Avi Limited Class Y · JSE:AVI

Avi Limited Class Y — FY2014 Earnings Presentation

74 slides from Avi Limited Class Y's earnings presentation, September 2014

  1. Slide 1: AVI Limited presentation to shareholders & analysts, year ended 30 June 2014

    AVI Limited presentation to shareholders & analysts for the year ended 30 June 2014

  2. Slide 2: Agenda

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

  3. Slide 3: Key features

    KEY FEATURES  Revenue from continuing operations up 11% to R10,27 billion;  Operating profit from continuing operations up 12% to R1,71 billion;  Headline earnings per share from continuing operations up 12% to 384 cents;  Sound group performance notwithstanding pressure on consumers and rising

  4. Slide 4: Results history: operating profit

    RESULTS HISTORY Operating profit history - continuing operations  Compound annual growth rate from F05 to F14 of 16,4%  Operating profit margin increased from 9,9% in F05 to 16,7% in F14

  5. Slide 5: Results history: cash generation

    RESULTS HISTORY Historical cash generation - continuing operations  Good conversion of operating profit growth to cash  Continued investment in replacement, capacity and efficiency

  6. Slide 6: Results history: dividend yield

    RESULTS HISTORY Dividend yield (based on closing share price)  Total dividend yield includes payments out of share premium and special dividends  F14 dividend yield based on closing share price of R61,25  Excludes share buy-backs

  7. Slide 7: Results history: return on capital employed

    RESULTS HISTORY Return on capital employed  Continued high returns with capital expenditure supporting growth and efficiency

  8. Slide 8: Group Financial Results

    CARVELA =N em © \ * a GROWING GREAT BRANDS ae » OonraL J Wwosoy (=

  9. Slide 9: Income statement - continuing operations

    GROUP FINANCIAL RESULTS Income statement - continuing operations F14 F13 Rm Rm % Revenue 10 267,4 9 218,3 11,4 Gross profit 4 427,8 4 107,8 7,8 Gross profit margin % 43,1 44,6 (3,4) Operating profit 1 712,5 1 526,2 12,2 Operating profit margin % 16,7 16,6 0,6 Net financing cost (48,4) (52,7) (8,2)

  10. Slide 10: Movement in gross profit margin

    GROUP FINANCIAL RESULTS Movement in gross profit margin – continuing operations  Fashion brands impacted by weaker Rand and constrained consumer environment  Grocery business benefitted from better I&J margin  Coty restructuring positive at operating profit level

  11. Slide 11: Operating profit 12,2% up

    GROUP FINANCIAL RESULTS Operating profit 12,2% up – continuing operations  Entyce: Volume growth in tea, coffee and creamer  Snackworks: Higher volumes, especially biscuits, and improved snacks price levels  I&J: weaker Rand, improved fishing and processing  Personal Care: body spray volume grow

  12. Slide 12: Group financial results: cash and net debt

    GROUP FINANCIAL RESULTS Continuing operations F14 F13 Rm Rm % Cash generated by operations 2 001,7 1 556,5 28,6 Working capital to revenue % 18,5 19,1 (3,4) Capital expenditure 531,9 566,9 (6,2) Depreciation and amortisation 286,1 259,0 10,5 Net debt 349,0 681,1 Net debt / capital employed % 7,6 15

  13. Slide 13: Cash flows - continuing operations

    GROUP FINANCIAL RESULTS Cash flows – continuing operations

  14. Slide 14: Capital expenditure & depreciation

    GROUP FINANCIAL RESULTS Capital expenditure & depreciation – continuing operations

  15. Slide 15: Capital projects spend summary - F14

    GROUP FINANCIAL RESULTS Capital projects spend summary – F14 Rm Coffee process improvement 20 Coffee packaging line upgrades 23 Tea packaging line replacement and upgrade 12 Tea property purchase 11 Biscuit process improvement 22 Redhill distribution centre expansion 19 I&J vessel dry-docks and upgr

  16. Slide 16: Dividends

    GROUP FINANCIAL RESULTS Dividends F14 F13 % Interim dividend - cps 120 90 33,3 Final dividend - cps 180 170 5,9 Normal dividend - cps 300 260 15,4 Normal dividend yield - %* 4,9 4,4 Special dividend – cps ─ 180 Total dividend – cps 300 440 Total dividend yield - %* 4,9 7,4 Cover ratio – normal divi

  17. Slide 17: Performance and prospects: Beverages

    BEVERAGES Performance and prospects Pree Se hn A x00 me GROWING GREAT BRANDS

  18. Slide 18: Entyce income statement

    Income statement - continuing operations  Continued strong performance from tea  Leading market position and strong margins maintained  Good rooibos category and market share growth  Margin pressure from high rooibos prices and the weaker Rand  Coffee performance constrained by category pressur

  19. Slide 19: Entyce income statement (continued)

    Income statement - continuing operations  Creamer performance constrained by competitor pressure  Good volume growth, particularly in H2, supported by increased capacity  Growth in selling prices and profit margins constrained by competitor activity  Unpredictable glucose supply risk to service

  20. Slide 20: Entyce sales volume and selling prices

    Sales volume and selling prices %Δ Comments F14 vs F13 Tea revenue growth 15,8 Volume 6,7 Strong rooibos growth with muted growth in black tea from lower demand Ave. selling price 8,5 Increases in response to raw material increases and weaker Rand Coffee revenue growth 6,8 Volume 4,9 Pressure on aff

  21. Slide 21: Entyce market shares

    ENTYCE BEVERAGES Market shares 60.0% 5 51.8% 53.0% 50.0% 5 40.0% 35.6% 35.6% 30.0% 5 23.4% 97.2% 100% | LavAT.In ITALY’S FAVOURITE COFFEE 10.0% ~ 0.0% + Five Roses Freshpak Frisco Ellis Brown m™F13 m@F14 AV | GROWING GREAT BRANDS

  22. Slide 22: Entyce costs

    Costs  Cost impact of raw materials and commodities consumed in the period (F14 vs F13):  Weaker Rand impacted on all imported / parity priced inputs  Improvements in black tea, coffee and palm oil USD prices  Double digit rooibos tea cost increases

  23. Slide 23: Entyce prospects for F15

    Prospects for F15  Constrained consumer spending  Selling price increases in Qtr 4 F14 to ameliorate raw material cost pressure from weaker Rand  Maintain strong Tea position – Five Roses and Freshpak  Focus on mixed instant coffee market share – Frisco granules and affordable refill format  Co

  24. Slide 24: Performance and prospects: Snackworks

    SnackwoOrks That’s Good Times! Performance and prospects GROWING GREAT BRANDS

  25. Slide 25: Snackworks income statement

    Income statement  Sustained strong Biscuits performance  Effective pricing / promotion to drive volumes  Mix change in favour of affordable products  Factory performance – capacity, quality, efficiency  New flavour variants and pack formats  Progress on savoury portfolio  Improving Snacks mar

  26. Slide 26: Snackworks sales volume and selling prices

    Sales volume and selling prices %Δ Comments F14 vs F13 Biscuits revenue growth 15,0 Volume growth 9,4 Effective pricing / promotional activity and category growth Ave. selling prices 5,2 Impact of increases diluted by change in sales mix Snacks revenue growth 11,0 Volume growth 3,7 Category growth;

  27. Slide 27: Snackworks market shares

    SnackwOrks Market shares 50.0% 5 44.4% 45.3% 45.0% 5 40.0% + 35.0% 4 30.0% + 25.0% + 21.1% 21.1% 19.2% 19.2% 20.0% + 15.0% + 10.0% + 5.0% 4 0.0% + Bakers (Sweet) Bakers (Savoury) Willards @F13 m@F14 AV | GROWING GREAT BRANDS

  28. Slide 28: Snackworks costs

    Costs  Cost impact of raw materials and commodities consumed in the period (F14 vs F13):  Weaker Rand impacted on all imported / parity priced inputs

  29. Slide 29: Snackworks prospects for F15

    Prospects for F15  Constrained consumer spending  Selling price increases in Qtr 4 F14 to ameliorate raw material cost pressure from weaker Rand  Sustain biscuit volume momentum  Increased NPD and associated marketing  Ongoing focus on factory performance, yields and efficiency  Snacks factory

  30. Slide 30: Performance and prospects: I&J

    - SINCE 1910 - GROWING GREAT BRANDS

  31. Slide 31: I&J income statement

    Income statement  Material benefit from weaker Rand  Higher catch and sales volumes due to:  Improved wet fleet availability  Higher freezer vessel catch rates  Improved fishing and processing performance  Operating costs impacted by higher fuel prices and general cost pressure  Limited incre

  32. Slide 32: I&J income statement (continued)

    Income statement  Fishing benefitted from the better H2 performance  Processing cost impact includes Marel benefit at Woodstock wet fish processing facility

  33. Slide 33: I&J sales volume and selling prices

    Sales volume and selling prices %Δ Comments F14 vs F13 I&J Domestic revenue growth 8,3 Volume 1,4 Increased retail volumes Ave. selling prices 6,8 Increases taken and favourable product mix changes I&J Export revenue growth 21,6 Volume 1,8 Increased catch volumes from better freezer vessel catch rat

  34. Slide 34: I&J local market share

    Local market share 50.0% 5 45.0% ~ 42.2% 43.0% 40.0% - 35.0% 5 30.0% + 25.0% ~ 20.0% - 18J ™F13 m@F14 AV | GROWING GREAT BRANDS

  35. Slide 35: Fishing performance

    Fishing performance  Increase in overall tons caught from improved availability  Catch rates still healthy but lower than last few years  Freezer fleet higher than last year  Wet fleet impacted by weather conditions in H1  Continued improvement through use of technology and capacity investment

  36. Slide 36: Vessel replacement cash flow summary

    Vessel replacement cash flow summary  Increased catching capacity of 6 000 quota tons from F16  Improved catching efficiency and lower maintenance costs

  37. Slide 37: I&J prospects for F15

    Prospects for F15  Higher exchange rates secured for 65% of export revenue  Increased catch volume with additional wet vessel (purchase and sale back)  Export markets:  Improving species recognition for Cape Hake  Achieving regular selling price increases  Domestic market focus on profitabilit

  38. Slide 38: Performance and prospects: Indigo Brands

    indigo brands Performance and prospects GROWING GREAT BRANDS

  39. Slide 39: Indigo Brands income statement

    Income statement  Category constrained and competitive  Gross margin pressure from weaker Rand  Good Yardley performance led by body sprays and colour cosmetics  Growth in body spray volumes notwithstanding increased competition  New trading terms with Coty from 1 November 2013 – operating prof

  40. Slide 40: Personal care sales volume and selling prices

    Sales volume and selling prices %Δ Comments F14 vs F13 Personal Care revenue 7,7 growth* Volume growth 4,5 Increase in body sprays Ave. selling price 3,1 Price increases and lower levels of discounting, reduced by change in product mix * Like-for-like comparison excluding Coty

  41. Slide 41: Body spray market share

    Market share 40.0% > 37.5% 37.7% 38.0% ~ 36.0% ~ 34.0% ~ 32.0% 5 30.0% 5 28.0% 5 26.0% + 24.0% + 22.0% + 20.0% + Body sprays @F13 m@F14 AV | GROWING GREAT BRANDS

  42. Slide 42: Indigo prospects for F15

    Prospects for F15  Constrained consumer spending  Selling price increases in Qtr 4 F14 to ameliorate raw material cost pressure from weaker Rand  Target body spray growth utilising spare capacity  Increased NPD / product launch activity  Improved wholesale channel presence  Export growth  Ong

  43. Slide 43: Performance and prospects: Spitz

    SPITZ Performance and prospects CARVELA Tosoni fits KURTGEIGER GANT J-Renee! GROWING GREAT BRANDS

  44. Slide 44: Spitz income statement

    Income statement  Revenue growth impacted by:  Higher selling prices  Kurt Geiger clothing revenue up 21%  Footwear volumes 5,8% lower  Gross profit margin decrease from 62,0% to 59,1%  Exchange rate pressure absorbed on core ranges  Increased stock provisioning in line with lower volumes  T

  45. Slide 45: Spitz sales volume and selling prices

    Sales volume and selling prices %Δ Comments F14 vs F13 Spitz & KG Footwear 4,4 revenue growth Volume growth (5,8) Lower demand in constrained consumer environment Ave. selling price 10,8 Price increases, including core Carvela range increase in March 2014 KG Clothing revenue 21,1 New stores and impr

  46. Slide 46: Spitz and Kurt Geiger operating profit and margins

    Spitz and Kurt Geiger Operating profit 350.0 300.0 250.0 R million 200.0 150.0 100.0 50.0 0.0 F06 F07 F08 F09 F10 F11 F12 F13 F14 90.0% Gross profit and operating profit margins 80.0% 70.0% 60.0% Margin % 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% F06 F07 F08 F09 F10 F11 F12 F13 F14 Operating profit % Gross

  47. Slide 47: Spitz and Kurt Geiger trading density

    Spitz and Kurt Geiger Trading density - Spitz stores 70,000 20,000 60,000 Spitz and Kurt Geiger 50,000 15,000 40,000 R/m2 10,000 m2 30,000 20,000 5,000 10,000 0 0 F06 F07 F08 F09 F10 F11 F12 F13 F14 Trading density (R/m2) Average trading space (m2) Trading density - Kurt Geiger stores 50,000 5,000

  48. Slide 48: Spitz prospects for F15

    Prospects for F15  Constrained consumer spending and increased competition  Focus on core brand ranging  Carvela, Kurt Geiger and Lacoste  Rejuvenate supporting premium footwear brands  Retail execution  Review store tiering and ranging  New Spitz store designs  Stabilise gross profit margin

  49. Slide 49: Performance and prospects: Green Cross

    GREEN CROSS Performance and prospects GROWING GREAT BRANDS

  50. Slide 50: Green Cross income statement

    Income statement  Retail revenue growth with higher prices and volume growth  Wholesale performance impacted by lower demand and non- recurring tender business – improvement in H2  First new design store opened in June 2014  Gross profit margin decrease from 51,9% to 49,2%  Exchange rate pressu

  51. Slide 51: Green Cross prospects for F15

    Prospects for F15  Traction with brand growth opportunities  Revised product selection and ranging  New retail store design roll-out  Open 5 new stores  Refurbish 10 stores  Wholesale focus – footprint, service levels  Supply chain focus – procurement, manufacturing, distribution

  52. Slide 52: AVI International

    GROWING GREAT BRANDS

  53. Slide 53: AVI International operating profit history

    AVI INTERNATIONAL Operating profit history  Healthy volume growth offset by brand building investment in new markets  Strong performance from biscuits  Changed Mozambique agent from February 2014  Higher cost of business in Namibia – model under review  Leverage RSA manufacturing base

  54. Slide 54: Sales outside of RSA

    AVI INTERNATIONAL Entyce, Snackworks and Indigo – Sales outside of RSA F14 F13 % Rm Rm International Revenue 769,0 639,4 20,3 % of Grocery and Personal Care brands 11,3 10,5 International Operating Profit 131,9 128,9 2,3 % of Grocery and Personal Care brands 12,1 13,5 International Operating Margin

  55. Slide 55: AVI Group prospects for F15

    AVI GROUP Prospects for F15  Improved I&J performance  Higher exchange rates secured for 65% of exposure  Additional wet vessel till end May 2015  Better catch rates if sustained from H2 F14  Ongoing gains in fishing and processing efficiency  Sustain Entyce, Snackworks and Indigo growth in ch

  56. Slide 56: AVI Group prospects for F15 continued

    AVI GROUP Prospects for F15 continued  Footwear & apparel  Retail execution  Green Cross re-design and ranging  Spitz store re-design, tiering and ranging  Kurt Geiger trading density progess  Optimise price vs volume in constrained environment  Green Cross wholesale business re-launch  Net

  57. Slide 57: AVI Group objectives

    AVI GROUP Objectives  Manage our unique brand portfolio to its long term potential  Organic earnings growth; target >10% HEPS growth p.a.  High dividend yield – maintain normal dividend payout ratio of 80%  Sustain high return on capital employed  Effective capital projects  Return excess cash

  58. Slide 58: Questions

    CARVELA =N em © \ * a Questions GROWING GREAT BRANDS ae » OonraL J Wwosoy (=

  59. Slide 59: Information slides

    CARVELA =N em © \ * a Information slides GROWING GREAT BRANDS ae » OonraL J Wwosoy (=

  60. Slide 60: Business unit financial results

    INFORMATION SLIDE Business unit financial results – continuing operations Segmental Segmental Operating Revenue Operating Profit Margin F14 F13 Δ F14 F13 Δ F14 F13 Rm Rm % Rm Rm % % % Food & Beverage Brands 7 598,4 6 688,4 13,6 1 161,5 951,5 22,1 15,3 14,2 Entyce 2 717,4 2 414,9 12,5 442,4 397,8 11,

  61. Slide 61: Footwear & apparel financial results

    INFORMATION SLIDE Footwear & apparel financial results – continuing operations Segmental Segmental Operating Revenue Operating Profit Margin F14 F13 Δ F14 F13 Δ F14 F13 Rm Rm % Rm Rm % % % Footwear & Apparel 1 615,5 1 536,1 5,2 388,1 409,8 (5,3) 24,0 26,7 Spitz 1 246,4 1 170,4 6,5 322,6 326,4 (1,2)

  62. Slide 62: Revenue 11,4% up

    INFORMATION SLIDE Revenue 11,4% up – continuing operations  Entyce: price increases in tea and coffee, volume growth in tea, coffee and creamer  Snackworks: higher volumes and selling prices  I&J: weaker Rand, higher prices as well as increased export and domestic volumes  Personal Care: aerosol

  63. Slide 63: Gross profit 7,8% up

    INFORMATION SLIDE Gross profit 7,8% up – continuing operations  Entyce: revenue growth offset by higher raw material costs, mostly weaker Rand  Snackworks: higher revenue offset by higher raw material costs and change in sales mix  I&J: weaker Rand and higher volumes offset by increased operating

  64. Slide 64: Gross profit margin history

    INFORMATION SLIDE Gross profit margin history – continuing operations  Gross profit margin in grocery brands remains healthy  Input cost pressure from weaker Rand, partly offset by I&J benefit  Change in Coty relationship negatively impacted Group’s profit margin by 0,5% but positive at operating

  65. Slide 65: Impact of revision to Coty license agreement

    INFORMATION SLIDE Impact of revision to Coty license agreement F14 Rm Revenue as reported 10 267,4 Less: Sale of opening stock on hand to Coty (36,1) Revenue restated to exclude once-off transaction 10 231,3 Add: Sales for November – June now on agency basis 214,8 Less: Commission, service fees and

  66. Slide 66: Marketing expenditure

    INFORMATION SLIDE Marketing expenditure *Excludes Coty  Includes advertising and promotions, co-operative expenditure with customers and marketing department costs  Total expenditure for F14 was R579m compared to R559m in F13

  67. Slide 67: Returns to shareholders

    INFORMATION SLIDE Returns to shareholders  Annual dividend cover ratio of 1,25

  68. Slide 68: Normal dividend history

    INFORMATION SLIDE Normal dividend history

  69. Slide 69: I&J quota - seafood products

    INFORMATION SLIDE I&J Quota– seafood products CY09 CY10 CY11 CY12 CY13 CY14 Hake Quota (tons) South African Total Allowable Catch (TAC) 118 578 119 861 131 847 144 742 156 088 155 308 % change in TAC (9,1) 1,1 10,0 9,8 7,8 (0,5) I&J 33 199 33 550 36 906 40 515 43 689 43 471 % 28,0 28,0 28,0 28,0 28,

  70. Slide 70: Spitz trading space and trading density

    INFORMATION SLIDE Trading space and trading density Spitz F14 F13 Number of stores 70 64 Turnover (Rm) 1 094 1 044 Average m2 17,264 16,357 Trading Density (R /m2) 63,300 63,820 Closing m2 17,813 16,586 Like-for-like metrics* F14 F13 Number of stores 60 60 Turnover (Rm) 1,001 1,001 Average & closing

  71. Slide 71: Kurt Geiger trading space and trading density

    INFORMATION SLIDE Trading space and trading density Kurt Geiger F14 F13 Number of stores 32 30 Turnover (Rm) 154 127 Average m2 3,825 3,845 Trading Density (R /m2) 40,175 32,897 Closing m2 3,880 3,751 Like-for-like metrics* F14 F13 Number of stores 24 24 Turnover (Rm) 128 112 Average & closing m2 2,

  72. Slide 72: Green Cross trading space and trading density

    INFORMATION SLIDE Trading space and trading density Green Cross F14 F13 Number of stores 30 29 Turnover (Rm) 189 180 Average m2 3,237 3,225 Trading Density (R /m2) 58,273 55,795 Closing m2 3,360 3,225 Like-for-like metrics* F14 F13 Number of stores 29 29 Turnover (Rm) 188 180 Average & closing m2 3,

  73. Slide 73: Closing number of stores and trading space

    INFORMATION SLIDE Closing number of stores and trading space at the end of each period Spitz Kurt Geiger Green Cross Period End # of stores Closing m² # of stores Closing m² # of stores Closing m² December 2005 29 8,232 1 128 June 2006 31 8,730 1 128 December 2006 35 10,397 1 128 June 2007 38 10,397

  74. Slide 74: OonraL

    ae » OonraL CARVELA =N % * J Wwosoy (= GROWING GREAT BRANDS

AVI — FY2014 Earnings Presentation on 6ix