Honey Bun sales, profits grow during COVID-19
Despite the tourism sector performing at lower outputs and schools remaining closed, Honey Bun Limited (HONBUN) managed to grow its sales and revenue during the COVID-19 period to deliver their highest net profit to date, which grew by six per cent to $166.7 million for the 2020 financial year (FY).
The company, which specialises in the manufacturing and distribution of baked goods, generated higher sales for the fourth quarter which was 15 per cent higher at $431.4 million in an environment which forced it to adjust its distribution strategy as consumer points of purchase shifted. The overall revenue for the financial year also grew by eight per cent to $1.67 billion which has been supported by a greater diversification in the product lines.
Although expenses climbed by eight per cent during the FY to $626.2 million, higher operating income and a reversal of impairment provisions related to trade receivables left the company with a 10 per cent rise in operating profit which stood at $196.4 million. The growth in selling and distribution expenses slowed as HONBUN adjusted its marketing strategies to the target market, which would have been at home rather than on the move.
Even with the fair value of its investments declining during the quarter compared to an increase in the prior period, HONBUN still managed to grow net profit by 76 per cent to $54.1 million and finish the
FY with an earnings per share of $0.35 versus the prior $0.33. This was also HONBUN’S final full FY where they can benefit from the 50 per cent remission in taxes before they begin paying the full income tax rate in June 2021.
Due to the eight per cent increase in cash generated from operating activities at $225.7 million, HONBUN was able to spend $118.9 million on additions to its property plant and equipment in addition to paying out 33 per cent more in dividends to shareholders which displayed the company’s ability to generate cash, expand and return value to shareholders.
This became more evident in the growth of total assets which rose by 11 per cent to $1.07 billion. The bulk of this asset increase was as a result of current assets growing by 26 per cent to $444 million with $297 million in cash making up most of it. With a nine per cent decline in total liabilities, shareholders equity increased by 17 per cent to $869.6 million.
Even in the face of the tax remission expiration in a few months, chief executive officer of HONBUN Michelle Chong remains confident that the company has sufficiently used their junior market experience to grow the business into a well-respected company. Despite providing no hints on the company’s next moves, there was a note of HONBUN possibly venturing into other business categories going forward.
HONBUN’S solid company framework was recognised on Wednesday as the company received its third best junior market company award and its second best corporate disclosure and investor relations plus best corporate governance awards at the JSE’S Best Practice Awards.
HONBUN also adjusted some roles recently with Daniel Chong being appointed chief operating officer and director to the board with Wayne Wray and Yaneek Page becoming the new chairs of the board subcommittees.
Michelle Chong stepped down as company secretary and Paula Graham–haynes appointed in her place.