Tiger Brands Limited · JSE:TBS
Tiger Brands — FY2019 Earnings Presentation
42 slides from Tiger Brands's earnings presentation, Nov 22, 2019
Slide 1: Group Results Presentation 2019
GROUP RESULTS PRESENTATION 2019 We nourish and nurture more lives every day For the year ended 30 September 2019
Slide 2: Index
Index Overview Financial & operational performance Conclusion 2
Slide 3: Disclaimer: Forward-looking statement
Disclaimer Forward-looking statement This document contains forward looking statements that, unless otherwise indicated, reflect the company’s expectations as at 22 November 2019. Actual results may differ materially from the company’s expectations if known and unknown risks or uncertainties affect
Slide 4: Overview
Overview 2019 Lawrence Mac Dougall Chief Executive Officer We nourish and nurture more lives every day
Slide 5: Our operating environment
Our operating environment Weak macro > Low GDP growth – social unrest, lack of municipal service delivery backdrop > Consumer spending muted, high unemployment, negative real wage growth, increase of the cost of basic services & utilities Customer landscape > More consumers shopping on promotion, SK
Slide 6: Challenging trading environment constrains volumes & impacts margins
Challenging trading environment constrains volumes & impacts margins Ex-VAMP HEPS+ excluding Oceana Down 4% Group revenue+ up 3% to R29.2 billion Up 5% to R28.6 billion -17% -4% 1 800 1 633 Gross margins+ down 230bps to 30.3% Down 180bps to 31.9% 1 600 1 349 1 381 1 331 1 400 1 200 Group operating i
Slide 7: Tiger Brands has strong category positioning
Tiger Brands has strong category positioning Brands win in the mind of the consumer Sunday Times Top Brands 2019 Grand Prix #1 Tinned foods 54% #1 Fruit based drinks #1 Condiments & sauces #2 Condiments & sauces #1 Brand in Category Leading Brands 29% #1 Essential foods #2 Essential foods Challenger
Slide 8: 8 of our Billion Rand Brands are #1 brands in value share
8 of our Billion Rand Brands are #1 brands in value share Value share 1 1 1 1 1 1 1 1 3 position 87% 63% 59% 40% 35% 33% 32% 32% 28% 30% 29% 27% 19% 21% 21% 9% 12% 7% Value share 12mm Sept 2019 Key competitor share Source: % = Nielsen | ** Purity Homogenised Foods OVERVIEW 8
Slide 9: Our brands remain relevant with our customers
Our brands remain relevant with our customers Tiger value share within customer Top-end grocer 40.2% 12mm TOTAL SA 25% GT 33% MT 23% Forward share Market share Customer 1 25% vs. Customer 2 27% 40.2% 23.0% Customer 3 28% Customer 4 23% Customer 5 31% Joint business plans implemented 97% General trad
Slide 10: Shoppers increasingly price sensitive & seeking value offers
Shoppers increasingly price sensitive & seeking value offers Three quarters of consumers buy brands Looking for 92% discounts & > Brand choice first criteria specials 88% 69% Buying in bulk 61% > 75% Brand loyal Using a 66% cheaper supermarket 64% > Repertoire 70% Changing to 54% cheaper (buy within
Slide 11: Delivering a pipeline of consumer relevant innovation in growing segments
Delivering a pipeline of consumer relevant innovation in growing segments Health & Nutrition KOO BBQ and Chilli Albany BoB Genius Ace + Fibre Wors flavour KOO Black Beans Value Tastic Benny Seasoning Basmanti Parboiled Rice Convenience Tastic Purity pouch variants Purity instant porridge Quick Cook
Slide 12: Contemporising to win against competition & build relevance
Contemporising to win against competition & build relevance Upgrading packaging to meet the needs of today’s visually conscious insta-consumers Beacon gained 16% share off units sold Old pack New pack New Pack New offering Stretching the brand up Source: Nielsen 12
Slide 13: Leveraging technology to measure effectiveness & respond to a new shopper journey
Leveraging technology to measure effectiveness & respond to a new shopper journey Leveraging AI to Digitally promoting – Turning ‘price’ Becoming omnichannel optimise promos broadsheets and into media with Buysmart coupons > Ambition of 100% trade spend optimisation that helps retailers and Tiger Br
Slide 14: We have built a strong foundation to launch our future growth ambitions
We have built a strong foundation to launch our future growth ambitions What’s working What’s challenging > Group strategy execution > Socio political headwinds • Portfolio optimisation - • Innovation pipeline > Municipal service delivery and cost of utilities Oceana, Deli, VAMP • Brand health • Cap
Slide 15: Financial & operational performance
Financial & operational performance 2019 Noel Doyle Chief Financial Officer We nourish and nurture more lives every day
Slide 16: Significant distortions make year-on-year comparisons difficult
Significant distortions make year-on-year comparisons difficult Unbundling of Oceana & VAMP’s slower than expected recovery impact performance 2019 2018 % change EPS EPS (cents) EPS (Cents) cps Earnings as reported (continuing operations) 2 364 1 530 55% Adjusted earnings – excluding Oceana 1 157 1
Slide 17: Operating results reflect challenging operating environment
Operating results reflect challenging operating environment offset by good procurement & expense control Associate income impacted by unbundling of Oceana, EPS boosted by gains on unbundling Continuing operations – Rm 2019 2018 % change Revenue 29 233 28 365 3% Cost of sales (20 383) (19 107) (7%) G
Slide 18: Impairments recognised in Davita & VAMP
Impairments recognised in Davita & VAMP reflecting challenging outlook Rm 2019 2018 Impairment of intangible assets (218) (144) Impairment of property, plant & equipment (98) (54) Other 9 - Total impairments (307) (198) FINANCIAL & OPERATIONAL PERFORMANCE 18
Slide 19: Income from associates impacted by unbundling of Oceana
Income from associates impacted by unbundling of Oceana Contribution to headline earnings declines to 17% despite earnings growth from remaining associates Total income from associates (Rm) 731 371 Rm 750 600 420 450 31 300 53 73 17 23 150 241 245 0 FY18 FY19 Empresas Carozzi UAC National Food Holdi
Slide 20: HEPS impacted by VAMP, Grains & associates
HEPS impacted by VAMP, Grains & associates HEPS – Impact of Group VAMP VAMP Associates IFRS 2, Once-off Tax impact HEPS Sept 18 WANOS trading trading recall & Interest, abnormals incl reported losses related costs Forex tax rate Sept 19 (net of differential insurance proceeds) * From continuing oper
Slide 21: Inflation increased progressively throughout the year albeit at the cost of volumes
Inflation increased progressively throughout the year albeit at the cost of volumes Strong performance from Domestic Business (ex-VAMP) 5% (2%) - price/mix volume forex R28.4bn R29.2bn Total Price/Mix Total volume Forex Grains 4% 6% (2%) - Consumer Brands – Food (ex VAMP) 9% 4% 5% - HPCB 20% 7% 13%
Slide 22: Beverages, Home & Baby Care post strong performances
Beverages, Home & Baby Care post strong performances Exports deliver a disappointing year – evidence of recovery Consumer Brands Food Exports & Group Grains (ex VAMP) HPCB International (ex VAMP) VAMP Group* Volume ▼ 2% ▲ 5% ▲ 13% ▼ 16% ▼ 1% ▼ 32% ▼ 2% R13.2bn R9.4bn R2.7bn R3.2bn R28.6bn R0.7bn R29
Slide 23: Grains: Margin compression across the portfolio
Grains Margin compression across the portfolio o Milling & baking impacted by operating income declines in Maize & Rm Grains 16 000 Bakeries 12 754 13 226 • Maize category increasingly fragmented with limited 12 000 differentiation 8 000 14.8% 10.9% • Inflation in wheat-to-bread value chain insuffic
Slide 24: Volume declines & pricing pressures impact market shares
Volume declines & pricing pressures impact market shares 50% 46% 45% 43% 40% 38% 33% 35% 35% 34% 33% 30% 30% 29% 30% 28% 26% 25% 25% 24% 20% 15% 13% 12% 10% 5% 0% Grains Bread Flour Maize Samp Cereals Rice Dry Pasta FY18 FY19 Source: Nielsen 12mm value share as at September 2019 FINANCIAL & OPERATIO
Slide 25: Snacks, Treats & Beverages
Snacks, Treats & Beverages S&T – delivers strong revenue growth o 5% volume growth; 4% price inflation Rm Snacks & Treats 2 500 2 249 o Re-launch of Beacon & Maynards well supported 2 061 2 000 • Pricing expertise drive profit recovery in Smoothies 1 500 o Conversion cost increases prompt review of
Slide 26: Strong marketing campaigns drive share gains in Snacks & Treats
Strong marketing campaigns & in-store activations drive share gains in Snacks & Treats 40% 37% 36% 35% 30% 25% 20% 19% 20% 15% 12% 12% 10% 5% 0% Sweet Treats Sugar Chocolate FY18 FY19 Source: Nielsen 12mm value share as at September 2019 FINANCIAL & OPERATIONAL PERFORMANCE 26
Slide 27: Oros & Energade drive market share gains in Beverages
Oros & Energade drive market share gains in Beverages 38% 40% 36% 34% 37% 36% 35% 33% 30% 25% 20% 19% 18% 15% 10% 5% 0% Beverages Liquid Concentrates Sport Drinks Ready To Drink FY18 FY19 Source: Nielsen 12mm value share as at September 2019 FINANCIAL & OPERATIONAL PERFORMANCE 27
Slide 28: Consumer Brands – Food: Groceries
Consumer Brands – Food Groceries – strong top line o Revenue up 7% Rm Groceries 6 000 5 100 • 4% volume growth & 3% price 4 746 • Volume accelerated in H2 to recover market share at the 4 000 expense of margin 9.1% 6.4% 2 000 • Solid growth in General Trade 432 325 o Profitability impacted by costs
Slide 29: Focus on availability & visibility to regain lost share
Focus on availability & visibility to regain lost share 70% 66% 63% 63% 59% 60% 50% 44% 40% 40% 36% 36% 30% 20% 10% 0% Beans Tomato Sauce Peanut Butter Mayo/Salad Cream FY18 FY19 Source: Nielsen 12mm value share as at September 2019 FINANCIAL & OPERATIONAL PERFORMANCE 29
Slide 30: Home, Personal & Baby Care (HPCB)
Home, Personal & Baby Care (HPCB) Strong operating recovery with capex investment starting to pay dividends o Home Care Rm HPCB 3 000 2 670 • Revenue up 33% 2 500 2 226 • Volume growth of 13% driven by sustained pest demand 2 000 1 500 • Profitability benefits from product mix & lower factory costs
Slide 31: Baby driven by pouches with 75% share of the market
Baby driven by pouches with 75% share of the market 80% 66% 67% 70% 56% 60% 54% 50% 40% 30% 20% 5% 10% 6% 0% Pest Personal Care Baby Nutrition FY18 FY19 Source: Nielsen Value share as at September 2019 FINANCIAL & OPERATIONAL PERFORMANCE 31
Slide 32: Exports & International – closure of Deli Foods
Exports & International – closure of Deli Foods Disappointing Exports performance offset partially by recovery in Deciduous Fruit o Exports H2 performance in line with cautious guidance Rm Exports & International • Mozambique & Zimbabwe impacted by ongoing macro 5 000 4 000 3 658 challenges 3 245 -
Slide 33: Value Added Meat Products – formal due diligence underway
Value Added Meat Products – formal due diligence underway Despite positive consumer support & brand health, operational performance below expectations Positives Challenges Decision to exit category > Well-received by consumers > Delayed re-opening > In line with strategic review, board > Non-partici
Slide 34: Cash generation benefits from good working capital management
Cash generation benefits from good working capital management at year end Efficiency gains as capex accelerates 2019 2018 Cash generated from operations (Rm) 3 492 3 284 Capex (Rm) 1 104 720 Net cash (Rm) 1 205 590 RONA (%) 21.6 26.6 Working capital per R1 of turnover 21.4 21.6 FINANCIAL & OPERATION
Slide 35: Ordinary dividend in line with dividend policy of 1.75x cover
Ordinary dividend in line with dividend policy of 1.75x cover Tiger Brands shareholders’ total distribution up 7% in FY19 cps Interim dividend 321 Special dividend 306 Final dividend 434 Total dividend from Tiger Brands 1 061 Dividend from Oceana* 94 Total distribution to Tiger Brands shareholders 1
Slide 36: Capex accelerates to R1.1 billion
Capex accelerates to R1.1 billion Drives efficiencies & supports cost control Focused efficiency improvements & increased capacity Brand development R14m > New oat mill - Jungle capacity expansion Major maintenance R72m Compliance R178m > 2L Oros line Efficiency optimisation R206m > Baby Pouch innov
Slide 37: Continuous improvements continue to deliver
Continuous improvements continue to deliver Lower impact but still significant as initiatives mature Drive productivity & efficiencies across value chain R53m R15m > Deliver distribution savings R193m R107m Total YTD savings > Enhance direct delivery R616m R15m > Improve materials & indirect savings
Slide 38: Strategic review
Strategic review 2019 Lawrence Mac Dougall We nourish and nurture more lives every day
Slide 39: Outlook remains subdued
Outlook remains subdued Focus on driving growth, productivity & efficiency 24 months + Environment 0-24 months “Addressing the performance and “Investing now to build a platform to > No signs of consumer recovery market challenges of today” address future demand and trends” > Driving topline growth
Slide 40: Q&A
Q&A 2019 We nourish and nurture more lives every day
Slide 41: Additional information
Additional information Net working capital days 2019 2018 Working capital per rand of turnover 21.4 21.6 Net working capital days 96.0 104.0 Stock days 94.8 96.5 Debtor days 35.6 41.9 Creditor days 34.4 34.4 Effective tax rate 29.7% 29.6%* *Restated for discontinuation of Deli Foods FINANCIAL & OPER
Slide 42: Contribution to revenue & operating income
Contribution to revenue & operating income Revenue Operating income before IFRS 2 46% 46% 32% 31% 20% 18% 12%11%11% 13% 17% 10% 9% 10%10% 8% 8% 6% 4% 4% 13% 13% 13% 11% 9% 8% 8% 7% -8% 5% 5% 4% 2% 2% 2% -20% 2019 2018 2019 2018 Milling and Baking Other Grains Groceries Snacks & Treats Beverages Valu