AVI Limited presentation to shareholders & analysts for the six - PowerPoint PPT Presentation

AVI Limited presentation to shareholders & analysts for the six months ended 31 December 2016

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

KEY FEATURES  Sound performance in a challenging environment;  Revenue up 11,6% to R7,13 billion;  Operating profit up 8,1% to R1,41 billion;  Gross margin pressure from weaker Rand and rising raw material prices;  Cash from operations up 11,5% to R1,67 billion;  Capital expenditure of R284,0 million on efficiency, capacity and retail stores;  Return on capital employed of 27,0% for 12 months to December;  Headline earnings per share up 7,6% to 302,9 cents;  Interim dividend up 8,0% to 162 cents per share

RESULTS HISTORY Operating profit history 1 408 1400 1 302 310 1 152 1200 306 1 021 140 921 1000 309 124 854 167 296 800 103 160 303 674 R million 231 98 97 412 600 512 170 74 91 86 520 450 369 47 101 402 82 340 67 111 298 42 99 400 282 57 246 100 181 36 126 203 60 31 75 240 69 75 - 27 121 27 200 140 39 129 389 351 97 312 67 259 89 259 245 247 167 133 122 111 106 90 0 H1 F05 H1 F06 H1 F07 H1 F08 H1 F09 H1 F10 H1 F11 H1 F12 H1 F13 H1 F14 H1 F15 H1 F16 H1F17 Entyce Snackworks I&J Personal Care Footwear and Apparel  Compound annual growth rate from H1 F05 to H1 F17 of 15,9%  Operating profit margin increased from 10,0% in H1 F05 to 19,7% in H1 F17

RESULTS HISTORY Return on capital employed 7 000 35% 6 000 30% 5 000 25% 4 000 20% R million 3 000 15% 2 000 10% 1 000 5% 0 0% F09 F10 F11 F12 F13 F14 F15 F16 F17* Net operating profit after tax Average capital employed ROCE (%) * F17 represents a rolling 12 month period to 31 December 2016  Sustained returns including increasing capital expenditure to support long term growth and efficiency

RESULTS HISTORY Historical cash conversion 3 000 120% 2 500 100% 550.0 2 000 80% R million 1 500 60% 226.6 1 000 40% 230.6 201.8 500 20% 0 0% F09 F10 F11 F12 F13 F14 F15 F16 F17* EBITDA Cash generated by operations after working capital changes Cash to EBITDA * F17 represents 12 months to 31 December 2016  Sustained strong conversion of earnings into cash

RESULTS HISTORY Dividend yield (Year end) 14% 12% 12.0% 10% 8% 7.7% 7.4% 6.4% 6.2% 6.5% 5.2% 6% 4.9% 4.5% 4.5% 4.1% 4.4% 3.8% 4.1% 4.0% 3.7% 4% 2.8% 2% 0% F05 F06 F07 F08 F09 F10 F11 F12 F13 F14 F15 F16 Normal dividend yield Total dividend yield  Based on share price at end of each year  Total dividend yield includes payments out of share premium and special dividends  Excludes share buy-backs

RESULTS HISTORY Returns to shareholders 1800 1 703.3 1600 1400 1 359.7 638.8 - 1 197.4 550.0 1200 - 550.0 R million 953.5 1000 869.5 788.3 800 269.9 620.7 319.1 - - 600 525.8 953.5 1 064.5 1 197.4 226.6 400 809.7 317.8 230.6 301.1 262.8 620.7 - - 229.4 - - 525.8 201.8 166.0 200 373.0 301.1 262.8 238.6 229.4 166.0 116.0 0 - F05 F06 F07 F08 F09 F10 F11 F12 F13 F14 F15 F16 F17 Normal dividend paid Interim dividend declared Special dividend paid Share Buyback  Effective payout ratio from F05 = 87,0% of headline earnings

Group Financial Results

GROUP FINANCIAL RESULTS Income statement H1 F17 H1 F16 %  Rm Rm Revenue 7 134,6 6 393,0 11,6 Gross profit 3 123,6 2 892,8 8,0 Gross profit margin % 43,8 45,3 (3,3) Operating profit 1 407,7 1 302,1 8,1 Operating profit margin % 19,7 20,4 (3,4) Net financing cost (79,9) (54,9) 45,5 Share of Joint Ventures 42,2 16,1 162,1 Capital items 11,9 (7,4) Effective tax rate % 28,4 28,5 Headline earnings 979,8 903,4 8,5 HEPS (cps) 302,9 281,6 7,6

GROUP FINANCIAL RESULTS Movement in group revenue  Movement in group revenue 7 500 7 000 6 500 R million 6 000 5 500 5 000 4 500 6 393 789 -98 -35 86 7 135 H1 F16 Price Footwear Volume I&J Volume Other H1 F17 Footwear Volume I&J Volume Volume  Price increases in all categories taken to offset weaker Rand and higher raw material costs  Volume pressure in constrained environment with higher selling prices  I&J impacted by illegal strike and lower catch rates  Volume growth in Coffee, Snacks, Biscuits and Tea

GROUP FINANCIAL RESULTS Gross profit margin history 50% 46.5% 45.9% 45.3% 44.5% 44.3% 43.8% 40% 30% 20% H1 F12 H1 F13 H1 F14 H1 F15 H1 F16 H1 F17  Price increases unable to fully recover accumulated cost pressure in food and beverages  Ongoing focus on cost and efficiencies to protect gross profit margin  Rand at current levels will assist margin going into F18

GROUP FINANCIAL RESULTS Marketing expenditure 18% 15.4% 16% 14.7% 14% 12% 10% 8.4% 7.8% 7.4% 7.3% 7.3% 8% 7.1% 6.2% 6.2% 6% 4.7% 4.6% 4.4% 4.1% 4% 1.9% 1.7% 2% 0% Tea Coffee Creamer Biscuits Snacks I&J retail Personal Care * Footwear H1 F16 H1 F17 * Excludes Coty  Includes advertising and promotions, co-operative expenditure with customers and marketing department costs  Total expenditure for H1 F17 of R386,5m compared to R356,4m in H1 F16

GROUP FINANCIAL RESULTS Operating profit 8,1% up 1 420 1 370 R million 1 320 1 270 1 220 1 302 38 44 8 16 2 1 -3 1 408 H1 Entyce Snackworks I&J Personal Spitz Green Cross Other H1 F16 Care F17  Entyce: Higher selling prices and coffee volume growth  Snackworks: Higher selling prices; snacks and sweet biscuit volume growth  I&J: Benefit of weaker Rand and lower fuel price offset by illegal strike in August 2016  Personal Care: Higher selling prices; strong owned brands performance, particularly exports  Spitz: Constrained demand at higher price points  Green Cross: Retail sales growth

GROUP FINANCIAL RESULTS Cash generation and utilisation H1 F17 H1 F16 %  Rm Rm Cash generated by operations 1 669,3 1 497,2 11,5 Working capital to revenue % 21,8 21,8 - Capital expenditure 284,0 559,8 (49,3) Depreciation and amortisation 195,7 168,3 16,3 Net debt 1 489,2 1 549,5 Net debt / capital employed % 23,7 26,4 Interim dividend – cps 162 150 8,0  Good conversion of earnings to cash  Prior year capital expenditure includes I&J vessel payments  Gearing in targeted range

GROUP FINANCIAL RESULTS Capital expenditure and depreciation F11 F12 F13 F14 F15 F16 1 000 822 900 849 800 322 690 700 567 600 541 532 R million 623 500 406 413 416 257 250 400 347 332 308 283 300 222 257 260 202 218 181 200 158 146 130 113 102 100 153 100 291 105 310 127 200 137 226 150 560 166 284 194 - F11 F12 F13 F14 F15 F16 F17 Capital expenditure H1 Capital expenditure H2 Depreciation charge H1 Depreciation charge H2 Forecast capital expenditure H2 Forecast depreciation charge H2  Continued investment in manufacturing capacity, efficiency and retail stores  Expenditure in respect of new I&J vessels of R100,9m in F15 and R259,9m in F16

GROUP FINANCIAL RESULTS Key capital projects spend summary H1 F17 H2 F17 F17 Total Actual Planned Planned Rm Rm Rm 14 13 27 Tea packaging line replacements and upgrades 44 57 101 Biscuit line capacity and process improvements 16 25 41 I&J vessel dry-docks and upgrades 18 33 51 Woodstock processing plant replacements and upgrades 13 5 18 Abalone farm expansion and upgrades 16 14 30 Indigo distribution centre upgrade 20 17 37 Retail store additions and refurbishments - 38 38 Logistics vehicle fleet replacement 24 2 26 Bryanston campus extension 13 9 22 Backup power generation 178 213 391 284 406 690 Total capital expenditure

GROUP FINANCIAL RESULTS Foreign exchange hedges March 2017 to July 2017 to January 2018 to June 2017 December 2017 June 2018 % Cover % Cover % Cover USD imports 95% 62% 19% EUR imports 91% 70% 17% EUR exports 84% 75% 18%  Consistent hedging philosophy provides stability to manage gross margins  Benefit to I&J’s export earnings diminishing in line with Rand strengthening  Recent Rand stability will provide relief on import costs towards the end of F17 and into F18 if sustained

Performance and Prospects