Picture: 123RF/ SUAT DEMIRIZ
Picture: 123RF/ SUAT DEMIRIZ

Consumer goods group AVI, owner of Five Roses, Green Cross and I&J, has sold its 40% interest in Australia-based seafood and snack manufacturer Simplot for R633m.

AVI said the deal was in line with its strategy to exit businesses in which it had limited managerial control and restricted ability to steer strategic change.

The company, the clothing and apparel businesses of which struggled in the 2019 financial year amid poor sales, said it also had a strategy to reduce exposure to categories with low growth potential “and whose future return on capital prospects do not meet AVI’s expectations”.

After tax, the sale of the stake in Simplot transaction would result in capital gain of about R370m, AVI said.  

AVI said it would continue to supply seafood to Simplot as part of the companies’ existing  supply agreement “and close working relationship with Simplot Australia”.

AVI chair Gavin Tipper said at the company’s annual general meeting (AGM) on Thursday that performance in the rest of the financial year depended on “sound” consumer demand over the festive season and through the second half of the financial year.

Tipper said group revenue for the first quarter ended September 2019 was  2% higher than that of the previous matching period, with growth in food and beverage categories offset partially by continued volume pressure in the fashion business.

“The consolidated gross profit margin was well protected, and costs were tightly managed, resulting in growth in operating profit for the quarter of 2%,” Tipper said.

AVI said in a trading statement that earnings per share for the six months to December 31 were expected to rise 35%-45% to between 409c and 440c from 303.2c the previous year.

The expected strong performance is in contrast to the group’s most recent performance.

AVI has struggled in financial 2019, with headline earnings falling for the first time since 2006 because of weak consumer demand and discounts from competitors. The Spitz business reported a 4.7% fall in revenue due mainly to a 6.9% drop in footwear sales volumes. Green Cross revenue plunged 19.4% due mainly to lower sales.

AVI's share price rose 2.04% to R86 on Thursday.

njobenis@businesslive.co.za