TSL optimistic of the future

Published: 31 January 2014

TSL is looking to broaden its participation in agriculture beyond tobacco through growing other crops in a structured way, CE Washington Matsaira told analysts at a briefing to present FY13 financial results.

The group announced satisfactory performance from the tobacco grower scheme which achieved the target production of 2.5 million kg while an additional 1.6mln kg was purchased on the auction floor. In F13, the joint venture grower scheme recovered 96% of the inputs from the farmers and management is confident of collecting the outstanding 4%. The success of this project in its maiden year has prompted management to seek to explore other opportunities in agriculture.

Group revenue in F13 increased 27% to $40.6mln as a result of the contribution of the scheme as well as 38% topline growth at the auction floor, 24% uplift at Propak and 27% at Agricura while Bak Logistics saw flat revenue.

Operating profit before revaluations of assets went up 43% to $7.1mln while pretax profit grew 42% to $9.2mln as property revaluations of $3.3mln were offset by an impairment of investment in Hunyani of $2.5mln.

Gearing went up to support the growers' scheme which was financed using expensive local resources.

Headline EPS went up 41% to 1.55c from which a total annual dividend of 0.5c was paid out to shareholders.

Giving a divisional analysis Matsaira said TSL Classic, the growers' scheme JV is on track to produce 3.8mln kg in F14 up from 2.5mln kg in F13 and efforts are underway to secure cheaper funding to support the project.

"We are going to blend the small grower base and the large grower base to achieve the right mix and as we expand the crop we will ensure we have extensions services to small growers to avoid slip ups," he added.

Revenue growth at the auction floor, TSF was ahead of group average and the unit remains a leader with market share of 40%. Matsaira said that 20% of revenue came from handling contracts and growing. This enabled them to participate in the contracted tobacco whose proportion has been increasing at the expense of auction crop.

"We have been engaging the contractors to let us handle their crop since it has to be auctioned as well," he said.

Propak, the hessian business, also benefited from the contracted crop with 12% of the turnover coming from that side. A large quantity of hessian is now used by contractors and Propak is managing it for some of them.

Bak had a flat performance because of business restructuring in H1but there was a strong recovery in H1 and that momentum has continued into F14. During the year a forklift business, Premier Forklift was acquired to complement the logistics business. The search for a strategic logistics partner continues and it has not been easy to find the right suitor, said Matsaira.

The vehicle replenishment exercise at the car hire services, Avis was reduced in line with lower demand but Matsaira said the business remain profitable.

Expansion of warehousing space is on progress at TSL Properties with the value of the portfolio increasing by $3.3mln as a result. Tenants outside the group now constitute 25% with projections to reach 50% in 2014.

Agricura posted strong revenue growth and a positive profit before tax contribution as a result of cost cutting measures.

"We cannot compete as manufacturer but as distributor and there will be minimal manufacturing through blending," said Matsaira before adding that the Agricura brand remains strong but requires investment to build it up.

The delisting of Chemco is expected to be completed in April 2014.

Matsaira announced the establishment of a trading business, TSL Trading to handle all trading functions within the group saying there is a good growth prospect to come from the growers' scheme and the group linkages.

In the outlook, he expects the projected 14% growth in the national tobacco crop to 190mln kg to have positive impact to their tobacco operations and logistics.
- zfn