NOMPU SIZIBA: JSE-listed agribusiness specialist Zeder released annual results for the 12 months ended February 28, 2021 [today]. The company reported that headline earnings per share came in at 39.7 cents. That’s 68% up on the year before, while profit before finance costs and taxation from continued operations came to R1.72 billion, compared to R252 million in the year prior. The company says that its net asset value per share declined by 7.5% to 433.2 cents as at the end of February, while its sum-of-parts value per share declined by 25.5% at R4.33. While having declared a special dividend during the period, the company has declared a further special dividend of 20 cents/share.
Well, to unpack the numbers for us and to indicate where to next for the company, I’m joined on the line by Johann le Roux. He’s the CEO of Zeder. Thanks very much, Johann, for joining us. Now, your earnings improved and your profit before taxation was up substantially on the year prior, but the value of the company has declined during the period. Please explain these issues to us.
JOHANN LE ROUX: Yes, Nompu. I think if you are trying to do the comparison to the prior year in terms of our sum of the parts, we must remember that we saw the Pioneer Foods and Quantum Foods companies doing that here, and we declared the special dividend of almost R4 billion to shareholders. So naturally with their declaration of such a big special dividend you would expect the value of the entire group to decrease.
NOMPU SIZIBA: You received a fair whack of cash from your disposals of the Pioneer Foods and Quantum outfits, and gave shareholders that whopping R4 billion special dividend, as you’ve just mentioned. And now you’re declaring another one of 20 cents/share. Why two special dividends in one year? And what are shareholders getting in terms of the ordinary dividend?
JOHANN LE ROUX: Nompu, when we did the Pioneer transaction, we gave a range in terms of the special dividend to the market. And then, as a result of Covid, at our interim period we told the market that it was probably a little bit too early for us to declare a further dividend, because initially we only paid the R2.30. So now that we’ve gone through Covid and we’ve seen how it’s affected our businesses, we did what we promised shareholders, and we are paying an additional special dividend to get to the R2.50 range that we said initially when we sold Pioneer.
NOMPU SIZIBA: Right. So in terms of your continuing operations, how did they fare in the period? And to what extent did the pandemic hamper activity, if at all?
JOHANN LE ROUX: I think all companies were slightly affected. I think our seed business, Zaad, was affected most where we struggled with our northern-hemisphere seed business. But I must say our portfolio has been very resilient during the Covid period and we are very fortunate that actually all our investee companies reported earnings growth for their respective financial years.
NOMPU SIZIBA: You indicate that following the major disposals and the significant special dividend payout to shareholders, the company has resolved to change its strategy. So are you at liberty to share with us the new strategy?
JOHANN LE ROUX: Nompu, the strategy remains the same. Our strategy has always been to create value for shareholders, and one can do it in a few ways. One can grow your underlying portfolio, you can distribute dividends to shareholders, or you can look at realising assets over time in a responsible way in order to create shareholder value. If you can get a combination of those three right, you will create shareholder value.
So our strategy hasn’t changed. It’s probably just going to be a slightly bigger focus on value-unlock options, and we’ve been approached by several parties that have shown some interest in some of Zeder’s assets.
NOMPU SIZIBA: Yes, you mentioned that. I was going to say in a separate statement this morning you did indicate that third parties are looking at some of your portfolio investments. How do you manage to ensure that you talk with these people and get value, while at the same time ensuring that you don’t get rid of really valuable assets, since you already got rid of Pioneer Foods and Quantum?
JOHANN LE ROUX: Yes, Nompu, I think in any potential transaction we’ll obviously look at maximising a return for shareholders. We’re not in a desperate situation. We’re not going out and selling shares. We’ve been approached, we are evaluating those options, and if they’re good transactions to be done for shareholders, we’ll pursue those.
NOMPU SIZIBA: And then is there an outside chance that you might also be looking at further investment opportunities yourself?
JOHANN LE ROUX: Nompu, there’ve been quite a few opportunities crossing our desk. I think also as a result of Covid there’ve been more opportunities, but it just remains a very difficult environment to invest [in], because I think even though we are through one year of Covid, there still remains some uncertainty in terms of what the new norm is. So it’s very difficult to place values on businesses and invest.
I think for now we will continue to invest in our portfolio and opportunities of value we see, rather than additional investments at a zero level.
NOMPU SIZIBA: And just talking at a bigger level in terms of what you see in the agricultural sector, you’re very much focused on agribusiness. Are you optimistic about 2021 in terms of the agricultural sector?
JOHANN LE ROUX: Yes, very much so. As you know, in agriculture there are lots of variables out of your control and one is often very reliant on the climate. It seems like we are in a good cycle. We’ve had a very good year this year, and even looking forward it does seem like the cycle will continue, and Zeder’s investing companies are in a good position to benefit from a good climatic cycle.
NOMPU SIZIBA: That was Johann le Roux. He’s the CEO of Zeder.