PRIVATE & CONFIDENTIAL, NOT FOR FURTHER DISTRIBUTION BAT ZIMBABWE BUSINESS UPDATE February 2016
AGENDA Key Business Highlights Audited Results 2016 Outlook Questions
Key Business Highlights Volume decline across local brand portfolio of 10% versus SPLY Volume decline attributed to reduction in market size as a result of the challenging economic environment Dunhill volume growth of 12% versus 2014 off a niche consumer base, boosted by “Switch” variant Marketing activities have focussed in supporting local brands Everest and Madison Market share increase despite the industry volume contraction Full compliance to the indigenization Policy as certified by NIEEB Kick off of the TET activities
2015 Audited Results Income Statement (USD 000’s) 2015 2015 2014 2014 US$ 000 Actual ual Actual ual Revenue enue 45 265 44 562 • Revenue grew by 2% driven by marginal gains Cost of sales (12 892) (15 777) from pricing net of the impact of the excise Gross Profit 32 373 28 784 increase in November 2014, inspite of sales Selling and marketing costs (3 734) (3 998) volume drop • Gross Profit grew by 12% Administrative expenses (10 658) (8 033) mainly from reduced raw materials prices, Indigenous ESOT Expenses 11 (109) productivity initiatives and Other income – net cost containment 2 799 1 180 measures in our Operati ting ng profit manufacturing operations 20 791 17 824 • Selling and Marketing Finance (cost) / income – net (3) 76 Costs reduced by 7%due to distribution efficiencies Income tax expense (5 312) (4 447) and cost containment initiatives Profit t for the year ar 15 476 13 454 EPS 0.75 0.65
2015 Audited Results Income Statement (USD 000’s) 2015 2015 2014 2014 US$ 000 Actual ual Actual ual Revenue enue 45 265 44 562 • Administrative expenses grew by 28% due to higher Cost of sales (12 892) (15 777) service fees as a result of the implementation of the Gross Profit 32 373 28 784 new Group wide management system which Selling and marketing costs (3 734) (3 998) will increase efficiencies and saving opportunities; Administrative expenses (10 658) (8 033) and one-off costs associated with a staff Indigenous ESOT Expenses 11 (109) rationalization exercise • Other Income includes Other income – net 2 799 1 180 proceeds from disposal of Operati ting ng profit a warehouse (USD 20 791 17 824 1.4mns) Finance (cost) / income – net (3) 76 • Operating Profit grew by 17% Income tax expense (5 312) (4 447) • PAT grew by 15% Profit t for the year ar 15 476 13 454 EPS 0.75 0.65
2015 Audited Results Consolidated Balance Sheet (USD 000’s) 31 Dec 2015 31 Dec 2014 Actual ual Actual ual ASSE SETS TS • Inventory increased by US$ 1.6mns due to slow down on Non Non-cur urrent ent assets ets 9 178 178 9 9 813 813 sales towards the year-end Current nt assets ets: • Trade and Other receivables Inventories 8 670 7 098 increased by US$2.0mns Trade and other receivables 7 226 5 211 impacted by the property sales Cash and cash equivalents 3 869 5 458 proceeds which were received 19 19 765 765 17 767 in 2016 Total Assets ets 28 943 28 943 27 27 580 580 • Trade and Other Payables EQUITY Y AND LIABILI BILITIES TIES increased by US$5.9mns due Equi uity ty 14 654 14 654 16 038 to delays in obtaining exchange Non Non-cur urrent ent liabi biliti ties es 1 352 1 585 control approvals for payments Current nt liabilities es: to foreign suppliers, and the timing of payments for leaf Trade and other payables 10 718 4 804 purchases Provisions 1,926 5127 Current tax liability 293 26 • Provisions reduced by US$3.2mns due to ESOT 12 937 12 937 9 9 957 957 payments Total Equity ty and Liabi biliti ties es 28 943 28 943 27 580 27 580
2015 Audited Results Statement of Cash Flows (USD 000’s) 2015 2015 2014 2014 Actual ual Actual ual $’000 $’000 Profit before tax 20 788 17 900 Cash generated from operations 20 611 13 533 Net cash h gener nerat ated ed from operati ating ng activities es 15 281 8 8 462 462 Net cash utilised in investing activities (780) (2 011) Net cash used in financing activities (16 090) (8 283) Net increase/(reduction) in cash and cash equivalents (1 589) (1 832) • Net Cash generated from operations increased by US$ 6.8mns mainly due to delays in obtaining exchange control approvals for payments to foreign suppliers, and the timing of payments for leaf purchases • Net Cash Utilised in Investment activities reduced by US$ 1.3mns due to lower CAPEX • Net cash used in financing activities increased by US$ 8.0mns due to higher dividend paid in 2015
2016 Outlook Trading conditions expected to remain challenging despite the promising macro- economic indicators Excise maintained in the 2015 National Budget, which BAT Zimbabwe supports, to allow pricing stability and volume recovery The business is focussing on its key Strategic Leadership pillars to grow volumes and deliver value in 2016: - Great brands - Distribution excellence - Manufacturing quality - Cost efficiencies - Investing in our People
2016 Outlook Continued full compliance with the laws of the land including SI 264/2002 and Indigenisation legislation BAT Zimbabwe will continue to carry out empowerment programmes through: - ESOT - Tobacco Empowerment Trust - Route to Consumer Distribution Model Continued investment by BAT in Zimbabwe, both through our commercial business and through contract purchases of a significant proportion of the national tobacco crop by our local partner on behalf of BAT Group
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