INTERIM RESULTS FOR THE SIX MONTHS ENDED 1 APRIL 2018
PRESENTATION OUTLINE REVIEW OF THE SIX MONTHS 1 2 FINANCIAL PERFORMANCE TRADING PERFORMANCE 3 4 CAPITAL INVESTMENT MARKET-LEADING BRANDS 5 6 INNOVATION OUTLOOK 7 RHODES FOOD GROUP INTERIM RESULTS 2018 1
REVIEW OF THE SIX MONTHS RHODES FOOD GROUP INTERIM RESULTS 2018 2
REVIEW OF THE SIX MONTHS ▪ Competitive performance from regional segment ▪ Continued market share gains across core categories ▪ Trading conditions constrained domestically and regionally ▪ International impacted by higher canned fruit costs due to drought, stronger Rand, weak market for industrial purees and concentrates ▪ Acquistions of Pakco and Ma Baker contributed revenue of R209m ▪ Increased capital investment programme RHODES FOOD GROUP INTERIM RESULTS 2018 3
INTEGRATION OF RECENT ACQUISITIONS Pakco ▪ Performed well in first full year since acquisition ▪ Restructure fully settled and significant cost duplication removed ▪ Renewed focus has brought about improvement in sales distribution ▪ Business tracking ahead of expectations ▪ Brand portfolio relaunched in March and well accepted by trade – extensive product innovation – new pack formats – refreshed packaging designs RHODES FOOD GROUP INTERIM RESULTS 2018 4
INTEGRATION OF RECENT ACQUISITIONS Ma Baker ▪ Integration has taken longer than initially planned ▪ Top-line maintained but operating issues took time to settle ▪ Once-off costs resulted in a loss for first half ▪ Changes made to management team ▪ Pietermaritzburg plant restructured to focus only on baking, repackaging and distribution ▪ Automation of Pinetown plant completed in April ▪ Integration challenges addressed and business now profitable ▪ Focus on improving margins to achieve expected level of profit RHODES FOOD GROUP INTERIM RESULTS 2018 5
FINANCIAL PERFORMANCE RHODES FOOD GROUP INTERIM RESULTS 2018 6
FINANCIAL PERFORMANCE ▪ Turnover +16.6% to R2.5 billion – Regional +19.5% – International +3.6% ▪ Gross profit margin 25.3% (2017: 27.1%) – Regional fresh foods impacted by lower Ma Baker margins – Regional long life foods consistent with prior year – Increased costs and currency impact on international ▪ Operating cost growth, excluding acquisitions, contained to 9.2% – Depreciation and amortisation R19 million higher owing to higher capex over past two years and acquisitions of Pakco and Ma Baker – Further impacted by once-off Ma Baker costs and Alibaba relocation Note: The reporting period comprises 26 trading weeks compared to 27 weeks in the comparable prior period RHODES FOOD GROUP INTERIM RESULTS 2018 7
FINANCIAL PERFORMANCE ▪ Operating margin 6.5% (2017: 9.7%) – Regional impacted by Ma Baker dilution and once-off costs – On a comparable basis regional margin in line with prior period – International impacted by weak industrial purees market, higher canned fruit costs and strengthening currency ▪ Interest payments R17.4 million higher at R51.9 million – Increased capex programme and funding Ma Baker acquisition ▪ Profit after tax -35.1% to R80.9 million ▪ Headline earnings -34.8% to R82.4 million ▪ Diluted HEPS -38.9% to 31.4 cps ▪ 6.7% increase in weighted average number of shares RHODES FOOD GROUP INTERIM RESULTS 2018 8
INCOME STATEMENT R’m H1 2018 H1 2017 % change Turnover 2 151 16.6 2 507 Cost of goods sold (1 567) 19.5 (1 874) Gross profit 584 8.4 633 Gross profit margin 27.1% 25.3% Other income 41 (11.6) 36 Operating costs (417) 21.7 (507) Operating profit 208 (22.2) 162 Net interest paid (34) 50.3 (52) Profit before tax 174 (36.6) 110 Tax (49) (38.7) (30) Profit after tax 125 (35.1) 80 Diluted HEPS 51.4c (38.9) 31.4c WAN shares in issue (‘m) 236.7 6.7 252.6 RHODES FOOD GROUP INTERIM RESULTS 2018 9
GROUP TURNOVER GROWTH 2 507 2 151 1 988 R'm 1 295 1 152 H1 2014 H1 2015 H1 2016 H1 2017 H1 2018 RHODES FOOD GROUP INTERIM RESULTS 2018 10
COMPONENTS OF TURNOVER GROWTH 2 600 +9.7% 2 507 +1.3% 2 400 +6.3% 2 151 2 200 -0.7% 2 000 R'm 1 800 1 600 1 400 1 200 H1 2017 Volume Price Forex Acqui- H1 2018 revenue growth inflation impact sitions revenue RHODES FOOD GROUP INTERIM RESULTS 2018 11
SEGMENTAL TURNOVER 845 689 539 R'm 447 1 251 949 373 1 066 503 429 500 411 396 350 345 H1 2014 H1 2015 H1 2016 H1 2017 H1 2018 International Regional - Long Life Regional - Fresh RHODES FOOD GROUP INTERIM RESULTS 2018 12
OPERATING PROFIT 250 30% 208 25% 200 186 162 20% 150 126 15% 107 R'm 100 10% 9.7% 9.7% 9.4% 9.3% 50 5% 6.5% - 0% H1 2014 H1 2015 H1 2016 H1 2017 H1 2018 Operating profit Operating profit margin RHODES FOOD GROUP INTERIM RESULTS 2018 13
INTERNATIONAL REVENUE BY CURRENCY ZAR 2% (2017: 1%) AUD 18% (2017: 22%) CAD 3% (2017: 4%) USD 53% (2017: 47%) GBP 13% (2017: 12%) EUR 11% (2017: 14%) ▪ Rand appreciated 4% against trading basket of currencies in H1 2018 (H1 2017: Rand appreciated by 11%) ▪ Foreign exchange hedging policy maintained RHODES FOOD GROUP INTERIM RESULTS 2018 14
BALANCE SHEET - ASSETS R’m H1 2018 H1 2017 % change Non-current assets 1 914 21.9 2 334 Property, plant & equipment 1 272 30.4 1 659 Intangible assets & goodwill 633 2.2 647 Biological assets 9 20.0 11 Other non-current assets - 17 Current assets 2 103 7.5 2 260 Inventory 1 320 5.5 1 393 Accounts receivable 702 11.0 779 Biological assets 19 (43.7) 11 Other current assets 22 177.8 60 Bank balance & cash on hand 40 (56.9) 17 Total assets 4 017 14.4 4 594 RHODES FOOD GROUP INTERIM RESULTS 2018 15
BALANCE SHEET - EQUITY AND LIABILITIES R’m H1 2018 H1 2017 % change Capital and reserves 2 240 2 123 5.5 Non-current liabilities 847 646 31.2 Current liabilities 1 507 1 248 20.6 Accounts payable & accruals 737 683 7.9 Other current liabilities 289 226 27.4 Bank overdraft 481 339 42.0 Total equity and liabilities 4 594 4 017 14.4 RHODES FOOD GROUP INTERIM RESULTS 2018 16
WORKING CAPITAL MANAGEMENT H1 2018 H1 2017 Net working capital days 139 149 Inventory days 137 147 51 Debtor days 48 Creditor days (49) (46) ▪ Recovery of international sales volumes contributed to improved inventory days RHODES FOOD GROUP INTERIM RESULTS 2018 17
CASH MANAGEMENT 300 240 200 (103) 100 76 (68) - (82) R'm (105) (3) (100) (200) (300) (264) Operating Working Net interest Dividends Loans Loans Other Purchase cashflows capital and tax paid paid raised repaid and disposal changes of PPE RHODES FOOD GROUP INTERIM RESULTS 2018 18
TRADING PERFORMANCE RHODES FOOD GROUP INTERIM RESULTS 2018 19
REVENUE CONTRIBUTION RHODES FOOD GROUP INTERIM RESULTS 2018 20
REGIONAL PERFORMANCE R’m H1 2018 H1 2017 % change Revenue 2 097 1 755 19.5 1 252 Long Life 1 066 17.4 845 Fresh 689 22.7 Gross profit margin 27.5% 28.9% Operating profit 164 162 1.4 7.8% Operating profit margin 9.2% ▪ Components of turnover growth – Volume growth 5.1% – Price/mix 2.5% – Acquisitions 11.9% ▪ Operating margin diluted by once-off costs and Ma Baker loss in Fresh Foods RHODES FOOD GROUP INTERIM RESULTS 2018 21
REGIONAL PERFORMANCE ▪ Continued strong organic growth ▪ Strong performance from bakery category , driven by new products ▪ Continued good growth in pies, snacking and ready meals ▪ Fruit juice performed well in highly competitive environment ▪ Manufacturing and distribution agreement concluded with BOS Brands ▪ Sales in sub-Saharan Africa slowed to 19.6% as strengthening Rand made products less price competitive in certain markets ▪ Pakco products gaining good traction and new launches will add further momentum RHODES FOOD GROUP INTERIM RESULTS 2018 22
INTERNATIONAL PERFORMANCE R’m H1 2018 H1 2017 % change Revenue 411 396 3.6 Gross profit margin 16.8% 25.3% Operating (loss)/profit (1) 50 (102.7) (0.5)% Operating profit margin 12.6% ▪ Components of turnover growth – Price/mix (4.1)% – Volumes 11.5% – Forex (3.9)% ▪ R51m movement in operating profit had a significant effect on group results ▪ Canned fruit market stable but H1 operating margin well below guided 10% ▪ Losses incurred on industrial products RHODES FOOD GROUP INTERIM RESULTS 2018 23
INTERNATIONAL PERFORMANCE ▪ Export volumes recovered ▪ Impacted by increased cost of canned fruit owing to drought in Western Cape over the past two years ▪ Industrial puree market remains weak ▪ Further impacted by strengthening Rand ▪ Industrial product costs will reduce in H2 due to the lower price paid for fruit ▪ Business is on track to be utilising 50% of industrial product output internally by 2019 RHODES FOOD GROUP INTERIM RESULTS 2018 24
CAPITAL INVESTMENT PROGRAMME RHODES FOOD GROUP INTERIM RESULTS 2018 25
WELL CAPITALISED PRODUCTION BASE 15 production facilities located close to source of raw materials and markets * * Site being consolidated into facilities at Groot Drakenstein RHODES FOOD GROUP INTERIM RESULTS 2018 26
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