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BUSINESS REVIEW



The Board continuously seeks to balance short-term earnings with long-term growth aspirations. This includes seeking new possibilities to expand the Group’s current product offerings as well as its presence in Africa.

SIX-Year financial review

Summarised results for the year Variance 
2014 vs 2013 		 2014 
R’000 		 2013 
Restated 
R’000 		 2012 
R’000 		 2011 
R’000 		 2010 
R’000 		 2009 
R’000 
Revenue 8,9% 8 530 237  7 832 911  7 223 863 6 542 321 @6 161 483 +5 475 800
Operating profit 24,0% 282 276  371 624  371 232 319 019 **558 970 *664 338
Net financing cost              
Current and long-term liabilities 23,7% (57 809) (46 717) (1 855) (16 081) (41 228) (103 501)
Debt portion of preference share capital 0% –  –  (22 007) (21 359) (22 290) (32 248)
Profit before tax from continuing operations (30,9%) 224 467  324 907 347 370 281 579 495 452 528 589
Taxes 49,7% (49 791) (99 022) (137 654) (97 534) (191 662) (29 239)
Share of profit of a joint venture 2,4% 14 306  13 974  –  –  –  – 
Profit after tax from discontinued operations –  –  –  – – 32 123 39 560
Non-controlling interest 87,8% (2 316) (1 233) (4 426) (4 446) (5 094) (11 740)
Profit attributable to equity holders of the parent (21,8%) 186 666  238 626 205 290 179 599 **330 820 *527 170
Headline earnings attributable to equity holders of the parent (12,8%) 187 464  214 894 207 800 175 177 19 000 (104 300)
Normalised earnings Variance 
2014 vs 
2013 		 2014 
R’000 		 2013 
R’000 		 2012 
R’000 		 2011 
R’000 		 2010 
R’000 		 2009 
R’000 
Operating profit   282 276  371 624  371 232 319 019 558 970 664 338
Adjusted for exceptional items:              
(Profit)/loss on sale and scrapping of property plant and equipment   5 102  (11 680) (878) (7 277) 940 (3 830)
Gain on fair valuing of existing investment in joint venture due to acquiring control   –  (16 747) – – – –
Profit on the sale of Boksburg factory   –  – – – (50 818) –
Discount on acquisition of PPE by Clover Waters through issue of shares   (20 716) –  –  – –  –
Profit on deconsolidation of Danone Clover   –  – – – – (637 518)
Profit on sale of Danone Clover   –  – – – (337 682) –
Retrenchment costs   7 174  17 184 3 629 6 628 84 900 17 200
Option fee paid to HCI on capital restructuring   –  – – – 11 400 –
Legal and professional services costs associated with the listing   141  49  – 8 499 – –
Legal and professional services costs associated with the capital restructuring   –  – – – 5 300 –
SAR bonuses paid to Executives on capital restructuring   –  – – – 37 100 –
Other restructuring cost   8 721  18 517  5 944 1 780 10 700 8 400
Normalised operating profit   282 698  378 947  379 927 328 649 320 810 48 590
Net financing cost   (57 809) (46 716) (23 862) (37 440) (63 518) (135 749)
Tax expense              
Total tax expense   (49 791) (99 022) (137 654) (97 534) (191 662) (29 239)
Other non-recurring tax adjustments   –  – 18 254 – – –
STC paid on capital restructuring   –  – – – 52 200 –
Taxation adjustment on exceptional items   (4 286) (8 453) (2 745) (1 845) 69 765 33 206
Share of profit of a joint venture   14 306  13 974  –  –  –  – 
Non-controlling interest   (2 316) (1 233) (4 426) (4 446) (5 094) (11 740)
Non-controlling interest’s portion in discount on acquisition of PPE by Clover Waters through issue of shares   6 215  –  –  –  –  – 
Non-controlling interest’s portion of restructuring cost of subsidiary   (741) –  –  –  –  – 
Normalised profit attributable to equity holders of the parent   188 276  237 497 229 493 187 384 182 501 (94 932)
@ During the first six months of the prior year raw milk sales to Danone Clover, an associated company at the time, were set off against cost of sales. To facilitate comparability to the current year that period’s sales are now shown as revenue and the cost of sales and revenue figures were regrouped accordingly. It has no effect on profits.
+ Following the sale of the Group’s interest in Danone Clover, the Group’s share of Danone Clover’s income was classified as income from discontinued operations. The 2009 comparative figures were restated accordingly.
* Includes R637,5 million (R599,5 million after tax) profit on deconsolidation of Danone Clover.
** Includes R337,7 million (R227,1 million after tax) profit on sale of Danone Clover.
*** Figures from 2009 to 2012 has not been restated for the equity accounting of CFI and Clover Manhattan.

 

  Variance 
2014 vs 
2013 		 2014 
R’000 		 2013 
Restated 
R’000 		 2012 
R’000 		 2011 
R’000 		 2010 
R’000 		 2009 
R’000 
Dividends              
Equity dividends – ordinary shares   69 342  41 912  53 734 58 720 – 1 000
Equity dividends – preference shares   –  – – – 370 030 28 984
Preference dividends recognised as interest   –  20 346 22 007 21 359 22 290 32 248
Earnings and dividends per share   Cents Cents Cents Cents Cents Cents
Equity dividends per ordinary share – Interim   16,0  10,0  15,0  10,0  – – 
Equity dividends per ordinary share – Final   16,0  22,0  13,4  15,0  32,95  – 
Equity dividends per preference share   – – – – – 33,5
Special dividend on the buy-back of the equity rights of preference shares per preference share   – – – – 413,7 –
Preference dividend recognised as interest per preference share   – 22,7  24,6 23,9 24,9 37,3
Earnings per ordinary share   102,3  133,1 114,6 116,7 **214,0 ***22,3
Diluted earnings per ordinary shares   97,3  123,8 107,4 108,9 **214,0 ***22,3
Headline earnings/(loss) per ordinary share   102,7  119,9 116,0 113,8 **33,1 ***(82,2)
Diluted headline earnings/(loss) per ordinary share   97,8  111,5 108,7 106,2 **33,1 ***(82,2)
Normalised earnings/(loss) per share, calculated by dividing the normalised profit/(loss) by the weighted average number of ordinary shares net of treasury shares   103,2  132,5 128,1 121,8 *118,1 *(120,6)
Summarised statement of financial position   R’000  R’000  R’000  R’000  R’000  R’000 
Non-current assets   2 302 052  1 997 482  1 526 306 1 361 355 1 202 482 1 823 620
Deferred taxation asset   8 919  6 722  492 3 262 18 840 110 449
Current assets   2 298 621  2 413 733  2 336 745 2 180 874 1 710 880 1 651 408
Total assets   4 609 592  4 417 937  3 863 543 3 545 491 2 932 202 3 585 477
Shareholders’ funds   2 252 270  2 113 116  1 894 244 1 742 362 1 048 358 1 440 122
Non-controlling interest   20 471  2 309  1 796 9 443 28 108 40 886
Non-current portion of interest-bearing borrowings   662 357  666 640  21 686 432 833 592 504 761 425
Non-current portion of provisions   67 615  60 814  61 637 62 522 50 457 60 464
Non-current portion of trade and other payables   4 351  9 267  6 904 13 357 6 320 –
Deferred taxation liability   179 023  137 313  116 950 32 015 6 363 6 292
Current portion of interest-bearing borrowings   214 495  172 646  421 376 173 828 66 947 234 809
Current liabilities   1 209 010  1 255 832  1 338 950 1 079 131 1 133 145 1 041 479
Total equity and liabilities   4 609 592  4 417 937  3 863 543 3 545 491 2 932 202 3 585 477
               
Net assets   2 272 741  2 115 425  1 896 040 1 751 805 1 076 466 1 481 008
Replacement value of property, plant and machinery (@)   7 577 153  6 106 300  5 746 800 5 445 700 5 112 800 4 927 000
@ Replacement value of property, plant and machinery is determined by an external valuator.
* The earnings/(loss) per share from continuing operations adjusted for exceptional items for years 2009 to 2010 are presented for illustrative purposes only to indicate what the earnings per share would have been if ordinary shareholders had been entitled to all equity earnings and if the two-for-one share split (4 November 2010) is taken into consideration.
** Earnings per share for the 2010 financial year has been recalculated to account for the two-for-one share split.
*** Earnings per share has not been adjusted for the two-for-one share split as at 4 November 2010.
****  Figures from 2009 to 2012 has not been restated for the equity accounting of CFI and Clover Manhattan.
A list of all definitions used in the above calculation is set out here.

 

Number of shares in issue   2014  2013 
Restated 		2012 2011 2010 2009 
Number of ordinary shares in issue at year-end   182 478 589  181 218 149  179 111 867 179 111 867 123 849 962 88 485 311
Weighted average number of ordinary shares net of treasury shares   182 478 589  179 267 674  179 111 867 153 882 447 154 595 442 78 711 534
Weighted average number of ordinary shares for calculation of diluted earnings   191 767 408  192 750 186 191 127 152 164 890 519 154 595 442 78 711 534
Number of preference shares in issue at year-end   –  – 89 442 022 89 442 022 89 442 022 86 492 589
Weighted average number of preference shares net of treasury shares   –  – 89 442 022 89 442 022 87 516 207 85 442 022
Cash flow   R’000  R’000  R’000  R’000  R’000  R’000 
Cash flow from operating activities   403 067  219 198  417 910 256 927 347 077 79 696
Cash (used in)/from investment activities   (351 734) (515 811) (256 150) (253 323) 1 005 113 (186 391)
Net cash (outflow)/inflow before financing activities   (97 780) 297 159  161 760 3 604 1 352 190 (106 695)
Cash flow from operating activities per share (cents)   220,9  122,3  233,3 167,0 224,5 101,3
Ratios and returns   % % % % % %
Operating profit to revenue   3,3  4,7  5,1 4,9 **9,1 *12,1
Normalised operating profit   3,3  4,8  5,3 5,0 5,2 0,9
Return on net assets   8,6  13,1  14,9 15,0 **27,1 *27,7
Return on net assets excluding exceptional items   8,6  13,4  15,2 15,4 15,5 2,0
Return on equity holders’ funds   8,6  11,9  11,3 12,9 **26,6 *44,3
Return on equity holders’ funds excluding exceptional items   8,6  11,9  12,6 13,7 15,1 (8,0)
Gearing percentage   9,8  6,4  (14,2) (12,4) 21,4 48,8
Effective tax rate   20,9  29,3  39,6 34,6 38,7 5,5
    Times Times Times Times Times Times
Net asset turn   5,6  6,2  6,8 8,3 6,9 6,5
Current ratio   1,6  1,7  1,3 1,7 1,4 1,3
Employees statistics   Number Number Number Number Number Number
Average number of employees   6 393  6 519  6 555 6 353 6 362 6 579
    R’000  R’000  R’000  R’000  R’000  R’000 
Revenue per employee   1 334,3  1 201,6  1 102 1 030 968 832
Operating profit per employee   44,2  57,0  57 50 88 101
Normalised operating profit   44,2  58,0  58 52 50 7
Average net assets per employee   343,2  307,7  278 223 201 188
# The number of ordinary shares have been adjusted for the two-for-one share split (4 November 2010).
* Includes R637,5 million (R599,5 million after tax) profit on deconsolidation of Danone Clover.
** Includes R337,7 million (R227,1 million after tax) profit on sale of associate Danone Clover.
***  Figures from 2009 to 2012 has not been restated for the equity accounting of CFI and Clover Manhattan.
A list of all definitions used in the above calculation is set out here.