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Trading update and trading statement for the year ending 30 September 2020
TIGER BRANDS LIMITED
(“Tiger Brands” or “the Company”)
(Incorporated in the Republic of South Africa)
(Registration number 1944/017881/06)
Share code: TBS
ISIN: ZAE000071080
Trading update and trading statement for the year ending 30
September 2020
In accordance with paragraph 3.4(b) of the Listings
Requirements of the JSE Limited (“JSE”), Tiger Brands is
required to publish a trading statement as soon as it is
satisfied that a reasonable degree of certainty exists that
its financial results for the year ending 30 September 2020
will differ by more that 20 percent when compared to the
previous financial year.
As previously reported, operations at Deli Foods in Nigeria
were terminated in October 2019. Shareholders are also
referred to the SENS announcement of 17 August 2020 with
regards to the disposal of the Company’s Value-Added Meat
Products business (“VAMP”).
As a consequence of the above, Deli Foods and VAMP have been
treated as discontinued operations for purposes of the below
disclosures, with the comparative information restated
accordingly.
Shareholders are accordingly advised that:
- Earnings per share (EPS) from total operations for the
year ending 30 September 2020 is expected to be between
76% and 79% (or between 1 771 cents and 1 843 cents)
lower than the 2 333 cents reported in the previous
financial year.
- Headline earnings per share (HEPS) from total
operations for the year ending 30 September 2020 is
expected to be between 35% and 40% (or between 460
cents and 532 cents) lower than the 1 322 cents
reported in the previous financial year.
- EPS from continuing operations for the year ending 30
September 2020 is expected to be between 68% and 71%
(or between 1 790 cents and 1 862 cents) lower than the
2 620 cents reported in the previous financial year.
- HEPS from continuing operations for the year ending 30
September 2020 is expected to be between 29% and 33%
(or between 450 cents and 521 cents) lower than the 1
558 cents reported in the previous financial year.
The ranges above reflect the poor first half performance,
but include an improved underlying performance expected in
the second half, offset by the impact of Covid-19 related
costs referred to in more detail below, as well as
restructuring costs estimated at approximately R70 million
as a result of adopting a fit-for-future operating model.
The decline in EPS relative to HEPS is largely due to the
surplus of R2 billion arising from the fair value gain
relating to the unbundling of the Company’s interest in
Oceana Group Holdings Limited (“Oceana”) in the previous
financial year, including the capital profit realised on the
disposal of the Company’s residual shareholding in Oceana.
Impairment assessments
The ranges provided in terms of EPS do not include any
further impairment adjustments to those recorded at 31 March
2020, in respect of the carrying value of the Company’s
assets. This will be further assessed at year end.
Trading performance for the June quarter
Boosted by the impact of strong volume growth, particularly
in the Rice, Pasta, Jungle (breakfast oats), Groceries and
Home & Personal Care categories, revenue from continuing
operations for the three months to June rose by 11% to R7.2
billion. This comprised of 4% volume growth, 5% price
inflation and a positive foreign exchange impact of 2%.
However, operating income declined marginally, due mainly to
Covid-19 related costs.
Exit from Deciduous Fruit
Further to the announcement that was made on 25 May 2020
regarding the Company’s intention to exit its Deciduous
Fruit business, shareholders are advised that Tiger Brands
has retained the services of Absa Investment Banking
Division (M&A Advisory). The preparatory components of the
sale process have been concluded and engagements with a list
of potential buyers, as part of an initial expression of
interest process, have commenced. The Company will issue
further communication as and when appropriate.
Covid-19 related costs
The Company has prioritised the safety of its workforce over
this period and has successfully managed to play a vital
role in ensuring the ongoing availability of essential food
items. In addition, it sought to support the Government’s
broader national effort by deferring price increases of
products for the initial period of the Lockdown whilst
pricing continues to be restrained by the Consumer and
Customer Protection and National Disaster Regulations, which
will remain in force for the extended period of the national
disaster to 15 September 2020.
As highlighted above, the Company has seen robust volume
growth in certain of its categories for the quarter ended
June 2020 as a result of increased at-home consumption
during the Lockdown period.
However, volumes in other categories such as Baby Nutrition,
Deciduous Fruit, Beverages and the Out of Home channel were
negatively impacted.
Notwithstanding the above, the direct costs related to
Covid-19 and the effects of the pricing regulations are
expected to be significant. The impact of the direct costs
associated with Covid-19 is set out below for the six months
ending 30 September 2020.
Actual Estimated Estimated
3 months 3 months 6 months
to June to ending 30
2020 September September
2020 2020
Rm Rm Rm
Impact of mandatory
factory closures (Sorghum
based Beverages & Home
Care) 63 - 63
Special staff attendance
incentive 24 - 24
Sanitisation, PPE &
testing protocols 23 31 54
Staff transport 21 20 41
Logistics & Manufacturing
under-recoveries 21 37 58
Additional CSI/Hunger
Relief 12 3 15
164 91 255
In addition, the impact of price increases foregone as a
consequence of the Company’s commitment to support
Government’s efforts as referred to above, and the cost of
complying with the Consumer and Customer Protection and
National Disaster Regulations is estimated to be R175
million for the three months to June and a further R127
million for the three months ending 30 September 2020. This
is significant when compared with an operating profit from
continuing operations in the corresponding six-month period
last year of R1.4 billion.
The Company has initiated engagement with the regulators
around the future construct and interpretation of these
regulations.
Nigeria
The legal dispute with the previous distributor in Nigeria
has been resolved and sales of our Benny and Jolly Jus
product ranges resumed in August 2020.
In addition, an agreement has been reached for the sale of
assets at Deli Foods in Nigeria.
Class Action Update
Following judgment of the Gauteng Division of the High
Court, Johannesburg handed down on 23 June 2020 in favour of
Tiger Brands, compelling third parties who were served with
subpoenas to provide information required for the Class
Action, all of the third parties except one have applied for
leave to appeal against the order. It is expected that the
High Court will shortly determine a date for the hearing of
the applications for leave to appeal.
Looking ahead
Significant progress has been made to ensure that the Group
is better positioned to navigate the tough operating
environment. This includes the work currently underway to
re-engineer the business and reduce costs, the
implementation of a fit-for-future operating model that
enables focused and relevant solutions for each of our
categories, as well as the acceleration of portfolio
optimisation initiatives. These developments, together with
an improved Export performance as a result of the resolution
of the legal dispute in Nigeria, are likely to strengthen
the Company’s core portfolio going forward.
The information above has not been reviewed or reported on
by the Company's auditors.
The Company’s results for the year ending 30 September 2020
are expected to be released on SENS on or about 20 November
2020.
Bryanston
21 August 2020
Sponsor
J.P. Morgan Equities South Africa Proprietary Limited
Date: 21-08-2020 02:33:00
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