I need a report that undertakes a general financial analysis, comparing financial position and performance over the two most recent financial years, of Bega Cheese Ltd.
Referencing: APA 6th Edition.
Sheet1 Formula2020Units Liquidity Ratios Current RatioCurrent Assets/Current Liabilities2.3ratio Quick Ratio(Current Assets – Inventory – Prepaid Expenses)/ Current Liabilities1.1ratio Profitability Ratios Gross Profit MarginGross Profit/Sales36Percent Net Profit MarginPAT/Sales6Percent Operating Profit MarginEBIT/Sales12Percent Return on AssetsPAT/Average Assets2.73Percent Return on EquityPAT/Average Equity6.12Percent Efficiency Ratios Accounts Receivable Turnover ratioCredit Sales/Average Accounts Receivables13.62times Days Receivables (DR)Average Accounts Receivables/ (Credit Sales/365)26.8days Accounts Payable Turnover RatioCredit Purchases/Average Accounts Payables9.06times Days Payables (DP)Average Accounts Payables/ (Credit Purchases/365)40.28days Inventory turnover ratioCost of Goods Sold/Average Inventory5.47times Days Inventory (DI)Average Inventory/ (Cost of Goods Sold/365)66.7days Cash Conversion CycleDR+DI - DP53.22times Capital Structure Ratios Debt to AssetsDebt / Total Assets36Percent Equity to AssetsEquity / Total Assets65Percent Debt to EquityDebt/Equity55Percent Interest coverage ratioEBIT/Interest4.22times Market Performance Ratios Earnings per sharePAT/Number of Shares0.11$ Dividend per shareDividend/Number of Shares0.05$ Price Earning MultipleMarket price of share / EPSNA BEGA CHEESE LIMITED 2020 Annual Report B E G A C H E E S E L IM IT E D A N N U A L R E P O R T 2 02 0 Contents Performance Highlights 02 Chairman’s Report 04 Chief Executive Officer’s Review 06 Directors’ Report 12 Auditor’s Independence Declaration 36 Corporate Governance Statement 37 Financial Statements 39 Notes to the Financial Statements 44 Directors’ Declaration 88 Independent Auditor’s Report 89 Shareholder Information 95 Corporate Directory 96 A special thanks to the staff, farmers and customers whose images we have used through the report to illustrate relevant facts of our business. They represent the many people that together make Bega the Great Australian Food Company it is today. Performance Highlights 32 ▲ Revenue ($m) Revenue has increased by $73 million, or 5%, compared to the prior year.1,493 millionFY20 20 1,420 millionFY20 19 International all business units 35% Bega International Export sales totalling $523 million, being an increase of 15% on the prior year, comprised 35% of total sales. FY2020 Revenue 59% Branded* 41% Bulk* * the Group has two new reporting segments: i. Branded – the manufacture of bulk ingredients into value added consumer products for internal or external brands. ii. Bulk – the manufacture of bulk dairy ingredients, nutritional and bio nutrient products. BEGA CHEESE LIMITED 2020 | PERFORMANCE HIGHLIGHTS 32 ▲ Financial results The statutory result for each of FY2020 and FY2019 included a number of non-recurring items, which in FY2020 related primarily to legal costs and in FY2019 related primarily to business acquisitions, impairment of Coburg assets and other corporate activity. On a statutory basis for FY2020 earnings before interest, tax, depreciation and amortisation (EBITDA) was $87.8 million, profit before tax (PBT) was $31.0 million and profit after tax (PAT) was $21.3 million. On a normalised basis for FY2020 EBITDA was $103.0 million, down 2%, PBT was $46.2 million, up 3%, and PAT was $31.9 million, up 3%. EBITDA ($’000) Basic earnings per share (cents) Normalised* Statutory 102,992104,867 FY2020FY2019** 78,933 FY2019** FY2020 87,824 Normalised* Statutory 14.9 14.9 FY2020FY2019** 9.9 2.1 FY2019** FY2020 Normalised* Statutory Profit after tax ($’000) Total dividend per share (cents) 30,929 31,886 FY2020FY2019** 4,447 FY2019** FY2020 21,268 Statutory 10.0 FY2020 11.0 FY2019 Production volume (tonnes) Production has decreased by 2%, compared to the prior year, reflecting the impact of drought and supply competition. Total dividend per share Bega Cheese Group has declared a final dividend of 5.0 cents per share, taking the total dividend relating to FY2020 up to 10.0 cents per share. This represents a total payment of $21.4 million, being 67% of the normalised profit after tax and a decrease of $2.0 million, or 9%, on the prior year. 303,252 297,668 *Normalised results exclude the impact of significant events occurring during the year. **Amounts have been restated, see note 32 of the financial statements for details. FY 20 19 FY 20 20 4 ▲ Chairman’s Report In the last two decades, it has often been the case that leaders from all walks of life have talked about a particular year as being tumultuous, a year of challenge, a year of change, a year of opportunities, a year the likes of which we have never seen before. While these statements are with good reason and foundation it is my view that FY2020 has made many of the preceding 20 years look simple and peaceful by comparison. At Bega Cheese we have faced highly competitive milk procurement markets, significant drought impacting our supply base, substantial increases in input costs across the supply chain, volatility in our markets and currency, never before experienced fires in Bega and Gippsland, and this was all prior to the arrival of COVID-19 and the disruption it has brought to our markets, customers, suppliers, staff and the global community. It is in the above context that I am proud to report on the sound and stable business performance of Bega Cheese for FY2020. While it has been a challenging year on many levels the strength of Bega Cheese’s strategy, experience and culture has once again been demonstrated and continues to position us well to manage challenge and change. It is important that the company acknowledges the misstatement in our FY2019 accounts which was discovered and corrected in our 1H FY2020 report. The misstatement was related to accounting systems changes associated with our Koroit acquisition and meant that EBITDA was overstated in the FY2019 year by $10.5 million. The company was very embarrassed by the error in our accounts and has conducted an internal and external review resulting in structural, personnel and process changes to ensure this does not happen again. Comparisons in my report will be to the corrected FY2019 EBITDA, EBIT, PBT and PAT. I am pleased to once again report that Bega Cheese has continued to grow with total revenues in FY2020 being $1.49 billion, an increase of 5%. While revenues continue to grow, a highly competitive milk supply environment and market both in Australia and internationally meant that normalised EBITDA and PAT were relatively stable at $103.0 million and $31.9 million respectively. Importantly, the company has reduced net debt significantly with FY2020 net debt being $236.4 million a reduction of 18%. The impact of drought and supply competition meant that overall production decreased by 2% to 298 thousand tonnes. Bega Cheese has continued to review and integrate its infrastructure to reflect changes in both our supply profile and the market. Following the closure of Coburg in FY2019 we have completed the integration of Koroit, continued to focus Tatura on high value dairy proteins and nutritionals, commenced consolidation of some of our processed cheese capacities between our Bega and Strathmerton facilities, created greater capacity flexibility at our Port Melbourne facilities and progressed toll manufacturing arrangements with other dairy industry manufacturers. The ongoing refinement of our manufacturing infrastructure reflects both changes in our supply regions and the market and is a great demonstration of the agility and experience of the business. The strategy of having diversified supply regions producing high value dairy ingredients for both the retail and dairy nutritionals markets continues to be a priority for the business. An important initiative this year was the construction and commissioning of our new lactoferrin infrastructure at Koroit. I am pleased to report that despite the challenges of COVID-19 the plant was commissioned on time and the company will receive the full benefit of the new capacity in FY2021. 5▲ BEGA CHEESE LIMITED 2020 | CHAIRMAN’S REPORT It has been an important year for our Bega Foods business. Sales in our peanut butter range continue to grow, particularly as a result of the successful launch of our Simply Nuts products, additionally we continue to develop our Farmer’s Table cream cheese and butter branded business, and the promotion of Vegemite has seen a return to growth, and the iconic status of this much loved brand reinforced. Bega Foods has successfully expanded in the spread’s category with the launch of B honey, which combined with our existing range and new product development gives us significant presence in Australian retail and food service channels in dairy and spreads. Bega Foods has continued to grow our international retail and food service business prior to the onset of COVID-19 where sales have since stabilised. It is noteworthy that the Bega Foods business was able to quickly respond to changed market conditions as a result of COVID-19, the business managed a collapse in both the Australian and international food service markets and a short term surge in demand in retail. The capability and flexibility of the team to quickly adjust and change in both the dairy and food business again confirms value of the diversity of the business and customers we serve in Australia and internationally. We were pleased to receive a favourable decision in our legal dispute with Kraft from the Full Court of the Federal Court of Australia in April 2020. The Full Court judgement confirmed Bega Cheese’s ownership of the trade dress currently associated with its peanut butter product. Kraft has now sought leave to appeal to the High Court. The High Court has set a date in mid-November 2020 to hear the application for leave to appeal to the High Court. The dispute with Fonterra regarding the Bega brand continues. The trial in the Supreme Court of Victoria completed in July 2020 and we are now awaiting judgment. Bega Cheese has grown substantially over the past decade making a number of acquisitions and managing significant change. As we have previously reported to the market it was appropriate that this year we conduct an organisational and process review to ensure that our business has the most effective and competitive structure available to us. This review has been completed and is being implemented, it does unfortunately mean that there will be some redundancies within the business, we are always conscious of the dedication and commitment our staff give and we will of course offer support to those whose jobs are not required. It is always important to continue to review the competitiveness of the business and ensure our structure and strategy are aligned and position us to be the company of choice for suppliers, staff, customers and shareholders alike. CEO Paul van Heerwaarden will provide more detail on the performance of the business and also expand on our actions and the impact of COVID-19. Paul has led the team wonderfully through a challenging year and his focus on the safety of all involved with Bega Cheese while stewarding the business through