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Food manufacturer Premier reports higher operating profit, cash generation

Premier factory

Premier factory

11th June 2024

By: Marleny Arnoldi

Deputy Editor Online

     

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JSE-listed fast-moving consumer goods manufacturer Premier Group has reported a robust set of results for the year ended March 31, with an 18.6% year-on-year increase in earnings before interest, taxes, depreciation and amortisation (Ebitda) to R2.1-billion.

This compares with Ebitda of R1.7-billion reported for the prior financial year.

The group’s operating profit increased by 26.4% year-on-year to R1.6-billion, compared with R1.2-billion in the prior year, while its earnings per share (EPS) increased by 13.3% year-on-year to 715c, compared with EPS of 630c in the prior year.

Headline earnings per share (HEPS) and normalised HEPS increased by 17.4% and 34.8%, respectively to 744c.

Notably, normalised HEPS in the prior year were reduced for foreign exchange gains on cash and loans of a funding nature of R60-million and by the reversal of accrued withholding tax on preference dividends of R43-million to profit on the conversion of redeemable preference shares to ordinary shares. These items were one-off and included in the prior year’s net profit.

Premier says its Ebitda growth was underpinned by strong results its Millbake category, having grown its Ebitda by 20.6% year-on-year, as well as the Groceries and International category, which grew its Ebitda by 3.7% year-on-year.

The group’s Ebitda margin improved by 140 basis points from 9.6% in the prior year to 11% in the reporting year.

Premier says its R6-billion of capital expenditure over the past ten years helped to deliver on its investment case, coupled with its focus on optimising operational efficiencies, margin management and upskilling people.

The growth in group Ebitda also helped cash generation increase by 54.8% to R2.4-billion for the year under review, supported by well managed working capital and lower inventory balances as of March 31.

Premier says the cash generated in the reporting year has enabled substantial deleveraging, with the company having reduced the leverage ratio to a level of 0.9 times, which is lower than historical levels.

Voluntary capital repayments on borrowings of R706-million were made in the year under review, while a further R210-million was repaid on a bank overdraft facility.

Premier declared a final gross dividend of 220c apiece, equating to a distribution of R238-million in respect of ordinary shares and R2.6-illion in respect of the A ordinary shares.

The company says that, following the strong 2024 financial year, it maintains appropriate cash reserves to execute on committed capital requirements and retail flexibility to assess more growth opportunities as they may arise, while being sufficiently funded for the foreseeable future.

In the new financial year, Premier will consider a combination of ordinary dividends, special dividends and share buybacks in an ongoing committed to deliver shareholder returns in line with its 30% to 60% targeted payout ratio.

CATEGORY PERFORMANCE

The Millbake division continued to deliver pleasing results in the 12 months under review, Premier states, adding that revenue growth moderated as soft commodity prices and global volatility stabilised.

Premier’s upgrading of several bakeries and wheat mills in recent years have improved efficiencies and yielded positive results in the year under review, despite the persistent burdens of high interest rates and unemployment levels, which continue to negatively impact disposable income.

Premier remains well positioned to service low-income consumers with its broad product offering.

The Groceries and International division also performed well, with strong growth in Sugar Confectionery and pleasing results in Home and Personal Care (HPC) segments.

The company says the optimisation of the confectionery footprint and increased capacity in HPC manufacturing has introduced enhanced efficiencies and enabled onshoring of supply to the UK market.

The group's business division in Mozambique, however, continues to face headwinds – but the business remains well positioned for the anticipated economic recovery.

ACQUISITION

Premier acquired a 30% shareholding in KwaZulu-Natal based rice distributor Goldkeys International on June 3.

The company supplies branded Thai and Indian sourced rice under the Golden Delight, Golden Pride and Light & Right brands, as well as house brands for a number of South African retailers and independent wholesalers.

The acquisition builds on a relationship that Premier had with Goldkeys, with Premier having previously managed Goldkeys’ sales function to assist it in building its brands and sales outside of KwaZulu-Natal.

The investment is aligned with Premier’s strategy to grow its branded product portfolio and rice complement’s Premier’s staple foods basket of bread, maize and wheat products.

Premier says the acquisition will benefit Premier’s existing rice operations outside of South Africa where it sources rice for sale under its own brands.

 

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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