The preparation of these results has been supervised by Pamela Padayachee CA(SA) (acting chief financial officer) and Deepa Sita CA(SA), chief financial officer of Tiger Brands Limited.

The summarised consolidated preliminary financial statements are prepared in accordance with the requirements of the JSE Limited Listings Requirements for preliminary reports and the requirements of the Companies Act of South Africa. The Listings Requirements require preliminary financial statements to be prepared in accordance with the conceptual framework, the measurement and recognition requirements of International Financial Reporting Standards (IFRS), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and also, as a minimum, to contain the information required by IAS 34 Interim Financial Reporting. The directors take full responsibility for the preparation of the preliminary report and that the summarised consolidated financial statements have been correctly extracted from the underlying annual financial statements. The accounting policies applied in the preparation of these financial statements are consistent with those applied in the previous financial statements.

The accounting policies applied in the preparation of the summarised consolidated financial statements from which the summary financial statements were derived are in terms of International Financial Reporting Standards and are consistent with those accounting policies applied in the preparation of the previous consolidated financial statements, except for IFRS 16 Leases which was adopted on 1 October 2019 and applied using a modified retrospective approach. The majority of the group’s financial instruments are measured at fair value in terms of IFRS 13 Fair Value Measurements, are noted as level 1 hierarchy, which are valued based on quoted market prices.

Ernst & Young Inc., Tiger Brands Limited’s independent auditors, have audited the consolidated financial statements of Tiger Brands Limited from which the summarised consolidated financial results have been derived. The auditors have expressed an unmodified audit opinion on the consolidated financial statements. Any reference to future financial performance included in this announcement has not been audited or reported on by the group’s independent auditors. The auditors’ audit report does not necessarily report on all the information contained in this announcement or financial results. Shareholders are therefore advised that in order to obtain a full understanding of the nature of the auditors’ engagement they should obtain a copy of the auditors’ audit report together with the accompanying financial information from the issuer’s registered office.

As a result of Covid-19 many of Tiger Brands’ manufacturing and distribution sites were classified as essential services and continued to operate during the lockdown period. However, certain facilities and offices were closed in line with regulatory requirements and demand dynamics during the initial 21-day lockdown period. To ensure the health and safety of our employees, several measures were implemented and continue to be in place. The financial effects of the Covid-19 pandemic have been material and negatively impacted the group results mainly due to the National Disaster Regulations (pricing regulations), and other Covid-19 related costs. Where applicable our assumptions have been revised in our assessment of provisions and impairment considerations.

Goodwill and indefinite useful life intangible assets are tested for impairment annually (as at 30 September) and when circumstances that indicate the carrying value may be impaired. The group’s impairment tests for goodwill and intangible assets with indefinite useful lives are based on the value in use calculations. The key assumptions used to determine the recoverable amount for the different cash-generating units are disclosed in the consolidated financial statements for the year ended 30 September 2020. During the current period, goodwill relating to Designer Group (R36,0 million) and Davita (R250,0 million) was impaired. Property, plant and equipment in the Deciduous Fruit business (LAF) was impaired by R196,5 million, down to its recoverable amount. The investment in the Nigerian associate has been impaired by R117,7 million.

The Designer Group goodwill impairment, related to the Personal Care category within the HPCB business and is driven by slowed growth, reflecting the pressure on consumer income and further compounded by competitors investing aggressively in pricing strategies and brand support. Given this, the related goodwill was written down to its recoverable amount, being its value in use.

Davita is included in the Exports and International cash-generating unit. The impairment arose during the interim reporting period as a result of the consistent risks associated with key export markets, with lower sales projected for Nigeria and Mozambique, as well as lower sales forecast for the powdered seasoning brand, Benny. During the six-month period ended 31 March 2020, a five-year discounted cash flow model was used with the post-tax discount rate utilised for the purposes of impairment testing of 18,4% (2019: 17,6%). The impact of Covid-19 led economic challenges as far as could be estimated at the time, were factored into the cash flow forecasts. The impairment assessment was re-evaluated at year end, a +1%/-1% change in the post-tax discount rate used in the year end testing would result in an approximately +/-R166 million change in the valuation.

The Deciduous Fruit business (LAF) is also included in the Exports and International cash-generating unit. LAF is predominantly an export sales business which has seen a downturn in the current year.

Given the adverse market outlook for the Nigerian economy, the deteriorating macro-economic factors within Nigeria, further exacerbated by currency devaluations as well as forex supply and liquidity challenges, the investment in UAC Foods (UAC) has been impaired down to its recoverable amount. The EBITDA multiple valuation technique was adopted using an appropriate, comparable EBITDA multiple.

Tax rate reconciliation

Loss for the period from discontinued operations (attributable to owners of the company)

In the current year, the loss of the held for sale VAMP business was included in the profit for the year as set out below and comparatives restated accordingly. Deli Foods is in the final process of closure which is expected to be concluded by the end of February 2021.

On 17 August 2020, the company announced that it has entered into two separate sale-of-business agreements (SBAs) for the disposal of its VAMP business as going concerns. The two SBAs comprise an agreement with Molare Proprietary Limited for a total cash contribution of R100 million paid on 30 September 2020. The second comprising an agreement with Silver Blade Abattoir Proprietary Limited with an effective date of 1 November 2020. A profit of R42,5 million (pre-tax) had resulted from the conclusion of the first SBA.

IFRS 16 introduces significant changes to lease accounting as it removes the distinction between operating and finance leases under IAS 17 and requires a lessee to recognise a right of use asset and a lease liability at commencement for all leases, except for short-term leases and leases of low value assets. IFRS 16 brings the majority of the group’s long-term property, equipment, vehicles and other leases onto the statement of financial position. As an accounting policy election, the group has applied the following recognition exemptions which allow for certain lease payments to be expensed over the lease term as opposed to recognising a right of use asset and related lease liability on the lease commencement date:

• Short-term leases – these are leases with a lease term of 12 months or less; and
• Leases of low value assets – these are leases where the underlying asset is of low value.

The group has elected to apply IFRS 16 using the modified retrospective approach. As prescribed by IFRS 16, lease liabilities are measured at the present value of remaining lease payments discounted at the incremental borrowing rate at the date of initial application. The group has elected to measure right of use assets on transition date (1 October 2019) at their carrying amounts as if IFRS 16 had applied since the lease commencement dates, discounted using the incremental borrowing rate at the date of initial application. Right of use assets relating to new leases are measured at the amount of initial measurement of the lease liability plus initial direct costs. As part of the modified retrospective transition approach, the group has elected to apply the practical expedient which allows a single discount rate to be applied to a portfolio of leases with reasonably similar characteristics.

Right of use assets are tested for impairment when there are indicators of impairment. IFRS 16 removes the straight-line rent cost previously recognised in respect of operating leases under IAS 17, and replaces the cost with depreciation on right of use assets and interest charged on outstanding lease liabilities.

On transition date, the right of use asset and lease liability recognised was R356,4 million and R412,7 million respectively. The long and short-term portion of the lease liability is R277,4 million and R135,3 million respectively. The deferred tax asset recognised on transition amounted to R12,9 million.

The right of use assets capitalised and included in the property, plant and equipment at 30 September 2020 amounted to R291,9 million with related depreciation of R123,2 million. The long and short-term portion of the lease liability is R197,2 million and R139,0 million respectively.

As disclosed in the 30 September 2019 financial statements, the equity accounted results of National Foods Holdings Limited (NFH), included in these results have been prepared in accordance with the provisions of IAS 29 Financial Reporting in Hyperinflationary Economies, with key accounting principles and judgements applied by the group. In line with the judgements applied during the 2020 financial year, management assessed that the official interbank closing exchange rate is 0,04 ZWL$ to the South African rand and this was therefore used when translating the results of NFH.

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.

As previously announced on SENS on 29 October 2020, the acquisition of the company’s meat processing facilities at Germiston, Polokwane and Pretoria by Silver Blade Abattoir Proprietary Limited, a wholly owned subsidiary of Country Bird Holdings Proprietary Limited, became effective on 1 November 2020.

On or about 9 November 2020, the company concluded an agreement to dispose of a number of non-core brands in its Personal Care portfolio. The transaction, which will be effective 15 January 2021, will not have a material impact on the company’s net asset value and earnings per share.