ANNUAL RESULTS For the year ended 29 September 2019
PRESENTATION OUTLINE REVIEW OF THE YEAR 1 2 FINANCIAL PERFORMANCE TRADING PERFORMANCE 3 4 NEW PRODUCTS CAPITAL INVESTMENT 5 6 OUTLOOK
REVIEW OF THE YEAR
REVIEW OF THE YEAR Strong turnaround in performance with operating profit up 24.9% and headline earnings 38.1% higher Robust regional performance in weak consumer environment Early signs of recovery in international business Expansion in operating profit margin No further once-off costs in H2 Reduction in net debt/EBITDA ratio from 2.7 to 2.1 times
FINANCIAL PERFORMANCE
NEW ACCOUNTING STANDARDS New IFRS standards adopted in FY2019 IFRS 9 – Financial instruments No material impact on financial performance R1.9 million additional lifetime expected credit loss recognised in terms of IFRS 9 Adoption had no impact on lifetime expected credit loss recognised for prior years IFRS 15 – Revenue from contracts with customers Reclassification of distribution and warehouse allowances from expenses to revenue This has resulted in a decrease in revenue and selling costs for 2018 of R119.4 million
NEW ACCOUNTING STANDARDS New IFRS standard to be adopted in FY2020 IFRS 16 – Leases To be adopted in FY2020 Expect material impact on balance sheet Impact if IFRS 16 had been adopted for FY2019: Decrease in profit after tax R1.0 million Increase in the right-of-use asset R95.9 million Increase in the lease liability R119.8 million Increase in net debt to equity ratio 47.0% to 51.8%
CHANGE IN DISCLOSURE PRACTICE Group has amended disclosure practice to present expenses by “nature” as opposed to “function” as in the prior years Expenses now disclosed according to: Direct manufacturing costs Manufacturing operating costs Selling and distribution costs Other operating costs Cost of goods sold no longer disclosed as a separate line item
FINANCIAL PERFORMANCE Turnover +8.5% to R5.4 billion Improved efficiencies with direct manufacturing costs as a % of revenue reducing to 66.7% (2018: 67.7%), realising an additional R51m contribution This offset the impact of cost increases in other expense line items, resulting in a 90 bps improvement in the net operating profit margin Gains from 7.7% Rand depreciation Costs impacted by R27.5m increase in depreciation and amortisation, and once-off H1 costs of R37m Gross profit margin on a pre-IFRS 15 basis and before change in disclosure would have been 25.8% (2018: 24.9%)
FINANCIAL PERFORMANCE Operating profit +24.9% and operating margin 7.2% vs 6.3% in 2018 Regional margin +30 bps despite lower margin long life foods growing faster than fresh foods International returned to profitability EBITDA +22.9% and EBITDA margin 10.5% (2018: 9.2%) Income tax rebates of R10.0m (2018: R8.5m) relating to capital projects Diluted headline earnings per share +37.8% to 83.8 cps Dividend per share +37.4% to 27.9 cents
INCOME STATEMENT R’m 2019 2018 % change Revenue 5 414 4 990 8.5 Direct manufacturing costs (3 610) (3 378) 6.9 Manufacturing operating costs (582) (530) 9.9 Selling and distribution costs (387) (359) 8.0 Other operating costs (485) (445) 9.0 Other income 42 36 20.3 Operating profit 392 314 24.9 Net interest paid (117) (113) 3.7 Profit before tax 275 201 36.8 Tax (60) (47) 27.5 Profit after tax 215 154 39.6 Diluted HEPS (c) 83.8 60.8 37.8 WAN shares in issue (‘m) 261.6 252.6 3.6
GROUP TURNOVER GROWTH 5 414 4 990* 4 593 4 146 R'm 3 023 2015 2016 2017 2018 2019 * Restated
DRIVERS OF TURNOVER GROWTH 5 414 +0.7% +1.5% +2.9% +3.4% 4 990* R'm 2018 Volume Price Forex Acquisitions 2019 revenue growth inflation revenue * Restated
SEGMENTAL CONTRIBUTION 32% 33% 33% 28% 31% 48% 47% 45% 47% 39% 27% 20% 20% 20% 30% 2015 2016 2017 2018 2019 International Regional - Long Life Regional - Fresh
OPERATING PROFIT 600 30.0% 498 500 25.0% 407 392 400 20.0% 314 311 R'm 300 15.0% 12.0% 200 10.0% 10.3% 8.9% 7.2% 100 5.0% 6.3% - 0.0% 2015* 2016** 2017 2018 2019 Operating profit Operating profit margin * Normalised operating profit and margin ** Restated
INTERNATIONAL REVENUE BY CURRENCY ZAR 0% AUD 8% (2018: 1%) (2018: 15%) CAD 4% (2018: 4%) GBP 14% (2018: 14%) EUR 13% (2018: 12%) USD 61% Average exchange rates 2019 2018 Change (2018: 54%) USD R14.43 R13.25 8.9% GBP R18.33 R17.66 3.8% EUR R16.20 R15.46 4.8%
BALANCE SHEET - ASSETS R’m 2019 2018 % change Non-current assets 2 520 2 445 3.1 Property, plant & equipment 1 831 1 777 3.1 Intangible assets & goodwill 662 643 3.0 Other non-current assets 27 25 4.6 Current assets 2 194 2 139 2.6 Inventory 1 204 1 228 (2.0) Accounts receivable 948 810 17.0 Other current assets 35 67 (47.1) Bank balance & cash on hand 7 34 (79.4) Total assets 4 714 4 584 2.8
BALANCE SHEET – EQUITIES AND LIABILITIES R’m 2019 2018 % change Capital and reserves 2 478 2 318 6.9 Non-current liabilities 1 017 1 199 (15.2) Current liabilities 1 219 1 067 14.3 Accounts payable & accruals 726 701 3.7 Other current liabilities 309 308 0.4 Bank overdraft 184 58 >100 Total equity and liabilities 4 714 4 584 2.8
WORKING CAPITAL AND RETURNS 2019 2018 Net working capital days 119 124 Inventory days 107 117 57 57 Debtor days Creditor days (45) (50) Return on equity % 9.0 6.8 Return on assets % 4.6 3.6 Return on capital % 10.9 9.1
CASH MANAGEMENT 560 (65) (97) R'm (53) (238) (6) (254) Operating Net Net interest Dividends Loans Other Purchase cashflows working and tax paid repaid of PPE and capital paid intangibles changes
EXISTING LONG-TERM DEBT PROFILE 216 238 R'm 234 1 226 988 566 754 84 42 188 104 62 2018 2019 2020 2021 2022 2023 Balance outstanding Contractual capital repayments Bullet repayment of R450m due by end FY2021 Group may elect to extend portion of R450m capital repayment Interest paid quarterly in arrears
DEBT RATIOS 2019 2018 Net debt 1 164 1 250 R’m Net debt to equity % 47.0 53.9 Net debt to EBITDA x 2.1 2.7 Working capital facilities R’m 925 785 Working capital facilities utilisation R’m 177 24 Headroom 81% 97% Long-term loan facilities R’m 1 500 1 525 Long-term loan facilities utilisation R’m 988 1 226 Headroom 34% 20% Costs of debt Working capital facilities Prime minus 1.5% Term loan facilities Prime minus 1.25% to 1.55% Debt covenants Actual Covenant Net debt to EBITDA X 2.1 < 2.9 EBITDA interest cover X 4.8 > 4.0
TRADING PERFORMANCE
TRADING PERFORMANCE: REGIONAL R’m 2019 2018 % change Revenue 4 002 8.4 4 339 Long Life 2 362 9.2 2 579 Fresh 1 640 7.3 1 760 Operating profit 321 11.7 359 Operating profit margin 8.0% 8.3% Components of turnover growth Volume growth 3.5% (2018: 8.7%) Price/mix 4.1% (2018: -5.6%) Acquisition 0.8% (2018: 5.7%) Margins diluted by once-off costs in H1
TRADING PERFORMANCE: REGIONAL Long life foods volume growth 4.3% Good balance between promotional activity and volume growth Good performances from canned meats, fruit juice and dry foods Baked beans the fastest growing category; despite margin improvement still having an adverse mix effect on overall margin Inflation averaged approx. 3 – 5% which was recovered in price Trading in sub-Saharan Africa remained tough but gains made, although liquidity constraints are a challenge in some markets
TRADING PERFORMANCE: REGIONAL Fresh foods volumes flat year-on-year Ready meals resilient although not showing real growth Pie category stable but facing strong competitor activity Increased capacity in pie production represents opportunity for growth Acquisition of protein snack foods business contributed sales of R33 million
MARKET SHARE (RFG as manufacturer) Sept 2018 Sept 2019 Position Market shares (%) Jams 50 47 1 Canned fruit 48 49 1 Canned vegetables 17 18 2 Canned meats & meals 75 80 1 Long life fruit juices 21 22 2 Salads and pickles 31 31 1 Moving annual total. Retailers scanning data processed by IRI Worldwide (market shares in the defined dataset, in retail prices)
BRAND SHARE Sept Sept Position Brand shares (%) Brand 2018 2019 Jams 31 28 2 Canned fruit 29 31 2 Canned pineapple 59 65 1 Canned vegetable 14 16 2 Canned tomato 27 28 1 Corned meat 60 65 1 Moving annual total. Retailers scanning data processed by IRI Worldwide (market shares in the defined dataset, in retail prices)
BRAND SHARE Sept Sept Position Brand shares (%) Brand 2018 2019 100% fruit juice 16 18 2 Infant meals 10 9 2 Salads and pickles 17 16 3 Dry gravy 28 27 2 Moving annual total. Retailers scanning data processed by IRI Worldwide (market shares in the defined dataset, in retail prices)
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