Monday 11th January 2010
2009 - Bestway Group's Turnover Exceeds £2 Billion - Sales up 8.6%; Profits up 26.1%
The Bestway Group has announced the financial results for the year ended 30 June 2009. The Group's annual turnover increased by 8.6% to £2.05 billion from £1.89 billion in 2008.
Profit before tax for the year ended 30 June 2009 was £80.6 million as compared to £63.9 million in 2008, an increase of 26.1%.
Mr Zameer Choudrey, the Group chief executive said when announcing the results, "During the year under review, our businesses showed robust performance, both in the UK and Pakistan with all Group businesses continuing to enhance their respective market shares during the year. We are very proud to have broken the £2 billion barrier for the first time."
Tangible fixed assets after depreciation as at 30 June 2009 stood at £497.6 million as compared to £451.6 million in the previous year. Despite the recession, the Group continues to make investments for the future. During the period under review, fixed asset additions amounted to £68.0 million. In Pakistan, investments of £33.8 million were made on the upgrade of Mustehkam Cement Limited and £19.2 million was spent on setting up the Waste Heat Recovery Power Plant at Chakwal. In the UK, £1.8 million was invested on Batleys Pet Food depot at Luton. £6.0 million also was invested on doubling the current central warehouse distribution facility at Coventry for the wholesale business.
Total fixed asset additions in Pakistan for the year were £53.0 million. This was partly financed by internally generated cashflows of £16.2 million and partly by bank borrowings of £36.8 million
During the year under review, the Group's total loans and overdrafts declined by £2.1 million, despite an increase of £68.0 million in fixed assets. All the development and expansion in the UK amounting to £15.0 million was financed by internal cash generation and in addition the balance sheet was strengthened by reducing debt in the UK by £39.3 million.
Rental income from investment properties for the year increased by 17.1% to £5.8 million. This increase was a result of most of the recently developed investment properties being fully rented out.
Mr Choudrey added, "All of these investments are a testimony of the Bestway Group's long term commitment to all of its businesses and proves how we are continuing to invest for the future."
Wholesale Businesses
Turnover in the wholesale business amounted to £1.92 billion as compared to £1.83 billion in the corresponding period last year, an increase of 5.2%. Profit before tax increased to £39.9 million as compared to £34.1 million in 2008, an increase of 16.8%.
Mr Choudrey said, "The wholesale Group prides itself as the most competitive wholesaler in the sector and our mission is "Building Business for the Independents". We continue to demonstrate our commitment to our customers by ensuring that we have the lowest prices and the widest product range in the wholesale sector. Despite the prevalent economic conditions, we provided consistently competitive pricing, relevant and deep cut promotions, and a comprehensive range of over 30,000 lines including our specialist ranges for catering, pet food, £ line, ethnic and own label products."
During the period under review, the central distribution warehouse at Coventry underwent extensive development to increase its capacity to 250,000 sq ft. Suppliers using the warehouse have been able to reduce their cost of distribution by delivering to only one central location. This has also ensured greater stock availability at all Bestway and Batleys depots as well as increased efficiency in the usage of the internal distribution fleet.
Sales to caterers exceeded £100 million during the year. A new scheme was introduced during the year which has been designed to build on the success of the Batleys Catering brand and increase sales to caterers across all branches. The Essentially Catering magazine, produced by the Group and specifically designed for professional caterers, continues to do well, breaking all records for advertising sales and is highly regarded in the industry.
During the year, the Group attracted many top brands like Colgate, Dettol, Harpic and Airwick to produce products for the highly successful £ line range, thus ensuring that the independents were provided with great value household names at some of the most competitive and attractive retail margins available.
The Best One symbol group has grown in excess of 20% year on year since its inception, seven years ago. An online ordering facility, as part of a dynamic new website, was introduced which has been a great success. A number of new business deals were also negotiated with top businesses, including Lloyds TSB Cardnet which allows members to accept credit, debit and commercial cards from their customers at competitive rates.
Batleys' profit before tax increased by 35.4% to £12.1 million from £8.9 million in 2008. After the great success of establishing dedicated pet food depots in Exeter and Bristol, Batleys opened its third pet food depot in Luton. In August 2008, Bestpets, the exclusive pet products own label, launched an online ordering facility for customers of its delivered pet product range.
Trading stock for the wholesale Group as at 30 June 2009 amounted to £182.8 million as compared to £182.4 million in the previous year.
During last year, the Group reduced its carbon footprint by a further 4% and has also taken a series of environmentally friendly measures in order to further reduce the carbon footprint.
Cement Manufacturing
For the year ending 30th June 2009 Bestway Cement Limited's (BCL) despatches increased to 3,673,538 tonnes from 3,032,758 tonnes in the corresponding period, a growth of 21.1%. The increase in volume came from the additional capacity of 6,000 tonnes per day from Chakwal Line II which commenced trial production in June 2008 and is now operating at designed capacity. Export sales nearly doubled to 1,130,612 tonnes in 2009 as Bestway Cement maintained its position as the largest exporter of cement to Afghanistan and India.
Turnover amounted to £128.4 million compared to £66.8 million for 2008, which is an increase of 92.0%. The company recorded a profit before tax of £8.6 million for the year as compared to a loss before tax of £6.6 million in 2008.
In September 2009, Mustehkam Cement Limited's production capacity was upgraded from 1,000 tonnes to 3,300 tonnes of clinker per day at a cost of £33.8 million. The main supplier for the pyro process equipment is FLSmidth. The raw mills have been supplied by Loesche and the motors, operation and control units and instrumentation has been supplied by Siemens. Consequently, the plant's fuel and energy consumption as well as dust emissions are now in line with international standards.
With Chakwal Line II and Mustehkam fully operational, Bestway's cement capacity is now 6 million tonnes per annum, consolidating Bestway's position as the 2nd largest cement producer in Pakistan.
The Waste Heat Recovery Power Plant (WHRPP) also became operational in September 2009 at a cost of £19.2 million. This plant is the first of its kind in Pakistan and has a capacity to generate about 15MW of power which will significantly reduce the Chakwal plant's dependency on external source of electricity and will also help reduce the cost of production. The 60,000 carbon emissions credits generated from the WHRPP will be a source of additional income. The WHRPP will also help reduce emission of waste gases which otherwise would have been released into the atmosphere.
Bestway Cement has now successfully completed all its projects which are operating smoothly. With no further projects in the pipeline in the short term, Bestway Cement will be able to reduce its debt through internal cash generation in the next few years.
Banking
United Bank Limited's total assets as at 31 December 2008 were $7.84 billion as compared to $6.91 billion for the corresponding period last year, which is an increase of 13.5%. UBL's deposit base grew by 19.6% to $6.22 billion for the year to 31 December 2008. Total advances for the year were $4.78 billion, an increase of 22.7%.
The Group's share in profit before tax declined to £29.1 million as compared to £33.7 million in the corresponding period last year mainly due to the bank's conservative policy of maintaining a high level of bad debt provisions as well as the weakening of the Pakistani rupee against the Pound sterling.
In 2008, the Investment Banking division of UBL closed 28 transactions worth in excess of $2.43 billion. The division also established a Middle East desk to leverage UBL's long standing presence in the region.
Since the IMF's stabilisation package was made available to Pakistan in 2008, the economic conditions have started to improve. As the liquidity pressure on the banks starts to ease off, the banking sector in general and UBL in particular is well placed to take full advantage of the recovery in the macro economic environment. The banking sector's average capital adequacy ratio (CAR) stands at 13.5% as compared to 12.1% last year.
In 2009, UBL celebrated 50 years of operations. Since the Group's acquisition of the bank, as a joint venture, in 2002, UBL has achieved numerous milestones in all aspects of its business and continues to take strides in achieving its vision of becoming a world class financial services provider.
Outlook for 2010
In looking to the future, Mr Choudrey said, "The Group's core activities of wholesale distribution of food and drink ensure that we are not as susceptible as other sectors to the recession pressures engulfing the wider UK economy. Despite the economic challenges, we are confident that by putting into practice the Board's well articulated policies, we shall continue to build our market share in the short term as well as in the long term.
"In Pakistan, the current economic scenario is also difficult and this has adversely affected the demand for cement. The rise in coal and oil prices has increased the cost of production and because of weak demand we will not be able to pass on all the cost increases to the consumer. This will have a negative effect on our margins in the short run.
"We feel that UBL will be able to improve its overall performance as it continues to focus on improving its operational efficiencies and asset quality and enhancing its retail deposit base along with strict monitoring of non performing loans.
"The Group sees challenges ahead both in the UK and Pakistan as the respective economies go through an economic stabilisation phase. However, the Group continues to be optimistic as it believes that it is well positioned to see through the current economic difficulties. Over the coming years, it plans to utilise its surplus cashflows to reduce debt in UK and Pakistan."