Business / Companies
Innscor posts a strong set of results
08 Sep 2011 at 03:57hrs | Views
Innscor posted a strong set of results which was broadly in line with our expectations and management guidance. The strong performance was driven by increased volume and margin expansion on improved efficiencies. Attributable earnings (from continuing operations) grew 74% of $26.1 million in line with our expectations of $25.9 million. EBITDA margins expanded 202bps to 9.2% resulting in EBITDA growing ahead of turnover growth at 64%. A strong performance from National Foods and Irvine's drove share of associates to $6.1 million, up 47% year on year.
Cash generation remained strong with 112% of EBITDA converted into cash. The balance sheet is in pristine condition with negligible net gearing of 21.5%. Borrowings of $39.6 million are local mostly short-term attracting rates of between 10% and 11%. Innscor's strong performance was further championed by the increase in its ROaE to 24% from 14%. A final dividend of 0.6 US cents a share was declared.
FMCG Businesses
Milling and Manufacturing turnover grew 46% to $132.1 million and PBT increased 85% to $19.1 million. Volumes for Innscor Bread increased 67% on improved capacity and efficiencies. A fourth bread line is expected to be operational by September 2010 and will increase capacity to approximately 350,000 loaves per day.
Colcom revenues grew 7% on improved volumes although margins were squeezed.
Efficiencies are expected to improve after the installation of a new real time meat utilization and tracking system.
Innscor Appliance Manufacturing volumes grew 134% (mainly fridge and freezer lines) as component costs were lowered through improved sourcing. New product lines were introduced. WRS performance was depressed impacted by imports.
Snacks Food recorded a loss on stiff competition from imports and volumes declined by 19%. The unit has since been restructured and is expected to return to profitability in H1 2012.
Natfoods processed 351,000mt, up 17% year on year. Natpak was disposed of and Innscor remained with 40% stake. The logistics division was outsourced. Natpak was marginally profitable.
Irvine's posted a strong performance as chicken sales grew 39%, table egg sales increased by 50% and day old chick sales jumped 35%. The volume growth was supported by the expansion programme with additional hatchery equipment having been installed. Efficiencies were enhanced by the new spiral freezing facility.
Distribution and Wholesale Turnover increased 49% to $97 million and PBT was $4.1 million, up 141% year on year. SPAR Distribution Centre supported 41 SPAR stores, 2 SPAR Express stores, 8 SaveMor branded stores and 2 TOPS bottle store. Volumes increased 38% on improved customer loyalty due to the sales and marketing campaigns. Total retail space increased to 32,000m2.
Volumes for Distribution Group Africa grew 27% propelled by the recovery in retail trade and increased product availability. Nonetheless, margins were negatively impacted by the strong Rand.
Retail revenues were $175.2 million, up 19% and PBT declined 14% to $8.2 million negatively impacted by the loses recorded by the SPAR Corporate Stores.
Fast Foods posted a strong performance as customer counts grew 16%. Average spend improved 5% to $2.76.
SPAR Corporate stores reported a loss of US 5.6m impacted by closure costs of the smaller stores and pre-opening costs of larger stores. Nonetheless, revenues were strong at approximately $76 million and average spend increased 18% to $7.97.
The Corporate stores have been restructured with financial structures centralised and cost control tightened.
Unit sales for credit retail grew 31% and the number of debtors accounts increased 179% with the book reaching $4.3 million. Credit sales were in excess of 50%.
Provisions were approximately 2.5% of book as collection remained good.
Regional Businesses
Innscor Zambia turnover was $68.3 million (FY 2011 $69.3 million) and PBT grew 675% to $3.1 million on improved performance by SPAR Corporate Stores. The average spent increased 69% to approximately $11.98. The Distribution operation recorded volume growth as the economy continues to recover although Malawi was impacted by forex shortages.
Regional Fast Foods turnover increased 8% to $38.6m and PBT jumped 44% to $2.6 million. Customer counts grew 11% and the average spend was approximately $3.52.
Innscor remains dominant in its businesses. Although the future of the group are aligned to the economy at large, the sectors in which the group is invested are relatively immature and are currently exuding growth rates in excess of that of the economy. We believe that Innscor's earnings per share growth rate can improve substantially when the economic environment recovers, making the counter an excellent early economic recovery cycle candidate. The group continues to focus on managing costs and driving volume growth. The group's cash generation remains impressive and Innscor should continue to generate substantial free cash flow, which creates financial flexibility (for dividends, acquisitions, stock repurchase, among other applications). In our view, Innscor's valuation is attractive considering the impressive growth prospects and defensive nature of the earnings.
Management expects group revenues for FY 2011 to grow by between 20% and 25% and margins to continue to expand boosting bottomline growth which is likely to expect FY 2011 growth rate.
Cash generation remained strong with 112% of EBITDA converted into cash. The balance sheet is in pristine condition with negligible net gearing of 21.5%. Borrowings of $39.6 million are local mostly short-term attracting rates of between 10% and 11%. Innscor's strong performance was further championed by the increase in its ROaE to 24% from 14%. A final dividend of 0.6 US cents a share was declared.
FMCG Businesses
Milling and Manufacturing turnover grew 46% to $132.1 million and PBT increased 85% to $19.1 million. Volumes for Innscor Bread increased 67% on improved capacity and efficiencies. A fourth bread line is expected to be operational by September 2010 and will increase capacity to approximately 350,000 loaves per day.
Colcom revenues grew 7% on improved volumes although margins were squeezed.
Efficiencies are expected to improve after the installation of a new real time meat utilization and tracking system.
Innscor Appliance Manufacturing volumes grew 134% (mainly fridge and freezer lines) as component costs were lowered through improved sourcing. New product lines were introduced. WRS performance was depressed impacted by imports.
Snacks Food recorded a loss on stiff competition from imports and volumes declined by 19%. The unit has since been restructured and is expected to return to profitability in H1 2012.
Natfoods processed 351,000mt, up 17% year on year. Natpak was disposed of and Innscor remained with 40% stake. The logistics division was outsourced. Natpak was marginally profitable.
Irvine's posted a strong performance as chicken sales grew 39%, table egg sales increased by 50% and day old chick sales jumped 35%. The volume growth was supported by the expansion programme with additional hatchery equipment having been installed. Efficiencies were enhanced by the new spiral freezing facility.
Distribution and Wholesale Turnover increased 49% to $97 million and PBT was $4.1 million, up 141% year on year. SPAR Distribution Centre supported 41 SPAR stores, 2 SPAR Express stores, 8 SaveMor branded stores and 2 TOPS bottle store. Volumes increased 38% on improved customer loyalty due to the sales and marketing campaigns. Total retail space increased to 32,000m2.
Volumes for Distribution Group Africa grew 27% propelled by the recovery in retail trade and increased product availability. Nonetheless, margins were negatively impacted by the strong Rand.
Retail revenues were $175.2 million, up 19% and PBT declined 14% to $8.2 million negatively impacted by the loses recorded by the SPAR Corporate Stores.
Fast Foods posted a strong performance as customer counts grew 16%. Average spend improved 5% to $2.76.
SPAR Corporate stores reported a loss of US 5.6m impacted by closure costs of the smaller stores and pre-opening costs of larger stores. Nonetheless, revenues were strong at approximately $76 million and average spend increased 18% to $7.97.
The Corporate stores have been restructured with financial structures centralised and cost control tightened.
Unit sales for credit retail grew 31% and the number of debtors accounts increased 179% with the book reaching $4.3 million. Credit sales were in excess of 50%.
Provisions were approximately 2.5% of book as collection remained good.
Regional Businesses
Innscor Zambia turnover was $68.3 million (FY 2011 $69.3 million) and PBT grew 675% to $3.1 million on improved performance by SPAR Corporate Stores. The average spent increased 69% to approximately $11.98. The Distribution operation recorded volume growth as the economy continues to recover although Malawi was impacted by forex shortages.
Regional Fast Foods turnover increased 8% to $38.6m and PBT jumped 44% to $2.6 million. Customer counts grew 11% and the average spend was approximately $3.52.
Innscor remains dominant in its businesses. Although the future of the group are aligned to the economy at large, the sectors in which the group is invested are relatively immature and are currently exuding growth rates in excess of that of the economy. We believe that Innscor's earnings per share growth rate can improve substantially when the economic environment recovers, making the counter an excellent early economic recovery cycle candidate. The group continues to focus on managing costs and driving volume growth. The group's cash generation remains impressive and Innscor should continue to generate substantial free cash flow, which creates financial flexibility (for dividends, acquisitions, stock repurchase, among other applications). In our view, Innscor's valuation is attractive considering the impressive growth prospects and defensive nature of the earnings.
Management expects group revenues for FY 2011 to grow by between 20% and 25% and margins to continue to expand boosting bottomline growth which is likely to expect FY 2011 growth rate.
Source - Imara Stockbrokers
