Premier Group CEO Kobus Gertenbach speaks at the group’s listing on the JSE in March. The company has opted not to declare a half year dividend despite revenue and earnings growth. Picture: JSE YouTube screengrab
Shares in food manufacturing company, Premier Group traded nearly flat on the JSE yesterday after the company announced it was skipping an interim dividend despite raising revenues and headline earnings per share for the period to the end of September.
Trade in the company’s shares started in March this year, with its share price up 11.94% in the past six months. However, trade in shares in Premier, which started off as a bakery in Cape Town in 1824, was marginally up by 0.08% at R60.50 yesterday.
This was after it announced that it was not paying a dividend for the six months to September 30, a period in which its headline earnings per share increased by 0.8% to 331 cents per share. Operating profit was 33.3% higher at R805 million.
Revenues quickened by 7.1% to R9.4 billion, driven by firmer income generation in its Millbake as well as the groceries and international categories. Cash generated from operations increased 33.6% to R831m, underpinned by growth in Premier Group’s Ebitda and supported by “well-managed” working capital.
“The impact of load shedding is not considered to have had a material effect, with additional costs incurred across the business for the period of about R17 million,” the company said Monday.
The company, however, anticipated that in its second half period to March 2024, revenue growth would likely be moderate compared to the year earlier same period which was fraught with significant impacts from inflation in soft commodity prices.
The company thus expected to register “low single-digit revenue growth” in its second half period although margins were expected to remain at levels similar to those attained for the first half.
EBITDA was 23.9% stronger at R1bn. Ebitda growth in Millbake at 27.3% offset a 4% decline in Ebitda from the groceries and international division, which was hammered by “macro-economic conditions experienced” at the Mozambican operations.
Millbake “delivered robust result” with revenues increasing 8.1% to R7.9bn. The company attributed this to the division’s price/mix growth of 8%.
Softer commodity wheat and maize prices and the associated price relief being passed through to consumers contributed to the unit’s financial performance.
Premier Group said “further price relief is expected to be muted by the rising fuel prices, high-interest rates and the weakened rand” unit of exchange.
The groceries and international division raised revenues by 2% to R1.5bn, with the focus on manufacturing optimisation and functionality remaining “critical in achieving cost efficiencies” in the sugar confectionery category.
“Efficiencies and increased capacity of tampon manufacturing installed at the Durban HPC facility will enable the on-shoring of supply to the UK market. The acquisition of a 35% stake in a UK-based niche skin care treatment range, under the brand Science of Skin (SOS), is a step towards leveraging the HPC infrastructure to expand participation within the broader personal care category,” the group said.
The Mozambique division remained under pressure as macro-economic factors and double-digit food inflation weighed heavily on households. Political instability, climate change and widespread poverty were key issues facing the consumer, although GDP growth in Mozambique is projected to rise over the next few years on account of stronger performance from mining, agriculture and Liquefied Natural Gas exports.
Overall, the trading environment during the period under review was characterised by currency and soft commodity volatility, extensive infrastructural constraints and high interest rates.
“The consumer remains under significant stress which has been compounded by the low-growth economy but the reduced load shedding regime has been a welcome relief. Inflation is anticipated to flatten as soft commodity prices continue to decline and stabilise.”
Debt of R357m was repaid in the period. This consisted of voluntary capital repayments on borrowings of R250m and about R107m repayment on a bank overdraft.
BUSINESS REPORT