Johannesburg - The R98.8 million fine imposed on Tiger Brands in the bread price-fixing scandal will use up almost a quarter of the cash resources reflected in its balance sheet last September.
The group provided for the penalty in its 2007 accounts, but only paid over the cash after the competition tribunal confirmed the fine last month.
So although the 2007 earnings were reduced by the fine, the group's cash flow will feel the pinch only this year.
Tiger Brands was fined for collusive activity in the baking industry that is alleged to have led to increased bread prices.
Although the fine was easily absorbed by Tiger Brands' attributable earnings of R2.2 billion, it was a costly blow.
As Lex van Vught says in his chairman's statement in the 2007 annual report: "Tiger Brands has incurred significant reputational damage as a consequence of this issue. It owns many iconic brands. Considerable work will need to be done in order to restore its good reputation and standing."
Van Vught describes the behaviour of those involved in the collusive practices as "inexcusable". He adds: "The company has publicly apologised unreservedly to all its stakeholders for this clear breach of its high ethical standards."
The penalty has done more than just damage the group's reputation. It wipes out the R75.3 million proceeds from the issue of share capital last year and is significantly more than the R68 million spent on research and development in the 12 months to September 2007.
Chief executive Nick Dennis resigned with effect from next month over the scandal.
Details on executive pay indicate there may have been horse trading over Dennis's package. He will not receive the 22 months of severance pay he is entitled to under the Labour Relations Act, but for share option purposes his termination date will be extended to February 19 2009. This 12-month extension will enable Dennis to take ownership of a valuable chunk of cash-settled options.
The shares rose R2 to R149 yesterday. They are down more than 10 percent this year.