INTEGRATED ANNUAL REPORT 2024
for the year ended 30 September 2024
for the year ended 30 September 2024
Tjaart Kruger
Chief executive officer
In taking on my role as CEO of Tiger Brands a year ago, it was evident that the culture needed a reset. The major contribution to this would be changing the operating model and getting the business to focus on the basics again. Despite a tough operating environment, we have seen encouraging progress on the turnaround initiatives.
The impact of our dedicated focus this year on cost leadership, driving affordability as a growth platform, rationalising our product and brand portfolio, and ensuring a superior channel presence, is evident in the pleasing signs of a second half turnaround in Bakeries, Culinary and Grains. This year’s performance gives me confidence that we are on track to deliver on our turnaround strategy.
This year, total revenue increased by 1% to R37,7 billion, reflecting the combined impact of a challenging operating environment, price inflation of 7% and overall volume declines of 6%. The reduced volumes in certain categories are a result both of deliberate pricing correction initiatives as well as the heightened competitive pressure that is driving our renewed strategic response.
Our cost savings drive, countered by high input cost inflation, contributed to a credible recovery in gross margins to 28,3% from 27,7% last year. We are pleased to report that our various initiatives to reduce working capital have proved successful, contributing to a reduction in net working capital balances, an improvement in our cash conversion and an associated reduction in net debt, moving us into a net cash position by year end. Group operating income (before impairments and non-operational items) was marginally ahead by 1% to R3,1 billion. Earnings per share were up 13% to 1 942 cents per share, while headline earnings per share increased to 1 810 cents per share.
Immediately after taking over as CEO in November last year, I undertook a detailed review of Tiger Brands’ operating model and organisational structure, with the aim of addressing some of the identified challenges within the business and restoring the company to deliver on its full potential. Following this review, the board approved a new federated operating model – comprising six business units led by empowered managing directors – aimed at improving speed of execution and enhancing accountability by decentralising decision-making and streamlining the ways of working across the different businesses.
To bring in fresh leadership, we appointed five managing directors to the Exco team with effect from 1 February 2024, each of whom has shown initial positive results in delivering on our turnaround plan. These six business units are supported by our functional executive committee members and their teams, which include legal, corporate affairs, marketing and strategy, manufacturing and human resources.
Under this new operating model, we have simplified and clarified the roles and interdependencies between business units and support functions, ensuring greater cohesion across the organisation. To encourage a more hands-on culture of decentralised decision-making, we have relocated the management teams to the operations, strengthening accountability and unlocking annualised cost savings.
During the year, the board approved our revised strategy, with five strategic thrusts and associated strategic enablers aimed at delivering on a clear set of strategic ambitions relating to growth, profitability, balance sheet returns and people. We have also refined Tiger Brands’ vision, prioritising our activities more specifically on southern Africa, sharpening our consumer goods focus, placing the consumer more explicitly at the centre of everything we do, and targeting our portfolio on the most accessible loved brands, recognising the critical importance of driving affordability and availability in an increasingly constrained consumer environment.
We have made pleasing progress this year on our five strategic thrusts:
These five strategic thrusts are supported by our critical enablers: igniting our people, embedding our new federated operating model, delivering game-changing innovation, ensuring competitive digital capabilities and manufacturing operations, and promoting sustainable agricultural sourcing. While each of these enablers is important – and reviewed in more detail elsewhere in the report – there are two enablers that I wish to highlight.
Since the decision of the Supreme Court of Appeal was handed down on 4 February 2022, the parties have continued with pre-trial preparations, including discovery of documents and records relevant to the class action as required in terms of the rules of court, to get the matter ready for trial for the court to determine liability. A trial date will be set by the court once all these pre-trial preparations have been fully attended to.
As part of our efforts to expedite resolution of the class action, in January 2023 the attorneys representing the company and its insurers (the company’s attorneys) and the plaintiffs’ attorneys (Richard Spoor Inc.) jointly approached the National Institute for Communicable Diseases (NICD) for access to their records relevant to the listeriosis outbreak. These records are vital to a determination of liability. In January 2024, the NICD released the so-called FASTQ files with some data relating to their investigation of the listeriosis outbreak to the plaintiffs’ attorneys. The files were shared with the company’s attorneys in February 2024 for review by their appointed experts. The experts’ review of the data is at an advanced stage but remains ongoing.
The company’s attorneys have engaged with the plaintiffs’ attorneys with a view to agreeing on relief to qualifying individuals who have urgent medical needs, regardless of the fact that liability has not yet been determined. In addition, the legal representatives are engaging on measures to arrive at a speedier resolution of the class action overall. We are committed to working diligently to bring the listeriosis class action to a close as quickly as possible.
Tiger Brands has product liability insurance cover appropriate for a group of its size. Coverage is subject to the terms and limits of the policy.
This year’s robust performance has been achieved in the context of a particularly dynamic trading environment, characterised at a global level by high levels of geopolitical uncertainty, and at a regional and local level by profound socio-economic challenges, including high inflation and increasing youth unemployment. Although there are some positive economic signs globally – such as the reduction in inflation and interest rates, and steady GDP growth rates – the outlook remains highly uncertain. The conflicts in the Middle East and Ukraine continue to pose risks to global energy supplies and trade routes, contributing to increased shortages and price volatility in essential commodities. This volatility is being exacerbated by the frequency and severity of extreme weather events that are increasingly affecting agricultural supply chains.
In South Africa, business and investor sentiment has responded positively to the establishment of the Government of National Unity (GNU), the cessation of loadshedding and the decline in inflation and interest rates. This positivity is reflected in an increase in foreign direct investment and evidence of a recovery in consumer confidence, with retail trade sales in the last quarter ahead of economists’ forecasts. While I am cautiously optimistic that the recent structural reforms will gain momentum and boost growth rates, we cannot ignore the country’s structural challenges, such as its infrastructure and logistics challenges, crime and corruption, and high unemployment, particularly among the youth. Addressing these challenges will require significant leadership and commitment as well as sustained levels of cooperation within the GNU and between government and the business community.
Despite these various challenges, I am confident that we are on track to achieve our long-term turnaround strategy and successfully reposition the company to deliver on our purpose, vision and strategic objectives. To help realise these objectives, my top five priorities for the year ahead are to:
This has been a rewarding first year as CEO of Tiger Brands. I wish to extend my appreciation to my colleagues on the leadership team for their support and dedication, and to all of Tiger Brands’ employees who are responding to the challenges we have set for ourselves: to make bold choices, execute fewer actions and move the performance needle, doing it right, first time, every time.
Finally, I would like to thank the board for their advice and support, and for their confidence in extending my tenure for a further three years.
Tjaart Kruger
Chief executive officer
December 2024