This year, Tiger Brands joins a select group of South African companies that have celebrated their centenary. The company has come a long way since starting out as a small family business in Newtown, Johannesburg, to become Africa's largest listed manufacturer of fast moving consumer goods (FMCG), with trusted brands that form part of every South African's shopping basket. Although the past few years have presented particularly high levels of volatility and uncertainty, with rapidly changing production and consumption patterns and increasing social, economic and environmental pressures, all of which have been exacerbated by the Covid-19 pandemic, our longevity reflects the company's resilience, the inherent strength of our brands and the quality of our people.
Inspired by our strong history, our strategic priorities are aimed at improving the performance of our core portfolio while positioning the company for sustainable long-term growth.
Tiger Brands' results for the year ended 30 September 2021 reflect steady progress against our strategic priorities with an improved underlying performance from the core business which was negated by the costs related to the product recall and the civil unrest that took place in July 2021. These costs amounted to R732 million (pre-tax).
The write-off of stock related to the civil unrest (R85 million), as well as the product recall (R308 million), has been accounted for through cost of sales. Customer refunds related to the product recall have been accounted for as a reduction in revenue, while other related costs have been accounted for through the relevant expense functions in the income statement.
In terms of the group's underlying performance, the year under review can be characterised as a year of two halves, with a solid first half result, driven primarily by a strong first quarter, offset in part by slower top line growth in the second half. Despite revenue challenges, cost savings and efficiency initiatives were sustained, resulting in positive operating leverage for the full year.
Total revenue from continuing operations (excluding the product recall and civil unrest) increased by 5%, underpinned by price inflation of 7%, which was partially offset by an overall volume decrease of 2%. As a result of the costs related to the product recall and civil unrest, operating income from continuing operations** declined to R2,2 billion from R2,5 billion the previous year. Gross margin and operating margin declined to 28,5% (2020: 30,1%) and 7,2% (2020: 8,3%), respectively. In addition, naked margins came under pressure due to the high level of agricultural commodity cost push not being fully recovered through selling price increases. However, this was offset by a steady improvement in manufacturing efficiencies, resulting in a marginal improvement of overall gross margins (excluding the product recall and civil unrest) to 30,3% from 30,1% in the prior year. Operating income** (excluding the product recall and civil unrest) increased 20% to R3,0 billion.
The impairment charge in the current period of R154 million relates primarily to property, plant an equipment in the Deciduous Fruit business.
Net financing costs for the year amounted to R54 million (2020: R97 million), benefiting from lower interest rates and lower average debt levels, due primarily to improved debtor collections. A foreign exchange loss of R9 million was recorded due to the significant strengthening of the rand against other major currencies during the year under review. This negatively impacted the translation of foreign currency cash balances, relative to a net foreign exchange profit of R40 million reported last year.
Income from associates decreased by 2% to R346 million despite an improved performance from all three associate companies in local currency. National Foods' reported outcome, which has been accounted for in line with IAS 29 Financial Reporting in Hyperinflationary Economies was adversely impacted on currency translation. As previously reported, Tiger Brands disposed of its 49% shareholding in UAC Foods effective 1 September 2021. The loss on the sale of UAC amounted to R11 million.
The effective tax rate before impairments, non-operational items and income from associates, declined from 32,0% to 29,1%, largely due to an increased benefit in respect of special investment allowances claimed on qualifying capital projects in the current year as well as lower non-tax deductible expenditure.
Earnings per share (EPS) from continuing operations increased by 21% to 1 070 cents (2020: 886 cents), while headline earnings per share (HEPS) from continuing operations declined by 6% to 1 127 cents (2020: 1 196 cents).
EPS from total operations increased by 87% to 1 142 cents (2020: 612 cents), and HEPS from total operations increased by 20% to 1 127 cents (2020: 940 cents).
The relatively higher rates of increase in EPS from total and continuing operations, compared to the year-on-year percentage changes in HEPS, are primarily due to the significant impairment charges of R603 million recorded in 2020, all of which relates to continuing operations. These impairment charges were excluded from the calculation of HEPS. The increase in HEPS from total operations is primarily due to the losses recorded in Value Added Meat Products (VAMP) in 2020 compared to a small profit in the year ended 30 September 2021. Consistent with the previous year, VAMP has been treated as a discontinued operation. The total after-tax profit for the year from discontinued operations amounted to R120 million (2020: R453 million loss). This primarily relates to the release of foreign currency translation reserves following the closure of Deli Foods as well as profit on the sale of trademarks, property, plant and equipment at Deli Foods and VAMP.
Domestic revenue in the second half was adversely impacted by volume declines across the Grains portfolio, Groceries and Snacks & Treats, compounded by lower overall price inflation relative to the first half. Despite the muted second half growth, Domestic revenue for the year increased by 5% to R27,6 billion, resulting from price inflation of 8%, less the impact of overall volume declines of 3%. The effective containment of costs, together with an improvement in production efficiencies, resulted in positive operating leverage, with Domestic operating income** (excluding the product recall and civil unrest) increasing by 19% to R2,9 billion.
Grains
Revenue increased by 5% to R14,6 billion, reflecting price inflation of 10%, while overall volumes declined by 5%. Our ability to pass through some input cost inflation, combined with cost savings across the segment, resulted in operating income increasing by 11% to R1,4 billion and the operating margin expanding to 9,4% from 8,9% in the prior year.
After a strong start to the year, Milling and Baking experienced a challenging second half, driven predominantly by Bakeries and Sorghumbased products. Revenue from Milling and Baking increased by a muted 2%, driven by average price inflation of 8% which was mostly offset by an overall volume decline of 6%. Operating income declined by 9% to R1,0 billion.
Maize enjoyed a strong recovery in the second half. Despite a year-on-year volume decline, primarily due to increased in-home consumption last year, margins improved in the second half, resulting in a positive performance for the year. The wheat-to-bread value chain continued to experience margin compression because of adverse category dynamics, with deep discounting in the market remaining prevalent. Higher selling prices were more than offset by the impact of reduced volumes. In addition to higher than expected electricity and fuel costs, lost sales and increased expenses caused by the civil unrest in KwaZulu-Natal, further negatively impacted performance. Sorghum-based products experienced a particularly difficult year as a result of higher conversion and distribution costs, which was compounded by lower sales volumes as competition intensified.
Revenue in Other Grains increased by 13% to R4,5 billion, comprising price inflation of 15% and an overall volume decline of 2%. Despite the impact of the civil unrest on the Rice business, its timely return to normal operations helped to ensure that it sustained its strong first half performance. As a result, the Rice business delivered a strong year-on-year improvement, underpinned by higher selling prices and sound cost management. Following muted revenue growth in the first half, Pasta volumes benefited as consumer behaviour favoured the category. Improved demand coupled with strong in-store execution resulted in Fatti's & Moni's gaining market share. Although growth in its core oats offering was sustained in the second half due to a successful winter campaign, an adverse mix impacted Jungle's overall second half performance. Nonetheless, Jungle achieved a pleasing full year performance.
Price increases coupled with improved efficiencies resulted in operating income in Other Grains increasing significantly to R353 million (2020: R114 million).
Consumer Brands
As was the case in the first half, the Baby category results were disclosed under the Consumer Brands segment. These results were previously reflected under Home, Personal Care and Baby. This change aligns external segmental disclosure with management reporting and has no financial impact on the group results. Prior year segmental numbers have been restated to reflect this change.
The Consumer Brands portfolio delivered overall revenue growth of 4%, comprising price inflation of 7% and a 3% reduction in total volumes. The flat revenue performance in Groceries was offset by year-on-year top line growth in Snacks & Treats, Beverages, Baby Care and Out of Home. Price inflation and significantly improved manufacturing efficiencies were the primary drivers for operating income increasing 20% to R1,1 billion.
Excluding the impact of the product recall, Groceries' sales were negatively impacted by a competitive trading environment, low seasonal demand in the first half and unusually quiet trade over Easter. Full year revenue was unchanged at R5,5 billion. This was underpinned by price inflation of 8%, offset by a similar percentage decline in total volumes. Consistent factory performance and expense management discipline resulted in operating income increasing 12% to R397 million despite experiencing significant increases in certain raw materials and packaging costs.
As previously reported, Tiger Brands' claim under the contract with the third-party supplier, arising from the product recall, is in the process of being assessed. In October 2021, we issued formal correspondence to the third-party supplier setting out the scope of our claim. The supplier has since referred the claim to its insurers who have appointed a loss adjuster to assess the claim. The process is still at its early stages and we will continue to engage with the supplier to find a speedy resolution to the matter.
Production volumes within Snacks & Treats were adversely impacted by Covid-19-related absenteeism as well as the civil unrest in the second half of the year. These factors resulted in supply chain complexities with regards to lost production as well as raw and packaging material shortages. In addition, adjusted lockdown measures implemented in July 2021 resulted in lower demand in respect of impulse purchases. This, as well as subdued shopper engagement relating to seasonal events such as Easter, led to slower revenue growth in the second half. Nonetheless, revenue for the year increased by 7% to R2,3 billion, underpinned by price inflation of 8% and an overall volume decline of 1%. Operating income increased strongly by 37% to R234 million, driven by higher realisations together with the impact of ongoing cost improvement initiatives.
Supported by a strong second half performance from the ready-to-drink category as well as concentrates (Oros), year-on-year revenue in Beverages increased by 6% to R1,7 billion. Operating income increased by 9% to R261 million, benefiting from a favourable product mix as well as improved factory efficiencies and sound cost management.
Baby delivered a strong performance, driven by a recovery in volumes across most segments. Revenue increased by 12% to R1,1 billion with equal price and volume growth. Operating income increased by 29% to R143 million, benefiting from a favourable product mix, waste reduction and lower distribution costs.
Home and Personal Care (HPC)
Overall revenue in HPC increased by 6% to R2,0 billion, resulting from sustained category leadership in the pesticides category (within Home Care), offset by a disappointing performance in Personal Care reflective of the adverse consumer dynamics specific to this category.
The solid volume uplift in Home Care was underpinned by a strong summer campaign at the start of the year, which included the benefits of effective in-store execution and innovation. This performance was sustained in the second half with revenue for the year ending 11% up. Operating income increased by 20% when compared to the prior year, due to improved efficiencies, better material usage variances and tight overall cost control.
Although Personal Care enjoyed a recovery in operating income in the second half, it was not enough to offset the weak start to the year. Volatile category demand together with retailers prioritising essential categories during the civil unrest, resulted in a volume reduction of 6% for the year. Despite selling price inflation of 3%, the lower volumes resulted in revenue declining by 3% to R643 million. Operating income declined to R47 million from R79 million the previous year.
Exports and International
Total revenue for the Exports and International businesses increased by 7% to R3,6 billion. This was primarily attributable to a strong start to the year as trade resumed in Nigeria following resolution of the trademark dispute with a former distributor. The second half, however, proved challenging for Exports, the Deciduous Fruit business as well as our operation in Cameroon. Operating income for the year reduced by 7% to R96 million as a result of increased losses in Deciduous Fruit.
The second half performance of the Exports segment was negatively affected by low levels of demand, while border congestion impacted sales into Mozambique. Operating income of R71 million reflects the improved performance in the first half, which was partly offset by the impact of industrial action at the Davita facility (powdered soft drinks and seasoning) during the third quarter.
Revenue in the Deciduous Fruit business declined by 6% due to a challenging second half performance as demand in key export markets remained subdued. The business recorded an increased operating loss of R147 million primarily due to the relative strength of the rand and higher global shipping costs. A business optimisation review process is underway in respect of the Deciduous Fruit business, while we continue to pursue a potential disposal.
Chococam recorded an exceptional milestone this year with revenue exceeding R1,0 billion. This was driven primarily by strong volume growth across all segments, underpinned by successful innovation, optimal pricing and improved distribution to neighbouring countries. Operating income increased by 16% in rand terms to R172 million (10% increase in local currency). This was assisted by improved efficiencies and lower conversion costs.
** Before impairments and non-operational items.
Cash generated from operations increased by 34% to R4,0 billion. This included an overall improvement in working capital requirements despite the group's conscious decision to increase inventory levels across the portfolio in anticipation of Covid-19-related supply chain disruptions. The group ended the year in a strong net cash position of R2,2 billion (2020: R1,8 billion). Total capital expenditure increased 8% to R1 billion, with replacement capex amounting to R762 million (2020: R659 million) and the balance relating to expansionary projects.
In February 2021, Mr Makhup Nyama retired from the board after 10 years of service, while Mr Ian Burton resigned from the board in June 2021, in turn stepping down as chairman of the investment committee. Ms Geraldine Fraser-Moleketi is appointed chairman of the investment committee with effect from 19 November 2021.
Having served on the board since August 2010, Ms Maya Makanjee will be stepping down as an independent non-executive director of the company with effect from 31 December 2021. Consequently, she will also step down as chairman of the social, ethics and transformation committee and member of the governance, nomination and remuneration committees. Ms Emma Mashilwane will be appointed chairman of the social, ethics and transformation committee, with effect from 2 January 2022.
Mr Mark Bowman will step down as an independent non-executive director with effect from the close of the annual general meeting on 16 February 2022. Consequently, he will also step down as chairman of the remuneration committee and member of the investment committee as well as the nomination and governance committees. Mr Donald Wilson will be appointed chairman of the remuneration committee with effect from 17 February 2022.
Advocate Mahlape Sello, SC, was appointed as a member of the audit committee with effect from 20 August 2021. Advocate Sello, SC, is currently an independent non-executive director of the company and chairman of the risk and sustainability committee.
Ms Deepa Sita, chief financial officer, will assume responsibility for Tiger Brands' procurement function with effect from 1 December 2021. This is aligned with the development of a best-in-class supply chain model and Ms Sita's extensive experience in this field.
As previously reported, the awaited subpoena appeal relating to the request by the company for various third parties to provide epidemiological information required for the Class Action lawsuit was finally heard by the Supreme Court of Appeal on 5 November 2021. Judgment is not expected to be handed down before the end of this calendar year. The parties continue to attend to pre-trial preparations, including discovery in terms of the Rules of the Court.
We acknowledge that the challenging economic climate and pressure on the consumer will remain. Against this backdrop, the company has made progress in strategically positioning itself for the future. Our strategy is supported by five key pillars namely:
We have continued to accelerate our efforts towards consumer and shopper orientation and strengthened our focus on meeting consumers' needs. Given the constrained consumer environment, our priority has been on delivering value for the consumer. We have made plans to roll out additional innovation in the value space, while several renovations are underway in the health and nutrition segment. We have launched the Black Cat brand as our third power brand, joining Jungle Energy and TV Bar to capitalise on the rising trend in snacking.
In line with our second and third strategic pillars, we have enhanced our supply chain and our cost-saving initiatives and efficiency programmes are expected to gain momentum, supported by increased technology investments.
In the medium to long term, the recent launch of the Tiger Brands Venture Capital Fund, which has led to the receipt of over 500 expressions of interest, will provide inorganic growth opportunities. We are in the final stages of making an offer for a business which is closely aligned to our health and nutrition strategy, while a further nine opportunities are being assessed. These initiatives, together with the reinvigorated and focused Africa growth strategy are expected to be supportive of top-line growth while driving our fourth strategic objective of building a growth pipeline.
Our fifth priority focus is on igniting our people and this forms the foundation of the company's growth strategy. We have aligned internally on the desired culture for the company, as well as the underpinning values and winning behaviours. Our focus is now on accelerating strategy execution.
The strategic progress achieved this year, together with the non-recurrence of once-off items in 2021, are expected to result in an improved overall performance in the year ahead.
For Tiger Brands to flourish in the years ahead, it needs to realise the commercial opportunities associated with creating a more sustainable future. This is the underlying ethos of our sustainable future strategy as we recognise the responsibility to address our material environmental, social and governance (ESG) impact and continue to integrate this across the organisation.
Any forward-looking information has not been reviewed or reported on by the group's auditors.
By order of the board
| GJ Fraser-Moleketi | NP Doyle |
| Chairman | Chief executive |
Bryanston
18 November 2021
Date of release: 19 November 2021
The board has declared a final ordinary dividend of 506 cents per share for the year ended 30 September 2021. This, together with the interim ordinary dividend of 320 cents per share, brings the total dividend for the year to 826 cents per share. In view of the company's ungeared balance sheet and strong cash-generating ability, it has been decided to determine this year's total dividend on the company's adjusted headline earnings. Consequently, HEPS was adjusted to exclude the impact of the product recall and the civil unrest, which took place in July this year. The company's dividend policy of 1,75x cover has therefore been applied to HEPS after the aforementioned adjustments.
In accordance with paragraphs 11.17 (a) (i) to (x) and 11.17 (c) of the JSE Listings Requirements, the following additional information is disclosed:
Shareholders are advised of the following dates in respect of the final ordinary dividend:
| Declaration date | Friday, 19 November 2021 |
| Last day to trade cum the ordinary dividend | Tuesday, 11 January 2022 |
| Shares commence trading ex the ordinary dividend | Wednesday, 12 January 2022 |
| Record date to determine those shareholders entitled to the ordinary dividend | Friday, 14 January 2022 |
| Payment date in respect of the ordinary dividend | Monday, 17 January 2022 |
Share certificates may not be dematerialised or re-materialised between Wednesday, 12 January 2022 and Friday, 14 January 2022, both days inclusive.
By order of the board
JK Monaisa
Company secretary
Bryanston
18 November 2021