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Cape Town - Zeder [JSE:ZED], the JSE listed investment holding company with a specific focus on the agri, food and beverage sectors, achieved an 18% increase in the value of its underlying investment portfolio during the six months to the end of August 2016.
The sum-of-the-parts (SOTP), calculated using the quoted market prices for all JSE-listed investments, and market-related valuations for unlisted investments, amounted to R14.3bn as at August 31 2016. At the close of business on Monday, September 26 2016, Zeder's SOTP value was R14.5bn or R8.40 per share.
This mostly follows a strong recovery in Pioneer Foods’ share price in which Zeder has a 27.2% interest. Pioneer Foods remained Zeder’s largest investment, representing 66.1% (Feb 2016: 60.9%) of its portfolio.
Announcing the results, Zeder CEO Norman Celliers said the results are satisfactory considering the challenging conditions in the macro environment. Positive earnings growth from Pioneer Foods, Kaap Agri and Agrivision were partially offset by declines from Capespan, Zaad and Quantum Foods.
“Overall we are satisfied with the results. It was particularly pleasing that Agrivision Africa delivered its maiden profit during a reporting period,” said Celliers.
“Also of significance was the successful finalisation and internalisation in September of the PSG management agreement. PSG Group's shareholding in Zeder has consequently increased from 34.5% to 42.4% and no further management fees will be payable to PSG Group in terms of the agreement."
READ: Zeder performs despite challenging macro environment
PSG Group remains the largest shareholder in Zeder and will receive a nominal fee for administrative services.
“This transaction should be positive for Zeder shareholders. It is envisaged that Zeder's free cash flow will improve while the large historical discount between Zeder's share price and (SOTP value per share should decrease over time as there is no longer any management fee liability that needs to be considered from a management fee perspective," said Celliers.
“It should allow Zeder to consider increasing its dividends, utilising its script in transactions when opportune and introducing additional gearing for making new investments. This provides Zeder with good prospects going forward.”
Turning to Zeder’s portfolio, Celliers said Pioneer Foods performed well in difficult conditions as indicated by its interim results. It remains a good company for Zeder.
“As stated previously, our strategy is to also grow the other portfolio companies. This means that companies like Capespan, Kaap Agri, Zaad and Agrivision has the potential to develop into much bigger companies. They are all busy to invest in expansion on farms, market penetration, research and development and other business activities," explained Celliers.
“While profit in the short term is always important, these companies are also focusing on developing opportunities with longer-term growth in mind. With good management teams the diversity and quality of Zeder’s portfolio should ensure that we are well positioned for cyclical recovery, as well as sustainable growth.”
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