15 January 2013

Bestway Group Announces Financial Results - Sales Reach £2.5 Billion

Profit before tax for the year ended 30 June 2012 was up 45.5% to £173.2 million as compared to £119.1 million in 2011.  All group businesses were profitable.

Mr Zameer Choudrey, the Group chief executive said, “the Group has maintained its market share in its respective markets despite a challenging business environment in UK and globally. The expansions that were undertaken in the wholesale business in the UK continue to do well.  Bestway is now the UK’s largest trade only wholesaler”.  Mr Choudrey also said, “the expansion that was undertaken in the cement business in Pakistan has also contributed towards the overall performance of the Group”.

Total fixed assets after depreciation as at 30^th June 2012 stood at £932.9 million as compared to £931.3 million in the previous year.  During the period under review, fixed asset additions amounted to £19.5 million.  These included investments in new depots in Brighton and Team Valley and a new chilled distribution centre in Coventry.

The Group’s total loans and overdrafts decreased by £75.4 million during the year under review. The Group managed to reduce its debt by £30 million in the UK and by £45.4 million in Pakistan which consequently reduced the financial charges. During the same period, the Group was able to increase its cash balances by £19.4 million.  

WHOLESALE BUSINESSES

Turnover in the wholesale business was £2.3 billion as compared to £2.2 billion in the corresponding period last year, an increase of 5.7%.  Profit before tax for the year ended 30 June 2012 was £58.2 million compared to £60.2 million in the previous year. This decrease of 3.3% in the profit before tax was due to the integration costs of the Bellevue and Martex businesses that were acquired in the prior year, the set up costs of the new depots in Brighton and Team Valley as well as the ongoing impact of the overall economic environment.

Own label sales increased by 14.1% to £103 million in 2012.  During the year, the Group launched the ‘Best-in’ Essential range which includes 34 key items at incredibly low prices that also deliver great margins of 30% POR to its customers.  During the year, ‘Best-in’ was presented with a gold medal and a commendation from ‘Wholesale Quality Food Awards’ for some of its products.

Export sales increased by 26% during the year.  Bestway has become one of the top performers in food exports from Britain. Bestway serves customers from around the globe who buy from a range of over 35,000 products.  The product range includes core groceries, soft drinks, confectionery, snacks, toiletries, household products, pet food and catering packs. In April 2012 Bestway won the much coveted ‘Queen’s Award for Enterprise: International Trade’ for its exports to countries around the world.

Over the years, the Group has endeavoured to play its role in supporting its independent customers regardless of their size as we firmly believe that their success is our success.  Our mission is ‘Building Business for the Independents’.  We offer our customers the lowest prices and the widest product range in the wholesale sector.

In November 2012, the wholesale business was awarded three gold medals from the Federation of Wholesale Distributors.  These included the award for ‘Best Wholesale Service to Retail’ which is a tribute to our commitment to our customers.

This year, our symbol group, ‘Best-One’ celebrated its 10 years with a current membership of over 950.  Currently our ‘Xtra Local’ and ‘Best-in’ retail club membership stands at 2,500. Pet retail club membership has increased to 527.

The newly opened depots in Brighton and Team Valley are performing well and continue to trade in line with expectations.

During the year Bestway launched a transactional website in order to provide a platform for customers to be able to order online, have access to up to date promotional activities as well the latest tools which can help increase the efficient running of their businesses. The considerable investment behind the new web initiative has ensured that Bestway is now at the leading edge of online wholesaling in UK. Currently our web sales average approximately £2.5 million per week.

Bestway decided to invest in setting up its own chilled distribution facility with the aim of improving the fresh product range offering to its customers.  This new facility at Coventry became operational in October.   Bestway will initially distribute chilled products directly to its depots.  This service will later be extended to the retailers. 

The Group has announced a £10 million investment plan to expand the Best Pets business across the UK over the next three years.  New specialised wholesale depots have already been opened in Newcastle and Nottingham and the two existing sites at Exeter and Luton have been doubled in size.  A new site in Glasgow is currently under development.

Trading stock for the wholesale business as at 30 June 2012 amounted to £220.8 million as compared to £224.4 million in the previous year, a decrease of 1.6%.

In May 2012, the wholesale division of the Group strengthened its operation board by appointing five new directors.  These promotions were made to take the business forward to the next level of success and also reflect Bestway’s ongoing strong performance over the years.

Notwithstanding the growth of its UK business, the Group managed to reduce its carbon emission by 5.6% by investing over £7 million in lighting and refrigeration upgrades and other measures to ensure further reduction in carbon emissions.

We have commenced online training to support the development of our employees and we are proud of our Investors in People status.  All of our 5,000 UK employees have access to the online training which includes 50 bespoke courses.  During the year 4,900 courses were completed.

CEMENT MANUFACTURING

During the period under review Bestway Cement Limited’s despatches increased by 1.1% to 4,192,512 tonnes as compared to 4,148,213 tonnes in the corresponding period last year. As construction activity picked up, it led to increased demand for cement in the domestic markets. 

Despite depressed demand in the international markets, export sales increased by 2.1% to 877,934 tonnes as compared to 859,557 tonnes in 2011. Our exports to Afghanistan increased by 6.6% and we were able to maintain our position as the largest Pakistani exporter of cement to Afghanistan and India. During the year under review, Bestway continued to explore new markets and our exports to other countries increased by 25.9%.

Turnover net of excise duty, rebates and discounts to customers amounted to £158.0 million compared to £124.5 million for 2011, which is an increase of 27%.  The increase in turnover was due both to an improvement in the selling price of cement as well as increase in sales volumes.  Interest payable during the year was £17.6 million as compared to £23.5 million in the corresponding period last year.  This decrease of 25% was due to healthy cashflows and lower interest rates on existing loans due to the declining interest rate environment. 

Profit before tax in 2012 was £25.8 million as compared to only £1.96 million for the year to 30 June 2011.  Lower cost of production due to declining coal prices and increased efficiency of the waste heat recovery power plant led to an overall increase in profit margins. 

During the period under review, Bestway Cement Limited reduced its total debt by £45.4 million to £105.6 million on the back of healthy cash flows.

During the year, Bestway Cement Limited acquired certification from the South African Bureau of Standardisation which will allow us to export cement to South Africa and its neighbouring countries.

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. UBL’s capital adequacy ratio for the year ended 31 December 2011 was 14.5%.

The Group’s share of UBL’s profit before tax was £89.1 million as compared to £60.6 million in 2011, an increase of 47%.  This increase is due to the growth in the bank’s balance sheet, continued improvements in operating efficiency and margins, and the full year impact of the increase in our shareholding in UBL from 31.07% to 51.07%.

The bank’s branch network continues to grow and in 2011 the bank added 100 branches to its network in Pakistan and opened 1 new branch in Qatar. UBL now has 1,235 branches in Pakistan and 18 branches internationally.

UBL Omni branchless banking which was launched in 2010 continues to do well.  Currently UBL Omni has grown to a network of 10,000 retail agents spread across Pakistan.

In June 2012, a UBL led consortium acquired 67.4% stake in Khushali Bank Limited (KBL) for US$26 million.  KBL is one of the largest microfinance banks in Pakistan and was established in close collaboration with the Asian Development Bank (ADB) as part of the Government & ADB’s aim to enhance the financial outreach to the large unbanked majority in the country, by offering micro credit financial solutions. This acquisition will fit in nicely with UBL Omni and the synergies between the two businesses will help enhance growth in their respective areas.

In December 2012, UBL was awarded Bank of the Year in Pakistan for 2012 by The Banker Magazine. The magazine commented that the award was “a testament to the strong management, sound business model and prudent risk approach of your institution.”

During the year United National Bank, UBL’s subsidiary in UK was rebranded as UBL UK to highlight and reflect its association with UBL Pakistan. The rebranding will provide UBL UK access to products, services, technology and expertise of its parent company, thereby allowing the bank to offer more value added services and benefits to its customers.

Mr Zameer Choudrey said, “we believe that with a network of 6 branches in the UK, the bank is suitably positioned to engage, serve and assist in the economic development of the local communities and in particular, the Asian community”.

OUTLOOK FOR 2013

Mr Choudrey spoke about the future outlook; “The focus of the Group’s wholesale business on organic growth is supported by investments in existing and new depots 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 during these challenging times”.

“In the Pakistani cement sector, the pressure on selling prices has eased off as domestic demand grows. Further reduction in interest rates in Pakistan should encourage increased economic activity, which will continue to have a positive impact on cement demand in the domestic market. International coal prices have been on the decline for some months and lower demand for coal for industrial use is likely to keep the coal prices at bay for the near future.”

“UBL continues to focus on managing its asset portfolio, improving asset quality and expanding its network both through branches and through Omni branchless banking.  However, with the declining interest rate environment in Pakistan, UBL’s profitability will be adversely affected next year”.