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Rainbow – Transition to International Financial Re

Rainbow – Transition to International Financial Reporting Standards

RAINBOW CHICKEN LIMITED

(Registration number 1966/004972/06)

JSE Share code: RBW & * ISIN code: ZAE000019063

Transition to International Financial Reporting Standards

CONSOLIDATED BALANCE SHEET

IFRS IFRS IFRS

Audited Unaudited Audited

31 March 30 September 1 April

2005 2004 2004

R”000 R”000 R”000

ASSETS

Non-current assets

Property, plant and equipment 850,318 543,462 513,073

Trademarks 1,205 1,605 2,005

Goodwill 287,444 – –

Deferred taxation 16,023 – –

Long-term receivables 441 – –

Total non-current assets 1,155,431 545,067 515,078

Current assets

Inventories 260,493 232,098 244,823

Biological assets 238,656 256,400 216,672

Trade and other receivables 425,442 330,193 296,077

Derivative assets 178 – –

Taxation receivable 15,799 5,503 –

Cash 106,007 421,407 482,286

Total current assets 1,046,575 1,245,601 1,239,858

Total assets 2,202,006 1,790,668 1,754,936

EQUITY AND LIABILITIES

Capital and reserves 1,286,706 1,166,875 1,127,809

Non-current liabilities

Preference share capital – 500 500

Interest bearing debt – long-term 651 1,183 1,694

Post retirement medical obligation 63,677 35,578 33,596

Deferred taxation 180,081 138,999 142,137

Total non-current liabilities 244,409 176,260 177,927

Current liabilities

Trade and other payables 626,654 400,331 369,353

Provisions 15,585 42,412 30,000

Derivative liabilities 15,980 3,660 3,970

Taxation payable 11,408 – 44,381

Interest bearing debt – short-term 1,264 1,130 1,496

Total current liabilities 670,891 447,533 449,200

Total equity and liabilities 2,202,006 1,790,668 1,754,936

CONSOLIDATED INCOME STATEMENT

IFRS IFRS

Audited Unaudited

Year ended Six months to

31 March 30 September

2005 2004

R”000 R”000

Revenue 4,026,998 1,978,257

Operating profit before depreciation and

amortisation 393,298 151,727

Depreciation and amortisation (78,036) (32,960)

Operating profit before interest and taxation 315,262 118,767

Finance income 28,146 20,729

Finance costs (1,126) (111)

Profit before taxation 342,282 139,385

Taxation (111,959) (49,699)

Attributable profit 230,323 89,686

Headline Earnings

Attributable profit 230,323 89,686

Profit on disposal of property, plant &

equipment (8,110) (8,709)

Asset impairment provision release (11,224) –

Headline earnings 210,989 80,977

RECONCILIATION OF INCOME STATEMENT

Audited Unaudited

Year ended Six months to

31 March 30 September

2005 2004

R”000 R”000

As previously reported 232,376 90,434

Share-based payments (4,764) (2,325)

Property, plant and equipment 3,538 1,770

Post-retirement medical obligation (827) (193)

As reported under IFRS 230,323 89,686

RECONCILIATION OF ASSETS, LIABILITIES AND EQUITY

Audited Unaudited Audited

31 March 30 September 1 April

2005 2004 2004

R”000 R”000 R”000

Assets

As previously reported 2,273,832 1,865,020 1,831,816

IFRS adjustments:

Property, plant and equipment (71,826) (74,352) (76,880)

As reported under IFRS 2,202,006 1,790,668 1,754,936

Liabilities

As previously reported 936,021 645,406 649,691

IFRS adjustments:

Preference shares reclassified – 500 500

Property, plant and equipment (21,548) (22,306) (23,064)

Post-retirement medical obligation 827 193 –

As reported under IFRS 915,300 623,793 627,127

Equity

As previously reported 1,337,811 1,219,614 1,182,125

IFRS adjustments:

Preference shares reclassified – (500) (500)

Property, plant and equipment (50,278) (52,046) (53,816)

Post-retirement medical obligation (827) (193) –

As reported under IFRS 1,286,706 1,166,875 1,127,809

CONSOLIDATED CASH FLOW STATEMENT (unchanged from SA GAAP to IFRS)

Audited Unaudited

Year ended Six months to

31 March 30 September

2005 2004

R”000 R”000

Operating profit before working capital

requirements 374,109 144,989

Working capital requirements 28,136 (16,333)

Cash generated by operations 402,245 128,656

Net finance income 27,020 20,618

Taxation paid (146,009) (102,721)

Dividends paid (83,435) (57,386)

Net cash flows from operating activities 199,821 (10,833)

Net cash flows from investing activities (581,570) (53,610)

Net cash flows from financing activities 5,470 3,564

Net decrease in cash (376,279) (60,879)

Cash at the beginning of the year 482,286 482,286

Cash at the end of the year 106,007 421,407

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY – for period ended

30 September 2004

Stated Share-based Preference Retained

capital payments share capital income Total

Unaudited R”000 R”000 R”000 R”000 R”000

Balance at

1 April 2004

as previously

reported 1,098,714 – 500 82,911 1,182,125

Opening IFRS

adjustments:

Share-based

payments 3,627 (3,627) –

Preference

shares

reclassified (500) (500)

Property,

plant and

equipment (53,816) (53,816)

Balance at

1 April 2004

under IFRS 1,098,714 3,627 – 25,468 1,127,809

Issue of shares 4,441 4,441

Attributable

profit as

previously

reported 90,434 90,434

IFRS adjustments:

Share-based

payments 2,325 (2,325) –

Property,

plant and

equipment 1,770 1,770

Post-retirement

medical obligation (193) (193)

Ordinary

dividend

paid (57,386) (57,386)

Balance at

30 September 2004

under IFRS 1,103,155 5,952 – 57,768 1,166,875

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY – for year ended 31 March 2005

Stated Share-based Preference Retained

capital payments share capital income Total

Audited R”000 R”000 R”000 R”000 R”000

Balance at

1 April 2004

as previously

reported 1,098,714 – 500 82,911 1,182,125

Opening IFRS

adjustments:

Share-based

payments 3,627 (3,627) –

Preference

shares

reclassified (500) (500)

Property,

plant and

equipment (53,816) (53,816)

Balance at

1 April 2004

under IFRS 1,098,714 3,627 – 25,468 1,127,809

Issue of

shares 7,245 7,245

Attributable

profit as

previously

reported 232,376 232,376

IFRS adjustments:

Share-based

payments 4,764 (4,764) –

Property,

plant and

equipment 3,538 3,538

Post-retirement

medical obligation (827) (827)

Ordinary

dividend paid (83,435) (83,435)

As reported

under IFRS 1,105,959 8,391 – 172,356 1,286,706

Statistics

As reported under IFRS As previously reported

Audited Unaudited Audited Unaudited

31 March 30 September 31 March 30 September

2005 2004 2005 2004

Number of ordinary shares in

issue 275,449 273,665 275,449 273,665

Weighted average number of

ordinary shares in issue 273,387 270,291 273,387 270,291

Fully diluted weighted average

ordinary shares in issue 281,275 277,757 281,587 277,802

Basic earnings per share 84.2 33.2 85.0 33.5

Basic earnings per share –

diluted 81.9 32.3 82.5 32.6

Headline earnings per share 77.2 30.0 77.9 30.2

Headline earnings per share –

diluted 75.0 29.2 75.7 29.4

Net asset value per share 467.1 426.5 485.7 431.8

Ordinary dividends:

Interim dividend paid 9.5 9.5 9.5 9.5

Final dividend declared 21.0 – 21.0 –

FINANCIAL INFORMATION FOR THE YEAR ENDED 31 MARCH 2005 AND SIX MONTHS ENDED 30

SEPTEMBER 2004 UNDER INTERNATIONAL FINANCIAL REPORTING STANDARDS (“IFRS”)

INTRODUCTION

For the year ended 31 March 2005 Rainbow prepared its financial statements under

South African Statements of Generally Accepted Accounting Practice (“SA GAAP”)

as effective at that date. In accordance with the JSE Limited Listings

Requirements the Group will be required to prepare its consolidated financial

statements in accordance with International Financial Reporting Standards

(“IFRS”) for the year ending 31 March 2006.

This requirement applies to financial reporting for all listed companies for

financial reporting periods beginning on or after 1 January 2005 and,

consequently, Rainbow”s first published IFRS results will be its interim results

for the six months ended 30 September 2005. As the Group publishes comparative

information for one year in its financial statements, the date for transition to

IFRS is 1 April 2004, which represents the start of the earliest period of

comparative information presented.

In order to explain how Rainbow”s reported performance and financial position

are impacted by IFRS, the Group has restated information previously published

under SA GAAP to the equivalent basis under IFRS. This restatement follows the

guidelines set out in IFRS 1 (First-time Adoption of International Financial

Reporting Standards).

It is important to note that this financial information has been prepared in

accordance with IFRS statements that are expected to be effective at 31 March

2006. These are subject to ongoing review and possible amendment by interpretive

guidance from the International Accounting Standards Board (“IASB”) and may

therefore be subject to change.

BASIS OF PREPARATION

The Group has prepared a consolidated preliminary balance sheet, income

statement, cash flow statement and statement of changes in equity (“financial

information”) for the year ended 31 March 2005 to establish the financial

position and results of operations of the Group necessary to provide comparative

information expected to be included in the Group”s first set of IFRS financial

statements for the year ending 31 March 2006.

The Board acknowledges its responsibility for the preparation of the preliminary

financial information which has been prepared in accordance with IFRS and

policies expected to be adopted when the Board prepares the Group”s first set of

IFRS financial statements for the year ending 31 March 2006. The Board has

approved the preliminary financial information.

APPLICATION OF IFRS 1

The date of transition to IFRS for the Group is 1 April 2004 and therefore as

required by IFRS 1, the Group”s opening balance sheet at 1 April 2004 has been

restated to reflect retrospectively all existing IFRS standards and IFRIC

interpretations expected to be applicable at 31 March 2006, other than where

certain available exemptions and exceptions to this retrospective application

principle has been utilised. The Group is not expecting to early adopt any IFRS

standards or IFRIC interpretations issued but not yet effective as at 31 March

2006.

Management has considered all exceptions and exemptions allowed in IFRS 1 and

have, consistent with Remgro Limited, applied the following:

* Business combinations: the Group has elected not to apply IFRS 3 (Business

Combinations) for business combinations that occurred prior to 1 April 2004.

Subsequent acquisitions have been accounted for in terms of IFRS 3.

* Share-based payments: the Group has elected not to apply the provisions of

IFRS 2 (Share-based payments) to equity instruments granted on or before 7

November 2002, or to equity instruments granted after 7 November 2002 but which

had vested prior to 1 January 2005.

* Property, plant and equipment: A first time adopter may elect to use the fair

value of individual property, plant and equipment at transition date as deemed

cost. The Group has elected not to make use of this optional exemption and has

applied IAS 16 (Property, plant and equipment) retrospectively.

* Employee benefits: The Group has elected to apply the exemption to account for

all cumulative actuarial gains and losses at the date of transition.

* Financial instruments: The Group has elected not to restate its comparatives

for IAS 32 (Financial Instruments – Disclosure and Presentation) and IAS 39

(Financial instruments – Recognition and Measurement). The Group has applied

existing GAAP applicable as at 31 March 2005 to financial instruments in its

2005 figures that will be disclosed as comparatives for the 2006 IFRS results.

ADJUSTMENTS

The basis of the adjustments, net of the taxation impact, as shown in the

reconciliation of assets, liabilities and equity, reconciliation of income

statement and reconciliation of statements of changes in equity are noted below:

Share-based payments

The Group grants share options to employees under the Rainbow Share Incentive

Scheme. Under SA GAAP, other than costs incurred in administering the scheme,

which were expensed as incurred, the scheme did not result in any adjustment,

besides a dilution in earnings per share when the shares were issued.

In accordance with the requirements of IFRS 2, the Group has recognised an

expense in the income statement, with a corresponding credit to equity,

representing the fair value of outstanding employee share options. The fair

value at the date of granting the options is charged to income over the relevant

option vesting periods, adjusted to reflect actual and expected levels of

vesting.

Property, plant and equipment

Past interpretation and practice, generally accepted in South Africa, did not

take into account separate depreciation of significant components of property,

plant and equipment, or the re-assessment of an asset”s useful life on a regular

basis.

The revised version of IAS 16 requires significant components of an asset, with

useful lives that differ significantly from the asset as a whole, to be

depreciated separately over their useful lives and also requires the useful life

and residual value of an asset to be reviewed at least at each financial year-

end.

Post-retirement medical benefits

Previously the Group elected to recognise, in full, actuarial gains and losses

in the year in which they arose. From 1 April 2004, actuarial gains and losses

will be recognised using the corridor method – actuarial gains and losses in

excess of 10% of the defined benefit obligation in the fund will be amortised in

the income statement over the expected remaining working lives of the employees.

Reclassifications

Previously the Group disclosed preference shares and leave pay in equity and

provisions respectively. These balances have now been re-classified under non-

current liabilities and trade and other payables respectively.

SPECIAL PURPOSE AUDIT REPORT

The financial information contained in this announcement has been extracted from

the consolidated preliminary special purpose financial information which has

been audited by the Group”s auditors, PricewaterhouseCoopers Inc. The auditors

expressed the opinion that the consolidated preliminary special purpose

financial information has been prepared, in all material respects, in accordance

with the stated basis of preparation thereof. The basis of preparation of this

information is included in the consolidated preliminary special purpose

financial information and includes a description of how IFRS 1 has been applied,

and the assumptions that management made about standards and interpretations

expected to be effective, and the accounting policies expected to be adopted,

when management prepares the first complete set of IFRS financial statements as

at 31 March 2006.

The auditors” report includes an emphasis of matter that cautions that standards

or interpretations issued by the IASB between the date of this announcement and

the finalisation of the financial statements for the year ending 31 March 2006

may result in changes to the financial information published. They further note

that only a complete set of financial statements comprising a balance sheet,

income statement, statement of changes in equity, cash flow statement, together

with comparative financial information and explanatory notes, can provide a fair

presentation of the Group”s financial position, results of operations and cash

flows in accordance with IFRS. The auditors” report is available for inspection

at the Company”s registered office.

The financial information for the six months ended 30 September 2004 has not

been audited or reviewed.

Date: 01/11/2005 04:26:13 PM Produced by the JSE SENS Department