Tiger Brands shares surge 8% after it announces a R4bn special final dividend

Tiger Brands' share price leapt 7.95% on Wednesday after it announced it plans to pay out a special dividend of 2 710 cents per share, or R4 billion, for the year ended September 30 off the back of strong financial performance.

The South Africa packaged food company said the special final dividend, together with the interim special dividend of 1 216 cents per share declared in May, brought the total special dividend for the year to 3 926 cents per share or R5.8bn.

This was on top of a final ordinary dividend of 1 229 cents per share, which was 79% higher than last year's as a result of a decision to reduce dividend cover, which with the interim dividend of 415 cents per share, brought the total ordinary dividend for the year to 1 644 cents or R2.7bn.

On the JSE, Tiger's share price was trading at R363.15 Wednesday afternoon, a price that was 36.5% higher than at the same time a year before.

The group delivered a strong full-year performance, marked by solid growth and continued cash generation and sound operational performance, while driving affordability for consumers who remain under pressure and value seeking, CEO Tjaart Kruger said in a statement.

Continuous improvement efforts and pricing initiatives contributed to increased product affordability with overall price deflation of 0.8% and volume growth of 3.5%.In addition, Tiger Brands refreshed its corporate brand to reflect steps it is taking to make affordable, quality foods and essentials available to more consumers across Southern Africa.

Revenue increased by 2.7% to R34.4bn. The gross margin increased from 29.1% to 31.3% through initiatives including value engineering, logistics optimisation and better factory efficiencies.

"Despite food and non-alcoholic beverages inflation moderating to 4.5% in September, household budgets remain strained as the increase in other essential costs impacts disposable income, and consumers have to make trade-offs," said Kruger.

Volume growth was ahead of short to medium-term guidance, driven by volume growth across the Milling and Baking, Grains and Culinary business units.

Revenue growth for Milling and Baking increased by 5.3% to R8.6bn, with volume growth of 7.9%. Operating profit increased by 26.8% to R761m.

Bakeries saw volume growth for the first time since the refreshed strategy was implemented, with double-digit growth in the second half of the year.

Grains revenue of R7.1bn was driven by 6% volume growth, offset by price deflation of 5%, with operating profit improving 236% to R736m.

Culinary revenue rose 3.1% to R10.2bn driven by 3.2% volume growth as a result of initiatives in the condiments category and improved service in the second half.

Tiger Brands' portfolio optimisation strategy was on track. Transactions included the Carozzi and Baby Wellbeing division disposals in the first half, and completion of the Langeberg and Ashton Foods (LAF) transaction at the end of September..

The Randfontein Operations (Wheat Mill and Maize business) transaction announced on May 28 was with the Competition Tribunal for approval..An agreement was reached to dispose of the 74.69% interest in the Cameroonian subsidiary Chocolaterie Confiserie Camerounaise S.A. (Chococam) to Minkama Capital, an Africa-focused investment firm specialising in consumer goods.

Tiger's directors said that QBE Insurance, the company's legal reinsurer, in the class action listeriosis suite against Tiger Brands, was engaging with the legal representatives of the parties towards a possible settlement. Interim relief payments to claimants with urgent needs had been made. The insurer had agreed to extend further relief to additional claimants with urgent medical needs.

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