Bestway Group profits rise 45% to £267m

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The Bestway Group has announced its financial results for the year ended 30 June 2014. The Group’s annual turnover increased by 1.2% to £2.55bn from £2.52bn in 2013. Profit before tax for the year ended 30 June 2014 was up 44.7% to £267.1m from £184.6m in 2013. All group businesses continued to be profitable.

Choudery: growth across the board

Choudrey: growth across the board

Zameer Choudrey, the group chief executive, said: “Despite a challenging business environment both in the UK and globally during the year under review, all the Group businesses continued to enhance their respective market share. In the last 12 months we have continued to demonstrate the strength of our business model and to create value for all our stakeholders.”

Talking about the future outlook, he said, “we see challenges ahead of us both in UK and in Pakistan as the respective economies go through an economic stabilisation phase.”

Wholesale business
Turnover in the wholesale business was £2.38bn as compared to £2.34bn in the corresponding period last year. Profit before tax for the year ended 30 June 2014 was £54.3m as compared to £54.2m in 2013.

In line with the dynamics of the wholesale sector and keeping in mind the demands of our customers; two years ago we identified three major area on which we intended to focus in order to drive future growth. The key areas were Retail Symbol/Club Growth, Online Sales and Foodservice Distribution.

The Group’s three focus areas continue to grow robustly. Retail growth is driven by retail clubs. Our retail clubs, Best One and Xtra Local are the largest retail clubs in the UK with over 4,300 members and a turnover of £640m per annum, an increase of 6.7% over 2013.

In digital, our web based online business continues to grow with over 26,000 registered users of our websites. During the year under review, web sales increased by 47.1% to £176.3m. We are the first wholesaler to introduce a fully functional smart phone app which quickly shot up the rankings to be amongst the top 10 apps in Apple’s App Store. The Group believes that the app will change customer shopping behaviour and to further reinforce our leadership in digital innovation, we are also now at the forefront of pioneering new technologies for the channel such as geo-fencing and i-beacons.

Bestway Batleys foodservice now has 23 contracts covering an extensive range of local authorities, NHS hospitals, schools, private ventures with another 22 tenders in place. During the year, the Group invested in re launching its flagship catering own label brand, Essentially Catering. The new range includes over 50 everyday catering products and was made available to the customers from February 2014. Foodservice turnover increased by 2.3% to £128.3m.

In April 2014 the Group acquired Sher Brothers, a business based in Glasgow. The new dual branded Bestway Batleys depot was opened to the customers in July and offers customers a brand new shopping experience from a 100,000sq ft sales area. This again underlines Bestway’s commitment to the wholesale sector and reiterates the Group’s mission of “Building Business for the Independents”.

Two years ago, the Group had announced an investment plan of £10m to expand the Best Pets division and its pet retail club.  We now have over 500 Best Pets branded stores all over UK.

Cement manufacturing

During the period under review, Bestway Cement Limited’s (BCL) turnover amounted to £174.5m compared to £177.8m for 2013, a decrease of 1.9%. Despite an increase in retention prices, overall turnover was down due to the rupee devaluation.

During the period under review BCL’s despatches decreased by 1.5% to 4,371,841 tonnes from 4,437,731 tonnes.  Despite an increase in domestic demand, overall despatches decreased as export sales were adversely effected.

BCL’s domestic sales increased by 2.4% to 3,533,761 tonnes in 2014 from 3,449,365 tonnes in 2013. Export sales decreased by 15.2% to 838,080 tonnes in 2014 as compared to 988,366 tonnes in 2013. Despite a decrease in exports to Afghanistan, we were able to maintain our position as the largest exporter of cement to the country.

Operating profits increased by 2.4% to £59.3m in 2014 as compared to £57.9m in 2013.

BCL reduced its total debt by £48.9m during the year. Consequently, financial charges decreased to £2.7m from £6.0m in 2013. Profit before tax registered an increase of 14.3% from £49.8m in 2013 to £56.9m for the year to 30 June 2014.

For the year ended June 2014, the company has paid a total dividend of 80%.

In July 2014, BCL acquired Lafarge Pakistan’s 2.4m tonnes per annum cement plant located in Chakwal for an enterprise value of US$329m. With this acquisition, BCL has now become Pakistan’s largest cement manufacturer with an annual capacity of 8m tonnes. We have recently launched a public tender and hope to complete this transaction by 27 April 2015.

Banking

UBL’s total assets as at 31 December 2013 were $10.3bn as compared to $9.1bn for the corresponding period last year, an increase of 13.2%. UBL’s deposit base grew by 18.2% to $8.45bn for the year to 31 December 2013. UBL’s total advances for the year were $3.94bn, an increase of 7.7%.

During the year under review, increase in cost of deposits further compressed the declining margins. However, as interest rates began to improve, this enabled UBL to contain the decline in net interest income.  For the year ended June 2014, UBL’s Net Interest Income was up 9.5% at £275.2 million as compared to £251.4 million in 2013.  With effective asset management and prudent lending strategy, the bank was able to register a 12.5% increase in its profit before tax from £190 million in 2013 to £213.8 million for the year ended June 2014.

UBL Omni Branchless banking was internationally recognised as one of 14 Sprinters by the GSMA Mobile Money for the Unbanked programme in 2013.  After yet another successful year in Pakistan, UBL Omni was launched in UK in March 2014.  The idea behind the UK launch is to offer a reliable transfer network to the UK’s growing Asian community.  UBL UK is the only bank to offer such a service in the UK.

In September and December 2013, the Group increased its shareholding in UBL by 8.3%.  The Group’s current shareholding in UBL is now 59.25%.  The Group’s share of profit from UBL during the year under review increased from £84.9 million in 2013 to £103.3 million, an increase of 21.7% on equity accounting basis.  This was because UBL has been consolidated for the first time in the Group accounts.

During the year, UBL declared 100% dividend.

Pharmacy
Co-operative Pharmacy (Well Pharmacy)

In July 2014, the Group ventured into the Pharmacy sector by acquiring The Co-operative Pharmacy for a purchase price of £620m. The transaction was completed in October 2014. During the sale process, Bestway saw off competition from McKesson & Celesio, Alliance Boots and Carlyle.

The Co-operative Pharmacy is the third largest pharmacy business in the UK.  It has  780 branches and over 7,000 employees.

Our initial focus was on re branding the pharmacy brand, followed by capital investment in the renovation and relocation of existing branches as well as acquiring more pharmacies going forward.  In February 2015, the pharmacy business was re branded under the new name, “Well”.

Bestway Group has announced a five year investment programme of £200m which will drive the business forward and create hundred of jobs across UK.

A further £1.6m is being invested into establishing a new headquarters for Well in Manchester, relocating 227 employees from the current Co-operative Group head office. The business will move into the 22,000sq ft Merchants Warehouse, a Grade II listed building in Manchester’s historic Castlefield district, in late 2015(Q4).