Five Roses tea, Bakers biscuits parent company AVI under pressure as consumers follow discounts | Fin24

Five Roses tea, Bakers biscuits parent company AVI under pressure as consumers follow discounts

Jan 23 2020 17:40
Lameez Omarjee

AVI, the parent company of brands Five Roses tea and Bakers biscuits, warns that headline earnings per share could be between 3% and 5% lower.

In a trading update issued by the maker of food and beverages on Thursday afternoon, it said its brands suffered through a difficult trading environment.

The share price took a knock following the release of the update. The share price was trading at R86.80 at 15:10, dropping to R83.78 by 15:50. By 17:00 the share price was 3.98% weaker at R83.10.

According to the update, its half-year performance was impacted by competitors offering discounts in some categories of goods, as well as Black Friday. Both these factors "diverted" consumer spending and constrained December sales, the group said.

"Significant load shedding in early December exacerbated a challenging trading month, particularly for the retail brands," the trading update read.

Headline earnings per share are expected to decrease between 3% and 5%, compared to the same period last year. This is a decrease from last year's 305.5c per share to a range between 290c and 296c.

Earnings per share is expected to increase between 35% and 37% - this is a range between 409c and 415c, compared to last year's earnings of 303.2c.

Group revenue edged up only 1% higher, than for the same period last year. Operating profit is expected to be marginally higher than the same period, last year. "Cash flows remained strong through the semester," the statement read.

Particularly food and beverages performed well, but this was outweighed by poor performance in personal care and footwear brands – with weaker sales being experienced for Spitz in December.  

During the period, net finance costs were higher than the year before, due to higher average borrowing levels.

Earnings from fish company I&J's joint venture with Australian-based agricultural company Simplot was also materially lower – due to the sale of the joint venture interest as well as lower earnings to the date of sale, the group said.

"Capital items increased significantly due mainly to the disposal of I&J Holdings Proprietary Limited’s interest in its joint venture with Simplot Australia Proprietary Limited, which was announced on 7 November 2019. This transaction resulted in a capital gain of approximately R370m," the statement read.

The group will release its half-year earnings for the six months ended December 31, 2019 on March 9, 2020.



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