PRELIMINARY SUMMARISED AUDITED GROUP RESULTS FOR THE YEAR ENDED 31 MARCH Commentary

Transcription

1 CROOKES BROTHERS LIMITED (Incorporated in the Republic of South Africa) Registration No. 1913/000290/06 Share code : CKS ISIN No: ZAE ("Crookes Brothers" or "the company" or "the group") PRELIMINARY SUMMARISED AUDITED GROUP RESULTS FOR THE YEAR ENDED 31 MARCH 2018 Commentary The 2018 financial year has been extremely difficult. Although the group made a strong recovery from the effects of the drought in the cane growing areas, the dramatic decline in the cane price in South Africa as well as the continuation of the drought in the Western Cape, severely impacted financial results. Revenue from farming operations decreased by 8 % to R608 million (2017: R664 million) on the prior corresponding year. Operating profit consequently decreased to R3 million (2017: R125 million), with 76 % of the decrease coming from our cane segment. Cash generated by operations decreased by 78% to R23 million (2017: R102 million). Additional short-term cash facilities were utilised for ongoing projects, mainly in the Mozambique macadamia and Renishaw property developments, in line with our long term plans. Our total borrowings increased by R171 million for the year ed 31 March 2018, giving rise to an increased net interest cost of R15 million (2017: R3.5 million net interest received). The group recorded a headline loss of 50.6 cents per share (2017: Headline earnings cents per share). Operations Sugar Sugar cane production dropped by 6 % to tons in the aftermath of the drought, while the SA RV price dropped by 15% compared to the prior year to R4187 per ton. Revenue from cane decreased by 13% to R300 million (R 2017 R343 million). The current low sugar prices also resulted in a significant reduction in the fair value of our standing crop at 31 March 2018, despite the additional area planted during the year, further impacting profits. Sugar cane operating profit decreased by 68% to R44 million (2017: R137 million) as a result of these factors. The adverse sugar price resulted from low international sugar prices, exacerbated by a strong rand and a delayed import tariff adjustment. We are hopeful that the low sugar price in South Africa will be rectified as an application submitted by the South African Sugar Association, for a revision of the import tariff, has reportedly been well received by Government. Deciduous As the year- falls in the middle of the deciduous harvest, the 2018 (financial year) results for deciduous fruit take into account the final results for the 2017 season as well as expectations for the 2018 season. In both seasons, crop quality and to a lesser extent yields were affected by drought. Deciduous production declined by 7% and the price by 6 %, the latter largely due to the impact of the dry conditions on fruit quality. Selling prices have not increased appreciably in nominal Rand terms in the past 5 years, putting pressure on deciduous profits. The loss from this division increased to R20.4 million from R10.4 million in the prior year. Macadamia Nuts The past year marked the beginning of production at Murrimo Macadamia, with 52 tons dry nut in shell (DNIS) harvested in April/May 2017 and 200 tons DNIS harvested in This project, which generated an operating profit of R5.5 million (2017: R2.3 million) is

2 running 40% ahead of the original yield estimates from our feasibility study, with production set to grow exponentially over the next 5 years. Banana Segment The banana division continued to deliver good results, although operating profit decreased by 27% to R28 million (2017: R38 million) following an exceptional 2017 prioryear, marked by strong banana prices as a result of the drought. Production was up 8 % on the prior year to tons but prices declined by 16% to R6 760 per ton. Banana prices have stabilised somewhat in 2018, but look set to remain at elevated levels for the next year, while the drought persists in Southern Mozambique. Renishaw property development The Renishaw Hills mature lifestyle village of 512 units, set to be built over the next 8 years, recorded revenue of R50 million in this financial year, with an operating loss of R 1 million, which is as a result of initial sales being competitively priced in order to create traction for the development. Later phases have been sold-out at higher prices. The Renishaw Hills development consumed group working capital of R 100 million over the past year in line with our plans. Additional working capital of R 14 million will be required in the next year. Prospects Performance over the next 12 months will largely dep on the expected recovery of the South African RV sugar price. As noted we are hopeful that the tariff will be amed in the short term. Long-term prospects in the deciduous sector are critically depent on the water supply situation in the Western Cape. Good early rains have been experienced this season, giving some hope of relief from the devastating drought. Macadamias are set to make an increasing contribution over the next months, as the orchards mature. We expect the bananas to continue to perform well as produce in the local market remains in short supply. We are pleased to report that the long-running land claim case at Renishaw has been resolved in our favour, offering opportunities to unlock value from sales of developable land. Capital Expiture and financing Activities Despite the difficult prevailing conditions, the group has continued to invest in the future. During the year R172 million was invested (2017: R189 million), mainly in the development of our macadamia and property projects, in line with our long term plans. This level of investment necessitated that we arrange additional short term facilities of R 50 million at year, and a further R60 million 3 year term facility subsequent to year. With these development projects nearing completion additional capital and project expiture as well as working capital will be limited to R 69 million for the 2019 financial year. CASH DIVIDEND DECLARATION Given the subdued performance of the group over the past year, the board of directors, ("the board") has, resolved not to declare a final divid for year ed 31 March BASIS OF PREPARATION The preliminary summarised consolidated financial statements are prepared in accordance with the requirements of the JSE Listings Requirements ("Listings Requirements") for preliminary reports, and the requirements of the Companies Act of South Africa applicable to summarised

3 financial statements. The Listings Requirements require preliminary reports 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 and Financial Pronouncements as issued by the Financial Reporting Standards Council, and to also, as a minimum, contain the information required by IAS 34, Interim Financial Reporting. The accounting policies applied in the preparation of the consolidated annual financial statements, from which the summarised consolidated financial statements were derived, are in terms of IFRS and are consistent with the accounting policies applied in the preparation of the 31 March 2017 consolidated annual financial statements. The results have been prepared by N Naidoo CA(SA), assisted by Melani De Castro CA(SA) under the supervision of GL Veale CA(SA), the group financial director. The financial information has been prepared on the historical cost basis except for the valuation of biological assets, investment property, certain financial instruments and share- based payments, which are at fair value. AUDITED RESULTS These preliminary summarised consolidated financial statements for the year ed 31 March 2018 have been audited by Deloitte & Touche who expressed an unmodified opinion thereon. The auditor has expressed an unmodified opinion on the consolidated annual financial statements from which these preliminary summarised consolidated financial statements were derived. A copy of the auditor's report on the preliminary summarised consolidated financial statements and of the auditor's report on the consolidated annual financial statements are available for inspection at the company's registered office, together with the financial statements identified in the respective auditor's reports. The auditor's report does not necessarily report on all the information contained in the financial results. Shareholders are therefore advised that in order to obtain a full understanding of the nature of the auditor's engagement they should obtain a copy of the auditor's report together with the accompanying financial information from the company's registered office. CHANGES TO THE BOARD OF DIRECTORS Malcolm Rutherford was appointed as audit committee chairman on the 24 August Rodger Stewart was appointed as risk committee chairman on the 24 August Tasneem Abdool- Samad was appointed to the board as a non- executive director on 6 June 2017 and Anthony Hewitt retired from the board on the 28 July NOTICE OF ANNUAL GENERAL MEETING Notice is hereby given to shareholders as recorded in the company's securities register on Thursday, 14 June 2018 that the 105th annual general meeting of shareholders of Crookes Brothers Limited ("Crookes Brothers" or "the company"), in respect of the financial year ed 31 March 2018 will be held at the Community Centre, Renishaw Hills, Scottburgh, 4181 on Friday, 27 July The proceedings will commence with a tour of the Renishaw Hills Development at 10h00 thereafter the annual general meeting will be held at 11h00 ("the annual general meeting"). The annual report be will published on or about 29 June For and on behalf of the board John Barton Chairman Guy Clarke Managing Director Durban 12 June 2018

4 Registered office and postal address 170 Flanders Drive, Mount Edgecombe, KwaZulu-Natal, 4300 PO Box 611, Mount Edgecombe, KwaZulu-Natal, 4300 Website Transfer secretaries Computershare Investor Services (Pty) Ltd PO Box 61051, Marshalltown, 2107 Sponsor Sasfin Capital Group A member of Sasfin Bank Limited Directors JR Barton* (Chairman), GS Clarke (Managing), RGF Chance*, TJ Crookes*, TK Denton*#, T Abdool Samad *, P Mnganga*, MT Rutherford*, RE Stewart*, G Vaughan-Smith*#, GL Veale (Financial) * Non-executive director #British Company secretary Highway Corporate Services (Pty) Limited PRELIMINARY SUMMARISED AUDITED GROUP RESULTS FOR THE YEAR ENDED 31 MARCH 2018 AND FINAL DIVIDEND DECLARATION The audited results of the group for the year ed 31 March 2018 together with those of the previous year are set out below: STATEMENT OF COMPREHENSIVE INCOME 31 March 31 March * Revenue Operating profit before biological assets Change in fair value of biological assets Operating profit after biological assets Share of profit of joint venture and associate companies Investment income Finance costs (16 700) (5 453) (Loss)/profit before tax (8 333) Income tax expense (34 655) (Loss)/profit for the year (3 237) Other comprehensive (loss)/income, net of income tax Items that will not be reclassified subsequently to profit or loss: Remeasurement of defined benefit surplus - (211) Remeasurement of post-employment medical aid obligation (514) 462 Items that may be reclassified subsequently to profit or loss: Net fair value loss on available-for-sale financial assets - (46) Exchange differences on translating foreign operations (5 238) Other comprehensive (loss)/income for the year, net of income tax (5 752) Total comprehensive (loss)/income for the year (8 989) (Loss)/profit for the year attributable to: Owners of the company (7 587) Non-controlling interests (3 237) Total comprehensive (loss)/income for the year attributable to:

5 Owners of the company (13 339) Non-controlling interests (8 989) (Loss)/earnings per share (cents) Basic (49.7) Diluted (49.7) * Prior year restated to split operating profit into operating profit before and after biological asset valuation. RECONCILIATION OF HEADLINE EARNINGS 31 March 31 March (Loss)/profit for the year attributable to owners of the company (7 587) Adjusted for: Gain on disposal of property, plant and equipment (361) (128) Loss on disposal of available-for-sale financial assets - held at cost 4 - Impairment of investment premium Loss arising on changes in fair value of investment property 17 - Tax effect of the adjustments Headline (loss)/earnings (7 723) Headline (loss)/earnings per share (cents) Headline (loss)/earnings per share (50.6) Headline (loss)/earnings per share (diluted) (50.6) DIVIDEND DECLARATION 31 March 31 March Divids per share (cents) Ordinary divids declared per share - interim Ordinary divids declared per share - final STATEMENT OF CHANGES IN EQUITY 31 March 31 March Shareholders' equity at beginning of year Movements in: Share-based payment reserve Other comprehensive (loss)/income for the year (5 238) Non-controlling interests Changes in retained earnings (37 542) Net (loss)/profit attributable to owners of the company (7 587) Net profit attributable to non-controlling interests Remeasurement of post-employment obligations (514) 462 Divids paid - ordinary shareholders (22 896) (25 186) Divids paid - community partners (10 895) (10 895) Shareholders' equity at of year STATEMENT OF FINANCIAL POSITION 31 March 31 March * ASSETS Non-current assets Property, plant and equipment Investment property

6 Deferred tax assets Other financial assets Investments in joint venture and associates Unsecured loans Current assets Inventories Biological assets Trade and other receivables Current tax assets Other financial assets Retirement benefit surplus Unsecured loans Cash and bank balances Total assets EQUITY AND LIABILITIES Capital and reserves Share capital and premium Investment revaluation reserve Foreign currency translation reserve (29 002) (23 764) Share-based payment reserve Retained earnings Equity attributable to owners of the company Non-controlling interests Non-current liabilities Deferred tax liabilities Borrowings - interest bearing Other financial liabilities Obligation to restore leased farmland Post-employment medical aid obligation Current liabilities Trade and other payables Provisions Current tax liabilities Post-employment medical aid obligation Borrowings - interest bearing Outside shareholders' loan Bank overdraft Total equity and liabilities * Prior year restated to reclassify deferred tax asset to net deferred tax liability. STATEMENT OF CASH FLOWS 31 March 31 March Operating profit for the year Depreciation Change in fair value of biological assets (2 600) (22 998) Other non-cash items (4 405) Net working capital changes (22 621) (51 505) Cash generated from operations Cash flows from operating activities (9 450) Cash generated from operations Interest received Interest paid (16 594) (5 453) Income taxes paid (17 171) (15 962) Cash flows from investing activities ( ) ( )

7 Proceeds on disposal of property, plant and equipment Investment in property, plant and equipment: replacement (9 668) (9 065) expansion, improvement and development (80 411) ( ) bearer asset replants (65 138) (47 151) Investment in investment property (11 449) - Investment in joint venture and associate companies (2 525) (31 798) Other net investing activities (9 602) (212) Cash flows from financing activities Divids paid: Ordinary shareholders (22 896) (25 186) Community partners (10 895) (10 895) Net increase in borrowings Net increase in general banking facilities Net increase in other financial liabilities Net decrease in cash and cash equivalents (44 161) (78 758) Cash and cash equivalents at beginning of the year Cash and cash equivalents at of the year Audited year Audited year OTHER GROUP SALIENT FEATURES 31 March 31 March Depreciation Capital commitments - Contracted and anticipated: - replacement expansion, improvement and development Authorised but not contracted: - replacement expansion, improvement and development bearer asset replants Net asset value per share (cents) Number of shares in issue Weighted average number of shares on which earnings per share (and headline earnings per share) are based SEGMENTAL ANALYSIS 31 March 31 March * Revenue Sugar cane Deciduous fruit Bananas Macadamias Property development Other operations Operating profit before biological assets Sugar cane Deciduous fruit (19 197) (5 083) Bananas Macadamias (1 398) Property development (974) (1 530) Other operations (3 667) Profit on disposal of property, plant and equipment Corporate expenses (49 898) (49 691)

8 Change in fair value of biological assets Sugar cane (4 684) Deciduous fruit (1 227) (5 303) Bananas Macadamias Other operations - (6) Operating profit after biological assets Sugar cane Deciduous fruit (20 424) (10 386) Bananas Macadamias Property development (974) (1 530) Other operations (3 667) Profit on disposal of property, plant and equipment Corporate expenses (49 898) (49 691) * Prior year restated to split operating profit into operating profit before and after biological asset valuation. Audited year Audited year NOTES TO THE FINANCIAL STATEMENTS 31 March 31 March Biological assets Growing crops at fair value Sugar cane Deciduous fruit Bananas Macadamias Livestock Fair value at of year Analysis of fair values of growing crops: Fair value at beginning of year Gains/(losses) arising from changes attributable to volume and price: Sugar cane - Gain arising from physical growth (yield) Gain/(loss) arising from area under crop to be harvested (11 332) - (Loss)/gain arising from price changes (41 040) Deciduous fruit - Gain/(loss) arising from physical growth (yield) (626) - (Loss)/gain arising from area under crop to be harvested (227) Loss arising from price changes (3 274) (5 681) Bananas - Gain/(loss) arising from physical growth (yield) 923 (775) - Gain/(loss) arising from area under crop to be harvested 203 (629) - Gain arising from price changes Macadamias - Gain arising from area under crop to be harvested Fair value changes attributable to births, deaths and ageing of livestock (5) (6) Transfer of livestock to inventory (916) - Effect of foreign currency exchange differences (1 508) 752 Fair value at of year NOTES TO THE FINANCIAL STATEMENTS 31 March 31 March Biological asset valuations The following key assumptions have been used in determining the fair value of biological assets: Sugar cane

9 Expected area to harvest after 31 March - South Africa (ha) Swaziland (ha) Zambia (ha) Total area (ha) Estimated yields - South Africa (tons/ha) Swaziland (tons/ha) Zambia (tons/ha) Weighted average Average maturity of cane at 31 March - South Africa (%) Swaziland (%) Zambia (%) Estimated RV price - South Africa (Rands) Estimated sucrose price - Swaziland (Rands) Estimated ERC price - Zambia (Rands) Deciduous fruit Expected area to harvest after 31 March (ha) Estimated yields (tons/ha) Average maturity of crop at 31 March (%) Estimated net price per kg - apples and pears (Rands) Estimated packout - Class 1 (%) Class 2 (%) Class 3 (%) Juice (%) Bananas Expected area to harvest after 31 March (ha) Estimated yields (tons/ha) Average maturity of crop at 31 March (%) Estimated net price per carton (Rands) Macadamias Expected area to harvest after 31 March (ha) Estimated yields (tons/ha) Average maturity of crop at 31 March (%) Estimated net price per ton (Rands)