Ref’s strategic mission is to be the supplier of choice across the markets for fresh, frozen and longtime meal solutions. Use of proceeds The gross proceeds from the subscription for the Us absorption Shares are estimated to be RARE million, before deducting commissions and other Offer expenses, which are expected to amount to up to ROR million . The net reseeds received by the Company will be used to: settle Ref’s RI 69 million mezzanine loan facility; settle the subordinated funding, provided by Capitalist’s to facilitate the Group Restructuring and specifically the acquisition by management of its 29% shareholding of the Ordinary Shares (27. 5% of the Fully Diluted Shares).
The subordinated funding comprises shareholder loans (and accrued interest thereon) and Funding Preference Shares (and accrued dividends related thereto), which will amount to a total of ROR 7 million at 30 September 2014; fund investment by the Company in capacity expansion, which is planned to e R 71 million in 201 5; reduce the working capital facility utilization; and provide the Company with greater balance sheet flexibility and a listed currency to accelerate its strategic growth plan. The planned settlement of the bank borrowings and suborder anted funding as envisaged above has enTABLEd RFC to renegotiate its banking facilities, which will result in an extension of the term of the debt and lower interest rates.
Pre-tax annual cost savings from the settlement, extension of the term and reduction in rates are estimated to be ROR million for the September 201 5 uncial year assuming the settlement of the funding, as described above, takes place on 2 October 2014. Dividend policy The Directors recognize the importance of maintaining a consistent and transparent dividend policy and will endeavourer to avoid volatile swings in the dividend profile by ensuring high quality medium term strategic and financial planning. It is the intention to pay regular dividends. However, there is no assurance that a dividend will be paid in respect Of any financial period, and any future dividends will be a function of the profitability and return on equity f RFC, the future organic or acquisitive growth strategies, and/or the need to strengthen the balance sheet during periods of economic uncertainty.
The Directors intend to declare the first dividend of the Company in early 2016 based on the earnings to 30 September 2015 and to adopt a dividend cover of three times diluted earnings per share at that time. The Directors believe this approach is compatible with the Company’s growth opportunities and ambitions and will regularly review the dividend policy. Business specific risks Prices of food products in South Africa and international markets are subject o change with volatility resulting from imbalances in aggregate levels of raw materials and final product supply and demand. Since revenues are largely dependent on prices RFC receives for its products, such volatility could materially and adversely affect the Company’s financial results.
Potential factors influencing final product prices, which are beyond the Company’s control, include: supply and demand for raw materials, such as fresh fruit and vegeTABLEs, raw meat, sugar and flour in South Africa and international markets; quantity and quality of products availTABLE from Ref’s direct and indirect competitors; economic and financial conditions in South Africa and export markets, including economic downturns and financial crises, which may reduce the purchasing activity of Rap’s customer base; adverse weather or other natural conditions, including natural disasters; and changes in legislative or regulatory developments in South Africa and export markets, such as import/ export bans, duty tariffs and quotas.
RFC relies on ongoing commercial relationships with major customers, including large retailers such as Pick n Pay, Spar, Shoppers and Woolworth. The loss Of a major customer, the inability of RFC to continue to contract on immemorially similar terms with any of these major customers or the inability of a customer to meet its payment obligations to RFC, resulting in increasing bad debt, could result in significant adverse financial consequences. RFC is dependent on its commercial relationships with major retailers to sell its products to end consumers. This represents a risk for RFC to the extent that retailers set prices for Rap’s products and determine product placement in accordance with their company-specific retail policies and strategies.
