Avi Limited Class Y · JSE:AVI

Avi Limited Class Y — FY2012 Earnings Presentation

58 slides from Avi Limited Class Y's earnings presentation, October 2012

  1. Slide 1: AVI Limited Presentation to shareholders & analysts

    AVI Limited Presentation to shareholders & analysts for the financial year ended 30 June 2012

  2. Slide 2: Agenda

    AGENDA  Key features and historical review  Group financial results  Capital projects  Operating environment  Performance and prospects  Questions and answers

  3. Slide 3: Key Features

    KEY FEATURES  Revenue from continuing operations up 11% to R8,29 billion  Operating profit from continuing operations up 23% to R1,37 billion  Headline earnings per share from continuing operations up 30% to 320 cents  Operating profit margin from continuing operations improved from 14,9% to 16,

  4. Slide 4: Historical Review: Operating profit history

    HISTORICAL REVIEW Operating profit history - continuing operations (excluding Real Juice, Denny and Alpesca) 1,400 1,386 1,200 308 1,121 1,000 236 156 915 892 806 101 179 800 151 133 718 133 95 91 Rm 105 509 147 73 600 238 74 329 435 115 60 160 262 - 47 51 117 233 400 193 84 6 157 186 105 127 200 40

  5. Slide 5: Historical Review: Historical cash generation

    HISTORICAL REVIEW Historical cash generation- continuing operations 1,400 1,200 1,043 1,005 1,000 780 800 502 619 595 Rm 600 480 454 436 460 356 363 400 284 237 227 92 541 200 410 325 209 224 264 256 196 - F05 F06 F07 F08 F09 F10 F11 F12 Free Cash Flow Total Capex  High conversion of operating prof

  6. Slide 6: Historical Review: Returns to shareholders

    HISTORICAL REVIEW Returns to shareholders Distributions to shareholders (R'm) 1,000.0 869.5 900.0 788.3 800.0 269.9 700.0 620.0 319.1 549.0 600.0 Rm 500.0 226.6 400.0 317.8 230.6 301.1 300.0 262.8 620.0 229.4 549.0 200.0 201.8 166.0 373.0 262.8 301.1 100.0 229.4 238.6 116.0 166.0 - F05 F06 F07 F08 F

  7. Slide 7: Historical Review: Dividend yield

    HISTORICAL REVIEW Dividend yield Historical dividend yield (based on closing share price) 14.0% 12.0% 12.0% 10.0% 8.0% 6.9% 7.7% 7.7% 6.2% 6.0% 5.2% 5.2% 3.8% 4.0% 4.1% 3.7% 4.0% 2.8% 2.0% 0.0% F05 F06 F07 F08 F09 F10 F11 F12 Normal dividend yield Total dividend yield  Total dividend yield includes

  8. Slide 8: Group financial results

    Group financial results J avs GROWING GREAT BRANDS

  9. Slide 9: Group Financial Results: Income statement

    GROUP FINANCIAL RESULTS Income statement - continuing operations (excluding Real Juice, Denny and Alpesca) F12 F11* Rm Rm % Revenue 8 287,1 7 489,7 10,6 Gross profit 3 762,8 3 375,0 11,5 Gross profit margin % 45,4 45,1 0,7 Operating profit 1 372,5 1 117,5 22,8 Operating profit margin % 16,6 14,9 11

  10. Slide 10: Group Financial Results: Continuing operations

    GROUP FINANCIAL RESULTS Continuing operations F12 F11* Rm Rm % Cash generated by operations 1 678,9 1 358,6 23,6 Working capital to revenue % 18,1 17,1 5,8 Capital expenditure 541,1 410,2 31,9 Depreciation and amortisation 220,7 192,8 14,5 Net (cash)/debt (175,0) 246,1 (171,1) Return on capital emp

  11. Slide 11: Dividends and returns of capital

    GROUP FINANCIAL RESULTS Dividends and returns of capital F12 F11* % Interim dividend - cps 83 50 66,0 Final dividend - cps 120 75 60,0 Normal dividend - cps 203 125 62,4 Normal dividend yield - %* 4,1 4,0 2,5 Special dividend – cps 180 75 140,0 Total dividend – cps 383 200 91,5 Total dividend yield

  12. Slide 12: Continuing operations – revenue 10,6% up

    GROUP FINANCIAL RESULTS Continuing operations – revenue 10,6% up 8 600 8 400 Movement in group revenue 8 200 8 000 Rm 7 800 7 600 7 400 7 200 7 000 7 490 219 269 28 135 146 8 287 F11 Entyce Snackworks Personal Footwear & I&J F12 Care apparel  Entyce: price increases and growth in tea, creamer and C

  13. Slide 13: Continuing operations – gross profit 11,5% up

    GROUP FINANCIAL RESULTS Continuing operations – gross profit 11,5% up 4 000 3 900 Movement in group gross profit 3 800 3 700 3 600 Rm 3 500 3 400 3 300 3 200 3 100 3 000 3 375 38 113 23 116 97 3 763 F11 Entyce Snackworks Personal Footwear & I&J F12 Care apparel  Entyce: growth in Tea and Ciro offse

  14. Slide 14: Gross Profit Margin Trend

    GROSS PROFIT MARGIN TREND Continuing operations – gross profit margin history 70% Gross profit percentage –H1,H2 and full year 60% 46% 45% 45% 45% 50% 44% 44% 44% 43% 42% 42% 41% 41% 41% 41% 40% 40% 30% 20% H1 H2 Full year F08 F09 F10 F11 F12  Brand portfolio supports sustainability of gross margin

  15. Slide 15: Continuing operations – operating profit 22,8% up

    GROUP FINANCIAL RESULTS Continuing operations – operating profit 22,8% up 1 600 1 500 Movement in group operating profit 1 400 1 300 Rm 1 200 1 100 1 000 900 800 1 118 13 64 23 72 87 -4 1 372 F11 Entyce Snackworks Personal Footwear & I&J Other F12 Care apparel  Selling and administrative expenses w

  16. Slide 16: Discontinued operations – Real Juice, Alpesca and Denny

    GROUP FINANCIAL RESULTS Discontinued operations – Real Juice, Alpesca and Denny F12 F11 Real Real Denny Total Denny Alpesca Total Juice Juice Revenue 146,2 - 146,2 196,6 385,2 298,4 880,2 Operating profit 8,1 - 8,1 10,7 50,0 (37,5) 23,2 Headline earnings 5,9 - 5,9 9,2 32,5 (28,7) 13,0 Capital items

  17. Slide 17: Capital projects

    Capital projects AN | GROWING GREAT BRANDS

  18. Slide 18: Capital Projects: Entyce

    CAPITAL PROJECTS Entyce Rm COMMENTS Tea packing line 19 Capacity and availability for Five replacements Roses and Freshpak. Commissioning during F13. Coffee granulation 12 Commissioned October 2011. Phase 2 phase 1 being evaluated in conjunction with volume growth from launch of Frisco Granules. Cof

  19. Slide 19: Capital Projects: Entyce

    CAPITAL PROJECTS Entyce Rm COMMENTS New creamer tower 74 Commissioned December 2011 and now in normal use; savings of R5 m relative to outsourced manufacture in F12. F13 savings estimated at R12 m depending on volumes. Creamer packaging line 20 Commissioned March 2012; increased capacity, efficiency

  20. Slide 20: Capital Projects: Snackworks

    CAPITAL PROJECTS Snackworks Rm COMMENTS Pumpable Shortening 28 Isando and Westmead in normal production; annual procurement saving R11 m and improved consistency. Isando finished goods 45 Palletising station and one case packing handling line successfully commissioned; case packing installed on all

  21. Slide 21: Capital Projects: I&J

    CAPITAL PROJECTS I&J Rm COMMENTS Abalone farm expansion 12 Expand capacity from 230 to 300 tons. Complete during H1 F13. Marel processing line at 59 Improved labour efficiency, product Woodstock factory yields and quality. Three year payback. Commissioning planned for H2 F13.

  22. Slide 22: Capital Projects: Fashion Brands

    CAPITAL PROJECTS Fashion Brands Rm COMMENTS Indigo 41 Line fully commissioned; case packing New aerosol line and palletisation in progress; annual efficiency savings of R5 m from H2 F12. Spitz 35 Phase 1 complete - 26 stores at end F12; Kurt Geiger clothing already contributing to Spitz results; exp

  23. Slide 23: Capital Projects: Shared Services

    CAPITAL PROJECTS Shared Services Rm COMMENTS Isando DC Expansion 88 Completed October 2011; additional space for peak periods and business growth. Entyce and Snackworks SAP 86 All sites now live on SAP; limited impact implementation on service levels in F12

  24. Slide 24: Operating environment

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  25. Slide 25: Operating Environment: Consumer demand

    OPERATING ENVIRONMENT Consumer demand %Δ Sales volume  Tea: strong Freshpak and Five Roses performance F12 vs growth  Coffee: H1 F11 boosted by competitor supply F11 problems; lower demand following commodity led Tea 6,2 price increases Coffee (5,0)  Creamer: Strong H2 growth using own capacity o

  26. Slide 26: Operating Environment: Selling prices

    OPERATING ENVIRONMENT Selling prices  Tea: limited price increases in competitive Average realised %Δ environment; stable black tea input cost selling prices by F12 vs  Coffee: price increases in response to increases in category F11 coffee bean and glucose cost Tea 2,8  Creamer: lower tactical d

  27. Slide 27: Operating Environment: Raw material / commodity costs

    OPERATING ENVIRONMENT Raw material / commodity costs Cost impact of prices of raw materials and commodities 40 35 30 29 25 25 19 20 20 Rm 15 15 12 12 12 12 10 6 6 5 4 0 -5 -10 Full year  Total increase of R172m for commodities shown  Includes impact of exchange rate  Fuel impact includes more exp

  28. Slide 28: Operating Environment: Spitz & Kurt Geiger

    OPERATING ENVIRONMENT Spitz & Kurt Geiger  Footwear volume growth of 9,5%; clothing revenue up 67,0%  Gross profit margin up from 61,9% to 64,7% - selling price and exchange rate  Operating profit up from R238,8 million to R304,6 million  Operating profit margin up from 26,5% to 29,2%  Kurt Gei

  29. Slide 29: Operating Environment: Key Market Shares

    OPERATING ENVIRONMENT Key Market Shares Market shares F11 vs. F12 60.0% 47.5% 46.5% 44.6% 43.3% 43.1% 42.7% 50.0% 38.1% 35.6% 37.2% 34.1% 31.7% 40.0% 31.2% 26.4% 24.3% 23.4% 22.3% 30.0% 20.1% 19.0% 20.0% 10.0% 0.0% F11 F12

  30. Slide 30: Operating Environment: Marketing expenditure

    OPERATING ENVIRONMENT Marketing expenditure Category support - % of NSV 25.0% 19.8% 18.6% 20.0% 15.0% 10.4% 9.8% 9.1% 8.7% 8.2% 7.8% 7.6% 7.5% 7.3% 10.0% 5.1% 4.8% 4.7% 3.2% 3.1% 5.0% 0.0% F11 F12  Includes advertising and promotions, co-operative expenditure with customers and marketing department

  31. Slide 31: Business unit performance and prospects

    Business unit performance and prospects

  32. Slide 32: Performance and prospects

    Performance and prospects

  33. Slide 33: Entyce: Performance in F12

    Performance and prospects  Performance in F12  Strong Freshpak growth  Five Roses maintained market leadership  Successful Frisco Granules launch  Frisco volume decline due to better competitor supply in H1 and lower category demand at higher prices  Strong Ellis Brown creamer volumes in H2 us

  34. Slide 34: Entyce: Prospects for F13

    Performance and prospects  Prospects for F13  Competitive environment and constrained consumer demand  Grow Frisco granules volume after successful launch  Maintain strong Tea position – Five Roses and Freshpak  Lower project commissioning / ramp-up activity  Pressure from weaker rand partiall

  35. Slide 35: Snackworks Performance and prospects

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  36. Slide 36: Snackworks: Performance in F12

    Performance and prospects  Performance in F12  Volume momentum  Selling prices reviewed and re-aligned with elasticity model  Effective in-store activity by AVI Field Marketing to combat competition  Improving factory performance  Higher raw material costs offset by  volume leverage  annuali

  37. Slide 37: Snackworks: Prospects for F13

    Performance and prospects  Prospects for F13  Sustain volume momentum  Focus on unsold capacity  Manage volume / price elasticity  Master brand support  Price increases to offset higher raw material costs  Ongoing focus on manufacturing yields / efficiency  Improved Snacks price points and m

  38. Slide 38: Performance and prospects

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  39. Slide 39: I&J Performance and prospects

    I&J Performance and prospects  Performance in F12  Improved operational performance and cost management  Improved exchange rates contributed R97 m  Continued good performance of hake resource  Higher sales volumes from TAC increase of 10,0% (CY11) and 9,8% (CY12)  Improvement in domestic retai

  40. Slide 40: Chilled and Frozen Convenience Brands: Prospects in F13

    CHILLED AND FROZEN CONVENIENCE BRANDS Performance and prospects  Prospects in F13  Current exchange rate outlook similar to F12, taking forward cover into account  Higher hake volumes from quota increase  Export prices constrained  Incremental development of export market opportunities  Growth

  41. Slide 41: Fashion Brands

    FASHION BRANDS Performance and prospects

  42. Slide 42: Fashion Brands – Personal Care

    FASHION BRANDS – PERSONAL CARE Performance and prospects  Performance in F12  Increasingly competitive environment  Volume growth – body sprays and cosmetics  Strong brand performance from Yardley  Gross margin improved due to stronger Rand and sales mix  Target operating profit margin of 16%

  43. Slide 43: Fashion Brands – Footwear & Apparel

    FASHION BRANDS – FOOTWEAR & APPAREL Performance and prospects  Performance in F12  Volume growth in core brands – Lacoste, Carvela, Kurt Geiger  Margin improvement from better exchange rate  Kurt Geiger clothing expansion – from 15 to 26 stores  Investment in resources to support Kurt Geiger an

  44. Slide 44: Green Cross acquisition – a brand opportunity

    FASHION BRANDS – FOOTWEAR & APPAREL Green Cross acquisition – a brand opportunity 12 months to 30 June F12  Included in Group results from July 2012 2012 (unaudited) Rm  Initial payment of R382,5 m made Revenue 315,5 in July 2012 Gross profit 167,8  Focus on successful transition in first year of

  45. Slide 45: AVI International

    AVI INTERNATIONAL 7, avs | GROWING GREAT BRANDS

  46. Slide 46: AVI International: Operating profit history

    AVI INTERNATIONAL Operating profit history 120 103 100 92 76 34 80 28 56 58 21 Rm 60 27 9 15 26 22 40 23 18 20 38 42 33 24 25 - F08 F09 F10 F11 F12 Tea Biscuits Other  Dedicated management team and structure in place  Targeting growth in existing and new African markets  Grow brands historically

  47. Slide 47: AVI International: Sales outside of RSA

    AVI INTERNATIONAL Entyce, Snackworks and Indigo – Sales outside of RSA FY12 FY11 %Δ Rm Rm International 548,1 497,8 10,1 Revenue % of AVI Group 6,6 6,6 International Operating 103,4 91,7 12,8 profit % of AVI Group 7,5 8,2 International Operating 18,4 18,9 (2,5) margin AVI Group Operating 16,6 14,9 1

  48. Slide 48: Group initiatives and prospects

    Group initiatives and prospects

  49. Slide 49: AVI Group: Prospects for F13

    AVI GROUP Prospects for F13  Leverage strong brand portfolio to sustain growth in challenging environment  Constrained consumer demand to persist  Competitive retail environment and cost of serving growing retail space  Margin / demand pressure from high commodity costs  Increased benefit from

  50. Slide 50: AVI Group: Focus areas

    AVI GROUP Focus areas  Top line growth  Volumes / market share  Innovation - new formats and products  Field Marketing and distribution – service levels, presence on shelf, defend against new entrants  AVI International  Margin expansion  Factory efficiencies  Price / volume / margin managem

  51. Slide 51: Questions and answers

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  52. Slide 52: Thank you

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  53. Slide 53: Business unit information

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  54. Slide 54: Business Unit Financial Results

    BUSINESS UNIT FINANCIAL RESULTS Continuing operations (excluding Alpesca, Denny and Real Juice) Segmental Segmental Operating Revenue Operating Profit Margin FY12 FY11* Δ FY12 FY11* Δ FY12 FY11* Rm Rm % Rm Rm % Rm Rm Food & Beverage Brands 6 274,8 5 641,2 11,2 922,5 758,2 21,7 14,7 13,4 Entyce 2 330

  55. Slide 55: Business Unit Financial Results: first and second half

    BUSINESS UNIT FINANCIAL RESULTS Continuing operations (excluding Real Juice, Alpesca and Denny) Changes in Changes in Revenue EBIT** Comparison of first and second half H1 H2 H1 H2 to prior year % % % % Entyce Beverages (incl Out of Home)* 8,5 12,5 (3,0) 14,0 Snackworks 8,8 16,9 12,6 50,2 Chille

  56. Slide 56: Spitz: Trading space and trading density

    SPITZ Trading space and trading density F12 F11 F10 F12 F11 F10 Spitz Kurt Geiger Number of Stores 61 57 56 Number of Stores 26 15 3 Turnover (Rm) 959 876 720 Turnover (Rm) 86 25 12 Average m2 15,107 15,233 15,147 Average m2 2,839 953 318 Trading Density (R/m2) 63,460 57,480 47,539 Trading Density (

  57. Slide 57: Chilled & Frozen Convenience Brands: Hake quota

    CHILLED & FROZEN CONVENIENCE BRANDS  Quota– seafood products Hake Quota (tons) CY12 CY11 South Africa Total Allowable Catch (TAC) 144 742 131 847 I&J 40 515 36 906 % 28,0 28,0 • Decline in 2012 catch rate due to higher proportion of quota caught with “wet” vessels which have lower catch rates than

  58. Slide 58: Changes in Accounting Policy

    CHANGES IN ACCOUNTING POLICY Retrospective restatement of comparatives Employee Net deferred Retained Reserves benefits liability taxation earnings/profit asset/(liability) or loss Rm Rm Rm Rm Balance as reported at 30 June 2011 (286,7) (10,1) (3 466,0) (131,2) Effect of change in accounting policy

AVI — FY2012 Earnings Presentation on 6ix