Premier Group, with brands including Blue Ribbon, Snowflake flour and Iwisa Mageu under its belt, lifted normalised headline earnings per share 22.7% to 552 cents in the year to March 31 and it plans to declare a maiden dividend at the end of its 2024 financial year.
The food manufacturer started trading on the JSE only six days prior to the financial year-end, after 18 years off the bourse, which is why no dividends were declared for the 2023 financial year.
Despite the good results, the share price was 4.53% lower at R52.51 yesterday afternoon.
Directors said the performance was “robust” considering the dynamic market conditions, characterised by “substantial pressure on our consumers”.
“Exceptionally high commodity prices, unprecedented levels of load shedding and social instability defined the operating landscape. The consumer continued to endure rising food inflation and high levels of unemployment impacting disposable income,” they said.
The group had responded by focusing on training and upskilling of its staff, internal cost saving initiatives and realising material operational efficiencies across both manufacturing and the group’s logistics and merchandising channels.
Training and upskilling had been a major advantage in assisting the group to navigate the challenging environment, they said.
“The group has invested in efficiency and capacity to produce basic foods at affordable prices. The new mega-bakery in Pretoria reached full production levels within budget, delivering cost savings and improved bread quality,” the directors said.
Group revenue increased by 23.4% to R17.9 billion. Earnings before interest, tax, depreciation, amortisation and impairment losses (adjusted Ebitda) increased by 16.2% to R1.7bn. Net profit was up 185.2% to R795 million.
The group concluded the acquisition of a bakery in the Western Cape. Synergies were extracted from the integration of the Mister Sweet acquisition, while changes to Premier’s sales and merchandising structures were bedded down.
The revenue increase was driven by increases in revenue in both the Millbake and Groceries and International categories, of 25.4% and 14.5%, respectively.
The higher normalised headline earnings per share was a result of growth in operating profit, and the after-tax effect of net finance costs being reduced as a result of the shareholder funding exchanged for equity during the year.
During the year, the Brait shareholder loan of R1.5bn was ceded for equity and the redeemable preference shares of R1.8bn were converted to equity.
The group refinanced its long-term debt and increased its drawn debt by R1.04bn with lower interest rates, increased flexibility and a bullet repayment profile. Some R934m of the proceeds were distributed to shareholders on November 4, 2022.
A voluntary capital repayment on borrowings of R294m was made through the year.
The Millbake division was focused on efficiencies and being the lowest cost producer. The mega-bakery in Pretoria was commissioned during the year and several Millbake facilities had been upgraded.
The Groceries and International division delivered “an encouraging performance supported by good growth in Sugar Confectionery and Home and Personal Care”.
The business division in Mozambique, CIM, had a tough year with the Mozambican economy experiencing challenges.
“Premier is proud of the strong performance. Improving distribution, product availability and forward share management will remain a strategic priority to increase market penetration, as well as a focus on innovation and product renovation to strengthen product margins and brand equity,” directors said.
The intention was to continue to leverage its infrastructure and capabilities through investment in assets, people, brands and production capability, as well as business integration and optimisation in pursuit of being the lowest cost producer, the group said.
Raw material cost inflation had softened in recent months, but operational cost inflation was anticipated to prevail given the rise in interest rates and the local inflationary impact of the weakened exchange rate.
Load shedding also continued to impose multiple challenges, but the group’s future performance was not expected to be materially impacted.