The prospects for Zeder’s portfolio have improved given the good winter rainfall experienced in the Western Cape. Above-normal summer rains are also expected for the rest of the country. This should contribute to much-improved agricultural conditions in the short- to medium term. With investments valued at R4,9 billion on 31 August 2020 in the broad agribusiness and related industries, the JSE-listed Zeder is well positioned to benefit from these improved conditions.
Financial results for Zeder
Announcing the financial results of Zeder for the six months ended August 2020, acting CEO Johann le Roux said: “We are experiencing the most favourable weather conditions in approximately three years following the extreme drought in the Western Cape. The full dam levels of the Cape are evidence of that, while the recent cold winter and resulting frequent snow should be positive for fruit producers. Winter wheat crops also look promising because of the timing of winter rains.”
Zeder adopted a change in accounting policy with effect from 1 March 2020 to that of an investment entity. The reported results for the interim period up to August 2019 and the financial year to February 2020 have not been restated and are not comparable to the period under review. The sum-of-the-parts (SOTP) value per share amounted to R3,72 as on 31 August 2020. This amount is calculated using the quoted market prices for all JSE-listed investments and internal valuations for unlisted investments.
This follows the disposal of the entire shareholding in Pioneer Foods on 23 March 2020 for a total consideration of R6,41 billion, as well as of its entire shareholding in Quantum Foods on 12 June 2020 for R308 million. In addition to settling all its debt and related obligations from the proceeds of the Pioneer Foods disposal, Zeder returned R3,9 billion to shareholders by way of a substantial special dividend. The company also invested R262 million in the repurchase of shares during the period.
“These transactions resulted in Zeder currently having no debt and R1 billion in cash,” Le Roux said. He added that it is expected that the negative economic impact and fallout of COVID-19 in South Africa and around the world will be severe in the short to medium term. Zeder and its portfolio companies will not be immune to this.
Effects of the lockdown
Nonetheless, Zeder’s portfolio companies were classified as ‘essential services’ under the COVID-19 regulations. Accordingly, they were permitted to continue certain operations during the government-imposed lockdown.
“As a result of pro-active portfolio management interventions, we are pleased with the portfolio companies’ performance during the reporting period,” Le Roux said.
Of note is that Zeder’s portfolio companies traditionally perform better in the second half of the year with the first half reflecting the annual input cost cycle, as well as the softer half of the annual consumer sales and spending cycles.
Performance of Zeder’s portfolio companies
Zaad, which invests and operates in the specialised agri-inputs industry with a focus on emerging markets, especially Africa, and Capespan, the vertically integrated fruit producer with global marketing, sales and distribution capabilities, both reported an improved performance from the prior comparative period.
The Logistics Group (TLG) has been successfully positioned to continue operating its existing strategic logistical and terminal assets in South Africa. The group will also expand its service offering and capabilities to a broader customer and market base in Southern Africa.
“TLG is driven by a young entrepreneurial management team and we are excited about their prospects,” Le Roux noted.
Kaap Agri, with its agricultural foundation, has mainly retail characteristics, augmented by a retail fuel strategy. The organisation reported a recurring headline earnings per share increase of 7,5% for the six months to 31 March 2020. The subsequent voluntary trading update Kaap Agri released during July 2020 demonstrated that it had shown resilience during the COVID-19 period.
“The disposal of investments in Pioneer Foods and Quantum Foods brought about substantial changes to the size and composition of Zeder, its portfolio and the company’s underlying value.
“Zeder’s overall goal remains to create value for its shareholders. The board is considering whether to change the strategy, including to one of responsible value-unlocking, but no final decision has been made. Zeder will communicate to the market in more detail in due course.
“However, we will do what is right for shareholders,” Le Roux concluded. – Press release, Zeder