ended 30 September 2007
Country Foods Limited
(Formerly Africa's Best 346 Limited)
(Incorporated in the Republic of South Africa)
(Registration number 2005/018743/06)
(JSE code: CFO ISIN: ZAE000105052)
("Country Foods" or "the company" or "the group")
Highlights
* Revenue up 327% to R171 million
* Earnings per share up 268% to 12.5 cents per share
* Headline earnings up 256% to R11.4 million
* Headline earnings per share up 176% to 12.4 cents per share
* Net tangible asset value per share up 63% to 57.9 cents per share
ABRIDGED AUDITED FINANCIAL RESULTS
FOR THE YEAR ENDED 30 SEPTEMBER 2007
Abridged consolidated income statements
Audited Audited
30 (1)
September 30
2007 September
Year 2006
R'000 15 months
R'000
Revenue 171 370 40 106
Cost of sales (111 014) (20 888)
Gross profit 60 356 19 218
Other income 5 053 2 539
Operating costs (33 526) (13 521)
Earnings before interest, tax, 31 883 8 236
depreciation and amortisation ("EBITDA")
Depreciation and amortisation (7 755) (3 672)
Profit before finance costs 24 128 4 564
Net finance costs (6 623) (3 671)
Profit before taxation 17 505 893
Income tax (expense)/credit (4 392) 1 747
Profit for the year 13 113 2 640
Attributable to:
Equity holders of the group 11 498 2 477
Minority interests 1 615 163
Profit for the year 13 113 2 640
Reconciliation of headline earnings:
Earnings attributable to equity holders 11 498 2 477
of the group
Adjusted for:
(Profit)/Loss on sale of property, plant (94) 729
and equipment
Headline earnings attributable to 11 404 3 206
ordinary shareholders
Weighted average shares in issue (`000) 92 236 72 000
Shares in issue at period end (`000) 126 455 72 000
Earnings per share (cents) 12.5 3.4
Headline earnings per share (cents) 12.4 4.5
Note:
The historical financial information for the 15 months ended 30 September
2006 is for Edulis Mushrooms (Pty) Limited ("Edulis") as the group was formed
with effect from 30 September 2006 as set out in the detailed prospectus
dated 21 September 2007 ("the detailed prospectus") and as set out below
under business combinations.
Abridged consolidated balance sheets
Audited Restated
30 Audited
September 30
2007 September
R'000 2006
R'000
ASSETS
Non-current assets 112 788 88 967
Property, plant and equipment 52 724 39 143
Other investment 19 3
Loans receivable (1.2) - 685
Trade receivables 4 949 2 700
Intangible assets (1.1) (1.2) 52 506 46 111
Deferred tax assets 2 590 325
Current assets 114 012 66 335
Inventories 23 658 16 024
Loans receivable 1 055 -
Trade and other receivables 68 513 43 939
Loans to related companies - 4 027
Cash and cash equivalents 20 786 2 345
Total assets 226 800 155 302
EQUITY
Equity attributable to equity holders of 125 753 71 669
the company
Ordinary share capital and premium 83 464 40 723
Non-distributable reserve 151 306
Retained earnings 42 138 30 640
Minority interest 2 706 513
Total equity 128 459 72 182
Non-current liabilities 43 311 33 351
Interest-bearing borrowings 19 259 14 745
Loans from related companies 1 815 -
Non-interest bearing borrowings 7 884 6 423
Deferred taxation liability (1.1) 14 353 12 183
Current liabilities 55 030 49 769
Trade and other payables 37 564 19 731
Current portion of interest-bearing 10 391 8 217
borrowings
Taxation payable 5 745 2 306
Bank overdraft 1 330 19 515
Total equity and liabilities 226 800 155 302
Number of shares in issue (`000) 126 455 72 000
Net asset value per share (cents) 99.4 99.5
Net tangible asset value per share 57.9 35.5
(cents)
Notes:
The balance sheet at 30 September 2006 has been restated for the following
adjustments:
(1.1) Recognition of the deferred tax liability amounting to R2 010 832
of Country Mushrooms (Pty) Limited ("Country Mushrooms") at acquisition, and
the resultant impact on the goodwill recognised in terms of the business
combination.
(1.2) A reclassification adjustment to reflect the acquisition of
exclusive rights of distribution of fresh mushrooms from Edulis Zimbabwe. The
amount of R10 518 370 has been reclassified as an intangible asset.
Abridged consolidated statements of changes in equity
Share Non- Retained Total
capita distribu earnings equity
l Share table R'000 Minori R'000
R'000 premium reserves ty
R'000 R'000 intere
st
R'000
Share
premium
R'000
Minori
ty
intere
st
R'000
Balance 1 July 2005 250 - (55) 28 163 350 28 708
Foreign currency - 361 - 361
translation reserve
movement - -
Shares issued - 42 - - 40 473
cost of acquisition 40 431 -
Transactions 42 361 - 40 834
recognised directly
in equity 40 431 -
Profit for the - - 2 477 2 640
period - 163
Balance at 30 292 306 30 640 72 182
September 2006 40 431 513
Foreign currency - (155) - (155)
translation reserve
movement - -
Acquisition of - - - 578
subsidiary - 578
Proceeds on share 84 - - 47 118
issue 47 034 -
Share issue - - - (4 377)
expenses (4 377) -
Transactions 84 (155) - 43 164
recognised directly
in equity 42 657 578
Profit for the year - - - 11 498 1 615 13 113
Balance at 30 376 151 42 138 128 459
September 2007 83 088 2 706
Abridged consolidated cash flow statements
Audited Audited
30 30
September September
2007 2006
Year 15 months
R'000 R'000
Cash inflow/(outflow) from operating 2 618 (8 554)
activities
Cash (utilised by)/from investing (9 194) 4 295
activities
Cash inflows from financing activities 43 025 942
Increase/(decrease) in cash and cash 36 449 (3 317)
equivalents
Cash on acquisition of subsidiary 177 (3 877)
company
Cash and cash equivalents at beginning (17 170) (9 976)
of year
Cash and cash equivalents at end of 19 456 (17 170)
year
Abridged segment reports
Audited Audited
30 30
September September
2007 2006
Year 15 months
R'000 R'000
By geographical segments
Revenue
Local
Mushrooms 50 663 4 814
Beverages 60 036 -
Other 3 356 4 100
Export
Mushrooms 57 315 31 192
171 370 40 106
Assets and liabilities
Local
Non-current assets 100 026 77 033
Current assets 93 345 49 663
Liabilities (84 432) (73 428)
108 939 53 268
Foreign
Non-current assets 12 762 11 935
Current assets 20 667 16 672
Liabilities (13 909) (9 693)
19 520 18 914
By lines of business
Revenue
Mushrooms - wild and exotic 63 078 36 006
Mushrooms - cultivated 44 900 -
Beverages 60 036 -
Other 3 356 4 100
171 370 40 106
Profit for the year
Mushrooms - wild and exotic 7 731 2 477
Mushrooms - cultivated 1 967 -
Beverages 1 973 -
Other (173) -
11 498 2 477
OVERVIEW
The directors of Country Foods have pleasure in presenting the audited
results for the year ended 30 September 2007 ("2007 year end") and are
pleased to announce that the group has met its earnings forecasts for the
year. Country Foods listed on ALTx on 3 October 2007.
Country Foods is a holding company of wholly-owned subsidiaries that
operate in the niche, high quality value-added food and beverage product
markets, through its subsidiaries Edulis, Country Mushrooms and Fruitime
Fruit Juices (Pty) Limited ("Fruitime").
Country Foods has completed an eventful year that has set the tone and
shape for future growth and expansion of the group. Whilst results are
substantially in line with group forecasts, as set out in its prospectus,
the substantial growth experienced during the period under review is
extremely pleasing. The recent commissioning of a number of productive
assets as well as the establishment of new offshore operations, will
undoubtedly contribute to sustained growth in the year ahead.
Demand for the group's products has remained positive in the South African
market and extremely strong on the export market. The local distribution
division acquired the sole distribution rights of international food
brands such as Greci, Ferrarelle, Antonio Amato and Colavita. The newly
acquired distribution rights will extend the group's ability to offer our
customers a more comprehensive basket of products while maximising
efficiency and lowering overall costs of distribution.
The acquisition of exclusive distribution and licensing rights of
international and local brands and the ownership and management of such
rights is an ongoing process and forms an important part of the growth
strategy of Country Foods. The effort in implementation of shared
infrastructure and services among the operating subsidiaries of the group
has begun to produce the expected cost reductions and increase in
efficiencies.
APPLICATION OF IFRS 3 BUSINESS COMBINATIONS AND REVERSE ACQUISITION
In a reverse acquisition, the acquirer is the entity whose equity interest
has been acquired (the legal subsidiary) and the issuing entity (the legal
parent) is the acquiree. Although legally the issuing entity is regarded
as the parent and the entity whose equity interest has been acquired is
regarded as the subsidiary, the legal subsidiary is the acquirer as it has
the power to govern the financial and operating policies of the legal
parent so as to obtain benefits from its activities.
Consolidated financial statements prepared following a reverse acquisition
are issued under the name of the legal parent, but are a continuation of
the financial statements of the legal subsidiary (i.e. the acquirer for
accounting purposes). Because such consolidated financial statements
represent a continuation of the financial statements of the legal
subsidiary:
the assets and liabilities of the legal subsidiary are recognised and
measured in those consolidated financial statements at their pre-
combination carrying amounts;
the retained earnings and other equity balances recognised in the
consolidated financial statements are the retained earnings and other
equity balances of the legal subsidiary immediately before the business
combination;
the amount recognised as issued equity instruments in the consolidated
financial statements shall be determined by adding to the issued equity of
the legal subsidiary immediately before the business combination, the cost
of the combination. However the equity structure appearing in the
consolidated financial statements (i.e. the number and type of equity
instruments issued) reflects the equity structure of the legal parent,
including the equity instruments issued by the legal parent to effect the
combination;
- comparative information presented in the consolidated financial
statements is that of the legal subsidiary.
FINANCIAL RESULTS
The financial performance for the 2007 year end was substantially in line
with forecasts as set out in the detailed prospectus. The growth
experienced during the 2007 year is the result of the business
combinations as set out below as well as substantial organic growth in the
export and production divisions. Satisfactory growth in revenue was
experienced across all operating units.
Group revenue for the year increased by 327% to R171.4 million (2006: R
40.1 million). EBITDA was up 287% to R31.9 million (2006: R8.2 million)
due to higher volumes. EBITDA margins decreased to 18.6% (2006: 20.5%)
due to the consolidation of Country Mushrooms and Fruitime for the 2007
year end period which traditionally earn lower margins than Edulis.
Headline earnings and profit attributable to equity holders of the group
increased by 256% and 364% from the previous year to R11.4 million (2006:
R3.2 million) and R11.5 million (2006: R2.5 million) respectively.
Headline earnings per share increased 176% to 12.4 cents (2006: 4.5
cents).
BUSINESS COMBINATIONS
The sale of shares and cession of claims agreement entered into between
the Country Mushrooms vendors as sellers and Country Foods as purchaser on
11 September 2006, in terms of which Country Foods acquired the entire
issued share capital of, and all shareholder claims of such vendors from
such vendors, with effect from 30 September 2006, for a consideration of
R22 000 000 in a "share for share" transaction.
The sale of shares and cession of claims agreement entered into between
the Edulis vendor as seller and Country Foods as purchaser on 11 September
2006, in terms of which Country Foods acquired the entire issued share
capital of, and all shareholder claims of such vendors from such vendors,
with effect from 30 September 2006, for a consideration of R29 993 000 in
a "share for share" transaction.
The sale of shares and cession of claims agreement entered into between
the Fruitime vendor as seller and Country Foods as purchaser on 11
September 2006, in terms of which Country Foods acquired the entire issued
share capital of, and all shareholder claims of such vendors from such
vendors, with effect from 30 September 2006, for a consideration of R20
000 000 in a "share for share" transaction.
The sale of shares and cession of claims agreement entered into between
the Porcini Mushrooms (Pty) Limited vendors as seller and Edulis as
purchaser on 1 October 2006, in terms of which Edulis acquired the entire
issued share capital of, and all shareholder claims of such vendors from
such vendors, with effect from 1 October 2006, for a consideration of R5
984 000.
BASIS OF PREPARATION OF THE AUDITED RESULTS
Statement of compliance
The abridged financial statements comprise a consolidated balance sheet at
30 September 2007, a consolidated income statement, consolidated statement
of changes in equity and summarised consolidated cash flow statement for
the year ended 30 September 2007. The abridged financial statements have
been prepared in accordance with the recognition and measurement criteria
of International Financial Reporting Standards ("IFRS") and the
presentation and disclosure requirements of IAS 34, Interim Financial
Reporting.
The basis of preparation is consistent with accounting policies used in
the prior year.
The abridged financial statements were approved by the board of directors
on 7 December 2007.
Basis of measurement
The abridged financial statements have been prepared on the historical
cost basis except for certain financial instruments measured at fair
value.
AUDITOR'S REPORT
The annual results have been audited by the company's auditors KPMG Inc.
whose unqualified auditor's report on the abridged financial statements is
available for inspection at the company's registered address.
PROSPECTS
The group will continue its expansion drive during the financial year
ending 30 September 2008. Recently established offshore subsidiaries in
Tunisia and Morocco began trading operations during October 2007. United
States of America ("USA") subsidiary Forest Products International LLC has
extended its market penetration and will begin distribution of a number of
additional products on the East Coast of the USA.
The benefits of the commencement of alternative production in the Midlands
facility as well as the increased product and brand offerings across the
divisions are expected to have a positive impact on the group's revenue
from the second quarter of the 2008 financial year.
Country Foods will remain actively interested in acquisitions that will
complement its current growth strategy and we are confident that the
planned management strategies, expansion of current operations and
continued consumer demand for Country Foods products will result in
continued growth and improved performance in the year ahead.
SUBSEQUENT EVENTS
Save for the listing of Country Foods on ALTx on 3 October 2007, the
directors are not aware of any matter or circumstance arising since the
end of the year, which significantly affects the financial position of the
the group or the result of its operations as presented in these results.
SHARE CAPITAL
Country Foods has, through a private placement, placed 30 000 000 ordinary
shares at 100 cents per share to selected investors of Country Foods with
the listing on the JSE Limited ("JSE").
DIVIDEND POLICY
Initially all earnings generated by the group will be utilised to fund
future growth and acquisitions. The company will periodically reconsider
its cash position with the intention to distribute dividends to
shareholders as soon as prevailing circumstances allow.
STATEMENT ON GOING CONCERN
The financial statements have been prepared on the going-concern basis
since the directors have every reason to believe that the company has
adequate resources in place to continue in operation for the foreseeable
future.
CHANGES TO THE COMPANY SECRETARY
LA Comuzio resigned as company secretary on Thursday, 6 December 2007.
Premium Corporate Consulting Services (Pty) Limited was appointed with
effect from the same day.
APPRECIATION
The invaluable contribution of our management and staff is clearly
reflected in these results. Their sustained support and performance
will enable Country Foods to continue growing and prospering in the
future. Our sincere appreciation is extended to each and every one of
our employees for their efforts and performance.
A note of thanks to all our board members for their invaluable input
and guidance.
To all our shareholders, a special thank you for your continued
support. Your loyalty and confidence in our group is greatly
appreciated.
On behalf of the Board
R G Casaletti R H Liversage
Chief Executive Officer Chief Financial
Officer
7 December 2007
CORPORATE INFORMATION
Non executive directors: V I Zwane (Chairman), J C
Fourie
Executive directors: R G Casaletti (CEO); R H Liversage (CFO), P
B Swanevelder
Registration number: 2005/018743/06
Registered address: 40 Electron Avenue, Isando,
Johannesburg, 1600
Postal address: PO Box 1838, Houghton, 2041
Company secretary: Premium Corporate Consulting Services
(Pty) Limited
Telephone: (011) 974 4043
Facsimile: (011) 974 5378
Transfer secretaries: Computershare Investor Services
2004 (Pty) Limited
Designated Adviser: Exchange Sponsors (Pty) Limited
These results and an overview of Country Foods Limited are available at
www.countryfoods.co.za.
Date: 10/12/2007 08:47:11 Produced by the JSE SENS Department.
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