The JSE-listed Zeder presented resilient financial results for the year to February 2020 with improved operating performances from most of its underlying investee companies, combined with strengthened balance sheets at group and investee company levels, respectively.
The active investor in the broad agribusiness and related industries reported an increase of 5,8% in the sum-of-the-parts (SOTP) value per share to R5,97 as at 29 February 2020 – calculated using the quoted market prices for all JSE-listed investments – and internal valuations for unlisted investments.
Zeder’s underlying investment portfolio was valued at R11,58 billion on 29 February 2020.
Operating under strenuous trading conditions
During this period recurring headline earnings per share increased by 18,4% to 32,8c. Zeder’s consolidated recurring headline earnings is the sum of its effective interest in the recurring headline earnings of each of its underlying investments.
Commenting on the results, Zeder CEO, Norman Celliers, said: “The results are satisfactory given the strenuous trading conditions under which it was achieved.
“The macro environment in which Zeder and its portfolio companies operated in remained severely constrained during the year under review. Notwithstanding, most of our portfolio companies stabilised or improved on the corresponding lower levels of profitability reported in the results for the previous year.”
Strategic focus remains unchanged
At the close of business on 7 April 2020 Zeder’s SOTP value per share amounted to R5,95, which includes a cash amount of R3,9 billion to be paid as a special dividend of 230c per share declared on 1 April 2020 and payable on 28 April 2020.
The special dividend will be paid out of cash reserves, reducing the total cash holdings. Following the payment of the aforementioned special dividend, Zeder will have approximately R1 billion in unencumbered cash with no debt.
“Our strategic focus was deliberately cautious, conservative and largely unchanged during the year. The effect thereof was that we dedicated most of our efforts to existing investments, strengthening their operating models and balance sheets where possible while driving for additional and diversified growth from within existing investment platforms.
“Additional strategic focus was given to ensure the successful disposal of its largest investment, Pioneer Foods. This approach contributed to satisfactory results. New and adjacent opportunities are continuously reviewed, and we will add to our portfolio when opportune,” Celliers said.
Zeder disposed of its entire interest in Pioneer Foods on 23 March this year for a total consideration of R6,41 billion. This provided the company with an opportunity to use a portion of the cash proceeds received to settle all its debt and related obligations. The remainder of Zeder’s portfolio represents strategic equity interests in leading organisations that span the agribusiness value chain.
Better positioned for COVID-19 challenges
Celliers said the successful and timely implementation of this transaction has ensured that Zeder is better positioned for COVID-19 related economic challenges. This, combined with the company’s deliberate process over the last few years to strengthen balance sheets, reduce debt and preserve cash resources, provides it with improved agility at a time of crisis.
Of note is that many of Zeder’s portfolio companies fall within the ‘essential services’ classification under the current COVID-19 crisis regulations and have been requested to continue with certain operations. While the final fallout of the crisis is still unclear, it is anticipated that the negative economic impact in South Africa and around the world will be severe in the short to medium term.
Delivering on long-term strategies
While the broader investor sentiment towards the sector and country is clearly negative at present and the external operating environment remains challenging, the underlying fundamentals of Zeder and its portfolio have not changed and remains strong.
The investee companies are well positioned with strong balance sheets and leading management teams that are committed to delivering on their respective long-term strategies.
“We believe that, despite inevitable cyclicality, investing in the agribusiness industry should offer attractive long-term returns and the strength of our defensive portfolio should ensure that we deliver the required shareholder return over time.
“We remain optimistic about the company’s prospects going forward,” Celliers concluded. – Press release, Zeder