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Tiger FY results, South Africa solid

With everything going on we have had to delay the bringing of the Tiger Brands results for a while, apologies. Rather late than never I say. The results themselves are available via the company website, Key financial indicators. As you can no doubt see, the stronger domestic performance, i.e. in South Africa offset the well documented problem business in Nigeria and irregularities at Haco in Kenya, as well as the failure of a key supplier in Mozambique. Remember that not so long ago the company decided not to fund their business in Nigeria any more. School fees. Equally they wrote the business off to nothing, and will carry that business as a discontinued operation.


Total group turnover advanced only 5 percent to 31.6 billion Rand, profits before tax decreased 20 percent to 2.1 billion Rand, as a result of the significant impairment of the Nigerian business. Earnings per share from continuing operations decreased 14 percent to 1068 cents, headline earnings per share from continuing operations decreased one percent to 1786 cents. Wait for it, by another measure, "Adjusted headline earnings per share from continuing operations, excluding the TBCG deferred tax asset impairment, increased by 6% to 1 920 cents". I am not a fan of that, it is comparable to saying, well, if I didn't get 20 percent wrong in that test I would have got an A.


The fact of the matter is that the company made a significant investment mistake in Nigeria, the only good news for shareholders is that this is now history, a bad chapter in their history. And ours as shareholders, we have a right to be peeved to a certain extent. The dividend for the second half is 611 cents (519.35 cents after tax), unchanged from last year, the interim dividend was 10 cents higher, effectively the write offs and the poor performance did not impact on that. Although, you would argue without that, it would be higher.


At a management level, CEO Peter Matlare exits the business in the coming month, the ex CFO in the Nick Dennis era, Noel Doyle was appointed the COO during the course of the year, that should soften the blow somewhat. In fact, Noel Doyle has been appointed as the interim CEO, Matlare will leave 31 December, and the announcement of a new CEO will be made in due course. Do you think that Doyle has a chance for the top job, any Tiger insiders who want to comment there?


The outlook is muted at best, it "remains challenging, with low domestic economic growth, rising costs and job security concerns weighing on the South African consumer. These factors are exacerbated by the weak rand which is fuelling inflationary pressures and intensifying the competitive trading dynamics already evident. The macro-economic outlook for the rest of sub-Saharan Africa is muted, while currency devaluations and foreign exchange liquidity are additional risks. However, Tiger Brands has the brands, people and capability to address these challenges. In addition, the group will continue to focus relentlessly on cost savings and efficiencies, as well as further investment in innovation, customer engagement and brand development."


Notwithstanding that, the share price reacted positively to the results, in other words they were not as bad as many had anticipated, the South African segment performed better than many had penciled in. The market has pencilled in more than 20 Rand worth of earnings inside of this financial year, and around low teen earnings growth the year after, i.e. above 22 Rand worth of earnings in 2017, a long way away to make any predictions with a great deal of accuracy. With dividend cover of around 2 times (that region), the stock yields 3.3 percent forward, pre-tax. Not a kings ransom, better than most on the local front. We continue to hold Tiger Brands in our client portfolios.


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