INTERIM RESULTS For the six months ended 31 March 2019 PRESENTATION - - PowerPoint PPT Presentation

INTERIM RESULTS

For the six months ended 31 March 2019

PRESENTATION OUTLINE

1 REVIEW OF THE SIX MONTHS 2 3 4 5 6 NEW PRODUCTS FINANCIAL PERFORMANCE TRADING PERFORMANCE CAPITAL INVESTMENT PROGRAMME OUTLOOK

REVIEW OF THE SIX MONTHS

REVIEW OF THE SIX MONTHS

• Improving performance with turnover +9.3%; operating profit +6.0%

and diluted HEPS +2.2%

• Strong regional volume growth in low inflationary environment
• Continued market share gains across core product categories
• Regional segment impacted by once-off costs of approx R14 million

relating to relocation of pulps and purees plant to Groot Drakenstein

• International posted a small profit for H1
• Major two-year capital investment programme completed

FINANCIAL PERFORMANCE

FINANCIAL PERFORMANCE

• Turnover +9.3% to R2.7 billion
• Regional +8.8%
• International +12.3%
• Gross profit margin 25.0% (2018: 25.3%)
• Impact of approx R23 million from lower international selling prices due

to drought related quality issues

• Costs of approx R14 million from relocation of pulps and purees plant
• Margin pressure due to low levels of inflation
• Benefit of approx R22 million from 10.5% weakening in currency
• Operating cost growth contained to 5.2%

FINANCIAL PERFORMANCE

• Operating profit +6.0% and operating margin 6.3% (2018: 6.5%)
• Margin impacted by factors which diluted gross profit margin
• EBITDA +7.2% and EBITDA margin 9.1% (2018: 9.3%)
• Net interest payments 12.1% higher at R58 million
• Increased capital expenditure programme over last two years
• Diluted headline earnings per share +2.2% to 32.1 cps

INCOME STATEMENT

R’m H1 2019 H1 2018 % change Turnover 2 741 2 507 9.3 Cost of goods sold (2 056) (1 874) 9.7 Gross profit 685 633 8.1 Gross profit margin 25.0% 25.3% Other income 21 36 (41.8) Operating costs (533) (507) 5.2 Operating profit 173 162 6.0 Impairment (3)

• Net interest paid

(58) (52) 12.1 Profit before tax 112 110 0.6 Tax (31) (30) 4.5 Profit after tax 80 80 (0.8) Diluted HEPS (c) 32.1c 31.4c 2.2 WAN shares in issue (‘m) 261.6 252.6 3.6

GROUP TURNOVER GROWTH

R'm

1 295 1 988 2 151 2 507 2 741 H1 2015 H1 2016 H1 2017 H1 2018 H1 2019

DRIVERS OF TURNOVER GROWTH

2 507 2 741 +6.2% +1.3% +1.8% 1,500 2,000 2,500 3,000 H1 2018 revenue Volume growth Price increase Forex impact H1 2019 revenue

R'm

SEGMENTAL TURNOVER

R'm

345 500 396 411 461 503 949 1 066 1 251 1 419 447 539 689 845 861 H1 2015 H1 2016 H1 2017 H1 2018 H1 2019 International Regional - Long Life Regional - Fresh

OPERATING PROFIT

R'm

126 186 208 162 173 9.7% 9.4% 9.7% 6.5% 6.3% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%

• 50

100 150 200 250 H1 2015 H1 2016 H1 2017 H1 2018 H1 2019 Operating profit Operating profit margin

INTERNATIONAL REVENUE BY CURRENCY

AUD 10% (2018: 18%) CAD 6% (2018: 3%) GBP 13% (2018: 13%) EUR 14% (2018: 11%) USD 57% (2018: 53%) ZAR 0% (2018: 2%)

BALANCE SHEET - ASSETS

R’m H1 2019 H1 2018 % change Non-current assets 2 514 2 334 7.7 Property, plant & equipment 1 820 1 659 9.7 Intangible assets & goodwill 668 647 3.2 Other non-current assets 26 28 (7.0) Current assets 2 395 2 260 6.0 Inventory 1 369 1 394 (1.7) Accounts receivable 978 779 25.5 Other current assets 35 70 (49.4) Bank balance & cash on hand 13 17 (21.7) Total assets 4 909 4 594 6.9

BALANCE SHEET – EQUITIES AND LIABILITIES

R’m H1 2019 H1 2018 % change Capital and reserves 2 345 2 240 4.7 Non-current liabilities 1 097 847 29.5 Long-term loans 865 651 32.9 Other non-current liabilities 232 196 18.3 Current liabilities 1 467 1 507 (2.6) Accounts payable & accruals 878 738 19.0 Current portion of long-term loans 241 237 1.8 Other current liabilities 61 51 20.8 Bank overdraft 287 481 (40.3) Total equity and liabilities 4 909 4 594 6.9

WORKING CAPITAL MANAGEMENT

• Increase in net working capital contained to 2.4%
• Inventory levels 1.7% lower
• Ongoing focus on working capital efficiency

H1 2019 H1 2018 Net working capital days 129 139 Inventory days 121 137 Debtor days 57 51 Creditor days (49) (49)

NET WORKING CAPITAL MOVEMENT

(166) 31 37 141 168 (177)

500 700 900 1,100 1,300 1,500 1,700 H1 2018 Inventory Debtors Creditors FY2018 Inventory Debtors Creditors H1 2019

1 435 1 337 1 469

R'm

CASH MANAGEMENT

248 (132) (38) (53) (120) 4 (159)

• 300
• 100

100 300 Operating cashflows Net working capital changes Net interest and tax paid * Dividends paid Loans repaid Other Purchase

• f PPE

and intangibles

R'm

* Net of income tax refunds received during the period of R35m

DEBT PROFILE

H1 2019 H1 2018 Net debt R’m 1 380 1 352 Net debt to equity % 58.9 60.4 Net debt to EBITDA x 5.52 5.80 1 106 980 754 188 104 62 22 2

H1 2019 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025

• Planning to convert portion of overdraft to long-term debt by end FY2019
• Bullet repayments of R450m payable by end FY2021

R'm

Bank facilities

• Working capital facilities:

R950m with interest rates varying between prime and prime minus 1.5%

• Revolving long-term debt facilities:

R1.3bn with interest rates varying between prime minus 1.25% and 1.55%

Existing long-term debt

TRADING PERFORMANCE

REVENUE CONTRIBUTION

52% (2018: 50%) 31% (2018: 34%) 17% (2018: 16%)

Long Life Foods Fresh Foods International

TRADING PERFORMANCE: REGIONAL

• Components of turnover growth
• Volume growth

7.3%

• Price/mix

1.5%

• Operating margin diluted by once-off costs

R’m H1 2019 H1 2018 % change Revenue 2 280 2 096 8.8 Long Life 1 419 1 251 13.4 Fresh 861 845 1.9 Gross profit margin 26.9% 27.5% Operating profit 169 164 2.8 Operating profit margin 7.4% 7.8%

TRADING PERFORMANCE: REGIONAL

• Strong volume growth of 9.2% in Long Life Foods
• Good growth in fruit juice, especially under the Rhodes brand in

wholesale and out-of-home channels

• Dry foods continues to perform well
• Good recovery in canned vegetables, particularly in baked beans

which are now being produced in the new plant

• Strong performance from canned meat
• Fresh Foods volumes flat year-on-year
• Ready meals and pie category still resilient in tough economic times
• Ma Baker settled

TRADING PERFORMANCE: REGIONAL

• Trading in sub-Saharan African markets remains challenging
• Sales account for 10.2% of regional long life category
• Electricity load shedding disruptive in H1 but most facilities are fully

backed-up by diesel generators

• Acquisition of protein snack foods business from RCL completed

and integrated into Western Cape ready meals facility

MARKET SHARE (RFG as manufacturer)

Market shares* (%) March 2017 March 2018 March 2019 Position Jams 48 48 49 1 Canned fruit 46 46 49 1 Canned vegetables 19 16 17 2 Canned meats & meals 66 76 80 1 Long life fruit juices 17 22 22 2 Salads and pickles 21 30 30 1

Moving annual total. Retailers scanning data processed by IRI Worldwide (market shares in the defined retail channel, in retail prices)

BRAND SHARE

Brand shares (%) Brand March 2017 March 2018 March 2019 Position Jams 27 29 29 2 Canned fruit 26 26 30 1 Canned pineapple 55 54 61 1 Canned vegetable 16 13 14 2 Canned tomato 29 31 27 1 Corned meat 50 59 61 1

Moving annual total. Retailers scanning data processed by IRI Worldwide (market shares in the defined retail channel, in retail prices)

BRAND SHARE

Brand shares (%) Brand March 2017 March 2018 March 2019 Position 100% fruit juice 10 16 16 2 Infant meals 6 8 10 2 Salads and pickles 13 15 15 3 Dry gravy

• 31

28 2

Moving annual total. Retailers scanning data processed by IRI Worldwide (market shares in the defined retail channel, in retail prices)

TRADING PERFORMANCE: INTERNATIONAL

• Components of turnover growth
• Volumes

2.7%

• Price/mix

(0.9)%

• Forex

10.5%

• R23m impact from lower selling prices due to quality of canned fruit
• Tailwind of approx R22m from weakening currency

R’m H1 2019 H1 2018 % change Revenue 461 411 12.3 Gross profit margin 17.3% 16.8% Operating profit/(loss) 4 (1) Operating profit margin 0.8% (0.5%)

TRADING PERFORMANCE: INTERNATIONAL

• Deciduous fruit production season (canned fruit, pulps and purees)

recently completed and early indications of improved fruit quality

• Market for industrial products (purees and concentrates) has remained

weak but margins improved through cheaper inputs

• Early signs of recovery in industrial market, with increasing demand
• Approx 50% of industrial product output now used internally
• Good growth in fruit snacks in plastic cups to USA

NEW PRODUCTS

NEW PRODUCTS: OWN BRANDS

Bisto instant gravy range launched Rhodes Hinds flavoured custard powder Bull Brand flavoured seasoning

NEW PRODUCTS: PRIVATE LABEL

NEW PRODUCTS: PRIVATE LABEL

Plant powered protein range (chilled and frozen)

CAPITAL INVESTMENT

CAPITAL INVESTMENT

R'm

176 238 487 480 129 80

FY2015 FY2016 FY2017 FY2018 FY2019 H2 planned H1 spend

CAPITAL INVESTMENT

Major capital projects completed in first half of FY2019

• Relocation of pulps and purees plant to Groot Drakenstein
• Expansion of Western Cape ready meals factory to incorporate snacking

business (Alibaba Foods and RCL snacking acquisition)

• Site upgrade at the Groot Drakenstein production hub

Projects to be undertaken in second half of FY2019

• Expansion of warehouse capacity at fruit juice production plant
• Ongoing development of new pineapple plantations in Eswatini
• Completion of infrastructure upgrade at Groot Drakenstein

OUTLOOK

OUTLOOK

Group

• Generate returns on capital invested and extract benefits
• Improve balance sheet by generating stronger cash flows, focus on

working capital management and contain costs International

• Expect to continue to improve operating margin in H2
• Quality of deciduous fruit improved

Regional

• Drive organic growth
• Increase brand shares, especially in new categories
• Improve margins in H2; committed to medium-term target of 10%

THANK YOU

DISCLAIMER

Rhodes Food Group Holdings Limited (“RFG” or “the company”) has acted in good faith and has made every reasonable effort to ensure the accuracy and completeness of the information contained in this presentation, including all information that may be defined as 'forward-looking statements' within the meaning of United States securities legislation. Forward-looking statements may be identified by words such as 'believe', 'anticipate', 'expect', 'plan', 'estimate', 'intend', 'project', 'target', 'predict' and 'hope'. Forward-looking statements are not statements of fact, but statements by the management of RFG based

• n its current estimates, projections, expectations, beliefs and assumptions regarding the group's future

performance. No assurance can be given that forward-looking statements will prove to be correct and undue reliance should not be placed on such statements. The risks and uncertainties inherent in the forward-looking statements contained in this presentation include, but are not limited to: changes to IFRS and the interpretations, applications and practices subject thereto as they apply to past, present and future periods; domestic and international business and market conditions; changes in the regulatory and legislative environments; changes to operational, social, economic and political risks; and the effects of both current and future litigation. RFG does not undertake to update any forward-looking statements contained in this presentation and does not assume responsibility for any loss or damage whatsoever and howsoever arising as a result of the reliance by any party thereon, including, but not limited to, loss of earnings, profits, or consequential loss or damage.

INVESTOR RELATIONS CONTACTS

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

www.rfg.com