Wrap Text
Unaudited Interim Results For The Six Months Ended 30 June 2018
Sea Harvest Group Limited
(Incorporated in the Republic of South Africa)
Registration number: 2008/001066/06
JSE Code: SHG
ISIN: ZAE000240198
"Sea Harvest" or "the Company" or "the Group"
UNAUDITED INTERIM RESULTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
Commentary
Key Performance Indicators
Year ended Period Ended Period Ended
December 2017 June 2018 June 2017
2 131 054 Revenue (R'000) 1 004 288 1 056 961
61% International Revenue Mix 59% 61%
716 790 Gross Profit (R'000) 367 646 353 515
33.6% Gross Profit Margin (%) 36.6% 33.4%
333 813 Operating Profit (R'000) 165 027 167 715
15.7% Operating Profit margin 16.4% 15.9%
266 945 Profit for the period (R'000) 111 222 135 888
217 859 827 Weighted Average Number of Shares (WANOS) 240 018 063 195 379 525
119.0 Basic Earnings per share (cents) 47.7 67.0
235 317 Headline Earnings (R'000) 111 325 110 664
108.0 Basic Headline Earnings per share (cents) 46.4 56.6
582.4 Net Asset Value per share (cents) 592.9 531.9
14.95 ZAR : Euro average exchange rate(1) 14.95 14.29
10.27 ZAR : AUD average exchange rate(1) 9.56 10.06
1 250 Closing Share Price (cents) 1 350 1 370
(1) Average spot exchange rate at which sales were recorded.
HIGHLIGHTS FOR THE PERIOD
- The Acquisition of Viking Fishing Group as part of a B-BBEE consortium, and 51% of the shares of Viking
Aquaculture, which became effective on 2 July 2018. This is a transformational transaction for the Group
delivering diversification into other species and high value aquaculture and will be earnings accretive
from the outset.
- Sea Harvest Group achieved Level 1 B-BBEE contributor status with a score of 100.37, an increase from
Level 2 with a score of 98.9, making it one of the most transformed businesses in the sector.
- The conversion of the Harvest Mzansi to a hake factory freezer trawler was completed within budget (R250 million)
and on time (April 2018).
- The acquisition and integration of two Spanish Mackerel vessels and the related licences in
Western Australia.
- Gross profit margin increased to 36.6% (2017: 33.4%), driven by further efficiency gains and Rand weakness.
TRADING AND FINANCIAL PERFORMANCE
The Sea Harvest Group delivered headline earnings for the six months ended 30 June 2018 of R111.3 million,
an increase of 1% compared to the same period last year (2017: R110.7 million), after absorbing transaction
costs relating to the Viking acquisition.
Group revenue for the period decreased by 5% to R1.0 billion (2017: R1.1 billion), impacted by the 5% reduction
in Total Allowable Catch (TAC) in South Africa and the delayed start to the prawn fishing season in Australia. The
impact of these factors was partially offset by global sourcing, a weaker Rand and firm pricing, which benefited
from continued global demand for high value, sustainably certified wild caught seafood with limited supply.
Gross profit for the period increased by 4% to R367.7 million (2017: R353.5 million) and the gross
profit margin improved to 36.6% (2017: 33.4%). The expansion in the gross profit margin has been driven
by further efficiency gains across both the fleet and factory operations, an increase in higher margin
export volumes, price increases and a weaker Rand.
Other operating income decreased to R26.9 million (2017: R30.2 million), mainly due to lower foreign
exchange hedge gains for the period, with the 2017 average hedge rates benefiting from the sharp
devaluation of the Rand in early 2016.
Operating expenses for the period increased by 6% to R229.5 million (2017: R215.9 million), after
absorbing transaction costs relating to the Viking acquisition. Normalising for these non-recurring
costs, operating expenses increased by only 1%, benefiting from good cost control measures across
the Group.
The Group delivered operating profit before joint venture and associate income of R165 million
for the period, 2% lower than the same period last year (2017: R167.7 million), impacted by the lower
revenue and the Viking transaction costs referred to above.
Operating profit before net finance cost and taxation of R166.3 million was 19% lower than
the prior period (2017: R205.6 million), as a result of a number of once-off, non-cash benefits being
recorded in the first half of 2017, including a gain on disposal of interest in a joint venture of R23 million
and a fair value gain on the initial recognition of an option of R14 million.
Profit after tax of R111.2 million for the period decreased by 18% compared to the prior period
(2017: R135.9 million), in line with the decrease in operating profit before net finance cost and taxation.
Earnings per share (EPS) decreased by 29% to 47.7 cents per ordinary share (2017: 67.0 cents)
and headline earnings per share (HEPS) decreased by 18% to 46.4 cents per ordinary share
(2017: 56.6 cents). The decrease in both EPS and HEPS was mainly attributable to an increase in
the weighted average number of shares in issue ("WANOS"), which increased from 195 379 525 at
30 June 2017 to 240 018 063 at 30 June 2018, as well as lower earnings as set out above. It is important
to note that the increase in the WANOS was as a result of the Group restructure and the subsequent
listing of the Group on the JSE on 23 March 2017. The shares issued at listing were included in the determination
of WANOS for only 99 days in 2017, compared to the full period in 2018.
South African Operations: South African sales volumes for the period were lower than 2017,
impacted by the 5% reduction in the TAC, which was partly offset by the Group's global sourcing strategy.
Revenue was on par with 2017, with the impact of the lower volumes offset by higher average prices.
Revenue and volumes from export markets grew by 3%, after the 5% reduction in the TAC. The export
mix of total sales increased to 54% of sales in value terms (2017: 53%) and 46% of volumes (2017: 43%).
The Rand weakened by 3% across the currencies in which Sea Harvest trades. Revenue from the
local South African market, which includes retail and foodservice, was 1% lower than prior year,
impacted by the continued challenging local retail environment, the 5% TAC reduction and the increase
in export volume mix, which saw local volumes reduce by 7% compared to the same period last year.
Australian Operations: Revenue for the period decreased by 23% to R174.1 million (2017:
R227.1 million), driven by the lower landings of prawns, which were impacted by the delayed
start to the Shark Bay prawn season. Average realisations on prawns were well up, benefiting
from a larger size mix and strong demand. As a result of the lower volumes and the resultant lower
revenues, the business reported an after-tax loss of R5.1 million for the period, compared to a profit
after tax of R12 million in the prior period.
CASHFLOW AND FINANCIAL POSITION
The Group generated cash of R194.5 million (2017: R229.1 million) from its operations in the period,
before changes in working capital and R125 million net cash from its operations after the investment in
working capital. The increase in working capital was due to higher inventory holdings and an increase
in debtors due to higher sales levels in the last two months of the period, compared to the last two
months of the prior period, partly offset by higher payables due to increased capital expenditure
relating to the Harvest Mzansi and Marel projects.
During the period the Group utilised R129.5 million in investing activities, including a further R44.1 million
on the conversion of the Harvest Mzansi into a hake factory freezer trawler and progress payments of
R30.9 million on the Marel factory processing facility in Saldanha Bay. The Group disposed of the Harvest
Atlantic Hope for an amount of R59 million. The Group raised a further R67 million of borrowings during the
period which was used to fund investing activities. The Group paid R78.5 million in its maiden dividend.
The Group ended the period with R321.2 million of cash on hand.
Driving transformation
Sea Harvest is a c. 80% black-owned business, and as such remains committed to driving transformation
within the fishing industry and communities within which it operates. Significant resources are focused
on skills development, employment equity, supply and enterprise development initiatives, as well as
projects focused on job creation, youth and rural development. This focus has been recognised by
Sea Harvest achieving Level 1 B-BBEE contributor status with a score of 100.37, an increase from Level
2 with a score of 98.9, making Sea Harvest one of the most transformed businesses in the fishing sector.
Dividends
No interim dividend is declared or proposed for the six months ended 30 June 2018.
OUTLOOK
Sea Harvest expects to see continued global demand for high value, wild caught, MSC certified
species such as Cape Hake, which will drive continued export growth and firm international pricing. Export
pricing should further benefit from a weaker Rand in the second half of the year. Local retail volumes are
expected to come under continued pressure as a result of the challenging economic environment, which will
necessitate sustained promotional activity, impacting average pricing.
On the supply side, higher margin export growth will be supported by the introduction of the Harvest Mzansi
into the fleet, whose frozen-at-sea products are targeted towards export markets. In addition, the acquisition
of Viking Fishing will drive additional export volume growth, in particular into the Iberian Peninsula, as well
as growth in foodservice and wholesale channels.
Strategic investments within the fish processing factory in Saldanha Bay during the third quarter will
drive further production efficiencies, although with c. R18m of restructuring costs in the second half of
2018, earnings are only expected to benefit from 2019 onwards.
In Australia, prawn volumes in the second half of the year are expected to be better than those of the first
half, due to the delayed start to the prawn fishing season. Prawn catch rates since the commencement
of the season have been below 2017 levels and this trend is expected to continue through the second half
of the year.
On 2 July 2018 the acquisition of 100% of the assets of Viking Fishing as part of a B-BBEE consortium, and 51%
of the shares of Viking Aquaculture, became effective.
This transformational transaction is earnings accretive for the Group from the outset, delivering value through
the complementary nature of the fishing businesses and diversification into other wild caught species and
aquaculture.
On 28 August 2018, the Group announced that its wholly-owned subsidiary, Cape Harvest Food Group
Proprietary Limited, has concluded a share purchase agreement to acquire the entire issued share capital
of Ladismith Cheese Company Proprietary Limited for R527 million. The transaction is subject to conditions
normal for a transaction of this nature.
Established in 1999, Ladismith Cheese is a value adding dairy processing company based in Ladismith
in the Western Cape. The company's primary business is the production, distribution, marketing and
sales of cheese, butter and milk powders to South African retail, wholesale and food service markets.
The company generated revenue of R681 million and profit after tax of R57.7 million for the financial year
ended 31 January 2018.
The acquisition is a further step in the execution of Sea Harvest Group's stated investment strategy of growing
through:
i. organic margin enhancement within existing operations;
ii. acquisitions of high value wild caught species in the South African and Australian seafood sectors;
iii. acquisitions within high value aquaculture
sectors; and
iv. acquisitions in complementary sectors of the South African food and agricultural industry
which exhibit strong fundamentals, growth and where the Group is able to leverage its core
competencies and strengths.
To this end, the transaction represents an acquisition of a profitable branded FMCG food manufacturer of
significant scale in the food and agricultural sector with a long track record, strong national brand and a
proven management team. The transaction is expected to conclude in the 4th quarter of 2018.
On behalf of the Board
F Robertson F Ratheb
Chairman CEO
Cape Town
28 August 2018
CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS
for the six months ended 30 June 2018
Audited Year Unaudited Unaudited
ended six months ended six months ended
31 December 30 June 30 June
2017 2018 2017
R'000 R'000 R'000
2 131 054 Revenue 1 004 288 1 056 961
(1 414 264) Cost of sales (636 642) (703 446)
716 790 Gross profit 367 646 353 515
74 707 Other operating income 26 903 30 172
(114 771) Selling and distribution expenses (58 137) (62 301)
(15 166) Marketing expenses (6 369) (6 662)
(327 747) Other operating expenses (165 016) (147 009)
Operating profit before joint venture
333 813 and associate income 165 027 167 715
Share of profit of joint venture and
1 000 associate - 1 000
Gain on the disposal of interest in
23 155 joint venture - 23 155
24 825 Fair value gains 1 254 13 727
Operating profit before net finance cost
382 793 and taxation 166 281 205 597
17 206 Investment income 13 057 5 862
(38 848) Interest expense (20 284) (30 045)
361 151 Profit before taxation 159 054 181 414
(94 206) Taxation (47 832) (45 526)
266 945 Profit after taxation 111 222 135 888
Profit for the period attributable to:
Shareholders of Sea Harvest Group
259 344 Limited 114 410 130 955
7 601 Non-controlling interests (3 188) 4 933
266 945 111 222 135 888
Earnings per share (cents)
119.0 - Basic 47.7 67.0
114.7 - Diluted 45.9 66.1
CONDENSED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
for the six months ended 30 June 2018
Audited Year Unaudited Unaudited
ended six months ended six months ended
31 December 30 June 30 June
2017 2018 2017
R'000 R'000 R'000
266 945 Profit after taxation 111 222 135 888
Other comprehensive (loss)/income
Items that may be reclassified
subsequently to profit or loss:
(20 224) Movement on cash flow hedging reserve (27 985) (17 917)
Exchange differences on foreign
(11 576) operations 24 037 7 382
Items that may not be reclassified
subsequently to profit or loss:
Net remeasurement gain on defined
1 625 benefit plan - -
(30 175) Other comprehensive loss, net of tax (3 948) (10 535)
Total comprehensive income for
236 770 the period 107 274 125 353
Total comprehensive income
attributable to:
Shareholders of Sea Harvest Group
233 403 Limited 104 916 119 050
3 367 Non-controlling interests 2 358 6 303
236 770 107 274 125 353
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 30 June 2018
Restated*
Audited Year Unaudited Unaudited
ended six months ended six months ended
31 December 30 June 30 June
2017 2018 2017
R'000 Notes R'000 R'000
ASSETS
Property, plant, equipment and
808 192 vehicles(1) 866 908 531 180
489 805 Intangible assets(2) 548 820 505 730
84 220 Goodwill 88 626 87 811
25 264 Available-for-sale investment 5 - 25 264
Investment at fair value through
- other comprehensive income 5 25 264 -
24 825 Financial assets 5 26 080 13 953
72 489 Loans to related parties 6 72 489 70 501
1 959 Loans to supplier partners 980 -
243 Deferred tax assets 244 -
1 506 997 Non-current assets 1 629 411 1 234 439
304 001 Inventories 384 778 324 982
332 578 Trade and other receivables 423 501 359 280
41 896 Financial assets 5 2 991 27 687
- Tax assets 46 -
383 047 Cash and bank balances 321 155 316 222
1 061 522 Current assets 1 132 471 1 028 171
2 568 519 TOTAL ASSETS 2 761 882 2 262 610
Notes
(1) Movement in property, plant and equipment during the period, includes further capitalisation of the Harvest Mzansi costs of R44.1 million, Marel
Flowline project of R30.9 million and disposal of Atlantic Hope with a carrying value of R56 million.
(2) Additions to intangible assets during the period, include the acquisition of Spanish Mackerel rights by Mareterram valued at R36 million.
* Refer to note 9.
Restated*
Audited Year Unaudited Unaudited
ended six months ended six months ended
31 December 30 June 30 June
2017 2018 2017
R'000 Notes R'000 R'000
EQUITY AND LIABILITIES
1 294 875 Stated capital 1 291 993 1 295 771
(71 476) Other reserves (76 897) (62 586)
174 267 Retained earnings 210 170 43 302
Attributable to shareholders of
1 397 666 Sea Harvest Group Limited 1 425 266 1 276 487
168 313 Non-controlling interests 170 718 152 993
1 565 979 Capital and reserves 1 595 984 1 429 480
Long-term
315 825 interest-bearing borrowings 347 813 121 398
26 342 Employee related liabilities 26 372 26 703
18 789 Share-based payment liability 25 373 -
12 110 Deferred grant income 11 499 12 920
59 348 Financial liabilities 5 41 252 61 267
205 277 Deferred taxation 221 206 182 245
637 691 Non-current liabilities 673 515 404 533
Short-term
31 298 interest-bearing borrowings 79 754 72 150
269 356 Trade and other payables 364 331 310 695
1 505 Short-term deferred grant income 1 541 1 581
20 848 Financial liabilities 5 38 748 22 548
30 980 Short-term provisions 6 949 -
10 862 Taxation 1 060 21 623
364 849 Current liabilities 492 383 428 597
2 568 519 TOTAL EQUITY AND LIABILITIES 2 761 882 2 262 610
* Refer to note 9.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 June 2018
Restated*
Audited Year Unaudited Unaudited
ended six months ended six months ended
31 December 30 June 30 June
2017 2018 2017
R'000 R'000 R'000
669 447 Balance at the beginning of the period 1 565 979 669 447
Attributable to:
Shareholders of Sea Harvest Group
517 404 Limited 1 397 666 517 404
152 043 Non-controlling interests 168 313 152 043
Total comprehensive income for the
period attributable to shareholders of
233 405 Sea Harvest Group Limited 104 916 119 050
259 344 Profit for the period 114 410 130 955
Movements in other items of
(25 939) comprehensive income, net of tax (9 494) (11 905)
Movements attributable to shareholders
of Sea Harvest Group Limited
1 294 047 Shares issued - 1 294 943
- Shares repurchased(1) (2 882) -
(55 000) Recognition of FSP reserve - (55 000)
(368 409) Redemption of preference shares - (368 409)
Distributions to participants of share
(218 771) trusts and repurchase of shares - (218 771)
- Dividends paid (78 506) -
15 178 Share-based payments 4 072 10 403
Reclassification of share-based
- payments - (23 133)
Transfer to share-based payment liability
(19 789) (modification) - -
Further acquisition of investment in
(399) subsidiary - -
Movement attributable to non-controlling
16 270 interests 2 405 950
1 565 979 Balance at the end of period 1 595 984 1 429 480
Notes
(1) 217 175 were repurchased for purposes of the forfeitable share plan.
* Refer to note 9.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the six months ended 30 June 2018
Audited Year Unaudited Unaudited
ended six months ended six months ended
31 December 30 June 30 June
2017 2018 2017
R'000 R'000 R'000
Operating activities
266 945 Profit after taxation 111 222 135 888
163 296 Adjustments for non-cash and other items 83 233 93 190
Operating cash flows before changes
430 241 in working capital 194 455 229 078
(14 255) Increase in inventories (74 433) (31 627)
(53 547) Increase in trade and other receivables (85 476) (74 873)
Increase/(decrease) in trade and
(21 448) other payables 90 708 19 745
340 991 Cash generated from operations 125 254 142 323
17 206 Investment income received 13 057 5 862
(80 011) Income taxes paid (34 707) (44 142)
(25 544) Interest paid (18 156) (21 177)
Net cash generated from operating
252 642 activities 85 448 82 866
Investing activities
Proceeds on disposal of property, plant,
2 855 equipment and vehicles 59 392 -
Acquisition of property, plant, equipment
(369 876) and vehicles (152 370) (48 386)
(1 526) Acquisition of intangible assets (36 564) (1 494)
(368 547) Net cash utilised in investing activities (129 542) (49 880)
Audited Year Unaudited Unaudited
ended six months ended six months ended
31 December 30 June 30 June
2017 2018 2017
R'000 R'000 R'000
Financing activities
1 239 025 Shares issued, net of listing costs - 1 239 943
- Shares repurchased (2 882) -
Redemption of B and C preference
(368 409) share capital - (368 409)
Repayment of B and C preference
(144 269) dividends - (144 269)
(332 024) Repayment of borrowings (361) (301 478)
257 968 Proceeds from borrowings 66 813 67 886
(22 256) Payments of financial liabilities (2 975) (25 284)
Repurchase of shares and distributions
(218 771) to participants of share trusts - (218 771)
- Dividends paid (78 506) -
(80 194) Amounts advanced to related parties - (120 776)
14 971 Rights issue in subsidiary - -
(1 479) Further investment in subsidiary - -
Net cash (utilised in)/generated from
344 562 financing activities (17 911) 128 842
Net (decrease)/increase in cash and
228 657 cash equivalents (62 005) 161 828
Cash and cash equivalents at the
154 404 beginning of the period 383 047 154 404
Effects of exchange rates on the balance
(14) of cash held in foreign operation 113 (10)
Cash and cash equivalents at the end
383 047 of the period 321 155 316 222
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL Statements
for the six months ended 30 June 2018
1. BASIS OF PREPARATION
The condensed consolidated interim financial statements have been prepared in accordance with
and containing the information required by IAS 34: Interim Financial Reporting, the SAICA Financial
Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting
Pronouncements as issued by the Financial Reporting Standards Council, the Listings Requirements
of the JSE Limited and the requirements of the Companies Act of South Africa, No. 71 of 2008.
The condensed financial information has been prepared under the supervision of the Chief Financial
Officer, JP de Freitas CA(SA).
The information has not been audited or reviewed by the Group's auditors, Deloitte & Touche.
2. ACCOUNTING POLICIES
The accounting policies applied in the preparation of these condensed consolidated interim financial
statements are in terms of International Financial Reporting Standards and are consistent with those
applied in the financial statements for the year ended 31 December 2017, except as set out below.
The Group adopted IFRS 9: Financial Instruments and IFRS 15: Revenue from Contracts with Customers
on 1 January 2018. As reported previously, the adoption of these standards has an immaterial
impact on the Group. The implementation of IFRS 9 resulted in the reclassification of the R25 million
"available-for-sale" investment to an equity instrument irrevocably designated as at fair value though
other comprehensive income as disclosed in note 5. There is no reclassification of fair value changes
on the "available-for-sale" investments as these are already reported in equity. The adoption of IFRS 15
had no material impact on the Group.
Audited Year Unaudited Unaudited
ended six months ended six months ended
31 December 30 June 30 June
2017 2018 2017
R'000 R'000 R'000
3. HEADLINE EARNINGS PER SHARE
3.1 DETERMINATION OF HEADLINE EARNINGS
Profit for the period attributable
to shareholders of Sea Harvest
259 344 Group Limited 114 410 130 955
(Profit)/loss on disposal of property,
(3 876) plant, equipment and vehicles (4 284) 408
Impairment of property, plant,
- equipment and vehicles - 1 230
Reversal of impairment of property,
- plant, equipment and vehicles - (436)
Realised profit on disposal of interest
(23 155) in joint venture - (23 155)
3 004 Total tax effects of adjustments 1 199 1 662
235 317 Headline earnings for the period 111 325 110 664
3.2 CALCULATION OF WEIGHTED AVERAGE
NUMBER OF ORDINARY SHARES
Weighted average number of shares
on which earnings and headline
217 859 827 earning per share are based 240 018 063 195 379 525
Weighted average number of shares
on which diluted earnings and diluted
226 173 525 headline earnings per share are based 249 279 116 198 154 131
Reconciliation of weighted average
number of shares between basic
and diluted earnings per share and
headline earnings and dilute headline
earnings per share:
217 859 827 Basic 240 018 063 195 379 525
8 313 698 Dilutive instruments 9 261 053 2 774 606
226 173 525 Diluted 249 279 116 198 154 131
Headline earnings per share (cents)
108.0 - Basic 46.4 56.6
104.0 - Diluted 44.7 55.8
Audited Year Unaudited Unaudited
ended six months ended six months ended
31 December 30 June 30 June
2017 2018 2017
R'000 R'000 R'000
4. SEGMENTAL RESULTS
The Groups' reportable segments under IFRS 8: Operating
Segments, are the South African operations and the
Australian operations.
Segment revenue
1 644 206 SA Operations(1) 830 187 829 890
486 848 Australia Operations 174 101 227 071
2 131 054 Total revenue 1 004 288 1 056 961
Segment profit/(loss)
from operations
312 262 SA Operations 166 463 155 244
21 551 Australia Operations (1 436) 12 471
Operating profit before associate
333 813 and joint venture income 165 027 167 715
24 825 Fair value gains 1 254 13 727
Gain on the disposal of interest in
23 155 joint venture - 23 155
Share of profits of joint venture
1 000 and associate - 1 000
17 206 Investment income 13 057 5 862
(38 848) Interest expense (20 284) (30 045)
361 151 Profit before taxation 159 054 181 414
Total assets
1 732 386 SA Operations 1 833 243 1 677 271
836 133 Australia Operations 928 639 585 339*
2 568 519 2 761 882 2 262 610
Total liabilities
638 084 SA Operations 744 527 430 746
364 456 Australia Operations 421 371 402 384*
1 002 540 1 165 898 833 130
(1) Revenue excludes inter-segmental revenue of R60.9 million (2017: R47.8 million) which is eliminated on consolidation.
* Refer to note 9.
Audited Year Unaudited Unaudited
ended six months ended six months ended
31 December 30 June 30 June
2017 2018 2017
R'000 R'000 R'000
5. OTHER FINANCIAL ASSETS AND LIABILITIES
66 721 Financial derivative assets 29 071 41 640
Non-current portion of
24 825 financial assets(1) 26 080 13 953
41 896 Current portion of financial assets(2) 2 991 27 687
Other financial asset
25 264 Available-for-sale investment(3) - 25 264
Investment at fair value through other
- comprehensive income(3) 25 264 -
Financial derivative liabilities
130 Current portion of financial liabilities(2) 16 706 -
Other financial liability
80 066 Fishing licence liability(4) 63 294 83 815
Non-current portion of
59 348 financial liability 41 252 61 267
20 718 Current portion of financial liability 22 042 22 548
(1) CALL OPTION DERIVATIVE
Included in non-current financial assets is a call option to acquire 100% of the shareholding in Vuna
Fishing Company Proprietary Limited from Vuna Fishing Group Proprietary Limited. The fair value
was independently determined by an expert using the Black-Scholes option pricing model. The call
option financial asset has been classified as a non-current asset at 30 June 2018 due to the expected
exercise date thereof exceeding 12 months from the reporting date. The call option disclosed in
financial assets is regarded as a Level 3 financial instrument for fair value measurement purposes.
Level 3 fair value measurements are those derived from valuation techniques that include inputs for
the asset or liability that are not based on observable market data (unobservable inputs).
(2) FINANCIAL DERIVATIVE ASSETS AND LIABILITIES
Financial assets and liabilities arise from hedging contracts entered into by the Group for the
purpose of minimising the Group's exposure to foreign currency volatility. Hedging contracts are
regarded as Level 2 financial instruments for fair value measurement purposes. Level 2 fair value
measurements are those derived from inputs that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices).
(3) INVESTMENT AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME
The Group holds 10% of the ordinary share capital of Desert Diamond Fishing Proprietary Limited, a
company involved in the fishing and fishing processing industries.
This investment was previously classified as "available-for-sale". With the adoption of IFRS 9, the
Group has irrevocably elected to classify this investment as measured at fair value through other
comprehensive income because it is held as a long-term strategic investment that is not expected
to be sold in the short to medium term. As a result, investment with a fair value of R25 million was
reclassified from "available-for-sale" to investment at fair value through other comprehensive income.
The Group reassesses the valuation of the investment annually, by using an asset valuation method
performed by an independent valuator.
The investment is regarded as a Level 3 financial instrument. Level 3 fair value measurements are
those derived from valuation techniques that include inputs for the asset or liability that are not
based on observable market data (unobservable inputs).
(4) FISHING LICENCE LIABILITY
The fishing licence liabilities relate to the Shark Bay Prawn Managed Fishery Voluntary Fisheries
Adjustment Scheme (VFAS). The VFAS operates from 12 November 2010 until 1 July 2021.
Mareterram owns ten fishing licences in the Shark Bay region. The liabilities shown represent
present values discounted at the five year Australian Corporate Bond rate. Fishing licence liabilities
are carried at amortised cost.
Audited Year Unaudited Unaudited
ended six months ended six months ended
31 December 30 June 30 June
2017 2018 2017
R'000 R'000 R'000
6. RELATED PARTY TRANSACTIONS
6.1 RELATED PARTY LOANS
Loans to related parties
Vuna Fishing Company Proprietary
27 420 Limited 27 420 27 420
Vuna Fishing Group Proprietary
45 069 Limited 45 069 43 081
72 489 Total 72 489 70 501
Interest paid to related parties
10 708 Brimco Proprietary Limited - 10 708
6.2 RELATED PARTY TRANSACTIONS
Sales to related parties
SeaVuna Fishing Company
Proprietary Limited
(Joint venture of Brimstone
34 880 Investment Corporation Limited) 18 913 19 873
Purchases from related parties
SeaVuna Fishing Company
Proprietary Limited
(Joint venture of Brimstone
165 731 Investment Corporation Limited) 103 159 75 381
In terms of the supply agreement with Vuna Fishing Company Proprietary Limited ("Vuna") and SeaVuna
Fishing Company Proprietary Limited ("SeaVuna"), fish caught by Vuna and SeaVuna is marketed by
Sea Harvest Corporation Proprietary Limited.
Audited Year Unaudited Unaudited
ended six months ended six months ended
31 December 30 June 30 June
2017 2018 2017
7. STATED CAPITAL (number)
In issue (number)
251 362 907 Ordinary shares 251 362 907 251 362 907
(11 389 304) Held as treasury shares (10 959 595) (11 389 304)
239 973 603 240 403 312 239 973 603
At 30 June 2018, the movement in stated capital is as follows:
TOTAL SHARES LESS TREASURY TOTAL NET
IN ISSUE SHARES SHARES IN ISSUE
Opening balance 251 362 907 11 389 304 239 973 603
Shares repurchased - 217 175 (217 175)
Shares vested - (646 884) 646 884
Closing balance 251 362 907 10 959 595 240 403 312
8. SHARE-BASED PAYMENTS
The Group has two controlled trusts which have been established as vehicles through which
certain executives, senior management and employees have made an investment in or acquired an
economic exposure to an investment in shares in the Company and a forfeitable share plan which
was adopted to attract, retain, incentivise and reward the right calibre of employees.
SEA HARVEST MANAGEMENT INVESTMENT TRUST NO.2
The Sea Harvest Management Investment Trust No. 2 was established as an investment vehicle for
senior executives of Sea Harvest Corporation Proprietary Limited (subsidiary) to acquire shares in
the Company.
The scheme is cash settled with the fair value of the liability measured at every reporting date.
SEA HARVEST EMPLOYEE SHARE TRUST
The Sea Harvest Employee Share Trust, was established as an investment vehicle for employees of
Sea Harvest Corporation Proprietary Limited (subsidiary) to acquire an economic exposure to an
investment in shares in the Company.
The scheme is cash settled with the fair value of the liability measured at every reporting date.
FORFEITABLE SHARE PLAN
On 23 March 2017, the Group established a forfeitable share plan. In terms of the forfeitable share
plan,executive directors and senior managers may be awarded performance, bonus and retention
shares in the Group. The performance shares are linked to a requirement of continued employment
over the prescribed period, the Group's performance and strategic, individual performance
conditions which have to be met. Shares are granted to participants for no consideration. These
shares participate in dividends and shareholder rights from grant date. The scheme is accounted for
as an equity-settled share based payment scheme.
The Sea
Harvest The Sea
Management Harvest
Investment Employee Forfeitable
Trust No.2 Share Trust Share Plan
Grant Date 31 March 2014 31 March 2014 23 March 2017
Number of shares granted 8 257 898 4 258 138 4 400 065
Fair value of shares at grant date (R) 8 788 000 5 155 000 46 283 566
Expiry Date 31 March 2020 31 March 2022 23 March 2020
Service and
Vesting conditions Service Service Performance
Number of shares held at the beginning
of the period 3 440 790 3 548 449 4 400 065
Shares repurchased - - 217 175
Shares vested - - (646 884)
Number of share held at the end of the period 3 440 790 3 548 449 3 970 356
9. RESTATEMENT OF THE FINANCIAL RESULTS FOR THE PERIOD ENDED 30 JUNE 2017
As disclosed in the annual financial statements for the year ended 31 December 2017, the audited
financial results for the year ended 31 December 2016 have been restated for the finalisation of
the purchase price allocation of the Mareterram business combination. The relevant effects of this
adjustment to the statement of financial position and statement of changes in equity are summarised
as follows:
Estimated 31 Dec 2016
fair value Measurement Adjusted
at time of period Exchange rate closing
acquisition adjustments differences balance
R'000 R'000 R'000 R'000
Assets acquired and
liabilities assumed at
date of acquisition
Intangible assets 310 918 157 648 (15 660) 452 906
Deferred tax assets/(liabilities) 30 181 (121 512) 12 071 (79 260)
Total adjustment 341 099 36 136 (3 589) 373 646
Less: non-controlling
interest's share (137 546) (15 940) 1 583 (151 903)
Equity holders of the
parent's share 203 553 20 196 (2 006) 221 743
Goodwill relating to the parent 115 722 (20 196) 2 006 97 532
The impact on the restatement of the 31 December 2016 balances reflected above on the 30 June 2017
reported numbers are as follows:
Reported Measurement Revised
June period June
2017 adjustments 2017
R'000 R'000 R'000
ASSETS
Intangible assets 363 742 141 988 505 730
Goodwill 106 001 (18 190) 87 811
Deferred tax assets 50 313 (50 313) -
Total assets 520 056 73 485 593 541
LIABILITIES
Deferred taxation 123 117 59 128 182 245
EQUITY
Non-controlling interests 138 636 14 357 152 993
Total equity and liabilities 261 753 73 485 335 239
10. EVENTS AFTER THE REPORTING PERIOD
a) Viking Fishing and Aquaculture
Following the transaction becoming unconditional on 25 June 2018, Sea Harvest Group Limited
with effect from 2 July 2018, has together with a consortium of broad-based black economic
empowerment investors, acquired the entire fishing business of Viking Fishing Holdings
Proprietary Limited by way of the purchase of selected assets, liabilities and businesses from,
and selected shareholdings in, the respective Viking Fishing group businesses; and 51% of the
issued share capital of Viking Aquaculture Proprietary Limited.
The purchase consideration for the Viking Group is R885 million and is comprised of:
1) An upfront consideration of R565 million for the Fishing acquisition, to be settled as follows:
- R315 million in cash; and
- The issue of 19 million Sea Harvest shares at an agreed price of R13 per share (totalling
R250 million).
2) R65 million for the Aquaculture acquisition;
3) Vendor funding in an amount of R56 million; and
4) Contingent consideration of R199 million based on the profit after tax generated by the
Viking Group for each of the two financial years ending 31 December 2018 and 31 December
2019 respectively, and that certain profit warranties having been achieved. Settlement will be
as follows:
- R44 million post the 31 December 2018 condition being met;
- R44 million post the 31 December 2019 condition being met; and
- R110 million on 1 January 2022.
Sea Harvest is in the process of determining the fair values of the assets and liabilities for IFRS 3:
Business Combinations purposes.
b) Ladismith Cheese
On 27 August 2018 Sea Harvest has, through its subsidiary Cape Harvest Food Group
Proprietary Limited, signed a share purchase agreement to acquire the entire issued share
capital of Ladismith Cheese Company Proprietary Limited for a consideration of R527 million, to
be settled in cash. The transaction is subject to conditions normal for a transaction of this nature.
CORPORATE INFORMATION
Registered address: The Boulevard Office Park
1st Floor, Block C
Searle Street
Woodstock
Cape Town
7925
South Africa
Directors: F Robertson * (Chairperson)
BM Rapiya **
WA Hanekom *
L Penzhorn * (Retired 2 July 2018)
MI Khan *
T Moodley * (Appointed 2 July 2018)
KA Lager * (Appointed 2 July 2018)
CK Zama * (Appointed 2 July 2018)
F Ratheb (Chief Executive Officer)
JP de Freitas (Chief Financial Officer)
Mo Brey (Chief Investment Officer)
* Non-Executive
** Lead Independent Non-Executive
Company Secretary: Nana Aston
Transfer Secretary: Computershare Investor Services Proprietary Limited
15 Biermann Avenue, Rosebank, 2196
Sponsor: The Standard Bank of South Africa Limited
Auditors: Deloitte & Touche
Date: 28/08/2018 04:36:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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