INTEGRATED ANNUAL REPORT 2023
For the year ended 30 September 2023
For the year ended 30 September 2023
While not always immediately visible in our year-on-year results, it is important to recognise that, in the past three years, we have successfully delivered some important corrective measures and continued to make valuable progress in the foundational areas of our business.
It is clear that, in these three years, we have made some valuable strides in key areas of our strategy, laying an important foundation for further growth in the context of a particularly tough operating environment.
This year’s performance suggests, however, that we haven’t yet delivered on our promised turnaround. The company still lags behind its historical earnings levels and faces sustained pressure on margins, despite having some of the country’s most iconic brands. Understandably, the market has lost patience with our various strategy “refreshes”, and there has been some evident frustration with the pace of execution.
When I took on the role of chairman of the Tiger Brands board three years ago, I made it clear that I was expecting the company to regain its rightful place as the country’s leading food company, underpinned by consistent strong growth. More specifically, in 2021, I stated that for Tiger Brands to turn the corner, it needed to build on the recent foundational work and instil a high-performance culture, supported by best-in-class capabilities. With regard to growth, I had indicated at the time that the management team was fully aware of the tough decisions required, and of the work to be done in driving a more aggressive approach to both organic and inorganic growth. The board therefore took decisive steps this year towards concretely building a high-performance culture that would achieve these outcomes.
This year, group operating income was down 9%, while headline earnings per share (HEPS) was up 2%, year-on-year. These results were ahead of market expectations, reflecting both the subdued nature of these expectations as well as Tiger Brands’ underlying resilience in the face of a particularly challenging operating environment. We saw good performance from Beverages, Tiger Brands Food Services Solutions, the Home and Personal Care divisions, and Deciduous Fruit, while our strategies in the Rest of Africa have gained traction, with Exports outperforming on every key metric. The strong performances were offset by the one-off impact of poor price/volume management in Rice in the first half, reduced demand within Groceries, and poor performance in the Bakeries and Snacks and Treats divisions.
Group earnings were bolstered by higher income from associates primarily due to earnings from National Foods being favourably impacted by a change in functional currency from Zimbabwean dollars to United States dollars. Earnings per share (EPS) decreased by 2% to 1 725 cents, while HEPS increased marginally to 1 735 cents. In addition, the company declared a final dividend of 671 cents per share, bringing the total dividend for the year to 991 cents per share.
While not always immediately visible in our year-on-year results, it is important to recognise that, in the past three years, we have successfully delivered some important corrective measures and continued to make valuable progress in the foundational areas of our business. We have achieved valuable improvements in manufacturing, digitalisation, procurement, and food safety and quality, launched new products in the value segment, expanded our reach in general trade and e-commerce, and exceeded our targets on cost-savings and efficiencies in each of the past three years. Given the heightened stakeholder interest in companies’ ESG performance, it has been pleasing to see the notable progress we have made in implementing our Sustainable Future strategy, leveraging our influence, and increasing our investment to advance our commitments to improve consumer health and nutrition, enhance livelihoods, and ensure responsible environmental stewardship. The strategy is closely aligned with the company’s growth strategy and has placed a particular focus on moving beyond simple compliance to identify opportunities to innovate and differentiate our products and services as a solution to societal challenges.
This year, despite high consumer inflation, our volumes were only marginally lower year-on-year, showing stronger comparative performance than most of our competitors. We were also able to sustain our service levels in the face of significant disruption in local and global supply chains, and we improved our in-market execution and pricing in our Rest of Africa markets.
Notwithstanding all these improvements, we recognise that Tiger Brands has not realised its full value potential. Given current pressure on consumer disposable income and heightened market competition – including from private label – we not only need to maintain a strong focus on addressing efficiencies and cost reduction, but also need to be more aggressive and effective in executing our innovation in products, processes, and packaging. Effectively realising these opportunities requires a strong performance-based culture and appropriate levels of responsibility and delegation in our decision-making.
These are all challenges and opportunities that have been well recognised internally, but in which we have struggled to execute efficiently and effectively.
Given this context, the board concluded that it was appropriate for new leadership to deliver the required transformation, jointly agreeing with Noel that he would step down as CEO while remaining available to the company until end-March 2024. Recognising the specific challenges facing the company, we were very pleased that Tjaart Kruger agreed to join Tiger Brands as CEO on a 26-month contract effective 1 November 2023. Tjaart is a chartered accountant with more than 30 years’ leadership experience at some of the top South African FMCG companies, the most notable being as CEO of Premier Foods, from 2011 to 2021, where he oversaw a fivefold increase in EBITDA and significant market share gains in the Milling and Baking category.
On the board’s behalf, I extend our appreciation to Noel for his contribution over 20 years of service with Tiger Brands. During his three-year tenure as CEO, Noel has navigated some particularly tough challenges, including managing the aftermath of the listeriosis crisis and dealing with COVID-19, civil unrest, supply chain disruptions, and high inflation. In this period, the company’s underlying operating profit trajectory was stabilised and there have been many improvements in internal operating metrics. We thank Noel for his unwavering commitment through these challenges, and we wish him the best in his future activities.
In addition to Noel’s departure, there have been several other changes to the board this year. In February 2023, Ms Emma Mashilwane was appointed as lead independent director with effect from the close of the AGM, having served on the board since 2016. Mr Sam Sithole joined the board as a non-executive director of the company with effect from 1 April 2023, bringing extensive experience in finance, general management and strategy, mergers and acquisitions, governance, and stakeholder relations. Ms Cora Fernandez stepped down as independent non-executive director with effect from 10 October 2023. At an executive level, Ms Deepa Sita resigned as chief financial officer and executive director with effect from 31 December 2023. The board extends its gratitude to Ms Sita and Ms Fernandez for their service and commitment, and we wish them well in their future endeavours.
To deliver the transformation we have committed to will require hard work in what promises to be a particularly challenging global and local macro-economic environment. Globally, the economic outlook remains uncertain, with a relatively flat Chinese economy, potential further tightening in monetary policy, worrying conflicts in Eastern Europe and the Middle East, and possible further disruptions in global supply chains from extreme weather events. In South Africa – our primary market – we continue to face increasing levels of poverty, inequality and unemployment, profound infrastructure challenges, persistent crime and corruption, and poor levels of service delivery.
Our incoming CEO faces a daunting in-tray. As part of the selection process, Tjaart outlined his vision for Tiger Brands, in which he prioritised operational excellence, margin management, and realignment of the organisational structure. His key performance indicators for the next two years will be linked to addressing priority areas of concern, including addressing gross and operating margin declines, stabilising the millbake operations, and delivering a recovery in shareholder returns, underpinned by strengthened strategy execution and a healthy company culture.
As chairman, I am fortunate to have an engaged board with significant FMCG skills and a strong global presence, well-suited to ensuring robust accountability of the executive team. I wish to thank my colleagues on the board for their continued support and advice during this challenging year. On behalf of the board, I would also like to thank the Tiger Brands management team and all employees for their effort in responding to some of the significant challenges, and for striving to move the company on a path to outperformance.
Geraldine Fraser-Moleketi
Chairman
30 November 2023
