Tiger Brands releases voluntary update
Tiger Brands Limited released a voluntary update for the four months to 31 January 2019.
Group revenue from continuing operations was up 1% compared with the corresponding period last year. The four months to January 2019 had 85 trading days versus 82 days last year. Excluding Value Added Meat Products (VAMP), group revenue from continuing operations was 8% higher, driven by overall price inflation of 2% and volume growth of 6%. Pleasing volume performances were recorded in Wheat, Maize, Groceries, Snacks & Treats, Beverages, Baby and in particular, Home & Personal Care. With the exception of Sorghum-based products, Pasta, Maize and Rice, all categories recorded selling price inflation although price increases were not sufficient to fully recover cost increases, resulting in gross margin compression.
The re-launch of the VAMP business has been well received by customers and consumers, however challenges in managing the factory start-ups have resulted in the inability to fully meet demand in this period, which has had a significant negative impact on VAMP's operating performance. Good progress is being made to resolve these challenges.
The trading environment is expected to remain challenging for the remainder of the financial year, with ongoing pressure on consumer spending.
On 3 December 2018, the High Court of South Africa, Johannesburg Local Division granted an order certifying the four classes of claimants in a Class Action lawsuit against Tiger Brands. To date, the Company has not received the summons from the Class Action lawyers. The Company has product liability insurance cover appropriate for a business of its scale. Coverage has been confirmed by the insurers, subject to the terms and limits of the policy. The policy will accordingly respond to the claim within its terms in the event that the Company is held liable.
As previously announced, the Tiger Brands Board has decided to pursue an unbundling of the Company's shareholding in Oceana Group Limited (Oceana). Further to this, shareholders are referred to the SENS announcement of 24 January 2019 regarding the proposed sale of 8 000 000 Oceana shares to Brimstone Investment Corporation Limited. Subject to the fulfilment of all the Conditions Precedent, this sale will take place prior to the unbundling date. The process of unbundling the remaining 49 104 774 shares is on track and expected to be completed by the end of April 2019.
As a consequence of the decision taken to unbundle the Company's investment in Oceana, the Company has ceased to equity account the earnings of Oceana with effect from 1 December 2018. From this date, the investment has been accounted for as a held-for-sale asset on the balance sheet.