FFI HOLDINGS LIMITED — AGM Information 2012

Nov 13, 2012

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Annual General Meeting 2012 Chairman’s Presentation

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FFI Holdings Ltd - 2012 AGM

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• Review of Financial Performance

• Factors Affecting Financial Performance

• Dividends

• Review of Food Operations

• Growth Strategy

• Food Operations

• Property Investments

• Industry Dynamics

• Conclusion

FFI Holdings Ltd - 2012 AGM

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	Year ended 30 June 2012 $‟000 2011 $‟000 % change Sales 32,240 31,064 up3.8% Profit before tax 3,036 3,541 down 15% Profit after tax 2,124 2,499 down 15 % Dividendspaid/payable 1,782 2,025 down 12% Cash flow from operations 2,407 2,508 down 4% Capital expenditure 385 486 down 21% Summaryof equity: - invested in food operations 13,943 13,878 - invested in land investments 10,224 10,224 24,167 24,102 Return on equity invested in food operations - pre tax 22% 26% Key financial results from continuing operations in the food industry	Year ended 30 June 2012 $‟000 2011 $‟000 % change Sales 32,240 31,064 up3.8% Profit before tax 3,036 3,541 down 15% Profit after tax 2,124 2,499 down 15 % Dividendspaid/payable 1,782 2,025 down 12% Cash flow from operations 2,407 2,508 down 4% Capital expenditure 385 486 down 21% Summaryof equity: - invested in food operations 13,943 13,878 - invested in land investments 10,224 10,224 24,167 24,102 Return on equity invested in food operations - pre tax 22% 26% Key financial results from continuing operations in the food industry	Year ended 30 June 2012 $‟000 2011 $‟000 % change Sales 32,240 31,064 up3.8% Profit before tax 3,036 3,541 down 15% Profit after tax 2,124 2,499 down 15 % Dividendspaid/payable 1,782 2,025 down 12% Cash flow from operations 2,407 2,508 down 4% Capital expenditure 385 486 down 21% Summaryof equity: - invested in food operations 13,943 13,878 - invested in land investments 10,224 10,224 24,167 24,102 Return on equity invested in food operations - pre tax 22% 26% Key financial results from continuing operations in the food industry	Year ended 30 June 2012 $‟000 2011 $‟000 % change Sales 32,240 31,064 up3.8% Profit before tax 3,036 3,541 down 15% Profit after tax 2,124 2,499 down 15 % Dividendspaid/payable 1,782 2,025 down 12% Cash flow from operations 2,407 2,508 down 4% Capital expenditure 385 486 down 21% Summaryof equity: - invested in food operations 13,943 13,878 - invested in land investments 10,224 10,224 24,167 24,102 Return on equity invested in food operations - pre tax 22% 26% Key financial results from continuing operations in the food industry	Year ended 30 June 2012 $‟000 2011 $‟000 % change Sales 32,240 31,064 up3.8% Profit before tax 3,036 3,541 down 15% Profit after tax 2,124 2,499 down 15 % Dividendspaid/payable 1,782 2,025 down 12% Cash flow from operations 2,407 2,508 down 4% Capital expenditure 385 486 down 21% Summaryof equity: - invested in food operations 13,943 13,878 - invested in land investments 10,224 10,224 24,167 24,102 Return on equity invested in food operations - pre tax 22% 26% Key financial results from continuing operations in the food industry
	Year ended 30 June		2012 $‟000	2011 $‟000 % change
	Sales		32,240	31,064 up3.8%
	Profit before tax		3,036	3,541 down 15%
	Profit after tax		2,124	2,499 down 15 %
	Dividendspaid/payable		1,782	2,025 down 12%
	Cash flow from operations		2,407	2,508 down 4%
	Capital expenditure		385	486 down 21%
	Summaryof equity:
	- invested in food operations		13,943	13,878
	- invested in land investments		10,224	10,224
			24,167	24,102
	Return on equity invested in food operations - pre tax		22%	26%

FFI Holdings Ltd - 2012 AGM

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There were a number of positive highlights in the FY2012 result,
notwithstanding the decline in profit
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• Results were achieved in a difficult trading environment

• impact of increased costs and competition was well managed

• Modest sales growth

• achieved despite intense competition and food price deflation

• Strong cash flows

• cash flow from operations = $2. 4 million

• Sound return on funds invested

• Minimal debt and high interest cover

• net debt = $0.9 million (debt to equity ratio = 4%)

• interest cover = 29x

• Net tangible assets = $2.91 per share

FFI Holdings Ltd - 2012 AGM

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In addition to generally difficult market conditions,
a number of specific factors significantly impacted the profit result
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• Significant increases in labour costs:

• external factors = general labour and associated cost increases

• internal factors = labour cost associated with development of

  • new products

• Major shortage of suitable apples for processing in the Fresh Foods Bakery Products division

• Delays and costs resulting from quality issues with new “sugar confectionery and inclusions products ”

FFI Holdings Ltd - 2012 AGM

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Maximising long term shareholder return is FFI‟s key objective and
drives all strategies, performance goals and management processes
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• Final dividend of 12 cps fully franked - full year dividends of 22 cps fully

• franked (25 cps previously)

• Follows 12 years of steady dividend growth

• Current dividend payout ratio = 86%

• Dividend reinvestment plan (DRP) reinstated

• A disciplined and conservative approach to capital management

• High level of importance placed on returning to dividend growth

80 70 60 50 40 30 20 10 0 Interim Final Special

FFI Holdings Ltd - 2012 AGM

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Chocolate Products of Australia

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Products: chocolate – cake toppings – confectionery – fudge – candy inclusions and decorations

Markets: food service – wholesale – private label – retail – industrial

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Fresh Foods Industries – Bakery Products Products: bakers jams – fruit fillings Markets: food service - wholesale - industrial

Prepact

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Products: home cooking needs – blending and packing Markets: industrial – private label – retail

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Traditional Smallgoods Products: sausages – bacon – ham – manufactured meat products Markets: retail – food service - industrial

FFI Holdings Ltd - 2012 AGM

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All business units continue to perform satisfactorily
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• Continued to build a solid customer base across all divisions

• Remained focused on pursuing sales growth in all markets – private label, food service, wholesale, industrial supply and retail

• Achieved significant improvements in quality systems, production processes and health & safety systems

• Managed the impact of reduced margins from increased competition

• Achieved significant growth in the rapidly developing fudge, candy and inclusions business area

FFI Holdings Ltd - 2012 AGM

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Fresh Food
Industries Pty Ltd
Food Operations
Equity = $13.9m
Tradition
Smallgoods Pty Ltd
FFI Holdings Ltd
Property Sales
Equity = $24.1m
(Commenced)
Property Investments
Development and
Lease (Proposed)
Equity = $10.2m
Hold for Longer
Term Growth
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FFI Holdings Ltd - 2012 AGM

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Organic growth is “ low risk / high return” strategy and Organic Growth is “ low risk / high return” strategy and remains FFI „s main focus remains the Company‟s main focus

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Upgrade
production /
reduce costs
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Increase market
penetration –
existing and new
products
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“Core competences”
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“Privileged assets”
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“Special relationships”
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• Free cash flow capacity available for capital expenditure

• FY2013 to be an active year of capital investment for future growth

FFI Holdings Ltd - 2012 AGM

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The key priority is to enhance long-term
capital value and create a cash flow from this valuable asset
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• Land held as property investments = 67,000 m[2] at Jandakot in Perth

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Property Investments $ million
At current valuation 14.1
Deferred tax liability (3.9)
Shareholders‟ equity 10.2
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• FFI has a three tiered growth strategy depending on the position and potential development value of the land

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Realise value from fully
developed areas
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Property sales
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Property sales commenced
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1 lot of 2,641m[2] sold for $990,370

2 lots totalling 5,520m[2] currently on market

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Enhance and release value
through development and
lease potential
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Development
and lease
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Opportunities being actively
pursued
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Retain areas that will benefit
from structural changes
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Hold for longer
term growth
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Long term value increases from
structural changes, road accesses
etc.
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Profit from property sales and/or asset re-valuations are likely in the
current financial year
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FFI Holdings Ltd - 2012 AGM 13

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• Price wars between major supermarkets

• restricts suppliers‟ ability to maintain margins

• Retail duopoly in Australia

• limits manufacturers‟ control over their retail offerings

• Continuing trend of major retailers to source lower priced overseas products

• High cost of doing business for Australian manufacturers

• regulatory, infrastructure and labour costs

The solution is to remain focused on:

• niche markets

• safety, quality and green aspects of Australian food

• implementation of a sound, effective and proven growth strategy

• investing for growth through innovation and productivity

FFI Holdings Ltd - 2012 AGM

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FFI Holdings is well positioned in its key market segments
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• Profitable, well established business units, delivering high returns on funds employed

• Sound financial position with low debts, quality assets and strong cash flows

• Significant property investment that will contribute to group profitability and generate an increase in cash flows going forward

• Experienced and proven management team

• Well defined growth strategy focused on delivering maximum long term, total shareholder returns

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Your Board and management look to the future with
confidence and enthusiasm
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FFI Holdings Ltd - 2012 AGM

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• This presentation was prepared by FFI Holdings Ltd. The information herein is current as at 14 November 2012.

• This presentation is not an offer or invitation for subscription or purchase of securities or a recommendation with respect to any security. Information in this presentation should not be considered advice and does not take into account the investment objectives, financial situation and particular needs of an investor. Before making an investment in FFI Holdings Ltd any investor should consider whether such an investment is appropriate to their needs, objectives and circumstances and consult with an investment adviser if necessary. Past performance is not a reliable indication of future performance.

• FFI Holdings Ltd has prepared this presentation based on information available to it. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information, opinions and conclusions contained in this presentation. To the maximum extent permitted by law, none of FFI Holdings Ltd, its directors, employees or agents, nor any person accepts any liability, including, without limitation, any liability arising from fault or negligence on the part of any of them or any other person, for any loss arising from the use of this presentation or its contents or otherwise arising in connection with it.

• This presentation may contain forward looking statements that are subject to a range of risk factors and uncertainties. Whilst the statements are considered to be based on reasonable assumptions, the statements themselves and the assumption upon which they are based may be affected by a range of circumstances which could cause actual results to differ significantly from the results expressed or implied in these forward looking statements.

FFI Holdings Ltd - 2012 AGM

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