JSE-listed Premier Group and its subsidiaries delivered a robust performance for the financial year ended March 31, under dynamic market and trading conditions.

The group states that exceptionally high commodity prices, unprecedented levels of loadshedding and social instability defined the operating landscape throughout the 12 months under review.

Consumers continued to endure rising food inflation and high levels of unemployment, impacting on disposable income.

In response, the group’s focus remained on the continuous training and upskilling of its people, internal cost-saving initiatives and the delivery of material operational efficiencies across both manufacturing and its logistics and merchandising channels.

Premier avers that the focus on training and upskilling its people has been a major advantage in assisting it to navigate the challenging environment.

A new mega-bakery in Pretoria was fully commissioned within budget during the year and is operating at maximum production levels, delivering cost savings and improved bread quality, the group says.

Premier also successfully concluded the acquisition of a bakery in the Western Cape, further expanding its footprint in the region.

Additional synergies from the Mister Sweet acquisition, concluded in 2022, were extracted through the integration into Premier’s confectionery operations and changes to Premier’s sales and merchandising structures were bedded down, it outlines.

On March 24, Premier concluded an initial public offering and returned to the JSE after an absence of 18 years, raising R3.6-billion in secondary capital for Brait.

The transition into the listed environment is expected to support Premier’s efforts to drive its organic and acquisitive growth strategy and strengthen its market position across all business areas.

Premier highlights good progress in recent years in establishing and executing on its environmental, social and governance.

Through several corporate social investment initiatives during the year, Premier has provided over 50-million nutritional meals, menstrual hygiene products and educational assistance to communities in need across the country, it highlights.

From an environmental perspective, prioritising cleaner energy initiatives and the elimination of waste in the manufacture and distribution of its products is an essential sustainability focus for the business.

FINANCIAL REVIEW
The group’s revenue increased by 23.4% year-on-year to R17.9-billion, driven by increases in revenue in both the Millbake and the Groceries and International categories of 25.4% and 14.5%, respectively.

The global inflationary impact on input raw materials necessitated the proactive management of product price increases. This had a muted effect on volumes but assisted in offsetting rising input costs.

The impact of loadshedding on the business is not considered to have had a material effect, with additional costs incurred across the business of about R32-million.

Earnings before interest, taxes, depreciation, amortisation and impairment losses (adjusted Ebitda) increased by 16.2% to R1.7-billion, driven by the growth in Millbake Ebitda of 17.4% and in Groceries and International adjusted Ebitda of 3.3%.

Ebitda in the prior year was adjusted by adding back an impairment loss of R130-million.

The group’s adjusted Ebitda margin of 9.6% contracted by 60 basis points compared with the prior-year level of 10.2%.

Operating profit, adjusted in the prior year for the impairment loss of R130-million, increased by 28.2% to R1.3-billion.

Net profit increased by 186.2% to R795-million for the year.

Earnings per share (EPS) increased by 90.7% to 630c, while headline earnings per share (HEPS) increased by 39.8% to 634c.

Normalised HEPS increased by 22.7% to 552c for the year.

The improvement in EPS, HEPS and normalised HEPS is a result of the growth in the group’s operating profit and the after-tax effect of the net finance costs being reduced as a result of the shareholder funding exchanged for equity during the year.

It is the board’s opinion that normalised HEPS provides shareholders with the most consistent perspective on Premier’s performance.

Cash generated from operations increased by 9.2% to R1.5-billion for the year, underpinned by the growth in the group’s Ebitda and supported by well-managed working capital.

Capital expenditure (capex), including maintenance and expansionary capex, was 1.7% lower than the prior year at R473-million.

Capex to revenue was 2.6%. In keeping with Premier’s strategy of achieving growth and being the lowest-cost producer, investment in best-in-class facilities is an ongoing priority.

Significant projects undertaken during the year included upgrades to two of Premier’s bakeries, improvements to two mills and investment in the sugar confectionery sites to improve efficiencies.

To continue to drive growth and support maintenance across the business, future capex is anticipated to be broadly in line with historical levels. The capex programme is expected to average R600-million a year for the next two years and R500-million thereafter.

Net debt at period end was R2.9-billion with a group leverage ratio of 1.7x (2022: 1.6x). The group’s gearing remains in line with historical levels and management says it is comfortable that there is sufficient flexibility to provide for expansion.

The company started trading on the JSE six days prior to the financial year-end. Consequently, no dividends were declared.

Its current intention is to declare a maiden dividend following the release of its full year 2024 results.

OUTLOOK
Improving distribution, product availability and forward share management will remain a strategic priority to increase market penetration, as well as a focus on innovation and product renovation to strengthen product margins and brand equity.

Premier intends to leverage its infrastructure and capabilities through continued investment in its people, as well as ongoing business integration and optimisation in pursuit of being the lowest-cost producer.

Despite a softening in raw material input cost inflation in recent months, cost inflation across production, sales and distribution is anticipated to prevail, given the rise in interest rates and the local inflationary impact of the weakened exchange rate.

Loadshedding continues to impose multiple operational challenges, including capacity availability in the milling category, but despite indications that it will persist for the remainder of the year, the future performance of the group is not expected to be materially impacted.

Premier says it will continue to take the necessary steps to protect its margins across the various categories.

The Aeroton bakery upgrade is due to begin during the second half of the current calendar year.