Avi Limited Class Y · JSE:AVI
Avi Limited Class Y — FY2006 Earnings Presentation
48 slides from Avi Limited Class Y's earnings presentation, Sep 23, 2006
Slide 1: AVI Limited Audited Results 2006
AVI LIMITED AUDITED RESULTS 2 0 0 6
Slide 2: Slide 2
Slide 3: Presentation to analysts for the year ended 30 June 2006
Presentation to analysts for the year ended 30 June 2006 NOTES AVI LIMITED audited results 2006
Slide 4: Agenda
Agenda 2006 Key features Group financial results Operational performance Structure for growth Prospects NOTES AVI LIMITED audited results 2006
Slide 5: 2006 Key features
2006 Key features Turnover and operating income up 14,2% and 10,3% despite poor performances from I&J and RBC HEPS of 107,2 cents versus prior year of 108,2 cents Full year dividend of 53c up from 51c in the prior year Solid performance from NBL and Indigo Cosmetics; excellent Spitz result
Slide 6: 2006 Key features
2006 Key features New AVI operating structure developed which substantially aligns objectives and strategies for the medium term Heightened brand focus maturing the group to a single company ethos Substantially strengthened management teams across most business units and AVI Material acquisi
Slide 7: Group financial results
Group financial results NOTES AVI LIMITED audited results 2006
Slide 8: Group financial results
Group financial results Continuing operations FY06 FY05 Income statement Rm Rm %∆ Revenue 5 406,6 4 734,8 14,2 Operating profit 517,3 469,1 10,3 Operating margin % 9,6 9,9 (3,0) Net financing cost (33,2) (8,7) (281,6) Share of JVs and associates (12,3) 1,2 (1 125,0) Effective tax rate 31,0 28,4 9,2
Slide 9: Group financial results
Group financial results FY06 FY05 Rm Rm %∆ Cash generated by operations 660,2 631,6 4,5 Working capital to revenue % 14,7 14,7 - Capital expenditure 215,1 207,1 3,9 Net debt / (cash) 268,5 (257,8) (204,2) NOTES AVI LIMITED audited results 2006
Slide 10: Group financial results
Group financial results Net financing cost includes R20,8 million notional interest in respect of Spitz transaction (based on 6,4% after tax rate) Loss from JVs includes Simplot restructuring cost – R7,6m Simplot asset scrapping – R7,5m (capital item) Effective tax rate Higher STC I&J
Slide 11: Operational performance
Operational performance NOTES AVI LIMITED audited results 2006
Slide 12: Revenue – 14% improvement
Operational performance Revenue – 14% improvement NOTES AVI LIMITED audited results 2006
Slide 13: Operating profit – 10% improvement
Group financial results Operating profit – 10% improvement NOTES AVI LIMITED audited results 2006
Slide 14: AVI LIMITED audited results 2006
NOTES AVI LIMITED audited results 2006
Slide 15: Financial results
Operational performance Financial results FY06 FY05 Rm Rm %∆ Revenue 2 606,7 2 434,9 7,1 Operating profit 337,0 301,1 11,9 Operating margin % 12,9 12,4 4,0 Capital expenditure 95,9 85,9 11,6 NOTES AVI LIMITED audited results 2006
Slide 16: 2006 Key features
Operational performance 2006 Key features Volume growth of 7,2% in competitive environment Market shares maintained – Biscuits strongly up Costs well controlled Raw/wrap costs tightly managed Benefit of strong rand Coffee prices negative impact Product development – Bakers Jambos, Will
Slide 17: 2007 Focus areas
Operational performance 2007 Focus areas Smooth transition to new business unit structure Accelerate top-line growth Category extensions for brands Focus on innovation in areas of relevant scale Improve product development and launch performance Implement price increases in response to r
Slide 18: AVI LIMITED audited results 2006
NOTES AVI LIMITED audited results 2006
Slide 19: Financial results
Operational performance Financial results FY06 FY05 Rm Rm %∆ Revenue 1 432,5 1 378,3 3,9 Operating profit 5,9 84,3 (93,0) Operating margin % 0,4 6,1 (93,4) Capital expenditure 65,7 72,2 (9,0) NOTES AVI LIMITED audited results 2006
Slide 20: Financial results
Operational performance Financial results Operating profit derived FY06 FY05 from each fishing resource Rm Rm %∆ South Africa (1,9) 85,8 (102,2) Argentina 0,1 (18,3) 100,5 Other 7,7 16,8 (54,2) Total 5,9 84,3 (93,0) NOTES AVI LIMITED audited results 2006
Slide 21: 2006 Key features – South Africa
Operational performance 2006 Key features – South Africa Revenue growth due to increased price realisation offset by lower volumes Poor fishing conditions (12% lower catch rates) Increased fuel prices Management changes Restructuring commenced and costs incurred Long term fishing rights
Slide 22: 2006 quota outcome
Operational performance 2006 quota outcome Hake quota (tons) FY06 FY05 South Africa 150 000 158 000 I&J 41 950 46 830 % 28,0 29,6 Argentina 380 000 394 000 Alpesca 27 847 24 259 % 7,3 6,2 South African quota allocation appeals finalised August 2006 – impact 10,4% CY06 including TAC reduction Alp
Slide 23: 2006 Key features
Operational performance 2006 Key features Alpesca Increase in hake volumes (fishing and quota) Shrimp fishery closed for most of the year Increased labour costs following strikes Increased fuel prices Simplot JV Staff retrenchment costs and asset scrapping costs Benefit of manufactur
Slide 24: 2007 Focus areas
Operational performance 2007 Focus areas Industry initiatives to improve South African fish resource management Restructuring process continues Reflect changing business drivers and quota position Head Office rationalised and building sold Benefit of head count reductions realised Optimi
Slide 25: AVI LIMITED audited results 2006
NOTES AVI LIMITED audited results 2006
Slide 26: Financial results
Operational performance Financial results FY06 FY05 Rm Rm Revenue 209,0 217,3 Operating profit (20,4) (0,2) Capital expenditure 2,8 11,3 NOTES AVI LIMITED audited results 2006
Slide 27: 2006 Key features
Operational performance 2006 Key features Significant impact of ineffective management Lost market share Retail gross margin declined Distribution costs increased Corrective actions implemented Senior structure and personnel resolved Recovery of relevant industry experience Sales and
Slide 28: 2007 Focus areas
Operational performance 2007 Focus areas Access benefits from new business unit structure Grow top line Improve sales and merchandising function Improve selling prices Accelerate innovation Reduce distribution cost Leverage volume growth NOTES AVI LIMITED audited results 2006
Slide 29: AVI LIMITED audited results 2006
NOTES AVI LIMITED audited results 2006
Slide 30: Financial results
Operational performance Financial results FY06 FY05* Rm Rm %∆ Revenue 254,7 226,9 12,3 Operating profit 21,5 27,8 (22,7) Operating margin % 8,4 12,3 (31,7) Capital expenditure 15,0 11,8 27,1 *2005 numbers are for 11 months – acquisition was effective August 2004 NOTES AVI LIMITED audited results 200
Slide 31: 2006 Key features
Operational performance 2006 Key features Fresh sales volumes increased by 5,6% over the previous 12 months Fresh market share increased from 52% to 55% Industry margins reduced with prices declining year on year Increased imports of Chinese processed mushrooms Pricing in the fresh market
Slide 32: 2007 Focus areas
Operational performance 2007 Focus areas Continue to strengthen the Denny brand (above the line TV) Optimise fresh pricing in the market via premiumisation Continued innovation of Denny branded processed convenience products Expand production facilities in Gauteng – brown mushroom project
Slide 33: AVI LIMITED audited results 2006
NOTES AVI LIMITED audited results 2006
Slide 34: Financial results
Operational performance Financial results FY06 FY05 Rm Rm %∆ Revenue 479,6 461,9 3,8 Operating profit 50,5 47,0 7,4 Operating margin % 10,5 10,2 2,9 Capital expenditure 16,9 14,8 14,2 NOTES AVI LIMITED audited results 2006
Slide 35: 2006 Key features
Operational performance 2006 Key features Much improved H2 First price increase in four years Weighted average below 2% Key de-listings in Australasian market and reduced investment NOTES AVI LIMITED audited results 2006
Slide 36: 2007 Focus areas
Operational performance 2007 Focus areas Maintain high levels of innovation 16 new fragrance launches Widen consumer mix Acquisitive ambition for new brands Take advantage of residual Australasian opportunities NOTES AVI LIMITED audited results 2006
Slide 37: AVI LIMITED audited results 2006
NOTES AVI LIMITED audited results 2006
Slide 38: Financial results
Operational performance Financial results FY06 FY05* Rm Rm %∆ Revenue 391,8 258,1 51,8 Operating profit 115,1 77,1 49,3 Operating margin % 29,4 29,9 (1,7) Capital expenditure 9,5 4,1 131,7 *2005 numbers for comparative purposes only NOTES AVI LIMITED audited results 2006
Slide 39: 2006 Key features
Operational performance 2006 Key features Acquisition effective July 2005 Final acquisition cost R596 million Revenue growth driven by Same store growth of 30% Eight new stores Trading density from R38k to R44k per annum Strong consumer demand for key brands – Carvela, Lacoste, Kurt Ge
Slide 40: 2007 Focus areas
Operational performance 2007 Focus areas Investment in people and infrastructure to sustain growth Upgrade shopping experience Expansion of brand portfolio Increased brand investment Continue geographic expansion Wider use of owned brands in fashion category (Kurt Geiger collection) NOTE
Slide 41: Structure for growth
Structure for growth NOTES AVI LIMITED audited results 2006
Slide 42: Structure rationale
Structure rationale To aggregate brands into natural groupings where the core skills, market instincts and business activities are as similar as possible To take advantage of AVI’s heightened focus to extract all the embedded linkages existing within the underlying activity To create business
Slide 43: Structure for growth
Structure for growth Retail Beverage Retail Snacking Fashion Chilled & Frozen Out of Brands Brands Brands Convenience Brands Home Hot Cold Biscuit Snack Beauty Footwear I&J Denny OOH Beverages Beverages Brands Brands A balance between business unit sovereignty and single company instinct NOTES AVI L
Slide 44: Structure for growth
Structure for growth The proposed new business units are similar in size, have a good balance of mature and growth brands with similar brand attributes Facilitates appropriate shared and support services (where rational and economic) Elevates our growth categories and places recent acquisition
Slide 45: Results viewed in accordance with the revised operating structure
Structure for growth Results viewed in accordance with the revised operating structure Operating Operating Revenue profit margin FY06 FY05 FY06 FY05 FY06 FY05 Rm Rm Rm Rm % % Retail beverage brands 1 207,1 1 162,1 149,3 137,5 12,4 11,8 Retail snacking brands 1 288,9 1 184,6 125,9 105,4 9,8 8,9 Chill
Slide 46: Prospects
Prospects NOTES AVI LIMITED audited results 2006
Slide 47: Prospects – positive outlook
Prospects – positive outlook Impact of inflationary environment and rising interest rates not readily predictable I&J (Rand weakness) and Food Brands, Indigo have defensive properties in tougher economic circumstances I&J’s multi-faceted re-structuring supports a sound recovery in 2007 Spitz
Slide 48: www.avi.co.za
www.avi.co.za NOTES AVI LIMITED audited results 2006