Slide 1: AVI Limited presentation to shareholders & analysts for the year ended June 2018
AVI Limited presentation to shareholders & analysts for the year ended June 2018
Slide 2: Agenda
AGENDA Key features and results history Group financial results Business unit performance Prospects Questions and answers
Slide 3: Key Features
KEY FEATURES Profit growth in a challenging demand environment; Carefully balanced value versus volume across key categories; Revenue up 1,9% to R13,44 billion; Gross profit margin recovery in line with easing of Rand driven cost pressures; Operating profit up 7,0% to R2,55 billion; Cash
Slide 4: Results History: Operating profit
RESULTS HISTORY Operating profit 2 600 2 568 2 398 2 400 395 2 165 2 200 366 2 000 1 929 250 345 1 800 241 1 722 404 218 425 1 600 1 529 1 386 388 389 R million 1 400 198 331 410 1 121 308 172 1 200 248 705 915 892 167 245 666 1 000 236 156 609 806 718 101 151 133 166 533 800 95 179 133 105 91 475 4
Slide 5: Results History: Return on capital employed
RESULTS HISTORY Return on capital employed 7 000 30% 6 000 29% 28% 5 000 27% 4 000 R million 26% 3 000 25% 2 000 24% 1 000 23% 0 22% F11 F12 F13 F14 F15 F16 F17 F18 Net operating profit after tax Average capital employed ROCE (%) Sustained returns including increased capital expenditure to support
Slide 6: Results History: Cash conversion
RESULTS HISTORY Cash conversion 3 500 120% 3 000 100% 2 500 550.0 80% 2 000 R million 60% 1 500 40% 1 000 226.6 230.6 500 20% 201.8 0 0% F11 F12 F13 F14 F15 F16 F17 F18 EBITDA Cash generated by operations after working capital changes Cash to EBITDA Sustained strong conversion of earnings into cas
Slide 7: Results History: Cash generation
RESULTS HISTORY Cash generation 2 400 2 200 2 000 1 944 1 800 1 693 1 620 1 548 1 600 1 488 1074 1524 1 400 R million 812 1 200 1 097 1 043 699 1 005 1 000 956 780 530 800 619 502 101 595 260 600 480 436 460 454 356 363 108 748 400 567 622 284 227 237 92 546 541 424 420 200 325 410 196 209 224 264 2
Slide 8: Results History: Dividend yield
RESULTS HISTORY Dividend yield 14% 12.0% 12% 10% 7.7% 7.4% 8% 6.4% 6.5% 6.3% 6.2% 6% 5.2% 4.9% 4.5% 4.1% 4.5% 4.3% 3.8% 3.7% 4.4% 4.1% 4.0% 4.0% 4% 2.8% 2% 0% F05 F06 F07 F08 F09 F10 F11 F12 F13 F14 F15 F16 F17 F18 Normal dividend yield Total dividend yield Based on share price at end of each year
Slide 9: Results History: Returns to shareholders
RESULTS HISTORY Returns to shareholders 2 500 2 246.1 2 000 1 703.3 819.8 1 500 1 359.7 550.0 1 322.0 638.8 1 197.4 953.5 R million 869.5 550.0 1 000 852.6 788.3 269.9 620.7 319.1 1 322.0 500 226.6 953.5 1 064.5 1 197.4 317.8 301.1 809.7 229.4 230.6 262.8 166.0 620.7 573.7 201.8 301.1 373.0 166.0 22
Slide 10: Group Financial Results
AN | Group Financial Results GROWING GREAT BRANDS
Slide 11: Group Financial Results: Income statement
GROUP FINANCIAL RESULTS Income statement F18 F17 Rm Rm % Revenue 13 437,5 13 184,6 1,9 Gross profit 5 939,5 5 762,2 3,1 Gross profit margin % 44,2 43,7 1,1 Selling and administrative expenses (3 387,0) (3 376,9) 0,3 Operating profit 2 552,5 2 385,3 7,0 Operating profit margin % 19,0 18,1 5,0 Net fi
Slide 12: Movement in group revenue
GROUP FINANCIAL RESULTS Movement in group revenue 14 000 13 500 R million 13 000 12 500 13 185 439 -186 13 438 F17 Price Volume F18 Higher selling prices mainly reflect the benefit of price increases taken in F17 Volume pressure in key categories in constrained and competitive environment
Slide 13: Gross profit margin history
GROUP FINANCIAL RESULTS Gross profit margin history 60% 50% 44.9% 45.4% 44.6% 43.1% 43.8% 43.9% 43.7% 44.2% 40% 30% 20% F11 F12 F13 F14 F15 F16 F17 F18 Stronger Rand and benign cost inflation across the basket of raw materials provided relief from accumulated cost pressure Few price increases in
Slide 14: Operating profit movement by business
GROUP FINANCIAL RESULTS Operating profit 7,0% up 2 600 2 550 2 500 2 450 2 400 R million 2 350 2 300 2 250 2 385 58 39 36 9 40 -21 7 2 553 F17 Entyce Snackworks I&J Personal Spitz Green Cross Other F18 Care Entyce: Margin recovery and cost savings offset by tea and coffee volume decline Snackwor
Slide 15: Marketing expenditure
GROUP FINANCIAL RESULTS Marketing expenditure 18% 16% 15.5% 15.3% 14% 12% 10% 8.4% 8.5% 7.9% 7.8% 7.5% 7.1% 7.6% 7.7% 8% 5.8% 6% 5.1% 4.6% 4.1% 4% 1.6% 1.8% 2% 0% * Excludes Coty F18 F17 Includes advertising and promotions, co-operative expenditure with customers and marketing department costs T
Slide 16: Cash generation and utilisation
GROUP FINANCIAL RESULTS Cash generation and utilisation F18 F17 Rm Rm % Cash generated by operations 2 691,9 2 318,6 16,1 Working capital to revenue % 24,5 22,2 10,4 Capital expenditure 419,9 545,6 (23,0) Net debt 1 269,8 1 444,1 Net debt / capital employed % 19,8 22,9 Strong conversion of earnin
Slide 17: Dividends
GROUP FINANCIAL RESULTS Dividends F18 F17 % Interim dividend - cps 175 162 8,0 Final dividend - cps 260 243 7,0 Normal dividend - cps 435 405 7,4 Dividend yield - %* 4,0 4,3 Special dividend - cps 250 - Total dividend - cps 685 405 69,1 Total dividend yield - %* 6,3 4,3 Normal dividend cover ratio
Slide 18: Capital expenditure and depreciation
GROUP FINANCIAL RESULTS Capital expenditure and depreciation 1 000 F12 F13 F14 F15 F16 F17 F18 12.0 0 900 849 882 10.0 0 800 101 260 700 8.00 600 567 546 541 532 R million 500 108 6.00 394 420 388 400 347 308 283 4.00 300 256 217 200 2.00 100 - - F12 F13 F14 F15 F16 F17 F18 Capital expenditure I&J v
Slide 19: Key capital projects spend summary
GROUP FINANCIAL RESULTS Key capital projects spend summary F18 F19 Actual Planned Rm Rm Tea packaging line replacements and upgrades 2 14 Rooibos upgrade project - 73 Biscuit line capacity and process improvements 119 92 I&J wet vessel replacement - 40 I&J vessel dry-docks and upgrades 25 46 I&J pro
Slide 20: Foreign exchange hedges
GROUP FINANCIAL RESULTS Foreign exchange hedges September 2018 to January 2019 to July 2019 to December 2018 June 2019 December 2019 % Cover % Cover % Cover USD imports 92% 53% 1% EUR imports 89% 57% 1% EUR exports 59% 62% 17% Consistent hedging philosophy provides stability to manage gross margin
Slide 21: I&J BBBEE shareholding extension
GROUP FINANCIAL RESULTS I&J BBBEE shareholding extension BBBEE shareholders remain invested through next long term rights application process Guaranteed minimum value accruing to BBBEE partners of R106,8 million Based on calculation as at initial maturity date Opportunity for further value,
Slide 22: Impact of new accounting standards
GROUP FINANCIAL RESULTS Impact of new accounting standards New standards implemented as of 1 July 2018 IFRS 15 – Revenue Reclassification between revenue, cost of sales and selling and administrative costs Lower gross profit and gross profit margin % No impact on operating profit or earnin
Slide 23: Illustrative impact of new accounting standards
GROUP FINANCIAL RESULTS Illustrative impact of new accounting standards F18 IFRS 15 IFRS 16 F18 Presented Reclassification Adjustments* Revised Rm Rm Rm Rm Revenue 13 437,5 (412,2) - 13 025,3 Cost of sales (7 498,0) (63,4) 12,9 (7 548,5) Gross profit 5 939,5 (475,6) 12,9 5 476,8 Gross profit margin
Slide 24: Performance for the year ended June 2018
Performance for the year ended 30 June 2018
Slide 25: Entyce Beverages: Tea income statement
Income statement F18 F17 % Rm Rm Revenue 3 834,1 3 757,1 2,1 Operating profit 792,6 735,1 7,8 Operating profit margin % 20,7 19,6 5,6 Good growth in tea operating profit despite lower volumes Price inflation from increases implemented in F17 and F18 in response to accumulated cost pressure Co
Slide 26: Entyce Beverages: Coffee income statement
Income statement F18 F17 % Rm Rm Revenue 3 834,1 3 757,1 2,1 Operating profit 792,6 735,1 7,8 Operating profit margin % 20,7 19,6 5,6 Coffee profit decrease due to pressure on mixed instant volumes Overall decrease in sales volumes Aggressive competitor discounting on mixed instant coffee P
Slide 27: Entyce Beverages: Creamer income statement
Income statement F18 F17 % Rm Rm Revenue 3 834,1 3 757,1 2,1 Operating profit 792,6 735,1 7,8 Operating profit margin % 20,7 19,6 5,6 Creamer profit growth despite aggressive competition Growth in volumes, particularly in H2 800 gram pack size distributed nationally Selling prices constrain
Slide 28: Sales volume and selling prices
Sales volume and selling prices %Δ Comments F18 vs F17 Tea revenue growth 5,4 Volume (1,8) Category decline at higher price points and consumer shift to lower priced product Ave. selling price 7,3 Price increases in F17 and F18 in response to continuing raw material cost pressure Coffee revenue grow
Slide 29: Market shares – value
Market shares – value 70% 59.2% 57.3% 60% 50% 44.5% 40.7% 40% 32.6% 31.0% 30% 25.2% 21.1% 20% 10.6% 10.6% 10% 0% Five Roses Freshpak Frisco Trinco Ellis Brown F17 F18 Market share declines due to competitor discounting and constrained environment Focus on long term profit margin and not just mar
Slide 30: Raw material costs
Raw material costs Cost impact of raw materials and commodities consumed in the period (F18 vs F17): 30 27 25 20 15 13 10 R million 5 4 0 -5 -2 -4 -10 -7 -15 -16 -20 Glucose Arabica Palm oil Robusta / Casien Black tea Rooibos chicory Rooibos cost increase due to constrained supply and export prici
Slide 31: Performance for the year ended June 2018
Performance for the year ended 30 June 2018
Slide 32: Snackworks: Biscuits income statement
Income statement F19 F18 % Rm Rm Revenue 3 960,8 3 956,2 0,1 Operating profit 705,0 666,4 5,8 Operating profit margin % 17,8 16,8 6,0 Constrained biscuit performance Volume decline, particularly in the first semester Category under pressure at higher price points Low income consumer shift t
Slide 33: Snackworks: Snacks income statement
Income statement F19 F18 % Rm Rm Revenue 3 960,8 3 956,2 0,1 Operating profit 705,0 666,4 5,8 Operating profit margin % 17,8 16,8 6,0 Strong snacks performance Slight increase in sales volume due to improved potato supply Selling price inflation from increases implemented in F17 Cost pressu
Slide 34: Sales volume and selling prices
Sales volume and selling prices %Δ Comments F18 vs F17 Biscuits revenue growth (1,7) Volume growth (5,8) Volume decline due to category pressure at higher price points and consumer shift to lower priced product. Lower decrease in H2. Ave. selling prices 4,3 Price increases in F17 Snacks revenue grow
Slide 35: Market share
Market share 50% Market shares – value 42.2% 41.2% 40% 30% 19.0% 18.6% 20% 15.7% 14.3% 10% 0% Bakers (Sweet) Bakers (Savoury) Willards F17 F18 Low income consumers shift to lower priced products Focus on long term profit margin and not just market share
Slide 36: Raw material costs
Raw material costs Cost impact of raw materials and commodities consumed in the period (F18 vs F17): 80 60 56 40 20 R million 0 -4 -11 -20 -16 -40 -46 -60 Flour Palm oil Maize Sugar Butter
Slide 37: Performance for the year ended June 2018
Performance for the year ended 30 June 2018
Slide 38: I&J income statement
Income statement F18 F17 Income statement % Rm Rm Revenue 2 487,6 2 362,7 5,3 Operating profit 425,0 389,1 9,2 Operating profit margin % 17,1 16,5 3,6 Revenue growth from higher selling prices and sales volumes, partly offset by lower Rand exchange rates achieved on export sales Good demand and
Slide 39: Movement in operating profit
Movement in operating profit 450 400 350 300 250 R million 200 150 100 50 - 389 -63 3 25 30 41 425 F17 Currency Fuel Unprotected Catch rates Price / volume / F18 strike other
Slide 40: Profit history
Profit history 550 480 453 450 62 382 73 67 350 70 71 R million 351 273 255 69 309 250 47 24 53 243 52 150 174 178 50 F14 F15 F16 F17 F18 Fishing Abalone Simplot Simplot profit negatively impacted by constrained retail environment and lower seafood trading profits Abalone decrease due to stronge
Slide 41: Fishing performance
Fishing performance 14 11.9 12 11.0 11.0 10.2 9.9 Hake tons per sea day 10 9.4 9.0 8.5 8.3 8.1 8 6 4 2 0 F09 F10 F11 F12 F13 F14 F15 F16 F17 F18 I&J catch rate Early signs of increasing size mix evident, supporting higher catch rates
Slide 42: Hake fishing quota (calendar year)
Hake fishing quota (calendar year) 45 000 35 000 25 000 15 000 5 000 2012 2013 2014 2015 2016 2017 2018 Deep sea Inshore 2018 quota reduced by 1 888 tons due to lower TAC Deep sea rights in place to end 2020 Commencement of renewal process announced BBBEE shareholding extended Level 1 BBBE
Slide 43: Sales volume and selling prices (hake)
Sales volume and selling prices (hake) %Δ Comments F18 vs F17 I&J Domestic revenue growth 9,7 Volume 1,5 Higher retail processed fish volumes Ave. selling prices 8,0 Price increases taken to mitigate cost pressure I&J Export revenue growth (5,4) Volume (0,1) Improved freezer vessel volumes offset by
Slide 44: Performance for the year ended June 2018
Performance for the year ended 30 June 2018
Slide 45: Personal Care income statement
Income Statement F18 F17 % Income Statement Rm Rm Revenue 1 190,6 1 194,5 (0,3) Operating profit 250,3 241,5 3,6 Operating profit margin % 21,2 20,2 5,0 Revenue from owned brands grew by 2,7% Volume growth from core ranges and innovation Price inflation from increases implemented in F17 E
Slide 46: Sales volume and selling prices
Sales volume and selling prices %Δ Sale volume and selling prices Comments F18 vs F17 Personal Care revenue growth* 2,7 Volume growth 1,7 Volume growth from market share gains in key categories Ave. selling price 1,0 Price increases in F17 * Like-for-like comparison excluding Coty Body spray mar
Slide 47: Performance for the year ended June 2018
Performance for the year ended 30 June 2018
Slide 48: Spitz and Kurt Geiger income statement
Income statement F18 F17 % Rm Rm Revenue 1 546,4 1 497,4 3,3 Operating profit 379,6 339,9 11,7 Operating profit margin % 24,6 22,7 8,3 Marginal footwear volume growth in difficult trading environment No price increases on core ranges in F18 Stock investment to support top selling styles Inc
Slide 49: Sales volume and selling prices
Sales volume and selling prices %Δ Comments F18 vs F17 Spitz & KG Footwear revenue growth 3,8 Sales volume 0,1 Strong December performance offset by muted second half Ave. selling price 3,7 Inflation in non core lines and lower volumes sold on end of season sales KG Clothing revenue growth 0,4
Slide 50: Spitz and Kurt Geiger operating profit and margins
Spitz and Kurt Geiger 400 Operating profit (Rm) 350 300 R million 250 200 150 100 50 0 F09 F10 F11 F12 F13 F14 F15 F16 F17 F18 Gross profit and operating profit margins 70% 60% 50% Margin % 40% 30% 20% 10% 0% F09 F10 F11 F12 F13 F14 F15 F16 F17 F18 Operating profit % Gross profit %
Slide 51: Trading density - Spitz stores
Trading density - Spitz stores 67 500 25 000 65 000 20 000 62 500 15 000 m2 R/m2 60 000 10 000 57 500 5 000 55 000 0 F13 F14 F15 F16 F17 F18 Trading density (R/m2) Average trading space (m2) Opened 1 new Spitz store Closed 3 Spitz stores in sub-optimal locations Refurbished 6 Spitz stores
Slide 52: Trading density - Kurt Geiger stores
Trading density - Kurt Geiger stores 60 000 4 300 50 000 4 200 4 100 40 000 4 000 m2 R/m2 30 000 3 900 20 000 3 800 10 000 3 700 0 3 600 F13 F14 F15 F16 F17 F18 Trading density (R/m2) Average trading space (m2) No store changes in F18
Slide 53: Performance for the year ended June 2018
Performance for the year ended 30 June 2018
Slide 54: Green Cross income statement
Income Statement F18 F17 % Rm Rm Revenue 366,1 371,9 (1,6) Operating profit 6,2 26,8 (76,9) Operating profit margin % 1,7 7,2 (76,4) Retail revenue growth of 0,5% from new stores Like-for-like trading density decreased Poor performance of Summer 2017 and Winter 2018 range Increased levels o
Slide 55: International
INTERNATIONAL Performance for the year ended 30 June 2018
Slide 56: AVI International operating profit history
AVI INTERNATIONAL Operating profit history 250 194 197 200 189 159 R million 150 129 132 117 100 92 76 56 58 50 - F08 F09 F10 F11 F12 F13 F14 F15 F16 F17 F18 Constrained performance in most markets Ongoing currency liquidity challenges in Zimbabwe and Angola Increased competition in Zambia P
Slide 57: Entyce, Snackworks and Indigo – Non RSA sales
AVI INTERNATIONAL Entyce, Snackworks and Indigo – Non RSA sales F18 F17 % Rm Rm International Revenue 992,1 1 016,2 (2,4) % of Grocery and Personal Care brands 11,0 11,4 (3,5) International Operating Profit 188,6 196,9 (4,2) % of Grocery and Personal Care brands 10,9 12,1 (9,9) International Operat
Slide 58: Prospects for F19
PROSPECTS FOR F19 Sustain Entyce, Snackworks and Indigo profit growth in a tough environment Sustain medium term approach through a tough demand cycle Risk of cost/margin pressure if recent Rand weakness persists Tactile price/volume management essential Low selling price inflation in cons
Slide 59: Prospects for F19
PROSPECTS FOR F19 I&J performance dependent on exchange rates and catch rates Exchange rates hedged at better levels than F18, plus benefits of recent Rand weakness Freezer vessel catch rates showing good improvement Prospect of continued improvement in size mix Good demand and prices in e
Slide 60: Prospects for F19
PROSPECTS FOR F19 Spitz Group Sustain medium term approach through a tough demand cycle Risk of cost/margin pressure if recent Rand weakness persists Tactile price/volume management essential Strong December promotions planned Extension of core range to stimulate demand Evolution of st
Slide 61: AVI Group investor proposition
AVI GROUP Investor proposition Ability to adapt to changing macro environment Actively reviewing business model in F19 Manage our unique brand portfolio to its long term potential Target real earnings growth in constrained environment High dividend yield – maintain normal dividend payout r
Slide 62: Questions
AN | Questions GROWING GREAT BRANDS
Slide 63: Information slides
AN | Information slides GROWING GREAT BRANDS
Slide 64: Business unit financial results
INFORMATION SLIDES Business unit financial results Segmental Segmental Operating Revenue Operating Profit Margin F18 F17 Δ F18 F17 Δ F18 F17 Rm Rm % Rm Rm % % % Food & Beverage Brands 10 282,5 10 076,0 2,1 1 922,6 1 790,6 7,4 18,7 17,8 Entyce Beverages 3 834,1 3 757,1 2,1 792,6 735,1 7,8 20,7 19,6 S
Slide 65: Footwear & apparel financial results
INFORMATION SLIDES Footwear & apparel financial results Segmental Segmental Operating Revenue Operating Profit Margin F18 F17 Δ F18 F17 Δ F18 F17 Rm Rm % Rm Rm % % % Footwear & Apparel 1 964,4 1 914,1 2,6 394,7 366,0 7,8 20,1 19,1 Spitz 1 546,4 1 497,4 3,3 379,6 339,9 11,7 24,6 22,7 Green Cross 366,
Slide 66: Revenue 1,9% up
INFORMATION SLIDE Revenue 1,9% up 13 500 13 400 13 300 R million 13 200 13 100 13 000 13 185 77 5 125 -4 49 -6 7 13 438 F17 Entyce Snackworks I&J Personal Spitz Green Cross Other F18 Care Entyce: Price increases, mostly in F17, offset by tea and mixed instant coffee volume decline Snackworks: Pr
Slide 67: Gross profit 3,1% up
INFORMATION SLIDE Gross profit 3,1% up 5 950 5 900 5 850 5 800 R million 5 750 5 700 5 650 5 762 76 36 12 18 46 -16 6 5 940 F17 Entyce Snackworks I&J Personal Spitz Green Cross Other F18 Care Entyce: Revenue growth and benefit of stronger Rand on imports, offset by lower mixed instant coffee volum
Slide 68: Cash flows
INFORMATION SLIDE Cash flows 3 500 3 000 2 500 2 000 R million 1 500 1 000 500 - 3 031 -268 -621 -420 -174 -127 -1 421 Cash from Working capital Taxation Capital Decrease in net Net interest paid Dividends paid operations and other expenditure debt
Slide 69: I&J fishing quota
INFORMATION SLIDE I&J fishing quota CY12 CY13 CY14 CY15 CY16 CY17 CY18 Quota (tons) South African Total Allowable Catch (TAC) 144 742 156 088 155 308 147 500 147 500 140 126 133 120 % change in TAC 9,8 7,8 (0,5) (5,0) - (5,0) (5,0) I&J 40 515 43 689 43 471 41 223 41 245 37 901 36 013 % 28,0 28,0 28,
Slide 70: Trading space and trading density: Spitz
INFORMATION SLIDE Trading space and trading density Spitz F18 F17 Number of stores 75 77 Turnover (Rm) 1 329 1 287 Average m2 19 841 19 776 Trading Density (R /m2) 66 960 65 071 Closing m2 19 460 20 037 Like-for-like metrics* F18 F17 Number of stores 72 72 Turnover (Rm) 1 281 1 258 Average & closing
Slide 71: Trading space and trading density: Kurt Geiger
INFORMATION SLIDE Trading space and trading density Kurt Geiger F18 F17 Number of stores 33 33 Turnover (Rm) 217 211 Average m2 4 194 4 135 Trading Density (R /m2) 51 640 50 920 Closing m2 4 194 4 115 Like-for-like metrics* F18 F17 Number of stores 31 31 Turnover (Rm) 210 202 Average & closing m2 3
Slide 72: Trading space and trading density: Green Cross
INFORMATION SLIDE Trading space and trading density Green Cross F18 F17 Number of stores # 45 42 Turnover (Rm) 276 275 Average m2 5 436 4 925 Trading Density (R /m2) 50 804 55 778 Closing m2 5 536 5 218 Like-for-like metrics* F18 F17 Number of stores # 38 38 Turnover (Rm) 253 270 Average & closing m
Slide 73: Closing number of stores and trading space
INFORMATION SLIDE Closing number of stores and trading space at the end of each period Period Spitz Kurt Geiger Green Cross End # of stores Closing m² # of stores Closing m² # of stores Closing m² December 2008 13 15,448 3 346 June 2009 56 15,595 3 346 December 2009 56 15,220 3 346 June 2010 56 15,0
Slide 74: Growing Great Brands
AN | GROWING GREAT BRANDS