eBusiness Weekly
$12m worth of dividends trapped in local banks n Reports pleasing set of results for HY18
Kudzanai Sharara
The country’s biggest cigarette manufacturing company, BAT Zimbabwe, says it is looking at ways of utilising dividend funds belonging to its major shareholder British American Tobacco Plc’s following its failure to repatriate pay-outs.The cigarette manufacturer is sitting on more than $12 million belonging to its major shareholder as dividend payment, but has been struggling to repatriate the funds in the wake of foreign currency shortages currently bedevilling the country.
Management said consultations are currently underway with the major shareholder on how the cash resource can be utilised within the business until the situation normalises.
In terms of the dividend, the bulk of which belongs to Plc (BAT International), we continue to engage the group in terms of how best we can address the issue, managing director Clara Mlambo, told analysts at the release of the company’s results for the half year ended June 30, 2018 yesterday.
“Dividends are not a top priority, if you look at the priority list, so we are very much aware of that and we continue to hold the $12 million in our bank. How best can we utilise it to preserve the value, . . . but it belongs to the shareholder. So at the end of the day it’s a shareholder’s decision in terms of how we are actually going to address the issue.
Mlambo said they are looking at quite a number of options, quite of number of scenarios with the shareholder which they are looking at implementing in the next couple of months.
In the period under review BAT declared an interim dividend of 30 cents per share, an increase of 36 percent compared to same period last year.
The latest dividend pay-out ratio of 83,3 percent is lower than BAT’s usual pay-out ratio of 100 percent, but Mlambo said management was looking for areas where the earnings can be utilised within the business.
Reports plausible set of results
In terms of performance, an upsurge of marketing activities during the period under review saw the cigarette manufacturer record double digit growth in volumes sold for the period under review, financial director Leslie Malunga said.
Total sales volumes grew by 21 percent to 580 million sticks versus 478 million sticks for the comparative prior year. This was driven by growth in all segments.
The volumes growth was across the board with Dunhill recording growth of 37 percent, Ascot 285 percent while the (Value for Money Brands) VFM segment recorded a 16 percent increase.
“Volume increase is mainly attributed to continued activities to support our brands (Everest Madison and Ascot),” said Malunga.
He also said a change in the timing of the Everest promotion had also helped in terms of starting the year on a high.
“We have been running promotions for Everest. We used to run this promotion at the end of the year but this year we are actually running at the beginning of the year and that has helped in terms of starting the year on a high.”
“The premium Brands recorded a growth of 37 percent, the Value for Money Brands attained a 16 percent growth and the low Value for Money Brands achieved a growth of 285 percent.
The growth in volumes resulted in total revenues increasing to $19,9 million, up 19 percent from what was achieved prior year comparative.
Gross profit was up 22 percent to $14,6 million from $11,9 million with gross margins improving to 73 percent from 71 percent last year.
Operating profit increased by $3,8 million or 58 percent compared to the same period last year, to close at $10,3 million.
Other income decreased by 56 percent $300 000 compared to the same period last year, driven by the termination of the contract for royalties by British American Tobacco Angola Limitada.
BAT Angola has since stopped using the brand/trade mark so no new royalties are expected. Malunga said BAT was owed a total $1,2 million by BAT Angola for trade mark use.
Profit before income tax was up 58 percent to $10,3 million from $6,5 million after administrative expenses came 37 percent lower to $1,4 million from $2,3 million.
“This is primarily as a result of savings initiatives and once off retrenchment costs incurred in the first half of 2017,” said Malunga.
Administrative expenses reduced by $1,4 million (37 percent) to $2,3 million compared to the same period last year, primarily as a result of savings initiatives and once off retrenchment costs incurred in the first half of 2017.
Selling and marketing costs increase by 19 percent due to upsurge in marketing activities
Net Profit attributable to shareholders for the year was $7,4 million, which is an increase of $2,8 million or 61 percent compared to the same period last year.
Consequently, the company’s earnings per share increased by 64 percent to 36 cents from 22 cents generated in the same period last year.
On the balance sheet, cash and cash equivalent increased by $6,3 million due to failure to remit dividends. Trade and Other Payables increased by $1,9 million due to increase in trapped dividend.
The future not predictable
Mlambo said although the business was optimistic about the future, it was aware of the challenges still prevailing in the economy including foreign currency shortages which have an impact on imports, cash shortages which affects consumer’s ability to purchase as well as low disposable incomes.
She, however, said the business will continue to focus on key strategic issues including refreshing and upgrading brands as has been done with the Madison stick.
“We will also continue with the optimisation of our route to market, and we are already working on a big project where we have automated our sales system which will improve efficiencies,” Mlambo said.
