| Wed 29 Aug 2001, 0:00 | | Anglovaal Industries Limited - Financial Results |
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ANGLOVAAL INDUSTRIES LIMITED
("the Group")
AVI ZAE000030102
Financial results for the year ended 30 June 2001
* Operating profit up 25% to R503m
* Profit before tax and exceptional items up 32% to R565m
* Diluted headline earnings per share up 25% to 99.4 cents
* Dividend per share up 27% to 38 cents
* 16% of issued shares repurchased
Angus Band, Managing Director, commented: "I am delighted with the overall
performance that AVI has produced in the light of an unresponsive market.
These results reflect the Group's strategy of continued innovation, focus on
operating efficiencies and optimising returns for our shareholders.
AVI is well placed to grow operating profits in the new financial year and
the benefit of the completed share buy-backs will also positively impact
earnings per share."
29 August 2001
Enquiries:
AVI
Angus Band Tel: 011 779 2703
Robert Katzen Tel: 011 779 2704
College Hill Johannesburg Tel: 011 447 3030
Julia Kerr
Nick Elwes
GROUP OVERVIEW
AVI has delivered a strong performance, lifting profit before tax and
exceptional items by 32% to R565m. This improvement has been driven by
continued innovation, improved operating efficiencies and a focus on
optimising shareholder returns.
In line with AVI's strategy of looking for synergy within the Group and
leveraging off its critical mass, the results have been presented firstly on
a Group basis and then by the business segments in which AVI competes.
These segments are Branded Consumer Goods, Packaging, Distribution and
Ingredients.
Group turnover increased by 8% to R5,1bn, as a result of acquisitions and
stronger international seafood sales within the Branded Consumer Goods
segment as well as market and pack share gains in Packaging. The basis of
disclosure of turnover for Distribution has been amended to reflect only
distribution fees earned and excludes principal's turnover. Comparative
figures have been restated accordingly. This has reduced the level of Group
turnover disclosed by R1,9bn (2000: R1,7bn).
Operating profit from continuing operations increased by 20% to R503m,
driven by significant improvements in all business segments, with the
Group's operating margin increasing from 8.6% to 10.0%. This improvement is
after additional energy and fuel costs in excess of R40m and is attributable
to growth in sales and in particular to the Group's drive to improve
efficiencies.
Net income from investments increased from R26m to R62m as a result of
strong cash generated by operating activities, which increased from R696m to
R967m and the receipt of the proceeds from the sale of the prepared
vegetable business of R261m in July 2000.
The profit before tax and exceptional items increased by 32% but the growth
in headline earnings was restricted to 20% following an increase in the
effective tax rate from 20% to 27%. Diluted headline earnings per share
increased by 25% to 99.4 cents.
Net cash after long-term borrowings ended the year at R586m (2000: R671m).
This is particularly pleasing as this position is after R536m was returned
to shareholders during the year through share buy backs and R64m used to
redeem the variable rate preference shares. Good working capital management
resulted in the percentage of working capital to sales decreasing from 17%
to 14%. The Group also continued to reinvest in its fixed asset base with
Group capital expenditure of R275m being in excess of the depreciation
charge of R256m.
In order to optimise shareholder returns, the Group has and will continue to
focus on improving the efficiency of its capital structure. During the year
AVI converted its debentures into ordinary shares, redeemed the variable
rate preference shares, and repurchased 16% of the issued ordinary shares at
an average price of 806 cents per share. The major portion of the buy-back
programme was completed on 30 April 2001 and therefore has not had a
material impact on the results for this year. The Hersov family also
elected to convert the convertible preference shares, their control
instrument, to ordinary shares in September 2000. Consequently, AVI no
longer has a controlling shareholder but continues to enjoy broad
institutional support.
AVI's strength is its brands and during the year continued the major thrust
in respect of innovation and promotional campaigns that have consolidated
the Group's market position. Some of the Group's product innovations
launched included, in the Branded Consumer Goods segment, the fragrances 54
on Browne and Venice and food products such as Provita MultiGrain, Romany
Cream Mini Cake Rolls, Ripples, Crispy Lites, The Occasions coffee range,
Pasta Partners, China Stir Fry, Pub Style Fish and a number of other seafood
products. In addition to these, the Packaging segment launched Consol XPRS,
a 24-hour delivery service to the smaller wine producers and estates, and
Consol Speciality Glass (CSG) enhanced its range into the production of
coloured bottles.
OPERATIONAL REVIEW
SEGMENTAL PERFORMANCE
Turnover from Operating profit
continuing from continuing
operations operations
2001 2000 Change 2001 2000 Cha
Rm Rm % Rm Rm %
Branded Consumer Goods 3,257.8 3,003.9 8% 262.0 247.0 6%
Packaging 1,377.9 1,213.4 14% 224.6 165.7 36%
Distribution 269.3 252.0 7% 32.2 26.7 20%
Ingredients 207.8 269.4 (23%) (6.5) (13.5) 52%
Holding Company - - - (9.0) (6.4) (41
Sub-total 5,112.8 4,738.7 503.3 419.5 -
Inter-segmental sales in (53.6) (53.4) - - - -
Distribution turnover
5,059.2 4,685.3 8% 503.3 419.5 20%
Branded Consumer Goods
Although volumes remained under pressure, turnover grew by 8% to R3,3bn and
total operating profit by 14% to R262m, following materially improved
performances from the Biscuits and Coffee categories.
National Brands Food and Cosmetics division
Turnover from continuing operations increased by 8% and the division
achieved strong growth in operating profit to R136m (2000: R117m). Good
progress was made in optimising the strong brand positions and driving the
focus on operating efficiencies. Operating margin improved from 5.7% to
6.1%. During the period under review, no material deterioration of market
share was experienced within the division and all brands continue to perform
well in difficult markets.
The main drivers of operating profit improvement in the NBL Food division
were the Biscuit and Coffee categories. The Biscuit category had a
particularly successful year with operating profit doubling in spite of a
1.8% volume decline. This was largely attributable to better material
procurement and lower wastage as well as reduced operating costs following
the Cape Town factory closure. The Coffee category delivered results well
ahead of the comparative year despite volumes remaining flat. This was
achieved through good management of operating and distribution costs and the
continuing benefit of low international coffee prices. The Tea category
encountered challenging trading conditions with volumes down 5% and
operating profit off the high base of the prior year, but still delivered
sound returns.
The major disappointment in the NBL Food division was the Snacks category,
which saw a deterioration in the second half of the financial year after 18
months of improved performance. This was mainly as a result of internal
disruptions in the last four months arising from factory and distribution
rationalisations. The situation was further compounded by a sharp decline in
the market in the last quarter. The category is receiving close management
attention to improve performance.
The Cosmetics division achieved a 32% growth in turnover within difficult
trading conditions for the cosmetics industry. The turnover growth achieved
was predominantly attributable to the acquisition of the Coty licence in
March 2000. Operating profit grew by 15% with the start-up costs related to
Coty limiting the increase relative to turnover growth. Both the Lentheric
and Yardley brands continue to perform well.
I&J Food division
The division increased turnover by 10% to R1,0bn and operating profit
declined by 3% to R126m.
The Core Seafood operations again delivered sound results as operating
profit grew by 22% notwithstanding increased fuel prices and raw material
costs incurred to augment reduced quotas. Hake catches in domestic waters
continued to produce improved catch rates and size mix for most of the year.
These gains were offset by disappointing results from fishing operations in
international waters caused by poor catch rates.
Soft demand for seafood products in the domestic market was offset by higher
prices, which resulted in satisfactory sales value growth in all channels.
Retail market share increased to 62%, driven by an enhanced rate of
innovation. International demand for white fish remained strong,
exaggerated by the outbreak of the BSE and Foot and Mouth epidemics. The
division's emphasis on developing its retail business internationally
through innovative value added products resulted in a 25% volume growth in
exports of these products for the year. Sales of I&J branded products into
Europe continue to grow and a successful initial campaign was mounted in the
United States. Export turnover now comprises 60% (2000: 57%) of the total
Seafood division's turnover.
Performance of the Seafood, Snacks and Meals joint venture with Simplot
Australia remained flat as the Australian economy weakened following a
strong first quarter in the lead-up to the Olympic games. Income from the
Namibian investments remained unsatisfactory, although ahead of last year.
Sales of beef and chicken prepared food products declined by 13% as a result
of the restructuring of this category following the sale of the prepared
vegetable business last year. The restructuring has been successful and the
operating loss of last year was replaced by a profit of R3m, notwithstanding
the decrease in turnover.
Packaging
Turnover grew by 14% to R1,4bn with strong glass volume growth, which
together with operating efficiencies resulted in a 36% increase in operating
profit to R225m.
Consol Glass division
In the Glass Packaging division, volumes exceeded the prior year by 11% as a
result of an improved focus on customer service and innovation and from pack
share growth. The record sales achieved confirm the increasing acceptance
of glass as the container of choice. The continued commitment to
productivity gains and rigorous cost management underpinned a 32%
improvement in operating profit.
A substantial reorganisation of the division's selling and marketing
resources was completed which will ensure an innovative and customer-driven
focus as the cornerstone of its market positioning. This included the launch
of Consol XPRS, which was completed in the last quarter and sales volumes to
date have exceeded management's highest expectations.
CSG completed the overall reconstruction of both furnaces and production
lines and commissioned the new glass tableware infrastructure. Despite the
resultant disruption, organic growth was especially pleasing and the outlook
for this operation is extremely promising.
Consol Plastics division
The 18-month restructuring of the Plastics Packaging division was completed
in the first half of 2001. Notwithstanding this disruption and the impact of
substantially higher raw material prices during the year, the division
produced an improvement in operating profit of 87%. This result was
particularly gratifying, seen against the background of a plastics industry
which, as a whole, remains constrained by both structural and capacity
dynamics.
Distribution
Turnover increased by 7% to R269m, notwithstanding a volume decline of 1%
that resulted primarily from a planned reduction of unprofitable product
lines. This decline was partially offset by growth in chicken volumes and
realisations.
Operating profit improved by 20% to R32m following the focus on improving
efficiencies, channel optimisation and a determined cost reduction drive.
A number of restructuring initiatives have now been completed, including the
computerised vehicle routing system, which was implemented at major
distribution centres. A comprehensive enterprise resource planning system
(ERP) is being installed at a cost of R25m. This will provide the basis for
the implementation of integrated supply chain management and position the
operation for future growth. It will also remove the expense and
inefficiency of the current outdated system.
Ingredients
Despite difficult trading conditions, the edible oil and protein division
showed a significant improvement during the period and was restored to
profit by year-end.
POST BALANCE SHEET EVENTS
On 10 August 2001, I&J concluded the acquisition of Alpesca S.A., one of the
largest fishing companies in Argentina. The total consideration to be paid
will be limited to US$7m, dependent upon finalisation of the audited
financial statements.
PROSPECTS
Taking account of current market conditions, including the existing level of
hake quota, the Board is confident that AVI will lift earnings from trading
in real terms which, together with the impact of the share buy-back
programme, will result in continued growth in earnings per share.
The Group remains strongly cash generative and continues to seek growth
opportunities, which are in line with its stated strategy.
DIVIDEND DECLARATION
Notice is hereby given that a final
ordinary dividend No. 57 of 38 cents per
share for the year ended 30 June 2001 has
today been declared payable to holders of 2001
ordinary shares. The salient dates
relating to the payment of the dividend are
as follows:-
Last day to register for the dividend and Friday, 28
for change of address or dividend September
instructions
Dividend warrants posted/dividends Friday, 26
electronically transferred October
ANNUAL REPORT
The annual financial statements for the year ended 30 June 2001 will be
posted to shareholders on or about 14 September 2001. The financial
statements will include a notice of the annual general meeting of
shareholders to be convened on or about
10 October 2001.
STRATE
Shareholders are advised that AVI has been informed that the
dematerialisation of its shares will commence on 12 November 2001 in terms
of the JSE Securities Exchange South Africa's listing requirements.
Other dates relevant to the dematerialisation are:
Trading for electronic settlement begins on: 3 December 2001
Electronic settlement of trades commences on: 10 December 2001
An explanatory letter to shareholders in connection herewith will be
enclosed with the annual report
28 August 2001
GROUP INCOME STATEMENTS
Increa
se
2001 2000
Rm Rm %
Turnover 5,059.2 4,704.7 7.5%
- Continuing operations 5,059.2 4,685.3 8.0%
- Discontinued operations - 19.4
Operating profit/(loss) 503.3 402.9 24.9%
- Continuing operations 503.3 419.5 20.0%
- Discontinued operations - (16.6)
Income from investments 89.2 76.5
Interest paid (27.5) (51.0)
Profit before exceptional items 565.0 428.4 31.9%
Exceptional items (69.1) (53.8)
Profit before taxation 495.9 374.6 32.4%
Taxation 53.0 44.2
- Normal 148.7 44.2
- Deferred tax asset raised (95.7) -
Profit after taxation 442.9 330.4 34.0%
Share of retained earnings of 5.6 11.9
associated companies and joint ventures
448.5 342.3
Minority interests 52.1 38.1
396.4 304.2
Preference dividends 3.9 7.1
Earnings 392.5 297.1 32.1%
Determination of headline earnings:
Earnings 392.5 297.1
Adjust for exceptional items: 4.4 4.4
Exceptional items net of attributable 10.2 10.2
taxation credit and minority interests
Amounts included in exceptional items (5.8) (5.8)
of a revenue nature
Determination of headline earnings
Deferred tax asset raised (95.7) -
Exceptional items, net of tax credit 63.6 10.2
and minority interests
Items of a capital nature net of tax 2.5 -
credit and minority interests
Items of a revenue nature included in - (5.8)
exceptional items
Headline earnings 362.9 301.5 20.4%
Earnings per ordinary share 108.9 88.8 22.6%
(cents)(note 1)
Diluted headline earnings per ordinary 99.4 79.6 24.9%
share (cents)(note 2)
Dividend per ordinary share (cents) 38.0 30.0 26.7%
Note:
GROUP BALANCE SHEETS
2001 2000
Rm Rm
ASSETS
Non-current assets
Property, plant and equipment 1,537.4 1,582.1
Goodwill 25.1 -
Associated companies 27.8 21.4
Joint venture companies 127.5 125.6
Other investments 3.4 71.8
Deferred taxation 89.2 16.3
1,880.4 1,817.2
Current assets
Inventories 670.9 687.0
Trade and other receivables 998.6 978.6
Cash and cash equivalents 685.6 760.3
2,355.1 2,425.9
TOTAL ASSETS 4,235.5 4,243.1
EQUITY AND LIABILITIES
Capital and reserves
Share capital - ordinary 15.9 16.6
Share capital - preference - 16.3
Share premium 162.7 489.5
Non-distributable reserves 114.8 110.9
Distributable reserves 2,036.4 1,767.9
Automatically convertible subordinated - 210.5
debentures
Total shareholders' funds 2,329.8 2,611.7
Minority interests 343.1 350.0
Non-current liabilities
Interest-bearing borrowings 59.2 65.7
Deferred taxation 139.7 139.5
198.9 205.2
Current liabilities
Trade and other payables 1,114.6 935.0
Short-term borrowings 40.6 24.0
Taxation 88.2 17.4
Shareholders for dividend 120.3 99.8
1,363.7 1,076.2
TOTAL EQUITY AND LIABILITIES 4,235.5 4,243.1
Number of ordinary shares in issue 316,558 332,721
(thousands)
GROUP CASH FLOW STATEMENTS
2001 2000
Rm Rm
Cash retained from operating activities 777.7 518.4
Cash generated by operations 767.1 598.5
Income from investments 87.6 69.8
Decrease in working capital 112.0 27.2
Cash generated by operating activities 966.7 695.5
Interest paid (27.5) (51.0)
Taxation paid (33.9) (3.2)
Cash available from operating activities 905.3 641.3
Dividends paid (127.6) (122.9)
Investing activities (264.6) (165.2)
Property, plant & equipment
- to maintain operations (240.6) (193.8)
- to expand operations (34.0) (109.4)
(274.6) (303.2)
Proceeds from disposals 32.1 61.6
Net investment in property, plant & (242.5) (241.6)
equipment
Investments - net (acquisitions)/disposals (22.1) 76.4
- subsidiaries and businesses (20.5) 93.2
- associated companies and other (1.6) (16.8)
investments
Financing activities (604.4) (101.9)
Net decrease in shareholder funding (593.6) (35.1)
Long-term borrowings - net repayment (10.8) (66.8)
Net (decrease)/increase in cash and cash (91.3) 251.3
equivalents
Net cash and cash equivalents at beginning 736.3 485.0
of year
Net cash and cash equivalents at end of 645.0 736.3
year
Net cash and cash equivalents at end of 645.0 736.3
year
The net cash and cash equivalents are as
follows:-
Consol Limited 497.1 275.2
Irvin & Johnson Limited 83.4 (13.8)
National Brands Limited 14.2 (104.6)
594.7 156.8
EXCEPTIONAL ITEMS
Exceptional items
consist of the
following:-
2001 2000
Rm Rm
Impairment of property, plant & equipment of (40.0) -
a subsidiary company
Rationalisation and (24.2) (84.5)
restructuring costs
Goodwill amortisation (6.2) (2.4)
Net surplus on disposal of subsidiaries, 1.3 33.1
businesses, investments, properties and
plant & equipment
(69.1) (53.8)
Adjustment for 5.5 43.6
attributable taxation
credit and minority
interests
Net charge (63.6) (10.2)
-ENDS-
