Continuing operations – excluding the Phase I B-BBEE share-based payment charge and the impairment of Quantum Foods shares relating to the Phase II B-BBEE transaction participants.

Revenue from continuing operations increased by 6% to R18.7 billion (7% excluding Pepsi and biscuits) for the year under review. Despite the competitive landscape, pleasing volume growth was achieved in key categories.

Revenue analysis by region (R’m) 2015 2014 % change
South Africa 16 125 15 461 4
Africa 900 812 11
Rest of world 1 723 1 426 21
Continuing operations 18 748 17 699 6
Discontinued operations 3 591 (100)
Group revenue 18 748 21 290 (12)

Essential Foods

Essential Foods delivered exceptional results in a low growth and contested environment, while successfully navigating challenging soft commodity procurement vagaries. The first half delivered strong maize volumes which came under pressure in the second half due to exponential cost push inflation. Bakeries continued to make progressive strides in expanding its operating margin through the relentless focus on key value drivers underpinning the strategy. A turnaround in rice profitability was achieved due to a strong increase in volumes and efficiencies. Pasta continued to contribute positively. Essential Foods recorded a 31% increase in operating profit for the year to R1.3 billion, while operating margin improved from 9.2% to 11.3%.


The Groceries division successfully exited both biscuits and Pepsi, while achieving excellent growth in wheat biscuits, cornflakes and long-life juice. The smaller brands underperformed, requiring increased attention. Groceries recorded a 26% increase in operating profit for the year to R435 million, while operating margin improved from 7.2% to 9.1%.


The newly divisionalised International business contributed 14% of total revenue and grew well ahead of the local market, bolstered by favourable international supply and demand dynamics in fruit exports in the second half. International recorded a 23% increase in operating profit for the year to R445 million, while operating margin improved from 16.0% to 17.0%.

Cost of goods sold increased 4% to R12.8 billion, benefiting from robust conversion cost containment initiatives and procurement savings. Significant cost push was offset by rigorous cost control and the extraction of efficiencies across the value chain, resulting in a 5% increase in other operating expenses to R4 007 million for the year.

The Group gross profit margin, as a result, improved from 30.4% to 31.9%, whilst the operating profit margin (before items of a capital nature) expanded a further two percentage points to 11.5% during the year under review. Operating profit, before items of a capital nature, and adjusted as per above, increased by 28% to R2 153 million (2014: R1 680 million).

Revenue analysis by segment (R’m) 2015 2014 % change
Essential Foods 11 335 10 652 6
Groceries 4 797 4 773 1
Cereals and other 2 420 2 362 2
Beverages 2 377 2 411 (1)
International 2 616 2 274 15
Continuing operations 18 748 17 699 6
Operating profit analysis by segment (R’m) 2015 2014 % change
Essential Foods 1 278 976 31
Groceries 435 346 26
Cereals and other 252 221 14
Beverages 183 125 46
International 445 363 23
Other (5) (5)
Continuing operations* 2 153 1 680 28
* Before items of a capital nature and adjusted for the impact of the Phase I B-BBEE transaction.
Operating margin by segment 2015 2014
Essential Foods 11.3% 9.2%
Groceries 9.1% 7.2%
Cereals and other 10.4% 9.4%
Beverages 7.7% 5.2%
International 17.0% 16.0%
Group continuing operations 11.5% 9.5%

Total Group earnings

The strong underlying financial performance of the Group has, however, been impacted by the effect of the 6 October 2014 unbundling of Quantum Foods, discontinued operations and the impact of the 2006 Phase I B-BBEE share-based payment charge.

Total Group headline earnings per share, on an adjusted basis, increased by 23% to 832 cents per share (2014: 678 cents per share).

Earnings for the Group in total, on an adjusted basis, increased by 28% to 807 cents per share (2014: 629 cents per share).

The impact of the non-operational costs related to the Phase I B-BBEE transaction

The 2006 Phase I B-BBEE transaction, benefiting more than 11 000 employees, is a cash-settled scheme. The number of participants, since inception, has declined to 2 579 as at 30 September 2015 (2014: 3 218), as a result of general staff turnover and the exit of Quantum Foods’ employees. The pre-tax value paid to such beneficiaries amounts to R374 million since its inception in 2006. The outstanding obligation is remeasured to fair value taking into account the Pioneer Foods share price at each reporting date. For the year under review the share price increased by 66% from R118.00 to R195.76, resulting in a charge of R307 million. In 2014 the share price increased by 35%, from R87.50 to R118.00, resulting in a charge of R187 million.

Quantum Foods unbundling

Quantum Foods was unbundled on 6 October 2014. During the year under review, a loss on the disposal of treasury related Quantum Foods shares and impairments in respect of Quantum Foods shares held by the 2012 Phase II B-BBEE consolidated special purpose vehicles, were recognised.

Group summary 2015 2014 % change
Total earnings (R’m) 1 130  965  17
Earnings per share (cents) 613  527  16
Plus: Items of a capital nature (after tax) (R’m) 97  90  8
Headline earnings (R’m) 1 227  1 055  16
Headline earnings per share (cents) 665  576  15
Adjusted for after-tax effect of the Phase I B-BBEE transaction (R’m) 307  187  64
Adjusted headline earnings (R’m) 1 534  1 242  24
Adjusted HEPS (cents) 832  678  23

Income from investments increased to R39 million (2014: R22 million), as a result of healthy cash balances and the higher interest rate.

Profit before tax amounted to R1 766 million (2014: R1 400 million) after financing costs of R142 million (2014: R138 million) and income from joint ventures and associates of R71 million (2014: R70 million). Bokomo Namibia, Bokomo Botswana and Bowman Ingredients SA delivered solid results, while Heinz recovered from supply chain difficulties in the first half.

Adjusted headline earnings per share from continuing operations, before the Phase I B-BBEE share-based payment charge, increased by 30% to 832 cents per share (2014: 637 cents per share).

Earnings from continuing operations, on an adjusted basis, increased by 34% to 831 cents per share (2014: 619 cents per share).