2014 RHODES FOOD GROUP Annual Results Presentation 2014 ANNUAL - - PDF document

ANNUAL RESULTS

2014

1

2

PRESENTATION OUTLINE

Section Presenter Introduction Bruce Henderson Strategic review Bruce Henderson Financial performance Tiaan Schoombie Trading performance Bruce Henderson Outlook Bruce Henderson Questions

ANNUAL RESULTS

for the year ended 28 September 2014

1

RHODES FOOD GROUP Annual Results Presentation 2014

2

RHODES FOOD GROUP Annual Results Presentation 2014

4

TRADING ENVIRONMENT

• Continued constrained consumer spending environment
• Middle and lower income customers under pressure
• Higher LSM customers more resilient
• Most export markets have remained strong
• Rand depreciated 13% against trading basket currencies
• Cost inflation is in line with food inflation, recovered

through efficiencies and price adjustments

INTRODUCTION

RHODES FOOD GROUP Annual Results Presentation 2014

3

5

REVIEW OF THE YEAR

• Strong trading and financial performance
• Sustained organic growth regionally and internationally
• Benefit of Bull Brand acquisition and currency

depreciation

• Successful listing on the JSE on 2 October 2014
• Raised primary capital of R600m
• Listing to accelerate the group’s growth strategy

STRATEGIC REVIEW

4

RHODES FOOD GROUP Annual Results Presentation 2014 BUSINESS SEGMENTS

Business segments Regional International Long Life Foods Fresh Foods Main products Canned fruits and vegetables, jams, canned meat Ready meals, pies and pastries, dairy products Canned fruits and fruit juice purees and concentrates Turnover contribution 33% (2013: 25%) 32% (2013: 38%) 35% (2013: 37%) Markets South Africa and Sub-Saharan Africa South Africa Major global markets Market positioning Strong product portfolio, both branded and private label Long-term partnership with Woolworths Supply agreement with Corner Bakery Extensive distribution of Magpie brand Long-term supplier to global retail and premium branded customers

and others

SUSTAINED ORGANIC AND ACQUISITIVE GROWTH

1999 2004 2006 2007 2010 2012 2013 2014 1896

Acquisition of Sunpie Acquired by shareholders of Swaziland Fruit Canners and renamed Rhodes Food Group Acquisition of Magpie, entry into pies

• Construction of a new ready

meals plant (Gauteng)

• Acquisition of Del Monte SA

Acquisition of Bull Brand, entry into canned meat Management buyout (led by Capitalworks) to fuel future business growth Listed on JSE

• n 2 October

Company established as a deciduous fruit business

. . .

Acquisition of Giants Canning, entry into canned vegetables

5

WORLD CLASS PRODUCTION FACILITIES

• 8 production sites
• 2 farms (dairy, pineapple)

Facilities 10

STRATEGY

Strategy Strategic objectives

Diversified food group

• Ensure diversity across products, customers, regions and

revenue streams

• Operate primarily in the domestic market and high growth

Sub-Saharan countries

• Export long life products to international markets
• Identify additional markets, channels or products with high

growth potential Value add meal solutions

• Offer convenience food in fresh, frozen and long life formats
• Meal solutions across customer income groups
• Continuous innovation in products, processes and

packaging

• Strategic goal to be the market leader in innovation

To be the supplier of choice across our markets for fresh, frozen and long life meal solutions

6

RHODES FOOD GROUP Annual Results Presentation 2014

FINANCIAL PERFORMANCE

11

STRATEGY continued

Strategy Strategic objectives

Market leading brands

• Trusted own brands
• Maintain #1 or #2 position in each target product category
• Complement organic growth with value accretive

acquisitions

• Accelerate growth in new segments or markets through

acquisitions and product launches Partnerships with industry leaders

• Produce for select private label programmes
• Extend existing partnerships to customers in new categories

and geographies

• Establish new long-term relationships with local and

international customers World-class manufacturing facilities

• Continuous investment in state-of-the-art technology and

production processes

• Facilities located close to end markets and sources of raw

materials

• Production sites certified to international standards

7

13

FINANCIAL HIGHLIGHTS

• Turnover +31.5% to R2.4 billion
• Operating profit +47.9% to R236 million
• Operating margin up from 8.6% to 9.7%
• Normalised* HEPS +40.5% to 36.8 cps
• Normalised* diluted HEPS +40.1% to 35.3 cps

* Assumes 221 million shares in issue for 2014 and 2013, and excludes one-off group restructuring costs of R22.2 million in prior period

14

INCOME STATEMENT

R’m Sep 2014 Sep 2013 % change Turnover 2 444 1 859 31.5 Cost of goods sold (1 790) (1 324) 35.2 Gross profit Gross profit margin 654 26.8% 535 28.8% 22.2 Other income 16 16 (1.4) Operating costs (434) (392) 10.7 Operating profit 236 160 47.9 Net interest paid (103) (89) 15.5 Profit before tax 133 71 88.6 Tax (51) (32) 56.5 Profit after tax 82 38 116.0 Normalised HEPS Normalised diluted HEPS 36.8c 35.3c 26.2c 25.2c 40.5 40.1

8

RHODES FOOD GROUP Annual Results Presentation 2014

16

SEGMENTAL TURNOVER

15

TURNOVER GROWTH

9

17

OPERATING PROFIT

18

OPERATING PROFIT - REGIONAL

* Margin diluted by inclusion of Bull Brand

10

RHODES FOOD GROUP Annual Results Presentation 2014

20

WORKING CAPITAL

R’m Sep 2014 Sep 2013 % change Net working capital 600 470 27.6 Inventory 543 458 18.6 Accounts receivable 390 301 29.4 Accounts payable (333) (289) 15.1

• Increase in net working capital in line with increase in trading activities in

Q4 relative to FY2013

• Net working capital days improved to 98 in 2014 from 120 in 2013

19

OPERATING PROFIT - INTERNATIONAL

* Includes integration costs for acquisition of Del Monte SA

11

21

CASH MANAGEMENT

22

USE OF LISTING PROCEEDS

• Net primary listing proceeds of approx R550 million
• Reduced debt and deleveraged balance sheet

– Settled subordinated debt R257 million – Settled mezzanine loan facility R169 million

• Approx R76 million finance cost saving from FY2015
• Invest in capacity expansion and production efficiency

12

RHODES FOOD GROUP Annual Results Presentation 2014

24

FINANCIAL GUIDANCE AND PLANS

• Interest saving from 2015 of approx 28.9 cents per share
• Tax rate to reduce to approximately 30% in 2015

– Expected to normalise to SA corporate tax rate in 2016

• Medium-term operating margin target of at least 10%
• Maintain flexible balance sheet structure

– Capacity for selective strategic acquisitions – Target debt:equity ratio of 20% to 50%

• First dividend planned for FY2015, payable early 2016

– Dividend cover ratio of 3 times diluted HEPS

23

CAPITAL EXPENDITURE

• R88 million in 2014

– Expansion R50 million; replacement R38 million

• R129 million planned in 2015

– Expansion R71 million; replacement R58 million

• Investment programme 2014 – 2015

Upgrading Bull Brand facility R41m Increasing capacity and upgrading pie facility R11m Increasing storage and dispatch capacity at fruit production facilities R50m

13

TRADING PERFORMANCE

26

REGIONAL: LONG LIFE FOODS

• Rhodes brand: Focus on LSM 5 – 10; over 130 SKUs

– Number 1 or 2 in canned fruit, vegetable and jam

• Bull Brand: Target LSM 4 – 8; over 20 SKUs

– Number 1 canned meat brand

• Consistent brand share gains
• Significant producer of private label products in SA
• Long-term relationships with retailers and distributors in

Africa

• Leadership in product and packaging innovation

14

RHODES FOOD GROUP Annual Results Presentation 2014

28

REGIONAL: LONG LIFE FOODS – BRAND SHARE

Brand shares* (%) Position 2010 2013 2014 Jams 2 12.0 15.7 18.2 Jam in glass 1 5.7 12.5 17.4 Canned fruit 2 12.9 22.3 23.3 Canned pineapple 1 39.5 49.5 52.5 Canned vegetables 2 5.5 10.7 12.5 Canned tomato 2 8.3 20.3 20.8 Tomato paste 1 5.9 28.7 31.3 Corned meat 1

• 37.5

39.0

* Moving annual total. Retailer scanning data processed by Aztec South Africa (market shares in retail channel, in retail prices)

27

REGIONAL: LONG LIFE FOODS – MARKET SHARE

Market shares* (%) Position 2010 2013 2014 Jams 2 29.9 35.9 38.4 Canned fruit 2 31.4 40.7 40.5 Canned vegetables 2 7.7 12.6 14.4 Canned meats 1

• 66.2

66.3

* Moving annual total. Retailer scanning data processed by Aztec South Africa (market shares in retail channel, in retail prices)

15

29

REGIONAL: LONG LIFE – SUB-SAHARAN AFRICA

Sub-Saharan countries where Rhodes Food Group is present (population covered c.170 m)

30

REGIONAL: FRESH FOODS

• Targeted mainly at higher LSM consumers in SA

– Focus on convenience and quality

• Long-term exclusive partnership with Woolworths

– Ready meals on a national basis – product portfolio of 145 SKUs – Pies and pastries – Dairy - Ayrshire milk and cream; speciality cheeses – Benefit from Woolworths strategic focus on fresh food products

16

RHODES FOOD GROUP Annual Results Presentation 2014

32

INTERNATIONAL

• Key export products are canned fruit, fruit purees and

juice concentrates

• One of two deciduous canners in the country
• Long-term supplier to global retail brands, selected

premium private label customers and wholesale

• Leader in fruit cup production

31

REGIONAL: FRESH FOODS

• Supply agreement with Corner Bakery (July 2014)
• Extensive presence in wholesale through Magpie brand
• Growing food service opportunity

17

33

INTERNATIONAL: GLOBAL EXPORT MARKETS

Australasia 10% of sales Middle East & Russia 10% of sales Europe 36% of sales US & Canada 15% of sales Far East 29% of sales

34

INTERNATIONAL: LONG-TERM RELATIONSHIPS

Branded products Retail customers

Over 20 years Over 10 years Over 20 years Over 5 years

Europe Australia

Over 10 years Over 20 years

Globally

Over 5 years

18

RHODES FOOD GROUP Annual Results Presentation 2014

OUTLOOK

35

INTERNATIONAL: CURRENCY MANAGEMENT

• A significant share of international sales are naturally hedged through the

purchase of raw materials:

– Fruit price contracts with farmers including an FX component – Purchases of packing and other raw materials, and some costs in foreign currencies

• Balance of currency exposure managed with forward contracts.

19

37

OUTLOOK

• Trading environment expected to remain unchanged
• Drive market share growth in Fresh Foods and Long Life
• Further expansion into Sub-Saharan Africa
• Bull Brand to increase revenue and profit contribution
• Continued investment in capacity expansion and

upgrading of production facilities

• Target strategic acquisitions aligned to core products

THANK YOU QUESTIONS

20

RHODES FOOD GROUP Annual Results Presentation 2014

40

CONTACT DETAILS

Bruce Henderson CEO hendersonb@rhodesfoodgroup.com Tiaan Schoombie CFO schoombiet@rhodesfoodgroup.com Graeme Lillie IR graeme@tier1ir.co.za

39

DISCLAIMER

This document, prepared by Rhodes Food Group Holdings Limited (“RFG” or “the company”), has been outlined for the benefit and information of the recipient to whom this document is submitted in good faith and who is deemed by RFG to have accepted responsibility for ensuring that the confidentiality of this document will be maintained at all

• times. This document may not be submitted in any manner or form to any party or utilised in any manner or form

without the prior written consent of RFG. The material contained in this document is intended to be general background information on RFG and its activities. The information is supplied in summary form and is therefore not necessarily complete. The financial information contained in this document may include non-IFRS financial measures. This document may include information derived from publicly available sources that have not been independently verified. No representation or warranty is made as to the accuracy, completeness or reliability of the information. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, goals, assumptions or future events or performance are not statements of historical facts and may be “forward looking statements”. Forward looking statements are based on expectations, estimates and projections at the time the statements are made that involve a number of risks and uncertainties which could cause actual results or events to differ materially from those presently anticipated. Forward looking statements may be identified through the use of words such as “expects”, “will”, “anticipates”, “estimates”, “believes”, or by statements indicating certain actions “may”, “could”, “should” or “might” occur. RFG is under no obligation, and does intend, to update any forward looking statements contained in this document. The recipient acknowledges that RFG does not assume responsibility to it or to any other person for loss or damage

• f any kind whatsoever arising as a result of the use or misuse by the recipient of this document or for any opinion,

advice, recommendation, representation or information, expressed or implied, contained herein, notwithstanding any negligence, default or lack of care by it or that such loss or damage was foreseeable.

www.rhodesfoodgroup.com