Pioneer Food Group Limited

05/20/2019 | Press release | Distributed by Public on 05/19/2019 23:12

PFG: PIONEER FOOD GROUP LIMITED - Unaudited Condensed Consolidated Interim Financial Statements For The Six Months Ended 31 March 2019

PFG: PIONEER FOOD GROUP LIMITED - Unaudited Condensed Consolidated Interim Financial Statements For The Six Months Ended 31 March 2019
PFG: PIONEER FOOD GROUP LIMITED - Unaudited Condensed Consolidated Interim Financial Statements For The Six Months Ended 31 March 2019
Unaudited Condensed Consolidated Interim Financial Statements For The Six Months Ended 31 March 2019
Pioneer Food Group Limited
Incorporated in the Republic of South Africa
Registration number: 1996/017676/06
Tax Registration number: 9834/695/71/1
Share code: PFG
ISIN code: ZAE000118279
('Pioneer Foods' or 'the Group' or 'the Company')
UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 31 MARCH 2019

SALIENT FEATURES
Revenue                                                                                                                                         +12%       R11 039 million
Adjusted operating profit (before items of a capital nature)*                                                                                   -23%          R729 million
Earnings                                                                                                                                        -18%          R509 million
Earnings per share                                                                                                                              -18%           272 cents
Diluted earnings per share                                                                                                                      -14%           272 cents
Headline earnings ('HE')                                                                                                                        -14%          R509 million
Headline earnings per share                                                                                                                     -14%           272 cents
Diluted headline earnings per share                                                                                                              -9%           272 cents
Adjusted headline earnings*                                                                                                                     -15%          R506 million
Adjusted headline earnings per share*                                                                                                           -15%           271 cents
Net cash profit from operating activities                                                                                                       -19%          R971 million
Net asset value per share                                                                                                                        +4%         4 508 cents
Interim gross dividend per listed ordinary share (2018: 105 cents)                                                                                -            105 cents
* HE and operating profit (before items of a capital nature) are adjusted for the impact of the share-based payment charge of the Phase I B-BBEE equity transaction
  and related hedge.
Pioneer Foods:      +27 21 974 4000
Tertius Carstens:   +27 83 627 2077; [email protected]
Felix Lombard:      +27 83 635 8278; [email protected] 
COMMENTARY
INTRODUCTION
Pioneer Foods posted revenue growth of 11.5% to R11.039 billion with volumes 2.7% higher for the six months ended 31 March 2019. Excluding the acquired
Wellingtons and Lizi's businesses revenue grew by 7.9% with volumes up by 1.3%. This represents a credible topline performance in the significantly constrained local
consumer market with consequent competitive pressures.
Revenue expansion was driven by sound volume growth in key product categories such as bread, wheat, rice, beverages (long life fruit juice), cereals in the UK and
sausage rolls in Nigeria. Total basket inflation of 6.6% (ahead of overall SA CPI) was fueled by price inflation in the Essential Foods, International fruit and some smaller
Groceries product categories.
Volume declines in maize and cereals constrained further revenue growth. Beverage exports into nearby African countries held its own despite the constrained trading
environment with increased credit risk.
The Group gained overall market share in South Africa across participating categories during the six months under review (Nielsen's Trade Desk).
FINANCIAL PERFORMANCE
Gross profit increased by 5% to R3.1 billion. The gross margin decreased from 29.6% to 27.9%, mainly as a result of insufficient price inflation to compensate for
increased raw material costs and operating cost growth.
Increased operating costs were driven by the considered investment in future growth capabilities (e.g. bread production and availability and distribution network
expansion) as well as the higher cost of fuel, impacting distribution and energy related cost elements.
Total trade investment required (promotional activity and incentives) to maintain volume momentum and category participation, increased materially on the comparative period.
This was caused mainly by intensified retailer competition and demands for promotional support.
Operating profit, before items of a capital nature, adjusted for the Phase I B-BBEE equity transaction ('BEE') share-based payment income/charge and related hedge
('SBP'), decreased by 23% to R729 million. In turn, the adjusted operating profit margin decreased from 9.6% to 6.6%. The Wellingtons business made a loss of
R40 million before income tax (2018: R150 million on a 100% interest basis) for the 6 months. The operating profit margin would have been 7.2% if the Wellingtons business is
excluded.
Profit for the period, after finance costs of R97.3 million (2018: R88.9 million) and the share of profit of joint ventures and associates of R38.7 million
(2018: R21.6 million loss), decreased by 17.7% to R512.1 million.
Earnings per share ('EPS') decreased by 18% to 272.3 cents and headline earnings per share ('HEPS') decreased by 14% to 272.4 cents per share. HEPS, adjusted for
the BEE SBP net charge/gain, decreased by 15% to 270.9 cents per share.
During the period, the strategic shareholder Phase II B-BBEE equity transaction matured and Pioneer Foods repurchased and cancelled 11 563 013 ordinary shares.
DIVISIONAL PERFORMANCE
SEGMENTAL REVIEW
Six months ended 31 March 2019
                                                                                                              Segmental revenue                    Segmental operating profit*
                                                                                                              2019                  %              2019                      %
                                                                                                               R'm             Change               R'm                 Change
Essential Foods                                                                                              6 384                 10               422                    (25)
Groceries                                                                                                    3 076                 16               171                    (41)
International                                                                                                1 579                 11               142                     18
Other^                                                                                                           -                  -                (6)                    76
Total                                                                                                       11 039                 12               729                    (23)
* Before items of a capital nature and the BEE SBP net charge/gain.
^ The higher unallocated corporate costs in 2018 relate mainly to insurance excess payments for KZN storm damage and inventory related claims as well as an increase
  in costs associated with mergers and acquisitions (The Good Carb Food Company ('Lizi's') and Heinz Foods SA).
Essential Foods
The business, excluding maize, delivered an improved performance on the comparative period, but not enough to counter the material maize shortfall. The recovery in the
wheaten value chain performance was led by strong bread volume growth following investments in manufacturing capacity during the past two years augmented by the
route-to-market and availability growth strategy.
Investment in operating cost to deliver the planned bread volume growth has accelerated, specifically in respect of distribution and manpower. The bread category
experienced some price inflation during the reporting period following an extended deflationary cycle since the end of 2016. Sound rice volume and profitability
expansion were achieved, with the pasta performance further constrained through competitively priced imports. Bread and rice posted market share gains for the
reporting period in the Top End Retail market.
The year-on-year regression in the performance of the maize category, off the strong comparative period base, was more than expected given sustained selling price deflation
despite raw material cost inflation, and a weaker milling performance. The latter was impacted by weaker milling yields to sustain uncompromised White Star quality
despite regression in maize quality and lower overall milling volumes. Although total White Star volumes sold were maintained compared to the comparative period, some
share loss is reported given underlying category growth. White Star Instant maize porridge continues to outgrow a fast expanding product category with leading Top End
Retail share reported during recent months.
Groceries
The major contributor to the decline in Groceries' profitability was the newly integrated Wellingtons business. Though overall negative profitability in the Wellingtons
business is materially better than the comparative period, the performance of the business was impaired mainly by claims and costs associated with third party sales and
distribution, which has now been addressed.
The integration of the Wellingtons business is completed with key category participation improving through share gains in Top End Retail. The product and brand
offerings together with accelerated innovation, portfolio maintenance, improved procurement and further operating performance enhancements, enabled through the
Pioneer Foods integration, portends further improvement and upside.
Within the rest of Groceries, the beverage business posted a good performance. Regression in cereals (negative product mix and pricing recovery lag) and some smaller
categories contributed to the lower year-on-year profit in the business, excluding Wellingtons. Material growth in trade investment to hold volume shares and increased 
distribution costs contributed negatively, whilst the remainder of operating and conversion costs were well contained. Long life fruit juice delivered an excellent 
performance given sound volume growth supported by pack format and product innovation and posted share expansion in a growing category.
International
International delivered an improvement on the comparative period in the face of challenging trading conditions in neighbouring export markets and rand/dollar volatility. 
Higher export fruit pricing delivered solid revenue and profit growth. As a consequence, the 2019 vine fruit procurement prices experienced double-digit inflation which was
further exacerbated by increased local competition. The UK subsidiary delivered an excellent performance driven by the core business, as well as the Lizi's product
range that was acquired in the prior year. The Nigerian business performed well with the construction of the new bakery in Lagos progressing to plan.
Joint ventures
Joint ventures posted a marked improvement, helped by the exclusion of Heinz Foods SA from this reporting line, with this positive trend expected to continue.
Bowman Ingredients and Bokomo Botswana contributed materially to the year-on-year growth.
FINANCIAL POSITION
Net cash profit from operating activities decreased by 18.8% to R970.5 million (2018: R1 195.0 million). Investment in working capital increased by R996.1 million
(2018: R1 151.6 million), which is normally the case during the first half of the financial year.
Capital expenditure amounted to R268.6 million (2018: R222.3 million).
The Group's net interesting-bearing debt, amounted to R1 573.2 million at 31 March 2019 (31 March 2018: R1 788.1 million excluding Phase II B-BBEE third-party debt),
with a debt to equity ratio of 18% (31 March 2018: 22%), compared to net debt of R441.8 million (excluding Phase II B-BBEE third-party debt) at 30 September 2018.
This Phase II B-BBEE third-party debt was settled during March 2019.
OUTLOOK
The macro environment is expected to remain challenging and will continue to place pressure on consumer demand with resulting muted spending. Cost inflation in key
raw materials and other operational input costs remains present although it is starting to level off. With pricing recovery still constrained by lower consumer demand and
retailer competitive intensity, pressure on operating margins is expected to continue. The Group will continue efforts to optimise costs and efficiencies whilst ensuring
its brands remain available and relevant to customers and consumers, thus strengthening the base for continued growth.
DIVIDEND
A gross interim dividend of 105 cents (2018: 105 cents) per share has been approved and declared by the Board from income reserves for the six months ended
31 March 2019. The applicable dates are as follows:
Last date to trade cum dividend                                                          Tuesday, 25 June 2019
Trading ex-dividend commences                                                          Wednesday, 26 June 2019
Record date                                                                               Friday, 28 June 2019
Dividend payable                                                                           Monday, 1 July 2019
Share certificates may not be dematerialised or rematerialised between Wednesday, 26 June 2019 and Friday, 28 June 2019, both days inclusive.
A gross interim dividend of 31.5 cents (2018: 31.5 cents) per class A ordinary share, being 30% of the gross interim dividend payable to ordinary shareholders in terms
of the rules of the relevant employee scheme, will be paid during July 2019.
The above statements have not been reviewed or reported on by the auditors of Pioneer Foods.
By order of the Board
ZL Combi                               TA Carstens
Chairman                               Chief Executive Officer
Tyger Valley
16 May 2019
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 31 MARCH 2019
GROUP STATEMENT OF COMPREHENSIVE INCOME
                                                                                                                         UNAUDITED          UNAUDITED
                                                                                                                        SIX MONTHS         SIX MONTHS             AUDITED
                                                                                                                             ENDED              ENDED          YEAR ENDED
                                                                                                                          31 MARCH           31 MARCH        30 SEPTEMBER
                                                                                                                              2019               2018                2018
                                                                                                                               R'm                R'm                 R'm
Revenue                                                                                                                   11 039.3            9 898.9            20 151.9
Cost of goods sold                                                                                                        (7 956.4)          (6 970.4)          (14 356.4)
Gross profit                                                                                                               3 082.9            2 928.5             5 795.5
Other income and gains/(losses) - net                                                                                         67.3               80.7               197.4
Other expenses                                                                                                            (2 426.1)          (2 054.4)           (4 420.5)
   Excluding the following:                                                                                               (2 421.0)          (2 060.2)           (4 390.4)
   Phase I B-BBEE transaction share-based payment and related hedge (charge)/income                                           (5.1)               5.8               (30.1)
Items of a capital nature                                                                                                      1.1               36.9                73.2
Operating profit                                                                                                             725.2              991.7             1 645.6
Investment income                                                                                                             24.9               15.3                28.0
Finance costs                                                                                                                (97.3)             (88.9)             (197.5)
Share of profit/(loss) of investments accounted for applying the equity method                                                38.7              (21.6)                  -
Profit before income tax                                                                                                     691.5              896.5             1 476.1
Income tax expense                                                                                                          (179.4)            (274.3)             (399.0)
Profit for the period                                                                                                        512.1              622.2             1 077.1
Other comprehensive income/(loss) for the period
Items that will not subsequently be reclassified to profit or loss:
Remeasurement of post-employment benefit obligations                                                                             -                  -                 2.2
Items that may subsequently be reclassified to profit or loss:                                                                12.4              (77.9)               21.9
Fair value adjustments to cash flow hedging reserve                                                                            1.7              (10.9)              (12.2)
   For the period                                                                                                            (13.5)               3.5                 3.6
      Current income tax effect                                                                                                6.0               (1.2)               (5.7)
      Deferred income tax effect                                                                                              (2.2)               0.2                 4.6
   Reclassified to profit or loss                                                                                             15.8              (18.7)              (20.5)
      Current income tax effect                                                                                                0.2                4.6                 5.1
      Deferred income tax effect                                                                                              (4.6)               0.7                 0.7
Fair value adjustments on equity investments (2018: available-for-sale financial assets)                                     (17.2)              15.7                 0.6
   For the period                                                                                                            (17.2)              16.7                18.8
      Deferred income tax effect                                                                                                 -                0.3                 6.4
   Reclassified to profit or loss                                                                                                -               (1.3)              (24.6)
Share of other comprehensive income/(loss) of investments accounted for applying the equity method                             5.0              (15.5)                7.4
Movement on foreign currency translation reserve                                                                              22.9              (67.2)               26.1
Total comprehensive income for the period                                                                                    524.5              544.3             1 101.2
Profit for the period attributable to:
Owners of the parent                                                                                                         509.1              620.3             1 072.6
Non-controlling interest                                                                                                       3.0                1.9                 4.5
                                                                                                                             512.1              622.2             1 077.1
Total comprehensive income/(loss) for the period attributable to:
Owners of the parent                                                                                                         519.7              544.9             1 090.9
Non-controlling interest                                                                                                       4.8               (0.6)               10.3
                                                                                                                             524.5              544.3             1 101.2
HEADLINE EARNINGS RECONCILIATION
                                                                                                                         UNAUDITED          UNAUDITED
                                                                                                                        SIX MONTHS         SIX MONTHS             AUDITED
                                                                                                                             ENDED              ENDED          YEAR ENDED
                                                                                                                          31 MARCH           31 MARCH        30 SEPTEMBER
                                                                                                                              2019               2018                2018
                                                                                                                               R'm                R'm                 R'm
Reconciliation between profit attributable to owners of the parent and headline earnings
Profit attributable to owners of the parent                                                                                  509.1              620.3             1 072.6
Remeasurements                                                                                                                (1.3)             (28.6)              (61.2)
  Net profit on disposal of property, plant and equipment and intangible assets                                               (1.1)             (35.6)              (35.2)
  Net profit on disposal of equity investments (2018: available-for-sale financial assets)                                       -               (1.3)              (24.6)
  Fair value adjustment of step-up from joint venture to subsidiary                                                              -                  -               (13.4)
  Before tax                                                                                                                  (1.1)             (36.9)              (73.2)
  Tax effect on remeasurements                                                                                                (0.2)               8.3                12.0
Remeasurements included in equity-accounted results                                                                            1.4               (0.1)                6.0
  Remeasurements                                                                                                               1.4               (0.1)                7.3
  Tax effect on remeasurements                                                                                                   -                  -                (1.3)
Headline earnings                                                                                                            509.2              591.6             1 017.4
Phase I B-BBEE transaction share-based payment and related hedge charge                                                       (2.8)               5.2                14.4
Adjusted headline earnings (Note 1)                                                                                          506.4              596.8             1 031.8
Number of issued ordinary shares (million)                                                                                   221.6              233.6               233.2
Number of issued treasury shares:
- held by subsidiary (million)                                                                                                18.0               18.0                18.0
- held by B-BBEE equity transaction participants (million)                                                                       -               18.1                18.1
- held by BEE trust (million)                                                                                                 10.7               10.7                10.7
Number of issued class A ordinary shares (million)                                                                             2.8                3.0                 2.9
Weighted average number of ordinary shares (million)                                                                         186.9              186.6               186.7
Weighted average number of ordinary shares - diluted (million)                                                               186.9              196.8               196.3
Earnings per ordinary share (cents):
- basic                                                                                                                      272.3              332.5               574.6
- diluted                                                                                                                    272.3              315.2               546.5
- headline                                                                                                                   272.4              317.1               545.0
- diluted headline                                                                                                           272.4              300.6               518.4
- adjusted headline (Note 1)                                                                                                 270.9              319.9               552.8
- diluted adjusted headline (Note 1)                                                                                         270.9              303.3               525.7
Gross dividend per ordinary share (cents)                                                                                    105.0              105.0               365.0
Gross dividend per class A ordinary share (cents)                                                                             31.5               31.5               109.5
Net asset value per ordinary share (cents)                                                                                 4 508.1            4 339.6             4 496.6
Debt to equity ratio (%)                                                                                                      18.1               27.6                10.7
Note 1:
Headline earnings ('HE') is calculated based on Circular 4/2018 issued by the South African Institute of Chartered Accountants. Adjusted HE is defined as HE adjusted
for the impact of the share-based payment charge on the Phase I B-BBEE transaction on profit or loss (and the impact of the related hedge).
GROUP STATEMENT OF FINANCIAL POSITION
                                                                                                                         UNAUDITED          UNAUDITED             AUDITED
                                                                                                                          31 MARCH           31 MARCH        30 SEPTEMBER
                                                                                                                              2019               2018                2018
                                                                                                                               R'm                R'm                 R'm
Assets
Property, plant and equipment                                                                                              5 696.5            5 312.3             5 653.9
Goodwill                                                                                                                     440.8              411.7               434.0
Other intangible assets                                                                                                      772.2              667.0               766.0
Investments in and loans to associates and joint ventures                                                                    832.7              855.7               791.3
Derivative financial instruments                                                                                              97.2              223.2               128.7
Equity investments at fair value                                                                                               4.0                  -                   -
Available-for-sale financial assets                                                                                              -              155.4                77.9
Trade and other receivables                                                                                                   39.1               36.6                45.8
Deferred income tax                                                                                                           62.3                7.1                55.8
Non-current assets                                                                                                         7 944.8            7 669.0             7 953.4
Current assets                                                                                                             6 624.1            6 262.6             6 587.7
Inventories                                                                                                                3 705.1            3 396.4             3 176.6
Derivative financial instruments                                                                                              29.9               35.9                28.0
Trade and other receivables                                                                                                2 452.2            2 245.7             2 244.1
Current income tax                                                                                                            21.2               17.2                10.2
Cash and cash equivalents                                                                                                    415.7              567.4             1 128.8
Assets of disposal group classified as held for sale                                                                             -               22.9                   -
Total assets                                                                                                              14 568.9           13 954.5            14 541.1
Equity and liabilities
Capital and reserves attributable to owners of the parent                                                                  8 696.4            8 104.9             8 379.7
Share capital                                                                                                                 22.2               23.4                23.3
Share premium                                                                                                              1 636.5            2 581.3             2 538.0
Treasury shares                                                                                                             (187.1)          (1 186.4)           (1 186.4)
Other reserves                                                                                                               194.2              128.6               188.9
Retained earnings                                                                                                          7 030.6            6 558.0             6 815.9
Non-controlling interest                                                                                                      40.0               24.4                35.3
Total equity                                                                                                               8 736.4            8 129.3             8 415.0
Non-current liabilities                                                                                                    2 367.2            1 297.1             2 396.2
Borrowings                                                                                                                 1 352.9              246.9             1 405.1
Provisions for other liabilities and charges                                                                                 113.8              113.7               112.2
Share-based payment liability                                                                                                 85.2              171.3               112.8
Deferred income tax                                                                                                          815.3              765.2               766.1
Current liabilities                                                                                                        3 465.3            4 528.1             3 729.9
Trade and other payables                                                                                                   2 770.4            1 870.3             3 018.5
Current income tax                                                                                                            14.8               35.6                15.2
Derivative financial instruments                                                                                               6.1               18.4                32.8
Borrowings
   B-BBEE equity transaction third-party finance                                                                                 -              449.2               451.5
   Other                                                                                                                     636.0            2 108.6               165.5
Loan from joint venture                                                                                                       17.5                8.5                21.0
Dividends payable                                                                                                              1.3                0.6                 1.6
Share-based payment liability                                                                                                 19.2               36.9                23.8
Total equity and liabilities                                                                                              14 568.9           13 954.5            14 541.1
GROUP STATEMENT OF CHANGES IN EQUITY
                                                                                                                         UNAUDITED          UNAUDITED
                                                                                                                        SIX MONTHS         SIX MONTHS             AUDITED
                                                                                                                             ENDED              ENDED          YEAR ENDED
                                                                                                                          31 MARCH           31 MARCH        30 SEPTEMBER
                                                                                                                              2019               2018                2018
                                                                                                                               R'm                R'm                 R'm
Share capital, share premium and treasury shares                                                                           1 471.6            1 418.3             1 374.9
Opening balance                                                                                                            1 374.9            1 391.2             1 391.2
Movement in treasury shares - derecognition of previously consolidated Phase II BEE equity transaction
participants                                                                                                                 999.3                  -                   -
Ordinary shares issued - share appreciation rights                                                                             2.9               27.1                51.5
Ordinary shares bought back and cancelled                                                                                     (1.3)                 -               (67.8)
Shares bought back from Phase II BEE equity transaction participants and cancelled                                          (904.2)                 -                   -
Other reserves                                                                                                               194.2              128.6               188.9
Opening balance                                                                                                              188.9              213.1               213.1
Equity compensation reserve transactions                                                                                      18.9               18.5                26.6
Ordinary shares issued - share appreciation rights                                                                            (2.9)             (27.1)              (51.5)
Deferred income tax on share-based payments                                                                                   (8.9)               2.0               (15.4)
Share of other comprehensive income of investments accounted for applying the equity method                                    5.0              (15.5)                7.4
Treasury shares derecognised                                                                                                 (12.5)                 -                   -
Other comprehensive income/(loss) for the period                                                                               5.7              (62.4)                8.7
Retained earnings                                                                                                          7 030.6            6 558.0             6 815.9
Opening balance                                                                                                            6 815.9            6 422.9             6 422.9
Effect of changes in accounting policies                                                                                      (2.3)                 -                   -
Restated opening balance                                                                                                   6 813.6            6 422.9             6 422.9
Profit for the period                                                                                                        509.1              620.3             1 072.6
Other comprehensive income for the period                                                                                        -                  -                 2.2
Dividends paid                                                                                                              (484.6)            (485.1)             (681.4)
Profit on disposal of Group treasury shares by Phase II BEE equity transaction participants and derecognition of
these previously consolidated entities                                                                                       202.6                  -                   -
Transaction cost on shares bought back                                                                                       (10.1)              (0.1)               (0.4)
Non-controlling interest                                                                                                      40.0               24.4                35.3
Opening balance                                                                                                               35.3               25.0                25.0
Profit for the period                                                                                                          3.0                1.9                 4.5
Share of other comprehensive income/(loss)                                                                                     1.7               (2.5)                5.8
Total equity                                                                                                               8 736.4            8 129.3             8 415.0
GROUP STATEMENT OF CASH FLOWS
                                                                                                                         UNAUDITED          UNAUDITED
                                                                                                                        SIX MONTHS         SIX MONTHS             AUDITED
                                                                                                                             ENDED              ENDED          YEAR ENDED
                                                                                                                          31 MARCH           31 MARCH        30 SEPTEMBER
                                                                                                                              2019               2018                2018
                                                                                                                               R'm                R'm                 R'm
Net cash profit from operating activities                                                                                    970.5            1 195.0             2 072.5
Cash effect from hedging activities                                                                                          (19.9)             (12.2)                2.1
Working capital changes                                                                                                     (996.1)          (1 151.6)              281.1
Net cash (utilised in)/generated from operations                                                                             (45.5)              31.2             2 355.7
Settlement of share-based payment liability                                                                                   (6.7)             (15.1)              (26.3)
Cash effect of forward purchase contracts related to share-based payments                                                      6.9               14.8                25.5
Income tax paid                                                                                                             (158.1)            (206.2)             (364.4)
Net cash flow from operating activities                                                                                     (203.4)            (175.3)            1 990.5
Net cash flow from investment activities                                                                                    (232.8)            (410.6)             (866.6)
Property, plant and equipment and intangible assets
- additions                                                                                                                 (201.4)            (127.2)             (297.9)
- replacements                                                                                                               (67.2)             (95.1)             (328.4)
- proceeds on disposal                                                                                                         9.5               74.5               106.6
Business combinations                                                                                                            -             (263.7)             (511.4)
Proceeds on disposal of and changes in loans and equity investments at fair value (2018: available-for-sale
financial assets)                                                                                                             (1.4)             (21.4)               79.3
Investment in joint venture                                                                                                      -              (15.0)              (15.0)
Investment in associate                                                                                                      (12.0)                 -                   -
Interest received                                                                                                             12.0                8.1                16.1
Dividends received                                                                                                            12.7                7.1                11.4
Dividends received from joint ventures                                                                                        15.0               22.1                52.1
Dividends received from associate                                                                                                -                  -                20.6
Net cash flow from financing activities                                                                                     (708.7)            (617.5)             (395.8)
Proceeds from borrowings - new syndicated and other borrowings                                                                   -                  -             1 207.0
Repayment of syndicated bullet loans                                                                                             -                  -              (600.0)
Repayment of Phase II BEE equity transaction third-party finance                                                            (427.8)                 -                   - 
Repayments of other borrowings                                                                                               (35.3)             (41.8)              (61.7)
External funding to Phase II BEE equity transaction participant                                                              429.3                  -                   -
Derecognition of cash and cash equivalents of previously consolidated Phase II BEE equity transaction
participants                                                                                                                 (77.3)                 -                   -
Ordinary shares bought back                                                                                                   (1.3)                 -               (67.8)
Other share scheme transactions                                                                                              (12.3)              (2.4)               (3.7)
Interest paid                                                                                                                (99.1)             (88.2)             (189.2)
Dividends paid                                                                                                              (484.9)            (485.1)             (680.4)
Effect of exchange rate changes on cash and cash equivalents                                                                   1.9                3.4                 3.0
Net cash, cash equivalents and bank overdrafts at beginning of period                                                      1 033.5              302.4               302.4
Net cash, cash equivalents and bank overdrafts at end of period                                                             (109.5)            (897.6)            1 033.5
Disclosed as:
  Cash and cash equivalents                                                                                                  415.7              567.4             1 128.8
  Bank overdrafts and call loans (included in current borrowings)                                                           (525.2)          (1 465.0)              (95.3)
                                                                                                                            (109.5)            (897.6)            1 033.5
GROUP SEGMENT REPORT
                                                                                                                         UNAUDITED          UNAUDITED
                                                                                                                        SIX MONTHS         SIX MONTHS             AUDITED
                                                                                                                             ENDED              ENDED          YEAR ENDED
                                                                                                                          31 MARCH           31 MARCH        30 SEPTEMBER
                                                                                                                              2019               2018                2018
                                                                                                                               R'm                R'm                 R'm
Segment revenue
Essential Foods                                                                                                            6 383.6            5 826.1            11 859.3
Groceries                                                                                                                  3 076.3            2 647.4             5 119.6
International                                                                                                              1 579.4            1 425.4             3 173.0
Total                                                                                                                     11 039.3            9 898.9            20 151.9
Segment results
Essential Foods                                                                                                              421.5              561.0               915.3
Groceries                                                                                                                    171.3              292.5               419.3
International                                                                                                                142.1              120.5               285.0
Other                                                                                                                         (5.7)             (25.0)              (17.1)
                                                                                                                             729.2              949.0             1 602.5
Phase I B-BBEE transaction share-based payment and related hedge charge                                                       (5.1)               5.8               (30.1)
Operating profit before items of a capital nature                                                                            724.1              954.8             1 572.4
Reconciliation of operating profit (before items of a capital nature) to profit before income tax
Operating profit before items of a capital nature                                                                            724.1              954.8             1 572.4
Adjusted for:
  Remeasurement of items of a capital nature                                                                                   1.1               36.9                73.2
  Interest income                                                                                                             12.2                8.2                16.6
  Dividends received                                                                                                          12.7                7.1                11.4
  Finance costs                                                                                                              (97.3)             (88.9)             (197.5)
  Share of profit/(loss) of investments accounted for applying the equity method                                              38.7              (21.6)                  -
Profit before income tax                                                                                                     691.5              896.5             1 476.1
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 31 MARCH 2019
1.    Basis of preparation
      The condensed consolidated interim financial statements of the Group for the six months ended 31 March 2019 have been prepared in accordance with the
      requirements of the JSE Ltd ('JSE') for condensed consolidated interim financial statements, and the requirements of the Companies Act of South Africa, Act
      71 of 2008, as amended, applicable to condensed consolidated interim financial statements. The JSE Listings Requirements require condensed consolidated
      interim financial statements to be prepared in accordance with the framework concepts and the measurement and recognition requirements of International
      Financial Reporting Standards ('IFRS'), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, the Financial Reporting Pronouncements
      as issued by the Financial Reporting Standards Council and also, as a minimum, to contain the information required by IAS 34 - Interim Financial Reporting. These
      condensed consolidated interim financial statements have not been audited.
      The directors take full responsibility for the preparation of the condensed consolidated interim financial statements and that the financial information has been
      correctly extracted from the underlying financial records.
2.    Accounting policies
      These condensed consolidated interim financial statements incorporate accounting policies that are in terms of IFRS and are consistent with those applied in the
      Group's annual financial statements for the year ended 30 September 2018 except for the adoption of the following new standards on 1 October 2018:
      IFRS 9 - Financial Instruments; and
      IFRS 15 - Revenue from Contracts with Customers
      The impact of the adoption of the new accounting standards is disclosed in note 3.
      The Group adopted all new as well as amended accounting pronouncements issued by the International Accounting Standards Board ('IASB') that are effective
      for financial years commencing 1 October 2018, however none of the other new or amended accounting pronouncements had a material impact on the
      consolidated results of the Group.
      In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting
      policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended
      30 September 2018 except where impacted by the adoption of the new accounting standards as indicated above.
3.    Changes in accounting policies
      The quantitative impact of the initial application of the new accounting standards is summarised below.
      The Group's results for the year ended and its financial position as at 30 September 2018 (previously disclosed) have been audited. The impact of the 
      adoption of IFRS 9 and IFRS 15 must still be audited.
  
                                                                                                 30 SEPTEMBER                                     1 OCTOBER
                                                                                                         2018                                          2018
                                                                                                   PREVIOUSLY       IFRS 15     IFRS 9         RESTATED FOR
                                                                                                    DISCLOSED        IMPACT     IMPACT        IFRS 9 AND 15
                                                                                                          R'm           R'm        R'm                  R'm               NOTE
      STATEMENT OF FINANCIAL POSITION
      ASSETS
      Non-current assets
      Available-for-sale financial assets                                                                77.9             -      (77.9)                   -           3.1.2 (i)
      Equity investments at fair value                                                                      -             -       77.9                 77.9           3.1.2 (i)
      Current assets
      Trade and other                                                                                                                                                3.1.2 (ii)
      receivables                                                                                     2 244.1           9.9       (3.2)             2 250.8        & 3.2.2 (ii)
      Inventories                                                                                     3 176.6          33.1          -              3 209.7          3.2.2 (ii)
      EQUITY AND LIABILITIES
      Capital and reserves
      Retained earnings                                                                               6 815.9             -       (2.3)             6 813.6          3.1.2 (ii)
      Non-current liabilities
      Deferred income tax                                                                               766.1             -       (0.9)               765.2          3.1.2 (ii)
      Current liabilities
      Trade and other payables                                                                        3 018.5          43.0          -              3 061.5          3.2.2 (ii)
      Comparative information has not been restated. The impact of initial application was applied retrospectively as an adjustment to opening retained earnings. Refer
      to notes 3.1 and 3.2 for further detail.
3.1   IFRS 9 - Financial Instruments
3.1.1 Nature of the change
      IFRS 9 replaces IAS 39 and addresses the classification, measurement and derecognition of financial assets and financial liabilities, introduces new rules for
      hedge accounting and a new impairment model for financial assets.
      In terms of IFRS 9 the classification of a financial asset depends on the entity's business model for managing the asset and the characteristics of the cash flows
      related to the financial asset as opposed to the 'specified-criteria' approach in terms of IAS 39.
      Apart from introducing simplified rules for hedge accounting, IFRS 9 introduces a new impairment model in terms of which impairment losses are based on
      expected credit losses ('ECLs') as opposed to incurred credit losses under IAS 39.
3.1.2 Impact on initial application
      The Group adopted IFRS 9 from 1 October 2018 which resulted in changes to accounting policies and adjustments to amounts recognised in the financial
      statements.
      In accordance with the transitional provisions in IFRS 9, the Group elected not to restate comparative information.
2019-05-20 07:05:00 Source: JSE News Service (SENS)