An interim dividend of 245 cents per share was declared, which is in line with that of 2008.
Headline earnings per share (HEPS) from continuing operations amounted to 607.1 cents - an 8% increase on that achieved in the six months ended March 2008. Earnings per share from continuing operations increased by 24% to 610.7 cents per share.
The group said the higher percentage improvement in EPS compared to HEPS is primarily due to the inclusion in March 2008 of an abnormal charge of R112.3 million, which related to the impairment of the carrying value of the goodwill associated with the beverages business.
Total group HEPS decreased by 17% to 627.3 cents compared to the same period last year. Total headline earnings of R984 million and group profit attributable to ordinary shareholders of R990.1 million are not directly comparable with the 2008 results as the prior year includes the results of the unbundled Healthcare interests.
The costs in respect of the approach to AVI adversely affected the rate of decline in total HEPS and EPS by approximately 2.7% and 3.0% respectively.
The group said the unbundling and separate listing of the Healthcare interests in August 2008, coupled with the planned disposal of the interest in Sea Harvest this year, has given rise for the need to distinguish between earnings from continuing operations, which exclude the Healthcare and Sea Harvest results, and total group earnings which include the Healthcare results for the comparative period ended 31 March 2008, as well as the results of Sea Harvest in both the comparative and current reporting periods.
Costs of R32.6 million were also incurred in the current period relating to the unsuccessful attempt by Tiger Brands to acquire the entire issued share capital of AVI. Excluding these costs, HEPS and EPS from continuing operations would have increased by 12% and 28% respectively.
The group said the trading environment was characterised by significant raw material cost increases, high interest rates and a weakening Rand exchange rate. As a result of these and other factors, consumers have altered their buying patterns which have had a negative impact on volumes in many categories in which the company operates.
Turnover from continuing operations increased by 24% compared with the same period last year. The turnover increase was particularly pronounced in the Grains division, reflecting the substantial increases in raw material commodity costs which had been partially absorbed in the comparative period.
The total operating margin from continuing operations of 14.4% compared with 13.8% reflected a recovery from the previous period in which certain raw material cost increases were partially absorbed by the group.
The Milling and Baking, Groceries, Snacks & Treats, Beverages, Exports and Fishing businesses all contributed to the operating margin improvement while Other Grains, Value Added Meat Products, Out of Home and Consumer Healthcare continued to experience pressure on margins.
"Overall the Group delivered a pleasing growth in operating income of 29% (2008: 15%) allowing it to adequately cover the increased cost of funding the higher working capital requirements," it said.
Earnings from associates for the half year reflect the improved contribution from Chilean-based Empresas Carozzi. The improved contribution primarily comprises a capital profit of R16.8 million arising on the part sale of a subsidiary and the benefits of a stronger Chilean Peso.
The increased share of income attributable to minorities is due to the improved levels of profitability in the Deciduous Fruit business as well as the minorities' share of current year income attributable to the two African acquisitions, Haco and Chococam, which were concluded during the second half of 2008.
Strong performances compared to the first six months of the prior year were experienced in most FMCG categories despite underlying consumer demand having weakened. The prior year trend of increasing cost push inflation, which accelerated in the second half of 2008 across all categories, continued into the current reporting period.
Looking ahead the group said although interest rates are expected to decline further, it is likely to continue to experience difficult trading conditions for the remainder of the year, caused by ongoing pressure on consumer spending. In addition, the recent strengthening of the Rand will have an adverse impact on the group's export earnings.
Notwithstanding these factors, headline earnings per share is expected to show modest growth in real terms for the full year, the group concluded.
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