Our business model

Key capital trade-offs in 2023

• Challenging operating conditions, investment in inventories and the purchase of the Midrand Campus for a cash consideration limited our ability to pay back interest-bearing debt.
• We often sacrificed operating margin at our Manufacturing division to ensure competitive pricing for our franchise partners.
• Measured investment in Capex to ensure flexible cash availability.

Challenges

• Rising input costs impact profitability and our margins.
• Higher interest rates make debt more expensive.
• Consumer confidence limits growth opportunities.

Future availability of the capital

Local economic conditions put pressure on financial capital. The Group’s sound financial position and longstanding relationship with our primary lender provide access to future capital.

We remain focused on organic growth, although we will consider acquisitions that align with our strategy.

Key capital trade-offs in 2023

• We placed the dough plant investment on hold as projections did not meet the required returns.

Challenges

• Imported equipment is increasingly expensive due to the Rand’s poor performance.
• New technology across the Manufacturing and Logistics divisions includes expensive implementation costs and ongoing licencing fees. These are often Dollar-based.
• Consumer-facing technology investments are expensive and selecting the right technology and partner can be challenging.
• General country-wide civil disruptions negatively impact our delivery channels.
• Load shedding disrupts operations and requires significant investment to continue operating.

Future availability of the capital

We will invest in essential maintenance and expansion across our Manufacturing and Logistics divisions.

Key capital trade-offs in 2023

• We impaired goodwill in the investment of Venus Solutions Limited and a trademark brand name in Signature Brands.

Challenges

• A fiercely competitive operating environment means that competitors are willing to cut prices to attract consumers.

Future availability of the capital

We will continue to invest in our portfolio of Brands in our chosen categories in line with our strategy.

We have the right legal frameworks to protect our intellectual property.

Key capital trade-offs in 2023

• Relevant skills with expected remuneration.

Challenges

• There is a skills shortage in South Africa and emigration continues to erode the current availability of skills.
• Digital and data skills are in
• high demand and at a higher cost.
• Recruitment of appropriately qualified and experienced non-executive directors is difficult due to a small talent pool at this level.
• Poaching of staff by competitors.

Future availability of the capital

The future availability of human capital is expected to remain scarce in the short, medium and long-term. We will continue to enhance our employee brand to attract, retain and incentivise our talented workforce.

Key focus on relevant training and development.

Key capital trade-offs in 2023

• We provided financial support to our franchise partners in Casual Dining Restaurants to ensure their continued sustainability. This impacted our short-term profitability.

Challenges

• Our franchise partners are under increased pressure due to poor economic conditions and load shedding.

Future availability of the capital

The current economic conditions are not conducive to attracting new franchise partners, especially for our Signature Brands. However, our strong brands and reputation for ethical franchise management makes our franchise propositions appealing. We will continue to grow our networks and several franchise partners are developing multi-franchise and multi-brand networks.

There are fewer potential franchise partners in Africa due to lower availability of funding. Here, we will continue to grow our footprint through Company-owned stores.

Key capital trade-offs in 2023

• We accelerated our energy solution investments, impacting our profitability but ensuring greater energy independence.
• Increased reliance on diesel generation to ensure smooth operations negatively affected our carbon footprint.

Challenges

• The Russia/Ukraine war has disrupted the supply of certain commodities.
• Local suppliers may be unable to meet commitments due to load shedding interruptions.
• Water interruptions are increasingly common.
• Climate-change is affecting agricultural production.

Future availability of the capital

We acknowledge that natural capital resources, including water, are constrained. In our Gqeberha operations, we face regular water shortages. We are investigating water reduction and recovery projects at various plants.

Climate-change will make some commodities scarcer and more expensive. We will need to counter this by expanding our supplier base, both locally and internationally.