Good afternoon, everybody, and welcome to AVI's results presentation for the year ended June 2022. It's myself, Simon Crutchley, and Justin O'Meara calling you from the AVI boardroom. I'm sorry we're not in person. Apparently we still think it's more efficient to do it like this. I guess, as I said to my colleagues, we'll send you a non-fungible token goodie bag in future. I'm going to try and go through the presentation reasonably quickly. Justin will take you through the group financial results, and then we'll try and have some time at the end for Q&A. As you can see from these results, I guess. Ooh, that's interesting. We've characterized the results, you know, by, you know, I guess what we can all, I think, and have experienced as a tough macro environment, both globally and domestically.
Certainly tough for our consumers. It was a year with lots of global and local supply chain disruptions. Obviously, it started in a very tough way with the July 2021 riots and unrest, which had a direct bearing on these results, which, I guess are set out in the document. From a revenue point of view, I guess the shortfall was largely I&J, materially constrained by, I guess, the impact of the stronger currency, the cut in the TAC, and obviously the change to the FRAP with respect to volumes available for both catching and processing. I think overall, the business did a good job of defending gross margins. I mean, hedging was certainly very important in the period, and we, as ever, worked extremely hard to contain selling and administrative costs, giving us some leverage at the operating profit up 5.4%.
I guess contextually, if you remove the I&J, I guess, income effect, the overall operating profit for the balance of the portfolio grew by 8%. As I said, I&J significantly impacted by the stronger rand and materially higher fuel price increases than were anticipated net of hedging. We did see a decent recovery in the I&J abalone business, which was very pleasing after a very tough period in the last two years, where our access to markets was substantially constrained. Small benefit from the change in the tax rate for corporations, giving us an improvement of 6.1% in headline earnings. As ever in AVI, notwithstanding all the challenges, we believe cash generation may remain strong and of a very high quality.
We did invest aside from obviously CapEx, in the acquisition of the Exclamation and Gravity brands from Kosi for ZAR 150 million, which was pleasing and obviously will benefit Indigo as we go forward. Final dividend up 6.2% to ZAR 2.92 a share. I guess what this graph highlights is the impact of COVID and hopefully a sustained recovery in the performance of the business. I think it underpins the strength of our FMCG portfolio, which has traded strongly despite some of the pressures, you know, over the last couple of years and in this last financial year. It was pleasing to see, I guess, the ongoing recovery in the two businesses most affected by COVID, the Indigo business and the Spitz Group, with better results, particularly in the second half of the financial year.
In terms of capital employed, very important to AVI. You know, capital allocation is an important part of how we run the business, and it was pleasing to see an ongoing recovery in the ROCE, despite some of the constraints that we faced in the financial year. Cash conversion, as I said, remains very strong, very much a hallmark of the portfolio and the strength of our EBITDA margins across our categories. And then the dividend yield, that's obviously historic, and that's based on ZAR 65.72. Justin will talk to you about the dividend and the dividend in the year. Last year, I think in April, we paid a special dividend. Obviously, this year we will pay a normal dividend. The normal cover remains high.
I think over the 15 years or so years that this graph depicts, we've paid out nearly 96% of headline earnings in dividends or in special dividends or share buybacks, and that hasn't constrained our ability to invest, obviously, in expanding our capacity and maintaining our assets. I'll hand you over to Justin to talk to you about the financial results in some more detail.
Thank you, Simon, and good afternoon, everyone. I think overall, a credible result in what Simon said was a very challenging environment. Revenue growth of 4.3%, largely underpinned by selling price increases across most of our categories required to recover the significant input cost pressures that we experienced, partly offset by some lower volumes. Gross profits was slightly lower than the revenue growth with gross profit margin of 38.6%, slightly lower than last year's 39%. I will go through some of the key drivers a little bit later of that.
Selling and administrative expenses increased 1.4%, and with the increase under inflation, largely underpinned by strong cost control and some of the benefits that we had coming through the business as a result of restructuring initiatives that were undertaken in the previous year. Overall ZAR 66.9 million worth of benefit in the current year as a result of those initiatives and a year-on-year benefit of almost ZAR 66 million that is unpacked slightly later on in the presentation under these information slides at the back of the deck. In addition, the insurance proceeds that we received in the first semester as a result of July's unrest are also recognized in those selling and administrative expenses.
Operating profit growth of 5.4%, and a slightly improved operating profit margin, underpinned by some strong cost control, as I mentioned before. Net finance costs higher than the previous year, largely a function of the higher average debt levels, which resulted from the April 2021 special dividend that Simon referred to earlier, as well as some higher interest rates that have been escalating through the financial year. No real capital items of any significance to mention. Obviously the recognition of our deferred tax assets and liabilities at the reduced corporate tax rate of 27%, providing some benefits to the effective tax rate.
Overall headline earnings growing 6.3% and headline earnings per share up 6.1%, which would include the impact of some of the dilution from additional shares that have been issued under the group's share incentive schemes. As mentioned, I guess a disrupted financial period or year for us. First half materially impacted by the civil unrest and supply chain challenges, which impacted a large portion of the business. As Simon mentioned, I&J's performance significantly impacted, and you can see in the graph on the slide the impact that has had on our second semester performance. A resilient performance, I think, across the rest of our business, with growth across all the rest of our categories, despite the high level of cost inflation and commodity pressures.
Our footwear and apparel and personal care and Ciro businesses have continued to recover through the year, although profits remain below the FY 2019 levels achieved. From an operating profit margin perspective, our operating profit margins remain healthy and strong. The fashion brands portfolio did particularly well with an expansion in our operating profit margin. This was largely underpinned by price increases, effective cost management, as well as some of the recognition of the insurance proceeds, which benefited our footwear and apparel business. Excluding the impact of the insurance proceeds and costs, this would have reduced our operating profit margin in the footwear and apparel business by 190 basis points. Still a better performance than that achieved in FY 2021.
Pressure in our food and beverage brand businesses, largely a function of selling price increases, which did not fully recover the impact of input cost pressures experienced through the year. This graph provides, I guess, context to the significance that price and volume have played on our top-line performance through the year. Revenue growth, as I mentioned before, largely underpinned by price increases across most of our categories required to recover input cost pressures. In addition, a pleasing result from our abalone business with improved pricing and demand in key Asian markets. Volume in our Snackworks and Entyce businesses remained resilient despite price increases.
I guess careful management of price and volume has continued to be a key underpin of our top-line performance and overall margin performance throughout the year. Volumes were lower in our I&J personal care and Spitz businesses, with lower hake volumes, lower aerosol volumes in our personal care business, despite an improvement in our color cosmetics and fragrance for parts of our business. The July unrest and supply chain challenges as well as store closures in our Spitz business negatively impacting on our volume achievement. The gross profit margin, as I mentioned earlier, finished slightly lower year-on-year.
The inventory write-offs of ZAR 31.6 million that resulted from July's unrest had a dilutive impact of about 0.2%. You can see the pressure and the impact that higher input costs had on our food and beverage brand businesses. Pleasing to see the fashion brands business margin improve, with some benefits coming through, obviously, as I mentioned before, from the gross margin levels and the improved gross margin as well as the improved cost management and some benefits from restructurings that had taken place last year. The key drivers in this slide are captured in the bullets below. I'm not gonna go through these in any sort of detail. They are covered later on in the presentation.
I think to reiterate the point that the careful volume and value management has continued to be an important underpin to our profit achievement. With selling price increases taken to protect margins, I think without the protection of margin, this graph would have looked very, very different. Strong cost control, as always, has remained an important underpin. Cash conversion, as Simon mentioned earlier, remains an important metric within the group, and something we pay careful attention to. A strong conversion of our earnings into cash throughout the year with cash to EBITDA close to 100%, slightly lower. The reduction from 100% is largely a function of an increased investment and deliberate increase in investment in our inventory levels to protect against short-term supply risks across a large portion of our business.
As a result, the working capital to revenue percentage increased from 23.1% last year to 23.5%. We continue to invest in our capability from a production perspective as well as in our retail store environment, and ZAR 240 million, just short of ZAR 241 million, was spent on capital expansion through the period. That did include some smaller deposits that were paid closer to the financial year-end in respect of some key projects that will be covered later on. The acquisition of intangibles includes the acquisition of our Exclamation and Gravity brands from Coty for ZAR 150 million, and our net debt position has improved from ZAR 1.7 billion to just short of ZAR 1.7 billion during the year.
This is partly offset by higher lease liabilities with a reduction in borrowings owing to banks. The net debt to capital employed percentage remains within our range of 20% to 30% and supports a strong balance sheet position, which I think stands us in good stead in the current constrained and difficult environment. Return on average capital employed improved from 27.6% to 29.1% during the year. A function of improved earnings growth, which was slightly better than the increase in average capital employed. From a dividend perspective, the table here outlines the dividend payments during the year. The final dividend of ZAR 2.92, 6.2% higher than the final dividend last year, and in line with the growth in earnings.
Our dividend yield improved, obviously based on the closing share price at 30 June, improved from 6.1% last year to 7%. A nice, attractive dividend yield and something that we look to protect, in the current environment. I will hand back to Simon, who will take you through the business unit performances.
Thanks, Justin. First up is Entyce, which is our tea, coffee, and creamer businesses. I mean, I think in general a very strong performance across all of the portfolios off a very high level. Margins are still very strong. If we talk specifically about the tea business, which is both rooibos and black tea, where we're market leaders in both categories, I think the rooibos performance, obviously from a revenue point of view, is down a little as rooibos raw material prices, excuse me, are tracking backwards. We have adjusted pricing obviously in line with that. Profitability at a gross margin level extremely good. Black tea, very strong performance, particularly in H2 for the Five Roses brand, which was pleasing. If we move onto coffee.
I mean, coffee is obviously benefiting from the ongoing recovery in the out-of-home part of the coffee category, which is the Ciro business. Pleasing to see that recovery, benefiting from, obviously, the improvement, post-COVID, and, we think, will continue to recover in the year ahead. We needed a lot of selling price, obviously in both coffee, and in creamer coffee in particular, both Robusta and Arabica prices rising through the 12-month period, accelerating certainly in the second half. Main challenge remains mixed instant volumes, I guess is the one category which you'll see in a slide to come, where we continue to see very aggressive pricing, which we're not prepared to match, in line with our view that margins matter more than volume in the long run.
As Justin has touched on, there was a strong investment in restructuring in Ciro in the prior year, and those benefits came through. In terms of creamer, very strong performance, particularly H1. A lot of innovation in terms of packaging and format in the year, which I think has really put our product on shelf in a very strong way. As I said, H1 obviously very strong. H2 less strong, given that the slide that I'll show you soon demonstrates the kind of price increases that were necessary to protect gross margins. We haven't fully recovered all of the, I guess, cost pressures yet. Fortunately, in the case of one or two of the main inputs, more recently, the cost pressures have abated somewhat net of our hedging position.
This slide, I guess, gives you a snapshot of the volume value movements. I'm not gonna go through them all, but as I said, the mixed instant coffee, I guess, from a volume point of view, is the one that's most fundamental. You can see the strength of the price increases coming through in the financial year, 12.5% in coffee, 11.8% in creamer. Of course, going back to the point I made about rooibos, obviously slightly lower, but, you know, volume obviously uplift, and that was largely underpinned by, you know, I guess, a contribution from both black tea and rooibos. Market shares, these are obviously important to us. I mean, they do obviously only reflect formal retail, which is. It's hard to read the whole market these days because it's getting more fractured as time passes.
In our key business, market shares are healthy across this portfolio. I think as Justin has alluded, and for those of you who've tracked AVI for many years, the most important thing we try and manage in an inflationary environment is to try and find the right balance, I guess, between price and volume, and that might have some impact in the short term on market shares. We think on balance, a very pleasing year from a share point of view, despite, I guess, some of the pressures and constraints. The impact of raw material costs. Now, keep in mind these are the costs year on year net of hedging. Fortunately, our hedging position protected us in some ways from some of the most rapacious increases. Palm oil in particular, certainly accelerated in a way that wasn't anticipated, as a cost pressure.
Got a slide that comes a lot later that I guess gives you a view of where our hedge positions were against spot prices across most of AVI's key ingredients, but we'll talk about that then. You can see the negative, I guess, cost coming through because of the decline in rooibos raw material prices as the main driver there. Black tea prices did lift. Snackworks a very solid performance from the biscuit and snacking category. Biscuit demand remained resilient and strong off a high base. It was pleasing to see, you know, some of the residual benefits of getting post-COVID lifestyles back, certainly in the on-the-go volumes and lunchbox volumes. In those formats, we saw, you know, good recovery.
We also had very strong growth from our lower priced formats, I guess, unsurprisingly given some of the constraints that many consumers are facing with respect to both inflation, unemployment and the macro environment generally. We have had to put prices up here to deal with input cost pressures across many of our ingredients. As Justin has alluded, we worked very hard to manage and sustain a low cost base in the portfolio. The snacks business, we had a lot of pressures on potato from a very wet weather season, certainly impacted the volumes in the first semester. We had some good innovation in H2, which supported improved volumes as our potato supplies improved. We have had to put prices up here as well and reduce discounting to try and deal with some of the inflationary pressures.
Certainly when you're moving snacks around, it's a high volume, low mass, so it is more materially impacted by the higher fuel and distribution costs. Again, I think, the team managed the volume and value and trade discounts very effectively in a competitive environment. You can see the benefit of volume gains and selling price increases in biscuits, with revenue growth up nearly 9.9%, and similarly in snacks. I mean, the issue here generally was the inability to supply in H1 adequate, I guess, potato volumes with some deleveraging in the factory as a consequence. A good recovery in H2. Market shares just to mirror the same sort of slide that we showed in Entyce.
I mean, we think overall reflecting our targeted behavior with respect to volume and value, so in general, I think well managed, you know, in the 12 months. You can see the substantial cost of palm oil and somewhat mirrored in the Entyce business as well. Then the balance of the portfolio pretty well contained notwithstanding these pressures by hedging in the 12-month period. I&J, I guess, the season of two halves and certainly a very much tougher, I guess, second half insofar as the deep sea fishing performance is concerned with reduction in FRAP, you know, about 4.3% in I&J's case. The TAC has come down 5%, and the TAC spans calendar years, you know, not financial years. Overall 10% decline because we've had two 5% TAC cuts.
I guess the combination of volumes and then a stronger rand, relatively speaking, obviously impacted the top line, and that came through, and you can see in the slide where we break out the fishing versus the abalone performance. Certainly a very strong recovery in abalone. The team has done an extremely good job, managed through a very difficult period, very careful husbanding of the size mix on the farm, and certainly worked very hard to develop, I guess, enough new markets to try and find some kind of countervailing force to the disruptions and the lockdowns that we've experienced out of China in the twelve-month period before this financial year. So we certainly benefited from that effort. You can see that coming through here.
Obviously, the waterfall chart. You can see from an operating profit point of view, a very strong performance from abalone on a year-on-year basis. The impact of the stronger rand, you know, significant but very significant, of course, is fuel and then catch rates, speaking to some of the issues that I talked about with respect to volumes. If you look at the history of I&J, we don't have Simplot any longer, so you know, that's left us. That was the red, I guess, block in the waterfall chart. What you're seeing, I guess, year on year is a significant decline in the fishing performance, and that was substantially, you know, the impact of H2, as Justin said earlier. Oops. Don't know why this does this. My apologies. We seem to have a.
If we go and talk to volume and value, you can see the impact of the decline in the fish available for us to catch, both in the domestic market and in the international market, where it's most substantial, which is the predominant market that I&J sells into, where it realizes the best return on its TAC. Selling prices have improved. There was materially, I guess, a stronger increase in selling prices in the fourth quarter of the second half of the financial year. Very important that we try and recover some of the cost pressures that we're seeing. We have seen whitefish prices rise fairly significantly internationally, which is pleasing, and we will benefit from that in the year ahead.
If I go to the Indigo Brands performance, personal care, beauty, and color, we think a pleasing performance, notwithstanding obviously the slow recovery in some of the categories post-COVID. We're certainly not anywhere near where the pre-COVID levels for cosmetics and fragrances, but we are seeing a sustained recovery. That sustained recovery is playing out in the first few months of the new financial year. We did lift selling prices here. We had the same input cost pressures that affected the grocery businesses. As Justin said, we benefited from restructuring initiatives that were done towards the second half of the last financial year, and those benefits came through lifting obviously the operating profit margin, notwithstanding, you know, I guess, a fairly constrained top line. From a volume and value point of view, volumes are still down, largely to do with, I guess, the beauty portfolio.
We did see some constraints in aerosol with the competitive environment, obviously forcing us to try and find the sweet spot between volume and value. Margin here is very important to manage. We did lift selling prices in line with some of those cost pressures. From a market share point of view, we were pleased with this performance because of the constraints. There was lots of category pressure and notwithstanding that category pressure, Indigo held on to its shares in its most important categories, which was very pleasing for the brands. The Spitz business overall, as Justin said, I think a very pleasing performance, obviously recovering post-COVID. There's still work to be done to get to the volumes that we had pre-COVID, but it's pleasing to see the sustained recovery, notwithstanding the very tough macro environment.
It's certainly not an easy environment, but we think our brands continue to be very relevant to consumers. It was a very tough year because of the impact of both July and then, people tend to forget the overarching impact of supply out of Asia and Europe in terms of container availability and container cost. We certainly didn't trade in H1 in Spitz with anywhere near the stock that we would have liked to in some key categories. I think the performance in December was very pleasing, notwithstanding those challenges. This business also benefited from restructuring in the prior year. I guess on balance, I think a reasonably decent performance in a very tough macro environment.
If we take a look at the business units specifically, what's also pleasing is the slow recovery of the Green Cross business, which is pleasing, you know, given the amount of work effort that's gone into trying to get this business back to profitability. I guess that's the first profit we've had for a number of years. I think demonstrating, you know, that we still believe that there is an opportunity here, and we're seeing good rates of growth sustained into this new financial year, which is also, I guess, encouraging. From a volume and value point of view, Justin talked about that. Some of it is a function of the July unrest, some of it was a function, obviously, of the supply challenges, but equally not an easy consumer environment, very competitive, lots of sales going on.
We do a very unique thing in the Spitz and Kurt Geiger portfolio, so I think in general, our demand was more resilient than we expected it to be. I think a function of the ongoing work and effort, both in ranging and in brand building. Then, as I said, you know, some improvement eventually, notwithstanding the declines in Green Cross, which are a function of, I guess, the closing of stores, but on a like-for-like volume up 14.6%. Certainly, again, we needed pricing here as well because the input base for the Green Cross product is also European and Asian.
Kurt Geiger clothing revenue growth, pleasing to see that sustained as people went back to working, you know, back in office environments, functions, weddings, matric dances, all of those things contributed to a recovery in the clothing revenue growth for the period. AVI International, which is essentially our portfolio of personal care and grocery, where we sell into, you know, strongly regional markets. Some of it is also international. This is net of I&J. Another, I think, solid performance. It was a very difficult year as well, with shipping delays and supply chain constraints certainly impacted a number of our markets. We did need to lift pricing here reasonably considerably to deal with the same cost pressures that affected the South African business.
It was also pleasing to see some recovery in the Eswatini, where we have a subsidiary, and that contributed to this performance. In terms of the, I guess, percentage that this represents, in terms of profitability and in terms of turnover, this graph sets out not a material change in the year, an important part of our business, and certainly something we continue to work hard at, you know, as an underpin to profits. That was FY22. FY23, well, I think you all know that, we're operating in a tough environment, both globally and regionally. Inflation, you know, isn't an issue that is now affecting, you know, many markets that for years have had very benign inflation. South Africans are more used to inflation, although our inflation rate is certainly higher. The rand, more recently, has weakened again.
What this slide below tries to demonstrate to you is essentially the commodity costs we achieved in H2 relative to market prices. I guess the rand is now higher than the 16.67 that is set out in the slide, which is why our hedging position is important, and I'll touch on that. We're going to have to work as hard as we did in FY22 to try and find the sweet spot between volume and value. We compete against multinationals materially, and of course, it does depend on how they deal, you know, with, I guess, their own outlook. We know that if the rand remains weak and commodity pressures remain high, there is this persistent need to look at selling prices to protect GPs.
I think we have, in the second, or the first half of the new financial year, a number of price increases already planned. Some have already been taken. It's going to be important to assess how demand is affected by those price increases. So far, we're reasonably pleased by the resilience of demand that we're seeing, notwithstanding the price increases. Talking specifically to Entyce and Snackworks, we have a pretty good portfolio of raw material and currency hedges, and certainly that gives us confidence for H1. I guess so much depends on what happens to both the rand and commodity prices in a very uncertain world. In H2, we've got some good innovation coming through to support constrained demand. We have some capital projects, which I'll talk to a little more specifically in a slide to come.
We continue to build our brands in relevant export markets as an underpin to growth that we might not find as easily as we might in South Africa in a constrained environment, which we think we will see in this year. We've got the recovery of Ciro in out-of-home volumes. We think the tourism industry and people going back to work are slowly and surely improving the opportunity for Ciro in the year ahead. We will continue to focus on cost savings and structure. I know it's something I say every year, and everybody says, you know, "Can we, you know, keep doing it?" I guess the question is, you just keep looking at cleverer ways of doing the same thing. I do think there are some opportunities for the group in general.
Indigo, we think beauty and fragrance will continue to improve, you know, as the COVID shadow, hopefully, you know, fades. We have the new acquired Coty trademarks, which we think we can do some interesting things with, which is, I think, great for the team. Certainly will help the business. We've got a Coty license agreement review and renewal up again, and we'll see how that goes. We are going to have to manage, you know, price and volume here just as we do in the grocery business. Certainly, if we need more pricing, you know, that will certainly be something we need to manage carefully. In terms of I&J, I mean, this business, unfortunately, no matter how well we operate it, has many dependencies on things we can't manage. You know, currency catch rates and fuel prices.
We need to get a lot of pricing out of the international market and the domestic market where applicable. Team is working very hard on that. We've seen some early success in some instances. We will have, obviously, the volume loss that comes out of the quota. We're not really sure yet on what sort of, I guess, TAC will affect H2 because it's calendar year. We're hoping that there won't be any further cut. We do have reasonably decent hedges for F22, and we've got the benefit of the unhedged portion on the current exchange rate. Certainly, our fuel hedges favor H2. We're working very hard to try and find technological solutions to fishing effectiveness to try and drive down the cost of fishing.
There's some quite interesting projects that we're trialing at the moment, and if successful, we'll roll those out because they have very high returns. Abalone, of course, will depend on whether, you know, Asian markets allow us to sustain pricing and demand. That's not clear to us yet, but we're still hoping for a pretty solid abalone performance, notwithstanding those risks. Footwear and apparel, I mean, the real challenge here is SA macro. The rand is weak. We were well hedged for H1, as you would have expected. Not necessarily as well hedged for H2. Difficult to call the exchange rate in the short term. Most economists are saying it will strengthen.
It's, I guess, a very, very difficult global scenario, so that's uncertain. We do have the benefit of working capital investment in supply, which is something we chose to do last year to try and ameliorate some of the risks that we faced in the prior financial year, particularly with respect to H1, which is the important trading semester for this portfolio. We've got a lot more of the low-cost product that we didn't have with the delays in the supply chain last year, which is a good opportunity for us. We've put and continue to put lots of work into our own brands, and some of those are coming through. The green cost profitability I touched on earlier, we're hoping to see sustained improvement.
We'll continue focusing on all of the key metrics in this business to try and be as efficient and as effective as we can be. Insofar as capital investment goes, we have obviously, aside from a lot of repairs and maintenance investments, we've got a number of key projects. I'll highlight some of them. We're looking to increase our creamer capacity and add automation into the packaging area using robotics, which is an interesting project for us, which will give us more access to product in the tower and more efficiency in the conversion into finished goods. We're expanding one of our main biscuit lines and adding process improvements for ZAR 44 million. Got a large investment in the snacking facility with respect to potato and upgrading, I guess, up and downstream of the frying end.
I&J has a number of major dry docks and upgrades. Of course, we continue to invest where we think there is an opportunity in our retail stores. There is other CapEx that isn't highlighted here. It's gonna be a higher spend than the prior year, I guess, giving you some indication that we're reasonably confident that we can find some volume growth in some of our key categories in the year ahead. Global supply chains, you know, always need to be called out. They're still an issue globally. The cost of moving containers remains very high. Most people anticipate this won't normalize until at least F 2024. We're also in the midst of a material investment, I guess diagnosis on the investment to increase substantially the production capability of our toppers format in the Westmead facility.
We're hoping to finalize that project, you know, certainly from an approval point of view in H1 of this financial year. I guess giving you some indication that we believe that that format in particular has opportunities for the Snackworks business. There's little that, you know, I can add here. We continue to work very hard to find the most efficient business model, you know, that we think can be married to a very tough macro environment. We've got to find a balance, obviously, between ensuring that we don't cut away, I guess, muscle, but certainly we're determined not to have any fat across any of the businesses. We are working harder on relevant innovation for constrained consumers. We think the macro environment remains tough in the short term. We've got lots of initiatives. None of these are new. Most important is margin management.
I guess very important that we find that sweet spot. From a volume value point of view, we know that pricing is always going to affect demand. There are price elasticities that we have to manage. We continue to work across the entire group with respect to procurement costs, cost savings generally, and certainly efficiencies in the process environment because we make most of what we sell. We have unique brands. I think you know that we believe brands really matter, in our portfolio, and we think it gives us the ability to build very strong relationships with consumers, lots of loyalty, and certainly gives us, I guess, you know, some confidence that when we're forced to lift prices, that loyalty will persist, you know, with respect to, I guess, consumers under stress. We are targeting real earnings growth despite the very weak environment.
We think we've got enough momentum and the opportunity in a post-COVID recovery in some of the categories to do that. Our philosophy around yield will remain the same. I've touched on those capital projects. We continue to look, obviously, wherever we can. It's gonna be a fairly busy year with respect to the ones that I've talked about and some of the facilities. We keep working regionally, you know, on promoting and building market leadership for our brands in regional markets, which is an opportunity. We continue to look very aggressively at acquisitions if available. They're not easy to come by, given that most of our competitors, you know, are in fact global multinationals and are not generally sellers. But we continue to spend time, effort, and money in examining opportunities to add brands to the portfolio.
Thank you very much, for your listening and patience. I'm very happy to take questions, Justin or myself.
Thank you, Simon. The first question comes from Anton Smit of Peregrine Capital. He says, "Well done to the team. Does the finalization of the FRAP quota process make you think differently about I&J and its place in the group going forward?
We've always said, you know, that I&J, you know, was a business that we ran as effectively as we could, but we wanted certainty, you know, and certainty was always a function of getting FRAP obviously behind us. It is still subject, obviously, to an appeals process. Formally, it's not finished yet, but we're confident that, you know, how it's played out hopefully will be how it finishes. Then we'll certainly have had a lot of time in the last year and a half because FRAP, as you know, has been delivered late to examine the opportunities to maximize, I guess, I&J, its future, and how we invest in it on behalf of shareholders.
I don't have any specific answers, but certainly, the certainty is giving us the ability to do that work for the first time, and I'm sure that in the next financial year, we'll get a chance to talk more about I&J and its future.
Thank you, Simon. Just a related question from Danie van Zyl at Clucas Gray. He's asked with the FRAP process, I guess nearly behind you, does it not provide an opportunity to open up discussions with interested parties on the sale of the fishing business again? Hypothetically, if I&J is sold, could that allow you to pursue more significant acquisition opportunities in FMCG or fashion to boost AVI's growth outlook?
I don't think that, you know, selling I&J, you know, would change our ability to make acquisitions. I think the ability of the company to, you know, basically make significant acquisitions, you know, I guess is the same with or without I&J. I'm not going to say more than I said to the first question. I think in the end, you know, we've always been determined to deploy capital effectively, efficiently, and with a strong return. You know, that doesn't mean I&J doesn't or couldn't have a place in AVI, but nor does it mean necessarily, you know, I guess, that we wouldn't look at it, and we're always open-minded. I think the most important thing we can look forward to is certainty, and that certainty will give us the ability, I think, to come back with a strategy that I think makes sense.
you know, we'll just have to be patient, let the process get finalized, and then allow the work that we've been doing, I guess, to come to the surface.
Thank you, Simon. Related M&A question from Suren Naidoo of Moneyweb. He has asked if there are any plans to exit the Spitz business, as it still seems to be an odd division in the group.
No, we have no plans to exit the Spitz business.
Thank you. A question from Nqobile Dludla from Reuters. Post-year end, what has consumer demand been like for footwear and apparel, as some consumers shun discretionary spend?
As I said earlier, you know, I mean, I can't obviously be specific, but certainly the demand, you know, has been reasonable and, you know, that's encouraging.
Thank you. Final question from Suren Naidoo of Moneyweb. Regarding the coffee business, with increased competition from the likes of international brands like Nescafé, Douwe Egbert, and Jacobs, how is the group positioning itself and defending market share? Also, it seems that there have been steep spikes in the price of international coffee brands. Is there an opportunity here?
Well, there's been an overwhelming increase in, you know, coffee raw material. Arabica prices have, you know, doubled over 18 months, so have Robusta prices. The reality is that pricing plus the currency effect, you know, will lead to price increases across the coffee portfolio. We contest all three tiers of the coffee portfolio: roast and ground, mixed instant, and affordable brew. We don't compete in 100% instant. A lot of the dynamics in the category with respect to pricing have played out between the multinationals who've been fighting for share, and it certainly affected the mixed instant category. That is the area where we've, you know, I guess, felt the most constrained. The balance of the coffee category, our performance has been acceptable and we continue to manage it.
Of course, the inflationary pressures affect us just as they affect our competitors. Certainly, coffee is getting more expensive for consumers.
Thank you, Simon. We have a question from Farouk Miah of All Africa Partners. What are the pricing differentials today versus key peers on Entyce or Snackworks versus two or three years ago? Market shares are holding up in formal retail outlets. Do you think market shares will be under greater pressure in non-formal outlets? Would any particular segments be priority for potential acquisitions, example, drinks versus snacks?
There's two questions. No, I don't think. I mean, we have to manage a very competitive environment. I mean, AVI, you know, basically oversimplifies what these categories look like. When you talk about Entyce and you talk about tea or you talk about coffee. I mean, these are categories with lots of competing price points, lots of competitors. We tend to have two or three brands in each of the categories with different pricing ourselves, so do our competitors. Every single one of those brands or price points does specific work for consumers in different markets and categories. It's so difficult to answer that question usefully because, you know, there are so many moving parts to the question. On balance, we have to remain relevant and we have to remain competitive. I mean, consumers have choices.
That's what makes, you know, modern market economies interesting to consumers. We try and find, I guess, target market shares depending on the brands that we own in each of these categories in order to maximize our position. We defend those positions where relevant, but we also have to accept volume and value is a constraint that we need to manage as effectively. We don't differentiate between formal or informal retail. We don't think the market is different. They're just different price points and different sizes that, you know, are used in each of those subsectors. You know, that retailers use, you know, when they buy their groceries.
With respect to acquisitions, what's critical for AVI is not so much category, but brand and the opportunity to build, you know, I guess, a brand that, you know, allows you to have pricing leverage so that you can underpin, I guess, a good capital return and decent margins and defend, obviously, I guess, your place at the table when you have cost pressures, and we have an inflationary environment, and so that's important. I mean, largely across the group, outside of even grocery, what interests us always is, you know, is the brand likely to be defendable and credible? Can we growth, and can we deliver a strong growth margin and therefore, you know, I guess, deliver a decent capital return ultimately to shareholders?
Thank you, Simon. We have a question from Siphelele Mdudu from Matrix Fund Managers. Also says well done on a good set of results. You mentioned that you are targeting real earnings growth. Where do you see opportunities? What could derail real earnings growth? Can the consumer continue to take these higher selling prices across the portfolios?
Look, it's something that we've been doing for years. You could argue that, you know, the prices are more acute and the macro environment more difficult, both regionally, globally and in South Africa. It's a bit like driving a car on a windy road. You need lots of accelerator and lots of brake, and you make, you know, the best decision that you can. It's hard to answer that usefully except, I guess, to look in the rearview mirror and say, on balance, we've always, I think, been able to do it reasonably credibly, and we believe that we can. We think that there are pockets across our portfolio where demand is resilient and where we do a good job, where we compete effectively.
We have the benefit, as I said, of the post-COVID recovery in some parts of the portfolio, which, on a like-for-like basis, give us opportunity to recover to pre-COVID levels. Certainly not easy. On balance, we think there's enough opportunity across the group for us, I guess, to have some degree of confidence in making that an ambition of ours.
Thank you, Simon. There don't appear to be any more questions from the webcast.
Well, thank you very much, everybody, and have a good day. Take care.