03 April 2012

Bestway Group Announced Financial Results - Sales up 11% as profit crossed £100 million

The Group's annual turnover increased by 11.1% to £2.34 billion from £2.10 billion in 2010. Profit before tax for the year ended 30 June 2011 crossed the £100 million mark and was up 65.3% to £119.1 million as compared to £72.0 million in 2010. All group businesses were profitable.

Mr Zameer Choudrey, the Group chief executive said, "The past twelve months have been very exciting for the Group and despite the difficult business conditions we have maintained our focus on the strategic goals by increasing turnover and market share of our businesses both in the UK and in Pakistan".

In November 2010, Bestway acquired the Martex business in Scotland from CJ Lang which operates from three warehouses in Aberdeen, Dundee and Perth. With the earlier acquisition of Bellevue Cash & Carry Limited, the Group now has seven warehouses in Scotland which will help enhance its market share and provide increased service to the customers.

In December 2010, the Group purchased an additional 24.6% in UBL Insurers Limited, Pakistan thereby increasing its overall shareholding to 55.6%.

In January 2011, the Group acquired an additional 20% in United Bank Limited from its joint venture partners, the Abu Dhabi Group. The Group now owns 50.95% of UBL.

Tangible fixed assets after depreciation as at 30 June 2011 stood at £524.8 million as compared to £521.5 million in the previous year. During the period under review, fixed asset additions amounted to £22.5 million. £5.5 million was spent on the acquisition of Martex and £10 million on two new warehouses in Aintree and Brighton. During the period under review, the Group also invested in new environmentally friendly refrigeration, lighting and ventilation in our warehouses.

The Group's total loans and overdrafts increased by £110.3 million. The funding for the acquisition of the additional shareholding in United Bank Limited was done partly through bank borrowing and partly through internal cash generation. The Group also managed to repay £51.6 million of the loans during the year. In Pakistan, we managed to reduce our debt by £39.5 million partly through the injection of extra equity in Bestway Cement Limited. At the same time, we were able to increase our cash balances by £22.9 million in the UK.

Wholesale Businesses

Turnover in the wholesale business crossed the £2 billion mark for the first time and amounted to £2.21 billion as compared to £1.99 billion in the corresponding period last year, an increase of 11.2%. Profit before tax increased to £54.7 million as compared to £49.6 million in 2010, an increase of 10.3%.

During the period under review, Best in own label sales grew by 21.3% to £102 million while export sales registered an increase of 20.5%.

In June 2010, with the acquisition of Bellevue Cash & Carry, the Best One symbol group entered the Scottish market. With the subsequent acquisition of Martex, Best One has made great inroads in Scotland and continues to do well. The Xtra Local and Best in retail club membership currently stands at 2365, an increase of 10%.

In October 2010, our new warehouse opened for trading in Aintree, Liverpool.

In 2011, The Group celebrated 35 years of the wholesale business and staged the biggest ever promotion event. The "Team 35 Drive" promotion gave the customers over £1 million in cash back and discounts. Mr Choudrey said, "Over the years, Bestway has endeavoured to play its role in supporting the customers by ensuring that we have the lowest prices and the widest product range in the wholesale sector. Our mission is Building Business for the Independents".

Trading stock for the wholesale Group as at 30 June 2011 amounted to £224.4 million as compared to £202.5 million in the previous year, an increase of 10.8%.

Cement Manufacturing

During the period under review Bestway Cement Limited's despatches declined by 15.8% to 4,163,183 tonnes from 4,944,440 tonnes in the corresponding period last year. This decrease was due to a weak domestic market on the back of the severe flooding in first quarter of the year under review. Despite this Bestway maintained its position as the second largest cement producer in Pakistan.

Export sales decreased by 13.4% to 859,557 tonnes in 2011 as compared to 992,296 tonnes in 2010. Overall exports suffered due to a slow down in construction activity in the Middle East. However, exports to Afghanistan and India increased by 8.1% and the company was therefore able to maintain its position as the largest Pakistani exporter of cement to these areas.

Turnover net of excise duty, rebates and discounts to customers amounted to £124.5million compared to £113.7 million for 2010, which is an increase of 9.5%. Despite a decrease of 15.8% in sales volumes, the turnover increased due to improvement in selling price of cement. Better profit margins turned the loss before tax of £14.1 million in 2010 to a profit before tax of £1.96 million for the year to 30 June 2011.

Two projects, the upgradation of Mustehkam Cement Limited and the Waste Heat Recovery Power Plant (WHRPP), which were both completed in 2010, have been operating successfully. The WHRPP has helped reduce the cost of production for the Chakwal plants.

The WHRPP has been registered with the UN Framework Convention of Climate Change (UNFCCC) under the Clean Development Mechanism, making it the first project in the Pakistani cement industry.

Banking

United Bank Limited's total assets as at 31 December 2011 were $8.97 billion as compared to $8.08 billion for the corresponding period last year, an increase of 11%. UBL's deposit base grew by 11.9% to $7.05 billion for the year to 31 December 2011. Total advances for the year were $3.79 billion.

The Group's share in profit before tax was £62.4 million, as compared to £36.6 million in the corresponding period last year, an increase of 70.4%. This growth is partly due to the increase in shareholding from 30.95% to 50.95% and partly due to the overall impressive performance of the bank in the backdrop of an ever challenging macroeconomic environment and banking sector characterised by intense competition.

In April 2010 the bank launched the UBL Omni - Branchless Banking which provides customers banking services through multiple access channels including Netbanking/ WAP, SMS, Contact Centre, ATMs etc. As of June 2011, UBL Omni had managed to grow to a network of 4,300 retail business agents spread across 350 cities and towns in Pakistan.

Recently UBL Omni won the GSMA Global Mobile 2012 Award for "best use of mobile in emergency or humanitarian situations".

During the period under review the UBL launched Pakistan's first platinum debit card in collaboration with MasterCard. This exclusive debit card is designed to cater for the bank's high net worth customers.

The bank's international franchise maintained its focus on liquidity management, asset quality management and expense control. UBL's Middle East Investment Banking Desk which became operational last year successfully completed first syndicated investment banking transaction for a private power project in Yemen. This was the first ever transaction of its nature for Yemen and also the first ever for UBL outside Pakistan.

In December 2010, United Insurers Limited (UIL), an associate of UBL issued rights shares. As part of its long term commitment, the Group fully subscribed to its share of the rights as well as the balance of the unsubscribed shares, thus increasing its shareholding of UIL to 55.6%.

Outlook for 2012

Mr Choudrey talked about the future outlook; "The focus of the Group's wholesale business on organic growth is supported by investments in existing and new warehouses and initiatives. Despite the tough trading conditions, we are confident that we will continue to provide maximum support to our customers by delivering the best prices, value and service to them".

"In the Pakistani cement sector, the pressure on selling prices has eased off. With an improvement in the law & order situation, we expect domestic demand to increase. With smoother and increased movement of goods across the Wagah border, we expect exports to India to pick up as well. Bestway has received the SABS certification which will allow us to sell our cement in the South African market".

"UBL continues to improve its operational efficiencies as it focuses on liability management, risk management and restructuring of affected assets".