Zeder’s portfolio resileint during Covid-19
The majority of Zeder’s investment portfolio companies have achieved acceptable earnings growth during their most recent respective financial years. The portfolio has proven to be more resilient than expected during the Covid-19 pandemic, while positive climatic changes of late should contribute to improved conditions in the short- to medium-term.
Announcing the financial results for the financial year to February 2021, Zeder CEO Johann le Roux said that the company’s portfolio companies are well positioned to benefit from these improved agricultural conditions. “This has resulted in enhanced valuations across a large part of the investment portfolio as at 28 February 2021.”
With investments in the broad agribusiness and related industries and with a historical focus on the food and beverage sectors, the JSE listed Zeder’s underlying investment portfolio was valued at R5.72 billion on 28 February 2021.
Due to a change in Zeder’s investment entity status in accordance with International Financial Reporting Standards (“|FRS”), Zeder’s reported results for the year to 28 February 2021 will not be comparable to the results for the year to 29 February 2020.
The performance of its investments is accordingly measured with reference to the fair value of each investment (i.e. Sum-Of-The-Parts or SOTP value) rather than the consolidated profitability of Zeder (i.e. recurring headline earnings). This is in Zeder’s strive to meet its objective of value creation through capital appreciation, investment income or both.
Zeder’s SOTP value per share, calculated using the quoted market prices for all JSE-listed investments and valuations performed for unlisted investments, decreased to R4.33 during the period under review. The decrease was mainly due to the payment out of cash reserves of a special dividend of R230 per share in April 2020.
An additional special dividend from income reserves of 20 cents per share was declared.
Le Roux, who was appointed as permanent CEO after being at the helm of the company during the period under review in an acting capacity, said that despite an improvement in the climatic cycle during the year, the macro environment in which Zeder and its portfolio companies operate remained largely constrained.
“Our strategic focus during the coronavirus pandemic was deliberately cautious and conservative. Accordingly, we dedicated most of our efforts to existing investments, strengthening their operating models and balance sheets where possible, while driving additional and diversified growth from within the existing investment platforms.
“It is important to note that the uncertainty around the global coronavirus pandemic remains and the main effects of Covid-19 on Zeder’s portfolio are currently being experienced on the supply chain side of operations, with disruptions and delays in international trade.
The disposal of our investments in Pioneer Foods in March 2020 and Quantum Foods in June 2020 as well as the declaration of the substantial special dividend, resulted in a material change to the size and composition of the Zeder group.
“This has necessitated the Zeder board to reconsider the company’s future strategy. During this evaluation process Zeder also recently received third party approaches on various portfolio investments. The Zeder board is currently evaluating these approaches.
“We will communicate in more detail to the market on the value enhancing progress, as may be required from time to time. The strategy does not have a specific timeline and will be executed in an appropriate and responsible manner in an attempt to maximise shareholder value.
“We nevertheless remain focused on growing our investment portfolio and will evaluate opportunities as and when deemed appropriate,” Le Roux concluded.
