Tiger Brands | Annual Financial Statements 2023 - Investments in associated companies

INVESTMENTS IN ASSOCIATED COMPANIES

An associate is an entity over which the group has significant influence through participation in the financial and operating policy decisions. The entity is neither a subsidiary nor a joint arrangement.

Associates are accounted for using the equity method of accounting in the consolidated financial statements. Goodwill relating to an associate is included in the carrying amount of the investment and is not tested separately for impairment.

The income statement reflects the group's share of the associate's profit or loss. However, an associate's losses in excess of the group's interest are not recognised. Where an associate recognises an entry directly in other comprehensive income, the group in turn recognises its share in the consolidated other comprehensive income. Profits or losses resulting from transactions between the group and associates are eliminated to the extent of the interest in the underlying associate.

After application of the equity method, each investment is assessed for indicators of impairment. If applicable, the impairment is calculated as the difference between the current carrying value and the higher of its value in use or fair value less cost of disposal. Impairment losses are recognised in profit or loss.

Associate investments have been shown at historical cost, plus the share of accumulated earnings less dividends received, adjusted for translation gains/losses.

Where an associate's reporting date differs from the group's, the associate prepares financial statements at the same date as the group. If this is impracticable, financial statements are used where the date difference is no more than one month, in particular for Empresas Carozzi. Adjustments are made for significant transactions between the relevant dates. Where the associate's accounting policies differ from those of the group, appropriate adjustments are made to conform to the accounting policies.

The conclusion regarding control or significant influence relating to associates is reassessed on an annual basis. In performing this assessment, the directors determine whether or not the group has control over the respective investee based on whether the group has the practical ability to direct the significant activities unilaterally. Any material transactions conducted by the associated companies which could change "significant influence" to "control" or a reduction in "significant influence" to an investment are considered in this assessment.

In making this assessment, the following factors are considered:

The group's shareholding in the investee relative to other investors
The relative size of and concentration of other shareholders
The inability of the group to unilaterally appoint the majority of board members of the investee
The absence of related key management between the group and the investee
Composition of the investee's board and board appointees of the group
The lack of any contractual or legal rights conferred upon the group by the investee or any other shareholder of the investee to direct its activities

Detailed disclosures of investment in associates

The group does have associate interests that are, in aggregate, material in the context of the group and accordingly detailed disclosure requirements in terms of IFRS 12 Disclosure of interests in other entities is assessed on an annual basis. In determining whether or not any individual associate is material, the group considers a combination of the share of the individual associate interest in the consolidated profits, other comprehensive income, headline earnings as well as total assets of the group. If any of these contributions exceed 5%, it is concluded as individually material.

				Percentage holding
	Principal place of business	Currency	Year end	2023 (%)	2022 (%)	Nature of business	Listed/ unlisted
National Foods Holdings Limited	Zimbabwe	US dollar (2022: Zimbabwean dollar)	June	37,4	37,4	Food processing	Listed
Empresas Carozzi	Chile	Chilean peso	December	24,4	24,4	Food processing	Unlisted
Herbivore Earthfoods Proprietary Limited	South frica	South African rand	February	15,0	15,0	Food processing	Unlisted

16.1

Reconciliation of carrying value

	GROUP		COMPANY
(R’million)	2023	2022	2023	2022
Listed, at cost	97,1	97,1	97,1	97,1
Unlisted, at cost less amounts written off	590,2	590,2
Share of accumulated other comprehensive income since acquisition	(616,4)	(687,8)
Share of accumulated profits since acquisition	3 021,1	2 421,7
	3 092,0	2 421,2	97,1	97,1
The trading results of the associate companies whose results are equity-accounted in the consolidated financial statements as follows:
Revenue (100%)	42 213,1	27 463,2
Profit for the year (100%)	2 625,8	1 706,9

16.2

Reconciliation of associates income

(R’million)	Empresas Carozzi	National Foods Holdings Limited	Other*	Total
Income attributable to ordinary shareholders of Tiger Brands	526,1	170,6	(0,1)	696,6
Less: Total dividends	(206,3)	(46,5)	–	(252,8)
Total share of associated companies’ income less dividends received	319,8	124,1	(0,1)	443,8
2022
Equity-accounted earnings	337,7	114,1	(0,2)	451,6
Interest and dividends received previously impaired	–	26,4	–	26,4
Income attributable to ordinary shareholders of Tiger Brands	337,7	140,5	(0,2)	478,0
Less: Total dividends	(338,5)	(7,1)	–	(345,6)
Total share of associated companies’ income less dividends received	(0,8)	133,4	(0,2)	132,4

* Other includes the Herbivore Earthfoods Proprietary Limited which is equity-accounted in terms of IAS 28. This associate was the first acquisition by the Tiger Brands Venture Capital Fund

16.3

Summarised statements of financial position of all associates

The aggregate statement of financial position of all associates are summarised as follows (100%):

	GROUP
(R’million)	2023	2022
Property, plant and equipment	14 208,1	12 130,7
Goodwill and intangible assets	4 603,5	3 756,7
Investments	437,3	15,9
Deferred taxation	305,4	254,7
Current assets	13 518,3	13 400,3
Total assets	33 072,6	29 558,3
Long-term liabilities	(7 401,1)	(7 456,7)
Deferred taxation	(2 478,3)	(2 290,1)
Current liabilities	(8 284,2)	(7 829,6)
Total shareholders’ funds	14 909,0	11 981,9

16.4

The assessment criteria, as noted in the accounting policies, are performed annually. Empresas Carozzi and National Foods Holdings Limited have met the assessment criteria to be classified as a material associate in the current year and thus further disclosure is provided below.

	Empresas Carozzi		National Foods Holdings Limited
(R’million)	2023	2022	2023	2022
Summarised statement of comprehensive income
Revenue	34 739,9	22 688,7	7 461,7	4 767,7
Profit after taxation	2 160,5	1 382,2	466,4	326,3
Attributable to outside shareholders	2 160,5	1 382,2	466,4	326,3
Other comprehensive income, net of taxation	315,1	489,9	–	–
Total comprehensive income for the year	2 475,6	1 872,1	466,4	326,3
Attributable to outside shareholders	2 475,6	1 872,1	466,4	326,3

Dividends received from associate	206,3	338,5	46,5	7,1
Summarised statement of financial position
Non-current assets	18 395,1	15 644,0	1 151,8	511,2
Current assets	12 016,0	11 804,5	1 489,6	1 586,7
Non-current liabilities	(9 838,6)	(9 653,7)	(29,2)	(92,0)
Current liabilities	(7 141,1)	(6 860,3)	(1 131,5)	(968,4)
Net asset value	13 431,4	10 934,5	1 480,7	1 037,6
Reconciliation of the summarised financial information presented to the carrying value of investment in associate
Tiger Brands’ share of net asset value (NAV)	3 274,6	2 665,8	553,8	388,0
Share of NAV acquired at nil value at acquisition	(267,3)	(190,5)	–	–
Impairment at acquisition	(192,0)	(192,0)	–	–
Effects of hyperinflation	–	–	(282,1)	(255,3)
Carrying value of associate	2 815,3	2 283,3	271,7	132,7

* Other includes the Herbivore Earthfoods Proprietary Limited which is equity-accounted in terms of IAS 28. This associate was the first acquisition by the Tiger Brands Venture Capital Fund

16.5

National Foods Holdings Limited (NFH)

Accounting for investment in associate

The group has a 37,4% investment in National Foods Holdings Limited (NFH), an associate company incorporated in Zimbabwe, which operates throughout Zimbabwe.

The prior year, equity-accounted earnings for NFH were in accordance with the provisions of IAS 29 Hyperinflationary economies (IAS 29).

NFH delisted from the Zimbabwean Stock Exchange (ZWSE) and listed on the Victoria Falls Stock Exchange (VFEX) in January 2022. The functional currency of this associate therefore changed from Zimbabwean dollar (ZWD) to United States dollar (USD). The treatment of the translation of NFH associate earnings is consistent with IAS 21. In consideration of the indicators in IAS 21.10, NFH determined that, with the new financing activities, the future currency change of issued capital and equity accounts, and the change in the currency in which cash and cash equivalents are retained, were relevant factors indicating that the ZWD will not be the currency to reflect the principal economic environment in which the company will generate and expend its cash. Accordingly, in accordance with IAS 21.36, the NFH determined that the USD is the new functional currency that will most appropriately reflect the underlying relevant transactions, events and conditions.

This change in functional currency was accounted for prospectively from the date of the change by translating all items of the NFH financial statements into the new functional currency, using the exchange rates at the date of the change. The change in the presentation currency of NFH was accounted for as a change in accounting policy and applied retrospectively, as if the new presentation currency had always been the presentation currency of the NFH consolidated financial statements. All of the resulting exchange differences have been recognised in equity under the reserve for exchange differences in translation.

Exchange rates applied in translating the results of investment in associate

The results and net asset value of NFH have been translated into the group's presentation currency at the closing exchange rate, in accordance with hyperinflationary provisions of IAS 21 The effects of changes in foreign exchange rates.