AVI dividend in face of Covid-19
Consumer goods group AVI — the owner of footwear retailer Spitz stores, Five Roses tea, and seafood company I&J — has opted to pay out R926m in a special dividend, citing strong cash generation and healthy debt levels, even as it continues to battle with the fallout from Covid-19.
Consumer goods group AVI — the owner of footwear retailer Spitz stores, Five Roses tea, and seafood company I&J — has opted to pay out R926m in a special dividend, citing strong cash generation and healthy debt levels, even as it continues to battle with the fallout from Covid-19.
The maker of Bakers biscuits and Willard’s chips, which has a market value of R24.6bn, said the pandemic has had a mixed effect on its businesses, boosting parts of its snacks and beverages division, but hitting fashion and abalone sales.
AVI remains cautious about 2021, bracing for the possibility that competitors will aggressively discount in a constrained environment, even as input costs — such as cereals — rise globally.
The group will need to make tough decisions on pricing in coming months, CEO Simon Crutchley said on Monday, adding that 2021 could be as tough as 2020.
“We are targeting real earnings growth despite the constrained environment; there’s enough across the portfolio for that to be possible,” Crutchley said during an investor presentation.
Overall cash generation remains healthy, the group said, announcing a 160c interim dividend for its six months to endDecember, in line with the previous year. This represents a payout of about R529m, with the group also paying out a 280c special dividend.
Net debt fell by about a third to R1.12bn, while group revenue fell marginally to R7.1bn. Headline earnings, a widely used profit measure in SA that excludes certain items, rose 1.4% to R979.9m.
Cash generated by operations decreased 2.3%, however interest and taxation paid were both lower than last year, meaning more cash was available, the group said. The group had also received R633m from the sale of its 40% stake in a joint venture with Australian food company Simplot in late 2019.
AVI’s food and beverages division generates about three quarters of group revenue. Revenue in this segment rose 3% to R5.5bn, while operating profit declined 1.1% to R1.1bn.
Operating profit growth for Snackworks and Entyce beverages were offset by a 25.5% fall in operating profit for I&J, which was under pressure as Covid-19 prompted poor export demand and low selling prices for abalone, compounded by increased air freight costs.
In its fashion segment, which includes Spitz and fashion retailer Gant, revenue fell 9.9% to R1.57bn, while operating profit decreased 6.5% to R318.6m.
The group’s fashion and personal care businesses were under pressure as consumers shied away from malls, while increased working from home hit cosmetics and fragrances.
AVI said on Monday demand for its snacking and beverage brands have normalised from the peaks during the hard lockdown period as consumers returned to normal spending patterns, while sales of fragrance and beauty products have improved.
Fashion sales had showed recovery, but traffic, particularly at regional malls, remained constrained, AVI said.
Spitz, which is less affected by this, having a greater number of stores on high streets, had seen a pleasing recovery, and sales in December were at 97% of the same period in 2019.
In afternoon trade on Monday, AVI’s share was up 0.57% to R73.52, having recovered marginally in 2021, but having fallen 1.7% over the past 12 months.