2017 ANNUAL RESULTS for the year ended 1 October 2017 RHODES FOOD - PowerPoint PPT Presentation

ANNUAL RESULTS FOR THE YEAR ENDED 1 OCTOBER 2017

ANNUAL RESULTS for the year ended 1 October 2017 RHODES FOOD GROUP ANNUAL RESULTS 2017 1

PRESENTATION OUTLINE REVIEW OF THE YEAR 1 FINANCIAL PERFORMANCE 2 OPERATIONS 3 OUTLOOK 4 QUESTIONS 5 2 RHODES FOOD GROUP – ANNUAL RESULTS 2017 RHODES FOOD GROUP ANNUAL RESULTS 2017 2

REVIEW OF THE YEAR RHODES FOOD GROUP ANNUAL RESULTS 2017 3

REVIEW OF THE YEAR ▪ Continued strong regional organic growth ▪ Regional gains offset by disappointing international performance ▪ Impacted by strengthening Rand, reduced demand for industrial products, pricing pressure and higher costs ▪ Equity capital of net R648m raised through book build ▪ Increased capital investment programme of R487m ▪ Pakco and Ma Baker successfully integrated 4 RHODES FOOD GROUP – ANNUAL RESULTS 2017 RHODES FOOD GROUP ANNUAL RESULTS 2017 4

REVIEW OF THE YEAR: REGIONAL ▪ Volume growth and share gains in key categories ▪ Good growth in pie category across all sales channels ▪ Sales in sub-Saharan Africa +47% ▪ Ongoing juice market share gains despite increased competitiveness in reaction to Rhodes’ entry ▪ Margin pressure – Tough consumer environment, notably in lower end market – Short-term dilutive impact of acquisitions 5 RHODES FOOD GROUP – ANNUAL RESULTS 2017 RHODES FOOD GROUP ANNUAL RESULTS 2017 5

REVIEW OF THE YEAR: INTERNATIONAL ▪ Canned fruit volumes recovered in H2 ▪ Slowdown in industrial pulp and puree products – Major decline in global prices – Reduced demand in key international markets – Pulps and purees comprise approx 20% of international sales ▪ Foreign exchange impact – Rand strengthened by 10% against trading currencies – Full impact of currency on international profitability limited by hedging policy in H1; hedge unwound in H2 6 RHODES FOOD GROUP – ANNUAL RESULTS 2017 RHODES FOOD GROUP ANNUAL RESULTS 2017 6

REVIEW OF THE YEAR: INTERNATIONAL ▪ Foreign pricing pressure – Softer prices in Asia in core canned fruit business – Depreciation in Asian currencies relative to US dollar ▪ Drought in W Cape impacting canned fruit costs – Poorer quality fruit, lower yields and resultant higher labour costs – Impact of approx 5% on cost of goods sold 7 RHODES FOOD GROUP – ANNUAL RESULTS 2017 RHODES FOOD GROUP ANNUAL RESULTS 2017 7

FINANCIAL PERFORMANCE RHODES FOOD GROUP ANNUAL RESULTS 2017 8

FINANCIAL PERFORMANCE ▪ Turnover +10.8% to R4.6 billion – Regional +21.4% – International -18.1% ▪ Gross profit margin 27.0% (2016: 29.3%) – Regional margin strengthened – International down on currency impact and slower sales ▪ Operating margin 8.9% (2016: 12.0%) – Regional improved in H2 but lower for year at 9.7% (10.3%) – International impacted by currency, lower pricing and higher costs due to drought 9 RHODES FOOD GROUP – ANNUAL RESULTS 2017 RHODES FOOD GROUP ANNUAL RESULTS 2017 9

FINANCIAL PERFORMANCE ▪ Profit after tax -20% to R235 million ▪ Headline earnings -19.1% to R237 million ▪ Diluted HEPS -27% to 93.4 cps – 10.8% increase in weighted average number of dilutive shares ▪ Dividend of 31.1 cps declared 10 RHODES FOOD GROUP – ANNUAL RESULTS 2017 RHODES FOOD GROUP ANNUAL RESULTS 2017 10

INCOME STATEMENT R’m 2017 2016 % change Restated Turnover 4 593 4 146 10.8 Cost of goods sold (3 355) (2 933) 14.4 Gross profit 1 238 1 213 2.0 Gross profit margin 27.0% 29.3% Other income 55 37 48.6 Operating costs (886) (752) 17.8 Operating profit 407 498 (18.3) Net interest paid (85) (89) (4.5) Profit before tax 322 409 (21.3) Tax (87) (116) (25.0) Profit after tax 235 293 (19.8) Diluted HEPS (c) 93.4 128.0 (27.0) WAN shares in issue (‘m) 244.5 219.9 11.2 11 RHODES FOOD GROUP – ANNUAL RESULTS 2017 RHODES FOOD GROUP ANNUAL RESULTS 2017 11

INCREASED SHARES IN ISSUE ‘000 2017 2016 % change Opening shares in issue 221 000 221 000 Equity capital raise (Nov 2016) 25 000 Acquisition of Pakco (Mar 2017) 7 762 Treasury shares (1 125) (1 125) Net closing shares in issue 252 637 219 875 14.9 WAN shares in issue 244 533 219 875 11.2 WAN dilutive shares in issue 253 722 228 967 10.8 12 RHODES FOOD GROUP – ANNUAL RESULTS 2017 RHODES FOOD GROUP ANNUAL RESULTS 2017 12

GROUP TURNOVER 4 593 4 146 3 023 2 444 R'm 1 859 2013 2014 2015 2016 2017 13 RHODES FOOD GROUP – ANNUAL RESULTS 2017 RHODES FOOD GROUP ANNUAL RESULTS 2017 13

COMPONENTS OF TURNOVER GROWTH R'm 14 RHODES FOOD GROUP – ANNUAL RESULTS 2017 RHODES FOOD GROUP ANNUAL RESULTS 2017 14

REGIONAL PERFORMANCE R’m 2017 2016 % change Restated Revenue 3 680 3 032 21.4 Long Life 2 151 1 857 15.9 Fresh 1 529 1 175 30.1 Operating profit 358 311 15.1 Operating profit margin 9.7% 10.3% * Infant foods reclassified from Long Life to Fresh Foods from October 2016 ▪ Components of turnover growth – Volume growth 10.7% – Price/mix 2.1% – Acquisitions 8.6% 15 RHODES FOOD GROUP – ANNUAL RESULTS 2017 RHODES FOOD GROUP ANNUAL RESULTS 2017 15

INTERNATIONAL PERFORMANCE R’m 2017 2016 % change Restated Revenue 913 1 114 (18.1) Operating profit 58 190 (69.5) Operating profit margin 6.3% 17.1% ▪ Components of turnover growth – Price/mix 3.2% – Volumes -11.6% – Forex -9.7% 16 RHODES FOOD GROUP – ANNUAL RESULTS 2017 RHODES FOOD GROUP ANNUAL RESULTS 2017 16

SEGMENTAL TURNOVER 1 529 1 175 929 R'm 777 1 857 2 151 702 1 185 818 463 1 114 909 913 849 694 2013 2014 2015 2016 2017 International Regional - Long Life Regional - Fresh 17 RHODES FOOD GROUP – ANNUAL RESULTS 2017 RHODES FOOD GROUP ANNUAL RESULTS 2017 17

OPERATING PROFIT R'm * Normalised operating profit and margin ** Restated 18 RHODES FOOD GROUP – ANNUAL RESULTS 2017 RHODES FOOD GROUP ANNUAL RESULTS 2017 18

FOREIGN EXCHANGE HEDGING POLICY ▪ Hedge approx 60% of projected foreign sales on a 12-month basis – Natural internal hedge – Forward exchange contracts ▪ Internal hedge – Direct import of packaging and raw materials – Linking pricing of fruit contracts with farmers to export prices realised in Rands ▪ Remain committed to continuing hedging policy 19 RHODES FOOD GROUP – ANNUAL RESULTS 2017 RHODES FOOD GROUP ANNUAL RESULTS 2017 19

INTERNATIONAL REVENUE BY CURRENCY ZAR 1% (2016: 7%) AUD 20% (2016: 13%) CAD 4% (2016: 3%) USD 50% (2016: 49%) GBP 13% (2016: 14%) EUR 12% (2016: 14%) Rand appreciated 10% against trading basket of currencies (2016: depreciated 17%) 20 RHODES FOOD GROUP – ANNUAL RESULTS 2017 RHODES FOOD GROUP ANNUAL RESULTS 2017 20

BALANCE SHEET - ASSETS R’m 2017 2016 % change Non-current assets 2 145 1 365 57.1 Property, plant & equipment 1 461 987 48.0 Intangible assets & goodwill 664 369 80.0 Deferred tax asset 9 - - Biological assets 11 9 22.2 Current assets 1 965 1 745 12.6 Inventory 1 144 948 20.7 Accounts receivable 768 749 2.5 Other current assets 49 41 19.5 Bank balance & cash on hand 4 7 (42.9) Total assets 4 110 3 110 32.2 21 RHODES FOOD GROUP – ANNUAL RESULTS 2017 RHODES FOOD GROUP ANNUAL RESULTS 2017 21

BALANCE SHEET – EQUITY AND LIABILITIES R’m 2017 2016 % change Capital and reserves 2 236 1 257 77.9 Non-current liabilities 878 787 10.4 Current liabilities 996 1 066 (6.6) Accounts payable & accruals 534 531 0.6 Other current liabilities 304 338 (10.1) Bank overdraft 158 197 (19.8) Total equity and liabilities 4 110 3 110 32.2 22 RHODES FOOD GROUP – ANNUAL RESULTS 2017 RHODES FOOD GROUP ANNUAL RESULTS 2017 22

CASH MANAGEMENT R'm 23 RHODES FOOD GROUP – ANNUAL RESULTS 2017 RHODES FOOD GROUP ANNUAL RESULTS 2017 23

KEY RATIOS 2017 2016 Restated Net debt R’m 1 073 1 030 Net debt to equity % 48.0 81.9 Net debt to EBITDA x 2.1 1.8 Net working capital days 135 126 Inventory 120 118 Accounts receivable 56 53 Accounts payable (41) (45) Return on equity % 13.4 25.6 Return on assets % 6.5 10.4 Return on capital % 14.5 24.3 24 RHODES FOOD GROUP – ANNUAL RESULTS 2017 RHODES FOOD GROUP ANNUAL RESULTS 2017 24

OPERATIONS RHODES FOOD GROUP ANNUAL RESULTS 2017 25

SEGMENTAL TURNOVER 26 RHODES FOOD GROUP – ANNUAL RESULTS 2017 RHODES FOOD GROUP ANNUAL RESULTS 2017 26

OPERATIONS: ACQUISITIONS RHODES FOOD GROUP ANNUAL RESULTS 2017 27

ACQUISITIONS: IMPACT OF PAKCO AND MA BAKER Company Pakco Ma Baker Purchase price (R’m) 197 193 FY2017 turnover* 97 133 FY2017 EBITDA* 9 11 RFG entry into dry Strengthened RFG packed foods market position in pies and pastries category Rationale for acquisition and Portfolio of strong synergy benefits and established Leading pie brand in brands KwaZulu-Natal Synergies with RFG’s Diversify customer canned foods and base and geographic bottled salads location * For six months since acquisition 28 RHODES FOOD GROUP – ANNUAL RESULTS 2017 RHODES FOOD GROUP ANNUAL RESULTS 2017 28