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GROUP RESULTS PRESENTATIONFor the year ended 30 September 2017
2Group Results Presentation for the year ended 30 September 2017
Index
Overview
Financial & operational performance
Strategy update
3Group Results Presentation for the year ended 30 September 2017
Disclaimer
Forward-looking statement
This document contains forward looking statements that, unless otherwise indicated, reflect the company’s expectations as at
27 November 2017. Actual results may differ materially from the company’s expectations if known and unknown risks or uncertainties affect the
business, or if estimates or assumptions prove to be inaccurate. The company cannot guarantee that any forward looking statement will materialise
and, accordingly, readers are cautioned not to place undue reliance on these forward looking statements. The company disclaims any intention and
assumes no obligation to update or revise any forward looking statement even if new information becomes available as a result of future events or
for any other reason, save as required to do so by legislation and/or regulation.
Overview
Lawrence Mac Dougall –
Chief Executive Officer
5Group Results Presentation for the year ended 30 September 2017
Strong operating performance in FY17
Offset by associates, abnormal items & once-off forex gain in FY16
Group revenue+** up 2%
to R31.3 billion
Group operating income+ up 11%
to R4.6 billion
Domestic operating margin up 150bps to 15.6%
Group operating margin+ up 110bps to 14.8%
Total dividends of 1 080 cents
Up 1%
+From continuing operations | Group operating income from continuing operations before impairments, abnormal items & IFRS 2 charges ** Turnover restated for early adoption of IFRS 15
2 119
2 155
2 100
2 110
2 120
2 130
2 140
2 150
2 160
FY16 FY17
HEPS+ up 2%
Cents
O V E R V I E W
6Group Results Presentation for the year ended 30 September 2017
Gross margins benefit from commercial pricing philosophy
Further leverage from well controlled costs & supply chain productivity
* Group operating margin from continuing operations before IFRS 2 charges, impairments & abnormal items; FY15 & FY16 adjusted to exclude EATBI & HACO
34.1%
14.7%
31.8%
13.7%
33.4%
14.8%
0%
5%
10%
15%
20%
25%
30%
35%
40%
Gross margin Operating margin*
FY 15 FY 16 FY 17
+160bps
+110bps
7Group Results Presentation for the year ended 30 September 2017
Revenue growth of 2% impacted by low consumer demand
Aggressive competitor pricing in H2 as inflation slowed
FY16 FY17
R30.6bn
7%
price/mix
R31.3bn
(3%)
volume (2%)
forex
Total
growthPrice/Mix Total volume Forex
Domestic operations 4% 7% (3%) -
International (including Exports) (5%) 7% (3%) (9%)
Total continuing operations 2% 7% (3%) (2%)
O V E R V I E W
8Group Results Presentation for the year ended 30 September 2017
Market share a key focus area going forward
Nielsen
Snacks & TreatsPersonal Care
Culinary
Baby Nutrition
VAMP
Beverages
Home Care
Baby Care
BreadR T E Cereal
Rice
Maize
Flour
Dry PastaHot Cereals
Buns & Rolls Pre Mixes
-100
-50
0
50
100
150
200
250
300
350
400
0 10 20 30 40 50 60 70 80
Total SA – 12MM (SEP 2017) – Total basket
Tiger basket value share
Tig
er
va
lue
gro
wth
in
de
xe
d to
ca
tego
ry g
row
th
Bubble size: market sales value
O V E R V I E W
9Group Results Presentation for the year ended 30 September 2017
Marketing investment prioritised in support of power brands
Source: % = Nielsen value share, 12 month moving average to September 2017 | * Homogenised Food
TOP
#132%
#130%
#140%
#152%
#163%
#150%
#140%
#170%
#123%
#235%
#138%
#149%
#272%
#186%*
#120%
O V E R V I E W
Hold number 1 or number 2 positions
TOP
10Group Results Presentation for the year ended 30 September 2017
Beyond the numbers
Stakeholder engagement
o Conducted a baseline survey
o Feedback informed engagement strategy
o Developed appropriate plan
• Appointed relationship owners
Sustainability
o Group footprint
• Steady progress on reducing impact
o Natural resources
• Group strategy developed to respond
to current water supply risks
o Supply chain
• Small holder producer programme in
partnership with DAFF proving
successful
• 25,000 tons of fresh produce sourced
from emerging black farmers
Execution discipline entrenched
o Improved quality
• Reduced consumer complaints
o Safety improves
• LTIFR 0.30 vs. 0.36
o Improved governance
• Risk management effective
• Sound system of internal control
o Customer service
• OSA improves to 97%
O V E R V I E W
Financial & operational
performance
Noel Doyle
Chief Financial Officer
12Group Results Presentation for the year ended 30 September 2017
Strong operating results with EBIT before IFRS 2 up 11%
Offset by impairments, abnormal items & associates
Continuing operations – Rm FY 17 FY 16* % change
Turnover 31 298 30 588 2%
Cost of sales (20 856) (20 870) -
Gross profit 10 442 9 719 7%
Sales and distribution expenses (3 596) (3 465) 4%
Marketing expenses (771) (765) 1%
Other operating expenses (1 440) (1 296) 11%
Operating income before IFRS 2 charges 4 634 4 192 11%
IFRS 2 charges (110) (89) 24%
Operating income before impairments and abnormal items 4 524 4 103 10%
Impairments (560) (335) 67%
Abnormal items (23) 11
Operating income after impairments and abnormal items 3 941 3 779 4%
Net finance costs (176) (291) (40%)
Net foreign exchange (losses)/profit (30) 129
Income from associated companies 533 861 (38%)
Profit before taxation 4 267 4 478 (5%)
Taxation (1 234) (1 209) 2%
Profit for the year from continuing operations 3 033 3 269 (7%)
Profit for the year from discontinued operations 105 53 98%
Profit for the period 3 138 3 322 (6%)
Headline earnings per share (cents) 2 161 2 127 2%
– Continuing operations 2 155 2 119 2%
– Discontinued operations 6 8 (25%)
* Restated for early adoption of IFRS 15 as well as discontinued operations
F I N A N C I A L & O P E R A T I O N A L P E R F O R M A N C E
13Group Results Presentation for the year ended 30 September 2017
Abnormal items include strategic review & related restructuring costs
Partially offset by profit on sale of property, insurance & warranty claims
Rm FY17 FY16
Once-off consulting fees (132) -
Restructuring provision (79) -
Proceeds from insurance claim 86 -
Profit on disposal of property 73 11
Proceeds from warranty claim settlement 28 -
(23) 11
F I N A N C I A L & O P E R A T I O N A L P E R F O R M A N C E
14Group Results Presentation for the year ended 30 September 2017
HEPS growth impacted by associates & once-off forex gain in FY16
* From continuing operations
HEPS*FY16
(cents)
WANOSadjustment
Tradingperformance
Interest Forex IFRS 2charges
Tax rate change
Tax effect TradingHEPS*
Once offabnormals
(Incl. in HEPS)
Associates Once off forex gain(TBCG
settlementof debt)
Tax effect Otherheadlineearnings
adjustments
HEPS*
FY17
(cents)
F I N A N C I A L & O P E R A T I O N A L P E R F O R M A N C E
+13%
15Group Results Presentation for the year ended 30 September 2017
Income from associates down 38%
Associates decline driven by once-off items in FY16 & tough trading conditions
* Excludes capital profits of R69m in Carozzi, R47m in Oceana & R1m in National Foods Holdings
303234 216
449
402
224
29
29
16
80
79
69
- 10
90
190
290
390
490
590
690
790
890
FY16 FY16 excl capital profits* FY17 excl capital profits
Empresas Carozzi Oceana Group UAC of Nigeria National Food Holdings
Total income from associates (Rm) 861 744 525
Y-Y growth (%) 43% 23% (29%)Contribution to headline
earnings (%) 25% 22% 15%
F I N A N C I A L & O P E R A T I O N A L P E R F O R M A N C E
16Group Results Presentation for the year ended 30 September 2017
Domestic business delivers operating income growth of 15%
Exports & International improved performance offset by Deciduous Fruit
Grains
Consumer Brands
Food HPCB
Exports &
International Group*
Volume ▲ 1% ▼ 9% ▲ 2% ▼ 3% ▼ 3%
TurnoverR13.3bn
▲ 5%
R11.1bn
▲ 1%
R2.7bn
▲ 9%
R4.2bn
▼ 5%
R31.3bn
▲ 2%
Operating income**R2.4bn
▲ 18%
R1.3bn
▲ 7%
R0.6bn
▲ 17%
R0.4bn
▼ 20%
R4.6bn
▲ 11%
Operating margin** ▲17.7% ▲ 11.5% ▲ 23.5% ▼ 9.5% ▲ 14.8%
* From continuing operations ** Before IFRS 2 charges, impairments & abnormal items
F I N A N C I A L & O P E R A T I O N A L P E R F O R M A N C E
17Group Results Presentation for the year ended 30 September 2017
Grains
o Milling & baking delivers strong EBIT growth
• Strong wheat-to-bread value chain performance – H2 slows
• Well-managed procurement positions
• Strong performance from sorghum & maize-based breakfast
offerings
o Other Grains driven by breakfast and rice
• Significant EBIT growth in Jungle driven by improved mix
• Rice delivers exceptional performance on volume growth,
favourable mix & procurement position
• Pasta volumes impacted by price increases
12 725 13 309
2 002 2 361
0
4 000
8 000
12 000
16 000
FY16 FY17
Grains
Operating income up 18% to R2.4 billion
Turnover Operating income
Rm
Operating margin %
15.7% 17.7%
F I N A N C I A L & O P E R A T I O N A L P E R F O R M A N C E
18Group Results Presentation for the year ended 30 September 2017
Consumer Brands – Food
o Second consecutive year of significant improvement
o Operating income up 26% to R589 million
o Operating margin expands by 190bps to 11.8%
o Driven by improved pricing & productivity initiatives
o Key focus for FY18
• Improve market share off corrected margin platform
4 699 5 008
466 589
0
2 000
4 000
6 000
FY 16 FY 17
Groceries
Groceries – key driver of growth
Turnover Operating income
Rm
Operating margin %
9.9%11.8%
F I N A N C I A L & O P E R A T I O N A L P E R F O R M A N C E
19Group Results Presentation for the year ended 30 September 2017
Snacks, Treats & Beverages
o Volumes impacted by industrial action & SKU rationalisation
o Margin improvement despite volume declines
o Operating income up 2% to R324 million
o Launch of Heavenly aerated chocolate
• Well received by consumers & trade
o Focus on volume recovery in year ahead
Beverages – improved performance in H2
o Insufficient to offset H1 disruptions
o Revenue declines by 9%
o Operating income down by 8%
2 263 2 157
316 324
0
500
1 000
1 500
2 000
2 500
FY 16 FY 17
Snacks & Treats
S&T – gross margin improvement offsets revenue decline
1 3211 204
157 144
0
500
1 000
1 500
FY 16 FY 17
Beverages
Turnover Operating income
Rm
Operating margin %
14.0% 15.0%
11.9% 12.0%
F I N A N C I A L & O P E R A T I O N A L P E R F O R M A N C E
20Group Results Presentation for the year ended 30 September 2017
Home, Personal & Baby Care (HPCB)*
o Home Care
• 23% revenue growth
• Operating income up 48%
• Sustained demand in pest category
• Underpinned by in-store execution & optimal pricing
• Innovation – Doom auto & Peaceful Sleep family range
o Personal Care
• Challenging category dynamics due to highly discretionary
nature
• Outlook encouraging on successful launch of Ingram’s lotions
o Baby Care
• 3% increase in revenue
• Continued pressure in jarred baby food volumes
• Good volume & market share growth in pouches
• Operating income impacted by unfavourable mix change
* Excludes stationery
2 3432 556
521 606
0
500
1 000
1 500
2 000
2 500
3 000
FY16 FY17
HPCB*
Third consecutive year of growth underpinned by strong Home Care performance
Turnover Operating income
Rm
Operating margin %
22.2% 23.7%
F I N A N C I A L & O P E R A T I O N A L P E R F O R M A N C E
21Group Results Presentation for the year ended 30 September 2017
Exports & International
o Chococam
• Operating income up 9% in constant currency terms
• 9% volume growth from innovation
o Exports benefit from normalized sales into Mozambique
• Operating income up 10%
o Deli Foods
• Impacted by lower consumer demand
- Significant input cost inflation
o Deciduous Fruit (LAF)
• Adversely affected by rand strength, international pricing
pressure & unfavourable customer mix
4 428 4 189
496 399
0
1 000
2 000
3 000
4 000
5 000
FY 16 FY 17
Exports & International
Deciduous Fruit major contributor to underperformance
Turnover Operating income
Rm
Operating margin %
11.2% 9.5%
F I N A N C I A L & O P E R A T I O N A L P E R F O R M A N C E
22Group Results Presentation for the year ended 30 September 2017
Cash from operations up 43% to R6.1 billion
Driven by working capital improvement of R668 million
Rm FY 17 FY16
Cash operating profit 5 388 4 837
Working capital changes 668 (604)
Cash generated from operations 6 056 4 233
Capital expenditure 919 945
Net cash / (debt) 431 (2 028)
Total dividend (cents) 1 080 1 065
F I N A N C I A L & O P E R A T I O N A L P E R F O R M A N C E
23Group Results Presentation for the year ended 30 September 2017
Strength of balance sheet provides agility
* Restated in terms of IFRS 5 for the treatment of EATBI & Haco as discontinued operations
FY 17 FY 16
Cash generated from operations (Rm) 6 056 4 233
Net cash / (debt) (Rm) 431 (2 028)
Net (cash) debt / equity (%) (3) 13
Net debt / EBITDA* N/A 0.4x
RONA (%)* 35 31
Net interest cover* 25x 14x
Working capital per R1 of turnover 21.8 23.6
F I N A N C I A L & O P E R A T I O N A L P E R F O R M A N C E
24Group Results Presentation for the year ended 30 September 2017
Capex of R919 million disbursed
Prudent & diligent approach to capex approvals
F I N A N C I A L & O P E R A T I O N A L P E R F O R M A N C E
R480m
R234m
R46m
R83m
R76m
Capex of R919 million
Grains Consumer Brands - Food HPCB Exports & International Other
R16m
R30m
R54m
R149m
R142m
R528m
0 200 400 600
Brand development
Compliance
Efficiency optimisation
Replacement
Maintenance
Capacity expansion
25Group Results Presentation for the year ended 30 September 2017
Continuous improvement programme delivers in line with commitments
Underpinned by procurement savings
R173m
R79m
R221m
R32m
Manufacturing efficiencies Logistics savings
Procurement savings Financial Shared Services Centre
245
481
692
913
0
100
200
300
400
500
600
700
800
900
1000
FY 14 FY 15 FY 16 FY 17
Cumulative procurement savings
Total YTD
savings
R505m
Rm
F I N A N C I A L & O P E R A T I O N A L P E R F O R M A N C E
26Group Results Presentation for the year ended 30 September 2017
Muted outlook as headwinds grow
Macro uncertainty & increased volatility to persist
F I N A N C I A L & O P E R A T I O N A L P E R F O R M A N C E
No signs of consumer recovery
Competition to intensify
Potential resurgence of inflation on
the back of a vulnerable currency
Co
un
ter
str
ate
gie
s
Innovation
Pricing precision
Cost reduction initiatives
Flawless strategy execution
H
E
A
D
W
I
N
D
S
Strategic review
Lawrence Mac Dougall
28Group Results Presentation for the year ended 30 September 2017
Main objectives of strategic review
Developing a strategy for sustainable profitable growth
Portfolio growth
& strategy
o Rejuvenate domestic operations to
profitable growth
o International strategy accretive to
domestic performance
o Build a capable & cost conscious
culture with the capacity to grow
o Winning through a high performance
culture
Cost
& investment strategy
Operating model
& organisational design
Growth
CapabilityCost
S T R A T E G I C R E V I E W
29Group Results Presentation for the year ended 30 September 2017
Holistic approach to sustainable growth
Values
Our
Mission
Purpose
Financial
measure
Vision
Unleash the
power of
our people
Accelerate
growth from
our core
Drive
efficiency to
fuel our growth
Achieve
selling &
channel ubiquity
Create a
world class
integrated supply
chain
As a good corporate
citizen, build a
renewable &
sustainable future
Our consumers
are our business
We have passion
for excellence
We continue to reinvest
in our society
We value our people &
treat them with dignity
We act with integrity in
everything we do
We nourish &
nurture more lives everyday
Deliver top tier financial results & be recognized
by all stakeholders as the best FMCG company in South Africa
& the most desirable growth company on the continent.
We attract the best talent & are recognised as a great place to work
Drive top-line growth ahead of category growth and improve EBIT margin in line with top tier industry benchmark
No compromise to Quality, Safety & Internal Controls
S T R A T E G I C R E V I E W
30Group Results Presentation for the year ended 30 September 2017
Operating model & organisational design
Focus on the consumer, re-ignite innovation and leverage our scale as one Tiger Team
The operating model vision is subject to consultation in terms of the Labour Relations Act
IntegratedHaving one face to our customers & suppliers and
using our scale to aggressively compete
Performance drivenUncompromising & commercially savvy, with
the best talent in the industry
AmbitiousRelentlessly innovating & growing in SA
and beyond
Consumer obsessedPutting the consumer at the
heart of every decision
AgileResponding to the market through fast
decision making & simple ways of working
BETTER
TOGETHER –
THE TIGER
TEAM
Cost consciousnessRigorously challenging our bottom-line
to unlock fuel for growth
S T R A T E G I C R E V I E W
31Group Results Presentation for the year ended 30 September 2017
Results in the context of strategy
FY17 - generating fuel for growth FY18 - creating a growth mindset
o Prioritised support of power brands
o Pricing philosophy embedded & margin correction
achieved
o Centralised procurement hub delivering results
o Embedded ZBB philosophy driven by cost conscious
culture
o Significant progress in improving working capital cycle
o Deliberate growth strategy embedded in 2018 plans –
“achieve our true potential”
o Increased marketing investment
o Capability gaps identified & being filled
o New operating model implemented & integrated supply
chain active
o Improved communication/change management
o Good progress against our ambition to be “a great place to
work”
o Further working capital improvements
S T R A T E G I C R E V I E W
32Group Results Presentation for the year ended 30 September 2017
Focus areas FY18
Profitable volume recovery & market share growth
Winning with consumers
Focused brand support
Re-energized innovation
Winning with customers
On-shelf availability -
Joint business planning
Geographic expansion of power brands
Renewed M&A activity
Maintain focus on driving a cost conscious culture
Improved supply chain efficiency
Achieve
selling &
channel ubiquity
Accelerate
growth from
our core
Drive efficiency
to fuel our growth
Create a
world class
integrated supply
chain
S T R A T E G I C R E V I E W
Appendices
34Group Results Presentation for the year ended 30 September 2017
Contribution*
* Inside circle = FY16; Outside circle = FY17 +From continuing operations
30%
12%
15%
7%
4%
7%
2%
8%
15%30%
12%
16%
7%
4%
7%
2%
9%
13%
Milling and baking Other grains Groceries
Snacks and treats Beverages Value added meat products
Out of home HPCB International (including Exports)
38%
9%11%
7%
4%
4%
2%
13%
12%
40%
11%13%
7%
3%
2%
3%
13%
8%
TurnoverOperating
income
35Group Results Presentation for the year ended 30 September 2017
Additional information
* From continuing operations
** Restated
FY 17 FY 16**
Net working capital days*
Working capital per R1 of turnover 21.8 23.6
Net working capital days 80.8 96.1
Stock days 76.5 83.8
Debtor days 41.0 40.1
Creditor days 36.7 27.8
Effective tax rate (before abnormal items & associate income) 28.9% 30.9%