Overview - Financial Results

Transcription

Profile
Listed on the JSE, Tiger Brands Limited is a branded
fast-moving consumer packaged goods company
that operates mainly in South Africa and selected
emerging markets.
TIGE R BR AND S AN NUA L R EP ORT 2009
Our vision
To be the world’s most admired branded consumer
packaged goods company in emerging markets.
Strategy implementation
Ongoing focus and investment in:
c Brand building and innovation
c Africa expansion
c Domestic acquisitions
c Capital expansion
of core business
Group highlights
c Pleasing results achieved in most businesses in a
challenging local and global economic environment
c Disposal of Sea Harvest
c Bedding down of group’s African acquisitions
c Continued investment in capital expenditure to
expand operations
(Rands in millions)
2009
2008
20 430,4
18 954,0
8
3 133,4
2 522,6
24
% Change
Consolidated results (continuing operations)
Turnover
Operating income
Headline earnings
Total assets employed
Cash generated from operations*
Capital expenditure
2 170,1
1 815,0
20
11 687,3
12 676,9
(8)
3 141,4
3 094,2
2
561,1
641,8
1 382,1
1 149,5
704,0
786,0
Ordinary share performance (continuing operations)
Headline earnings per ordinary share (cents)
Dividends and distributions out of capital per ordinary share (cents)
Dividend cover (times)
Market price at year end (cents)
*Group results, including Adcock Ingram Holdings Limited and Sea Harvest in 2008.
2,0
1,9
15 050
13 740
20
c Acquisition of Crosse & Blackwell business
(effective 1 October 2009)
1
Group at a glance
Domestic food
The Domestic food division is a leading manufacturer, distributor and marketer of
food brands.
Grains: Ace, Albany, Golden Cloud, Jungle, King Korn, Morvite, Tastic
Groceries: All Gold, Black Cat, Colmans, Fatti’s & Moni’s, KOO
Snacks & Treats: Anytime, Beacon, Black Cat, FFWD, Inside Story, Jelly Tots, Maynards,
Smoothies, Wonderbar
Beverages: Energade, Hall’s, Oros, Roses
Value Added Meat Products: Bokkie, Enterprise, Like-it-Lean
Out of Home: Food service and home meal replacement
Home and Personal Care (HPC)
The HPC division is a leading manufacturer, distributor and marketer of personal care,
babycare and homecare brands.
Personal Care: Gill, Ingram’s Camphor Cream, Kair, Lemon Lite, Perfect Touch, Protein Feed
Babycare: Elizabeth Anne’s, Purity
2
Homecare: Airoma, Bio-Classic, Doom, FastKill, ICU, Jeyes, Peaceful Sleep, Rattex
International operations and Exports
Tiger Brands has direct and indirect interests in international food businesses in Chile,
Zimbabwe, Kenya and Cameroon.
Empresas Carozzi (Chile, Peru, Argentina): Bonafide, Carozzi, Costa, Molitalia – 24%
Haco Industries Kenya Limited (Kenya): Ace, Bic, Jeyes, Miadi, Motions, Palmers, TCB – 51%
Chocolaterie Confiserie Camerounaise (“Chococam”) (Cameroon): Arina, Big Gum, Kola,
Mambo, Martinal, Tartina, Tutoux, Start – 75%
National Foods Holdings Limited (Zimbabwe): Gold Seal, Red Seal – 26%
Datlabs (Pvt) Limited (Zimbabwe): Cafemol, Ingram’s Camphor Cream, Lanolene Milk – 50%
Fishing
Oceana is involved in the fishing, processing, marketing and trading of a wide variety of
marine species and cold storage operations. The results of Oceana were proportionately
consolidated up to 31 March 2009 after which date the earnings after tax have been equity
accounted in terms of the accounting standard applicable to associate companies.
Sea Harvest Corporation is involved in deep-sea fishing, fresh and frozen fish and the
processing and marketing of fish products. Sea Harvest was sold to a consortium led by
Brimstone Investment Corporation Limited effective 28 May 2009, for R578,1 million.
Domestic food
09
R2 408,3 million
08
R1 740,6 million
07
R1 601,5 million
Turnover
Operating income
Operating margin (%)
Operating income
Home and Personal
Care (HPC)
09
R485,0 million
08
R450,0 million
07
R382,7 million
Operating income
09
R214,0 million
08
R219,8 million
07
R104,2 million
Turnover
Operating income
International operations
and Exports
Turnover
Operating income
2009
Rm
2008
Rm
%
Change
15 922,3
2 408,3
15,1
14 446,8
1 740,6
12,0
10,2
38,4
2009
Rm
2008
Rm
%
Change
1 883,7
485,0
25,7
1 765,8
450,0
25,5
6,7
7,8
2009
Rm
2008
Rm
%
Change
2 030,6
214,0
10,5
1 519,3
219,8
14,5
33,7
(2,6)
Operating income
3
Operating income*
09
R135,3 million
08
R249,6 million
07
R198,0 million
*Sea Harvest was disposed of on 28 May 2009.
With effect from 1 April 2009 Oceana was
reclassified from a joint venture to an associate.
Fishing
Turnover
Operating income
2009
Rm
2008
Rm
%
Change
1 336,1
135,3
10,1
2 298,7
249,6
10,9
(41,9)
(45,8)
Chairman’s letter to shareholders
4
“This performance is particularly pleasing as it comes
after a period when the company was unsettled by serious
reputational issues as well as the departure of a number
of its senior, experienced executives.”
In a year in which Tiger Brands has for the first
time operated as a focused, branded, consumer
products company, I have pleasure in introducing
an excellent set of results which were achieved in
a difficult environment. Good strategic progress has
also been made during the year under review.
This performance is particularly pleasing as it comes
after a period when the company was unsettled by
serious reputational issues as well as the departure
of a number of its senior, experienced executives.
Peter Matlare and his Executive team have
demonstrated their ability to ably deal with the softer
issues such as compliance, reputation, morale and
cultural transformation, whilst at the same time
delivering a world-class bottom-line performance.
It is with great satisfaction that the unlocking of
shareholder value that was anticipated as a result
of the unbundling and separate listing of the
company’s healthcare interests – Adcock Ingram –
in August 2008, came to fruition. We are delighted
by the consequent enhanced focus of Tiger Brands
as a branded food and HPC (Home and Personal
Care) company. A major strategic objective was
thus achieved.
Operational results
The company has performed well in turbulent
economic conditions. The global financial crisis that
has contributed to volatile raw material input costs
and soft consumer demand, provided management
with significant challenges.
The company achieved an improvement in headline
earnings per share from continuing operations of
20%. Turnover and operating income from
continuing operations rose by 8% and 24%
respectively, translating to an operating margin of
15,3% (2008: 13,3%). The Fast Moving Consumer
Goods (FMCG) business, excluding Oceana,
increased turnover by 12% to R19,7 billion, largely
due to a strong first half as turnover increased by
only 1% in the second six months. This was due to
significant price deflation in food commodities in the
second half and the weaker trading environment.
At an operating income level, most of the businesses
performed strongly and delivered double digit growth.
Tiger Brands’ balance sheet remains extremely
healthy, with total net borrowings decreasing to
R377 million at 30 September 2009 from a peak
of R2,1 billion at 31 March 2009. Net borrowing
levels in the second half benefited in particular from
the proceeds of R578 million received on the sale
of the company’s 73,16% interest in Sea Harvest,
as well as the proceeds of R466 million relating to
the sale of the company’s residual shareholding in
Adcock Ingram.
Peter Matlare, the Chief Executive Officer, deals
with the operational results in greater detail later
in this report.
Investing for growth
The company continues to invest in upgrading
its facilities and expanding capacity to meet the
growing demand for its products. In recent years
the investment that has taken place includes the
installation of a new tomato sauce bottling plant, a
new pasta manufacturing facility, a major upgrade
of the Jungle Oats plant and the expansion of the
Albany bakery in Pretoria. Capital expansion
projects this past year totalled R240 million with
replacement and efficiency projects amounting to
R321 million. Expansionary capital expenditure of
R600 million is anticipated to be spent in the year
ahead. This includes the commencement of work
on the planned R561 million investment in the
replacement and upgrade of the Hennenman
wheat mill, in the Free State.
Strategy implementation
The company is committed to a growth path through
organic growth in its existing product categories
and acquisitive growth by way of selected
acquisitions in South Africa and elsewhere,
particularly in the rest of Africa.
Dear Shareholder
5
Chairman’s letter to shareholders
(continued)
In the year under review, excellent progress has
been made with the integration of the newly
acquired African businesses, namely the 51%
owned Haco Industries (Kenya) and 74,7% owned
Chococam (Cameroon). It is particularly pleasing to
note the willing acceptance of the management
teams of these companies in both Kenya and
Cameroon to becoming very much part of the Tiger
Brands Group. The company continues to actively
pursue other opportunities in Africa and it is hoped
that the ensuing financial year will lead to further
substantive investments in the African continent.
6
Subsequent to the year-end, the company acquired
the Southern African based mayonnaise business of
Crosse & Blackwell from Nestlé. Crosse & Blackwell
is a well recognised market leader and the
company is particularly pleased to be able to add
this brand to its portfolio. This acquisition will prove
to be of significant benefit and value to Tiger
Brands in the forthcoming years.
Transformation
Several years ago, the board of Tiger Brands
committed the company to achieving a broadbased BEE ownership structure with a Black
ownership target of 25% by the year 2010. It was
the stated objective that a minimum of 10% would
be effected by way of direct Black ownership with
the balance comprising indirect Black ownership. In
2005, the first phase of the empowerment initiative
took place which resulted in a direct Black
shareholding of approximately 4%. This transaction
was aimed primarily at the company’s employees.
The company was unable to progress with the
second phase of its Broad Based Black Economic
Empowerment initiative until such time as it had
resolved the competition law issues that it had
encountered and had completed the unbundling of
its pharmaceutical interests. During the year under
review, Phase II of the company’s Broad Based
Black Economic Empowerment transaction was
initiated and was approved by shareholders and
implemented in October 2009. This has resulted
in an effective Black shareholding of 28,9%, which
has exceeded the company’s stated objective. The
major component of Phase II is the Tiger Brands
Foundation, established for the benefit of selected
regional and community groups. The company is
particularly pleased to be able to contribute in this
way to the meaningful transformation of South
African society.
Corporate action
In October 2008, the company advised the board
of AVI Limited of its intention to make an offer for the
entire issued share capital of AVI Limited. This was
considered an important, strategic acquisition.
Careful steps were taken to ensure that there was
strong support for this acquisition from the
AVI Limited shareholders. Notwithstanding significant
shareholder support, the AVI board declined to
afford its shareholders an opportunity of voting on
the proposed transaction. In February 2009, in
view of the unwillingness of the AVI board to
support the acquisition, the company decided to
withdraw from the proposed transaction.
Corporate social investment
The company is fully committed to assisting in the
upliftment of the underprivileged in South Africa and
in the countries where it operates. In the year under
review, a total amount of R25,6 million was spent
on upliftment projects, compared to R22,0 million in
the previous year. Details of the way in which these
funds have been spent and the company’s
commitment to sustainable development, are
outlined in the sustainability report contained herein.
It is particularly in respect of nourishment where
Tiger Brands is pleased to be able to play a role,
by providing almost R17 million worth of food
donations in the form of daily school meals, the
provision of monthly family food packs and monthly
product and ad hoc donations of food products to
various charities. Over the course of the year,
approximately 100 000 people benefited from the
company’s various initiatives.
The company has progressed in responding to
challenges in its governance structures, particularly
with regard to its admitted contraventions of the
Competition Act in 2007 and 2008. The adoption
of a culture of greater team participation and
openness, together with the appointment of a Group
Compliance Executive in November 2008 and the
implementation of various compliance training
initiatives, have provided the board with much
comfort in respect of overall governance issues.
The company welcomes the publication of the
King Report on Governance for South Africa –
2009 (King III) and is taking all appropriate steps
to ensure compliance by the effective date of
1 March 2010.
Directorate
Early in the financial year under review, Doug Band
resigned as a non-executive director of the
company. Doug was appointed to the board in
2000 and served for a period as chairman of the
Remuneration and Nominations Committee. Doug
provided significant value and strategic input in the
deliberations of the board and his insight and
experience will be sorely missed.
During the course of the year, Chris Nissen resigned
as a non-executive director after serving on the
board for a nine-year term. Chris was chairman of
the company’s Transformation Committee. Chris’
experience played a key role in assisting the
company in achieving its transformation objectives.
We wish Chris well.
Phil Roux, an executive director, resigned from the
company in March 2009. Phil had, over a period
of some eight years, held a number of key executive
management positions in the company. Shortly after
leaving he was appointed a non-executive director
of the company. Phil’s extensive knowledge of the
group and his strategic and operational insights will
continue to be of significant benefit.
During the course of the year Michael Fleming, the
Chief Financial Officer, was appointed an executive
director of the company.
Appreciation
Peter Matlare and his relatively new but enthusiastic
management team, and all Tiger Brands employees,
are to be congratulated for an excellent set of results
under particularly difficult conditions, and for
instilling a fresh spirit of excitement and teamwork.
Prospects
The company continues to face strategic challenges
in being able to meet the growth expectations of
its shareholders. In this regard, the executive
management team will continue to focus on growth
opportunities in existing, new and adjacent
categories. Innovation will be a cornerstone of its
growth initiatives. Expansion opportunities that add
value, particularly in Africa, will continue to be
aggressively pursued and carefully assessed.
Tiger Brands has a wonderful basket of leading
brands and, notwithstanding the difficult trading
conditions that are anticipated in year ahead,
headline earnings per share, before taking into
account the once-off IFRS 2 costs relating to the
recently concluded BEE Phase II transaction, are
expected to show satisfactory growth in real
terms in 2010.
Governance
7
Lex van Vught
Chairman
Directorate
Non-executive directors
3. Susan (Santie) Botha (45)
BEcon (Hons), independent non-executive director,
chairman of the remuneration and nomination
committee
Santie is executive director of MTN Group
Management Services. Santie was appointed
to the Tiger Brands board in August 2004.
2. Bheki Sibiya (52)
BAdmin, MBA, deputy chairman, independent nonexecutive director, chairman of the transformation
committee and member of the remuneration and
nomination committee
Bheki is the executive chairman of Smartvest
Investment, chairman of Brait South Africa Limited
and Pretoria Portland Cement Company Limited
and director of Famous Brands Limited. Bheki was
appointed to the Tiger Brands board in March
2003.
4. Richard Dunne (61)
CA(SA), independent non-executive director,
chairman of the audit committee and the risk
committee
Richard is a director of Anglo Platinum and AECI
Limited and was recently appointed to the board of
Standard Bank Limited. Richard was appointed to
the Tiger Brands board in June 2006.
1. Lex van Vught (66)
BSc (Hons), BCom, independent non-executive
director, chairman, member of the audit committee,
and remuneration and nomination committee
Lex joined Tiger Brands in March 2003 as a nonexecutive director, and was appointed chairman
in 2006.
5. Ursula Johnson (55)
BA, independent non-executive director, member
of the transformation committee
Ursula is managing director of Network International
(Pty) Limited and a director of SA Civil Society
Initiative and SA International Women’s Forum.
Ursula was appointed to the Tiger Brands board in
February 2002.
8
1
2
3
4
5
6. Khotso Mokhele (54)
BSc (Agriculture), MS, PhD (Microbiology),
independent non-executive director, member of the
audit committee
Khotso was appointed to the Tiger Brands board in
August 2007. He currently serves as chairman of
Adcock Ingram Holdings Limited and Impala Platinum
Holdings Limited, and non-executive director of African
Oxygen Limited and Zimplats Holdings Limited. In
July 2007 he was appointed as a trustee of
Hans Merensky Foundation.
8. Phil Roux (44)
BCom (Hons), MBA, non-executive director
Phil joined Tiger Brands in 2001 and was appointed
to the executive committee in 2006 and to the
Tiger Brands board of directors on 1 August 2008.
Phil resigned as an executive director on 13 March
2009, and was appointed as a non-executive
director on 16 March 2009. Phil is currently
divisional director of Coca-Cola Sabco (Pty) Limited,
South Africa.
Audit committee*
R M W Dunne (Chairman)
K D K Mokhele
A C Parker
L C van Vught
B N Njobe
C F H Vaux
B Koornneef
M Matooane
T Segoale
Nominations/remuneration
committee*
S L Botha (Chairperson)
B L Sibiya
L C van Vught
Risk committee*
R M W Dunne (Chairman)
M Fleming
B N Njobe
C F H Vaux
I W M Isdale
J Parkin
Executive management committee*
P B Matlare (Chief executive)
N G Brimacombe
M Fleming
Transformation committee*
B L Sibiya (Chairman)
N G Brimacombe
U P T Johnson
P B Matlare
B N Njobe
C Jackson
B Koornneef
Z Mabaso
C Manning
M Matooane
*As at 30 September 2009.
7. André Parker (58)
BEcon (Hons), independent non-executive director,
member of the audit committee
André Parker was managing director of SABMiller
Africa and Asia until his retirement in September
2007. He is currently a director of AECI Limited
and Distell Limited. André was appointed to the
Tiger Brands board in August 2007.
9
6
7
8
Directorate
(continued)
Executive directors
1. Peter Matlare (50)
BSc (Hons), Political Economy (MA), chief executive
officer, member of the transformation committee
Appointed to the group in April 2008
Peter is a non-executive director of Oceana Group Limited
and Kumba Iron Ore Limited.
2. Neil Brimacombe (45)
BCom (Hons), MBL, executive director – responsible
for Consumer Food Brands. Neil has 10 years’ service
with the group and is a member of the transformation
committee
4. Bongiwe Njobe (47)
MSc (Agriculture), executive director – sustainability,
member of the transformation committee and of the
risk committee
Appointed to the group in August 2008, serves as a
non-executive director of Langeberg & Ashton Foods
(Pty) Limited.
5. Clive Vaux (58)
CA(SA), corporate finance director, member of the
risk committee, 25 years’ service with the group
3.Michael Fleming (42)
CA(SA), financial director, 9 years’ service with the
group, member of the risk committee
Michael is a non-executive director of Oceana Group
Limited and serves as chairman of Langeberg &
Ashton Foods (Pty) Limited.
10
1
2
3
4
5
Executive management committee*
A.Neil Brimacombe (45)
Executive director
Refer to Neil’s CV on page 10.
E.Matsie Matooane (44)
MIS, MBA, group executive: Human Resources,
member of the transformation committee
Appointed to the group in 2005
B.Michael Fleming (42)
Executive director
Refer to Michael’s CV on page 10.
F.Bongiwe Njobe (47)
Executive director
Refer to Bongiwe’s CV on page 10.
C.Brenda Koornneef (56)
BCom, group marketing and corporate strategy
executive, member of the transformation committee
G. Thabi Segoale (37)
MSc, managing executive: Grains division
D.Peter Matlare (50)
Chief executive officer
Refer to Peter’s CV on page 10.
H. Clive Vaux (58)
Corporate finance director
Refer to Clive’s CV on page 10.
*As at 30 September 2009.
11
C
E
G
Chief executive officer’s review
12
“The company is committed to ensuring that it is able to
meet the demand for its quality products by continuing to
invest for future growth.”
Headline earnings per share (group)*
Overview of results
09
1 407 cents
A significant factor in reviewing the performance
08
1 195 cents
was that it was “a tale of two halves”, with the
07
878 cents
impact of the recession on consumers becoming
1 207Includes
cents Sea Harvest and excludes
*Note:
Adcock Ingram in all years.
more apparent in the second half.
Turnover growth from continuing FMCG operations
of 12% was impacted by the significant price
It is with much pleasure that I can report to
deflation in food commodities and a weaker trading
shareholders on a year in which the company has
environment in the second half of the financial year.
performed admirably and good strategic progress
Turnover growth at the half year was 24% while
has been made.
turnover in the second six months reflected a
marginal increase of 1%.
Tiger Brands Limited, the company’s challenges
The improvement in turnover has been assisted by
have been externally driven, particularly the effect
the inclusion of the turnover of the African businesses
of the global financial crisis and the implications
which the company acquired during 2008 being
thereof on the South African economy.
Haco Industries (Kenya) and Chococam
(Cameroon).
Financial performance
Operating income from continuing FMCG
A comparison of the financial performance of the
operations increased by 28% with the operating
company to that of the previous year, is complicated
margin improving to 15,5% from 13,5% the
by the unbundling and separate listing of the
previous year. This improvement was influenced by
company’s Healthcare interests that took place in
a recovery in selling prices of certain raw material
August 2008, the disposal of the company’s interest
cost increases which in the prior year were partially
in Sea Harvest in May 2009 and the fact that the
absorbed. The improved beverages performance,
company ceased to proportionally consolidate
after a disappointing performance in the previous
Oceana Group Limited with effect from the end
year, contributed meaningfully to the results.
of March 2009.
The company is committed to investing in its brands
It is accordingly preferable, in order for shareholders
and its facilities in order to create and meet the
to have a meaningful appreciation of the
growing demand for its products. The year under
performance of the company, that my comments are
review has seen significant investment decisions to
focused on the company’s continuing operations.
meet this strategic imperative. A capital expansion
project at the Hennenman mill of over R561 million
was approved and the project is under way. The
expansion project at the Pietermaritzburg bakery,
costing in excess of R200 million will be
commissioned in the year ahead. This follows on
In my first full year as chief executive officer of
13
(continued)
the upgrading and expansion that has taken place
empowerment transaction that had yet taken place
in recent years at several operations. In total
in the South African fishing industry. Sea Harvest is
expansion projects for continuing operations
an excellent company and we wish it well under its
approved over the last three years have exceeded
new owners.
R800 million. The company is committed to
ensuring that it is able to meet the demand for its
quality products by continuing to invest for future
growth.
This is a credible performance in a challenging
environment.
Strategic focus
14
AVI Limited was identified as a strategic domestic
acquisition target. In his letter to shareholders, the
chairman has outlined the circumstances surrounding
this potential acquisition and the decision not to
proceed.
Much has been made of the company’s stated
objective of expanding further in the African
continent. The acquisitions made in Kenya (Haco
Tiger Brands has refined its strategy of focusing on
Industries) and Cameroon (Chococam) in the
organic growth complimented by domestic and
previous year, performed credibly and according to
international acquisitions.
expectations. We continue to actively pursue further
An important strategic acquisition was that of the
Crosse & Blackwell business that was acquired from
Nestlé, the effective date being subsequent to the
year end (1 October 2009). The Crosse &
Blackwell brand is a heritage brand well-known to
expansion opportunities on the African continent
and it is hoped that further progress in this regard
will be made in the forthcoming year.
Sustainable development
all South African consumers. We are confident in
It is vital that the company, as part of its strategic
the future success of this acquisition, which will be
focus, addresses the important issues of culture and
integrated into the Groceries business.
organisational health. The company has taken steps
During the period under review the company
divested of its interest in Sea Harvest. In one of the
earliest transformation initiatives, the company had
facilitated the acquisition by Brimstone of a minority
interest in Sea Harvest. The original transaction
to develop a number of targets that would indicate
the organisational health of the company, which
would include being an employer of choice, the
retention and development of the best people,
transformation and leadership development.
gave rise to a put option in favour of Brimstone
Sustainability issues have, in particular, been a
against Tiger Brands which could be exercised at
subject of focus in the year under review internally
any time during the three-year period ending in
as well as externally in the context of discussions
December 2009. The company, in reviewing its
on climate change. Tiger Brands understands
portfolio, felt that it was appropriate to offer its
sustainability is part of our licence to do business
shares in Sea Harvest to a consortium of investors
and the key enabler to build our reputation as a
led by Brimstone. The result was the most significant
solid corporate citizen. A sustainability strategy has
been developed, the key deliverables of which
shareholders in October 2009. Significant progress
include:
has been made in overall transformation, particularly
(i)regulatory compliance;
(ii)commitment to environmentally attuned business
practices;
(iii)working with key stakeholders to create shared
values; and
those elements relating to preferential procurement
and enterprise development, which has resulted in
the company becoming a level 5 contributor, having
moved from a level 6 contributor in 2008.
This is a significant achievement and is reflective of
the company’s commitment to transformation issues.
(iv)partnering with employees and their families as
fabric.
A formal compliance function has been established
which has assisted the business in the
implementation of a robust and proactive
compliance regime. In line with our commitment to
uphold the highest ethical standards, the company
will be participating in the South African Ethics
Indicator which measures honesty and transparency
in an organisation.
An environmental management strategy has been
completed and 20 key metrics have been adopted
in order to measure the critical areas of water,
waste, energy and packaging. The businesses will
be testing and implementing these measures during
the forthcoming financial year.
Details of the company’s sustainability strategies
and achievement are outlined in detail in the
sustainability report.
Transformation
Review of operations
FMCG
Strong performances were experienced in most
FMCG categories, however, underlying consumer
demand weakened marginally in the second half of
the financial year compared to the first six months.
An encouraging trend of a reduction in the rate of
inflation in the second half of the year extended
across most categories.
Domestic food increased turnover and operating
income by 10% and 38% respectively.
Within the Grains segment, the higher growth in
operating income relative to turnover was primarily
as a result of falling soft commodity prices which
benefited the Milling and Baking business in
particular. The prior year results were also adversely
affected by the substantial increases in raw material
commodity costs which were not fully recovered in
selling prices. Ace instant porridge continues to be
a very successful innovation in which the group
continues to invest, both in the form of marketing
A key element of the company’s transformation
and additional production capacity. Notwithstanding
strategy was the implementation of Phase II of
the difficult trading environment, the Albany brand
its ownership strategy which was approved by
recovered both volumes and market share in the
well as communities to build a solid social
15
(continued)
second half. Tastic and Aunt Caroline rice volumes
Home and Personal Care (HPC) grew operating
were negatively impacted by some consumers
income by 8% compared to an increase in turnover
switching from rice to maize products, primarily as a
of 7%.
result of the impact of high raw material rice prices.
Personal Care achieved a modest improvement in
Demand for Jungle Oats was particularly strong with
operating income in a category where pressure on
the oats category continuing to reap the benefits
consumer discretionary spending is particularly
of the previously reported major upgrade to its
noticeable. In Baby care, both the Nutrition and
manufacturing facility in Maitland. The Sorghum
Well-Being categories recorded acceptable results,
beverages business continued to disappoint, with
with the Purity and Elizabeth Anne’s brands feeling
both volumes and margins remaining under
the impact of the slowing economy as consumers
pressure.
came to grips with the tighter economic realities.
The Groceries business recorded a 27%
improvement in operating income off a 19%
increase in turnover. Strong volume growth was
TIG E R B RAN D S A NNU AL REP ORT 2009
achieved by Fatti’s & Moni’s with the new state-ofthe-art pasta manufacturing facility operational for
16
was particularly evident in the chocolate category.
the full 12 month period compared to six months in
the prior year. The KOO, All Gold and Black Cat
brands grew sales volumes, albeit at a much slower
rate than in the prior year, as consumer demand
The Homecare category was negatively affected by
a poor pest season in the first six months, which
impacted the performance of the Doom brand in
particular. However, the category ended the year
with a 6% increase in operating income, primarily
due to an improved performance by the Jeyes
portfolio.
Exports and International
remained sluggish particularly during the
Tiger Brands International, comprising the
second half.
Tiger Brands Export division, the Deciduous Fruit
Snacks & Treats recorded a pleasing growth of
14% in operating income off an increase in turnover
of 9%. This performance was achieved despite
pressure on consumer discretionary spending, which
business Langeberg & Ashton Foods (67% held),
Haco Industries (Kenya) and Chococam
(Cameroon), reflected a combined decrease in
operating income of 3% for the year. This reduction
in profitability was attributable to a significant
decline in the contribution from the Deciduous Fruit
The performance of the Beverages business reflected
business as a result of softer global demand arising
a marked improvement on the prior year with
from the global financial crisis and a stronger rand
operating income of R89,5 million being
exchange rate. The Tiger Brands Export division
R78,4 million ahead of last year. The prior year
produced an excellent result. This was assisted by
result had been negatively impacted by
its enhanced distribution capabilities and heightened
unfavourable weather conditions.
in-country sales focus, particularly in Zambia,
Angola, Mozambique and Zimbabwe.
With regard to Haco and Chococam, 2009 has
customers and other stakeholders, for the continued
been a year of bedding down the two African
support that you have provided Tiger Brands over
acquisitions concluded during 2008. Haco has
the past year. We look forward to continuing
performed well during the year under review and,
addressing the many challenges and opportunities
in addition, made a good contribution to the
that face us in assisting the company in achieving
distribution of Tiger Brands’ products in the
its strategic objectives and in meeting shareholder
East African region. The overall performance of
expectations.
Chococam was satisfactory despite the business
being challenged with significant cost increases
in certain major raw materials and an
underperformance in its key export market of
Gabon.
I have received the continued and valued support
of the members of the board together with executive
management and I would like to thank them all,
together with all of our employees, suppliers,
Peter Matlare
Chief executive officer
TIG E R B RAN D S A NNU AL REP ORT 2009
Appreciation
17
Group financial review
for the year ended 30 September 2009
Introduction
The unbundling and separate listing of the
company’s Healthcare interests on 29 August
associated with the Beverages business. These three
items were excluded for the purposes of determining
HEPS in the respective reporting periods.
2008, and the disposal of the company’s interest
In total, there were 173,6 million shares in issue as
in Sea Harvest on 28 May 2009, have given rise
at 30 September 2009. This includes 10,3 million
for the need to distinguish between earnings from
held as treasury shares and a further 5,9 million
continuing operations, which exclude both the
shares held, in aggregate, by the Tiger Brands
Healthcare and Sea Harvest results, and total
Black Managers’ Trust and Thusani Empowerment
group earnings. Total group earnings include the
Investment Holdings (Pty) Limited in terms of the
Healthcare results for the 11 months ended
Phase I staff empowerment transaction which was
29 August 2008 in the comparative period as well
implemented during October 2005. The weighted
as the results of Sea Harvest for the eight months
average number of ordinary shares (157,0 million)
ended 28 May 2009 in the current period and for
on which headline earnings per share and basic
the full twelve months of the comparative period.
earnings per share are based, excludes both the
treasury and the empowerment shares. The treasury
18
Financial results
shares and empowerment shares, together, account
Headline earnings from continuing operations
for 9,3% of the company’s total issued share
for the year ended 30 September 2009 of
capital.
R2 170,1 million reflected an increase of 19,6%
On a per share basis, total group headline earnings
compared to the previous year. At the headline
decreased by 7,7% to 1 407,4 cents compared to
earnings per share (HEPS) level, this translates to an
the prior year, whilst total group earnings per share
increase of 20,2% following a 0,6% decrease in
increased by 9,9% to 1 583,0 cents. For the
the weighted average number of shares in issue.
reasons outlined in the introductory statement above,
Earnings per share (EPS) from continuing operations
total group headline earnings per share and total
increased by 44,9% to 1 556,8 cents per share.
The higher percentage improvement in EPS
group earnings per share for 2009 are not directly
comparable with the previous year.
compared to HEPS is primarily due to the inclusion
As the company no longer has joint control of
in 2009, of an abnormal amount of R201,1 million
Oceana, it has ceased to proportionately
(relating to the capital profit of R234,3 million
consolidate its results with effect from the end of
arising from the disposal of the group’s residual
March 2009. Accordingly, although Oceana’s
shareholding in Adcock Ingram Holdings Limited,
results are included for the full year, the first six
net of taxation of R33,2 million) as well as the
months to 31 March 2009 are shown on a
inclusion of a capital profit of R62,1 million from
proportional consolidation basis, whereas the results
the disposal of the group’s 73,16% interest in
for the second six months to 30 September 2009
Sea Harvest. Furthermore, the comparative period
have been equity accounted as an associate
included a charge of R112,3 million relating to the
company. This change in accounting treatment of
impairment of the carrying value of the goodwill
Oceana makes meaningful comparison of the
group’s results difficult and hence, to assist
growth. Within Exports and International, the
shareholders in comparing the performance of the
sustained strength of the rand negatively impacted
company with the previous year, the information in
the performance of the Deciduous Fruit business,
the commentary below excludes Oceana’s results.
but pleasing results were achieved by Haco,
Also see note 16 of the accompanying financial
Chococam and the Tiger Brands Export division.
The commentary below therefore relates only to
the group’s FMCG businesses.
Abnormal items (excluding Oceana) reflect a net
abnormal profit of R342,4 million in 2009. The
current year composition of abnormal items primarily
Turnover from continuing operations (excluding
includes a capital profit of R234,3 million relating
Oceana) amounted to R19,7 billion, reflecting an
to the sale of the group’s residual shareholding in
increase of 12% on the previous year. This rate of
Adcock Ingram Holdings Limited; a capital profit of
growth is lower than the 24% increase recorded at
R62,1 million relating to the disposal of the group’s
the half year. Turnover showed a marginal increase
73,16% interest in Sea Harvest; the release to
of 1% in the second six months. This reflects the
income of an amount of R81,4 million relating to
impact of the significant price deflation in food
the Sea Harvest put option provision which is no
commodities and a weaker trading environment.
longer required; and the costs of R29,8 million
The full year improvement in turnover has benefited
incurred in the current year relating to the
from the inclusion of the turnover of the African
unsuccessful attempt by Tiger Brands to acquire
businesses, Haco Industries (Kenya) and Chococam
the entire issued share capital of AVI Limited.
(Cameroon), in which the company acquired a
51,0% and 74,7% stake on 1 June 2008 and
1 August 2008 respectively.
Net financing costs from continuing operations
(excluding Oceana) of R256,5 million (2008:
R87,7 million) rose sharply over the prior year,
Operating income for the year (excluding Oceana)
reflecting the increased level of gearing of the
rose by 28% to R3 054,9 million. The group
FMCG business as a consequence of the
operating margin from continuing operations
unbundling of Adcock Ingram, as well as the impact
improved from 13,5% last year to 15,5%,
of higher working capital demands, particularly
benefiting from a recovery in selling prices of
during the first six months of the year.
certain raw material cost increases which were
partially absorbed by the group in the prior year, as
well as a normalised Beverages performance after
this category was adversely impacted in the prior
year by cool and wet summer conditions. The
Milling & Baking, Groceries, Snacks & Treats and
Value Added Meat Products businesses produced
exceptional operating performances while Other
Grains, Home and Personal Care (HPC) and Out
of Home recorded single digit operating income
Group net debt from continuing operations has
reduced to R377,4 million at 30 September 2009
from a peak of R2 104,4 million at 31 March 2009.
Net borrowing levels in the second half benefited from
the gross proceeds of R578,1 million received on
28 May 2009 for the disposal of Sea Harvest, as
well as the net proceeds of R465,5 million relating to
the sale of the shares in Adcock Ingram Holdings
Limited received on 30 September 2009.
statements for further information in this regard.
19
Group financial review
for the year ended 30 September 2009 (continued)
Income from associates reflects a significant
increase compared to the prior year. This is due to
the inclusion for the first time of the company’s share
of the after tax earnings of Oceana which
amounted to R76,5 million (for the second six
months to 30 September 2009 as noted above),
as well as the inclusion of a capital profit of
R16,6 million arising on the part disposal of a
subsidiary by Chilean-based Empresas Carozzi.
A stronger trading performance by Empresas
Carozzi also contributed to the improvement.
The average tax rate, before abnormal items,
increased to 32,3% (2008: 30,7%). This was
primarily due to a reduced STC charge in 2008
as a result of a portion of the 2007 final dividend
being distributed as a payment of capital out of
share premium in January 2008.
20
Discontinued operations in 2009 comprise the profit
after tax attributable to the Sea Harvest fishing
business, determined from the commencement of the
2009 financial year to the date of its disposal on
28 May 2009. The prior year discontinued
operations include the profit after tax attributable
to the Healthcare business, determined from the
commencement of the 2008 financial year to the
date of its unbundling on 29 August 2008, as well
as the profit after tax attributable to Sea Harvest for
the 12 months ended 30 September 2008.
The share of income attributable to minority
shareholders decreased from R71,2 million in the
prior year to R48,5 million in 2009. The lower
share of income attributable to minorities is largely
due to the declining profitability in the group’s
Deciduous Fruit business, partially offset by a full
12 month contribution by the two partly owned
African subsidiaries, Haco and Chococam, which
were acquired during the second half of 2008.
Group cash flow performance (including
Healthcare in the prior year)
Cash generated from operations increased by
1,5% from R3 094,2 million in the prior year (which
includes 11 months trading from unbundled Adcock
Ingram) to R3 141,4 million. Cash available from
operations of R1 947,9 million reflected an increase
of 11,9% compared to the previous year. The previous
year was adversely affected by the payment of
Competition Commission administrative penalties
amounting to R152,3 million.
After taking into account dividend payments and net
cash movements from investing activities, there was
a net cash inflow, before financing activities, of
R812,5 million compared to a net cash outflow
of R1 620,5 million in the previous year. The prior
year included a significant cash outflow of
R2 240,9 million in respect of investing activities,
largely due to the distribution relating to the
unbundling of Adcock Ingram amounting to
R1 130,2 million, capital expenditure amounting
to R888,5 million and the cost of acquisitions of
R186,7 million.
The group ended the year with net borrowings
of R377,4 million (2008: R1 272,7 million).
Cash flow performance from continuing
operations (pro forma)
Continuing operations generated cash from
operations of R3 001,8 million in 2009 after
accounting for working capital outflows of
R470,7 million.
After taking into account dividend payments and the
net cash movements from investing activities, there
was a net cash inflow before financing activities of
R754,0 million. The cash inflow of R172,3 million
in respect of investing activities in 2009 largely
comprised the proceeds of R465,5 million from the
disposal of the group’s residual investment in Adcock
Ingram Holdings Limited, the net proceeds on
disposal of businesses amounting to R242,2 million,
less capital expenditure of R561,1 million.
Key financial ratios
The key ratios for the group are outlined below:
Profitability and asset management
Operating margin (%) – continuing operations
Net asset turn (times)
Return on average net assets (%)
Working capital per R1 turnover (cents) (end of year)
Financing and liquidity
Net debt/(cash) to equity (%)
Net interest cover (times)
Current ratio (:1)
Total liabilities to total shareholders’ funds (%)
FMCG only.
FMCG including Sea Harvest.
Including Healthcare and Sea Harvest.
20091
20081
20082
20072
20073
15,5
3,2
50
18,7
13,5
3,3
44
14,8
13,2
3,5
46
14,8
13,9
3,2
44
17,0
16,4
3,4
54
20,1
5,2
12,4
1,8
54
20,5
30,5
1,3
93
20,5
36,5
1,3
93
(1,3)
29,3
1,6
71
12,1
17,5
1,5
89
1
3
The improvement in the return on average net assets
(RONA) in 2009 is reflective of the increase in the
group’s profitability.
Notwithstanding continued investment in capital
expenditure and increased working capital
requirements, net interest cover remained at a healthy
level for continuing operations of 12,4 times (2008:
30,5 times). Net interest cover is expected to improve
in the year ahead given the lower levels of debt and
the more favourable interest rate environment.
The reduction in the percentage of total liabilities to
total shareholders’ funds reflects the lower level of
gearing in 2009. In addition, the net debt to equity
ratio reduced to 5,2% by the end of the financial
year (2008: 20,5%).
Capital reduction out of share premium in
lieu of final dividend
At the general meeting of shareholders of the
company held on 12 October 2009, the board of
directors was given the general authority to make
payments to shareholders out of the company’s
share premium account. Pursuant to this authority,
the directors have decided to declare a capital
distribution by way of a reduction of capital (in lieu
of the final dividend) out of share premium of
459 cents per share, for the year ended
.
.
30 September 2009. This, together with the interim
dividend of 245 cents per share, will therefore
amount, in aggregate, to a total payment to
shareholders of 704 cents per share (2008:
786 cents per share, comprising the interim and final
dividend). The total payment of 704 cents per share
represents a decrease of 10,4% on the total dividend
of 786 cents per share declared in respect of the
previous year, primarily as a result of the unbundling
of Adcock Ingram. The Tiger Brands final dividend in
respect of 2008 of 541 cents per share took into
account the earnings of Adcock Ingram up to the
date of the unbundling on 29 August 2008.
The company’s stated policy of paying an annual
dividend/distribution cover of two times, remains in
place. In respect of the 2010 financial year, the
two times annual dividend/distribution cover ratio
would be applicable to headline earnings before
taking into account the once-off IFRS 2 costs relating
to the recently concluded BEE Phase II transaction.
Inflation
Details of the group’s performance after adjusting
for the cumulative effects of inflation are outlined
on page 92. The effect of inflation is constantly
monitored and built into future plans in order to
meet the group’s long-term objective of creating
shareholder wealth in real terms.
2
21
Divisional review
DOMESTIC FOOD
Operating income
09
R2 408,3 million
08
R1 740,6 million
07
R1 601,5 million
Highlights
• Most categories achieved pleasing performances
• R ice category declined as consumers switched into
more affordable carbohydrate categories, benefiting
the Milling business
22
• Beverages reflected a sound recovery
Salient features
Turnover
Operating income
2009
Rm
2008
Rm
%
Change
15 922,3
2 408,3
15,1
14 446,8
1 740,6
12,0
10,2
38,4
Favourite brand
KOO is one of South Africa’s heritage brands and the strong
market leader in the canned foods category. In 2009 the
brand was voted no 3 in the “South Africa’s favourite brand”
survey run by TNS and the Sunday Times. The KOO brand is
continually strengthened by successful innovations such as
Chakalaka, Samp & Beans and flavoured paste, and supported
by strong marketing positioning – “the Best You can Do”

Overview - Financial Results

Transcription

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PIODAO GROUP | SMALL COMPANY | PORTUGAL