Posted on

RCL FOODS LIMITED – ANNEXURE TO THE INTERIM RESULTS (PRO FORMA) FOR THE SIX MONTHS ENDED 31 DECEMBER 2014

RCL 201502180042A
Annexure to the interim results (pro forma) for the six months ended 31 December 2014

RCL Foods Limited
(“RCL Foods” or “the Company”)
(Incorporated in the Republic of South Africa)
Registration number: 1966/004972/06
JSE share code: RCL
ISIN: ZAE000179438

ANNEXURE TO THE INTERIM RESULTS (PRO FORMA)
for the six months ended 31 December 2014

Introduction

During the financial year ended 30 June 2014 RCL Foods concluded significant corporate transactions (collectively “the
Transactions”), certain of which had a material impact on the published results for the financial year and the interim period
ended 31 December 2013 which are listed below:

– Acquired 100% of the issued ordinary shares in TSB Sugar RSA Proprietary Limited and TSB Sugar International Proprietary
Limited (collectively referred to as “TSB”) from TSB Holdings (“TSB Transaction”);
– Restructured the existing BEE notional vendor financed shareholding (“the old BEE scheme”) and implemented a new BEE
Transaction (“the new BEE scheme”) (collectively the “BEE Transaction”);
– Raised R790.2 million in a pro-rata minority share offer (“pro-rata share issue”);
– Redeemed Foodcorp”s Euro-denominated Senior Secured Notes (“SSNs”) in November 2013 (10%) and April 2014 (remaining
90%) through cash and new rand-based debt (“the Bridging Loan”) (collectively the “Foodcorp financing activities”); and
– Acquired the remaining 35.82% minority interest in New Foodcorp Holdings Proprietary Limited (“Foodcorp”) in two
transactions from Foodcorp management (1 July 2013) (“the Foodcorp management buyout”) and Capitau Investment
Advisers Proprietary Limited (“Capitau”) (6 September 2013) for a total consideration of R520.7 million collectively
(“Foodcorp minority buyout”).

RCL Foods has consequently published the pro forma financial information for the 6 months ended 31 December 2013
below that aims to provide shareholders with a better understanding of the underlying financial performance of the Group
through the inclusion of a half year impact of the Transactions and the elimination of related once-off charges. The pro
forma financial information is the responsibility of the directors and has been prepared for illustrative purposes only and due
to its nature may not fairly present the Group”s income statement. The pro forma financial information refers only to past
events and does not contain any forward looking projections. PricewaterhouseCoopers Inc. have reported on the pro forma
financial information. Their report is available for inspection at the registered office of RCL Foods.

The pro forma financial information, assuming an effective date of the Transactions being 30 June 2013, effectively presents
the following:

TSB Transaction:
– Inclusion of the TSB results for the period 1 July 2013 to 31 December 2013.

BEE Transaction:
– Exclusion of the BEE expenses for the period 1 July 2013 to 31 December 2013 relating to the old BEE scheme; and
– Inclusion of the recurring IFRS 2 charge relating to the new BEE scheme for the period 1 July 2013 to 31 December 2013.

Transaction costs:
– Exclusion of all transaction costs associated with the Transactions for the period 1 July 2013 to 31 December 2013.

Pro-rata share issue:
– Inclusion of the finance income for the six months ended 31 December 2013 in respect of the cash received from the new
shares issued.

Foodcorp financing activities:
– Exclusion of the effects of Foodcorp”s Euro denominated debt for the period 1 July 2013 to 31 December 2013 which
removes the impact of interest on the Euro denominated debt, foreign currency losses and the 10% bond
redemption gain; and
– Inclusion of finance expense related to the replacement rand based debt for the period 1 July 2013 to 31 December 2013.

Foodcorp minority buyout:
– Exclusion of finance income earned on the cash utilised to settle the acquisition of shares from Capitau;
– Exclusion of the finance costs and the gain on the settlement of the preference shares; and
– Reversal of the loss attributable to minorities in Foodcorp.

The impact of the investments in Senn Foods Logistics (Pty) Limited and Zamhatch Ltd have not been taken into account
as the impact is considered to be immaterial.

The elimination of corporate transaction costs (R17.9 million), the BEE expenses relating to the old BEE scheme
(R1.7 million) and the NCI relating to the Foodcorp minority buyout (R7.4 million) is contrary to IFRS as this effectively
removes the amounts from the pro forma information. However, in terms of the JSE guidance letters of March 2010 –
Presentation of pro forma financial information and August 2012 – Presentation of constant currency information the non-
application of IFRS in the context of pro formas on a voluntary basis to accompany results is not prohibited.

PRO FORMA CONSOLIDATED INCOME STATEMENT
Pro-rata
TSB Transaction BEE Transaction Transaction costs share issue Foodcorp financing activities Foodcorp minority buyout
TSB Sugar
Holdings
Published Proprietary
unaudited Limited (“TSB
restated Sugar”) Reversal Reversal Interest Foodcorp
6 months audited 6 Elimination BEE of Senior of interest Additional earned Impact of non-
ended months ended of inter- current Interest Secured earned interest on on cash– Capitau controlling
31 Dec 31 Dec group sales year ESOP Transaction earned on Notes on cash bridging Foodcorp preference Interest
R”000 2013(2) 2013(3) 6 months(4) charge(5) charge(6) costs(7) cash(8) (“SSNs”)(9) – SSNs(10) loan(11) buyout(12) shares(13) (NCI)(14) Pro forma

Continuing operations
Revenue 8 669 470 2 939 318 (13 553) 11 595 235
Operating profit before depreciation, amortisation
and impairment (EBITDA) 688 277 205 955 1 693 (8 800) 17 866 (15 940) 889 051
Depreciation, amortisation and impairment (245 228) (67 815) (313 043)
Operating profit 443 049 138 140 1 693 (8 800) 17 866 (15 940) 576 008
Finance costs (437 830) (31 330) 403 321 (154 420) 617 (219 642)
Finance income 29 884 2 730 20 514 (8 754) (1 228) 43 146
Share of profits of joint ventures 2 491 4 353 6 844
Share of profit of associate 102 080 102 080
Profit before tax 37 594 215 973 1 693 (8 800) 17 866 20 514 403 321 (8 754) (154 420) (1 228) (15 323) 508 436
Income tax expense (17 600) (44 963) (5 744) (112 930) 2 451 43 238 344 4 290 (130 914)
Profit after tax from continuing operations 19 994 171 010 1 693 (8 800) 17 866 14 770 290 391 (6 303) (111 182) (884) (11 033) 377 522
Loss for the period from discontinued operation (14 301) (14 301)
Profit for the period 5 693 171 010 1 693 (8 800) 17 866 14 770 290 391 (6 303) (111 182) (884) (11 033) 363 221
Attributable to:
Equity holders of the company 13 096 192 431 1 693 (8 800) 17 866 14 770 290 391 (6 303) (111 182) (884) (11 033) (7 403) 384 642
Non-controlling interests (7 403) (21 421) 7 403 (21 421)
HEADLINE EARNINGS
Continuing operations
Profit for the period attributable to equity holders of
the company 27 308 192 431 1 693 (8 800) 17 866 14 770 290 391 (6 303) (111 182) (884) (11 033) (7 403) 398 854
Loss on disposal of property, plant and equipment 42 136 178
Headline earnings from continuing operations 27 350 192 567 1 693 (8 800) 17 866 14 770 290 391 (6 303) (111 182) (884) (11 033) (7 403) 399 032
Discontinued operation
Loss for the period attributable to equity holders of the
company (14 212) (14 212)
Headline loss from discontinued operation (14 212) (14 212)
Earnings per share from continuing and discontinued
operations attributable to equity holders of the
company (cents)
Basic earnings per share
From continuing operations 4.8 46.7
From discontinued operation (2.5) (1.7)
From profit for the period attributable to equity holders
of the company 2.3 45.0
Diluted earnings per share17
From continuing operations 4.7 46.6
From discontinued operation (2.5) (1.7)
From profit for the period attributable to equity
holders of the company 2.2 44.9
Ordinary shares in issue (‘000)
Weighted average ordinary shares in issue 574 404 853 241
Diluted weighted average ordinary shares in issue 576 799 855 636
Pro forma financial effects on
segmental analysis
Revenue 8 669 470 2 939 318 (13 553) 11 595 235
Foodcorp 3 862 876 3 862 876
Rainbow 4 413 617 4 413 617
TSB 2 939 318 2 939 318
Vector 861 356 861 356
Sales between segments:
Foodcorp to Rainbow (19 210) (19 210)
Rainbow to Foodcorp (16 139) (16 139)
TSB to Foodcorp (13 553) (13 553)
Vector to Foodcorp (10 081) (10 081)
Vector to Rainbow (422 949) (422 949)
Operating profit/(loss) before depreciation,
amortisation and impairment (EBITDA) 688 277 205 955 1 693 (8 800) 17 866 (15 940) 889 051
Foodcorp 376 128 (2 656) 373 472
Rainbow 191 308 1 328 (2 931) 189 705
TSB 205 955 (2 045) 203 910
Vector 124 171 365 (1 107) 123 429
Unallocated group costs (3 330) (61) 17 866 (15 940) (1 465)
Depreciation, amortisation and impairment (245 228) (67 815) (313 043)
Operating profit/(loss) 443 049 138 140 1 693 (8 800) 17 866 (15 940) 576 008
Foodcorp 249 437 (2 656) 246 781
Rainbow 97 705 1 328 (2 931) 96 102
TSB 138 140 (2 045) 136 095
Vector 99 237 365 (1 107) 98 495
Unallocated group costs (3 330) (61) 17 866 (15 940) (1 465)
Finance costs (437 830) (31 330) 403 321 (154 420) 617 (219 642)
Finance income 29 884 2 730 20 514 (8 754) (1 228) 43 146
Share of profits of joint ventures 2 491 4 353 6 844
TSB 4 353 4 353
Zambian operations 2 491 2 491
Share of profit of associate 102 080 102 080
TSB 102 080 102 080
Profit before tax 37 594 215 973 1 693 (8 800) 17 866 20 514 403 321 (8 754) (154 420) (1 228) (15 323) 508 436

Pro forma financial effects on weighted average ordinary shares in issue Number of shares
Published unaudited six months ended 31 December 2013 574 404
Impact of TSB Transaction15 230 947
Impact of pro rata share issue15 47 890
Pro forma weighted average number of shares in issue 853 241
Share option dilution impact16 2 395
Pro forma diluted weighted average number of shares in issue 855 636

Notes

NOTES TO THE PRO FORMA CONSOLIDATED INCOME STATEMENT

1. The pro forma consolidated income statement was prepared on the assumption that the Transactions were effective
30 June 2013.
2. The consolidated income statement of RCL Foods Limited for the six months ended 31 December 2013, was extracted
from its published interim unaudited financial results for the six months ended 31 December 2014.

TSB Transaction
The effective date of the TSB Transaction was 1 January 2014. The pro forma financial effects seek to demonstrate the impact
of consolidating TSB”s results for the six-month period ended 31 December 2013. The consolidation of TSB will be recurring.

3. The consolidated income statement of TSB Sugar was extracted from its audited financial information for the period
1 July 2013 to 31 December 2013.
4. Inter-company sales between Foodcorp and TSB for the period 1 July 2013 to 31 December 2013 have been reversed.

BEE Transaction
The effective date of the new BEE Transaction and the cancellation of the old BEE scheme was 17 January 2014. The Group”s
income statement for the six months ended 31 December 2013 includes the effect of the charges relating to the employee
portion of the old BEE scheme. The effects below seek to demonstrate the impact of excluding the expenses related to the
old BEE scheme and including a six-month effect of the recurring charge relating to the new BEE scheme.

5. All BEE expenses (relating to the old BEE scheme) included in the Group results for the six months ended
31 December 2013 have been reversed.
6. The recurring employee portion expense, relating to the new BEE scheme, for the six-month period has been included.
The valuation assumptions are consistent with those used in the RCL Foods Limited audited financial statements for
the year ended 30 June 2014.

Transaction costs
The transaction costs related to the Transactions are once-off and the pro forma financial effect seeks to demonstrate the
impact of excluding the non-recurring expense.

7. Transaction costs relating to the Transactions have been reversed.

Pro-rata share issue
The cash inflow from the pro-rata share issue occurred on 10 February 2014. The interest earned on the cash is expected to
be recurring. The effects below seek to demonstrate the impact of receiving the cash on 30 June 2013.

8. Interest earned on the cash received from the pro-rata share issue for the period 1 July 2013 to 31 December 2013, at
an average rate of 5.15% has been included.

Foodcorp financing activities
The Foodcorp Euro-denominated debt was settled during the 2014 financial year by utilising funds obtained from a rand-
denominated bridging loan and existing financial resources. The Euro-denominated debt was settled in November 2013
(10%) and April 2014 (remaining 90%). The bridging loan was obtained in April 2014. The pro forma financial effects seek to
demonstrate the impact of replacing the SSNs with the bridging loan for the half year. The expenses related to the SSNs are
considered once-off and the expense related to the bridging loan is considered recurring until such time that the bridging
loan is repaid.

9. All finance costs (including foreign exchange gains and the profit on the extinguishment of debt) currently included in
the Group results for the six months ended 31 December 2013 relating to the SSNs have been reversed.
10. The interest relating to cash utilised in settling the SSNs for the period from 1 July 2013 to the date of redemption of
the SSNs settled in November has been calculated at a rate of 5.15% and deducted from finance income.
11. Interest relating to the bridging loan has been calculated at a rate of JIBAR plus a margin of 1.65% for the period
1 July 2013 to 31 December 2013 and added to finance costs.

Foodcorp minority buyout

The Foodcorp management buyout was effective 1 July 2013 and consequently the impact of the transaction is fully recognised
in the consolidated results for the period. The transaction with Capitau and the settlement of the related preference shares
were effective 6 September 2013. From this date, RCL Foods held a 100% interest in Foodcorp and no preference share debt.
The pro forma financial effects demonstrate the impact of reversing the non-recurring expense as well as demonstrating the
impact of assuming that the cash outflow related to the Foodcorp minority buyout occurred on 30 June 2013.

12. Interest on the cash utilised to settle the transaction with Capitau and the settlement of the preference shares for the
period from 1 July 2013 to 6 September 2013 has been calculated at a rate of 5.15% and deducted from finance income.
13. The preference share finance costs have been added back and the profit on the settlement of the preference shares
has been deducted.
14. The full non-controlling interest (“NCI”) charge for Foodcorp relating to the period 1 July 2013 to 6 September 2013
has been reversed.

Weighted average ordinary shares and diluted weighted average ordinary shares

15. The shares issued in respect of the TSB Transaction occurred on 17 January 2014. The shares issued for the pro-rata
share issue occurred on 10 February 2014. The effects demonstrate the impact of the assumption that the shares were
issued for the full period.
16. The dilutive impact of the share options issued in terms of the new BEE scheme amounts to 2 395 000 and is taken
into account in determining the diluted EPS.

Diluted earnings per share

17. Diluted earnings per share has been updated for the impact of the Transactions.

Sponsor
RAND MERCHANT BANK (a division of FirstRand Bank Limited)

Date: 18/02/2015 05:16:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (“JSE”).
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.