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AS
TR
AL
FO
OD
S
AN
NU
AL
RE
PO
RT
2003
Nu
rturin
glife
with
na
ture
s’a
bu
nd
an
ce
Brought to you by Global Reports
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1 Astral Foods A
The group experienced an
excellent trading year.
Good procurement
strategies, lower raw
material prices together
with imports benefitted
the Animal Feeds division.
Poultry experienced high
volume increases and best
ever production and
processing efficiencies.
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Astral Foods Annual Report 2003
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3 Astral Foods A
• Operating profit u
49% to R328 millio
• Headline earnings
by 49% to R208 m
• Dividend per share
55% to 168 cents
• Dividend cover
reduced
• Net cash inflow fo
the year R180 mill
01 02 0300
Operating profit (R million)
328
220
174
00 01 0302
203
Headline earnings (R million)
90
00 030201
117140
208
Operating cash flow (R million)
236
127
154
02 0301
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CAPE
PROVICE
1 Paarl
2 Cape Town
3 Hermanus
EASTERN
CAPE
4 Port Elizabeth
KWA ZULU
NATAL
5 Pietermaritzburg
FREE STATE
6 Welkom
GAUTENG
PROVINCE
9 Pretoria
10 Pelindaba
11 Olifantsfontei
12 Randfontein
13 Meyer ton
MPUMALANGA
7 Delmas
8 Standerton
12
34
5
6
109
12 7
8
1113
Astral Foods Annual Report 2003
Brought to you by Global Reports
5 Astral Foods A
Meadow Feeds - division* 100%
Earlybird Farms (Pty) Ltd 50%
Ross Poultry Breeders (Pty) Ltd 90%
Central Analytical Laboratories (Pty) Ltd 100%
National Chick - division* 100%
County Fair Holdings (Pty) Ltd 100%
29% Elite Breeding Farms 53%
County Fair Foods (Pty) Ltd 100%
National Chick Ltd 100%
National Chicks Botswana (Pty) Ltd 67%
National Veterinary Supplies (Pty) Ltd 100%
National Chicks Swaziland (Pty) Ltd 67%
Investment Holdings Poultry Operations Animal Feed Operations
Africa Feeds Ltd (Zambia) 80%
Meaders Feeds Ltd (Mauritius) 32%
NuTec SA (Pty) Ltd 50%
*Division of Astral Operations Limited
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6
7
8
9
5
9
Astral Foods Annual Report 2003
2
3
4
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7 Astral Foods A
2 Jurie Johannes Geldenhuys (60) #
BSc (Eng Elec), BSc (Eng Mining), MBA
Chairman of the human resources and remuneration
committee
Director of companies
Appointed to the board on 24 May 2001
3 Evert Michiel Groeneweg (67) @
CA(SA) , PMD (Harvard)
Chairman of the audit and risk management
committee
Director of companies
Appointed to the board on 19 February 2001
4 Charles Gustav van Veyeren (69) #
BSc Agric
Director of companies
Appointed to the board on 19 February 2001
5 Thabang Charlotte Christine Mampane (44)
BA Honours (Public Administration)
Head of Regions: SABC
Appointed to the board on 14 November 2003
6 Malcolm Macdonald (61)
BCom, CA(SA), CIMA, AMP (Harvard)
Executive director, Finance: Iscor Limited
Appointed to the board on 14 November 2003
8 Thomas Pritchard (48)
BCom (Hons), CA(SA)
Financial Director and Company Secretary
Appointed to the board on 9 February 2001
9 Michael Andrew Kingston (52)
Chief Operating Officer poultry division
Appointed to the board on 19 February 2001
# Members of the human resources and remuneration
committee
@ Members of the audit and risk management
committee
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Astral Foods Annual Report 2003
The board is consistentlyreviewing acquisition andexpansion criteria and wouldhope to make some progressduring the coming year.
– further improvement in production efficiencies; and
– the continuing strengthening of the rand, with resultant lower
prices.
For the year under review, the group reported a headline earni
of 49%, from R140 million (2002) to R208 million (2003).
168 cents per share have been declared by the board, an incr
on the previous year’s 108 cents per share.
Market conditions. The industries in which the grou
experienced almost opposite trading conditions during the pas
The 2002 year was characterised by a sharp decline in the
rand against the US dollar. Commodity prices are dollar-bas
result that the price of maize over a short period increased
high of R1 801/ton during January 2002. During the period u
exactly the opposite occurred. The strong recovery of the
most currencies caught a number of industry players off guard
of maize reduced to its lowest level of R733/ton during April 2
The group did well during these turbulent conditions through
procurement strategies, including hedging and imports of maiz
prices were artificially high.
Imports of poultry meat entered the South African market on t
strong rand. The industry has applied, through the South Af
Association, to increase tariffs that have not been adjusted
The International Trade Administration Commission of South A
expected to decide on the level of future tariffs shortly.
Strategic focus. The group’s strategy, namely, "to grow the
selected food markets to become a better balanced le
commodity company", remains firm. The strong cash flow of th
resulted in a net cash surplus of R59 million (2002: ne
R103 million). Although the true cash situation is closer to a
level, the group is in a much stronger position to pur
opportunities. The board is consistently reviewing acquisition an
criteria and would hope to make some progress during the co
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9 Astral Foods A
Corporate governance. The board is fully committed to the principles of
transparency, integrity and accountability, and recognises that the primary
responsibility for corporate governance in Astral Foods rests firmly with the
board and its chairman. The group complies, in all material aspects, with
the King Report on Corporate Governance for South Africa 2002.
Prospects. It is not expected that the decrease in raw material prices will
continue, as international commodity prices have already started to firm.
The rand is expected to remain strong, especially against the US dollar.
Overall, in spite of lower interest rates and higher disposable income, it is
not expected that the current margins will be maintained. Earnings for the
year ahead is nevertheless not expected to be lower than the past year.
Appreciation. I wish to record my thanks to the members of the board for
their support and contribution to the group’s success.
I also wish to thank the management and staff, under the able leadership
of our Chief Executive Officer, Nick Wentzel, for their dedication and hard
work.
Our achievements were possible due to our continued excellent working
relationship with our suppliers, which we acknowledge and appreciate.
A particular thank-you to our customers who supported us throughout the
year.
JAN VAN DEN BERG
Chairman
14 November 2003
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Astral Foods Annual Report 2003
Trading results summary. The group continued its good trading
performance with a strong 49% growth in headline earnings from
R140 million to R208 million. For the three years that the group has been
listed, the compounded annual headline earnings growth has been 32%.
Turnover for the year increased by 6,5% to R3 947 million
(2002: R3 692 million), whilst operating profit increased by 49% to
R328 million (2002: R220 million). Net operating margins improved from
5,9% to 8,3%.
The Animal Feeds division continued its good performance in uncertain
trading conditions. Operating profits increased by 18,4% to R153 million
(2002: R130 million), whilst operating margins improved from 4,8% to
5,7%. The Poultry division experienced a good year after the drastic
increase in raw material prices in 2002. This division increased operating
profits by 93% to R174 million (2002: R90 million) following a reduction of
feed prices. Poultry contributed 53% (2002: 41%) of group operating
profits.
The group’s balance sheet structure has strengthened with net asset value
per share increasing to R14,18 (2002: R10,79). Net cash inflow of
R180 million (2002: R28 million) resulted in a cash surplus situation for the
first time in the company’s short history. This ungeared position creates
new challenges for the group.
For the three years that group has been listed, thecompounded annual heaearnings growth has been
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Investments. In accordance with the group’s strategic focus the following investments were made:
• a feed mill (Bulkop) in Patterson was acquired for R5 million. This business, together with the
current outdated facility at Humansdorp, will be consolidated into a single modern facility in Port
Elizabeth and will be commissioned shortly at an estimated cost of R35 million,
• County Fair has recently commissioned a 10-house broiler farm, which will increase production
by 55 000 broilers per week. The cost of this facility is R21 million, and
• County Fair is doubling its cold storage facilities at Epping at a cost of R6 million.
The group is continuously re-investing in its existing facilities to ensure they keep abreast with new
technology and are maintained in excellent working order. Furthermore, the group is well
positioned for further expansion and acquisition opportunities.
Appreciation. I would like to thank our clients for their support during the past twelve months. We
remain committed to excellent client service and providing products of the highest quality.
I also wish to thank our suppliers, service providers and other institutions for their involvement with
the group.
My sincere appreciation to our chairman and board of directors for their guidance and participation
in the group’s activities.
Finally, to my colleagues in management and our staff, thank you for your support and contribution
to the group during 2003.
NICK WENTZEL
Chief Executive Officer
14 November 2003
11
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Astral Foods Annual Report 2003
COUNTY FAIR’S NEW STATE OF THE ART BROILER FACILITY
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13 Astral Foods A
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Astral Foods Annual Report 2003
positioned to take advantageof the volatile marketdevelopments during thepast year.
The 2003 year was characterised by the reduction of the
yellow maize price as reflected by the year-on-year Safex
prices from R1 484/ton to R910/ton at September 2003.
The strengthening of the rand against most currencies had
a direct impact on maize prices. Good rainfall in the maize
producing areas, as well as minimal exports to neighbouring
countries resulted in a record 2,8 million ton maize carry-
over to the new season.
of commodities in US dollars are on the incre
plantings of maize for the new season are exp
down on the previous year, mainly due to th
stock from the previous season and lower
Local weather conditions are critical in determin
of future maize prices.
Meadow Feeds, a wholly-owned division of the
market leader in the animal feed industry in So
operates from six strategically placed mills as
page 4.
Meadow Feeds was well positioned to take adva
volatile market developments during the past ye
turnover was static at R2,7 billion, whilst n
margins improved from 4,8% to 5,7%. Operat
the year amounted to R148 million (2002: R131
contributed 45% (2002: 60%) of group profits.
The group benefited from a good procurem
optimising benefits from the sharp reduction in
raw materials and in particular yellow maize
maize imports as well as efficiency improvem
contributed to this performance.
Central Analytical Laboratories recorded a stron
situation. NuTec SA (50% joint venture) contin
significant growth. National Veterinary Supp
developed as the national procurement arm of t
the products in its specialised range. The res
companies are included under Animal Feed (SA
The Animal Feed division should continue
reasonably. The acquisition of the Bulkop fe
internal broiler expansion will secure increased
addition, new products and markets are
developed to ensure growth. The latest devel
the launch of a game feed range of products f
drought in parts of the country.
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Animal feed (Africa)
The group’s African operations recorded a R5 million
operating profit (2002: R1,2 million loss). The Zambian
operation experienced favourable trading conditions
resulting from a better maize harvest. Reduced maize
prices and an improved economy following firmer export
copper prices contributed to this good performance.
The Mauritius joint venture performed satisfactorily, with
results in line with expectations.
The group is committed to increasing its presence in Africa.
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The broiler industry experienced a satisfactory trading year.
Strong demand for poultry meat as well as the closure of
Agrichicks during 2002 gave rise to a more balanced supply
and demand situation. The sharp reduction in the cost of
feed and increased consumer spending caused poultry
margins to increase. A relatively disease-free year was
experienced.
The strengthening of the rand has created a favourable
climate for importers. Large quantities of imported poultry
entered the South African market. The South African
poultry industry has made application to the International
Trade Administration Commission of South Africa (ITAC) to
increase the current tariff that was approved in 1997, in line
with the subsequent weakening of the exchange rate. A
decision on this application is expected shortly.
Looking ahead it is expected that feed costs will not
increase dramatically and this, coupled with increased
consumer demand, paves the way for another reasonable
poultry year.
The Poultry division’s revenue increased from R
R2,2 billion in 2003. Sales volumes increas
compared to 2002. Main reasons for the incre
• a full-year effect of 134 000 broilers per wee
Poultry following the long-term rental
effective from June 2002; and
• good production and processing efficienc
Earlybird and County Fair.
Average sales realisations increased by 8% on
Poultry operating margins recovered from a
during the second half of 2002 to 8,0% for the fu
(2002: 5,2%). Operating profits almost do
R90 million to R174 million, with both broile
recording record profits albeit off a very low bas
volumes, reduced raw material prices and goo
efficiencies led to this strong performance.
Specific additional information, by company, is
Ross Poultry Breeders
Ross Poultry Breeders is responsible for
development of the South African 788 Ross Br
which is unique to South Africa. The compa
close association with its 10% shareholder Avia
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17 Astral Foods A
THE IMPROVEMENT OF PRODUCTION EFFICIENCIES WAS A KEY
STRATEGY AND MAJOR SUCCESS WAS ACHIEVED IN BOTH THE
FARMS AND PROCESSING DEPARTMENTS
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Astral Foods Annual Report 2003
into Africa. The intention is to actively expand t
conjunction with Aviagen Limited, which co
territories. Exports will come from existing capa
improve utilisation.
The company has performed well financially in
stiff competition from a new entrant to the p
market. Further refurbishment of the facilities is
next year.
County Fair Foods
This wholly-owned operation is the leading bro
in the Western Cape and the third largest nation
benefit of the expansions during 2002 materia
the current year. Broiler production performa
first nine months of the year exceeded all pre
Sudden weather changes in the last quarte
resulted in a deterioration of performances.
have been initiated to remedy this situation.
turnaround has already been achieved.
The construction of a 10-house broiler farm
been completed. This state-of-the-art
accommodate 410 000 broilers. The fac
operational during October 2003 and will
increase of 55 000 broilers per week for sla
expansion in processing facilities is required a
the increased production as adequate capacity
Earlybird Farm (50% joint venture)
Earlybird is the second-largest broiler produc
Africa, with its abattoir facilities situated
(Gauteng) and Standerton (Mpumalanga).
The strong turnaround forecast in the 2002 a
materialised. The improvement of production
was a key strategy and major success was ach
ROSS THE LEADER IN
BROILER GENETICS
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the farms and processing departments. In this regard, the
benefits derived from separate sexing became more
apparent and contributed significantly to lower cost and
improved product quality. Special emphasis was also
placed on the marketing and distribution functions to
improve service levels and increase realisations at the same
time. No major capacity expansions were undertaken
during the year. Capital expenditure was kept to a
minimum, with the focus on projects that would improve
performance and reduce costs.
National Chick
The Natchix group made a strong turnaround following an
extensive rationalisation programme. The depressed state
of the market in which this company operates, mainly as a
result of surplus incubator capacity, has made it extremely
difficult to regain lost volumes. Sales volumes have been
materially affected due to a contractual breach by certain
customers with regard to the supply of day old chicks.
Legal action has been instituted against the parties
concerned to recover damages.
As part of an ongoing rationalisation programme, the group
has disposed of its shareholding in the Lesotho operation.
Although much has been done to improve results, the
Natchix group requires additional volumes to deliver a good
financial performance. An aggressive sales drive to increase
volumes will continue to be pursued.
THE NATCHIX GROUP MADE A STRONG TURNAROUND
FOLLOWING AN EXTENSIVE RATIONALISATION PROGRAMME.
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Astral Foods Annual Report 2003
procurement strategies, cheaper raw material imports,
high poultry volume increase at marginal cost and best
ever poultry production and processing efficencies
following a disease free and weather friendly year, were the
main contributors to this fine performance.
Net funding costs reduced from R22 million to R15 million
following the strong cash inflow.
The group’s tax rate (inclusive of STC) of 32,7% was up on
the previous year’s 30,7% due to the utilisation of STC
credits during 2002.
For the year under review the group reports a headline
earnings increase of 49%, from R140 million to
R208 million.
Operating profit margin (%) 8,3
Return on equity (%) 35
Return on net assets (%) 51
Net asset turn (times) 6,1
Net cash/(debt) (Rm) 59
Interest cover (times) 21,5
Working capital days 21
Net asset value per share (cents) 1 418
300
Cash flow 2003
Interest paid 15Replacement capex 33
Working capital (12)
Cash generat
Tax paid 90
Dividend paid 51
Sep 03
Expansion capOther investin
(103)
(59)
0
(112)
250
200
150
100
50
-50
-100
Sep 02
R’m
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21 Astral Foods A
are now materialising as reflected in the return on net assets
of 51%.
The group, following a net cash inflow of R180 million
(2002: R28 million) is in a net cash surplus situation of
R59 million (2002: borrowings at R103 million). Although the
more representative cash position at September 2003 is
closer to a break even due to contractual payments to a
certain creditor on 1 October 2003, the cash surplus
situation creates new challenges.
Dividends. The dividend cover has been reduced to
2,9 times (2002: 3,0 times). It is the stated intention of the
company to further reduce the cover over a planned period
but mindful not to pay lower dividends than the
corresponding prior year figure and prudent funding levels
retained.
Total dividends declared amount to 168 cents, a 55%
increase on the previous year’s 108 cents.
TOM PRITCHARD
Financial Director
14 November 2003
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Astral Foods Annual Report 2003
for South Africa 2002 (the King Report 2002 ).
The board believes that the group’s governance practices
are strong and that in all material respects, the group
conforms to the principles embodied within the King Code
2002 and is committed to ensuring that these principles
continue to be an integral part of the way in which the
group’s business is conducted.
The constitution and operation of the board of directors
The board. The group has a unitary board of directors that
comprises three executive and six independent non-
executive directors. An independent non-executive
chairman leads the board. A complete list of board
members, their respective qualifications, responsibilities,
and director status is available on Page 6 of this report.
There are no contracts of service between any of the non-
executive directors and the group. One third of the directors
retire each year in terms of the company’s Articles of
Association.
The directors are experienced businessmen who are
conscious of their duty to ensure that the group maintains a
high standard of corporate governance. The board is
committed to guiding and monitoring that high standard.
The board is aware that it is accountable for the actions of
management and has retained full and effective control of
the organisation over the last year. In addition, board
members, management and staff representatives from
across the group participated in a workshop in order to
identify opportunities within the group. Key opportunities
identified are in the process of being exploited. Not only did
valuable opportunities come from the workshop but the
downside of these opportunities also reconfirmed many of
the risks identified at the prior year’s risk management
workshop. These risks, together with other emerging risks,
are being monitored by the board through the audit and risk
management committee on an ongoing basis.
issues regarding technology and information sy
group.
Management has ensured that the information
board are well defined and regularly monitore
are provided with comprehensive board pack
prior to each scheduled meeting.
The non-executive directors meet regularly
unrestricted access to executive management.
Board charter. The board operates in terms
adopted in May 2003, which sets out its
responsibilities. In accordance with this charte
• The chairperson of the board is an indep
executive director.
• A formal orientation programme for new dire
• Specific clauses, in line with the requirem
Companies Act and King Code 2002, exis
to conflicts of interest. The company secreta
a register thereof. No conflicts of interest
recorded in the register of interests.
• Formal annual evaluations of the bo
committees, individual directors and the Ch
Officer are in the process of being impleme
• Directors have access to staff, records, the
services of the group secretary and may, in
circumstances, seek independent profess
on group-related affairs.
• Succession planning for the Chief Executive
executive management has been prepa
updated as appropriate.
• A strategic plan and approvals framew
business have been adopted and are regula
• Terms of reference for all board committee
formulated.
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23 Astral Foods A
formulated.
• The nature and extent of social, transformation, ethical,
safety and health, human capital, and environmental
management policies and practices are monitored and
reported on.
The board is satisfied that, for the period under review, it has
effectively adhered to all duties and responsibilities as set
out in the charter. Furthermore, the board is not aware of
any cases of non-compliance with legislation and regulation
within the group during the period under review.
Board committees. The board has constituted two board
committees to address matters requiring specialised
attention. The board acknowledges its accountability to the
group’s shareholders for the actions of the board
committees and is satisfied that the committees have met
their respective responsibilities for the period under review.
The board committees are as follows:
• The audit and risk management committee. The
audit and risk management committee consists of three
appropriately qualified members, two of whom (including
the chairperson of the committee) are independent non-
executive directors, and meets at least twice a year with
management, internal and external audit.
The audit and risk management committee has terms of
reference, which were adopted and approved by the
board in November 2002. Responsibilities of the audit
and risk management committee, as per the terms of
reference, include:
• Oversee the internal and external audit function.
• Review with internal and external audit the adequacy
and effectiveness of internal controls, the quality of
financial information, compliance with the King Code
2002, the effectiveness of the risk management
• Oversee and monitor the risk management functions
in the group.
• Review and advise on the adequacy of insurance
cover.
Both the group internal audit manager and external
auditors have direct access to the chairman of the audit
and risk management committee.
To further enhance the effectiveness of the group’s audit
and risk management committee the group also has bi-
annual divisional audit committee meetings for each
operation. The group internal audit manager and
external auditor report at all divisional audit committee
meetings and these meetings are also attended by the
Chief Executive Officer and Financial Director. The
results of these meetings are tabled at the group audit
and risk management committee.
• The human resources committee. The human
resources committee consists of three independent
non-executive directors and one executive director and
meets at least twice a year.
The human resources committee has terms of reference,
which were adopted and approved by the board in
November 2002. Responsibilities of the human resources
committee, as per the terms of reference, include:
• Develop the group’s general policy on executive and
senior management remuneration.
• Determine remuneration packages for executive
directors.
• Measure the performance of executive directors.
• Employment equity and skills retention matters.
• Management succession planning.
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Astral Foods Annual Report 2003
13 Feb 20 May 21 May 21 Aug 14 Nov 20 May 13 Nov 12 May
JL van den Berg ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓
JJ Geldenhuys ✓ ✓ ✓ ✓ ✓ Ø Ø ✓
EM Groeneweg ✓ ✓ ✓ ✓ ✓ ✓ ✓ Ø
CG van Veyeren ✓ ✓ ✓ ✓ ✓ Ø Ø ✓
M Macdonald Ø Ø Ø Ø ◊ Ø Ø Ø
TCC Mampane Ø Ø Ø Ø ◊ Ø Ø Ø
NC Wentzel ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓
T Pritchard ✓ ✓ ✓ ✓ a Ø Ø Ø
MA Kingston ✓ a ✓ ✓ ✓ Ø Ø Ø
Key: ✓ – Present
Ø – Not a member
a – Apologies tendered
◊ – Appointed 14 November 2003
Remuneration policy and share incentive scheme
The group’s remuneration policy is to attract, retain and
incentivise management and personnel of the highest
calibre.
Executive directors, senior management and middle
management are eligible to participate in the group’s share
incentive scheme, which is designed to enable them to
participate in the growth which they helped to create for the
shareholders. Options are allocated at the market price ruling
at the date the option is granted, vest after stipulated periods,
and are exercisable up to a maximum of ten years from the
date of issue. Non-executive directors are not entitled to
options in terms of the group’s share option scheme.
Organisational integrity and ethics
The board believes that the group maintains a high standard
of ethical behaviour, which is effectively enforced throughout
the organisation by the board, executive and operational
management. The Chief Executive Officer has overall
responsibility for ethical behaviour within the group and
management throughout the organisation is responsible for
ensuring that the various operations are run ethically. The
audit and risk management committee also oversee the
overall standard of ethical behaviour.
The group has a code of ethics, which was ado
board in February 2003 and was distrib
employees in the form of a "pocket guide". A
are required to comply with the letter and spirit
by observing the highest ethical standards an
ensure that all business practices are cond
manner which is beyond reproach.
No director, officer or employee may deal eithe
indirectly in the group’s shares on the basis of pr
information or during any closed period. Closed
one month prior to interim and year-end and up
of announcement of interim and year-end financ
well as any other period during which the grou
under a cautionary announcement.
The group has a zero-tolerance approach
behaviour. Any employee found to be acting u
subject to disciplinary proceedings, which c
dismissal.
With effect 1 May 2003 the group implemen
hotline.
The board has no reason to believe that there h
material non-adherence to the code of ethics.
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25 Astral Foods A
management of identified risk issues.
The board has established a process that will regularly
evaluate the effectiveness of the risk management
processes throughout the group. The group strives to
identify, evaluate and manage all significant business and
financial risks. The board believes its focus on risk issues,
including those relating to information technology and
information systems, is appropriate for the requirements
and nature of the group and that the group has an adequate
system of internal control in place to mitigate significant
risks identified to an acceptable level. The systems of
internal control in place within the group also provide the
board with satisfaction in relation to the group’s operational
sustainability, the reliability of its reporting, safeguarding of
its assets, its behaviour towards all stakeholders and proper
planning for the mitigation of the identified risks.
In addition, the group also promotes ongoing commitment
to risk management and control by participating in
externally organised risk management and safety
programmess such as ISO 9001/2000, Good
Manufacturing Processes (GMP) and Hazard Analysis and
Critical Control Points (HACCP) at its various operations.
Meadow Feeds Randfontein recently became the first
animal feed mill in the southern hemisphere to be certified
by an international certification body for ISO 9001/2000,
GMP and HACCP. These quality systems are recognised
locally and internationally and will greatly assist our export
clients and also allow others to become exporters.
Meadow Feeds will continue to implement these integrated
quality systems at its other feed mills.
The risk management processes and systems of internal
control have been evaluated for the year under review and
up to the date of the approval of the annual report and
financial statements. The board also believes that it has
reasonable, but not absolute, assurance with regard to the
effectiveness and efficiency of the group’s operations,
protection of its assets and information, and regulatory and
legal compliance.
has unrestricted access to the chairman of the board,
chairman of the audit and risk management committee and
the Chief Executive Officer.
The scope of the internal audit function is to determine if the
group’s risk management, internal control and governance
processes are adequate, monthly reporting is accurate and
internal policies and approval frameworks are adhered to.
The audit and risk management committee approved the
annual internal audit plan.
External audit
The audit and risk management committee recommends to
the board the appointment of external auditors. The audit
and risk management committee also considers the
independence of the external auditors, and has set
principles for the use of external auditors to provide non-
audit services. Consultation and co-operation between
external auditors and internal auditors is encouraged by the
board.
Management reporting
The group has comprehensive management reporting
disciplines, which include the preparation of annual strategic
plans and budgets by all operations. Group strategic plans
and budgets are approved by the board. Results and the
financial status of operations are reported monthly against
approved budgets and compared to the previous year.
Working capital requirements and borrowing levels are
monitored on an ongoing basis and corrective or remedial
action taken as appropriate.
Communication
The board has ensured that communication with relevant
stakeholders has been both open and prompt throughout
the group. The group will continue communicating with its
stakeholders on a balanced, transparent and open basis.
The board believes that material matters of significant
interest and concern to shareholders and other
stakeholders are addressed in the company’s public
disclosure and communication. In this regard, the board
ensures that the group provides adequate transparency on
all pertinent financial and non-financial matters.
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Astral Foods Annual Report 2003
demonstrable changes and benefits resulting from the
adoption and implementation of such practices, and the
steps taken to ensure adherence in this area of business
activity. The board will also ensure that the non-financial
aspects of operations are subject to external validation in
the group’s annual report when appropriate.
Human capital development The board is committed to a
value system that strives towards excellence. To this end
the group is introducing programmes aimed at enabling it to
become a world-class organisation and preferred employer.
The group’s vision is therefore, to attract, develop and retain
individuals with relevant competencies to achieve the
group’s goals.
As a reinforcement of the group’s commitment to improving
productivity, the "one team" philosophy and
uncompromising professional approach to business, the
group continued its 20 Keys workplace improvement
programme. All employees who participate in the
programme receive training, which empowers them to apply
these best practices.
In addition, the group also has a study loan policy providing
employees with financial assistance to further their
academic qualifications in line with current or future job
requirements.
Employee participation The group has a variety of
participative structures to deal with issues that affect
employees directly and materially. These include structures
to drive productivity improvements, safety committees and
other participative forums. The group is committed to
creating a working environment in which all employees are
encouraged to become involved in its affairs and to obtain a
sound understanding of its activities. This is achieved
opportunities for all its employees. Measures ar
training programmes to be implemented
development plans have been submitted to
Sector Education and Training Authority
emphasise the development of our human reso
Training and education of employees occur on a
structured basis and are aimed at building
capital across the group and creating equal o
for all. The group successfully claimed back a
of its contributions paid over to the rele
Education and Training Authority.
The group has a five-year plan to address imba
past. Employment equity committees within
operations meet regularly to ensure that employ
and business plans are monitored and impleme
The geographical distribution of the group p
group with a richly diverse workforce and the gr
on recruiting local people into its operations.
Social impact The group recognises the
involved in social upliftment programmes
contributed towards several initiatives, including
1. Adult basic education and training (ABET)
2. AIDS awareness programmes and training
3. Various schools and old age homes are sup
4. Feed donated to drought stricken areas
HIV/AIDS The board recognises the impact th
may have on both its workforce and client base
related issues have been addressed at operatio
May 2003 the group also adopted a formal HIV
in order to address and manage the potenti
HIV/AIDS on the group and its stakeholders.
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27 Astral Foods A
Limit the number of new infections among employees
and their families;
– Minimise the spread of the disease and its impact within
the group and the local community;
– Provide counselling and support services to employees
living with HIV/AIDS so as to improve the overall health of
all employees;
– Ensure that the rights of employees with HIV/AIDS are
protected and respected;
– Provide guidelines on managing the disease in the
workplace; and
– Seek to change the official standpoint of denial in order to
make it a reportable disease like tuberculosis.
The board acknowledges the need to develop a corporate
understanding of the challenges it faces in addressing
HIV/AIDS. The HIV/AIDS programme is driven by senior
management and progress reported annually to the human
resources committee.
Health and safety The group is committed to ensure a
safe, healthy and clean environment for all employees. In
order to ensure this, all operations are subjected to an
occupational health and safety audit annually.
Environmental impact Environmental awareness is an
integral element of the group’s operations and protection of
the environment is essential for the long-term survival of the
group. The group is therefore committed to the continuous
improvement of environmental performance at both a
corporate and an operational level. Our environmental
obligations include full compliance with current
environmental and regulatory requirements. Environmental
performance across the group continued to be sound,
were recorded during the year under review.
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Astral Foods Annual Report 2003
Headline earnings R 000 208 257 140 032 116 523 9
Balance sheet informationTotal assets R'000 1 300 560 1 371 755 1 019 879 98
Total shareholders' funds R'000 608 226 466 612 366 066 26
Total liabilities R'000 710 708 922 169 661 253 72
Net assets R'000 645 489 668 891 511 494 54
Profitability and asset managementReturn on total assets % 24,0 14,8 17,0
Return on equity % 34,8 30,0 31,2
Return on net assets % 50,7 32,8 39,7
Net asset turn times 6,1 5,5 5,5
Solvency and liquidityTotal assets to total liabilities % 183,0 148,8 154,2
Total liabilities to total assets % 54,7 67,2 64,8
Gross debt to total assets % 0,7 9,6 10,9
Gross debt to equity % 1,5 28,1 30,4
Net debt to equity % – 22,4 26,3
Net interest cover times 21,5 9,9 5,8
Cash interest cover times 26,0 12,6 7,1
Current ratio ratio 1,3 1,3 1,4
Cash flow to total debt % – 185,4 232,5
Shareholders' ratiosBasic earnings per share cents 487,8 322,8 265,9
Headline earnings per share cents 487,2 326,3 271,5
Dividend per share cents 168,0 108,0 90,0
Dividend cover times 2,9 3,0 3,0
Net asset value per share cents 1 418,3 1 078,7 852,7
Economic value added R'000 118 500 33 385 55 916 3
Stock exchange statisticsMarket value per share
– Upon listing cents – – 775
– At year end cents 2 395 1 310 1 185
– Highest cents 2 400 1 555 1 220
– Lowest cents 1 300 1 000 760
Closing dividend yield % 5,0 8,2 7,6
Closing earnings yield % 15,2 24,9 22,9
Closing price/earnings ratio times 6,5 4,0 4,4
Number of shares issued* '000 42 867 42 867 42 924
Number of transactions 2 793 4 760 5 564
Number of shares traded '000 15 158 20 178 32 663
Value of shares traded R'000 269 986 248 502 304 171
Closing market capitalisation R'000 1 026 659 561 555 508 649
*Refer to note 17 of the financial statements for the number of shares effectively in issue resulting from share buy-back.
Brought to you by Global Reports
29 Astral Foods Annual Re
Ratio of current assets excluding cash and cash equ
to current liabilities excluding short-term borrowings.
(Gives an indication of the ability to settle short-term lia
Cash flow to total debt
Cash generated from operations as percentage
interest-bearing liabilities.
(Indicates the ability to service total debt.)
Basic earnings per share
Net profit for the year divided by the weighted average
of ordinary shares in issue during the year.
Headline earnings per share
Headline earnings divided by the weighted average nu
ordinary shares in issue during the year.
Dividend cover
Headline earnings per share divided by dividend per s
Net asset value per share
Ordinary shareholders' equity divided by the nu
ordinary shares in issue at the end of the financial yea
Economic value added (EVA)
The difference between the net operating profit a
(nopat) as a percentage of net assets and the w
average cost of capital (wacc) percentage, multiplie
net assets. Income from and investment in assoc
included in nopat and net assets respectively.
(Measures the wealth created in excess of the cost o
invested in the business)
Closing dividend yield
Dividends per share as a percentage of market value p
at year end.
Closing earnings yield
Headline earnings per share as a percentage of mark
per share at year end.
Closing price/earnings ratio
Market value per share divided by headline earnings p
at year end.
Total tangible assets less total liabilities excluding cash and
cash equivalents, borrowings, normal and deferred tax,
shareholders for dividends and the carrying value of
investments.
(Indicates the level of net assets utilised.)
Return on total assets
Operating profit less finance costs as a percentage of total
tangible assets.
(Measures the effectiveness with which the total assets were
uitilised.)
Return on equity
Net profit attributable to ordinary shareholders as a
percentage of ordinary shareholders' interest.
(Measures the earning power of the suppliers of share capital.)
Return on net assets
Operating profit before interest and taxation as a percentage
of net assets.
(Measures the earning capacity of net assets.)
Net asset turn
Revenue divided by net assets.
Total assets to total liabilities
(Indicates to which degree liabilities are covered by assets.)
Total liabilities to total assets
(Measures the percentage of total funds supplied by creditors.)
Gross debt/equity ratio
Interest-bearing liabilities to total shareholders’ interest.
(Indicates to which degree total debt is covered by
shareholders' funds.)
Net debt/equity ratio
Interest-bearing liabilities less cash and cash equivalents to
total shareholders' interest.
(Indicates to which degree net debt is covered by
shareholders' funds.)
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Astral Foods Annual Report 2003
Income from investments – 0,0 4 823
Total value added 717 598 100,0 553 162
Value distributed
To labour 312 306 43,5 261 816
To government 111 107 15,5 70 454
Normal and deferred tax 102 076 62 061
Regional Service Council levies 7 177 6 604
Skills development levies 1 854 1 789
To providers of capital 66 348 9,2 65 510
Dividends to shareholders 51 130 43 353
Interest on borrowings 15 218 22 157
Total distributions 489 761 68,3 397 780
Income retained in the business 227 837 31,7 155 382
Depreciation 68 744 58 483
Retained profit for the year 157 385 95 178
Outside shareholders' interest in subsidiaries 1 708 1 721
Total value distributed and reinvested 717 598 100,0 553 162
Sales per permanent employee 727 756
Value added per permanent employee 132 113
Employee cost per permanent employee 58 54
Average number of employees Number Number
Management 207 169
Other employees 5 223 4 715
Total permanent employees 5 430 4 884
Contracted labour 617 355
Total 6 047 5 239
2003 2002
Labour 47%
Reinvested 28%
Government 13%
Providers of capita
Labour 44%
Reinvested 32%
Government 15%
Providers of capital 9%
Brought to you by Global Reports
31 Astral Foods Annual Re
(PO Box 1053, Johannesburg 2000)
SPONSOR
HSBC Investment Services (Africa) (Pty) Limited
HSBC Place
6 – 9 Riviera Road
Houghton 2198
LEGAL ADVISORS
Edward Nathan & Friedland (Pty) Limited
4th Floor
The Forum
2 Maude Street, Sandown
Sandton 2196
(PO Box 783347, Sandown 2146)
POSTAL ADDRESS
Postnet suite 329
Private bag X10
Elarduspark 0047
Telephone (012) 347-5077/8
Telefax (012) 347-5308
e-mail: [email protected]
WEBSITE ADDRESS
http://www.astralfoods.com
CORPORATE OFFICE
Group Financial Manager: D D Ferreira
Group Human Resources Manager: L W Hansen
Group Internal Audit Manager: A W Kruger
Assistant Company Secretary: S Vally-Kara
SENIOR MANAGEMENT
ANIMAL FEED
Managing Director – Meadow Northern Region: D G Hugo
Managing Director – Meadow Cape Region: L J Swanson
Managing Director – Meadow KwaZulu Natal Region: J D G Bestel
Managing Director – NuTec SA: A T MacGillivray
General Manager – Central Analytical Laboratories: D S Hattingh
General Manager – National Veterinary Supplies: G de Wet
Poultry
Managing Director – Earlybird Farm: C A du Toit
Managing Director – County Fair Foods: T Delport
Managing Director – National Chicks: M C van Deventer
Managing Director – Ross Poultry Breeders and
Elite Breeding Farms: D R Redpath
Brought to you by Global Reports
Accounting Policies 39
Income Statement 44
Balance Sheet 45
Statement of Changes in Equity 46
Cash Flow Statement 47
Notes to the Cash Flow Statement 48
Notes to the Annual Financial Statements 50
MEADOW RECENTLY LAUNCHED A GAME FEED RANGE OF
PRODUCTS.
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33 Astral Foods Annual Re
14 November 2003
CERTIFICATE BY COMPANY SECRETARY
In my opinion as company secretary, I hereby confirm, in terms of the Companies Act, 1973, that for the yea
30 September 2003, the company has lodged with the Registrar of Companies all such returns as are required of a public c
in terms of this Act and that all such returns are true, correct and up to date.
T PRITCHARD
Company Secretary
Pretoria
14 November 2003
RESPONSIBILITY FOR ANNUAL FINANCIAL STATEMENTS
The directors are responsible for the preparation, integrity and fair presentation of the financial statements of Astral Foods
and its subsidiaries. The financial statements presented on pages 35 to 66 have been prepared in accordance with Statem
Generally Accepted Accounting Practice in South Africa, and include amounts based on judgments and estimates m
management. The directors also prepared the other information included in the annual report and are responsible for
accuracy and its consistency with the financial statements.
The going concern basis has been adopted in preparing the financial statements. The directors have no reason to believe
group or any company within the group will not be going concerns in the foreseeable future based on forecasts and availa
resources. These financial statements support the viability of the company and the group.
The financial statements have been audited by the independent accounting firm, PricewaterhouseCoopers Incorporated, wh
given unrestricted access to all financial records and related data, including minutes of all meetings of shareholders, the
directors and committees of the board. The directors believe that all representations made by them to the independent
during their audit are valid and appropriate.
Brought to you by Global Reports
Astral Foods Annual Report 2003
• examining, on a test basis, evidence supporting the amounts and disclosures in the annual financial statements;
• assessing the accounting principles used and significant estimates made by management; and
• evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
Audit opinion
In our opinion, the abovementioned annual financial statements fairly present, in all material respects, the financial positio
company and of the group at 30 September 2003, and the results of their operations and cash flows for the year then e
accordance with Statements of South African Generally Accepted Accounting Practice and in the manner required by the Co
Act in South Africa.
PRICEWATERHOUSECOOPERS INCORPORATED
Chartered Accountants (SA)
Registered Accountants and Auditors
Johannesburg
14 November 2003
Brought to you by Global Reports
35 Astral Foods Annual Re
For a review of the year's results, see the financial director's review on page 20.
A segmental analysis of the revenue, operating profit, assets and liabilities is set out on page 38 of the annual
statements.
The Bulkop feedmill was acquired with effect from 1 August 2003 at a total cost of R4 766 000. The effect of this ac
on the group was the consolidation of the following into the group's financial statements at 30 September 2003:
R'000
Revenue 13 400
Operating profit 580
Non-current assets 5 056
Current assets 12 788
Current liabilities 8 830
3. Share capital
Detail of the share capital is reflected under note 17 of the financial statements.
In terms of a share buy-back programme 605 877 shares were acquired by a subsidiary of Astral Foods Limited at a t
of R12 005 000.
4. Subsidiaries, joint ventures and associates
Details of the subsidiaries, joint ventures and associates of Astral Foods Limited are set out in notes 28, 27 and 12 res
of the annual financial statements.
The attributable interest of the company in the profits and losses of its subsidiaries, joint ventures and associates for
ended 30 September is as follows:
2003
R'000
Subsidiaries
Total profit after tax 164 484 12
Total loss 3 724
Joint ventures
Total profit after tax 53 588 2
Associated company
Total profit after tax –
5. Dividends
The following ordinary dividends were declared (net of share buy-back):
Interim dividend of 58 cents per share (2002: 47 cents per share) R24 807 163 R20 17
Final dividend of 110 cents per share (2002: 61 cents per share) R46 486 993 R26 14
Total dividend of 168 cents per share (2002: 108 cents per share) R71 294 156 R46 32
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Astral Foods Annual Report 2003
on page 35 for details.
No material contracts involving directors' interest were entered into in the year. A register on other directorships and int
disclosed and circulated at every board meeting.
8. Resolutions
No special resolutions, the nature of which might be significant to members in their appreciation of the state of affai
group, were passed by any subsidiary companies during the period covered by this report.
9. Share incentive scheme
The number of shares originally put under the control of the directors by the shareholders for purposes of the co
employee share incentive scheme was limited to 10% of the issued share capital of Astral Foods Limited from time to ti
directors have decided for the time being to limit this to about 7,5% of the issued shares.
At 30 September 2003, options in respect of 3 316 100 shares had been granted.
Details of the dates and prices at which the options were granted are given in note 17 to the financial statements.
10. Shareholders
Details of the shareholders are set out on page 67 of the annual financial statements.
11. Events subsequent to balance sheet date
No events took place between year-end and the date of the report that would have a material effect on the financial sta
as disclosed. There has also been no material change in the financial or trading position of the company and its sub
between year-end and the date of this report.
12. Litigation
The board is not aware of any legal or arbitration proceedings pending or threatening that may have or have had a mater
on the group’s financial position.
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37 Astral Foods Annual Re
M A Kingston 990 525 254 131 1 900
T Pritchard # 798 425 163 172 1 558
6 499
Non-executive directors' fees
For services as directors
J L van den Berg 180
J J Geldenhuys 100
E M Groeneweg 100
C G van Veyeren 90
470
Total paid to directors by the company and its subsidiaries 6 969
# Service contracts which expire at 31 December 2003 were entered into in order to retain the services of the directors for
group.
Share incentive scheme interests
Exercise Number o
price per options outstan
Date granted share 2003
N C Wentzel 3 July 2001 R 7,75 1 022 500 1 02
M A Kingston 5 July 2001 R 7,75 100 000 10
T Pritchard 3 July 2001 R 7,75 408 800 40
1 531 300 1 53
None of the non-executive directors have share incentive scheme interests.
One third of the options is exercisable per year after each of the third, fourth and fifth year from date of granting the option.
Any balance not exercised after ten years from date of granting the option will lapse.
Issued share capital interest
Directly held Indirectly h
2003 2002 2003
No of shares No of shares No of shares No of
Beneficial interests
Non-executive directors
J L van den Berg 50 000 20 000 –
E M Groeneweg 2 645 2 645 218
Executive directors
N C Wentzel – – 10 000
52 645 22 645 10 218
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Astral Foods Annual Report 2003
, , ,
Intergroup revenue (901,9) (717,9)
3 947,0 3 692,1 327,5
Assets Liabilities
Animal Feed – South Africa 410,3 579,2 327,4
Animal Feed – Other Africa 39,9 65,5 14,8
Poultry – South Africa 875,9 820,4 394,2
Poultry – Other Africa 25,0 – 6,5
Set-off of intergroup balances (32,2) (76,3) (32,2)
1 318,9 1 388,8 710,7
Capital expenditure Depreciation
Animal Feed – South Africa 38,6 30,2 16,7
Animal Feed – Other Africa 3,9 1,4 1,7
Poultry – South Africa 37,9 75,2 47,0
Poultry – Other Africa – – 1,3
80,4 106,8 66,7
Revenue
3000
2500
2000
1500
1000
500
0
Animal FeedsSouth Africa
Animal FeedsAfrica
PoultrySouth Africa
Operating profit
200
150
100
50
0
Animal FeedsSouth Africa
Animal FeedsAfrica
PoultrySouth A
2002 2
R m
illio
n
R m
illio
n
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39 Astral Foods Annual Re
Intergroup transactions, balances and unrealised surpluses and deficits on transactions between group companies ha
eliminated. The results of subsidiaries acquired or disposed of during the year are included in the consolidated income st
from the effective date of the acquisition or up to the effective date of the disposal, as appropriate. The purchase m
accounting is used to account for the acquisition of subsidiaries. The cost of an acquisition is measured as the fair valu
assets given up. shares issued or liabilities undertaken at the date of acquisition, plus cost directly attributable to the acq
The excess of the cost over the fair value of the net assets is recorded as goodwill.
3. Interest in associated companies
Associated companies are those entities which are not subsidiaries, in which the group exercise significant influence, b
it does not control. These investments in associated undertakings are accounted for by the equity method of accountin
group annual financial statements. Provisions are recorded for long-term impairment in value.
Equity accounting involves recognising in the income statement the group’s share of the associates’ profit or loss for t
The group’s interest in associates is carried in the balance sheet at an amount that reflects its share of the net asse
associate and includes goodwill on the acquisition.
The company accounts for the investment in associated companies at cost.
4. Interest in joint ventures
Joint ventures are those entities that are not subsidiaries and in which the group exercises joint control. Joint vent
accounted for on the proportionate consolidation method. Under this method the group includes its share of the joint v
individual income and expenses, assets and liabilities in the relevant components of the financial statements on a lin
basis.
5. Foreign currencies
Subsidiaries
Income statements of foreign entities are translated into the group’s reporting currency at average exchange rates for
and the balance sheets are translated at the year-end exchange rates ruling on 30 September. Exchange difference
from the translation of the net investment in foreign subsidiaries and associated undertakings and of borrowings that hed
investments, are taken to “Translation reserve” in shareholders' equity. On disposal of the foreign entity, such tra
differences are recognised in the income statement as part of the gain or loss of sale.
The local currency financial statements of foreign entities operating in hyper-inflationary economies are restate
appropriate indices to current values at the balance sheet date before translation into the group’s reporting currency.
Foreign currency transactions in group companies are accounted for at the exchange rates prevailing at the dat
transactions. Gains and losses resulting from the settlement of such transactions and from the translation of monetar
and liabilities denominated in foreign currencies, are recognised in the income statement. Such balances are translated
end exchange rates.
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Astral Foods Annual Report 2003
6. Financial instruments
The group adopted AC133: Financial instruments: recognition and measurement at 1 October 2001.
Measurement
Financial instruments are initially measured at cost, which includes transaction costs. Subsequent to initial recognitio
instruments are measured as set out below:
Trade receivables are carried at original invoice amount less provision made for impairment of these receivables. An
of the impairment provision is based on a review of all outstanding amounts at the year-end. The impairment provisio
difference between the carrying amount and the recoverable amount, being the present value of expected cas
discounted at the market rate of similar borrowers. Bad debts are written off during the year in which they are identifie
Cash and cash equivalents are carried in the balance sheet at cost. For the purposes of the cash flow statement, c
cash equivalents comprise cash in hand, deposits held on call with banks, and investments in money market instrum
the balance sheet, bank overdrafts are included in borrowings in current liabilities.
Trade and other liabilities originated by the group are stated at amortised cost.
Borrowings are reported at amortised cost, namely original debt less principal repayments.
Investments in associate companies and subsidiaries are shown at cost in the holding company's financial stat
Provisions are made for a permanent diminution in the value. Other investments are carried at amortised cost less impa
Derivative financial instruments
Changes in the fair value of derivatives that are designated and qualify as cash flow hedges and that are highly effec
recognised in equity. Where the forecasted transaction or firm commitment results in the recognition of an asset or of a
the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of
of the asset or liability. Otherwise, amounts deferred in equity are transferred to the income statement and classified as
or expense in the same periods during which the hedged firm commitment or forecasted transactions affects the
statement (for example, when the forecasted sales take place).
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accountin
AC 133, any cumulative gain or loss existing in equity at that time remains in equity and is recognised, when the comm
forecasted transaction ultimately is recognised in the income statement. However, if a committed or forecasted trans
no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the
statement.
The fair value of publicly traded derivatives and trading and available-for-sale securities is based on quoted market price
balance sheet date. The fair value of forward foreign exchange contracts is determined using forward exchange market
the balance sheet date.
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41 Astral Foods Annual Re
as an intangible asset and is amortised using the straight line method over its estimated useful life, generally over 10 ye
carrying amount of goodwill is reviewed annually and written down for impairment where it is considered necessary.
Where the net asset value of an acquired subsidiary/associated undertaking at date of acquisition exceeds the cost o
acquired, the excess is treated as a non-distributable reserve.
8. Research, development and related expenditure
Research expenditure is charged to operating income in the year in which it is incurred. Development expenditure
charged to operating income in the year in which it is incurred, unless the viability of the future product is assured, in wh
it is capitalised and amortised from the commencement of commercial production of the product. Technology, royalty a
costs, which are disclosed separately from research and development expenditure, are charged to operating inc
incurred. These costs include technical licence fees and royalties paid to third parties where the payments are consider
a contribution to the research and development activities of those parties.
9. Property, plant and equipment
All property, plant and equipment is initially recorded at cost and subsequently shown at historical cost less depreciation
subject to finance lease agreements are capitalised at their fair value and the corresponding liabilities raised. Deprec
calculated on the straight-line method to write off the cost of each asset to their residual values over their estimated u
as follows:
Buildings 5%
Plant, machinery and equipment 20%
Vehicles 20 – 25%
Land is not depreciated, as it is deemed to have an indefinite life.
The carrying values of property, plant and equipment are reviewed for impairment losses whenever events or cha
circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the am
which the carrying amount of the asset exceeds its recoverable amount which is the higher of an asset's net selling p
value in use.
Interest costs on borrowings to finance the construction of qualifying property, plant and equipment are capitalised, du
period of time that is required to complete and prepare the property for its intended use, as part of the cost of the ass
10. Inventories
Inventories are stated at the lower of cost or net realisable value. Cost is determined by the first-in, first-out (FIFO) meth
cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs and related pro
overheads, but excludes interest expense. Net realisable value is the estimate of the selling price in the ordinary c
business, less the costs of completion and selling expenses.
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Astral Foods Annual Report 2003
employees. A provision is made for the estimated liability for annual leave and long service awards as a result of
rendered by employees up to the balance sheet date.
A provision is raised for profit-sharing bonuses where an agreement enforceable by law exists and an accurate estima
liability can be made.
Long-term employee benefits retirement obligations
It is the group's policy to provide retirement benefits for its employees. A number of defined contribution and defined
pension schemes are operated by the group in accordance with local regulations. The contributions by group companie
obligations for the payment of retirement benefits are charged against income in the year they become payable. Where
shortfalls arise in defined benefit funds they are met by group companies through lump sum payments or increase
contributions. The full accrued liability for post retirement medical aid obligations are recognised. Valuations of these ob
are carried out by independent qualified actuaries.
Equity compensation benefits
Share options are granted to management and key employees. Options are granted at the market price of the share
date of grant and are exercisable at that price. The share option scheme allows one third of the share options to be e
per year after each of the third, fourth and fifth year from date of granting the option. A compensation cost is not recog
these financial statements for the fair value of options granted.
13. Deferred income tax
Deferred income tax is provided, using the liability method, for all temporary differences arising between the tax bases o
and liabilities and their carrying values for financial reporting purposes. Currently enacted tax rates are used to de
deferred income tax. The principal temporary differences arise from depreciation on property, plant and equipment, reva
of certain non-current assets, provisions for pensions and other post-retirement benefits and tax losses carried
Deferred tax assets relating to the carry forward of unused tax losses are recognised to the extent that it is probable th
taxable profit will be available against which the unused tax losses can be utilised.
Provision for taxes, mainly withholding taxes, which could arise on the remittance of retained earnings principally re
foreign subsidiaries is only made when there is a current intention to remit such earnings.
14. Revenue recognition
Revenue comprises the invoiced value for the sale of goods net of value-added tax, rebates and discounts, and after eli
sales within the group. Revenue from the sale of goods is recognised when significant risks and rewards of ownersh
goods are transferred to the buyer.
Other revenues earned by the group are recognised on the following basis:
– interest income: as it accrues unless collectability is doubtful
– dividend income: when the shareholder’s right to receive payment is established.
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43 Astral Foods Annual Re
period of the lease.
16. Borrowing costs
Borrowing costs are charged to the income statement, except as noted in the policy for property, plant and equipmen
17. Segmental reporting
Business segments provide products or services that are subject to risks and returns that are different from those
business segments.
The group operates in the poultry and animal feed businesses. Income and expenditure directly related to segm
allocated specifically to the segments.
18. Dividends
Dividends are recorded in the annual financial statements in the period in which they are approved by the directors.
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Astral Foods Annual Report 2003
Distribution costs (122 768) (107 760) –
Marketing expenditure (36 913) (29 984) –
Other operating income 27 717 17 152 –
Operating profit 2 327 517 219 647 (1 341)
Share of results of associates 12 – 4 823 –
Dividends received from subsidiary – – 77 722 3
Net finance costs 5 (15 218) (22 157) (99)
Profit before tax 312 299 202 313 76 282 3
Taxation 6 (102 076) (62 061) (686)
Profit from ordinary activities 210 223 140 252 75 596 3
Minority interests (1 708) (1 721) –
Net profit for the year 208 515 138 531 75 596 3
Headline earnings for the year 7 208 257 140 032
Basic earnings per share (cents) 7
Earnings per share 487,8 322,8
Headline earnings per share 487,2 326,3
Diluted earnings per share (cents) 7
Earnings per share 457,0 307,7
Headline earnings per share 456,1 310,9
Dividends per share (cents) 8 168,0 108,0
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45 Astral Foods Annual Re
Interests in subsidiaries and joint ventures 11 – – 313 864 28
Investment in associate 12 – – –
Other investments 13 7 526 4 159 –
Deferred tax 19 2 857 – 2 857
504 753 490 180 316 721 28
Current assets
Inventories 14 274 426 358 089 –
Receivables and prepayments 15 471 675 512 038 49
Cash and cash equivalents 16 68 080 28 474 1 996
814 181 898 601 2 045
Total assets 1 318 934 1 388 781 318 766 29
Equity and liabilities
Capital and reserves
Ordinary shares 17 423 429 429
Share premium 17 261 032 264 777 264 777 26
Reserves 337 940 197 211 53 062 2
599 395 462 417 318 268 29
Minority interest 8 831 4 195 –
Total equity 608 226 466 612 318 268 29
Non-current liabilities
Interest-bearing borrowings 18 2 742 14 856 –
Deferred tax liabilities 19 74 916 80 012 –
Retirement benefit obligations 20 51 699 45 689 –
129 357 140 557 –
Current liabilities
Trade and other payables 21 524 909 624 542 12
Current tax liabilities 49 659 40 624 –
Current portion of borrowings 18 6 297 116 446 –
Shareholders for dividend 486 – 486
581 351 781 612 498
Total liabilities 710 708 922 169 498
Total equity and liabilities 1 318 934 1 388 781 318 766 29
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Astral Foods Annual Report 2003
– Shares issued – 483 – –
– Buy-back of shares – (1 311) – –
– Share issue expenses – (4) – –
Changes not recognised in
income statement – – 2 051 –
– Currency differences arising in year – – 2 223 –
– Gain on cash flow hedge – – (172) –
Net profit – – – 138 531 13
Dividends declared – – – (43 353) (4
Balance at 30 September 2002 429 264 777 3 363 193 848 46
Changes during the year:
Buy-back of shares 17 (6) (3 745) – (8 254) (1
Changes not recognised in
income statement – – (8 402) –
– Currency differences arising in year – – (7 547) –
– Disposal of subsidiary – – (840) –
– Minority interest in other reserves
movement – – (108) –
– Cash flow hedge realised – – 93 –
Net profit – – – 208 515 20
Dividends declared – – – (51 130) (5
Balance at 30 September 2003 423 261 032 (5 039) 342 979 59
Company
Balance at 30 September 2001 429 265 609 – 40 471 30
Changes during the year:
Net movement from odd-lot offer – (832) – –
Net profit – – – 31 359 3
Dividends declared – – – (43 353) (4
Balance at 30 September 2002 429 264 777 – 28 477 29
Changes during the year:
Net profit – – – 75 596 7
Dividends declared – – – (51 011) (5
Balance at 30 September 2003 429 264 777 – 53 062 31
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47 Astral Foods Annual Re
Cash generated from/(utilised in) operations 392 180 243 479 5 378
Interest received 5 510 6 517 –
Interest paid (20 728) (28 674) (99)
Dividends received – – 77 722 3
Tax paid C (90 415) (50 910) (3 627)
Cash available from operations 286 547 170 412 79 374 2
Dividends paid D (50 644) (43 376) (50 525) (
Net cash inflow from/(utilised in) operating activities 235 903 127 036 28 849 (
Cash flows from investing activities
Purchase of property, plant and equipment (47 382) (54 137) –
Proceeds on disposal of property, plant and equipment 4 877 7 078 –
Cost of acquisition of businesses E (4 753) (44 659) –
Investment in subsidiaries – – – (
Disposal of subsidiary F (3 118) – –
Research, development and related expenditure (4 593) (8 436) –
Loans (advanced)/repaid (6 095) 1 501 –
Proceeds on disposal of an interest in a subsidiary 5 250 – –
Loans to subsidiaries – – (27 440) 6
Net cash (outflow)/inflow from investing activities (55 814) (98 653) (27 440) 2
Net cash inflow for the year 180 089 28 383 1 409
Cash outflow to financing activities (133 687) (14 710) –
Net movement in share capital from odd-lot offer – (832) –
Buy back of shares (12 005) – –
Decrease in borrowings (121 682) (13 878) –
Loans received 3 058 1 568 –
Proceeds from finance lease liabilities 569 1 677 –
Payment of capital element of long–term borrowings (34 760) (2 411) –
Payment of capital element of finance lease liabilities (1 152) (735) –
Decrease in bank overdrafts (89 397) (13 977) –
Net increase in cash and cash equivalents 46 402 13 673 1 409
Effects of exchange rate changes (6 796) 105 –
Cash and cash equivalents at beginning of year 28 474 14 696 587
Cash and cash equivalents at end of year 68 080 28 474 1 996
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Astral Foods Annual Report 2003
Increase in provision for retirement benefit obligations 6 010 – –
Increase in provision against loans 6 066 2 941 –
Other non–cash flow items (323) (2 092) –
408 014 278 979 (1 341)
Research, development and related expenditure 4 593 8 436 –
Cash operating profit/(loss) 412 607 287 415 (1 341)
B. Changes in working capital
Decrease/(increase) in inventories 77 260 (98 975) –
Decrease/(increase) in receivables and prepayments 40 641 (68 893) 6 892
(Decrease)/increase in trade and other payables (105 330) 176 581 (173)
Total change in working capital 12 571 8 713 6 719
C. Tax paid
Balance payable at beginning of year (40 624) (37 384) (70)
Provision for the year (109 731) (50 089) (3 543)
Disposal/(acquisition) of subsidiaries 545 (4 061) –
Provision relating to pre-acquisition period 9 736 – –
Amounts payable at end of year 49 659 40 624 (14)
Total tax paid (90 415) (50 910) (3 627)
D. Dividends paid
Amounts payable at beginning of year – (23) –
Per statement of changes in equity (51 130) (43 353) (51 011) (4
Amounts payable at end of year 486 – 486
Total dividends paid (50 644) (43 376) (50 525) (4
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49 Astral Foods Annual Re
Deferred tax provision (118) 22 167 –
Trade and other payables 6 788 43 654 –
Tax liabilities – 4 061 –
Borrowings – 33 863 –
Cash and cash equivalents (13) (5 976) –
Net assets acquired (1 418) (65 263) –
Acquisition of outside shareholders’ interests – (2 274) –
Less:
Carrying value of investment in subsidiaries previously
held as investment in associate – 21 963 –
Goodwill on acquisition of subsidiaries (3 348) (3 851) –
Goodwill on acquisition of minorities – (1 210) –
Total purchase consideration for subsidiaries
and minority interests (4 766) (50 635) –
Cash and cash equivalents 13 5 976 –
Cash flow on acquisition, net of cash acquired (4 753) (44 659) –
F. Disposal of subsidiary
Receivables 2 696 – –
Trade and other payables (1 091) – –
Provision for tax (545) – –
Loan account (4 178) – –
Cash and cash equivalents 3 118 – –
Net assets disposed – – –
Cash and cash equivalents (3 118) – –
Cash flow on disposal, net of cash disposed (3 118) – –
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Astral Foods Annual Report 2003
3 947 030 3 692 129 –
Revenue, net of value-added tax, normal
discounts and rebates excludes:
Share of revenue of associated company – 56 852 –
Intergroup revenue 901 913 717 924 –
2. Operating profit
The following items have been charged in arriving
at operating profit:
Auditors' remuneration 2 346 1 966 –
Audit fees 1 986 1 696 –
Management consulting services 286 187 –
Taxation services 5 30 –
Expenses 69 53 –
Fees paid for managerial, secretarial and technical services 6 628 7 323 230
Amortisation of goodwill 2 000 1 200 –
Depreciation on property, plant and equipment 66 744 57 283 –
Land and buildings 15 623 13 310 –
Plant and equipment 44 517 37 441 –
Vehicles 6 224 6 151
Leased assets under finance leases 380 381 –
Profit on disposal of property 532 23 –
Taxation effect – – –
Profit on sale of plant, equipment and vehicles 804 2 069 –
Research and development expenditure 4 593 8 436 –
Profit on sale of interests in subsidiaries 2 726 – –
Foreign exchange (losses)/gains (3 358) 1 147 –
Realised profits on financial instruments and contracts in
respect of procurement not qualifying as effective hedges 18 145 – –
Operating lease payments 20 333 12 295 –
Property 10 115 6 864 –
Plant and machinery 4 048 2 176 –
Vehicles 6 170 3 255 –
Directors' remuneration (note 3) 6 969 5 889 350
Cost of employees (note 4) 305 337 255 927 –
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51 Astral Foods Annual Re
Other benefits 477
Non-executive directors 6 499
Fees 470
Total directors' remuneration 6 969
Less paid by subsidiary (6 619)
350
No share options were granted to the directors of the
company during the year (2002: nil).
Details of the directors’ remuneration is given on page 37.
4. Cost of employees
Wages and salaries 257 735 220 096 –
Termination benefits 3 979 2 294 –
Social security costs 14 025 11 855 –
Pension costs – defined contribution plans 22 650 16 960 –
Pension costs – defined benefit plans 3 416 3 554 –
Post-retirement benefits 3 532 1 168 –
305 337 255 927 –
Average number of employees
– Permanent employees: 5 430 (2002: 4 884)
– Contracted labour: 617 (2002: 355)
5. Finance costs
Bank borrowings 18 445 26 108 99
Finance leases 260 144 –
Loans 1 093 1 495 –
Creditors and other 930 927 –
Interest expenses 20 728 28 674 99
Interest income (5 510) (6 517) –
Net finance cost 15 218 22 157 99
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Astral Foods Annual Report 2003
102 076 60 548 686
Share of tax of associates (note 12) – 1 513 –
102 076 62 061 686
The tax on the group's profit before tax differs from the
theoretical amount that would arise using the basic
tax rate of South Africa:
Profit before tax 312 299 202 313 76 282 3
Tax calculated at a tax rate of 30% (2002: 30%) 93 690 60 694 22 885
Adjustment to prior year's tax provision (331) (2 060) 481
Effect of different tax rates in other countries (1 357) (287) –
Income not subject to tax (1 212) (735) (23 317)
Expenses not deductible for tax purposes 4 567 4 323 432
Current tax losses not utilised 849 771 –
Utilisation of previous year's tax losses (369) (1 186) –
Secondary tax on companies 6 239 541 892
Tax charge 102 076 62 061 1 373
Further information about deferred tax is presented in note 19.
7. Earnings per share
Basic earnings
Net profit for the year 208 515 138 531
Headline earnings for the year 208 257 140 032
Weighted average number of ordinary shares in
issue (net of share buy-back) 42 742 565 42 916 475
Earnings per share 487,8 322,8
Headline earnings per share 487,2 326,3
Diluted earnings
Net profit used to determine diluted
earnings per share 210 495 142 369
Headline earnings used to determine
diluted earnings per share 210 237 143 870
Weighted average number of ordinary shares
for diluted earnings per share 46 063 665 46 268 075
Weighted average number of ordinary shares in
issue (net of share buy-back) 42 747 565 42 916 475
Adjusted for unexercised share options 3 316 100 3 351 600
Diluted earnings per share 457,0 307,7
Diluted headline earnings per share 456,1 310,9
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53 Astral Foods Annual Re
Amortisation of goodwill 2 000 1 200
Write off of loans 2 048 2 393
Profit on sale of interest in subsidiaries (2 726) –
208 257 140 032
8. Dividends per share
An interim dividend in respect of the year ended 30 September 2003 of 58 cents per share (2002: 47 cents pe
amounting to a total of R24 807 163 (net of share buy-back) (2002: R20 174 280) was declared on 21 May 2003.
A final dividend in respect of the year ended September 2003 of 110 cents per share (2002: 61 cents per share) amo
to a total of R46 486 993 (net of share buy-back) (2002: R26 148 736) was declared on 14 November 2003.
Land and Plant, and Capitalised
buildings equipment Vehicles leased assets
R'000 R'000 R'000 R'000
9. Property, plant and equipment
Group
Balance at 30 September 2001
Cost 254 668 344 810 54 290 1 020 65
Accumulated depreciation (72 147) (204 268) (44 073) (109) (32
Carrying amount 182 521 140 542 10 217 911 33
Changes for the year ended
30 September 2002
Exchange differences 8 2 507 17 –
Additions – Expansion 12 523 37 422 2 595 1 597 5
Additions – Replacement 9 504 40 103 3 534 – 5
Subsidiary acquired 59 055 23 563 5 132 – 8
Disposals (840) (3 541) (539) (553)
Depreciation charge (13 310) (37 441) (6 151) (381) (
Closing carrying amount 249 461 203 155 14 805 1 574 46
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Astral Foods Annual Report 2003
y g
Changes for the year ended
30 September 2003
Exchange differences (52) (1 382) (78)
Additions – Expansion 13 028 33 024 1 061 269 4
Additions – Replacement 5 052 25 835 2 111 – 3
Subsidiary acquired – 1 727 41 –
Disposals (5 177) (1 320) (300) (94)
Depreciation charge (15 623) (44 517) (6 224) (380) (6
Closing carrying amount 246 689 216 522 11 416 1 369 47
Balance at 30 September 2003
Cost 350 548 512 281 67 892 1 918 93
Accumulated depreciation (103 859) (295 759) (56 476) (549) (45
Carrying amount 246 689 216 522 11 416 1 369 47
Details of the individual properties are contained in a register, which is open for inspection by members or their nominee
registered office of the company.
Assets with a book value of R5 815 000 (2002: R47 724 000) are pledged as security for secured borrowings of R6
(2002: R35 608 000) (refer note 18).
Group Compan
2003 2002 2003
R'000 R'000 R'000
10. Intangible assets
At beginning of year 17 026 7 440 –
Goodwill resulting from fair value adjustments to
pre-acquisition net asset value of subsidiaries – 5 725 –
Goodwill resulting from cost being in excess of the
net asset value of subsidiaries acquired 3 348 5 061 –
Amortisation charge (2 000) (1 200) –
At end of year 18 374 17 026 –
Balance at 30 September
Cost 22 814 19 466 –
Accumulated amortisation (4 440) (2 440) –
Carrying amount 18 374 17 026 –
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55 Astral Foods Annual Re
By subsidiaries 90 962 6
By joint ventures 5 500
Total 313 864 28
The amount due by the subsidiaries has been ceded as
security for bank overdrafts.
Details of joint ventures and subsidiaries are given in
notes 27 and 28 respectively.
12. Investment in associate
Unlisted
Opening carrying amount at cost – 19 498 –
Net share of post-acquisition results of associate – 2 465
Share of results before taxation – 4 823
Share of taxation – (1 513)
Share of minority interest – (845)
– 21 963 –
Transferred to investment in subsidiaries – (21 963) – (
Closing carrying amount – – –
Summarised financial information regarding
National Chicks Limited for the six months ended
30 March 2002 is as follows:
Revenue – 162 901
Operating profit – 19 001
Net profit – 8 468
13. Other investments
Unlisted
Loans and advances 7 526 4 159 –
14. Inventories
Raw materials 91 828 166 069 –
Finished goods and merchandise 27 105 34 027 –
Consumable stores 22 693 24 152 –
Livestock and sundries 132 800 133 841 –
274 426 358 089 –
Previous year's inventories with a book value of
R13 485 000 was pledged as security for bank overdrafts.
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Astral Foods Annual Report 2003
471 675 512 038 49
Trade receivables with a book value of
R101 443 000 (2002: R275 625 000)
have been ceded as security for available
bank facilities (refer note 18).
16. Cash and cash equivalents
Cash at hand and in bank 42 080 20 474 1 996
Short-term bank deposits 26 000 8 000 –
68 080 28 474 1 996
17. Ordinary shares and share premium
17.1 Authorised share capital
75 000 000 ordinary shares of 1 cent each
(2002: 75 000 000 ordinary shares of 1 cent each) 750 750 750
17.2 Issued share capital
42 866 780 ordinary shares of 1 cent each 429 429 429
(2002: 42 866 780 ordinary shares of 1 cent each)
605 877 ordinary shares held by subsidiary in holding
company (share buy-back) (6) –
423 429 429
Share premium 261 032 264 777 264 777 26
– Share premium 265 448 265 448 265 448 26
– Share issue expenses (671) (671) (671)
– Premium on shares held by subsidiary
in holding company (share buy-back) (3 745) – –
Total issued share capital and premium 261 455 265 206 265 206 26
All issued shares are fully paid.
Buy-back of shares
In terms of a decision taken by the board of directors, a wholly owned subsidiary of Astral Foods Limited has pu
605 877 shares for R12 004 601 at an average cost of R19,81 per share. The number of shares to be bought
not to exceed 10% of the total number of shares issued.
The shares purchased by the subsidiary will not be cancelled nor will the stock exchange listing of those sh
terminated.
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57 Astral Foods Annual Re
– Number of shares at end of year 42 260 903 42 866 780
17.3 Un-issued share capital Number of shares Number of sh
Number of shares under the control of directors
for the purpose of the Astral Foods Limited
Employee Share Trust 2001 4 292 400 4 292 400 4 292 400 4 29
17.4 Share incentive scheme
The number of shares available to be utilised
for purposes of the scheme, were as follows:
At beginning of year 940 800 928 900 940 800 92
Granted (175 000) (102 600) (175 000) (1
Lapsed 210 500 114 500 210 500 1
At end of year 976 300 940 800 976 300 94
Share options lapsed were in respect of employees
who left the employment of the group.
Number of Exercise
Date options price
Share options were granted to employees at the
following date and exercise price during the year: 22-May-03 175 000 R 15,00
No share options were exercised during the year, and
detail of the options still outstanding at the end of
the year is as follows: 17-Apr-01 2 901 100 R 7,75 2
1-Jul-01 20 000 R11,60
9-Jul-01 87 400 R11,45
1-Sep-01 30 000 R11,65
10-Nov-01 30 000 R 13,55
2-Jan-02 15 000 R 13,70
2-May-02 25 000 R 11,80
13-Aug-02 32 600 R 11,50
22-May-03 175 000 R 15,00
3 316 100 2
The share option scheme allows one third of the share options to be exercised per year after each of the third,
and fifth year from date of granting the option.
A compensation cost is not recognised in these financial statements for the fair value of share options granted.
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Astral Foods Annual Report 2003
Total 6 141 35 608 –
Less: Portion payable within one year (3 399) (20 752) –
2 742 14 856 –
Short-term
Bank overdrafts 2 898 95 694 –
Portion of long–term borrowings payable within one year 3 399 20 752 –
6 297 116 446 –
Total borrowings 9 039 131 302 –
All borrowings are linked to the bank prime overdraft rate.
Liabilities are secured over assets with the following
book values (refer note 9):
Capitalised finance leases 1 493 1 596 –
Secured loans 4 648 46 128 –
The previous year's bank overdrafts of
R74 423 000 were secured over trade receivables
with a book value of R275 625 000.
Maturity of long-term borrowings:
Less than 1 year
Capitalised finance leases 457 416 –
Secured loans 2 942 20 336 –
Between 1 and 5 years
Capitalised finance leases 1 036 1 203 –
Secured loans 1 706 3 498 –
After 5 years
Secured loans – 10 155 –
6 141 35 608 –
Borrowing facilities
The group has the following undrawn borrowing facilities
at floating interest rates: 362 750 313 622 –
Borrowing powers
No limit has been placed in the articles of association on the borrowing powers of the company.
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59 Astral Foods Annual Re
A deferred tax asset has been recognised in respect
of available STC credits.
The movement on the net deferred
tax account is as follows:
At beginning of year 80 012 47 139 –
Exchange differences (180) 247 –
Subsidiary acquired (118) 22 167 –
Deferred tax on STC credit (2 857) – (2 857)
Income statement (credit)/charge (note 6) (4 798) 10 459 –
At end of year 72 059 80 012 (2 857)
Deferred tax assets and liabilities
Deferred tax assets and liabilities are offset when
the income taxes relate to the same fiscal
authority and there is a legal right to offset
at settlement. The following amounts are
shown in the consolidated balance sheet:
Deferred tax asset
STC credit 2 857 – 2 857
Deferred tax liabilities
Accelerated tax depreciation 77 592 79 910 –
Lower tax value for livestock and farming consumables 42 065 42 974 –
Provisions (46 787) (42 048) –
Other temporary differences 2 046 (824) –
74 916 80 012 –
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Astral Foods Annual Report 2003
both defined contribution and defined benefit funds
covering the majority of the employees. The funds are
governed by the Pension Funds Act of 1956. The defined
benefit funds are valued at regular intervals and the financial
positions of the funds are set out below:
The last actuarial valuations were carried out at 1 April
2003. No assets is recognised in respect of surpluses as
the apportionment of surpluses still needs to be calculated
and approved by the Registrar of Pension Funds in terms of
the Pension Fund Second Amendment Act, 39 of 2001.
The next valuation is due in April 2006.
Actuarial valuation of pension fund
Balance at the end of year
Present value of funded obligations (16 626) (6 572)
Fair value of plan assets 23 204 13 796
Net asset 6 578 7 224
Unrecognised asset (6 578) (7 224)
Liability at balance sheet date – –
Actuarial valuation of retirement fund
Balance at the end of year
Present value of funded obligations (17 552) (9 559)
Fair value of plan assets 15 779 10 554
Net (liability)/asset (1 773) 995
Unrecognised asset – (995)
Liability at balance sheet date (1 773) –
The principal actuarial assumptions used for
accounting purposes were:
Discount rate/(investment rate) 12% 12%
Salary inflation 10 – 16% 10%
Pension inflation 8% 10%
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61 Astral Foods Annual Re
The liability recognised in the financial statements
was actuarially valued at 1 April 2003 and the same
actuarial assumptions still apply in assessing the
current liability. The liability was valued using the
projected unit credit method.
Present value of funded obligations 51 699 45 689
Liability at beginning of year 45 689 41 192
Acquisition of subsidiary – 3 418
Current service cost 5 167 –
Notional interest cost 4 773 4 652
Contributions paid (3 930) (3 573)
Liability at end of year 51 699 45 689
Investment return 12% 12%
Healthcare inflation rate 10% 10%
21. Trade and other payables
Trade payables 351 347 442 290 –
Accruals and other payables 173 562 182 252 12
524 909 624 542 12
22. Commitments
Capital commitments
Capital expenditure approved not contracted 6 406 255 –
Capital expenditure contracted but not recognised
in the financial statements: 39 111 7 204 –
The capital commitments will be financed by net cash flow
from operating activities and the utilisation of cash and
borrowings within the accepted gearing profile of the group.
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Astral Foods Annual Report 2003
Not later than 1 year 20 257 19 174 –
Later than I year and not later than 5 years 71 056 66 928 –
Later than 5 years 51 156 54 422 –
142 469 140 524 –
Leases are contracted for periods ranging from
42 to 120 months with no renewal options.
Rental escalations vary from nil to prime
interest rate linked escalations.
Other commitments
The group has contracted its raw-material
requirements from various suppliers for the
2004 financial year in terms of future supply
agreements.
Contracted amounts not recognised in the
balance sheet are as follows: 276 349 509 470 –
The company guaranteed the payment obligations
of its subsidiary, Astral Operations Limited, in respect
of raw material purchases.
23. Contingencies
Two broiler farms were disposed of to an independent third party purchaser during 1997. The institution providing the
to the purchaser has, in terms of a put and call agreement, the right to put the farms to the group in the event of a b
the purchaser of certain conditions. As a result the group has a contingent asset in the form of the call option and a co
liability to the institution providing the finance for the exercise price of the option (being a maximum of R7 700 000).
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63 Astral Foods Annual Re
Maximum number of Exchange rate range 2003
months to settlement date Rx = 1 foreign currency R'000
US dollar 3 8,32 – 7,62 1 168
Euro 1 9,14 – 8,40 347
Pound sterling 1 14,60 – 11,62 1 028
Commodity price risk
This represents the risk the group may suffer financial loss when a fluctuating price contract obligation is entered into
commodity prices increase or when a fixed price agreement is entered into and commodity prices fall. The fair value
commodity positions included in trade and other receivables at 30 September 2003 amounts to R1,2 million and h
accounted for in the income statement.
Interest rate risks
All interest payable on long- and short-term borrowings is at variable rates, which are linked to the bank prime lend
Cash flow exposure from interest rate fluctuations is hedged by entering into interest swap agreements. As the
operating with a small gearing ratio, interest rate risk on borrowings is minimised.
Credit risk
The group's main credit risk is concentrated in the aggregate balance of amounts receivable. Trade receivables comprise
widespread customer base. These risks are controlled by the application of credit limits and credit controlling procedu
largest single credit risk amounts to R98,7 million, however the group does not consider there to be any significant conce
of credit risk that has not been adequately provided for at 30 September.
Liquidity risks
The group's liquidity risk consists mainly of the amount borrowed. The details of borrowings and undrawn facilities are d
in note 18. In terms of the articles of association, the group's borrowing powers are unlimited. The liquidity risk is man
monitoring the daily borrowing levels and by conducting cash flow forecasts at regular intervals.
Fair value of financial instruments
At 30 September 2003 the carrying amounts of cash and short-term deposits, trade receivables, trade payables,
expenses and short-term borrowings approximated their fair values due to the short-term maturities of these ass
liabilities.
Group
2003
R'000
Derivatives have been re-measured to fair value and the impact on
shareholders' equity at 30 September is as follows:
Cash flow hedges –
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Astral Foods Annual Report 2003
Sales to joint ventures 239 044 20
Purchases from joint ventures 101 566 4
Sales of goods to related parties are effected at arm's length.
Outstanding balances at year end:
Included in receivables and prepayments 32 901 1
Included in trade and other payables (3 387)
Cross guarantees
Cross deed of suretyship was given by Astral Foods Limited, Astral Operations Limited, County Fair Holdings (Pty)
County Fair Foods (Pty) Limited, Ross Poultry Breeders (Pty) Limited, National Veterinary Supplies (Pty) Limited and
Analytical Laboratories (Pty) Limited in respect of borrowings.
Directors' remuneration
Details of directors' remuneration are given on page 37. Executive directors are eligible for an annual performance relate
payment linked to appropriate group targets. The structure and payments of bonuses is decided by the human resou
remuneration committee.
Details of share options granted to directors are given on page 37.
Principal joint ventures and subsidiary undertakings
Details of subsidiaries are set out in note 27 and 28 to the financial statements
26. Discontinued operation
The plant and equipment of Meadow Feeds Limited (Malawi) were sold during 2002 and the operation is report
discontinuing operation.
The relevant income statement and balance sheet related information is as follows ;
Group
2003
R'000
Revenue – 4
Operating loss –
Property, plant and equipment –
Current assets(excluding cash) –
Current liabilities –
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65 Astral Foods Annual Re
Elite Breeding Farms – partnership Grand parent breeding and hatching 82
The following amounts represent the group's share of assets and liabilities, revenue and expenses and cash flows of
ventures, and are included in the consolidated financial statements:
R'000
Assets and liabilities
Property, plant and equipment and investments 152 983 15
Current assets 275 498 23
Total assets 428 481 38
Non-current liabilities 6 929
– Interest bearing 923
– Non-interest bearing 6 006
Current liabilities 195 919 17
– Interest bearing 3 564
– Non-interest bearing 192 355 17
Deferred tax liability 42 448 3
Total liabilities 245 296 2
Net assets 183 185 17
Revenue and expenses
Revenue 1 017 738 88
Profit before tax 92 689 3
Income taxes (39 101)
Profit after tax 53 588 2
Cash flows
Operating cash flows 71 522 2
Dividend paid (47 722)
Investing cash flows (3 590)
Financing cash flows 2 806
Total cash flows 23 016
Proportionate interest in joint venture commitments –
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Astral Foods Annual Report 2003
Unlisted investments
Directly held:
Astral Operations Limited a 12 12 100 100 152 750 152 750 36 108 1
National Chick Limited b 23 720 23 720 100 100 63 993 63 993 –
County Fair Holdings (Pty) Limited b 20 20 100 100 29 29 54 854 5
Meadow Feeds Limited (Malawi) * c 20 20 100 100 589 589 –
Africa Feeds Limited (Zambia) ^ e 24 24 80 80 – – –
Indirectly held:
Ross Poultry Breeders (Pty) Limited a 1 1 90 100
County Fair Foods (Pty) Limited f – – 100 100
National Chick Holdings (Pty) Limited c – – 100 100
National Chicks Swaziland
(Pty) Limited# a 1 1 67 67
National Chicks Botswana
(Pty) Limited@ a 625 625 67 67
National Veterinary Supplies
(Pty) Limited g – – 100 100
Central Analytical Laboratories
(Pty) Limited d 133 133 100 90
Boston Breeders (Pty) Limited c 2 050 2 050 100 100
National Chick Management
Services (Pty) Limited c – – 100 100
Less: provision (10 986) (10 986) –
206 375 206 375 90 962 6
The directors' valuation of the investments in subsidiary companies is not less than their respective carrying values.
* Incorporated in Malawi
^ Incorporated in Zambia
# Incorporated in Swaziland
@ Incorporated in Botswana
Nature of business
a-Animal feed and pre-mix production, broiler genetics, broiler breeding , production and sale of day old broilers, and
hatching of eggs
b-Investment holding
c-Dormant
d- Analytical services
e-Animal feed production
f- Broiler operations
g- Retailer of animal health products
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67 Astral Foods Annual Re
– Shares held by directors 3 0,1 62 863
3 250 100,0 42 866 780
Type of shareholders
Shareh
Mutual funds
Investment companies
Pension funds
Private investors
Insurance companies
Other
Major shareholders
Shareholders with a beneficial interest of 5% or more of the company's listed securities as at 30 September 2003
% o
shareh
Old Mutual Asset Management (SA)
Investec Asset Management (SA)
RMB Asset Management (SA)
Allan Gray Limited (SA)
African Harvest Fund managers
Prudential M&G Funds
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Astral Foods Annual Report 2003
Dividends
Interim dividend
Declaration May
Payment July
Final dividend
Declaration November
Payment January
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69 Astral Foods Annual Re
Charles Gustav van Veyeren (69)
Academic qualifications: BSc Agric
Occupation: Director of Companies
Experience: Chairman of Onderberg Processing Co-Operative Limited, Malelane Citrus Co-Operative
Malelane Irrigation Board and Crocodile River Major Irrigation Board. Previously an e
member of the South African Agricultural Union and served on the boards of the Land & Ag
Bank of South Africa, Agricultural Research Council and Citrus Industry Trust. Also serve
Tariffs/Marketing Development Committee, National Water Advisory Committee and as a
Member of Eskom. Appointed a Director of Astral Foods Limited on 19 February 2001.
Michael Andrew Kingston (52)
Occupation: Chief Operating Officer: Poultry Division
Experience: Has extensive experience in the poultry industry having been with Rainbow Chicken for
and prior to that at the commercial farming operations of Illovo Sugar. Joined Country Bird
and returned the operations to profitability, thereafter taking up a managerial position at Cou
being responsible for all aspects of parent breeding including sales, marketing and
Managed Elite Breeding Farms for a period.
Has served on the South African Poultry Association for the past 17 years and is a past c
of the Broiler Organisation Committee. Awarded "Poultry Man of the Year" in 1999. App
Director of Astral Foods Limited on 19 February 2001.
3. To elect T C C Mampane and M Macdonald, appointed 14 November 2003 and who retire in accordance with the co
articles of association and, being eligible, offer themselves for re-election. Abbreviated CV’s of the above are as follow
Thabang Charlotte Christine Mampane (44)
Academic qualifications: BA Honours (Public Administration)
Occupation: Head of Regions: SABC
Experience: Started career at the SABC in 1983 as a junior announcer on Radio Setswana and remaine
position until 1988 when promoted into the role of announcer, and in 1989 senior an
Promoted to Manager: Drama, Culture and Language in 1991. Joined Telkom as Manag
Audio Visual Section in 1995, and subsequently moved to the Independent Broadcasting A
as the special assistant to the Chief Executive Officer. Returned to the SABC in 1996 as
Manager of the portfolio of eight radio stations, thereafter appointed as Chief Executive
Division for three years before moving into current position as Head of Regions.
Previously chaired the NCRO Board and currently serves on the NEMISA and the National
Video Foundation boards. Appointed a Director of Astral Foods Limited on 14 November 2
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Astral Foods Annual Report 2003
Holdings BV. Also Chairman of the Iscor Pension Fund Board of Trustees as well as a me
the Top Organisations Network of SAICA.
Previously chairman of Foskor, NDH and Sapekoe. Also served on the boards of ADE,
Forge, Ferrovorm, Natal Oil and Soap Industries, North East Cape Forests, Safmarine,
Sasol 2 and 3, Strategic Energy Fund, Ticor and Volkskas Industrial Bank. Appointed a Di
Astral Foods Limited on 14 November 2003.
4. To consider and, if deemed fit, to pass, with or without modification, the following resolutions in the manner require
Companies Act, 61 of 1973, as amended ("the Act") and subject to the Listings Requirements of the JSE Securities E
South Africa ("the JSE"):
4.1 Ordinary Resolution No 1
"Resolved that the ordinary shares of the company (excluding for this purpose those ordinary shares which have sp
been placed under the control of the directors for allotment and issue in terms of the Astral Foods Share Incentive S
be placed under the control of the directors as a general authority in terms of section 221(2) of the Act, subje
provisions of the Act and the rules and regulations of the JSE, until the next annual general meeting of the comp
the allotment and issue to such persons and on such conditions as the directors deem fit."
4.2 Ordinary Resolution No 2
"Resolved that, subject to the renewal of the general authority proposed in terms of ordinary resolution No 1 abov
terms of the Listings Requirements of the JSE, the directors be granted a general authority to issue ordinary s
1 cent each for cash as and when suitable situations arise, subject to the following limitations:
(i) that this authority shall not extend beyond 15 (fifteen) months from the date of this annual general meeting;
(ii) that a paid press announcement giving full details, including the impact on net asset value and earnings pe
will be published at the time of any issue representing, on a cumulative basis within one year, 5% or mo
number of shares of that class in issue prior to the issues;
(iii) that issues in the aggregate in any one financial year will not exceed 15% of the number of shares of any cla
company’s issued share capital, including instruments which are compulsorily convertible into shares of tha
(iv) that, in determining the price at which an issue of shares will be made in terms of this authority, the m
discount permitted will be 10% of the average traded price of the shares in question, as determined over the
prior to the date that the price of this issue is determined;
(v) that the shares will be issued to the public and not to related parties; and
(vi) that the shares to be issued will be of a class already listed, or where this is not the case, will be limited to suc
or rights that are convertible into a class that is already in issue.”
The approval of a 75% majority of the votes cast by shareholders present or represented by proxy at this me
required for this ordinary resolution No 2 to become effective.
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71 Astral Foods Annual Re
4.4 Special Resolution No 1
"Resolved that the directors be and are hereby authorised to approve and implement the acquisition by the com
a subsidiary of the company), of shares issued by the company, by way of a general authority which shall only be v
the company’s next annual general meeting, unless it is then renewed, provided it shall not extend beyond 15
months from the date of this annual general meeting, in terms of the Act and the Listings Requirements of the JS
provide, inter alia, that the company may only make a general repurchase of its shares subject to:
(i) the acquisition being implemented on the open market of the JSE;
(ii) the company being authorised thereto by its articles of association;
(iii) acquisitions may not be made at a price greater than 10% above the weighted average of the market valu
shares for the five business days immediately preceding the date on which the transaction was agreed;
(iv) a paid press announcement being published as soon as the company has acquired shares constituti
cumulative basis, 3% of the number of shares in issue prior to the acquisition pursuant to which the 3% thre
reached, containing full details of such acquisitions;
(v) the appointment by the company, at any point in time, of only one agent, to effect any acquisition(s) on the co
behalf;
(vi) the company complying with the shareholders’ spread requirements in terms of the JSE Listings Requireme
(vii) acquisitions not being undertaken by the company or its subsidiaries during a prohibited period, as define
JSE Listings Requirements; and
(viii) acquisitions not exceeding 10% in aggregate of the company’s issued ordinary share capital in any one financ
The directors, having considered the effects of the acquisition of the maximum number of shares in terms of the afo
authority, are of the opinion that for a period of 12 months after the date of the notice of the annual general meet
(i) the company or the group will be able, in the ordinary course of business, to pay its debts;
(ii) the consolidated assets of the company or the group, fairly valued in accordance with generally accepted ac
practice, will exceed the consolidated liabilities of the company or the group; and
(iii) the company’s or the group’s ordinary capital reserves and working capital will be adequate.
It is the intention of the directors to utilise this authority if the circumstances are appropriate. A working capital st
will be submitted to the JSE prior to the company entering into a general repurchase of its shares.
The company’s sponsor will provide a working capital sign off to the JSE before the company commences an
repurchase in terms of the general authority being sought here.
The reason for and effect of special resolution No 1 is to grant the directors of the company a general authority
of the Act and the Listings Requirements of the JSE, for the acquisition by the company (or a subsidiary of the co
of its own shares on the terms set out above.
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Astral Foods Annual Report 2003
for the accuracy of the information given and certify that to the best of their knowledge and belief there are no fa
have been omitted which would make any statement false or misleading, and that all reasonable enquiries to a
such facts have been made and that the annual report contains all information required by Section 11.26 of
Listings Requirements pertaining to this special resolution.
Voting
Any shareholder who holds certificated ordinary shares in the company or who holds dematerialised ordinary shares in the c
through a Central Securities Depository Participant ("CSDP") and who has selected "own name" registration, may attend, sp
vote at the annual general meeting or may appoint any other person or persons (none of whom need be a shareholder) as
or proxies, to attend, speak and vote at the annual general meeting in such shareholder’s stead.
Should any shareholder who holds dematerialised ordinary shares in the company and has not selected "own name" reg
wish to attend, speak and vote at the annual general meeting, such shareholder should timeously inform his CSDP for the p
of obtaining the necessary letter of representation from such shareholder’s CSDP or broker to attend the annual general me
timeously provide such shareholder’s CSDP or broker with such shareholder’s voting instruction in order for the CSDP or b
vote on such shareholder’s behalf at the annual general meeting.
A proxy form is enclosed for use by shareholders holding certificated ordinary shares in the company or dematerialised
shares in the company through a CSDP or broker and who has selected "own name" registration. Such proxy form, duly co
should be forwarded to reach the transfer secretaries of the company, by no later than 09:30 on Tuesday, 10 February 20
completion of a proxy form will not preclude a member from attending the meeting.
By order of the board
T PRITCHARD
Company Secretary
Pretoria
14 November 2003
Printed by Ince (Pty) Ltd
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Astral Foods Annual Re
meeting and request their CSDP or broker to issue them with the necessary authorisation to attend or provide their CSDP o
with their voting instructions should they not wish to attend the annual general meeting in person. Such shareholders must n
this form of proxy to the transfer secretaries
I/We
of (address):
being the holder/s of shares in the company, do hereby appoint (see
or failing him/her
or failing him/her
the chairman of the meeting, as my/our proxy to vote for me/us on my/our behalf at the third annual general meeting of the
company to be held on Thursday, 12 February 2004 at 09:30 and at any adjournment thereof.
Signed this day of
Signature
(*Indicate instructions to proxy by way of a cross in the space provided below.)
Unless otherwise instructed, my/our proxy may vote as he/she thinks fit or abstain from voting.
*In favour of *Against * Absta
1. To receive, approve and adopt annual financial statements
2. Re-election of directors who retire by rotation
3. Re-election of new directors appointed during the year
4.1 To place ordinary shares under the control of the directors
4.2 To authorise the issuing of shares for cash
4.3 To approve remuneration payable to directors
4.4 To approve the acquisition of shares issued by the company
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Astral Foods Annual Report 2003
4. This form of proxy must be received by the transfer secretaries, Computershare Limited, Ground Floor, 70 Marsha
Johannesburg, 2001 (P O Box 1053, Johannesburg 2000) by no later than 09:30 on Tuesday, 10 February 2004.
5. Documentary evidence establishing the authority of the person signing the proxy in a representative capacity must be a
hereto unless previously recorded by the company’s transfer secretaries.
6. The completion and lodging of this form of proxy will not preclude a shareholder from attending the annual general mee
speaking and voting in person thereat to the exclusion of any proxy appointed in terms of this proxy form.
7. Any alteration or correction made to this form of proxy must be initialled by the signatory/ies.
8. The Chairman of the meeting may accept or reject any form of proxy, which is completed and/or received other
accordance with these notes.
9. Shareholders who have dematerialised their shares other than with "own name" registration, must inform their CSDP o
of their intention to attend the annual general meeting and request their CSDP or broker to issue them with the ne
authorisation to attend the annual general meeting or provide their CSDP or broker with their voting instructions should
wish to attend the annual general meeting in person.
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