Home » Industry » Innscor Half-Year Profit Declines

INNSCOR Africa Limited’s half-year net profit to December 2014 sharply declined due to inefficiencies emanating from the group’s bloated structure, the company said yesterday. The group has since restructured to ensure sustainable long-term growth through addressing shortcomings and inefficiencies inherent in the existing business models.

Innscor has restructured the reporting of its operations into four core silos being Light Manufacturing, Logistics and Distribution, Quick Service Restaurants, Retail and Wholesale.

“There is no doubt that the declining local macro conditions will continue to challenge our management and businesses to constantly revisit their operating models and find ways of becoming more efficient,” said the company.

“The numerous restructuring activities that were embarked on by the group in the last financial year are beginning to have a positive effect on the group’s results, although further work is needed in a number of operations to ensure the desired returns are met.”

Net profit for the period declined to $23,8 million in six months to December 2014 from $64,2 million during the same period last year. Revenue dropped to $513 million from $525,2 million a year earlier.

Innscor runs the Chicken Inn and Pizza Inn chains, as well as the local operations of supermarket Spar.

The group also runs Chicken Inn and Pizza Inn chains franchises in some southern African countries.

For Innscor, being a consumer facing company, the decline in revenue depicts a story much bigger than the company itself. The story is of an economy in depression pulled down by among other things liquidity constraints and weak consumer demand.

The six months have been “extremely difficult” for the group, characterised by management challenges at operational level, a deteriorating trading environment and low disposable incomes.

Tonnage at National Foods was similar to what was achieved in the comparative prior period at 259 000 metric tonnes but a change in sales mix emanating from reduced maize meal sales had a negative impact on margins and consequently operating profit, which was slightly behind that recorded in the comparative prior period.

With respect to the other divisions, stockfeeds showed a slight reduction in profitability, but there were improved performances from both the flour and FMCG units.

About $11 million was spent on securing strategic raw materials and this should enable the operation to trade gly in the second half of the financial year, said Innscor.

Colcom recorded 27 percent growth in operating profit over the comparative prior period.

However, overall sales volumes declined by 6 percent over the period under review, but an improved sales mix and rationalised product range gave rise to improved margins.

“Efficiencies at both the farm and the processing plant also continued to improve,” said Innscor.

At Irvine’s, frozen chicken and day old chick volumes grew 20 percent and 9 percent respectively, while table egg volumes declined by 7 percent. The company invested into egg breeding facilities to become self-sufficient in hatching.

New feed mills will be commissioned at the beginning of the final quarter of the current financial year.

Volumes at the bakery declined 2 percent and this together with retrenchment and restructuring costs of $1,8 million, which rose on the consolidation of the Harare bread lines to the Shepperton Road plant, resulted in a 29 percent reduction in operating profit.

Sales at Capri rose 38 percent while additional gains were made in raw material and overhead cost reductions. This translated to a 67 percent increase in operating profit.

The new refrigerator line is being commissioned and production from this facility will commence in the third quarter of the current financial year, said the company.

TV Sales amp Home recorded a 4 percent revenue growth over the comparative prior period.

The SPAR Corporate Store Retail Operations showed a marginal decline in like for like revenue.

The SPAR Distribution Centre posted a 20 percent decline in revenue compared to the comparative prior period, as trade with independent retailers remained suppressed.

The SPAR Corporate Store retail operations in Zambia saw a further increase in the SPAR footprint across Zambia with the opening of the first corporate store in Ndola.

This takes the Zambia network to 15 stores, eight of which are corporate stores and a further seven being franchised stores. Revenue for the first six months was similar to that achieved in the comparative prior period while operating profit reduced by 22 percent.

Source : The Herald