Karachi: The Bestway Group has announced its financial results for the year ended 30 June 2015. The Group’s annual turnover increased by 20% to £ 3.06 billion from £2.55 billion in 2014. Profit before tax for the year ended 30 June 2015 was up 39.9% to £373.8 million from £267.1 million in 2014. All group businesses continued to be profitable.
Mr Zameer Choudrey CBE, the Group Chief Executive said, “The past financial year has been very exciting for the Group. Despite difficult business conditions we have maintained our focus on our strategic goals by increasing turnover and market share of our businesses both in the UK and in Pakistan”.
During the year the Group undertook two major acquisitions. The Group acquired The Co-operative Pharmacy (now re-branded as Well Pharmacy) in the UK for £641.3 million. Well Pharmacy is the UK’s 3rd largest retail pharmacy with 795 stores nationwide and represents a key diversification for the Group.
The Group also acquired an 88% shareholding in Lafarge Pakistan (now re-branded as Pakcem) for a total consideration of £182.0 million, of which £161.6 million is direct consideration and £20.4 million is existing debt within Pakcem, taken on by the Group on completion. Pakcem’s cement plant has a capacity of 2.4 million tonnes per annum and the acquisition has resulted in Bestway Cement becoming Pakistan’s largest cement producer, with an annual production capacity of 8 million tonnes.
Mr Choudrey said, “Both the acquisitions were completed through a competitive bidding process where the Group saw off some major competitors. Despite the fact that the Group’s offers were not the highest, the Group was seen as the most credible party and the best fit to complement the existing businesses”.
Turnover in the wholesale business was £2.27 billion as compared to £2.37 billion in the corresponding period last year. Profit before tax for the year ended 30 June 2015 was £44.6 million as compared to £49.2 million in 2014.
The year under review has been a busy and challenging year for the company as we maintained our focus on the three pillars of Symbol & Club, Foodservice and Digital.
During the year, the Best-one and Xtra Local retail club membership increased to 4,300 stores with a combined turnover of £650 million. The Group is further investing in this area by continuing our crusade on developing a market leading chilled, fresh and retail foodservice offering to help our customers compete, as well as doubling the number of business development executives.
Bestway Batleys Foodservice signed on new contracts including Accuro Catering, Warwickshire Colleges and East Lancashire & Birmingham NHS hospitals. We were also re-awarded two 4-year contracts worth over £24 million.
Last year we became the first wholesaler to introduce a fully functional mobile app. In a year, the app has been downloaded over 12,000 times. Net sales from the app during the year averaged £2 million per month. We also introduced i-beacon technology in our depots that transmits promotional offers to customers’ smart phones as they shop in the depot. At our Abbey Road Depot we have become the first wholesaler to introduce Apple Pay which allows our customers to pay using their iPhone or iWatch.
During the year we completed the installation of 12 dedicated world food hubs in the depots that serve multicultural communities. We also created a multiple account division within Bestway Direct to service the supply requirements of multi-site forecourt and convenience operators. In order to facilitate our customers and improve their cash flows, we removed all charges for credit card transactions and delivery surcharges. This underlines Bestway’s commitment to the wholesale sector and reiterates the Group’s mission of “Building Business for the Independents”.
In July 2014, Bestway Cement Limited (BCL) entered into a binding agreement to acquire Pakcem and on 22nd April 2015, BCL completed the transaction and assumed management control of the company after a public tender. Pakcem’s plant has a production capacity of 2.4 million tonnes per year. Consequently, BCL has now become the largest cement manufacturer in Pakistan with an annual capacity of 8 million tonnes.
Recently, there has been a shift in market dynamics with domestic demand continuing to exhibit strong growth, while the export market has declined due to less activity in Afghanistan and the imposition of import levies in certain economies.
Consequently, BCL’s domestic despatches increased by 15.4% to 4.1 million tonnes from 3.5 million tonnes in 2014, with like for like sales up by 7.8%. Export despatches decreased by 7.9% to 772 thousand tonnes in 2015 as compared to 838 thousand tonnes in 2014. Despite a decrease in exports to Afghanistan, we were able to maintain our position as the largest exporter of cement to Afghanistan.
During the financial year BCL consolidated despatches increased by 10.9% to 4.9 million tonnes from 4.4 million tonnes in the corresponding period last year. The strong despatches performance is due to domestic demand and due to the recognition of despatches from the acquisition of Pakcem for the two months to June 2015.
Turnover for the financial year 2015 amounted to £205.0 million compared to £174.5 million for 2014, an increase of 17.5%. Profit before tax registered an increase of 19.9% from £56.9 million in 2014 to £68.2 million for the year to 30 June 2015. This is attributable to the increased economies of scale and synergies generated through the acquisition of Pakcem as well as our continued focus on cost control.
During the financial year, the cement business settled in full the £14.2 million of debt it had outstanding at 30 June 2014. During the year, BCL took on debt of £182.0 million in order to complete the acquisition of Pakcem.
During the year, BCL installed a 7.5 MW and 6.0 MW Waste Heat Recovery Power Plant (WHRPP) at Hattar plant and Farooqia plant respectively. The Hattar WHRPP became fully operational in May 2015 and Farooqia’s power plant became operational in June 2015. We also signed a contract for a 12MW WHRPP at the newly acquired Pakcem plant and this is currently under construction.
The plant is estimated to cost £9.5 million and is expected to come online by March 2017. The investments in WHRPPs are part of our continued strategy to reduce our reliance on the national grid as well as to reduce the environmental impact of our operations through the reduction of carbon emissions. This will reduce our cost of production and we shall be able to enjoy financial benefits in future years.
For the year ended 30 June 2015, the BCL declared a combined dividend of 10 PKR per share compared to a 7.5 PKR per share dividend last year.
UBL’s total assets at 30 June 2015 were £9.0 billion as compared to £6.9 billion for the corresponding period last year, an increase of 30%. UBL’s deposit base grew by 20% to £6.6 billion for the year to 30 June 2015.
UBL’s profit before tax recognised in the Group’s accounts during the period under review increased from £163.9 million in 2014 to £300.6 million, an increase of 83.4%. This increase has largely been due to a change in accounting methodology as UBL has now been reflected as a subsidiary for the full year, whereas in the prior year it was accounted for as an associate for 6 months and as a subsidiary for 6 months. On a like for like basis UBL’s profit before tax increased by 39.7% to £300.6 million in 2015 from £215.2 million in 2014.
UBL was able to increase its like for like net interest income by 27.1% from £277.1 million in 2014 to £352.1 million in 2015. Critically, UBL was also able to deliver an increased focus on non-financial income which grew, like for like, by 25.8% from £131.5 million in 2014 to £165.4 million in 2015.
During the year UBL’s operation in Tanzania continued to perform well and has started to make a positive contribution to the group after being opened in June 2013. This is a significant milestone and presents an opportunity for UBL to increase its presence in the region.
The Pakistani banking market has started to witness increased pressure on net interest margins as a result of the State Bank of Pakistan’s policy of reducing interest rates. There is a clear indication that this margin compression will continue going forward as inflation has been on a downward trend. Consequently, there has been an increased focus on diversifying income streams into non-interest derived income to better counteract any changes to margin spreads.
UBL continues to pursue its goal of financial inclusion. During the financial year UBL has grown its Omni division of the bank, which provides communities with branchless banking. This is a major milestone in the evolution of banking that will reshape the traditional banking model by offering basic banking services across urban and rural Pakistan, well beyond the regular branch networks. UBL is the largest supplier of this service in Pakistan with over 36,800 agents, an increase of 15,100 agents on the prior year.
The Group also remains committed to Khushhali Bank, the largest micro-finance institution in Pakistan, which UBL had invested in June 2012. Khushhali Bank increased its deposits by 35.4% from £41.3 million at December 2013 to £55.9 million at December 2014. Khushhali Bank also grew its loan portfolio by 54.0% to £78.0 million over the same period. Khushhali Bank contributed profit before tax of £7.1 million in the year to 30 June 2015, compared to £4.0 million in the year to 30 June 2014.
The acquisition of Well Pharmacy for £641.3 million was completed in October 2014. The Group had been searching for a target that was asset backed, in a defensive sector which generated stable cashflows and Well Pharmacy met these criteria.
Turnover of the pharmacy business for the 9 months ended June 2015 slightly exceeded expectations at £583.0 million, with profit before tax of £14.6 million.
The main focus since acquisition has been separating the business from The Co-operative Group, such that it is a fully standalone business, as well as re branding all 795 pharmacy branches under the new name “Well Pharmacy”. This rebranding exercise was completed in October 2015. The majority of the separation process has been completed and we expect final separation activities to be completed by the end of December 2015, thus ensuring we have a strong platform to execute our future growth strategy. During the year £5.9 million has been invested in separating and restructuring the business post-acquisition.
A further £1.6 million was invested into establishing a new headquarter for Well Pharmacy in Manchester, relocating 227 colleagues. The new office was inaugurated by The Chancellor, George Osborne in October 2015.