Tiger Brands

With the exception of VAMP, the group’s core domestic food businesses delivered a steady performance in the six-month period ended 31 March 2018, notwithstanding intense competition and ongoing pressure on pricing as consumers continually search for value. The group’s overall performance was negatively affected by the Home and Personal Care division, as well as Deciduous Fruit (LAF) and VAMP.

Group revenue from continuing operations declined by 4% to R15,7 billion, while operating income* decreased by 8% to R2,0 billion. Revenue was negatively impacted by price deflation of 2,7% and an overall volume decline of 1,6%.

The consolidated gross profit margin percentage of 33,3% improved by 80 basis points (bps) compared with the corresponding period last year, benefiting from a stronger Rand and lower raw material costs. However, lower volumes across the majority of businesses had a negative effect on operating leverage. Despite lower revenue, marketing investment increased by 7% to R502 million in line with strategy to invest in and support our core brands, which further impacted profitability.

Total revenue from domestic operations decreased by 3% to R13,8 billion. Overall, volumes in the domestic business were in line with the previous year. Operating income declined by 4% to R2,0 billion, with the total operating margin remaining unchanged at 14,2%.

Revenue in Exports and International declined by 11% to R1,9 billion, while operating income decreased by 56% to R85 million, driven primarily by LAF.

Costs associated with the VAMP product recall, amounting to R365 million (net of insurance claims submitted to date), have been included in abnormal items. These costs exclude ongoing trading losses and are calculated on the basis that VAMP’s facilities are reopened by 30 September 2018. Note 4 on page 16 makes reference to the residual value of stock amounting to R183 million where future utilisation is dependent on ongoing test results and the reopening of the facilities.

Net financing costs of R45 million (2017: R118 million), reflect a reduction of R74 million compared to the same period last year. This was primarily due to lower average debt levels compared to last year.

Income from associates increased by 43% to R341 million, with all associates contributing to the improved performance. Oceana benefited from a once-off R161 million deferred tax adjustment in Daybrook Fisheries following the reduction in the Federal corporate tax rate in the United States from 35% to 21%, effective after 31 December 2017. A blended tax rate of 25% was accordingly applied in calculating the deferred tax adjustments in this period. Tiger Brands’ equity accounted share of this benefit amounts to R79 million with a 5% impact on headline earnings per share.

Profit before tax from continuing operations decreased by 18% to R1,9 billion. Excluding the VAMP recall costs of R365 million, profit before tax from continuing operations decreased by 2% to R2,3 billion.

Haco Tiger Brands (E.A) Limited (Haco), which was reflected as an asset held-for-sale at 30 September 2017, was disposed of with effect from 14 December 2017. Its results for the current period to the date of disposal are included in the consolidated income statement as discontinued operations.

Earnings per share from continuing operations decreased by 18% to 852 cents (2017: 1 036 cents), while headline earnings per share from continuing operations was down 16% to 868 cents (2017: 1 036 cents). Earnings per share from total operations declined by 17% to 859 cents (2017: 1 036 cents) and headline earnings per share from total operations decreased by 16% to 870 cents.

Grains

The revenue decline of 5% in the Grains division reflects the significant price deflation of 6% as overall volume grew by 2%. Operating income increased by 3% to R1,0 billion.

Milling and Baking’s revenue declined by 8%, driven by price deflation in maize. Operating income improved by 4% to R826 million, with improved performances from maize and sorghum. Notwithstanding intense competitor activity in the wheat-to-bread value chain, this segment delivered a steady performance.

Other Grains grew revenue by 4% to R2,1 billion, underpinned by a 10% volume increase, driven primarily by rice. Operating income decreased by 3% to R220 million, with procurement benefits in rice being invested behind the brand to recover market share.

Consumer Brands – Food

Consumer Brands – Food was negatively impacted by the cessation of activities at the company’s VAMP operations in March 2018, as well as a disappointing performance in Groceries. However, this was offset by strong performances from the Snacks & Treats and Beverages businesses. Total revenue was unchanged at R6,0 billion, reflecting flat volumes and pricing for the period, while operating income grew by 5%.

The management of margins and volumes proved difficult in the Groceries business, following intense competition in core product segments. Revenue increased 2% to R2,7 billion, in line with volume growth of 2%. Operating income declined by 15% to R264 million, principally due to increased levels of promotional spend and an unfavourable product mix.

Revenue in Snacks & Treats was unchanged at R1,1 billion. This was due to the containment of selling prices in order to remain competitive on shelf. Operating income, however, increased by 20% to R194 million as a result of improved factory efficiencies and aggressive cost control.

The Beverages business increased volumes and revenue by 13%, with operating income growth of 95% reflecting the positive volume leverage and sound management of costs.

VAMP’s performance was impacted by the closure of its facilities in early March 2018. As a consequence, revenue declined by 9% to R1,0 billion and operating income fell by 78% to R13 million.

An update on Listeria is provided separately in this SENS announcement.

Home, Personal Care and Baby (HPCB)

HPCB’s revenue declined by 14% to R1,2 billion and operating income decreased by 43% to R196 million.

Revenue in the Personal Care category increased by 2% to R296 million, following strong volume growth of 8%. This was offset by significant investment in promotional activity and an adverse product mix. As a consequence, operating income declined by 61% to R26 million.

In Baby Care, pouch volume growth of 15% was offset by a decline in the cereals and jarred baby food segments, as consumers down-traded in favour of more affordable options. Revenue decreased by 10% to R390 million, while operating income fell by 33%. The trading performance was negatively affected by an unfavourable product mix in the baby food segment.

Revenue in the Home Care category declined by 23% to R534 million. This was due to a decrease in volumes of 22% as a result of a poor pest season. The impact of this volume decline is reflected in lower operating income of R108 million.

Exports and International

Total revenue for the Exports and International businesses was down 11% to R1,9 billion compared with the corresponding period last year. Operating income declined by 56%, driven by LAF.

Notwithstanding the ongoing foreign currency shortages in the group’s export markets, which resulted in tighter credit terms and the slower replenishment of stock by distributors, the Export business delivered a satisfactory result with revenue increasing by 2% to R898 million and operating income being in line with the previous year.

The International operations’ performance was mixed. A strong performance from Chococam was offset by the impact of the ongoing challenges at Deli Foods.

LAF’s revenue decreased by 23% to R639 million, mainly due to volume declines driven by muted demand for its products and competitive pricing pressure. Fruit quality and availability in the current period have been affected by the prolonged drought in the Western Cape. This resulted in significant factory under-recoveries. The combination of these factors led to an operating loss of R72 million compared with an operating profit of R30 million in the corresponding period last year.

Cash generated from operations decreased to R1,5 billion (2017: R3,1 billion). This was primarily due to a net increase in working capital of R0,9 billion (2017: net decrease of R0,5 billion). The strategic procurement of certain raw materials contributed to higher stock holdings, while customer payments were impacted by the half year closing on the Easter long weekend. Capital expenditure incurred during the period amounted to R297 million (2017: R383 million).

The company has declared an unchanged interim dividend of 378 cents per share for the six-month period ended 31 March 2018. Shareholders are referred to the accompanying dividend announcement for further details.

The outlook for the balance of the year remains challenging, with intense competitor activity in the domestic market and no meaningful recovery expected in international markets.

The VAMP facilities are likely to remain closed for a large part of the second half as we complete remedial work on our facilities and await guidance from the Department of Health. Shareholders are referred to the SENS announcement issued on 19 April 2018 on the financial impact of the suspension of operations.

Mr Clive Vaux retired as executive director of the company, with effect from the conclusion of its annual general meeting held on 20 February 2018.

Shareholders are referred to the SENS announcements issued by the company on 5, 9, 19, 29 March 2018 and on 25 April 2018.

Looking ahead, the company is considering a number of initiatives aimed at rebuilding trust with consumers. The initiatives will focus on facilitating a national solution to a national crisis and ensuring sustainable food safety into the future. Some of the initiatives include:

• A multi-stakeholder forum to ensure a sustainable and inclusive response to the current challenges;
• Leveraging our corporate social investment programme to support initiatives aimed at improved food hygiene and awareness; and
• Partnering with relevant stakeholders to drive world-class food safety research.

The company is carefully considering the best approach to ensure that the recently launched class actions are handled sensitively and responsibly having regard to all the facts. The application for certification of the Classes is in progress, while our legal representatives are in discussion to explore further collaboration. Given that these discussions are in progress, we will communicate our approach as soon as a decision has been reached.

Tiger Brands has at all times had measures in place to ensure compliance with the prevailing standards and best practices and it remains committed to food safety and placing consumers’ health and safety above all else. Considerable effort and time are being expended to ensure that these objectives are met across the portfolio, including an assessment of current processes and practices as they relate to production, quality assurance and reporting lines.

The detection of the presence of Listeria ST6 in our factory in Polokwane was disappointing to us given our compliance with best practices and prevailing standards. We are engaging openly and transparently with relevant government departments, regulators and all other stakeholders. As one of South Africa’s leading food manufacturers, with a long and proud heritage in the country, it is our duty to rebuild trust through our actions and deal with this crisis honestly and with integrity. Tiger Brands remains resolute in addressing the social and reputational consequences of the Listeriosis outbreak.

The board and management are deeply saddened that people have fallen ill and that some have lost their lives as a result of Listeriosis. Our heartfelt condolences are extended to those who suffered the loss of a loved one

By order of the board

Bryanston 23 May 2018

Date of release: 24 May 2018

The board has approved and declared an interim dividend of 378 cents per ordinary share (gross) in respect of the six months ended 31 March 2018.

The dividend will be subject to the dividends tax that was introduced with effect from 1 April 2012.

In accordance with paragraphs 11.17 (a)(i) to (x) and 11.17 (c) of the JSE Listings Requirements the following additional information is disclosed:

• The dividend has been declared out of income reserves;
• The local dividends tax rate is 20% (twenty per centum) effective 22 February 2017;
• The gross local dividend amount is 378 cents per ordinary share for shareholders exempt from the dividends tax;
• The net local dividend amount is 302,40 cents per ordinary share for shareholders liable to pay the dividends tax;
• Tiger Brands has 189 818 926 ordinary shares in issue (which includes 10 326 758 treasury shares); and
• Tiger Brands Limited’s income tax reference number is 9325/110/71/7.

Shareholders are advised of the following dates in respect of the interim dividend:

Last day to trade cum the interim dividend	Tuesday, 26 June 2018
Shares commence trading ex the interim dividend	Wednesday, 27 June 2018
Record date to determine those shareholders entitled to the interim dividend	Friday, 29 June 2018
Payment in respect of the interim dividend	Monday, 2 July 2018

Share certificates may not be dematerialised or rematerialised between Wednesday, 27 June 2018 and Friday, 29 June 2018, both days inclusive.

By order of the board

JK Monaisa
Company secretary

Bryanston
24 May 2018