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Tiger Brands Limited integrated annual report
2015 33
As disclosed in the chairman’s report, with effect from
mid-November 2015, the board of Tiger Brands decided
not to extend any further financial support to TBCG and
consequently from this date, the business will be reflected
as a discontinued operation in Tiger Brands’ results. Tiger
Brands reached agreement with Dangote Industries Limited
(DIL) on 11 December 2015 to sell its 65,7% shareholding
interest for a nominal sum of US$1 and to forgive its
shareholder loans to TBCG of R0,7 billion. In addition,
Tiger Brands will assume responsibility for debt of
R0,4 billion guaranteed on behalf of TBCG in return for DIL
providing an immediate cash injection of R0,7 billion into
TBCG. The transaction is subject to the fulfilment of certain
conditions precedent, including approval of the Exchange
Control Division of the South African Reserve Bank and the
Securities and Exchange Commission of Nigeria.
The investment in TBCG and related exposures have been
fully provided against as at 30 September 2015 and
consequently, no further loss will be incurred on disposal.
Given the losses that have been sustained by TBCG since
its acquisition by Tiger Brands, the transaction will have a
positive impact on Tiger Brands’ earnings in the future.
Income statement
Group turnover increased by 5% to R31,6 billion
(2014: R30,1 billion), underpinned by 1% volume
growth and pricing inflation of 4%. Operating income
of R3,7 billion was up 3% on the prior year after
accounting for a R29 million IFRS 2 share option charge
(2014: R105 million) and the foreign exchange losses
in TBCG of R134 million.
Profit before tax decreased by 20% to R2,1 billion
(2014: R2,7 billion) after accounting for net financing costs
of R397 million, income from associate companies of
R603 million and abnormal charges of R1,7 billion. These
included a R1,4 billion impairment charge relating to the
group’s residual investment in TBCG. Goodwill and intangible
assets relating to the group’s investment in Deli Foods of
R250 million was also impaired during the year, primarily
as a result of the naira devaluation and increased cost of
capital in Nigeria.
Income from associates of R603 million was up 1% on
the prior year. Oceana delivered another solid set of results,
contributing R309 million to the group’s earnings, reflecting
a 10% increase on the prior year. The group’s share of
earnings from Empresas Carozzí increased by 4% to
R207 million, while UAC Foods and National Foods
Holdings recorded weaker earnings, with their contribution
to group earnings down 25% and 26% to R33 million and
R54 million respectively. (The performance of the associate
companies is set out on page 49.)
Net financing costs of R397 million were in line with the
prior year, despite higher domestic borrowing rates and the
increased level of debt in TBCG.
The group’s income tax expense of R1,2 billion
(2014: R832 million) represents an effective tax rate of
37,3% (2014: 28,1%) based on total profits before
abnormal items and associate income. The lower tax rate
in the prior year was primarily due to special investment
allowances claimed on qualifying capital projects
completed during the year, as well as a prior year deferred
tax adjustment. The current year tax rate was negatively
impacted by the non-recognition of deferred tax in respect
of losses and other timing differences arising in TBCG
during the current year as well as the derecognition of the
balance of TBCG’s net deferred tax asset brought forward
from 2014. Excluding the impact of the above tax
adjustments relating to TBCG, as well as the release in
2015 of surplus tax provisions, the group tax rate for the
year was 29,3%.
After accounting for minority shareholders’ share of after-tax
losses in TBCG and Haco, non-controlling interests
amounted to R785 million (2014: R127 million).
Profit attributable to ordinary shareholders from
continuing operations decreased by 13% to R1,7 billion
(2014: R2,0 billion) while earnings per share from
continuing operations decreased by 14% to 1 068 cents
(2014: 1 243 cents).