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Rainbow final results March 2005

Chicken revenue increased by 5.5% to R3.3bn (R3.1bn) on the back of a 6.0% improvement in price realisations. Bird performance was impacted negatively by the Group’s feed being contaminated for a limited period by a supplier’s product. This reduced pre-taxation earnings by some R80m and caused headline earnings to decrease by 6.3% over the comparable period. Without this impact the Group would have reported headline earnings growth of approximately 19%. Chicken volumes decreased by 0.5%, affected by the feed issue and to a lesser extent the three week national strike in May/June 2004. Group revenue increased by 5.1% to R4bn (R3.8bn). EBITDA includes a non-recurring profit of R9m (R0.1m) on disposal of fixed assets and a R16m (nil) release of impairment provisions in respect of increased valuations of dormant properties that are either to be sold or brought back into use. Excluding these items, headline EBITDA increased by 2% to R374.1m (R366.8m) and headline EBITDA margin declined to 9.3% (9.6%). Chicken cost of production increased by 7% partly as a result of a 30.4% increase in depreciation arising out of recent capex investments. The average feed cost was 2.1% higher than last year. The effective taxation rate was slightly lower at 32.3% (33.1%). Headline earnings decreased by 6.3% to R213m (R227.5m) with headline earnings per share declining by15% to 77.9c (85.2c). Cash generated by operations remains strong at R402.2m (R309.8m), with the improvement largely attributable to lower working capital requirements. The cash balance at the end of the period was lower than the previous year due to the R454.9m acquisition of Vector Logistics, which was funded from the group’s cash resources, and increased capital expenditure. As a result interest income was also lower at R27.1m (R37.2m).



Prospects

Indications are that the macro economic environment will remain stable with sound fiscal disciplines and a lower interest rate contributing to consumer spending remaining fairly positive over the next period. A strong rand and excess maize stocks should translate into lower feed raw material input costs. However, a negative earnings contribution is expected from the new Further Processing plant as it will only be commissioned mid-way through the next period. Further to this, as mentioned at the time of concluding the acquisition, YUM! (KFC) changed its distribution partner and therefore Vector’s profit contribution will be lower in the year ahead, offset in the second half to some extent by the inclusion of certain Rainbow volumes not previously distributed by Vector. The group expects to report earnings growth for the upcoming financial year, albeit off a compromised base.



Dividend

The board has declared a final dividend of 21c per ordinary share.

The salient dates of the declaration and payment of this dividend are as follows:

*Last date to trade ordinary shares ‘CUM’ dividend Friday, 17 June 2005

*Ordinary shares trade ‘EX’ dividend Monday, 20 June 2005

*Record date Friday, 24 June 2005

*Payment date Monday, 27 June 2005