National Foods Holdings Ltd HY 2015 financial results
National Foods Holdings Ltd listed on the Zimbabwe Stock Exchange has released its half year results. Check out insights into this company in their presentation which appears below. Sign up to the www.theinvestormailinglist.com to receive earnings presentations of all listed companies in Africa by email
Published on: Mar 3, 2016
Transcripts - National Foods Holdings Ltd HY 2015 financial results
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(NA| RMAN’S STATEMENT
The Group recorded a subdued performance for the half year with proﬁt before tax of $8.78 million which
was 4.7% below the comparative prior period results. The outcome was influenced primarily by the poor
perfonnance of the Maize business, where volumes declined 28% versus prior period as a result of a
signiﬁcantly impmved 2013-14 local maize harvest, particularly in the Matabeleland and Masvingo
Provinces. Excluding the Maize division, revenue for the half year grew by 10.9%, despite a moderate
performance by the Stockfeeds division.
During the period, consumer disposable income declined further in the face of reducing formal
employment. In addition, deflationary pressures continued, with the consumer price index recording food
and nonalcoholic beverage prices deﬂating at 1.6% for the year to December 1014. This, together with a
devaltiing Rand, signiﬁcantly heightened competitive pressure against imported product. The authorities
were cognisant of the situation and moved to protect local industry through enhanced monitoring of
imports. This supported volumes in certain parts ofthe business, notablythe Flour division.
Overview of Financial Performance
Total volumes increased marginally during the period, while changes in product mix across most categories
reduced margins and consequently proﬁtability. All in costs declined by 2% versus last year as the various
efficiency improvement and cost containment measures began to bear fruit. A strategic decision was taken to
substantially increase marketing investment to support our brands with the objective offurther entrenching
the category leading position that most of our brands hold.
As is the nonn in the first half of the financial year, the Gmup cortsumed 55.9 million of free cash and this was
primarily directed to seasonal holdings of maize, wheat and stockfeeds raw materials. National Foods continues
to suppon local farming and the recently completed 2014 wheat scheme provided input suppon to the tune of
$3 million, funding 3,300 hectares of wheat pniduction from which 21,000 mt was purchased. A similar scheme
is undenrvay in the cunent season, where 5,000 hectares of maize and says beans are being gmwn.
the division performed well during the period, with volumes increasing 155% compared to the prior
period. The volume growth was driven primarily by the bakers ﬂour channel, while in the pre-pack flour
segment Gloria and Red Seal continued to perform strongly on shelf. The three year program to refurbish
both the Harare and Bulawayo Flourmillsto international standards is underwayand progressing according
to plan, with capital expenditure of $4.1 million planned furthe current financial year.
The Maize business had a disappointing halfyear on the back of reduced volumes following the good local
harvest which meant increased household retentions of raw maize. Whilst volumes achieved were
disappointing, they were largely in line with similar size harvests in previous years. The authorities
legislated a maize purchase price of $390/mt during the period, and whilst National Foods purchased
23,000 mt of local maize at this price, the new regulation created some distortions in the maize market.
Through the Grain Millers Association, National Foods is working with the authorities to create a more
sustainable solution to the issue of maize pricing forthe coming season.
The Stockfeeds business had a subdued half year, with volumes declining 5.5% compared to the same
period last year. This was driven by a combination of lacklustre feed demand, disappointing sales to small
scale poultry farmers and the fact that some N60 based livestock support programs were discontinued
following an excellent 2013-14 rainy season.
From an industry perspective livestock producers across all sectors have faced constrained viability on the
back of muted consumer demand, cheap protein imports and high grain prices. The small scale poultry
sector was the exception and continued to register encouraging growth. Our efforts to better service this
sector will be furtherintensiﬁed in the coming period.
This division continues to make an increasingly important contribution to the Group, with volumes
increasing 18.4% compared to prior year. This was driven by cooking oil where Red Seal and Better Buy
performed strongly as well as new launches of Red Seal and Better Buy Baked Beans, Better Buy Macaroni
and Red Seal Relish Mix.
Intense focus has been placed on developing an appropriate portfolio of brands in each category that match
the ever changing consumer needs. Many of the categories in this business have high growth potential and
as such it will be a key growth vector in future.
(orporate Social Responsibility
The Group provides regularsupport toa total of as institutions spread across 10 pnrvinces inthe country. or
these, 13 were added to the programme during the period under review. In addition, the Group supports to
livestock and wildlife based institutions with supplies of stockfeed.
Vlhth the exception of the Flour operations, the manufacturing facilities are now largely operating to
expectation. Whilst efforts to further optimise manufacturing performance through capital projects and
upskilling of our people will be an ongoing journey, the major focus of the Group will now be to achieve a
deep understanding or consumer needs and to establish how best to meet those needs.
Work to optimise the cost base of the business continues, with a major project to improve the effectiveness
and cost of pmduct distribution underway, Iii addition to the various capital PIOJECLS being implemented.
The Group has capacity to fund growth initiatives from internal resources and is in the process of identifying
prospective opport ‘ties with a view to increasing contribution from the existing ﬁxed services platform.
Organic and acquisitive grovirth is now a key theme in order to sustain eamings gnrwth and to moderate the
impact of the seasonally dependent maize category.
The Board has declared an interim dividend of 3.11( per share payable on or about 2nd April 2015, to
shareholders registered in the books of the company by noon on 20th March 2015. The transfer books and
registerof members will be closed from the 21st March to 21nd March 201 5, both days inclusive.
Directorate and Appreciation
During the penod under review National Foods has experienced a number of changes in its Directorate.
Following the management re-structure at lnnscor Africa limited, MrJu| ian Schonken was appointed to the
Board with effect from 1st January 2015, with Mr John Koumides acting as his alternate. I wish to thank
John sincerely for his dedication to National Foods over the past two years. We welcome Julian back to the
Board and look forward to his valuable contributions.
Mr Jeremy Brooke resigned as (hief Executive Ofﬁcer of National Foods with effect from 31st iictober 2014.
Jeremy provided astute leadership to the Group during his seven years of ofﬁce, leading it through the
difﬁcult prerdollarization era, onto revival and then growth. He leaves the business well positioned to take
advantage of the opportunities that lie ahead.
MrMichael lashbrook was appointed Chief Executive Ofﬁcerwith effect from 1st January 2015. Michael has
spent the past six years in the position ofﬁroup Operations Director, and brings a wealth ofexperience into
his new mle, having been a key member of the management team responsible for the resuscitation and
growth of the business: the Board joins me in wishing Michael continued success with this new
Finally, I wish to take this opportunity to thank staff and management for their continued commitment to
the business and my fellow Board members for their ongoing support and counsel.
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ABRIDGED GROUP STATEMENTOF PROFIT DR lOSS AND OTHER COMPREHENSIVE INCOME I
ended 31 Dec ended 31lJec
l. lSD'il00 llSD'O0ll
Revenue 167 038 165773
10 212 10 972
depreciation and amortisation ii 251) (1 078)
Proﬁt before interest and tax 8 961 9 894
Interest income 497 297
Interest Paid (680) (980)
Proﬁt before tax 8778 9 211
tax (2 401) (Z 341)
Proﬁt for the period 6 377 6 870
ﬂther comprehensive income-to be recycled to proﬁt or loss at
a future point In time
exchange differences arising on thetranslation offoreign operations (1) *
Total comprehensive Income for the period 6 376 6 870
Proﬁt for the period attributable to:
equity holders nttiie parent 6 377 6 370
Total comprehensive income for the period attributable to:
equity holders ofthe parent 6376 6870
EARNINGS PEN SHARE (CENTS)
—Basic eamings per share 9.32 10.04
-Headline earningspershare 9.29 10.01
ABRIDGEDGROUPSTATEMENTOF FINANEIALPOSITION I
31 Dec 1014 301m! 2014
USD'l'l0O I. l5D'O(lll
property, plant and equipment 38 634 37186
other non—current ﬁnancial assets 120 122
38 754 37 308
cash and cash equivalents 7 995 12672
inventory 48 963 41 381
trade and other receivables 29 991 26 377
assets held forsale 1351 1351
B8 300 B2 781
Total assets 127 054 120 089
EQUITV AND lIABIlITIE5
Capital and reserves
ordinary share capital 684 684
non-distributable reserves (9) I8)
distributable reserves 75 664 71831
Total shareholders‘ equity 76 339 73 507
deferred taxliability 7347 7606
7 347 7 606
(urrerrt I s
interest-bearing bonowings 9644 1 216
bank overdrafts 4 134 7 221
trade payables 22 591 23 284
other payables 6197 6950
currenttaxliability 634 237
liabilitiesrelatinglo assets held forsale 68 68
43 368 38 976
Total lia s 50 715 46 582
Total equity and liabilities 117 use 111) 089
ABRIDGEDGROUPSTATEMENTOF (ASH FIOWS I
6 months 6 months
ended 31 Dec evrdedli Dec
l. lSD'OllO Il$I)'OOll
(ash (utilised in)! generated from operating activities (1 353) 9 076
net interest paid (183) (683)
tax paid (2 263) (1482)
Total cash (utilised in)/ generated from operations (3 799) 6911
Purchase of property, plant and equipment to expand operations (649) (970)
Purchase of property, plantand equipmentto maintain operations (2 059) (801)
Other cashflowsﬁom investing activities 32 (1146)
Net cash outﬂow from investing activities (1 676) ( 3 917)
Net cash (outﬂow)/ irrﬂoiw before ﬁnancing act lies (6 475) Z 994
Financing activities 4 835 (5 356)
Net decrease in cash and cash equivalents I1 590) (2 361)
Cash and cash equivalents atthe beginning ofthe period 5 451 4106
(ash and cash equivalents at the end ofthe period 3 861 1 744
Cash and cash equivalents comprise
cash and short term deposits 7 995 1744
bank overdrafts (4134) -
3 861 1 744
iiEta. lI= rIrraut; .r: .arrrrrt= r/‘million
7 in i -i
i t= r,l
eratin roﬁ oziz _
-' roﬁt before ta 778 _ it
asic eamins r rshare (cents) .3 .4 “i.
eadline earnins ershare centsi .29 M .
ash eneratedfromoeration 1353) .4 i5“i
nterimilivicleriiideclaredershareicentsi 11 __ “.
AERIDGEDGRDUPSTATEMENTOF ENANGESIN EQUITY I
Share capital Reserves Reserves Total
US| )'00ll llS| i‘0ll0 lISD'l)0O llS| l'0l)0
Balance at 30 June 2014 684 (8) 72 831 73 507
profit attributable to equity — — 6377 6 377
holders of the parent
dividends paid - - (3544) I3 544)
othercomprehensiveincome — (1) — (1)
Balance at 31 December 2014 684 (9) 75 664 76 339
SUPPIEMENTARV INFORMATION I
1 Corporate Information
The Company and its subsidiaries are incorporated in Zimbabwe except for Botswana Milling and
Produce Company (Proprietary) limited and Red Seal Manufacturers (Proprietary) Limited which are
incorporated in Botswana.
2 fiperating Segments
I Manufacturing lntersegntent
and Distribution Properties adjustments Total
USD'00li USD'0l’l0 l. lSD'lll)0 l. lSD'(llll)
31 December2014 166870 1 136 (968) 167038
31 December2013 165543 I 185 (955) 165773
operating proﬁt before depreciation
31 December2014 9676 536 10212
31De(eml)er2(l13 10 $47 425 T0 972
Depreciation and amortisation
31 De(errrber20T4 (982) (269) — (1251)
31 December2013 (796) (282) c (1078)
Net Interest Expense
31 December2014 (448) 265 — (183)
31 December2013 (726) 43 V (683)
Proﬁt before tart
31 December2014 B246 532 - 8778
31 De(eml)er2C|13 9025 186 — 9211
31 De(ember2014 90422 40898 (4266) 127054
30June 2014 82 345 40 552 (2 803) 120 089
Segment lia ities
31 December 2014 (49 356) I5 625) 4266 (50 715)
30June 2014 (43 727) I5 663) 2 808 (46 S82)
31 December2014 2350 358 2708
31 December2013 T317 450 — 1771
6 months 6 months
ended 31 Dec erided31 Dec
l. l5D'0l)l'l l. lS| i'0li0
3 Depreciation (1251) I1 078)
4 Bank overdrafts 4134 —
Facilities are secured by a cession of movable assets,
receivables and inventory worth S13,5m
5 (apltaleitpentilturetortbe period 2708 1771
6 Future lease commitments
Payable within one year 330 380
Payable two to ﬁve years 527 1 407
Payable after ﬁve years - —
7 Commitments for capital expenditure
(ontractsand orders placed 5119 5255
Authorised by Directors but not contracted 1 458 538
6 577 5 793
The capital expenditure is to be ﬁnanced out of the Group's own resources and existing bonowing facilities.
8 Eamlngs per share
Basic eamings basis
The calculation is based on the proﬁt attributable to equity holders of the parent and number ofshares
in issue for the period.
Neadline earnings basis
Headline earnings comprise of basic earnings attributable to equity holders of the parent adjusted for
proﬁts, losses and items of a capital nature that do not form part of the ordinary activities of the Group,
net of their related taxeffects.
6 months 6 months
ended 31 Dec ended 31 Dec
Reconciliation of basic earnings to headline eamings l. ISD'000 l. |Sil‘0ll0
Pmfrt for the period attrioutableto equity holders of the parent 6376 6 870
Pnzﬁt on disposal of property, plant and equipment (28) (29)
Tax effect on adjustments 7 B
Neadllne earnings attributable to ordinary shareholders 6 355 6 849
Number of shares in issue
Weighted averagenumber ofnrdinary sharesin issue 68 400 68400
Basic earnings per share (cents) 9.32 10.04
Headline earnings pershare lcerits) 9.29 10.01
9 Events after the reporting date
There have been no signiﬁcant events after reporting date at thetinie of issuing this press release.
10 Contingent liabilities
The Group had no contingent liabilities at 31 December 2014.
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