Avi Limited Class Y · JSE:AVI
Avi Limited Class Y — H1 2005 Earnings Presentation
40 slides from Avi Limited Class Y's earnings presentation, March 2005
Slide 1: Presentation to Analysts: Interim Results
PRESENTATION TO ANALYSTS INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2004
Slide 2: Re-alignment of Business Portfolio
RE-ALIGNMENT OF BUSINESS PORTFOLIO • OI interest in Consol purchased – net cost R507m • Sale of Vector to Rainbow – R454m • 2H05 - Consol unbundled and re-listed • Attainment of long-stated strategic positioning: AVI is a consumer products Group providing enjoyment to people through the supply of br
Slide 3: Financial Summary
FINANCIAL SUMMARY Continuing Group operations Rm % Rm % Turnover 3 9776 2 5397 Operating profit 55214 23922 Operating margin - % 13.98 9.414 Diluted HEPS - cents 108.019 47.617 Cash generated by operations 76614 34019
Slide 4: Key Features – Continuing Operations
KEY FEATURES – CONTINUING OPERATIONS • NBL strong performance, I&J under pressure, Indigo and RBC in investment phase, Denny on track • Continued growth in consumer demand • Rand - material impact • Strong operating performance – Volume growth across all businesses – 7% – Deflation experienced in mo
Slide 5: Financials
AVI FINANCIALS Robert Katzen
Slide 6: Impact of IFRS on Dec 03 Group Numbers
IMPACT OF IFRS ON DEC 03 GROUP NUMBERS Previously IFRS Restated reported impact Rm Rm Rm Operating profit 482 4 486 Net finance income 14 8 22 Capital items (6) 6 - Taxation 168 9 177 Profit after tax 322 9 331 Equity 3 453 33 3 486
Slide 7: Analysis of DHEPS (cents)
ANALYSIS OF DHEPS (cents) 120 7.1 108.0 53.3 80 47.6 40 0 Continuing Consol* Vector Group operations *Consol reported DHEPS 58.2c, the 4.9c difference is due to - Number of shares - Consolidation adjustments
Slide 8: Dividend
DIVIDEND • Special distribution of 64 cents per share – Includes interim dividend of 31cps • AVI – 14cps (1H04: 12cps) • Consol – 15cps (1H04: 12cps) • Vector – 2cps (1H04: 2cps) • AVI dividend policy of 2.5x HE remains intact • Dividends from Consol – R200m – 1Q05 – redemption of preference shares
Slide 9: Continuing Operations Income Statement
CONTINUING OPERATIONS Income Statement 1H05 1H04 Rm Rm %Δ Turnover 2 539 2 369 7 EBITDA 323 266 21 Operating profit 239 196 22 Operating margin - % 9.4 8.3 14 Net interest (cost) / income (9) 6 - Effective tax rate - % 34.8 33.5 4
Slide 10: Impact of translation adjustments under IFRS
CONTINUING OPERATIONS Impact of translation adjustments under IFRS 1H05 1H04 Rand/US$ - at balance sheet date 5.63 6.59 Average for period 6.17 7.06 Rm Rm Impact on operating profit (2) 1 Translation of Integrated Foreign Operations - direct to equity ito IFRS Charge direct to equity 42 54
Slide 11: Continuing Operations Balance Sheet and Cash Flow
CONTINUING OPERATIONS Balance Sheet and Cash Flow 1H05 1H04 Rm Rm Working capital to sales - % 16 16 Capital expenditure 101 80 - Maintenance 53 39 - Expansion 48 41 Investment expenditure 177 101 Cash generated by operations 340 286 Net (Debt) / Cash (35) 308
Slide 12: Investing in Manufacturing Capacity
INVESTING IN MANUFACTURING CAPACITY Planned Spent Revised FY05 1H05 FY05 Rm Rm Rm • NBL 100 40 100 • I&J 83 34 68 • Indigo 30 8 31 • Real Juice 15 8 18 • Denny 11 5 17 239 95 234
Slide 13: Continuing Operations Segmental Overview
CONTINUING OPERATIONS Segmental Overview Angus Band
Slide 14: Contribution to Turnover
CONTRIBUTION TO TURNOVER 2 600 111 2 538 2 500 44 17 Rm 2 400 2 369 (63) 61 2 300 2 200 1H04 I&J NBL Indigo RBC Denny 1H05
Slide 15: Contribution to Operating Profit
CONTRIBUTION TO OPERATING PROFIT
Slide 16: Financial Summary
FINANCIAL SUMMARY 1H05 1H04 Rm Rm %∆ Turnover 1 313 1 252 5 Operating profit 171 129 33 Operating margin - % 13.0 10.3 26 Capex 40 35 14 Working capital to sales - % 14 17 (18)
Slide 17: Turnover up 5%, operating profit up 33%
• Turnover up 5% – Volume growth of 6% (international volumes up 20%) • Biscuits up 9% • Affordable coffee up 18% – Deflation in most categories • Operating profit up 33%, driven by – Reduced raw and wrap costs • Lower commodity prices and Rand impact • Diversified procurement – Cost management and
Slide 18: Willards; Proudly South African award
• Willards – Progress in turnaround of business – operating loss of R2m (1H04: loss R12m) – New MD appointed and management restructured – Improved gross margin – price stability, raw and wrap costs – Marketing and channel to market reviews in progress – Quality drive – Early indications of volume g
Slide 19: Financial Summary
FINANCIAL SUMMARY 1H05 1H04 Rm Rm %∆ Turnover 734 798 (8) Operating profit 26 43 (40) Operating margin - % 3.6 5.4 (33) Capex 34 28 21 Working capital to sales - % 17 14 21
Slide 20: Turnover by Currency & Average Rates
TURNOVER BY CURRENCY & AVERAGE RATES 1H05 1H04 % of Ave % of Ave total rate total rate Rand 39.6 - 33.8 - US$ 26.6 6.20 34.8 7.07 €uro 28.9 8.27 26.6 8.23 AU$ 3.2 4.54 3.3 4.84 Other 1.7 - 1.5 -
Slide 21: I&J: Turnover down 8%, operating profit down 40%
• Turnover down 8% – Core volumes up 5% – Rand impact on export realisations – Reduction in high value shrimp sales in Alpesca • Operating profit down 40% – Impact of Rand strength – Catch rates and size mix – Loss from Pelagic operations – Loss from Alpesca • I&J restructured – I&J Holdings – inter
Slide 22: South African operations
• South African operations – Operating profit R15m (1H04: R7m) – Efficiencies / cost reductions offset impact of currency and poor fishing – Innovation • Progress in processing smaller fish • New product drive 2H05 • Proudly South African award – Marketer of the Year
Slide 23: Alpesca
• Alpesca – Operating loss R6m (1H04: profit R15m) – Hake – good performance • Recovery in catch rates • Deeper penetration into international markets • Nine week strike – Settled within mandate – Revenue loss R4m – Shrimp – underperformed • Adverse catch rates – Fishery closed mid November – Re-ope
Slide 24: Simplot and Pelagic
• Simplot – Sales up 9% - higher level of marketing support – Impacted by weaker AUS$ – Kelso factory – efficiency variances • Pelagic – Operating loss R13m (1H04: loss R6m) • No loss expected in second half – Sale of vessel – profit R20m
Slide 25: Financial Summary
FINANCIAL SUMMARY 1H05 1H04 Rm Rm %∆ Turnover 264 247 7 Operating profit 27 27 - Operating margin - % 10.4 11.0 (5) Capex 8 13 (38) Working capital to sales - % 29 24 21
Slide 26: Turnover up 7%, operating profit in line
• Turnover up 7% driven by – Volume growth in local market – 4% – No price increases – Australasia export initiative • Operating profit in line with prior year – Local market performed well – up 29% • Margin up to 13.6% (1H04: 11.0%) • Input cost benefits – Brand development costs in Australia
Slide 27: Innovations; Lenthéric Australasia
• Innovations – Six new bridge fragrances launched – Kids category expanded • Lenthéric - Australasia – Marketing investment to build brand – R8m – Listed in 85% of targeted outlets – Increase in working capital – Negative impact on cash flow
Slide 28: Financial Summary
FINANCIAL SUMMARY 1H05 1H04 Rm Rm Turnover 117 73 Operating profit 1 (2) Capex 8 2 Working capital to sales - % 13 11
Slide 29: Turnover, operating profit and management change
• Turnover – Sir Juice acquired Aug 04, R17m in sales – Improving product mix, impact on realisations • Operating profit – Investment in brand development – R3m – Teething problems in commissioning of Kya Sands • Impacted national launch of Quali Juice and service levels • Change in management under
Slide 30: Financial Summary
FINANCIAL SUMMARY 1H05* 1H04 Rm Rm Turnover 111 100 Operating profit 11 11 Operating margin - % 9.9 11.0 Capex 5 5 Working capital to sales - % 15 15 *Acquired 1 August 2004
Slide 31: Denny Mushrooms; Dining In; Business restructured
• Denny Mushrooms – Volume growth strong at 9% – Production problems at Gauteng operations • Constrained fresh sales in Dec 04 • Impacted overhead recoveries in cannery – HACCP accreditation – only mushroom facility in SA • Dining In – Significant increase in volumes – innovation – Material increase
Slide 32: Prospects
AVI PROSPECTS
Slide 33: Group Prospects
GROUP PROSPECTS • Business portfolio now aligned to strategic focus of Group • Positive outlook for domestic consumer demand • Strong balance sheet a platform for growth • Drivers of growth – Organic growth • Solid innovation pipeline across Group • Export growth – Acquisition programme • Impact of
Slide 34: I&J – Performance Plan
I&J – PERFORMANCE PLAN • Strategy – Value enhancement – Cost reduction – Asset optimisation • South African operations – Value enhancement • Small fish utilisation – contribution R4 000 per ton – Flame Grills – Steam Fresh • Freezer filleting capacity enhanced – contribution R5 000 per ton – Cost re
Slide 35: I&J – Performance Plan (continued)
I&J – PERFORMANCE PLAN (continued) • Alpesca – Value enhancement • Recovery in shrimp catch • Impact of new shrimp vessels and flexibility for hake • Hake realisations opportunity US$3.30 vs US$3.05 current • Pelagic – Phased exit to optimise asset prices • International – Value enhancement • Levera
Slide 36: Strategic Update
AVI STRATEGIC UPDATE
Slide 37: AVI – branded consumer products and services
AVI – branded consumer products and services AVI’s current business portfolio Food Beverage Personal Care Out of Home Review of strategic positioning AVI is a consumer products Group providing enjoyment to people through the supply of branded, added value products Evaluation of BCP universe AVI’s BC
Slide 38: Linkages Supporting Acquisition Strategy
LINKAGES SUPPORTING ACQUISITION STRATEGY Marketing Innovation Distribution Consumers Channel to market Branding Manufacturing
Slide 39: Summary
SUMMARY • Business fully aligned to stated strategy • Vector sold on favourable terms • Significant unlock of shareholder value through OI acquisition and Consol re-listing • Well-positioned to benefit from sustained consumer demand • Focus on acquisitive growth “Strong growth prospects with the bal
Slide 40: Thank You
THANK YOU WWW.avVi.CO.Za