Salient Features - Continuing Operations
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National Foods FY2011 financial results

National Foods FY2011 financial results
Published on: Mar 3, 2016
Published in: Investor Relations      
Source: www.slideshare.net


Transcripts - National Foods FY2011 financial results

  • 1. Salient Features - Continuing Operations Volumes (mt) Revenue (US$’000) Operating profit (US$’000) Profit before tax (US$’000) Basic earnings per share (UScents) Dividends per share - paid and proposed (UScents) 30 June 2011 audited 351 533 201 170 8 627 7 304 7.37 1.55 30 June 2010 audited 300 143 160 818 2 888 869 4.60 - The Directors are pleased to present the Audited Financial Results of National Foods Holdings Limited for the year ended 30 June 2011 Chairman’s Statement Introduction The stable political and economic environment has enabled the Group to continue its strategy of streamlining and right sizing its operations whilst striving to match regional performance benchmarks. The Group is well positioned to enjoy its share of Zimbabwe’s economic growth if it can achieve increased capacity utilisation and access more locally grown raw materials. Government’s decision to introduce a nominal duty on imported maize meal in July 2011 should enable the Group to increase maize milling volumes without increasing retail price. Should a similar duty on flour be introduced it will likewise have positive impact. We support Government’s strategy to boost throughput of local manufacturers to stem the flow of factory closures and staff retrenchment. The increase in throughput will in turn encourage local crop production which is critical for national food security in an era of rising commodity prices. Seven of our thirteen manufacturing units are currently mothballed and we remain well positioned to process the anticipated increased volumes of locally grown commodity. The continued economic stability is also encouraging a longer term view towards plant upgrades and capital developments. Overview of Financial Performance The Group’s results for the full year ending 30 June 2011 reflect the delicate balance of retaining revenue in a fiercely competitive retail arena and protecting a slim operating margin whilst simultaneously retooling, recapitalising, establishing appropriate staffing levels and re-engineering systems and processes. Most year on year performance indicators show positive trends, with the exception of the gross profit percentage which we intentionally sacrificed in order to maintain valuable market share. Volumes sold at 351,000 tons were 17% above the prior year and this translated to revenue of $201m which was an annual increase of 25%. Gross profit measured in absolute dollar terms increased by 19% versus prior year. Total costs were reduced by $25 per ton in line with the need for a more competitive value chain. The voluntary retrenchment program is nearing completion and $1m was spent on this during the reporting period. The Group further spent $2.6m on repairs and maintenance. Other financial highlights for the year were: • Profit for the year from continuing operations of $5.1m. • Net debt reduced to $1.1m from $4.3m prior year. • Weighted average cost of debt of 10% versus 14% prior year. • Gearing reduced to 2.6% from 11% prior year. • Net cash flows from operating activities $4.1m. • Capital expenditure of $2.2m which was funded from internal resources. The Group has adequate funding facilities to support its short and medium term requirements. Operations Manufacturing operations were consolidated into fewer more productive sites in the year under review. This initiative improved efficiencies and our extensive distribution network ensured that service levels to our customers were maintained at even the most remote locations. Stockfeeds The Stockfeeds business continued on a positive trajectory with volume increasing by 31% over prior year, justifying management’s strategy to price competitively and distribute widely in order to assist in the rehabilitation of the nation’s livestock levels. The Group spent $2.2m on capital expenditure and this was predominantly directed towards enhancing manufacturing efficiencies, upgrading the IT platform, security and controls at the major manufacturing sites. A new rice packing plant was constructed in Mutare at an existing National Foods facility at a cost of $636,000 and was commissioned in July 2011. The Group’s technical relationship with In Vivo of France through Coprex of South Africa continues to provide innovations in formulations and processes which results in a better quality feed. We reached out to farmers through the provision of training programs that aim to improve the production efficiency of our customers. In July 2011 the assets of the Transport division were disposed of and a service level agreement concluded with the new owners to provide transportation for 15,000 tons of product monthly. The disposal is in keeping with our strategic intent to focus on and strengthen our core Milling, Stockfeeds and FMCG businesses supported by a strong distribution platform. Pursuant to this, greater resource has been allocated to our route to market architecture to improve efficiencies and capitalise on our brands and scale which are material competitive advantages. A new specialist beef and dairy feed plant at Harare will be commissioned in October 2011 and has a production capacity of 6,000 tons per month whilst a third pelleter was installed in June 2011 to support the expected growth in the poultry sector. Our investment into Capital Foods was profitable in the first year of operation and we expect this business to continue its growth pattern. Flour Milling Flour volumes for the year were flat on the comparative year however the gross margin fell by 3% in the last quarter as we endeavored to hold volumes at the remaining operating mill. The Group has sufficient stocks of the correct wheats to produce a high quality flour but remains under pressure to compete against cheap Turkish and Mozambican duty free imports. The Gloria brand remains the market leader in the prepacked flour category. Capital expenditure for this business amounted to $413,000 for the year and largely involved plant improvements. Projects earmarked for the ensuing financial year will further improve manufacturing efficiencies as well as enhance bulk flour distribution capabilities. Maize Milling Initiatives to improve quality, packaging and pricing during the year resulted in volume growth of 52% for the maize category. Capacity utilisation of the Harare and Bulawayo mills is 35% of installed capacity and the mills in Gweru, Mutare and Masvingo remain closed under care and maintenance. The Group has ample capacity and sufficient raw materials to contribute significantly to the national maize meal requirements into the foreseeable future. As with Flour the ongoing capital expenditure initiatives are focused on enhancing efficiency and quality. Red Seal is the entrenched market leader in the roller meal category whilst Pearlenta is now the second choice refined product in its category. Considerable investment will be made to continue to support the Pearlenta brand going forward. Abridged Group Statement of Comprehensive Income Management focus going forward will be on further improving production efficiencies and enhancement of bulk distribution capability whilst maintaining a strategy to grow volumes. FMCG Sale volumes in this business grew year on year predominantly through the introduction of sugar packaged into the Red Seal Brand. Like for like volumes increased by only 9% mainly due to significant competition in the rice category. In keeping with Group strategy, prices were adjusted and market share regained towards the year end. Red Seal salt, Fattis and Monis pastas, Perfecto noodles and Koo baked beans further consolidated dominant positions in their respective categories. During the year the Mazappy snack line, kapenta and biscuits were discontinued due to poor performance. Management has been tasked with re-engineering the FMCG business in the forthcoming year to enhance profitability. Depot Network Sales volumes increased by 93% compared with the prior year and contributed 26% of total Group revenue. In line with the growth potential of rural communities we will offer a greater range of products and services to our wholesale depot customers. Further capital expenditure has been earmarked to improve IT connectivity to the depot network. This initiative will enhance both stock and cash management. Management’s efforts to improve controls and service levels have impacted positively on this unit’s contribution to Group strategy and cash generation. Properties Five properties were disposed of during the year leaving net lettable area of 105,000m of which 57% was let to National Foods, 40% to third parties and 3% remains unoccupied. The Group’s balance sheet is bloated with property assets that are not producing sufficient returns, particularly given the substantial increases in property rates. Management will continue to dispose of non-core properties whilst creating a broader long term strategy for the overall portfolio in order to provide a better return on equity. Future Prospects The Group has recently implemented an activity based measurement system. An integrated sales and operations planning module driven by market demand principles will be adopted. In addition there will be continued strong emphasis on production efficiencies, savings from procurement, logistics and line-automation whilst growing revenue and volumes. Continued investment will be made behind the Group’s brands in an effort to drive consumer preference. Needless to say the success of our strategy is dependent upon continued political and economic stability and a concerted effort to grow more crops locally. Dividend The Board has declared a final dividend of 0.85 US cents per share payable on or about 7 October to shareholders registered in the books of the company by noon 23 September 2011. The transfer books and register of members will be closed from 24 September 2011 to 2 October 2011, both dates inclusive. Together with the interim dividend of 0.7 US cents per share this final dividend brings the total dividend for the year to 1.55 US cents per share. Acknowledgement and Appreciation I would like to express thanks to my Board colleagues for their support and commitment. In particular I wish to thank Mike Conway, who resigns with effect from 30 June 2011, for his guidance during much of the transition to a dollarised economy. I welcome Mr Neil Brimacombe of Tiger Brands to the Board from 1 July 2011. My thanks also go to the management and staff for their efforts and commitment which is evidenced by National Foods being the market brand leader in most of the categories in which we compete. I wish the management well in their strategies which I am confident will steadily improve returns to shareholders and stakeholders alike. Todd Moyo Chairman 23rd August 2011 Abridged Group Statement of Cash Flows Year ended 30 June 2011 audited USD Year ended 30 June 2010 audited USD 201 169 576 160 818 215 8 627 160 (1 594 616) 2 888 401 (1 449 116) 7 032 544 (551 333) 822 845 1 439 285 (1 198 098) 627 955 Profit before tax from continuing operations tax 7 304 056 (2 207 267) 869 142 2 278 801 Net cash flows from investing activities Profit for the year from continuing operations 5 096 789 3 147 943 Net cash outflow before financing activities (72 911) (251 085) 5 023 878 2 896 858 Continuing Operations Revenue Operating profit before depreciation and amortisation depreciation and amortisation Profit before interest and tax net interest equity accounted earnings Year Ended 30 June 2011 audited USD Year Ended 30 June 2010 audited USD Cash generated from operating activities net interest paid tax 5 802 803 (650 009) (1 044 255) (4 127 717) (1 572 003) (409 899) Net cash flows from operating activities 4 108 539 (6 109 619) (2 217 181) 1 244 597 (1 959 147) 4 610 723 Investing activities purchase of property, plant and equipment other investing activities Profit for the year from continuing and discontinued operations Other comprehensive income exchange differences arising on the translation of foreign operations (1 390) - Other comprehensive income for the year, net of tax (1 390) 2 896 858 (6 332 571) 8 259 418 Net increase in cash and cash equivalents (3 196 616) 4 801 375 Cash and cash equivalents at the beginning of the year 7 084 414 2 283 039 Cash and cash equivalents at the end of the year 3 887 798 7 084 414 - 5 022 488 2 651 576 (3 458 043) Financing activities Discontinuing Operations loss after tax for the year from discontinuing operations (972 584) 3 135 955 Total comprehensive income for the year Profit for the year from continuing and discontinuing operations attributable to: equity holders of the parent non-controlling interests 4 970 886 52 992 5 023 878 Abridged Group Statement of Financial Position ASSETS Non-current assets property, plant and equipment other non-current assets Current assets cash and cash equivalents other current assets assets classified as held for sale Total assets Equity and Liabilities Capital and reserves ordinary share capital non-distributable reserves distributable reserves non-controlling interests Total shareholders' equity Non-current liabilities deferred tax liability 4.24 7.37 At 30 June 2011 audited 2 896 858 2 896 858 7.27 Earnings per share (cents) from continuing and discontinuing operations basic earnings per share from continuing operations basic earnings per share 2 896 858 4 969 496 52 992 5 022 488 Total comprehensive income for the year from continuing and discontinuing operations attributable to: equity holders of the parent non-controlling interests 2 896 858 - 4.60 At 30 June 2010 audited USD USD At 30 June 2009 audited RESTATED USD 33 266 170 877 212 34 288 277 627 955 34 495 612 - 34 143 382 34 916 232 34 495 612 3 887 798 41 173 937 45 061 735 7 084 414 36 264 451 43 348 865 Non Distributable Share Capital Reserves USD USD 748 045 78 265 097 64 475 392 Total USD Non controlling Interests USD Total USD 683 788 25 367 596 (683 788) 10 767 897 2 896 858 2 896 858 - 36 135 493 2 896 858 2 896 858 - - 36 135 493 2 896 858 2 896 858 - Balance at 30 June 2010 Profit for the year Other comprehensive income Total comprehensive income Dividends paid Acquisition of subsidiary Share options excercised Balance at 30 June 2011 683 788 200 683 988 24 683 808 (1 390) (1 390) 24 682 418 13 664 755 4 970 886 39 032 351 4 970 886 (1 390) 4 969 496 (478 652) 200 43 523 395 52 992 52 992 24 825 77 817 39 032 351 5 023 878 (1 390) 5 022 488 (478 652) 24 825 200 43 601 212 4 970 886 (478 652) 18 156 989 Supplementary Information 1 Basis of preparation The basis of preparation of these financial statements is International Financial Reporting Standards (IFRS). Year Ended 30 June 2011 audited USD - 79 953 162 Distributable Reserves USD Balance at 30 June 2009 - Restated Profit for the year Other comprehensive income Total comprehensive income Transfer of redenominated share capital 2 283 039 27 696 741 29 979 780 Year Ended 30 June 2010 audited USD 683 988 24 682 418 18 156 989 43 523 395 77 817 43 601 212 683 788 24 683 808 13 664 755 39 032 351 39 032 351 2 Capital expenditure for the year 2 217 181 1 959 147 3 Commitments for capital expenditure Contracts and orders placed Authorised by directors but not contracted 723 217 1 858 416 1 599 469 2 581 633 1 599 469 25 367 596 10 767 897 36 135 493 36 135 493 The capital expenditure is to be financed out of the Group's own resources and existing borrowing facilities. 4 8 190 198 8 190 198 7 360 844 7 360 844 9 796 605 9 796 605 5 000 000 23 000 219 161 533 28 161 752 11 394 844 20 477 058 31 871 902 3 135 425 15 127 389 280 480 18 543 294 Total liabilities 36 351 950 39 232 746 28 339 899 Total equity and liabilities 79 953 162 78 265 097 64 475 392 Current liabilities interest-bearing borrowings trade and other payables current tax liability Group Statement of Changes in Equity New and amended IFRS and IFRIC interpretations The Group has decided to adopt IFRS 1, First-Time Adoption of International Financial Reporting Standards ahead of the effective date. This has had the effect in the current year financial reporting of disclosing three statements of financial position together with appropriate notes. The statements of financial position cover the opening position at 30 June 2009 with deemed US Dollar amounts, the closing balances as at 30 June 2010 and the closing balances as at 30 June 2011. Directors: T. Moyo (Chairman), J.J. Brooke (Managing)*, T.W. Brown, M.J. Conway, L.T. Murimwa (Financial)*, J.P. Schonken, N. Segoale. (*Executive)

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