Business / Companies
TSL revenue up 31%, profit up 50%
14 Jun 2013 at 04:54hrs | Views
CE Matsaira, left, with FD Peter Mujaya
TSL Limited posted a 31% growth in revenue to $20.22 million for the six months ended 30 April 2013 from $15.38 million in the same period last year on the back of strong performance from the group's tobacco operations, particularly TSF and Propak.
Group CE Washington Matsaira told an analyst briefing yesterday that the group's operating profit went up 50% to $4.235 million from $2.817 million whilst the earnings per share improved by 29% to 0.9cents per share.
The half year dividend of 0.2c per share was declared by the company as noted by Matsaira.
The return on assets is now 4% up from 3% in H1 2012 and cost containment were noted to be a top priority.
"We're keeping a close eye and ensuring that costs are monitored in line with scale of activity that is going on," he said.
Total assets went up to $80.58 million from $70.18 million recorded in the prior period.
He noted that the rationalization and upgrading of skills across the group will continue.
Looking at the tobacco group, under TSL Classic he noted that their grower scheme is on target to deliver 2.5 million kgs.
"We're on track to deliver the target that we set for ourselves," Matsaira said.
He told analysts that the overall target remains 4.5 million kgs for the season and that the TSL Classic Leaf business will start to contribute to revenue from October 2013.
"The good news clearly is that we won't suffer from side marketing… We have kept that very much under control and where we felt there were some risks we had some mitigates that we put in place and we are quite confident..," he said.
Tobacco Sales Floor (TSF) recorded strong performance in H1 benefiting significantly from a bigger national crop which is expected to be 30% up from prior year.
"The good news is that of the tobacco that has gone through the auction system we will get 40% market share and we are very comfortable with that.
"The company has kept its position as the leading tobacco auctioneer and costs control measures effected in 2012 have also had a positive impact on this unit's profitability," he said.
Furthermore, he noted that TSF had contract sales of 3.5 million kgs versus 500 000 kgs in 2012 contributing 10% to revenue.
Looking at Propak, Matsaira said the business posted a strong performance in H1 as they are managing hessian for a number of contract merchants.
"We're on track to deliver a strong performance in the second half … so we're happy," he said.
Presenting on the logistics operations, Matsaira highlighted that revenue for Bak Logistics was 9% above the previous year while profits were subdued largely due to a services price restructuring exercise which is currently underway.
"We are looking at our pricing model and the contracts that we have for logistics business.
"We have been working hard to expand our customer base and product range with great focus on container handling, freight forwarding, bulk grain handling and distribution," he said.
He told analysts that the search for technical partners for Bak continues while Avis fleet will be expanded in H2 particularly in "anticipation of changes in the operating environment."
The first phase of property expansion under the property group is underway at a cost of $3 million.
"…In our last briefing we had gone into contracts with some large operators who had signed up to take up space and on the back of that we might be putting up to 15 000square metres of additional warehouse space," he added.
Furthermore, Matsaira indicated that the second phase of the property expansion will commence in November 2013 and they are on track to commission the first phase in October 2013.
He said one area of focus for the firm is space optimization where they would like to see a better balance between internal client use and third party tenancy.
"Third party obviously represents real new revenue coming in and we will always strive to strike that balance.
"We are targeting that by year end 40% of our space that we let out in the properties group will be to external tenants as opposed to in-house," noted Matsaira.
He further pointed out that significant renovation and refurbishment of key properties continues while cladding of three warehouses at Willowvale was completed.
"So it's constantly upgrading what we have but at the same time carefully looking at opportunities to expand the warehousing stock.
"The intention obviously is that we would like to see the property group continue to grow as a profit center; as a business on its own so that over time we keep our option open," Matsaira added.
Matsaira said discussions to finalise the delisting of Chemco are in progress and have not been able to finalize it because in terms of the legal requirements they need to clear some issues with minorities.
Agricura is back to profitability, said Matsaira, on the back of cost restructuring in 2012. The business' revenue was 18% up on the previous year.
Commenting on associated companies he said the group's share of profits in Hunyani went up 8% in H1 2012 and the company is expected to benefit from increased tobacco volumes in H2.
Under Cut Rag he mentioned that the relocation of the company's secondary department was completed.
"This disruption had an impact on their performance but... the trading performance is now returning to normal and we expect in H2 that they will contribute at the levels that we've been used to," added Matsaira.
He also told analysts that the TSL Greenbelt Joint Venture for specialized fertilisers is making steady progress and they made some significant sales for the winter cropping season.
Aggregated analysts comment: This was probably the shortest briefing of 2013 lasting only 25 minutes but what needed to be said was adequately covered. Thanks Washington for not wasting people's time! Again, TSL continues to make significant progress in its operations thanks to the restructuring and the strategic shift brought by Matsaira and his team. Key operations such as TSF and Propak performed strongly in 1H13 while the repositioning of BAK from just storage to real logistics is ongoing. Management expects the out grower scheme to achieve the budgeted quantity with the financial impact of that performance expected from October 2013 reporting going forwards. TSL has often been viewed as an asset play and right now the management is doing a lot to unlock value from the assets through operationalising the property portfolio. The property group is being expanded, space is optimism and renovations are taking place as well.
Matsaira did not want to commit to the traditional 40:60 split between first and second half but should the current momentum be maintained revenue of about $44 million and EPS above 2c should be achievable at fully year (F13), implying a forward PE of 11x which should be an attractive valuation for a stock in turnaround mode.
Group CE Washington Matsaira told an analyst briefing yesterday that the group's operating profit went up 50% to $4.235 million from $2.817 million whilst the earnings per share improved by 29% to 0.9cents per share.
The half year dividend of 0.2c per share was declared by the company as noted by Matsaira.
The return on assets is now 4% up from 3% in H1 2012 and cost containment were noted to be a top priority.
"We're keeping a close eye and ensuring that costs are monitored in line with scale of activity that is going on," he said.
Total assets went up to $80.58 million from $70.18 million recorded in the prior period.
He noted that the rationalization and upgrading of skills across the group will continue.
Looking at the tobacco group, under TSL Classic he noted that their grower scheme is on target to deliver 2.5 million kgs.
"We're on track to deliver the target that we set for ourselves," Matsaira said.
He told analysts that the overall target remains 4.5 million kgs for the season and that the TSL Classic Leaf business will start to contribute to revenue from October 2013.
"The good news clearly is that we won't suffer from side marketing… We have kept that very much under control and where we felt there were some risks we had some mitigates that we put in place and we are quite confident..," he said.
Tobacco Sales Floor (TSF) recorded strong performance in H1 benefiting significantly from a bigger national crop which is expected to be 30% up from prior year.
"The good news is that of the tobacco that has gone through the auction system we will get 40% market share and we are very comfortable with that.
"The company has kept its position as the leading tobacco auctioneer and costs control measures effected in 2012 have also had a positive impact on this unit's profitability," he said.
Furthermore, he noted that TSF had contract sales of 3.5 million kgs versus 500 000 kgs in 2012 contributing 10% to revenue.
Looking at Propak, Matsaira said the business posted a strong performance in H1 as they are managing hessian for a number of contract merchants.
"We're on track to deliver a strong performance in the second half … so we're happy," he said.
Presenting on the logistics operations, Matsaira highlighted that revenue for Bak Logistics was 9% above the previous year while profits were subdued largely due to a services price restructuring exercise which is currently underway.
"We are looking at our pricing model and the contracts that we have for logistics business.
"We have been working hard to expand our customer base and product range with great focus on container handling, freight forwarding, bulk grain handling and distribution," he said.
He told analysts that the search for technical partners for Bak continues while Avis fleet will be expanded in H2 particularly in "anticipation of changes in the operating environment."
The first phase of property expansion under the property group is underway at a cost of $3 million.
"…In our last briefing we had gone into contracts with some large operators who had signed up to take up space and on the back of that we might be putting up to 15 000square metres of additional warehouse space," he added.
Furthermore, Matsaira indicated that the second phase of the property expansion will commence in November 2013 and they are on track to commission the first phase in October 2013.
He said one area of focus for the firm is space optimization where they would like to see a better balance between internal client use and third party tenancy.
"Third party obviously represents real new revenue coming in and we will always strive to strike that balance.
"We are targeting that by year end 40% of our space that we let out in the properties group will be to external tenants as opposed to in-house," noted Matsaira.
He further pointed out that significant renovation and refurbishment of key properties continues while cladding of three warehouses at Willowvale was completed.
"So it's constantly upgrading what we have but at the same time carefully looking at opportunities to expand the warehousing stock.
"The intention obviously is that we would like to see the property group continue to grow as a profit center; as a business on its own so that over time we keep our option open," Matsaira added.
Matsaira said discussions to finalise the delisting of Chemco are in progress and have not been able to finalize it because in terms of the legal requirements they need to clear some issues with minorities.
Agricura is back to profitability, said Matsaira, on the back of cost restructuring in 2012. The business' revenue was 18% up on the previous year.
Commenting on associated companies he said the group's share of profits in Hunyani went up 8% in H1 2012 and the company is expected to benefit from increased tobacco volumes in H2.
Under Cut Rag he mentioned that the relocation of the company's secondary department was completed.
"This disruption had an impact on their performance but... the trading performance is now returning to normal and we expect in H2 that they will contribute at the levels that we've been used to," added Matsaira.
He also told analysts that the TSL Greenbelt Joint Venture for specialized fertilisers is making steady progress and they made some significant sales for the winter cropping season.
Aggregated analysts comment: This was probably the shortest briefing of 2013 lasting only 25 minutes but what needed to be said was adequately covered. Thanks Washington for not wasting people's time! Again, TSL continues to make significant progress in its operations thanks to the restructuring and the strategic shift brought by Matsaira and his team. Key operations such as TSF and Propak performed strongly in 1H13 while the repositioning of BAK from just storage to real logistics is ongoing. Management expects the out grower scheme to achieve the budgeted quantity with the financial impact of that performance expected from October 2013 reporting going forwards. TSL has often been viewed as an asset play and right now the management is doing a lot to unlock value from the assets through operationalising the property portfolio. The property group is being expanded, space is optimism and renovations are taking place as well.
Matsaira did not want to commit to the traditional 40:60 split between first and second half but should the current momentum be maintained revenue of about $44 million and EPS above 2c should be achievable at fully year (F13), implying a forward PE of 11x which should be an attractive valuation for a stock in turnaround mode.
Source - zfn
