563 Headline earnings per ordinary share (cents) 265.9 248.6 7 542.8 Net income per ordinary share (cents) 229.8 222.7 518.8 Dividends per ordinary share (cents) 68.0 60.8** 192.1** Reconciliation between earnings and headline earnings Rm Rm Rm Income attributable to ordinary shareholders 380.7 368.6 858.9 Adjusted for: Losses on sale or discontinuation of operations, net 46.2 18.0 42.4 Profits on sale of fixed assets, net (10.8) (3.9) (4.2) Losses on change of interest in subsidiaries, associates and other investments 24.4 28.7 (5.0) Other 6.6 Headline earnings for the period 440.5 411.4 7 898.7 * Pro forma - excluding the unbundled Agri-Poultry interests **Pro forma in March and September 2000 based on the actual dividend cover last year GROUP BALANCE SHEET Unaudited Audited Six months ended Year ended 31 March 30 Sept 2001 2000* 2000* Notes Rm Rm Rm ASSETS Non-current assets 3 454.9 2 802.2 3 411.6 Property, plant & equipment 1 494.4 1 613.6 1 551.6 Goodwill 47.6 Investments 1 760.6 1 084.3 1 716.1 Deferred tax asset 152.3 104.3 143.9 Current assets 5 307.0 6 290.1 4 999.7 Inventories 1 707.6 1 632.4 1 580.2 Accounts receivable 2 374.9 2 457.2 2 215.1 Bank and cash resources 1 224.5 2 200.5 1 204.4 TOTAL ASSETS 8 761.9 9 092.3 8 411.3 EQUITY AND LIABILITIES Capital and reserves 1 081.0 532.7 610.4 Share capital and premium 656.5 650.1 652.2 Non-distributable reserves and retained income 424.5 (117.4) (41.8) Minority interest 78.0 261.5 119.1 Total non-current liabilities 3 884.7 208.5 3 086.9 Deferred tax liability 38.0 38.7 24.6 Long-term borrowings 3 846.7 169.8 3 062.3 Total current liabilities 3 718.2 8 089.6 4 594.9 Short-term liabilities 390.4 129.3 1 113.5 Accounts payable including shareholders for dividend 3 327.8 3 960.3 3 481.4 TOTAL EQUITY AND LIABILITIES 8 761.9 9 092.3 8 411.3 * Pro forma - excluding the unbundled Agri-Poultry interests GROUP CASH FLOW STATEMENT Unaudited Audited Six months ended Year ended 31 March 30 Sept 2001 2000* 2000* Rm Rm Rm Cash operating income 933.8 899.5 1 838.7 Working capital changes (201.7) 35.3 (160.1) Net interest paid (208.2) (89.9) (283.4) Dividends received 11.3 21.4 47.6 Taxation paid (370.6) (180.4) (475.8) Cash available from operations 164.6 685.9 967.0 Dividends paid (251.6) (205.1) (319.2) Net cash (outflow)/inflow from operating activities (87.0) 480.8 647.8 Net cash inflow/(outflow) from investing activities 92.1 (3 821.2) (4 721.5) Net cash inflow/(outflow) before financing activities 5.1 (3 340.4) (4 073.7) Net cash inflow from financing activities 15.0 3 275.2 3 004.6 Net increase/(decrease) in cash and cash equivalents 20.1 (65.2) (1 069.1) * Pro forma - excluding the unbundled Agri-Poultry interests STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 31 MARCH 2001 Share Non dis- capital and tributable Retained premium reserves income Total Rm Rm Rm Rm Balance at 30 September 2000 (Pro forma) 652.2 287.7 (329.5) 610.4 Reversal of excess provisions brought forward 6.4 6.4 Restated balance at the beginning of the period 652.2 287.7 (323.1) 616.8 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 Income attributable to ordinary shareholders 380.7 380.7 Dividends on ordinary shares (112.7) (112.7) Balance at 31 March 2001 656.5 301.2 123.8 1 081.0 NOTES Unaudited Audited Six months ended Year ended 31 March 30 Sept 2001 2000* 2000* Rm Rm Rm 1. Operating income Operating income is reflected after charging: Cost of inventories utilised 5 448.0 5 084.3 10 445.5 Depreciation 109.2 111.0 237.4 2. Abnormal items Net loss on discontinued and disposed operations (46.2) (18.0) (42.0) Profit/(loss) on sale of land and buildings 0.1 (2.1) Loss on change of interest in subsidiaries, associates and other investments (24.6) (33.8) (6.2) Other (3.3) Abnormal loss before taxation (70.7) (51.8) (53.6) Taxation (7.8) (11.8) (70.7) (44.0) (41.8) Outside shareholders' interest 1.6 0.2 Abnormal loss attributable to shareholders in Tiger Brands Limited (70.7) (45.6) (42.0) 3. Change in accounting policy The company has changed its accounting policy for goodwill and other intangible assets. Whereas goodwill and intangible assets were previously written off to distributable reserves, they are now capitalised and amortised over their useful lives in terms of AC 129. OTHER GROUP SALIENT FEATURES Unaudited Audited Six months ended Year ended 31 March 30 Sept 2001 2000* 2000* Net worth per ordinary share (cents) 750 684 401 Net debt: Total funding (%)** 72.2 72.5 80.3 Interest cover - net (times) 3.9 8.6 4.9 Current ratio (:1) 1.4 0.8 1.1 Capital expenditure (R million) 107.7 125.2 212.2 - expansion 56.3 65.3 108.5 - replacement 51.4 59.9 103.7 Capital commitments (R million) 106.3 105.7 97.8 - contracted 26.3 48.7 38.5 - approved 80.0 57.0 59.3 Capital commitments will be funded by operating cash flows and the utilisation of existing borrowing facilities. Contingent liabilities Guarantees and contingent liabilities 160.8 233.5 79.8 Market and directors' valuation of investments and loans Listed - market value 287.2 175.7 241.3 Unlisted - directors' valuation 1 636.4 1 507.9 1 527.7 * Pro forma - excluding the unbundled Agri-Poultry interests **Total funding represents net debt plus interest of all shareholders Segmental analysis Unaudited Unaudited Audited Six months ended Six months ended Year ended 31 March 31 March 30 Sept 2001 2000* Change 2000* Rm % Rm % % Rm % Revenue - continuing operations Food Brands 4 096.9 48 3 973.3 52 3 7 814.3 51 Dry Groceries 2 996.2 35 2 952.7 39 1 5 825.4 38 - Cereals & Beverages 1 802.5 21 1 818.8 24 (1) 3 603.2 24 - Culinary 833.9 10 793.9 10 5 1 570.9 10 - Confectionery 359.8 4 340.0 5 6 651.3 4 Perishables 1 100.7 13 1 020.6 13 8 1 988.9 13 - Fishing 686.4 8 602.7 8 14 1 210.5 8 - Dairy 414.3 5 417.9 5 (1) 778.4 5 Healthcare 917.2 11 819.3 11 12 1 724.6 11 - Pharmaceutical 423.5 5 409.8 5 3 813.4 5 - Consumer 246.2 3 188.5 3 31 455.1 3 - Critical Care & other 247.5 3 221.0 3 12 456.1 3 Spar 3 458.0 41 2 866.5 37 21 5 898.4 38 Other 1.6 8 472.1 100 7 659.1 100 11 15 438.9 100 Operating income - continuing operations Food Brands 334.2 42 290.3 41 15 617.2 42 Dry Groceries 214.9 27 188.7 27 14 405.6 27 - Cereals & Beverages 100.1 13 92.7 13 8 200.6 14 - Culinary 81.2 10 67.0 10 21 141.8 9 - Confectionery 33.6 4 29.0 4 16 63.2 4 Perishables 119.3 15 101.6 14 17 211.6 15 - Fishing 102.3 13 79.5 11 29 186.5 13 - Dairy 17.0 2 22.1 3 (23) 25.1 2 Healthcare 322.6 40 313.7 44 3 614.2 41 - Pharmaceutical 201.6 25 200.4 28 1 387.3 26 - Consumer 59.7 7 52.8 7 13 99.9 7 - Critical Care & other 61.3 8 60.5 9 1 127.0 9 Spar 125.5 16 102.8 15 22 203.5 14 Other 16.9 2 (1.2) 43.2 3 799.2 100 705.6 100 13 1 478.1 100 * Pro forma - excluding the unbundled Agri-Poultry interests ordinary (interim) dividend number 113 Notice is hereby given that an interim dividend (number 113) of 68 cents per share has been declared payable to shareholders who are registered in the books of the company at the close of business on 22 June 2001. The dividend is payable in the currency of the Republic of South Africa and warrants in payment thereof dated 6 July 2001, will be posted to shareholders by the company's transfer secretaries in South Africa and the United Kingdom on or about 3 July 2001. Payments made by way of electronic transfer will be made on 6 July 2001. Registered shareholders paid from the United Kingdom will receive the United Kingdom currency equivalent of the rand currency value of their dividends (less appropriate taxes), the rate of exchange being determined on 25 June 2001. By order of the Board I W M Isdale Group Company Secretary 17 May 2001 REVIEW OF OPERATIONS In a difficult and static trading environment, Tiger Brands achieved an increase of 7% in headline earnings per share for the 6 months ended 31 March 2001. An important event during the period under review was the unbundling of Tiger's Agri-Poultry interests into a separately listed entity called Astral Foods Limited with effect from 1 October 2000. Consequent upon the unbundling, Tiger Brands no longer has any shareholding or management involvement in the newly listed Astral Foods. For comparative purposes, Tiger's results for the 6 months to 31 March 2000 and the year ended 30 September 2000 are presented on a pro forma basis in order to provide financial information which is relevant for the company after the unbundling. Following the unbundling of Astral Foods, Tiger's future growth strategy will focus on its core activities of Food Brands, Healthcare Brands and Spar. Repositioning for growth Tiger has embarked upon a major change process which is geared to the achievement of profitable top-line growth. The programme involves a total restructure of the food and healthcare businesses which will result in the creation of a synergised, demand-driven organisation. The businesses will be structured according to newly defined consumer categories which will be supported by designated functional structures covering brand development, customer management, supply chain management, finance and administration, information technology and organisational effectiveness. It is anticipated that the new category-based structure, which will be implemented over the course of the next 12 months, will not only result in the creation of a more market responsive organisation, but will also realise significant cost savings for the group. Benefits will start to materialise from the 2002 financial year, although the full impact of the programme will only be achieved from 2003. Consistent with Tiger's strategy of focusing on its core activities, a number of disposals have recently taken place. The Healthcare business, during March 2001, disposed of its 100% interest in Lagap Pharmaceuticals - a generics wholesaler based in the United Kingdom. The effective date of the disposal was 1 January 2001. During the review period, Tiger reached agreement for the sale to Nestle South Africa of its 49,9% interest in Pets Products. This transaction has been referred by the Competition Commission to the Competition Tribunal with a positive recommendation. Negotiations are ongoing for the disposal of Tiger's 30% interest in the Jumbo Cash & Carry joint venture. Results The turnover and operating income from continuing operations reflected growth of 11% and 13% respectively, with ongoing operating margin improving to 9,4% from 9,2%. Certain comparisons in the income statement continue to be affected by the acquisition of the full ownership of Adcock Ingram during December 1999. These are the net interest charge, which increased to R208 million from R90 million last year and the share of profit attributable to outside shareholders, which showed a reduction of R58 million in the current period. Headline earnings from continuing operations reflected growth of 11%. This compares favourably to the reported increase in earnings of 7% (which includes the prior year earnings of discontinued operations). Food Brands Food Brands performed well, reflecting growth in operating income of 15% on a 3% increase in turnover. Turnover growth of the core brands was higher at 5%. This pleasing result arises primarily from ongoing efficiencies as well as a turnaround to profitability in the maize meal category. In parallel with the implementation of the new category-based structure, various market driven initiatives are taking place to improve top-line growth. The Cereals and Beverages business recorded a satisfactory improvement in operating income of 8%, influenced primarily by the maize meal and sorghum malt categories. The recovery in maize meal was mainly due to the utilisation of lower priced maize compared to the previous year together with strong volume growth. The sorghum malt category produced an excellent result benefiting from lower raw material costs and a good contribution from the Mnanti brand. The flour category reduced profits as a result of lower selling prices and increased competitor activity. Bakeries recorded a loss for the period due to adverse trading in the rural bakeries. In March 2001, 9 rural bakeries were closed. The remaining bakeries, which operate in the urban areas are now profitable. An amount of R46 million has been provided for the closure of the rural bakeries and this is reflected as an abnormal charge in the current period. The rice category experienced a difficult trading period with premium brand volumes marginally down on the prior year. Operating income also reflected a decline due to the sales mix favouring the lower margin economy brands. The pasta category achieved a good improvement in operating profit, benefiting from satisfactory volume growth and lower durum wheat prices. The Culinary business, comprising the former Langeberg operations, Colman Foods (including babyfood) and the edible oil and margarine interests, reflected operating income growth of 21% on turnover growth of 5%. This result was mainly influenced by improved operating efficiencies. The Confectionery business performed well with a 16% increase in operating income. The ongoing rationalisation of the number of product lines resulted in an overall decline in volumes, but an improvement in operating margin to 9,3% (2000: 8,5%) was achieved. Perishables, which comprises the company's fishing interests (Sea Harvest and Oceana) together with Dairybelle and the 50% interest in DairyMaid Nestle, achieved a good result with operating income improving by 17%. Sea Harvest recorded strong growth in operating profit with margins benefiting from firm international demand for white fish and a favourable rand/dollar exchange rate. The Oceana Group increased headline earnings per share by 17% with good contributions from fish meal and oil, the Lucky Star brand, the lobster operations and Commercial Cold Storage. At Dairybelle, the cheese category performed in line with expectations, whilst the fresh milk operation recorded lower profits as a result of a decline in margins across most product lines. Healthcare Brands (formerly Adcock Ingram) Excluding discontinued operations, Healthcare Brands achieved a modest increase of 3% in operating income on turnover growth of 12%. The strategic initiatives referred to above, aimed at the creation of a synergised, demand driven Healthcare business, will enable the business to achieve acceptable levels of both top-line and operating income growth. The full impact of these initiatives is likely to be felt only from the 2003 financial year, although some benefits will start to flow through next year. Pharmaceuticals' turnover was 3% higher than last year with operating income increasing by 1%. Notwithstanding the low increase in turnover, operating margins were generally maintained. Although the key pharmaceutical brands have held market share, the growth in sales continues to be affected by the lack of new products. During the period under review, the company has made significant progress in rebuilding its new product pipeline by entering into a number of new licence agreements. The new products arising from these agreements should start to have a positive impact on growth from 2002. The Consumer division achieved turnover growth of 31% due in part to a strong performance by the major brands including Panado, Compral, Ingrams Camphor Cream and Gill. The inclusion of the newly licensed consumer product range from Bristol-Myers-Squibb (including Nice & Easy, Body on Tap, Herbal Essences and the Mum range of deodorants) for the full 6 months this year compared to only 3 months in the same period last year also had a positive effect. Operating income increased by 13%, reflecting a reduction in the operating margin from 28% to 24,2%. This was primarily due to the impact of the new licensed products as well as an increased marketing spend. Critical Care recorded turnover and operating income growth of 11% and 7% respectively, with new product sales showing significant increases. The operating margin was adversely affected by continuing price pressure in the core business of intravenous solutions. Spar The Spar business recorded turnover growth of 21% together with operating income growth of 22%. The results include the benefit of an additional week's trading in the current period compared to the previous year. On a comparable basis, Spar increased turnover and operating income by 15% and 13% respectively. The business continues to benefit from new store growth, whilst market share was further increased. The number of franchised stores in South Africa now totals 671 compared to 658 at 30 September 2000. During the period under review, Spar continued with its expansion in the perishable sector of the market through its 'fresh line' range and through increased focus in the value-added home meal replacement area. It is anticipated that this sector of the market will make a growing contribution to Spar's results in the future. Associates Income from associates showed good growth, with a positive contribution from ConAgra Malt compared to a loss incurred in the corresponding period last year. Empresas Carozzi and Enterprise Foods also made good contributions. DIVIDEND Notwithstanding the impact of the unbundling of Astral Foods, the company has declared an unchanged interim dividend of 68 cents per share. Consequently, this has resulted in the dividend cover at the half year reducing from 4,1 to 3,9 times. PROSPECTS The significant change process which is currently underway will only start to have a positive impact on the results from the 2002 financial year. It is expected that the rate of earnings growth in the second-half of the year should approximate that achieved in the first six months. For and on behalf of the Board R A WILLIAMS N DENNIS Chairman Managing Director 17 May 2001 http://www.tigerbrands.com Directors Messrs RAWilliams (Chairman), D E Cooper, N Dennis (Managing Director) (British),B HAdams, D D B Band, B P Connellan, M H Franklin, WRCHolmes, Ms W Y N Luhabe, JHMcBain (British), A C Nissen, M C Norris, I B Skosana, R V Smither, J L van den Berg, C F H Vaux Company secretary I W M Isdale Registered office 85 Bute Lane, Sandown Sandton, South Africa Postal address: POBox 78056 Sandton, 2146, South Africa London office St James 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: POBox 1053, Johannesburg, 2000 United Kingdom: Computershare Services plc, POBox 82, Caxton House Redcliffe Way, Bristol, BS99 7NH

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