The collective actions taken by management to enhance performance are resulting in accelerated earnings. Headline earnings have more than doubled from R206 million to R466 million and this momentum is expected to continue, demonstrating the strategy of value creation driven by earnings growth.
A final dividend of 280 cents per share has been declared which, together with the interim dividend of 120 cents, amounts to a total dividend of 400 cents per share, an increase of 135 percent on the 170 cents per share of the previous year.
A track record of delivery is adding to the appreciation in the market of the value in Tongaat-Hulett going forward. This is reflected in the share price which has increased by 51 percent over the past year, following its 61 percent rise in 2004.
The board continually identifies and executes actions to increase shareholder value and, following an extensive strategic review, this resulted in the decision on 17 February 2006 to list and unbundle Hulett Aluminium from the Tongaat-Hulett Group and to simultaneously proceed with the introduction of BEE equity participation in both entities. The decision was unanimously supported by the directors as a positive move and it is anticipated that the process will be completed in approximately 12 months.
South Africa continues to grow from strength to strength with an impressive list of achievements: financial and political stability, control of inflation, low interest rates, rising GDP, an improving global rating and its attractiveness as an investment destination. The current economic expansion is providing a solid platform for the country’s future sustainable growth. Global economic and business fundamentals are also favourable and have increased demand for Tongaat-Hulett’s products.
The EU is at last compromising on its previously rigid production and export subsidies and the United States and Japan are under increasing pressure to follow suit. It is encouraging to see the consequential impact on the world sugar price which has risen considerably over the past year. Tongaat-Hulett is ideally placed to benefit from such changes in the world economy.
The above factors are supportive of the strategy of growing earnings on a sustainable basis, especially when considered in the context of the various growth opportunities that are available to Tongaat-Hulett.
The sustainability of our business is important and we are proud of our inclusion as a founding member of the JSE’s Socially Responsible Investment Index. In addition, progress continues in the areas of safety in the workplace, developing our employees and broad based BEE.
The success in voluntary counselling and testing campaigns is encouraging given that HIV and AIDS remains an important health challenge. Free antiretroviral treatment is provided to eligible employees. The effect of the programmes in mitigating the impact of HIV and AIDS on the business is closely monitored.
It is pleasing that the considerable efforts in employment equity continue to be recognised, this time with a ranking of seventh place in this category in the Financial Mail 2005 survey.
The important areas of corporate governance and sustainability are covered in more detail in the corporate governance and sustainability report of this annual report.
The board of directors maintains high standards of corporate governance. It endorses the principles of openness, integrity, accountability, transparency and social responsibility. Tongaat-Hulett is fortunate to have on its board the quality and experience in a team of eminent business and professional individuals. We continually strive to improve our standards of corporate governance and regular board assessments are a fundamental part of this process. Tongaat-Hulett fully complies with the requirements of King II.
A warm welcome is extended to Lucy Mokoka who joined as company secretary during the year. Lucy adds a new dimension with her range of skills. Our thanks are extended to Samantha Davidson who ably filled the position previously and continues in her role as principal officer of The Tongaat-Hulett Pension Fund.
Peter Staude and his management team have again performed admirably, instilling a capacity for change and entrenching a culture of leadership, accountability and performance. This has had a major influence on our results and Tongaat-Hulett is appropriately positioned to further grow earnings and increase shareholder value.
Major changes in company structure, as announced, will create both challenges and opportunities in the year ahead. During the unbundling process, the board is committed to ensuring that the planned improvement in performance is met and not diluted by the pending structural changes.
In closing, I would like to thank the board for their valued contributions, support and wise counsel. I would also like to express my sincere appreciation to Peter, his executive team and to all the people at Tongaat-Hulett for their hard work, loyalty and dedication in contributing to its success.
Cedric Savage
Chairman
Amanzimnyama
Tongaat, KwaZulu-Natal
17 February 2006