AVI sells stake in seafood ven­ture

Business Day - - FRONT PAGE - Siseko Njobeni In­dus­trial Writer njobe­[email protected]­nesslive.co.za

Con­sumer goods group AVI, owner of Five Roses, Green Cross and I&J, has sold its 40% in­ter­est in Aus­tralia-based seafood and snack man­u­fac­turer Sim­plot for R633m.

Con­sumer goods group AVI, owner of Five Roses, Green Cross and I&J, has sold its 40% in­ter­est in Aus­tralia-based seafood and snack man­u­fac­turer Sim­plot for R633m.

AVI said the deal was in line with its strategy to exit busi­nesses in which it had limited man­age­rial con­trol and re­stricted abil­ity to steer strate­gic change.

The com­pany, the cloth­ing and ap­parel busi­nesses of which strug­gled in the 2019 fi­nan­cial year amid poor sales, said it also had a strategy to re­duce ex­po­sure to cat­e­gories with low growth potential “and whose fu­ture re­turn on cap­i­tal prospects do not meet AVI’s ex­pec­ta­tions”.

Af­ter tax, the sale of the stake in Sim­plot trans­ac­tion would re­sult in cap­i­tal gain of about R370m, AVI said.

AVI said it would con­tinue to sup­ply seafood to Sim­plot as part of the com­pa­nies’ ex­ist­ing sup­ply agree­ment “and close work­ing re­la­tion­ship with Sim­plot Aus­tralia”.

AVI chair Gavin Tip­per said at the com­pany’s an­nual gen­eral meet­ing on Thurs­day that per­for­mance in the rest of the fi­nan­cial year de­pended on “sound” con­sumer de­mand over the fes­tive sea­son and for the du­ra­tion of the sec­ond half.

Tip­per said group rev­enue for the first quar­ter ended Septem­ber 2019 was 2% higher than that of the pre­vi­ous cor­re­spond­ing pe­riod, with growth in the food and bev­er­age cat­e­gories par­tially off­set by con­tin­ued vol­ume pres­sure in the fash­ion busi­ness.

“The con­sol­i­dated gross profit mar­gin was well pro­tected, and costs were tightly man­aged, re­sult­ing in growth in op­er­at­ing profit for the quar­ter of 2%,” Tip­per said.

AVI said in a trad­ing state­ment that earn­ings per share for the six months to De­cem­ber 31 were ex­pected to rise 35%-45% to be­tween 409c and 440c from 303.2c the pre­vi­ous year.

The ex­pected strong per­for­mance is in con­trast with the group’s most re­cent per­for­mance. AVI has strug­gled in fi­nan­cial 2019, with head­line earn­ings fall­ing for the first time since 2006 be­cause of weak con­sumer de­mand and dis­counts from com­peti­tors.

The Spitz busi­ness re­ported a 4.7% fall in rev­enue due mainly to a 6.9% drop in footwear sales vol­umes. Green Cross rev­enue plunged 19.4% due mainly to lower sales.

AVI’s share price rose 2.04% to R86 on Thurs­day.

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