AVI Ltd: Spitz, Green Cross ‘reasonable in difficult environment’
Johannesburg (SA) – AVI Limited’s unaudited interim results for the 6 months ended December 31, 2016 were released this morning. AVI, which is a fast moving consumer goods group, includes A&D Spitz and Green Cross, along with food and beverages and personal care products. Extracts follow:
Group overview: Group revenue for the first semester of the financial year increased by 11,6%, from R6,39 billion to R7,13 billion.
This growth reflects a combination of price increases in response to a weaker Rand exchange rate and higher raw material costs, and volume growth in most of our grocery categories. Gross profit rose by 8,0% to R3,12 billion with the consolidated gross profit margin dropping from 45,3% to 43,8% as some categories have yet to fully recover the input cost pressures resulting from the weaker Rand exchange rate. Operating profit increased by 8,1%, from R1,30 billion to R1,41 billion underpinned by the improvement in gross profit and the containment of selling and administrative expenses. The operating profit margin decreased from 20,4% to 19,7% in line with the pressure on gross profit margins in some categories.
Footwear and Apparel: The Footwear and Apparel category increased revenue by 4,3% to R1,19 billion while operating profit increased by 1,3% from R305,6 million to R309,6 million. The operating profit margin decreased from 26,9% to 26,1%.
The Spitz and Kurt Geiger brands grew revenue by 2,8% as a result of higher selling prices offset by lower footwear volumes. Core footwear brands performed well considering the constrained consumer environment, although some consumers found it difficult to absorb the higher prices necessary to address rising, Rand driven, input costs. The gross profit margin was in line with last year underwritten by prudent control of selling and administrative costs. Spitz recorded its best monthly sales in December supporting a reasonable semester in a tough environment. Operating profit increased from R288,6 million to R290,4 million while the operating profit margin for the semester declined from 30,6% to 29,9%.
Green Cross revenue grew 11,1% to R193,8 million. Retail revenue increased by 17,3% due to price increases in response to the weaker Rand and increased trading space, with one new store opened in addition to the eight new stores opened in the 2016 financial year. Improved assortment and stock replenishment resulted in encouraging retail sales growth notwithstanding the constrained environment. Wholesale revenue declined by 1,9%, reflecting continued volume pressure on this channel as consumers increasingly display a preference to buy higher priced footwear in branded stores. Gross profit margin was maintained despite the weaker Rand, while selling and administrative costs increased in line with the increased number of stores. Operating profit increased from R17,8 million to R18,7 million with encouraging overall progress in the last three months of the semester. – [http://www.sharenet.co.za/v3/sens_display.php?tdate=20170306070500&seq=2]