• AVI results were in line with guidance resulting in HEPS down 8.9%, on the back of a material decline in the second half, due to Covid-19 related impacts.

  • Despite challenging trading conditions, the group was able to once again protect gross profit margins, which helped offset volume losses in some of the divisions.

  • The diversified nature of the AVI business model, underpinned by strong brands in snacks, coffee, tea and biscuits, proved how resilient the company was in the light of the prevailing operating environment.

  • Revenue growth of 0.40% was muted, which resulted in operating profit declining by 7.5%, despite the gross profit decline of 2.9%, to a still-healthy 39.8% from 41.1%

  • Selling and admin expenses were well managed, increasing by only 1%, whilst cash flow from operations increased by 13%. Capex was down 20% from R472 million to R376 million.

  • The Snackworks portfolio showed strong growth, even with the hospitality industry in lockdown mode. The Entyce Beverage operations, which includes the Five Roses range of teas, and the Freshpak Rooibos and coffee creamers, were in strong demand.

  • I&J, the fishing division, was a victim of the lockdown, not being able to operate at optimum levels, as well as being unable to export high margin Abalone to the Far East. 

  • Likewise, the Apparel division suffered a decline in revenue of 15% with operating profit down by 33% in the high income markets, as retailers were only allowed to sell essential merchandise.

  • Again, the price/volume mechanism used to keep margins intact, was well managed, despite aggressive competitor discounting. 

  • The Return on Capital Employed is still strong at 25%, with cash conversion in excess of 100%. Special dividends and share buybacks are a regular occurrence, due to strong cash generation. The final dividend was held at R2.50, making for a total dividend of R4.10 versus R4.15 in the 2019 financial year. This is a testament to the quality of management and the resilient business model. The dividend yield at the current share price of R73.00 is an attractive yield, in excess of 5%, and AVI is a defensive investment, as well as a best performer in the food sector.