Tiger Brands : Annual Financial Results 2021 Webcast Transcript

Tiger Brands FY21 Results Presentation Transcript

Speaker Key:

ND	Noel Doyle (CEO)
DS	Deepa Sita (CFO)
NCW	Nikki Catrakilis-Wagner (IR Director)
NCW	Good morning, ladies and gentlemen, and welcome to Tiger Brands' results
	presentation for the year ended 30th September 2021. I am Nikki Catrakilis-
	Wagner.
	In terms of the agenda this morning, Noel Doyle, CEO, will kick off the presentation
	with an executive summary, an overview of the year under review, as well as our
	progress against strategic objectives. CFO, Deepa Sita, will provide us with a
	financial and an operational review and Noel will conclude the presentation with a
	strategic update and outlook. We will then open it up to Q&A.
	We ask that you please keep the questions pointed without long preambles so that
	we can get through as many questions as possible. Before we begin, I draw your
	attention to the forward-looking statement.
	With that, I hand over to CEO, Noel Doyle. Thanks, Noel.
ND	Thanks very much and thanks to all of you for taking the time to join us and listen
	to Deepa and I this morning.
	Slide five - Current trading environment requires a consumer-focused
	approach, optimal supply chain and relentless cost containment
ND	We're presenting in an environment where there have been plenty of challenges
	over the last 12 months, and I'm not going to dwell on those challenges, but I'll just
	call them out.
	We saw, particularly in the first half of the year, significant compression in terms
	of consumer demand. As the lockdown has been released and the level of social
	interaction has improved, we've seen an improvement in the levels of consumer
	demand, particularly over the last three months in terms of the market overall.
	We didn't see any great upsurge in demand with the renewal of the SRD grant. Of
	course, what's very topical at the moment is the challenges around the post-
	COVID-19 global supply chain squeeze, both in terms of the inflation that it's
	pumping into the system, as well as the challenges in terms of absolute supply
	and logistics.
	Slide 6 - Well-known headwinds required management focus
	If I move on to the other specific headwinds that Tiger Brands has had, quite clearly
	an event as significant as the product recall that we had in July was something
	that took quite a lot of management focus in terms of the lead up to the decision
	to do that recall and managing the logistics that came from it.
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We also had to deal with both the specific incident over a couple of days in July of the civil unrest, as well as the challenges of getting back to operating. Particularly challenging for us was our Snacks & Treats and rice plants. In terms of rice, we were completely and utterly cleaned out of stock for a period of time. That obviously would have had an impact that isn't specifically captured in the numbers that we excluded, or that we showed as being specific to those challenges.

I think the other area that we would call out is the rest of Africa. Whilst the rest of Africa did perform better than last year, it performed significantly below our expectations. That wasn't helped by industrial action that we had in March/April at our Davita manufacturing plant, but it does talk to the longer, slower growth curve without any acquisitions in building a business on the continent.

Slide 7 - Despite challenges, steady progress achieved against strategic priorities aimed at improving performance & capitalising on growth

If I look at the big strategic drivers that we've spoken about in the past, I've colour coded these in terms of our own internal performance, and I think we're fairly hard in marking ourselves against these.

Meet the needs of the consumer. We still think there's lots of work to do there. But in the last six months we've been pleased that we've actually started to execute against value, specifically value-orientated innovations, and we've made some good progress there in our bakery business and our grocery business. If you look at our brand health, all of those metrics have been maintained, with the exception of one of our businesses, which was in Rice, where there's a little bit of a glitch in volume and we'll talk about that going forward.

In terms of our focus on delivering quality to the consumer, we're really pleased that our external consumer complaints numbers are down 25%. I think one of the things that we did get right this year was getting that price-volume mix a little bit more calibrated towards the middle of the scale.

We managed for the first time in a number of years, to grow our volume share. It did come at the expense of value share, but in terms of our own performance, it didn't come at the expense of our gross margins, where you see that we managed to move our gross margins up marginally at the same as we grew share.

Growth in share was despite some very specific challenges, particularly in the grains business, some of which is directly attributable to our own conscious decisions in the marketplace, and I'm talking there about rice, and some of it related to the challenges of the specific categories.

In terms of igniting our people, I think the processes that you'd expect in a company of our scale, and with our aspirations are very much in place. We were pretty comfortable with how we managed through the second and third waves from a looking after our people perspective.

I think the area where we still have work to do, and I'll talk about it a little bit later, is in terms of developing that can-do culture, a growth focus. Again, we'll talk a little bit about encouraging a little bit more risk taking and a little bit more bravery in setting out our stall on a growth agenda.

But in terms of building that growth pipeline, we've successfully embedded

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revenue growth management in our Grocery businesses last year and expanded that into Snacks & Treats and Beverages this year, showing good progress and we're going to be rolling that out across the business. That takes us close to our customers, takes us closer to our shoppers and maximises value both for ourselves and for consumers in the long run.

We have made some very good momentum in our initiatives in the general trade where across a pretty large universe of stores we've managed to expand our SKU presence very significantly.

The disposal of UAC Foods in Nigeria was an important transaction for us in terms of our long-term aspirations. What that really does now is free up our unhindered participation in the Nigerian market and allows us to control our destiny entirely within our own hands. We're now not obliged to go through any specific vehicle in terms of going to market there.

We've done well, in terms of the venture capital fund that we launched in May, filtering through a massive array of opportunities that have been presented to us. We've made our first offer, still negotiating around that and hopefully by the time I come back to talk to you in May of next year, we'll have a lot more tangible things to talk about. Of course, we stay focused on the key consumer trends that will drive growth.

Where we think we've done well and I suppose this is part of Tiger's DNA, our obsession with cost savings and efficiencies and the work we've been doing in our supply chain in particular in the past year has paid off for us and it's allowed us to be a little bit more generous in terms of our pricing. Because you have seen our naked margins actually decline slightly, and it was the efficiencies that we were able to take out of conversion that allowed us to hold up the gross margin over that period of time.

Our OEEs, up 7% and we're going to look for a similar improvement next year. We've done that with a lot of on quality and safety and actually embedding our processes so that it's not a once-off impact. That's why we're quite confident in setting out our stall for next year that we will see some savings.

The work that we've done in the latter part of last year and of this year on logistics, resulted in us having a very clear road map ahead of us for the next two to three years. We are executing against the plans that we had put in place during the course of the F21 financial year, both in terms of customer service and in terms of cost savings and efficiencies.

We've also hit all of our targets in respect of overall cost savings and specifically savings in our MUVs. Those, as I've said, are quite critical in us being able to recognise our premium position, and to get price points that are more appealing to our consumers.

Slide 8 - Our Billion Rand Brands continue to rank highly on all metrics; making them relevant and resilient

As I said, when you look across our billion-rand brands, in terms of the metrics relative to where we were six months ago, we've had a couple of brands which have improved some of their rankings. The only brand where we've seen slight

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movement was in Tastic, where our volume rank has slipped in the short-term from number one to number two.

Then what you'll really see is one of the things that we really worked hard on and struggled over the years, is to get closer to that sweet spot where we can get volume growth without significant degradation of margin across our categories, however it is a challenge and a category-by-category story.

Slide 9 - Volume share gains in the long-term supported by optimal pricing and more effective promotional activity achieved without margin sacrifice in aggregate

If you look here across the longer term (12 months), and the last quarter in more recent months, you'll see that in our basket we've been managing to grow share. Not necessarily at the same rate as all of our competitors, but having said that, we have not degraded the value-to-volume equation at the same rate as some of those competitors that have been growing volume.

The savings that we've been pulling out of the businesses have allowed us to grow market share without our gross margin going backwards. In fact, I'm sure Deepa will show you that we managed to marginally improve our gross margin despite very significant competitive pressures and pricing pressures, particularly in the grains and soft commodity businesses.

Slide 10 - Value share loss despite volume share gains represents attempts to price more effectively for market conditions while efficiency gains make it possible

You'll see that in terms of the value share loss, marginal value share loss against the volume share gain. Relative to the competitors that we've highlighted there, our value-to-volume index has not deteriorated at the same rate as theirs. We've been able to get that calibration closer to a sweet spot than in the past.

Slide 11 - Accelerating strategic execution while some initiatives are of a long-term nature

in terms of our scorecard against our key long-term strategic initiatives and we look at Meeting the needs of the Consumer, what we can see in terms of global best practice is a significant amount of benefit and differentiation being leveraged in that digital and direct marketing space.

This is probably the most significant area this year in terms of our level of disappointment in terms of our progress. We've got very specific plans to catch up in that space. It's not just about buying and tapping into tech, it's also about ensuring that you can find the right skill set and we've been making some progress in that.

In terms of the Health and Nutrition, I think we have launched and have in the pipeline products that tap into that narrative. We've made, some progress in respect of DOB opportunities, however not as much as we might have thought a year ago. I think that's a combination of some hesitancy on the part of the retailers, as well as in some ways being counterculture within the organisation.

But we expect to make some smaller, more incremental progress in this space. It

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	was never going to be a massive growth driver for us, but not as much progress
	as we originally anticipated.
	I think I've covered what's happened in the Supply Chain. The real challenge now
	is to inculcate the progress that we've had over the last couple of years and make
	sure that it's not a once-off. But we're certainly getting a very good sense as we
	move into this year that we are being successful in terms of that.
	We've amber carded ourselves in terms of the Customer Services and Logistics
	and that's really because we're still on the journey. I think we are where we would
	have expected to be at this stage and delivering against the targets that we
	achieved, but still some progress to go. The same thing in terms of just getting that
	focus on execution. There's still some work to do in parts of our portfolio.
	In terms of Cost Savings, we have made very good progress this year, but there's
	still legs in that space, and we need that as we go into the super inflation, that
	we've been experiencing in this post-COVID supply chain scenario.
	SKU rationalisation has played a role in the optimisation of our OEEs. It's got to
	play a more significant role going forward, but we have made good progress in the
	last year. Some of our growth has come out of the value solutions and executing
	against that.
	From a customer perspective, I think the real call-out here is in terms of our Rest
	of Africa strategy. We are a little bit disappointed with our progress in terms of the
	precision with which we work with our distributors, and with which we ensure that
	we have all the right distributors in place. This is much more about us and less
	about the choice of distributors. However, we have invested heavily in terms of
	people in that space, and we expect further progress going forward.
	Then the Igniting our People, we have all of the processes in place. We were quite
	pleased with the results that came out of our Voice of Tiger internal climate survey,
	given the backdrop against which the survey was conducted. But we've got more
	work to do to make people really believe in that mindset shift that drives growth
	and that understands that you can't grow without taking some risk.
	In capex we're seeing very good delivery against replacement efficiency-based
	capex. Where we need more people to be a little bit more confident and more risk
	taking is in putting their names behind the growth opportunities that require
	significant capex. With that brief summary, I'll hand over to Deepa.
	Slide 12 - Financial and operational review
DS	Thank you, Noel. Good morning, ladies and gentlemen. Thanks for joining us this
	morning. I'll spend some time talking to you about the FY21 financial results and
	then we'll talk a little bit around where we are trading to date in terms of FY22.
	Slide 13 - Despite slower revenue growth in H2; momentum maintained in
	cost saving initiatives and efficiencies
	Let's start with the executive summary in terms of the highlights as well as the
	headwinds that we experienced in FY21. Despite the significant cost push, the
	business did see solid naked margin performance in H2 in most of the categories.
	As Noel indicated, this was largely driven by the procurement as well as the MUV
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