Innscor spends $48m on expansion

Tinashe Makichi Business Reporter
CONGLOMERATE Innscor Africa Limited invested a total of $48 million towards capacity expansion and funding the company’s working capital requirements in the full year to June 2015. The company said increased investment in working capital during the period related to procurement of additional strategic reserves of key raw materials such as maize, wheat and soya beans.

Innscor said a significant amount of the funding during the period under review went towards meeting the cost of a penalty by the Competitions and Tariff Commission for violating fair competition rules. Increased working capital investment resulted in cash generated from operating activities for the 2015 financial year of only $66,8 million compared to $106 million in the comparative period.

“We invested about $48 million last year towards generating excess capacity within our business portfolio at the same time addressing our working capital requirements,” said chief executive Mr Antonio Fourie. “The coming year will be slightly less as we are trying to get our CAPEX under control, so our target is to spend not more than 40 percent of our EBITDA on CAPEX,” he added.

During the period, the diversified group recorded revenue of $814 million on continuing operations, a 6,52 percent decrease from $871 million recorded in the previous comparative period. The company’s profit for the year from continuing operations went down to $30 million from $72 million recorded in the previous year while profit from discontinuing operations, attributable to equity holders of the parent and non-controlling interests, was down at $37 million from $78 million.

During the period under review and following on good progress and reconfiguring programme, the group re-organised the reporting of its operations into four core reporting business sectors. Innscor’s new business sectors comprise light manufacturing, logistics and distribution, quick service restaurants (QSR) and retail and wholesale.

Mr Fourie said subject to regulatory approvals, the board made a strategic decision to unbundle the quick service restaurant business. He said the separate listing of QSR business is nearing conclusion and the restructuring exercise is expected to continue in tandem with environmental changes. “On the separate listing of QSR we are almost done subject to the final regulatory approvals that will be done by the middle of November. However, we are working on the remaining ones.

“The board’s view is that this unbundling will unlock value to the Innscor Africa Limited shareholders and allow investors more choice and thereby better portfolio management,” said Mr Fourie. “I cannot guarantee that there will not be a change in the group considering that the environment is changing everyday therefore as a business we are bound to change to match the dynamics of the environment.”

Mr Fourie said a number of operations in the group managed to reduce their cost of sales during the period through more efficient buying, improved efficiencies and effective pricing management, thus improving margins. He said some Innscor units had new management and also undertook restructuring to remove inefficiencies while improving productivity.

Restructured businesses all benefited as costs decreased from prior year, contributing to the group’s total costs reduction in spite of once-off restructuring charges of about $8 million. Mr Fourie said the group has a focused strategy to achieve organic and acquisitive growth, improve margins and reduce costs towards achieving target return on equity and cash generation objectives. A number of businesses within the Innscor group produced good results while some key business generated poor results compared to the previous year.