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RCL FOODS LIMITED – ANNEXURE TO THE RESULTS ANNOUNCEMENT

RCL 201408270049A
Annexure to the results announcement

RCL FOODS LIMITED (“RCL Foods” or “Group”)
Registration number: 1966/004972/06
JSE share code: RCL
ISIN: ZAE000179438

Annexure to the results announcement

By eliminating the impact of the corporate transactions, the Group”s attributable profit to
equity holders of the company improves from the published loss of R289,0 million to a pro forma
profit of R428,4 million with an earnings per share of 50,2 cents.

INTRODUCTION
During the current financial year RCL Foods concluded
significant corporate transactions, certain of which had
a material impact on the published results 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 and implemented a new BEE
transaction (“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 (“SSN”s”) in November 2013 and
April 2014 through cash and new rand-based debt
(“Foodcorp financing activities”)

– Acquired the remaining 35,82% minority
interest in New Foodcorp Holdings
Proprietary Limited (“Foodcorp”) in two
transactions from Foodcorp management
(1 July 2013) and Capitau Investment Advisers
Proprietary Limited (“Capitau”) (6 September 2013)
for a total consideration of R520,7 million
(“Foodcorp minority buyout”).

RCL Foods has consequently published the pro forma
financial information below that aims to provide
shareholders with a better understanding of the
underlying financial performance of the Group through
the inclusion of a full year impact of the corporate
transactions and the elimination of once-off charges
related to corporate transactions.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 which
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 full year results of TSB

BEE Transaction:

– Exclusion of the current year BEE expenses relating
to the old BEE scheme (including the once-off
acceleration charge of R14,2 million)

– Exclusion of the once-off expenses relating to the new
BEE scheme

– Inclusion of the recurring IFRS 2 charge for a
12-month period relating to the new BEE scheme

Transaction costs:

– Exclusion of all transaction costs associated with the
corporate transactions

Pro rata share issue:

– Inclusion of the finance income for the full year in
respect the cash received from the new shares issued

Foodcorp financing activities:

– Exclusion of the current year effects of Foodcorp”s
Euro denominated debt which removes the impact
of interest on the Euro denominated debt, foreign
currency losses and the bond redemption gain

– Inclusion of finance expense related to the
replacement rand based debt for a full 12 months

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

– Reversal of the loss attributable to minorities in
Foodcorp

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

The elimination of corporate transaction costs (R27,4 million),
the BEE expenses relating to the old BEE scheme (R16,1 million),
the once -off BEE expense relating to the new BEE scheme (R88,5 million)
and the NCI relating to the Foodcorp minority buy-out (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
Transaction Pro rata
TSB Transaction BEE Transaction Costs share issue Foodcorp financing activities Foodcorp minority buyout
TSB Sugar
Holdings
Proprietary
Limited
Published (TSB Sugar) Reversal of Pro forma
audited audited elimination Reversal Reversal of Interest Foodcorp results
12 months 6 months of inter- BEE of Senior interest Additional earned Impact of non- 12 months
ended ended group current Interest Secured earned on interest on on cash – Capitau controlling ended
30 June 31 Dec sales year ESOP Transaction earned Notes cash – bridging Foodcorp preference interest 30 June
R”000 2014 2013(3) 6 months(4) charge(5) charge(6) costs(7) on cash(8) (SSNs)(9) SSNs(10) loan(11) buyout(12) shares(13) (NCI)(14) 2014
Continuing operations)
Revenue 19 719 965 2 939 318 (13 553) 22 645 730
Operating profit before depreciation,
amortisation and impairment (EBITDA) 1 122 220 205 955 112 486 (17 600) 27 440 (15 940) 1 434 561
Depreciation, amortisation and impairment (588 177) (67 815) (655 992)
Operating profit 534 043 138 140 112 486 (17 600) 27 440 (15 940) 778 569
Finance costs (1 043 458) (31 330) 903 573 (232 902) 617 (403 500)
Finance income 148 283 2 730 25 085 (71 086) (38 551) (1 228) 65 233
Share of profits of joint ventures 16 854 4 353 21 207
Share of loss of associate (6 520) 102 080 95 560
(Loss)/profit before tax (350 798) 215 973 112 486 (17 600) 27 440 25 085 832 487 (38 551) (232 902) (1 228) (15 323) 557 069
Income tax expense 44 061 (44 963) (7 024) (233 096) 10 794 65 213 344 4 290 (160 381)
Loss after tax from continuing operations (306 737) 171 010 112 486 (17 600) 27 440 18 061 599 391 (27 757) (167 689) (884) (11 033) 396 688
Profit for the year from discontinued operation 29 755 29 755
(Loss)/profit for the year (276 982) 171 010 112 486 (17 600) 27 440 18 061 599 391 (27 757) (167 689) (884) (11 033) 426 443
Attributable to:
Equity holders of the company (289 039) 192 431 112 486 (17 600) 27 440 18 061 599 391 (27 757) (167 689) (884) (11 033) (7 403) 428 404
Non-controlling interests 12 057 (21 421) 7 403 (1 961)
RECONCILIATION OF HEADLINE EARNINGS
Continuing operations
(Loss)/profit for the year attributable to
equity holders of the company (318 794) 192 431 112 486 (17 600) 27 440 18 061 599 391 (27 757) (167 689) (884) (11 033) (7 403) 398 649
(Profit)/loss on disposal of property,
plant and equipment (9 192) 136 (9 056)
Impairment loss reversed (4 639) (4 639)
Headline earnings from continuing
operations (332 625) 192 567 112 486 (17 600) 27 440 18 061 599 391 (27 757) (167 689) (884) (11 033) (7 403) 384 954
Discontinued operation
Profit for the year attributable to equity holders
of the company 29 755 29 755
Headline earnings from discontinued
operation 29 755 29 755
Earnings per share from continuing and
discontinued operations attributable to
equity holders of the company (cents)
Basic earnings per share
From continuing operations (45,7) 46,7
From discontinued operation 4,3 3,5
From (loss)/profit for the year attributable to
equity holders of the company (41,4) 50,2
Diluted earnings per share17
From continuing operations (45,7) 46,6
From discontinued operation 4,3 3,5
From (loss)/profit for the year attributable to
equity holders of the company (41,4) 50,1
Ordinary shares in issue (“000)
Weighted average ordinary shares in issue 697 988 853 924
Diluted weighted average ordinary shares in issue 697 988 856 264
Pro forma financial effects on
segmental analysis
R”000
Revenue 19 719 965 2 939 318 (13 553) 22 645 730
Foodcorp 7 768 001 7 768 001
Rainbow 8 732 933 8 732 933
TSB 2 482 052 2 939 318 5 421 370
Vector 1 699 903 1 699 903
Sales between segments: –
Foodcorp to Rainbow (61 981) (61 981)
Rainbow to Foodcorp (51 736) (51 736)
TSB to Foodcorp (13 552) (13 553) (27 105)
Vector to Foodcorp (21 495) (21 495)
Vector to Rainbow (814 160) (814 160)
Operating profit/(loss) before depreciation,
amortisation and impairment (EBITDA) 1 122 220 205 955 112 486 (17 600) 27 440 (15 940) 1 434 561
Foodcorp 720 960 (5 312) 715 648
Rainbow 203 650 2 656 (5 862) 200 444
TSB 147 483 205 955 (4 095) 349 343
Vector 199 132 727 (2 213) 197 646
Unallocated Group costs (149 005) 109 103 (118) 27 440 (15 940) (28 520)
Depreciation, amortisation and impairment (588 177) (67 815) (655 992)
Operating profit/(loss) 534 043 138 140 112 486 (17 600) 27 440 (15 940) 778 569
Foodcorp 455 172 (5 312) 449 860
Rainbow 622 2 656 (5 862) (2 584)
TSB 79 541 138 140 (4 095) 213 586
Vector 149 119 727 (2 213) 147 633
Unallocated Group costs (150 411) 109 103 (118) 27 440 (15 940) (29 926)
Finance costs (1 043 458) (31 330) 903 573 (232 902) 617 (403 500)
Finance income 148 283 2 730 25 085 (71 086) (38 551) (1 228) 5 233
Share of profits of joint ventures 16 854 4 353 21 207
TSB 9 327 4 353 13 680
Zambian operations 7 527 7 527
Share of loss of associate (6 520) 102 080 95 560
TSB (6 520) 102 080 95 560

(Loss)/profit before tax (350 798) 215 973 112 486 (17 600) 27 440 25 085 832 487 (38 551) (232 902) (1 228) (15 323) 557 069
Pro forma financial effects on weighted average ordinary and diluted weighted average ordinary shares in issue Number of shares “000
Published audited 12 months ended 30 June 2014 697 988
Impact of TSB transaction15 126 546
Impact of pro-rata share issue15 29 390
Pro forma weighted average number of shares in issues 853 924
Share option dilution impact16 2 340
Pro forma diluted weighted average number of shares in issues 856 264

NOTES
1. The pro forma consolidated income statement was prepared on
the assumption that the TSB Transaction, the BEE Transaction,
the Transaction costs, the Pro rata share issue, the Foodcorp
financing activities and Foodcorp minority buyout occurred on
30 June 2013.

2. The consolidated income statement of RCL Foods Limited was
extracted from its audited financial statements for the year
ended 30 June 2014.

TSB Transaction
The effective date of the TSB Transaction was 1 January 2014. The
effects below seek to demonstrate the impact of consolidating
TSB”s results for a 12-month period. The consolidation of TSB will
be recurring.

3. The consolidated income statement of TSB Sugar was extracted
from its audited financial statements 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 includes the effect of the once-off charges related to
the cancellation of the old scheme (non-recurring), the once-off
charges related to the Strategic Partners” equity holding (non-
recurring) and a portion of the charges related to the employee
portion (recurring) of the new BEE Scheme. The effects below seek
to demonstrate the impact of excluding the non-recurring expenses
related to the BEE Transaction and including a full year”s effect of
the recurring charge relating to the new BEE Scheme.

5. All BEE expenses (relating to the new and old scheme) included
in the Group results have been reversed.

6. The recurring employee portion expense, relating to the new
scheme, for the 12-month period has been included. The
valuation assumptions are consistent with those used in the
RCL Foods Limited audited financial statements.

Transaction costs
The transaction costs related to the corporate transactions are
once-off and the effect below seeks to demonstrate the impact of
excluding the non-recurring expense.

7. Transaction costs relating to the corporate 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 10 February 2014, at an
average rate of 5,15% has been included.

Foodcorp financing activities
The Foodcorp Euro-denominated debt was settled during the 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 effects below
seek to demonstrate the impact of replacing the SSN”s with the
bridging loan for the full year. The expenses related to the SSN”s
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. Allfinance costs (including foreign exchange losses and the
profit on the extinguishment of debt) currently included in the
Group results relating to the SSN”s have been reversed.

10. The interest relating to cash utilised in settling the SSN”s for
the period from 1 July 2013 to the date of redemption 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 9 April 2014 and added to finance costs.

Foodcorp minority buy out
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 year. 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 effect below demonstrates the impact of reversing the non-
recurring expense as well as demonstrates the impact of assuming
that the cash outflow related to the transactions 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 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 acquisition occurred on
17 January 2014. The shares issued for the pro rata minority
offer occurred on 10 February 2014. The effects demonstrate
the impact of the assumption that the shares were issued for
the full year.

16. The dilutive impact of the share options issued in terms of the
employee share schemes amounts to 2 340 000 and is taken
into account in determining the diluted EPS as the pro forma
adjustments result in a pro forma profit for the year.

Diluted earnings per share

17. Dilutive earnings per share has been updated for the impact of
the above transactions.

Date: 27/08/2014 05:21:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (“JSE”).
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