Notes
1. Basis of preparation and changes to the group's accounting policies
The preparation of these results has been supervised by N Doyle, Chief Financial Officer of Tiger Brands Limited.
The condensed consolidated financial statements are prepared in accordance with the requirements of the JSE Limited Listings Requirements for preliminary reports and the requirements of the Companies Act of South Africa. 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) and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by 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 condensed consolidated financial statements are in terms of IFRS and are consistent with those applied in the previous consolidated annual financial statements, with the exception of the early adoption of IFRS 15.
Ernst & Young Inc., Tiger Brands Limited's independent auditors, have audited the consolidated financial statements of Tiger Brands Limited from which the condensed consolidated financial results have been derived. The auditors have expressed an unmodified audit opinion on the consolidated annual financial statements. Any reference to future financial performance included in this announcement has not been audited or reported on by the group's external auditors. The auditor's audit report does not necessarily report on all the information contained in this announcement/financial results. Shareholders are therefore advised that in order to obtain a full understanding of the nature of the auditors' engagement they should obtain a copy of the auditor's audit report together with the accompanying financial information from the issuer's registered office.
The majority of the group's financial instruments measured at fair value in terms of IFRS 13 are noted as level 1 hierarchy, which are valued based on quoted market prices.
2. Operating income before impairments and abnormal items
| R’million | Audited year ended 30 September 2017 |
Audited year ended 30 September 2016 Restated# |
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|---|---|---|---|---|---|---|---|---|
| Depreciation (included in cost of sales and other operating expenses) | 552,5 | 524,5 | ||||||
| Amortisation | 11,4 | 11,6 | ||||||
| IFRS 2 (included in other operating expenses) | ||||||||
| – Equity settled | 97,7 | 70,9 | ||||||
| – Cash settled | 12,6 | 18,0 | ||||||
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3. Impairments
| R’million | Audited year ended 30 September 2017 |
Audited year ended 30 September 2016 Restated# |
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|---|---|---|---|---|---|---|---|---|
| Goodwill and indefinite useful life intangible assets are tested for impairment annually (as at 30 September) and when circumstances indicate the carrying value may be impaired. The group’s impairment test for goodwill and intangible assets with indefinite lives is based on the value-in-use calculations. During the current year R300,0 million of Davita, R4,9 million of Groceries and R5,0 million of Beacon goodwill and indefinite life intangible assets have been impaired. The investment in UAC Foods has been impaired by R250,0 million. |
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| Impairment of intangible assets | (309,9) | (300,0) | ||||||
| Impairment of investment in associate | (250,0) | – | ||||||
| Impairment of property, plant and equipment | – | (34,8) | ||||||
| (559,9) | (334,8) | |||||||
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4. Abnormal items
| R’million | Audited year ended 30 September 2017 |
Audited year ended 30 September 2016 Restated# |
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|---|---|---|---|---|---|---|---|---|
| Once-off consulting fees | (132,0) | – | ||||||
| Restructuring provision | (78,5) | – | ||||||
| Proceeds from insurance claim | 85,7 | – | ||||||
| Profit on disposal of property | 73,0 | 11,0 | ||||||
| Proceeds from warranty claim settlement | 28,4 | – | ||||||
| (23,4) | 11,0 | |||||||
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5. Net finance costs and investment income
| R’million | Audited year ended 30 September 2017 |
Audited year ended 30 September 2016 Restated# |
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|---|---|---|---|---|---|---|---|---|
| Net interest paid | (179,7) | (297,0) | ||||||
| Investment income | 3,3 | 6,3 | ||||||
| Net foreign exchange (losses)/profit | (30,2) | 128,6 | ||||||
| Net financing costs | (206,6) | (162,1) | ||||||
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6. Taxation
| R’million | Audited year ended 30 September 2017 |
Audited year ended 30 September 2016 Restated# |
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|---|---|---|---|---|---|---|---|---|
| Tax rate reconciliation | ||||||||
| The reconciliation of the effective rate of taxation with the statutory taxation rate is as follows: | % | % | ||||||
| Taxation for the year as a percentage of income before taxation | 28,9 | 27,0 | ||||||
| Impairment of goodwill and intangibles | (3,7) | (1,9) | ||||||
| Expenses and provisions not allowed for taxation | (0,9) | (0,9) | ||||||
| Non-recognition of other current year timing differences | (0,2) | (0,4) | ||||||
| Non-recognition of other prior year timing differences | – | (0,4) | ||||||
| Additional investment allowances | 0,5 | 0,4 | ||||||
| Prior year adjustments | 0,6 | – | ||||||
| Withholding taxes | (1,0) | (1,2) | ||||||
| Income from associates | 3,5 | 5,4 | ||||||
| Effect of differing rates of foreign taxes | (0,1) | (0,2) | ||||||
| Other sundry adjustments | 0,4 | 0,2 | ||||||
| Rate of South African company taxation | 28,0 | 28,0 | ||||||
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7. Analysis of profit from discontinued operations
| R’million | Audited year ended 30 September 2017 |
Audited year ended 30 September 2016 Restated# |
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|---|---|---|---|---|---|---|---|---|
| In the current year, the results of the discontinued operation (EATBI) and the results of the held-for-sale business (Haco) were included in the profit for the year as set out below. EATBI and Haco were previously accounted for within the segment referred to as “International operations – East Africa”. The prior year includes the results of the discontinued Tiger Branded Consumer Goods (TBCG). | ||||||||
| Profit for the year from discontinued operations (attributable to owners of the company) | ||||||||
| Revenue | 561,2 | 2 556,8 | ||||||
| Expenses | (547,2) | (2 442,7) | ||||||
| Operating income before impairments and abnormal items | 14,0 | 114,1 | ||||||
| Impairments | – | – | ||||||
| Abnormal items | 97,9 | 49,7 | ||||||
| Operating income after impairments and abnormal items | 111,9 | 163,8 | ||||||
| Finance costs | (0,2) | (99,5) | ||||||
| Profit before taxation | 111,7 | 64,3 | ||||||
| Taxation | (6,7) | (11,4) | ||||||
| Profit for the year from discontinued operations | 105,0 | 52,9 | ||||||
| Attributable to non-controlling interest | 3,3 | 9,6 | ||||||
| Attributable to owners of parent | 108,3 | 62,5 | ||||||
| Cash flows from discontinued operations | ||||||||
| Net cash inflows from operating activities | 138,6 | 363,6 | ||||||
| Net cash inflows/(outflows) from investing activities | 1,4 | (65,9) | ||||||
| Net cash (outflows)/inflows from financing activities | (80,8) | 90,5 | ||||||
| Net cash inflows | 59,2 | 388,2 | ||||||
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8. Reconciliation between profit for the year and headline earnings
| R’million | Audited year ended 30 September 2017 |
Audited year ended 30 September 2016 Restated# |
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|---|---|---|---|---|---|---|---|---|
| Continuing operations | ||||||||
| Profit for the year attributable to owners of the parent | 3 011,0 | 3 243,1 | ||||||
| Profit on disposal of property, plant and equipment | (52,5) | (8,3) | ||||||
| Impairment of intangible assets | 309,9 | 300,0 | ||||||
| Impairment of investment in associate | 250,0 | – | ||||||
| Impairment of property, plant and equipment | – | 25,3 | ||||||
| Headline earnings adjustments – associates | ||||||||
| – Profit on sale of non-current assets | (8,5) | (116,9) | ||||||
| Headline earnings for the year | 3 509,9 | 3 443,2 | ||||||
| Tax effect of headline earnings | 15,5 | (7,0) | ||||||
| Attributable to non-controlling interest | – | – | ||||||
| Discontinued operations | ||||||||
| Profit for the year attributable to owners of the parent | 108,3 | 62,5 | ||||||
| Profit on disposal of subsidiary | (98,1) | (49,7) | ||||||
| Loss on disposal of property, plant and equipment | – | 0,1 | ||||||
| Headline earnings for the year | 10,2 | 12,9 | ||||||
| Tax effect of headline earnings | – | – | ||||||
| Attributable to non-controlling interest | – | – | ||||||
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9. Early adoption of IFRS 15 Revenue from Contracts with Customers
| R’million | Audited year ended 30 September 2017 |
Audited year ended 30 September 2016 Restated# |
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|---|---|---|---|---|---|---|---|---|
| The group has early adopted IFRS 15 Revenue from Contracts with Customers and therefore restated the comparatives applying the full retrospective transition method. The policies were changed in accordance with the transitional provisions, but without making use of any of the practical expedients available during the first-time adoption of the standard. The impact of early adopting IFRS 15 resulted in a reallocation of costs in September 2016 from selling and distribution of R105,6 million, marketing of R41,3 million and cost of sales of R4,1 million to turnover, totalling R151,0 million. There has been no impact on the basic earnings per share or basic headline earnings per share. The reconciliation of the adjustments to the revenue comparatives are as follows: | ||||||||
| As previously reported | 31 697,5 | |||||||
| Reclassified to discontinued operations in terms of IFRS 5 | (958,3) | |||||||
| Reallocation of costs due to early adoption of IFRS 15 | (151,0) | |||||||
| Restated revenue after reclassification | 30 588,2 | |||||||
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10. Subsequent events
| On 23 November 2017, Tiger Brands was notified that the transaction regarding the disposal of Haco Tiger Brands (E.A.) Limited (“Haco”) had been approved by the Competition Authorities in Kenya. The estimated profit or loss on disposal is not expected to be material. |