AVI Limited Class Y · JSE:AVI

AVI Limited Class Y — H1 FY2014 Earnings Presentation

66 slides from AVI Limited Class Y's earnings presentation, Mar 10, 2014

  1. Slide 1: Presentation to shareholders & analysts

    AVI Limited Presentation to shareholders & analysts for the six months ended 31 December 2013

  2. Slide 2: Agenda

    AGENDA  Key features and results history  Group financial results  Performance and prospects  Questions and answers

  3. Slide 3: Key features

    KEY FEATURES  Revenue from continuing operations up 10% to R5,40 billion  Operating profit from continuing operations up 11% to R1,02 billion  Headline earnings per share from continuing operations up 10% to 231 cents  Solid group performance notwithstanding pressure on consumers and rising inpu

  4. Slide 4: Results history

    RESULTS HISTORY Operating profit history - continuing operations 1200 1,021 1000 921 854 296 800 303 674 231 97 600 R million 520 512 170 86 91 74 450 47 402 82 111 67 101 99 42 3 400 282 57 298 240 100 36 181 246 126 60 203 69 31 75 - 27 27 75 121 200 39 16 129 140 67 97 259 259 89 245 247 106 111

  5. Slide 5: Results history: dividend yield

    RESULTS HISTORY Dividend yield Historical dividend yield (based on closing share price) 14.0% 12.0% 12.0% 10.0% 8.0% 7.7% 6.4% 7.4% 6.2% 6.0% 5.2% 4.5% 3.8% 4.1% 4.4% 3.7% 4.0% 4.0% 2.8% 2.0% 0.0% F05 F06 F07 F08 F09 F10 F11 F12 F13 Normal dividend yield Total dividend yield  Total dividend yield i

  6. Slide 6: Group financial results

    “ah 7114s § ce GROWING GREAT BRANDS

  7. Slide 7: Income statement - continuing operations

    GROUP FINANCIAL RESULTS Income statement - continuing operations H1 14 H1 13 Rm Rm % Revenue 5 400,3 4 891,6 10,4 Gross profit 2 394,2 2 246,6 6,6 Gross profit margin % 44,3 45,9 (3,5) Operating profit 1 020,7 921,3 10,8 Operating profit margin % 18,9 18,8 0,5 Net financing cost (30,7) (24,0) (27,9

  8. Slide 8: Impact of revision to Coty license agreement

    GROUP FINANCIAL RESULTS Impact of revision to Coty license agreement H1 14 Rm Revenue as reported 5 400,3 Less: Sale of opening stock on hand to Coty (36,1) Revenue restated to exclude once-off transaction 5 364,2 Add: Sales for November/December now on agency basis 55,5 Less: Commission and service

  9. Slide 9: Continuing operations – revenue 10,4% up

    GROUP FINANCIAL RESULTS Continuing operations – revenue 10,4% up Movement in group revenue 5 600 5 400 5 200 R million 5 000 4 800 4 600 4,892 106 190 105 59 58 (8) 5,400 F13 H1 Entyce Snackworks I&J Personal Spitz Green Cross F14 H1 H1 F13 Care H1 F14  Entyce: price increases in tea and coffee; vo

  10. Slide 10: Continuing operations – gross profit 6,6% up

    GROUP FINANCIAL RESULTS Continuing operations – gross profit 6,6% up Movement in group gross profit 2 450 2 400 2 350 2 300 R million 2 250 2 200 2 150 2,247 26 79 26 2 21 (6) 2,394 F13 H1 Entyce Snackworks I&J Personal Spitz Green Cross H1 F14 H1 F13 Care F14 H1  Entyce: revenue growth offset by h

  11. Slide 11: Continuing operations – gross profit margin

    GROUP FINANCIAL RESULTS Continuing operations – gross profit margin Movement in group gross profit margin 47.0% 46.0% 45.0% Gross profit % 44.0% 43.0% 42.0% 41.0% 40.0% 45.9% -0.6% -0.5% 44.8% -0.5% 44.3% F13 H1 Fashion brands Food and Normalised Coty restructuring F14 H1 H1 H1 F13 beverage brands F

  12. Slide 12: Continuing operations – operating profit 10,8% up

    GROUP FINANCIAL RESULTS Continuing operations – operating profit 10,8% up Movement in group operating profit 1 040 1 000 960 R million 920 880 840 921 11 52 28 6 6 (13) 10 9 1,021 H1 F13 Entyce Snackworks I&J Personal Spitz Green Cross Other H1 F14 F13 H1 Care F14 H1  Selling and administrative cos

  13. Slide 13: Group financial results: cash and net debt

    GROUP FINANCIAL RESULTS Continuing operations H1 14 H1 13 Rm Rm % Cash generated by operations 941,7 762,3 23,5 Working capital to revenue % 20,8 19,7 5,6 Capital expenditure 199,9 309,9 (35,5) Depreciation and amortisation 138,8 128,3 8,2 Net debt 522,6 782,2 Net debt / capital employed % 11,5 19,

  14. Slide 14: Cash flows

    GROUP FINANCIAL RESULTS Cash flows Cash generation – H1 F14 1 200 1 000 800 R million 600 400 200 - 1,132 (148) (200) 150 (220) (152) (31) (531) Cash from Working Capital Payment from Taxation Decrease in Net interest Dividends operations capital and expenditure Coty net debt paid paid other

  15. Slide 15: Capital expenditure & depreciation history

    GROUP FINANCIAL RESULTS Capital expenditure & depreciation history Historical & forecast capital expenditure & depreciation - H1 & H2 F9 F10 F11 F12 F13 F14 700 600 567 541 520 500 410 R million 400 337 257 250 300 280 258 256 138 217 320 200 92 182 186 261 191 129 143 96 94 97 113 100 166 86 199 92

  16. Slide 16: Capital projects spend summary

    GROUP FINANCIAL RESULTS Capital projects spend summary – F14 cash flow forecast Rm Coffee process improvement 24 Coffee packaging line upgrades 21 Tea packaging line replacement and upgrade 16 Biscuit process improvement 46 Snacks process improvement 14 Redhill distribution centre expansion 25 I&J v

  17. Slide 17: Beverages: Performance and prospects

    BEVERAGES Performance and prospects a PR rico SE el I —————— UV GROWING GREAT BRANDS

  18. Slide 18: Income statement - continuing operations

    Income statement - continuing operations H1 14 H1 13 % Rm Rm Revenue 1 416,1 1 310,0 8,1 Operating profit 258,9 247,4 4,6 Operating profit margin % 18,3 18,9 (3,2)  Continued strong performance from Tea  Leading market position and strong margins maintained  Margin pressure from high rooibos and

  19. Slide 19: Income statement - continuing operations

    Income statement - continuing operations H1 14 H1 13 % Rm Rm Revenue 1 416,1 1 310,0 8,1 Operating profit 258,9 247,4 4,6 Operating profit margin % 18,3 18,9 (3,2)  Coffee pressure from lower consumer demand and increased competition  Healthy profit margins maintained  Margin pressure from weake

  20. Slide 20: H1 14 vs H1 13 comments

    %Δ Comments H1 14 vs H1 13 Tea revenue growth 13,6 Volume 4,1 Key brands performed well, especially Freshpak Ave. selling price 9,1 Increases over last 12 months in response to raw material increases Coffee revenue growth 2,6 Volume (1,6) Pressure on affordable SKU’s with rising price points and sus

  21. Slide 21: Market Share

    Market Share Brand market shares H1 13 vs H1 14 60.0% 50.7% 52.5% 50.0% 40.0% 34.9% 35.4% 36.4% 34.7% 30.0% 24.2% 22.1% 20.0% 10.0% 0.0% Five Roses Freshpak Frisco Ellis Brown H1 F13 H1 F14

  22. Slide 22: Costs

    Costs  Cost impact of raw materials and commodities consumed in the period (H1 14 vs H1 13): 30 24 25 20 R million 15 9 10 5 3 0 -5 -1 -3 Palm oil Arabica Glucose Robusta / chicory Tea  Weaker Rand impacted on all imported / parity priced inputs  Palm oil and coffee USD prices lower; black tea US

  23. Slide 23: Prospects for H2

    Prospects for H2  Constrained consumer spending  Raw material pressure – weaker Rand  Selling price decisions to defend F15 profit margins  Maintain strong Tea position – Five Roses and Freshpak  Focus on mixed instant coffee market share - Frisco granules  Creamer volume leverage and margin i

  24. Slide 24: Snackworks: Performance and prospects

    SnackwoOrks Performance and prospects 4 f ees VA )). ANNE Mr tito el I ————————————————— UV GROWING GREAT BRANDS

  25. Slide 25: Income statement

    Income statement H1 14 H1 13 % Rm Rm Revenue 1 614,0 1 424,4 13,3 Operating profit 297,9 245,9 21,1 Operating profit margin % 18,5 17,3 6,9  Sustained strong Biscuits performance  Effective pricing / promotion to drive volumes  Factory performance – capacity, quality, efficiency  New flavour va

  26. Slide 26: Sales volume and selling prices

    Sales volume and selling prices %Δ Comments H1 14 vs H1 13 Biscuits revenue growth 14,1 Volume growth 10,4 Effective pricing / promotional activity and category growth Ave. selling prices 3,3 Limited raw material pressure in this period; sales mix Snacks revenue growth 10,8 Volume growth 4,7 Categor

  27. Slide 27: Market Share

    Market Share Brand market shares H1 13 vs H1 14 50.0% 44.1% 44.9% 45.0% 40.0% 35.0% 30.0% 25.0% 21.5% 21.1% 18.4% 19.1% 20.0% 15.0% 10.0% 5.0% 0.0% Bakers (Sweet) Bakers (Savoury) Willards H1 F13 H1 F14

  28. Slide 28: Costs

    Costs  Cost impact of raw materials and commodities consumed in the period (H1 14 vs H1 13): 14 12 12 10 8 6 5 R million 4 2 2 0 -2 -4 -6 -8 -6 Palm oil Butter Sugar Flour  Weaker Rand impacted on all imported / parity priced inputs  Good overall factory performances  Higher distribution cost (f

  29. Slide 29: Prospects for H2

    Prospects for H2  Constrained consumer spending  Raw material pressure – weaker Rand  Selling price decisions to defend F15 profit margins  Sustain biscuit volume momentum  Increased NPD and associated marketing  Ongoing focus on manufacturing yields / efficiency  Snacks factory investment –

  30. Slide 30: I&J: Performance and prospects

    ———— eT /\ ——— V GROWING GREAT BRANDS

  31. Slide 31: Income statement

    Income statement H1 14 H1 13 % Rm Rm Revenue 824,5 719,7 14,6 Operating profit 74,3 46,5 59,8 Operating profit margin % 9,0 6,5 38,5  Material benefit from weaker Rand  Higher catch and sales volumes due to:  Improved wet fishing fleet availability  Higher freezer vessel catch rates  Higher op

  32. Slide 32: Movement in I&J operating profit

    Income statement Movement in I&J operating profit 120 100 80 R million 60 40 20 - 46 56 (10) 5 (23) 74 H1 H1 F13 F13 Exchange rates Fuel Volume Operations H1 H1 F14 F14  Operations cost impact includes  Weather impact - approximately R8m (lower catch rates and processing inefficiency)  Timing and

  33. Slide 33: Sales volume and selling prices

    Sales volume and selling prices %Δ Comments H1 14 vs H1 13 I&J Domestic revenue 4,0 growth Volume 1,8 Increased retail volumes Ave. selling prices 2,1 Increases constrained by aggressive competition I&J Export revenue growth 21,7 Volume 8,1 Increased catch volume from improved freezer vessel catch r

  34. Slide 34: Market Share

    Market Share Brand market share H1 13 vs H1 14 50.0% 45.0% 43.8% 42.2% 40.0% 35.0% 30.0% 25.0% 20.0% I&J H1 F13 H1 F14

  35. Slide 35: Fishing Performance

    Fishing Performance I&J H1 catch rates (hake tons per sea day) 14.0 12.0 Hake tons per sea day 10.0 8.0 6.0 4.0 2.0 0.0 H1 F07 H1 F08 H1 F09 H1 F10 H1 F11 H1 F12 H1 F13 H1 F14 I&J catch rate  Catch rates still healthy but lower than last few years  Freezer fleet higher than last year  Wet fleet i

  36. Slide 36: Prospects for H2

    Prospects for H2  Increasing benefit from weaker Rand – better rates secured  Higher hake catch volumes  Export markets to remain constrained  Better operations performance  Lower cost fuel blend  Increased benefit from Marel project at Woodstock  MSC re-certification in progress  Ordered ne

  37. Slide 37: Fashion Brands

    FASHION BRANDS Performance and prospects

  38. Slide 38: Personal Care: Income Statement

    PERSONAL CARE Income Statement H1 14 H1 13 % Rm Rm Revenue 574,4 515,8 11,4 Operating profit 97,2 91,1 6,7 Operating margin % 16,9 17,7 (4,5)  Category constrained and competitive  Good Yardley cosmetics performance  Growth in body spray volumes notwithstanding increased competition  New tradin

  39. Slide 39: Personal Care: Sales volume and selling price

    PERSONAL CARE Sales volume and Selling price %Δ Comments H1 14 vs H1 13 Personal Care revenue 8,5 growth* Volume growth 4,0 Increase in body sprays and cosmetics Ave. selling price 4,3 Increases in F13 and mix * Like-for-like comparison adjusted for impact of Coty restructuring

  40. Slide 40: Personal Care: Market Share

    PERSONAL CARE Market Share Brand market share H1 13 vs H1 14 40.0% 38.0% 38.0% 37.3% 36.0% 34.0% 32.0% 30.0% 28.0% 26.0% 24.0% 22.0% 20.0% Body sprays H1 F13 H1 F14

  41. Slide 41: Personal Care: Prospects for H2

    PERSONAL CARE Prospects for H2  Constrained consumer spending  Raw material pressure – weaker Rand  Selling price decisions to defend F15 profit margins  Continue body spray volume recovery  Focus on wholesale channel  Export growth through AVI International  Capital project evaluation – dist

  42. Slide 42: Footwear & Apparel

    FOOTWEAR & APPAREL Performance and prospects

  43. Slide 43: Income statement: Spitz and Kurt Geiger

    Income statement Spitz and Kurt Geiger H1 14 H1 13 % Rm Rm Revenue 782,2 727,5 7,5 Operating profit 258,9 254,1 1,9 Operating margin% 33,1 34,9 (5,2)  Revenue growth impacted by:  Higher selling prices with footwear volume 4,6% lower  Clothing revenue up 25,6% - Kurt Geiger  Gross profit margin

  44. Slide 44: Sales volume and selling prices

    Sales volume and selling prices %Δ  Sales volume and selling prices Comments H1 14 vs H1 13 Spitz & KG Footwear 5,3 revenue growth Volume growth (4,6) Lower demand in constrained consumer environment Ave. selling price 10,4 Price increases, including core Carvela range increase in April 2013 KG Clo

  45. Slide 45: Spitz and Kurt Geiger operating profit

    Spitz and Kurt Geiger Operating profit 300.0  250.0 Spitz and Kurt Geiger 200.0 R million 150.0 100.0 50.0 0.0 H1 F06 H1 F07 H1 F08 H1 F09 H1 F10 H1 F11 H1 F12 H1 F13 H1 F14 Gross profit and operating profit margins 75.0% 65.0% 55.0% Margin % 45.0% 35.0% 25.0% 15.0% H1 F06 H1 F07 H1 F08 H1 F09 H1 F

  46. Slide 46: Spitz and Kurt Geiger trading density

    Spitz and Kurt Geiger Trading density - Spitz stores 50,000 25,000  Spitz and Kurt Geiger 40,000 20,000 30,000 15,000 R/m2 m2 20,000 10,000 10,000 5,000 0 0 H1 F06 H1 F07 H1 F08 H1 F09 H1 F10 H1 F11 H1 F12 H1 F13 H1 F14 Trading density (R/m2) Average trading space (m2) Trading density - Kurt Geiger

  47. Slide 47: Prospects for H2

    Prospects for H2  Constrained consumer spending  Cost of sales pressure – weaker Rand  Further price increase on core Carvela ranges to offset exchange rate pressure  Price decision impact on volumes  Continued space growth if right locations are available  Focus on Spitz ranging and retail ex

  48. Slide 48: Green Cross: Income Statement

    Income Statement H1 14 H1 13 % Rm Rm Revenue 163,1 171,0 (4,6) Operating profit 34,3 47,6 (27,9) Operating profit % 21,0 27,8 (24,5)  Wholesale performance impacted by lower demand and non-recurring tender business  Retail revenue growth with no new stores opened  Gross profit margin decreased f

  49. Slide 49: Green Cross: Prospects for H2

    Prospects for H2  Traction with brand growth opportunities  Revised product selection and ranging  New retail store design roll-out – 3 doors  Supply chain focus – procurement, manufacturing, distribution  Wholesale focus – footprint, service levels

  50. Slide 50: AVI International

    el I ———————————————— UV GROWING GREAT BRANDS

  51. Slide 51: AVI International operating profit history

    AVI INTERNATIONAL Operating profit history 90 80 73 77 70 70 17 60 56 23 46 24 R million 50 21 35 40 17 21 30 30 14 20 12 10 21 25 20 25 17 - H1 F10 H1 F10 H1 F11 H1 F11 H1 H1 F12 F12 H1 H1 F13 F13 H1 F14 H1 F14 Operating profit Tea history Biscuits Other  Growth in core brands  Increased market s

  52. Slide 52: Sales outside of RSA

    AVI INTERNATIONAL Entyce, Snackworks and Indigo – Sales outside of RSA H1 14 H1 13 % Rm Rm International Revenue 385,5 336,1 14,7 % of Grocery and Personal Care brands 10,7 10,3 International Operating Profit 76,5 73,3 4,4 % of Grocery and Personal Care brands 11,7 12,5 International Operating Marg

  53. Slide 53: AVI Group: Prospects for H2

    AVI GROUP Prospects for H2  Improved I&J performance  Higher exchange rates secured  Better catch rates if sustained  Improved operations performance  Leverage strong brand portfolio to sustain growth in challenging environment  Manage selling prices to secure F15 margins  Constrained consume

  54. Slide 54: Questions and answers

    “ah 7114s ce Questions and answers AV GROWING GREAT BRANDS

  55. Slide 55: Information slides

    “ah 7114s ce Information slides AV GROWING GREAT BRANDS

  56. Slide 56: Business unit financial results

    BUSINESS UNIT FINANCIAL RESULTS Continuing operations Segmental Segmental Operating Revenue Operating Profit Margin H1 14 H1 13 Δ H1 14 H1 13 Δ H1 14 H1 13 Rm Rm % Rm Rm % Rm Rm Food & Beverage Brands 3 854,6 3 454,1 11,6 631,1 539,8 16,9 16,4 15,6 Entyce 1 416,1 1 310,0 8,1 258,9 247,4 4,6 18,3 18,

  57. Slide 57: Footwear & Apparel financial results

    FOOTWEAR & APPAREL FINANCIAL RESULTS Income statement Segmental Segmental Operating Revenue Operating Profit Margin H1 14 H1 13 Δ H1 14 H1 13 Δ H1 14 H1 13 Rm Rm % Rm Rm % Rm Rm Footwear & Apparel 966,2 915,9 5,5 296,0 303,0 (2,3) 30,6 33,1 Spitz 782,2 727,5 7,5 258,9 254,1 1,9 33,1 34,9 Green Cross

  58. Slide 58: Marketing Expenditure

    INFORMATION SLIDE Marketing Expenditure Brand support - % of NSV 18.0% 16.1% 16.0% 15.2% 14.0% 12.0% 10.0% 8.9% 8.1% 8.2% 8.0% 7.3% 6.7% 7.2% 6.6% 6.3% 6.4% 6.0% 5.1% 3.9% 4.1% 4.0% 2.0% 2.2% 2.0% 0.0% Tea Coffee Creamer Biscuits Snacks I&J retail Personal care * Footwear *Excludes Coty H1 F13 H1 F1

  59. Slide 59: Returns to shareholders

    INFORMATION SLIDE Returns to shareholders Interim distributions to shareholders (CPS) 140 120 120 100 90 Cents per share 83 80 60 50 36 39 40 33 20 - H1 F08 H1 F09 H1 F10 H1 F11 H1 F12 H1 F13 H1 F14 Interim dividend paid Interim dividend declared  Annual dividend cover ratio reduced from 1,5 to 1,2

  60. Slide 60: Return to shareholders

    INFORMATION SLIDE Return to shareholders Distributions to shareholders (R'm) 1,600.0 1,400.0 1,356.4 1,200.0 550.0 1,000.0 869.5 R million 788.3 800.0 269.9 620.7 600.0 319.1 226.6 378.6 400.0 317.8 806.4 230.6 301.1 262.8 620.7 229.4 200.0 201.8 166.0 373.0 378.6 238.6 262.8 301.1 166.0 229.4 116.0

  61. Slide 61: I&J Quota– seafood products

    INFORMATION SLIDE I&J Quota– seafood products CY09 CY10 CY11 CY12 CY13 CY14 Hake Quota (tons) South African Total Allowable Catch (TAC) 118 578 119 861 131 847 144 742 156 088 155 308 % change in TAC (9,1) 1,1 10,0 9,8 7,8 (0,5) I&J 33 199 33 550 36 906 40 515 43 689 43 471 % 28,0 28,0 28,0 28,0 28,

  62. Slide 62: Gross profit margin history

    INFORMATION SLIDE Continuing operations – gross profit margin history Gross profit margin 70.0% 60.0% 50.0% 45.4% 46.5% 45.9% 44.3% 41.0% 41.0% 40.0% 30.0% 20.0% H1 F09 H1 F10 H1 F11 H1 F12 H1 F13 H1 F14

  63. Slide 63: Trading space and trading density: Spitz

    INFORMATION SLIDE Trading space and trading density Spitz H1 14 H1 13 Number of stores 67 64 Turnover (Rm) 698,4 661,4 Average m2 16 766 16 128 Trading Density (R /m2) 41 653 41 010 Closing m2 17 156 16 586 Like-for-like metrics* H1 14 H1 13 Number of stores 60 60 Turnover (Rm) 645,8 639,8 Average &

  64. Slide 64: Trading space and trading density: Kurt Geiger

    INFORMATION SLIDE Trading space and trading density Kurt Geiger H1 14 H1 13 Number of stores 32 31 Turnover (Rm) 83,8 66,1 Average m2 3 742 3 840 Trading Density (R /m2) 22 400 17 208 Closing m2 3 960 4 113 Like-for-like metrics* H1 14 H1 13 Number of stores 24 24 Turnover (Rm) 70,3 59,7 Average & c

  65. Slide 65: Trading space and trading density: Green Cross

    INFORMATION SLIDE Trading space and trading density Green Cross H1 14 H1 13 Number of stores 30 30 Turnover (Rm) 97,5 100,3 Average m2 3 382 3 382 Trading Density (R /m2) 28 834 29 663 Closing m2 3 382 3 225 Like-for-like metrics* H1 14 H1 13 Number of stores 30 30 Turnover (Rm) 97,5 100,3 Average &

  66. Slide 66: 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 June 2005 26 7,571 - - December 2005 29 8,232 1 128 June 2006 31 8,730 1 128 December 2006 35 10,397 1

AVI — H1 FY2014 Earnings Presentation on 6ix