Inghams Group Limited Full Year Financial Results FY2017
Financial highlights FY17 (compared to FY16)
- Pro forma poultry volumes 495.3kt, up 11.5%
- Pro forma revenue $2,383.9m, up 3.3%
- Pro forma EBITDA $195.0m, up 16.4%
- Pro forma net profit after tax $102.0m, up 22.8%
- Statutory net profit after tax $59.1m, up 134.5%
- Pro forma net debt of $297.7m, EBITDA to net debt 1.5x
- Final dividend 9.5 cents per share, fully franked
(22 August 2017) Inghams Group Limited (ASX: ING, Ingham’s), Australia and New Zealand’s largest integrated poultry producer, today announced its statutory financial results for the 53 weeks ended 1 July 2017 including pro forma results for the 52 weeks ended 24 June 2017.
- Performance exceeded prospectus forecasts
- Strong volume growth in Australia driven primarily by retail and QSR demand
- Improved New Zealand trading conditions and performance in the second half
- Project Accelerate initiatives delivering as expected
- Continued progress in extending key customer contractual coverage
- Further investment in capability including key people, technology and capital assets
- Capital investment program on track, expanding capacity and improving efficiency
Inghams Group Limited CEO Mick McMahon said “FY2017 was a landmark year in Ingham’s long and proud history following its listing on the Australian Stock Exchange on 7 November 2016.
“The Group has delivered against prospectus forecast, supported by good progress on implementing our strategy. Our results reflect continued strong demand for Ingham’s quality products supported by consumer preference for great value, healthy and versatile poultry products.
“Overall poultry volumes increased 11.5% (7.5% for core chicken and turkey products), with stronger than expected growth in Australia and improving New Zealand volume growth in the second half,” Mick McMahon said.
Group pro forma revenue growth of 3.3% reflected the growth in volumes, partially offset by the deflationary effect of feed costs and changes to poultry sales mix.
Pro forma gross profit increased 8.1% to $456.8M driven by volume growth and progress on implementation of Project Accelerate initiatives, including increased automation of primary processing plants, labour productivity, procurement efficiencies and network rationalisation including the closure of the Cardiff plant.
Group pro forma EBITDA increased 16.4% to $195.0m versus prospectus forecast of $190.1m.
Pro forma net debt reduced to $297.7m with very strong operating cash, supported by working capital improvements and cash from the sale of surplus properties.
Significant investment continues to be made in capacity expansion with the expanded Murraylands hatchery and Monarto breeder farm complex in South Australia now operational. Additional breeder capacity at Yumali (SA) is nearing completion and construction of a new SA feedmill is progressing on schedule.
The costs of the Group’s IPO and pre-IPO restructuring initiatives previously disclosed were reflected in the statutory net profit after tax of $59.1m.
Mick McMahon said “It was a busy period with strong volume growth, strategy implementation and significant capital investment all underway while listing as a public company.
“It is very pleasing to see the progress we have made reflected in volume growth and improved financial performance, especially our strong cash generation and reduction in net debt,” he said.
The Board of Inghams Group Limited has declared a fully franked final dividend of 9.5 cents per share to be paid on 4 October 2017, bringing the total dividend for FY2017 to 12.1 cents per share.
The total dividend represents ~70% of post-IPO pro forma net profit after tax (NPAT).
Continued growth in poultry volumes is expected, with Australian volume growth expected to align more closely with historical trends as we cycle a number of customer EDLP initiatives, while the improved New Zealand second half performance has continued into FY2018.
Implementation of Project Accelerate remains on track with further benefits expected from automation, labour productivity and procurement initiatives underway, as well as benefits to be captured as we rebalance the supply chain the following rapid volume growth in FY2017.
Project Accelerate benefits, supported by energy efficiency initiatives and recovery of increased costs via market pricing, are expected to help offset increasing electricity prices.
The effect of increasing feed prices over recent months is expected to be mitigated by forward cover arrangements (of approximately 9 months), feed cost pass through mechanisms in place with customers (covering approximately 60% of Australian volume) and market recovery of increased prices over time.
In recent weeks the market has seen price increases off the back of increasing costs.
Some further asset sales are expected to improve cash flow, reduce debt and help offset the cost of further restructuring initiatives.
Capex levels are expected to reduce from the FY2017 peak although further opportunities to invest in the business may arise with increased focus on identified opportunities in farming, further processing, commercial feed sales and measured growth in exports.
A strategic review of the commercial stock feed business (third party feed sales) has commenced and will consider options to grow shareholder value.
All numbers are pro forma, unless labelled otherwise. A reconciliation from Statutory EBITDA to pro forma EBITDA and Statutory NPAT to pro forma NPAT is included in the Appendix.
Veneta Chapple M: + 61 (0) 455 372 311 | E: [email protected]