Results from continuing operations
Overall, AFGRI put in an excellent performance for the year under review increasing revenue proportionally by 11% to R8,8 billion for the 12-month period. The Group grew its pre-tax earnings from continuing operations by 46% to R552,7 million. A significant increase in the average tax rate due to certain once-off items in both the current and prior year diluted this growth, resulting in an increase in the Group’s after tax profit from continuing operations of 25% to R446,3 million.
Discontinued operations
AFGRI’s stated intention is to focus on its core businesses and as such the Group embarked on the sale of non-core and underperforming businesses some time ago. During the year under review the Group disposed of certain units and resolved to dispose of its Seed unit. During the year, the discontinuance or disposal of non-core and underperforming assets resulted in an after tax loss of R92,4 million. The process of disposing of non-core operations and underperforming businesses will continue in order to focus on a core value proposition into the future.
This brought attributable earnings per share in at 72,7 cents per share compared to 69,5 cents per share for 2008, an increase of 5%. Headline earnings per share were maintained at 74,4 cents per share (2008: 73,7 cents per share) for the year.
Corporate actions
In February 2009 AFGRI announced a successful R2,5 billion securitisation arranged in conjunction with Co-öperatieve Centrale Raiffeisen-Boerenleenbank B.A., trading as Rabobank International (“Rabobank”). R1,25 billion of the Rabobank facility remains to be syndicated. AFGRI was delighted to have concluded this transaction as it allows more flexibility in raising agricultural finance for our customers, the farmers and primary processors. Historically, the South African agricultural sector was limited in terms of the providers of agricultural finance. This transaction was truly a breakthrough for the agricultural sector and proved that the sector is of such a high standing, that a reputable international bank was willing to fund AFGRI and the South African farmer in a time of turmoil for the international banking sector. This transaction proves that AFGRI’s performance as well as the quality of its debtors, the farmers, is world-class.
In May 2009 a joint announcement by AFGRI and Sovereign Food Investments Limited (“Sovereign”) was released whereby AFGRI proposed the reverse listing of its Food Division into Sovereign through a sale of AFGRI Foods to Sovereign. On 21 July 2009, AFGRI announced the formal withdrawn from the transaction as conditions precedent to the Heads of Agreement had not been fulfilled. AFGRI announced that it remains committed to the expansion of the broiler business and will continue to assess opportunities on a pro-active basis.
Management changes
Effective 01 July 2008, John Mooney was appointed chief executive officer in an interim capacity, until 1 October 2008 when the Board announced the appointment of Chris Venter to the position. For three years prior to his appointment, Chris was CEO of the Financial Services division and this appointment from within the Group has proved to be successful as Chris implements his strategic vision for the Group and better positioning AFGRI for future growth.
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| Source: USDA (United States department of agriculture) |
Jan van der Schyff was appointed chief financial officer for the Group effective 1 June 2008 upon the retirement of the previous financial director. Jan fulfils an important role in the Company at both financial and a strategic level.
The previous Company Secretary resigned with effect from 30 November 2008 and Pieter Badenhorst joined the Group on 1 December 2008 as Group Legal Adviser and fulfilled the role of interim Company Secretary until Niki van Wyk was appointed as Group Company Secretary for AFGRI on 4 March 2009.
It is with great sadness that I write of the passing of John Mooney on 22 May 2009. John had been with the Group for over eight years and was considered a valued member of the AFGRI team. His years of experience and knowledge of the Group and the industry added tremendous value. He will be fondly remembered by all at AFGRI and was regarded as wise council to leaders of AFGRI.
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| Source: The South African Afgricultural Baseline 2009 |
Corporate Governance
The AFGRI Board of Directors continues to recognise responsibilities in terms of risk management and sound corporate governance practices. These practices are tabled and approved by the Board and circulated to all staff as good governance. The Group’s corporate governance standards adhere to the principles outlined in the most recent King Code on Corporate Governance. The Group is in the process of assessing compliance with King III recommendations. The Board comprises a majority of non-executive directors, of which three are independent with vast amounts of industry knowledge. Sub-committees are responsible for audit and risk controls and report directly into the Board. The recommendations of the King Code have been incorporated into AFGRI’s risk management procedures and controls, at all levels of the business.
Dividend payment
The interim dividend of 19,70 cents per share and final dividend of 16,70 cents per share equate to a total dividend of 36,40 cents per share declared for the year ended 30 June 2009.
Prospects
AFGRI is expecting that good rainfalls will continue in our planting areas and as such there should be another good crop on the land for farmers. From a strategic perspective, AFGRI has spent a good part of the year disposing of loss-making and non-core businesses within the Group in an effort to improve the capital position of the Company.
Internally the Group has embarked on a number of strategic initiatives and operational efficiency projects which will see the Group focus on organic growth in an effort to join together and operate as “One AFGRI”, benefit from implementations such as shared services and extract synergies from the food and agricultural value chain.
The South African government supports the agricultural sector through the implementation of a five year plan and a constitutional mandate of national food security in an effort to assist the sector as well as eradicate hunger. As an “honourable management goal” AFGRI is committed to support the food security effort in South Africa and Africa.
Appreciation
I wish to thank my executives and fellow Board members and the staff of AFGRI for their outstanding work ethic and dedication to the Group. This enables AFGRI each year to fulfil its vision of providing world-class, full-spectrum services to customers. It was always AFGRI’s intention to partner with farmers in an effort to provide them with this spectrum of services. This has been embraced by farmers and I wish to thank them for their support of the Group. To our shareholders and stakeholders, thank you for your support. We look forward to further cementing our relationship.
David Daniel de Beer
Chairman
1 September 2009