Good morning to all of you joining us here at the JSE in person, as well as all of those who are joining us online. My name is Barati Mahloele, Investor Relations at Tiger Brands, and I have the absolute honor of welcoming you all to the Interim Results for 2025. Joining me on stage, we have the CEO of Tiger Brands, Mr. Tjaart Kruger, as well as the CFO, Mr. Tushen Govender, who will be taking you through our presentation this morning. Before I hand over to Tjaart, I'd like to bring your attention to our forward-looking statement. With that, I'll hand over to the CEO of Tiger Brands, Mr. Tjaart Kruger.
Good morning, everyone. I will try not to sound as formal as Barati does. We can also say welcome to our Chair Lady, Geraldine, that's here. Thank you for attending, Geraldine. I really thought you've heard enough of this yesterday in the board meeting. And we've got some other colleagues. Joey's here, of course, he is here, and our PR people, thank you very much, and thank you very much for attending. Let's start off with the highlights for the year. We really feel that we've made that, turned that corner in Tiger of having year- after- year declines in our volumes, turning it to get into growth and to see the 2.6% number that we talk about growth.
Tushen will explain it later, but we've taken out all the stuff in the base that we got rid of, and we compare the core business to the core business of a year ago, and that's where the growth comes from. We are very happy that we've actually been able to do that, to get the business, to get our trading in the businesses where we want it to be, to get that trading going, and get some volume growth. We've done that with improving the margins. We'll talk about it later, but the capital allocation model, it's all about gross margin, operating margin, working capital management. We've done pretty well in all of those. Our continuous improvement programs, and remember we've explained a year ago that we don't measure continuous improvements maybe the way we did in the past.
We measure continuous improvement, actual cost savings year- on- year, not cost avoidance. Our continuous improvement programs are running way ahead of target, and we're really pleased with how the business has responded to driving continuous improvement. The portfolio reshuffling, very pleased with the sale of Karachi, sale of the baby wellbeing, and most operations in Lath is at the Competition Commission in the process of being sold. Lots of press last week or so around Lath, very positive outcome for us that we've got the community sorted out, the business is a going concern, and we've really avoided that two years ago thing where we wanted to close down the place. Very, very positive outcome for us. Looking at these disposals and resetting the portfolio of Tiger, we're very pleased with the progress that we've made.
You look at the balance sheet, we sit with a lot of cash on the balance sheet at the moment. As a result of all these activities, operational cash generation, working capital management, and all the disposals that we've done, we sit in quite a bit of cash, and you've seen the normal dividend and then paying a special dividend, and we're in a share buyback program as well. Very good performance on most of these matrices that we've looked at. If we look at the performance compared to the guidance that we've given you guys over the last year or so, on the right-hand side there, the 2.6% versus the 1.3% that we spoke about last year, you can see we've had a decline of 8%. Revenue growth is good.
The pleasing thing about our revenue growth is that we talk a lot about cost competitiveness and affordability. Right now, as we went into the second half of the six months, our food inflation is actually lower than the market, which means we are getting our price points really where we want them to be. Operating margin is approaching 10%, which is where we want it to be. ROIC is really on the up. If you take out the averaging calculation, ROIC is closer to 20%, so it is really on track. Net working capital days, I think that number is not sustainable, but it is very good. We have really done a great job in working capital over the last six months, but at year-end, you will probably see some money getting back into working capital. The simplification of the business, our portfolio optimization, SKU rationalization, all on track.
You'll see later what we're talking about. We've got Chococam, Chocolate, and King Food left that we need to deal with, and we're in processes with all of those. SKU rationalization, on track, ahead of the curve, and then Karachi and maize and wellbeing has been sold. If you look at that scorecard that we gave you and we measure ourselves against that, I think we're ahead of the curve. If you look at our performance, operating margin, ROIC, cash conversion, gross margin, and remember the guidance we've given is that gross margin must get to 30% and above. It's well on its way there. The portfolio optimization, we're ahead of the curve. We're really pleased with these results, and we're really pleased with how the numbers came out.
Just a little bit about the capital allocation model, which we started talking about last year when we did the roadshow. We have really established this discipline in the organization now that whatever we do, we test it against our capital allocation model. You can look at the gross margin, operating margin, cash flow, balance sheet management, working capital management, and the resulting ROIC out of that. We can see how the numbers are improving. The principles are really being well established in the business. Our organization is really starting to understand what it means if we make decisions and we put it through the filters of the capital allocation model. As a result of that, the portfolio optimization, that's happened. What we said all along, if we generate surplus cash, there are only a few things we can do with it.
Obviously, we invest internally, which we're doing. Tushen will share some numbers with you, what's in the pipeline, what's coming. If you've got surplus cash, we'll return it to the shareholders. You can see the start of the process of special dividends. The first special dividend, this interim, of ZAR 1.8 billion on top of the normal dividend of ZAR 600 million. I'm very pleased with that. That's starting a process of how do we, in a disciplined way, deal with surplus cash that sits on the balance sheet. A bit of a strategic update. If you look at the market, I think six months ago when we spoke to you, we were quite upbeat about the macroeconomical situation in the country.
I remember my remark was, "The next two years are going to be better than the previous two years." I think that's probably toned down a little bit, probably mostly because of geopolitical issues. We are still very positive. What is real is that the consumer's under pressure. We know that the consumer's still under pressure. The two-bucket system in the pension fund relieved a little bit of stuff. I think that money went mostly to cars, not to food. The economy is under pressure. You see the forecast in the third budget attempt came down from 2% growth GDP to 1.4%. There is no doubt the consumer's under pressure. If you look at affordability to the consumer, which is what we've been driving for the last 18 months, it's extremely important that we make sure our products are affordable.
Food inflation is coming down. We can see that, especially in a category like rice. There is lots of deflation in rice, and we're really doing well with that. Our rice business is really pumping quite well. We can see food inflation coming down, which is a bit of a positive for affordability. Your challenge in a business, obviously, is you've got deflation, you always sit with expensive stock. How we manage that, and the guys are managing that quite well. Affordability, I spoke about retail and wholesale growth. You can see the growth there has been more towards retail than wholesale, but they're trading well. There is growth in those channels. We're really close to all our customers and how we manage their growth to get our growth that we're looking for. Unemployment obviously remains to be a problem.
Just a bit of a process, the stuff we've done over the last year. As you can see, we were pretty busy for the last 12 months. I'm not going to go through each one of those, but I think the important ones is when we changed the model a year ago to a federated operating model, that's really in place and that's really starting to deliver results. People are really starting to make informed, well-judged decisions at an operational level to drive the business and get things going. We've changed our category structures a little bit where we didn't have separate business for export, but we put that into the business, made that a channel. We disposed of HPC, we disposed of Karachi.
I think the other thing that's quite important here is that in these results, you'll see Tushen talking about it later, we've really classified non-core, and you will be very clear on what still needs to happen to get our core business going. Tushen will also show you some numbers in terms of that to get real clarity of where we will get to and what that means for us. I am personally very pleased with the progress that we've made over the last year. You can see Tushen is only 35, he's not that old. I'm going to hand over to Tushen for the operational performance.
Thank you, Tjaart. Good morning, everyone. I'll touch on a few key messages as we go through the slides. There are quite a few of them to go through and then tag on to a few comments that Tjaart made just to give you more detail on that. Probably the key takeout here is we're pleased to inform you that we're running ahead of our commitment with regards to the continuous improvement plans. We had communicated with the market that we were going to deliver ZAR 500 million over two years. In this first half, it has been an exceptional delivery, reaching ZAR 200 million CI. As you can see, the margin expansion is benefiting from it. On logistics optimization, I spoke to you about six months ago on our progress here, and we saw a huge opportunity to improve our logistics network. I referenced the supply chain control tower.
This was the software that we were developing, which will allow us to have full line of sight of our primary and secondary vehicles. I am pleased to notify you that it has now been developed and is fully implemented. What that does for us is actually allow every single service provider in the secondary and primary network to be geolocated so we can monitor their route efficiency, their turnaround time at customers, as well as their turnaround time out of our site. Driving all that efficiency as we had committed to. Tjaart chatted about the portfolio optimization, maybe just to add one or two points here. On the maize deal transaction, which is subject to the regulatory approvals, you would recall we talked to you about a maize disposal. Ultimately, we disposed of the entire Randfontein site for two reasons.
It was difficult to separate the operations practically, retain the wheat mill, and then sell off the maize mill. More importantly, we saw it as an opportunity to optimize our wheat milling footprint and leverage the Hennemann and Petermaritzburg mill better and reduce our conversion cost per unit. All in all, it proved to be quite a strategic deal. On Lath, as you know, we've been discussing this with you for many years, and we're pleased with the transaction that we've managed to conclude subject to regulatory approvals. There's a vested interest. The growers are involved in the consortium. We've introduced a development fund that has insights into global agri development that can bring technology and, more importantly, deep funds for long-term investment.
As you know, for a listed company, Lath may not meet the return on invested capital criteria, but for patient capital such as a DFI, it's certainly spot on the money. We've actually also resolved the coup claim. You would recall about four and a half years ago, there was a recall of our products. We've now settled this with our suppliers. It is not to the extent you may be thinking, but I would like to think we negotiated on a fair number. It also is reflective of the fact that we need this relationship going forward that's quite strategic with regards to our supplier. You would have seen the news as well with regards to the progress we've made on listed EOSIS. We've committed to you this is something we intend dealing with sooner rather than later.
Moving on, as Tjaart mentioned, it was an exceptional first half. I'll take you through some of the detail that underpins the growth that you see, as well as the margin expansion due to our cost leadership initiatives. On HEPS and EPS, you've seen the benefit of the operating efficiency, margin expansion, as well as the portfolio optimization. On working capital, we probably overshot the mark a bit. I'm not sure what to put into my performance contract for next year, Tjaart. Essentially, we've had some tailwinds as well as some of the considered interventions that I spoke to you about before. Dealing with our largest suppliers, renegotiating terms, making sure we pay for product when it arrives at our port as opposed to the port that it's leaving from. We looked at every one of our strategic suppliers, went in, renegotiated those terms.
We've also implemented software at our shared services that allows us to reduce claims sooner rather than later from our debtors. The tailwinds that Tjaart referred to as the deflation you've seen in commodities, which is obviously helping the working capital position. The other point is, last year, you would recall we had the impact of the El Niño weather patterns, which means we had to go slightly longer on stock holding to make sure we had enough and sufficient security stock on hand. Other than that, it was an exceptional performance with the teams really coming together to try and bring down that working capital balance. I spoke to you about the solid revenue and operating income growth, and I'll touch on that within the detailed business segments analysis. Income from associates really reducing due to the fact that the Carozzi transaction was effective in February.
You do not see those earnings coming through in the latter part of the first half. As you can see, with the solid cash operator generation from our operations, as well as the portfolio activity, we have declared in total a dividend of ZAR 2.4 billion to our shareholders. For those of you that believed in the story, thank you. Here is your reward for getting in early. Might I add to all friends, welcome back. Tjaart spoke and referred to the core operation analysis. Essentially, this is trying to give you a perspective on what the core business would look like going forward. This is where management will invest a disproportionate amount of time and at the same time channel our investments here so that we develop a long-term sustainable advantage. Essentially, this takes away the entities that we have disposed and calls out the non-core.
There's one or two points to make on the non-core, which I have mentioned previously as well. There's no fire sale on these assets. Management will continue with their turnaround strategy. Ultimately, if we don't find the right home for these businesses, we will retain it and continue to extract value for our shareholders. On chocolate, it's worth mentioning we still see the Jungle Energy Bar as core to our business, and that's a critical enabler for our snackification strategy. This is essentially unpacking the previous slide into the numbers that Tjaart referred to. You'll see on a like-for-like basis, the core operations, H1 2025 versus H1 2024, delivered an exceptional performance all the way from revenue growth, operating leverage, margin expansion, and obviously the HEPS growth.
In this slide, what we've essentially done is removed the discontinued ops and at the same time removed all the SKUs we had reduced from the portfolio that we were referring to about a year ago, where we said to you there is an intervention required and we've reduced about 20% odd SKUs. This is the core business going forward. As you can see, we're delivering on our commitments to market where our cost efficiency and cost leadership initiatives is invested behind price to drive affordability for our consumers and at the same time expand margins. On Milling & Baking, you are seeing the impact of some deflation on wheat coming through. On Culinary, the value engineering is driving a better price point, which I will talk to. On Grains, Tjaart mentioned the rice deflation that you've seen in those numbers.
Essentially, we are now right-sizing or correcting that index relative to our competitors so that we can remain competitive on shelf. I spoke about the strong cash generation. As you can see, the closing balance is extremely healthy relative to the prior year. On the repurchase of shares, as of today, we have spent about ZAR 1.2 billion continuing to find value and acquiring some of our shares. That ZAR 483 million has increased. You will see the significant turnaround in our net debt position, which is obviously resulting in the special dividend as well. Another point worth noting on this slide, the return on invested capital that you see is as per the Tiger methodology, which averages out over two years. If I were to look at just the H1F25 ROIC, that number is 20%. It has been an exceptional turnaround in performance.
On CapEx, we lag in from a spend perspective, but we've applied ourselves really to these capital projects, looked at the returns, looked at the long-term sustainable advantage that it creates. In the coming slide, you'll see that we have actually approved quite a bit of CapEx that's allowing us to drive that competitive advantage. These approvals total to ZAR 1.8 billion. You're aware of the super bakery. We've discussed that with you previously. I'm pleased to say that the order has been placed by the team, and we're well on track there. The mega DC is something new to you. Actually, the last three, we haven't spoken to you about that previously. I'll give you a little bit of insights around that.
Essentially, phase one was the supply chain control tower on logistics efficiency that I mentioned right up front, which allowed us to drive secondary and primary efficiencies. Phase two is about warehouse consolidation using the best technology and sustainable energy solutions to drive down our costs and create a mega DC in each of our regions. Gauteng is the first site that we will establish. It allows us to consolidate six different warehouses and set up a mega site and a mega DC where with technology, we can control our stock better and ultimately improve our service levels. This piece of work is about to commence. On snacks and treats, those of you who know our business appreciate the candy site is on two different locations, Jacobs and Mobeni. We're about to consolidate under one site and drive further overhead reduction and cost synergies.
Beverages, for many years, we've carted Oros and Ener-Jade from our Rudacop site into Gauteng, double-handled because there wasn't sufficient space at the site to store product and deliver directly to customer. What this warehouse does is allow us to reduce those inefficiencies. Two points on this slide before I go into the detail of Milling & Baking. On the revenue, you'll see muted growth due to the wheat inflation. I'll talk to that in the coming slide. You've seen significant improvement and turnaround from this business on operating margin and operating income. It was a really stellar piece of work from the team. It's worth pointing out, I'm sure the question is, why have we decreased in margins from H2 2024?
You will recall last year when I first presented to you as CFO, I mentioned to you Tiger had this habit of establishing trade provisions and then releasing it in the second half of the year, which distorted the results. What we have been doing since is moving away from that behavior to ensure the results that you see are reflective of the actual results and there aren't any provisions underpinning it or reducing it for that matter. If we were to remove the impact of that trade provision, I'm pleased to note that the core business operating margin remains intact and has grown. Some key callouts on this slide. We spoke to you about the technology that we're introducing to our bakeries. I'm pleased to say we've introduced this route planning technology across all of our bakeries.
The team has done an exceptional job to focus on cost to serve, reducing that cost to serve, making sure we monitor driver behavior, traffic conditions, and ultimately get to our sparser stores and customers with the least cost in terms of fuel and other delivery associated costs. This software has enabled us to bring that efficiency to the table. It also allows us to geolocate our various stores that we want to expand into the general trade with. As a consequence, we reconfigure the network, shut down unoptimal depots, and drive better service efficiency. Price and volume, we spoke to you about this particular business focusing on driving profitable growth. As a consequence, we stopped unprofitable routes where there were deep discounts occurring. That behavior has been dealt with.
Sales teams have the right parameters in which to deal and ultimately ensure that every single delivery is at the appropriate margin. We have also used the opportunity to reduce some underperforming SKUs. You will see that the 600-gram loaf has now been discontinued as well. On operating efficiency, I am pleased to say we now have real-time dashboards that allow us to monitor every aspect of the manufacturing chain, whether it is damages, whether it is raw materials usages, water inclusion. With these real-time dashboards, we are able to intervene sooner rather than later and go back to that old discipline of managing cents per loaf when we manufacture a product, which ultimately drives the margin expansion that you have seen. Another exceptional turnaround from the business leaders of Grains. Just two callouts before I go into the detail. Revenue growth muted because of the rice deflation that we mentioned.
Operating income, exceptional growth with some tailwinds that assisted. I think there's about ZAR 40 million in the prior year due to some exceptional circumstances. You'll see there's still significant improvement over the prior year, even if you account for the ZAR 40 million abnormalities. You will recall that ZAR 40 million was due to the write-off of poor quality rice we've had first quarter prior year, as well as where we actually stopped the pasta facility because there was just too much stock on hand. I'm pleased to note that that has actually changed dramatically. We're now running out of capacity and for the first time in many years, making profit on pasta. It has been a really exceptional performance from the team. You see the common themes that Tjaart mentioned flowing through the business here.
The logistics optimization, driving cost leadership, allowing us to invest behind price, business simplification, focusing on the core operations, focusing on the KBIs, and reducing the SKUs that were really a drag on management focus and margin. The other significant callout here is the value engineering. The teams are looking at packaging lightweighting. They're looking at their product and going to look at every aspect of the supply chain. For example, on rice, are we doing too much relative to our competitor set? With regards to packaging, the width of packaging, with regards to the amount of polishing we put the product through, with regards to the amount of fumigation that we apply to our product, every aspect of our key products is being assessed to ensure that we're not over-engineering across the board and in particular, basically remaining focused on providing our consumers with an affordable solution.
There was a solid set of results as well from the culinary team. I am pleased to say that this was underpinned across all channels: wholesale, retail, food services, as well as the export business. There was an exceptional performance. I will take you through some of the value engineering initiatives. I spoke about that margin regression and the provisioning in the prior year. There is probably one other callout, which was an exceptional circumstance to this year. We have had vinegar shortages, and that was experienced across the country in the first half of the year. That increased the vinegar prices substantially and was an abnormal cost base for us. Having said that, the issue has been addressed, and we have identified a long-term solution to deal with this challenge. We will be talking about that some more in the second half.
This business, in particular, had a head start on some of the value engineering initiatives, whether it's moving to PET or lightweighting cans or de-gramming. As you can see, that's allowed us to invest behind price, ensure that we have the right index relative to our competitors, and at the same time, expand margins. The other areas that assisted with cost leadership were the time and motion studies that we underwent across our facilities, making sure we optimize in labor and headcount. Waste management has been a particular focus. I think the El Niño and some of the more disruptive weather patterns we've been having have been a wake-up for agri-processes. We've got to minimize the waste and consider sustainable agri-practices as we look ahead. The tier two brand strategy is well on track.
On mayonnaise, we had to delay the Kasi tier two brand launches to an extent because of the vinegar shortages. That is now on track. The migration to PET is also on track for both Cross & Blackwell and our tier two brand Kasi. On peanut butter, you would recall we spoke to you about a variant that will be a reduced peanut inclusion under the sub-brand Cremica to Black Cat. That is on track to be launched towards the latter part of the year. Really exceptional performance, a team that is delivering against our strategic intent. Snacks, treats, and beverages, solid growth for this business as well. What you are seeing here is the performance of Oros and the Jungle Energy Bar that is really aiding in growing the revenue as well as expanding margins.
Here again, this business was focusing on time and motion study, conversion cost reduction, de-grammage of the products. You would recall we spoke about the cocoa price increase. The recipe formulation change has helped us to an extent mitigate the compression of margin. The other thing that I'm pleased to note is, despite the cost push on orange concentrate, we've managed to deliver an expanding operating margin as a consequence of these continuous improvement initiatives. What's also to come is the two sites that I referred to, the consolidation of the candy site in Durban, as well as the primary warehouse for beverages that will drive further margin expansion in this business. On home and personal care, probably one of the segments where we had a few more challenges than the rest. Don't get me wrong, it's been competitive trading across the board.
We continue to deal with sophisticated competitors with significant capacity in the market. On this particular business, there were two challenges. One was during the height of the pest season, our supplier could not supply us with aerosol cans. As a consequence, the Doom volumes were drastically reduced. We have mitigated that issue going forward, and we have moved to one of the largest global suppliers of cans for aerosols. That has been addressed going forward. The other challenge that this business faced was significant competitor activity in the personal care space, in particular hand and body creams that targeted our Ingram's Camphor Cream. There are two jobs to be done here, really. One is to continue to remain relevant to our core users on Camphor Cream. Two is to attract a new user base with innovation and by launching functional creams and essentially de-seasonalizing this business.
Historically, it's always been a winter product. By launching these functional creams around Moisture Plus, Triple Glycerine, it will allow us to evenly spread sales throughout the year. The team is also busy with quite a few value engineering initiatives around packaging, which will allow us to get to a better and more competitive price point. The plans are in place to turn around this business. Worth also calling out, we've had an exceptional performance from the international team, where exports of Ingram's in particular, as well as aerosols for that matter into Zambia, have been performing very well. The last slide that I will cover before handing over to Tjaart. Now, with the left business shown under discontinued, you're able to have full sight of the Chococam business. This is really an exceptional team managing this business.
Those of you who know Cameroon or know of Cameroon will appreciate the socioeconomic challenges that that market is facing. This business as well has been impacted by the high cocoa pricing. Essentially, they have managed to deliver a solid set of results. If I look at this performance in local currency before translation into ZAR, they have actually grown year on- year. The team has really been one of the forerunners across Tiger in value engineering and cost leadership initiatives. Thank you. I will hand over to Tjaart now.
Thanks, Tushen. If you look at our strategic priorities as we go forward and what we are busy with and what we are challenging ourselves with as we go forward, you could almost say more of the same. It is really, if you look at some of our key strategic issues, superior channel presence.
We've started various programs in the general trade. We look at channels out of home, and we look at out of South Africa, where we look at neighboring countries. I think the activities in place are actually really busy delivering. The bakeries, Shen spoke about it, great job in getting back into the general trade and getting our market shares back in general trade, food services. We need innovation in there, which we're driving, and the guys are doing that. Obviously, modern trade is big. The retailers are very big, and we get along well with all of them. We interact with them all the time. We strategize with them all the time. All that is in place.
It is very important for us that we identify all the key strategic issues in these various channels and that we explore them and exploit them as best as we can. We will continue to shape our portfolio. We have sold quite a few things over the last couple of months. We have got a couple still to do. As we go along testing through our capital allocation model, we test not only businesses but SKUs, sub-sectors, categories. We do that all the time, and the business is getting quite good at doing that. Our cost leadership is something that will probably never end. The job the guys have done over the last 18 months is phenomenal. As you can see, one big driver is logistics.
You can see we're right in the process there where we've got a couple of years of great savings coming out of logistics as we get these mega DCs and stuff in place. I think if you look at procurement, we're starting to get the balance right there. It's for sure certain stuff that you can buy on a group basis where you need a centralized activity or a centralized approach to do it. The focus is back into the business to sort out relative issues. It frustrates me to death if we run out of vinegar. We find out when we run out of vinegar. Or we've got a packaging problem, and we find out when we get to the packaging problem. We must be much more proactive than that.
You can only be more proactive if you sit in the business and you know what's going on and you know your suppliers. You can preempt these things and have longer-term solutions for them and be busy with that. We're doing that. I think we've got that balance right of what happens in the business and what do we need an umbrella for, which we can get group benefits and group synergies from. Then factory efficiencies. I think we've only started that journey. That is something that continues forever. We've got so much opportunity in the group to develop mega sites. We're looking at the Western Cape at Paarl to put a lot of plants, a lot of activities under one roof. You can imagine your overhead dilution.
We've got lots of opportunities in the pasta business in that plant, that facility in Isando where we can put lots of other plants in there and make that a much more efficient hub. In individual factories, to look at efficiencies, packaging efficiencies, automation, yields, something that we are really getting good at, and I think that we will continue to do well. If you look at our growth platforms, we said that affordability is one of the big things. We must be relevant to our consumers, and our consumers must be, if we set up the premium to a competitor, which includes house brands, the consumer must be willing to pay that premium. If the consumer's not willing to pay that premium, we've lost it. We must get back to being very relevant. We know we've got loved brands, and we know our brands deliver.
We must just make sure that they're affordable. That is in progress, and that's important. We spoke about health. In a lot of our products, we measure the health. I know we've got sugar products, but for some very poor people, sugar is a healthy product. We are driving into getting to healthier food. We know that's one of the key drivers. It has been done by the United Nations where, how do we get our people to have nutritious food that's healthy? That is a big agenda for us as we drive that. We have been fortifying grains for many, many years. I think we've got lots of opportunities in all our offerings, how we can drive the nutrition and the health issue of that. Snackification, which is a big drive.
I think we've got lots of snacks in our S&T business, the Jungle Energy Bar. I think our Jungle brand has got very, very long legs to traveling to the snackification area. We've only started to explore that with the Jungle Energy Bar. I think both in the snacks and treats business and in the grains business, where the core Jungle business sits, we've got lots of opportunity to drive into that category of snackification. The guys are busy with this. Rejuvenating our brands, I think maybe we've always had this argument. We're not spending enough on marketing, and we've disclosed that in the past. We will spend enough on marketing. We will make sure our brands are relevant and our brands are loved and our brands are preferred.
We will do that through clever marketing, efficient spend, and getting the spend to what we are starting to do now, which is measure our marketing spend, what is consumer-facing and what is overhead cost, research and stuff like that. Doing quite well on that as well. That is my story. We are over to questions. I think just before we take questions, maybe I must just thank a few people here. I think in particular, the management teams in Tiger, the last year was exceptional in the work that people have done. If you look at the restructuring, and remember when we started off last year, four of the five MDs were new in their positions. They did not know those categories or those businesses. We really just had to start running. The guys have really delivered quite well.
Thank you to everybody in the operation, every Tiger person in the operation. That was great. I think I must also thank the board for great support, Geraldine. It was really, if I look at yesterday's board meeting, great support to the organization. That is great to work under a board like that. Maybe I'll end up before we start questions with this. For me, one of the leading indicators of whether we're on track is whether people are starting to phone us for a job. That is busy happening. I am very pleased with that. Over to you for questions. Thank you.
Thank you so much, Tjaart, and Tushen. Before I go to the online questions, there are a couple. I do not know, maybe we should start in the room. Does anyone have a question? Can we get the mic to him?
Just please introduce yourself before your question.
Yeah, thank you. Shen Chao Ge from Nedbank. I've got about three questions, some detailed, but let's go through them one by one. I’ll start with the first one. With regards to the mega DCs, it appears to be a tactical play to sort of reduce reliance on the retailers' DCs, where they've been squeezing the producers on rebates. Please speak about the state of play and how this translates to margin expansion as well as increased sales to the general trade. What are the timelines around this? In addition to that question, still being the first question, highlight the cost to serve the general trade versus formal and what the proximity radius is for each depot and sort of how much potential or scope you see here. Sort of integrate it into one question. Thanks.
Thank you, Shen.
Shen, you can take the DCs. Yeah. On the DC, essentially, it's taking our existing primary and secondary locations, and that does balance out whatever is delivered direct to a retailer DC. We have accounted for that in the fact we have trading terms with many of our suppliers, at least our retailers, and they retain a certain stock holding for us. That has been taken into account in the equation. All it's doing is consolidating six existing warehouses, that whole primary and secondary stock. As a consequence of six being reduced into one, the overheads, the fact that it's going to be a newer DC with better technology to enable cost reduction is where we see the margin expansion opportunity. Your other question was on, as you said, the general trade and how this plays out in the DCs play as well.
Just on the DCs, Shen, we're not competing with the retailers on DCs. It's an addition that we need to get the supply chain to be efficient. We're not competing with Shoprite. On the mega DC, you wouldn't be necessarily redistributing to the general trade from there. Remember, with our general trade model, there are two distinct models. One is via the bakeries into that channel, and one is via sub-distributors and wholesalers into that channel. They are very distinct, and the mega DC is not necessarily an enabler to that. That journey is well on track, and as we speak, we're expanding our presence in the general trade.
What a critical enabler to reducing cost to service in particular in the bakeries, as I said, is looking at your go-to-market technology that we've implemented across all the bakeries, geolocating the spas or stores, mapping the most effective way to service those spas or stores, and then considering what's the optimal location for our depots. Should this still be in existence, or should this be serviced via the bakery or via another depot? That is what's driving the cost synergies. Tjaart, do you think?
Yeah. The difference on whether it's more expensive or not, to deliver bread to a big retailer is cheaper than going into the general trade. The general trade does not have rebates. If you get the general trade, the general trade, I'm talking bakery specific now, the other activity we have in general trade is really to create pull.
It's not to compete or sidestep anybody. It's just to create pull of our own brands into the general trade. If you talk bakery specifically, cost to service is more expensive. You can get closer to if you get more efficient, like we're trying to do, but you don't have the rebate structure. You're taking out middlemen in that structure. You're selling directly to a spaza store that sells to a retailer where it doesn't go to a wholesaler, mini-saler, and then to a spaza store. You share better in the value chain. You've got your brand. Again, you're driving the presence of your brand. You're not relying on a whole chain of customers to drive your brand's presence.
Okay. Let me move to the second one. Thanks for that.
The second one is around the disposal of the wheat mill as part of it being sold with maize in Randfontein. How much throughput from that wheat milling was coming into your bakeries in terms of production? Help me understand something. Is that as part of you owning that and getting that input through your bakeries, there were some benefits at the group level, I would think, in terms of sourcing. Maybe if you could expand on the mechanics a bit more to help me understand. Maize.
Yeah, it's a good question. No flour went from that mill to bakeries. All the inland bakeries' flour comes from Hennemann, and all the coastal Cape Town comes from the Cape Town mill. All the other coastal mills come out of P&B. That mill was purely retail flour.
Why we've done the deal is that to try and sell the maize business on its own is actually not a deal. Nobody can buy it because you've got two maize mills in a building where there's a wheat mill. So there's three mills in that building. There's a wheat mill and two maize mills. And initially, the deal that we tried to do was for someone, probably an existing miller, to buy the two mills and remove the equipment and put it up somewhere else. But that just didn't happen. That's why we decided to sell the whole facility. There's surplus wheat capacity in the country and it certainly wasn't Premier. There's surplus wheat capacity. And our wheat business, we drive into almost an industrial business supplying our bakeries and our pasta business.
We will probably do a few other things in the upcoming future where we also use wheat. The retail part of wheat is not the profitable part of it. The bakery part of it is the profitable part. We are very comfortable if the Randfontein facility is gone, we will have less wheat to lose less money on. Did that land properly? Maybe just to add, both Tiger and Premier have excess capacity. The whole industry has got excess capacity. All the big millers of wheat run at relatively poor capacity utilization in wheat. That is an Africa problem. Zambia has also got massive surplus capacity. We are comfortable to get rid of some capacity, and then what we have left, we can balance better. We can get better utilization of those plants, which means you get better yield, you get better throughput, higher volumes, lower overheads.
Your other question, your part is obviously that Randfontein site contributed to overhead allocation. I'm going to use the word, although I've banned it in Tiger, stranded cost. There is stranded cost coming out of that. We've used the word stranded cost. We made it variable so we can get rid of it. We are getting rid of it. Maybe just to call out on that point because I think it would be a concern as you see these disposals and portfolio restructuring occur. If you consider the CI program that we've put together as well as the commitments we will come to you with for September, the revised numbers, those continuous improvement cost leadership targets are going to enable us to reduce some of those stranded costs.
Thank you. I'll ask my last question. It's around super bakeries.
I think you've downplayed it a bit today. It's still the golden price we look forward to. You said it's about to commission by FY 2027. As part of that, how many bakeries are you looking to consolidate production into this one? Just remind us on the mechanics on the yields versus existing bakeries, versus the existing bakeries that you have, and so on. Thanks.
The super bakery will be commissioned towards the latter part of next year. Our plan is to have it commercialized around October. It's a massive project. If it's a month or so later, it doesn't matter. We must just do it properly. That's when the super bakery, towards the end of next calendar year, the super bakery will be up and running. The whole premise of the capital for the super bakery is not to increase capacity but to reduce costs.
That bakery is based on closing down about five, six other bakeries. We're only talking in inland, not inland. If we look at where we're sitting right now with our inland bakeries, we're out of capacity actually, and we were very short a year ago. The guys are doing a very good job. The lovely problem we would like to have by the time we open this new bakery is that because of the volume demand, we can't close the other bakeries. That's what we're hoping to do because then we can start the second super bakery sooner. At least the current super bakery, the CapEx is based on cost savings by closing down about six other bakeries. I can tell you now it won't happen. The cost reduces dramatically. The cost of production reduces dramatically.
Okay. Thank you.
Perhaps we go to some online questions. Continuing on the bread theme, Tjaart, we've got a question here from MIBFA, and they're asking, how has your performance been for the six months to 31 March 2025 in bread relative to your competitors but outside of top-end grocers?
Outside of top-end grocers. Modern trade. In the general trade. It's been pretty good. I think it's a regional story in Gauteng, as I've said earlier, in Gauteng, in the last month or two, we're running at volumes where we really have to box clever to get the peaks all together because the peaks are over our capacity, which is a very nice problem to have. Cape Town, we're still running a bit short. Cape Town is a bit of a harder job because in Gauteng, we're by far market lead, and in Cape Town, we're not.
In Cape Town, it's a longer haul there. We're making progress, not very fast, but that's what it is. KZN, we had lots of problems in our Pietermaritzburg bakery with maintenance and breakdowns. We've resolved that around January, February. The first quarter still included a lot of problems there. That bakery has now been sorted out since late February, and we're also getting back into the general trade. If I like for like, year on year, I think we've grown a bit of market share in general trade. We've also grown a little bit of market share in top-end retail. It's incremental. It's a tough battle. The bakery industry is formidable. The competitors are very good. We know that. We know we've got a brand, and we know we're building up capability in the organization. We're comfortable with the progress.
We are getting really back into the general trade through these technologies that Tushen touched on. Certainly, the simple answer is we have grown market share in our calculations. Very difficult to measure. We've got a few ways in the way in which we measure it, but we are making good progress.
Thank you, Tjaart. I'll take another online question before coming back into the room. This one is around the capital allocation framework. This comes from Anker Capital, and they're asking, can you elaborate on your capital allocation framework between share buybacks, special dividends, and acquisitions? Are you possibly looking or actively looking for acquisitions, or are you rather focusing on fixing your existing business?
The focus up to now, look at my tenure up to now, the focus was on fixing the base.
The absolute focus was on getting the portfolio sorted out, getting the tail cut, getting all that stuff sorted out. We are now, as we have shown in the base business or the core business, turning the corner to get back into growth. In that, we will grow into how do we grow these core businesses we have, and what does growth on top of that mean? What does it mean? We are certainly not out of acquisitions. We will certainly look at acquisitions. We also want to be proactive and not reactive. We will certainly start soon in looking at what would make strategic sense. I think the one thing we will not do is to go and buy a lot of bolt-ons and just bolt it on because that is what we are busy disposing of. That is the tail we are cutting on the SKUs.
There's a lot of bolt-in acquisitions. I don't think we want to make that mistake again. Right now, we're not in that space, but certainly look at the capital allocation model. The first thing is, what do we need to invest back into the business? I think we're well on track with that, and we will invest quite a bit of money back into the business over the next couple of years. The second thing is we look at acquisitions, but we're not going to pay too much for something. We're not going to buy something that doesn't make strategic sense. Until you find that something, you must look at what do you do with your surplus cash. That's a good balance between do we drop our dividend cover, normal dividend cover? Do we pay special dividends? Do we buy back shares?
I think the guidance we've given is it's a combination. As we go along, you can see we've paid a special dividend. Now we still sit on a lot of cash. It's the question, should we have paid a bigger special dividend? The answer is we are conservative. We're getting into this in a conservative way. We don't want to pay a big special dividend and then nothing. We rather want to make it a habit rather than a once-off thing. As we go forward and we keep on generating good cash, we will probably get into lowering the dividend cover of the normal dividend and look at special dividends when the cash gets to a certain level every year, every two years, whatever it is. Obviously, share buybacks, depending on where the share price is, we run that through the capital allocation model.
We look at evaluation of the share. If the share price in our view is undervalued, we'll get back into share buybacks. We're into share buybacks now, but we stopped it because the share price moved a bit. That's the model. Okay. Thank you. Is there any question in the room?
Yeah. Sorry. Tjaart. Just wait for the mic.
They just need the mic to record what you asked me so that we can keep it against you.
Yeah. Sorry. On the grains business, I mean, it's obviously quite a big jump off a very low base because it hadn't performed over several years. In the presentation, it mentioned sort of price management, maybe a little bit more on that and what kind of growth because obviously that 600-odd % jump is certainly something you notice. Yeah, thank you so much.
Look, I think there's a few things. I think the new operating model contributes a lot because there's quite a bit of sometimes commodity trading or the ability to trade. You can't do that out of error. You must be on top of the business. You must know exactly what your stock positions are. You must know exactly what the rice price is doing. You must know exactly what the maize price is doing. If there's a bit of deflation, you must be really short on top of things. If you think there's inflation, you go. All those decisions, you must be very close to the business to do that. I think we've cleaned up the Grains business, and the Grains business is by and large. It's the rice business. Pasta, it's a Jungle. Very, very specific focus on pasta to fix it.
We've changed the types of wheat that we use to get the cost down. We've cut the tail very aggressively in pasta, and we've got our price points right. If you sit at pasta for a 500-gram packet at ZAR 40.99, you take the market. If you sit at ZAR 70.99, you sell nothing. You need to understand that. You can't sit here and say, "Sales are bad because we think our pricing points are wrong." You need to be on top of that, and you need to understand that. In rice, it's something similar. In rice, we've seen not a lot of volume growth, but we've seen a lot of movement from Mount Caroline into Tastic, which is a much better margin. It's music to our ears.
It's the ability to sell Tastic, get it on shelf, talk to customers, be on the promos, be on the combos, understanding what a government grant, what the amount is, and what type of combo you need to put together to get into that grant to be affordable. It's to do that stuff with all the customers all the time. That's what Liesel and the team is very good at. That's just getting focused back into that business and get that done. Kushen spoke about we've had a couple of own goals in rice in the past years. We had that telesellers thing three years ago, and we had that shipment that we couldn't sell, that we sold to a competitor. We bought it for ZAR 10,000, sold to a competitor for ZAR 5,000, and replaced it at ZAR 12,000.
That debacle we had in the beginning of the previous financial year, those things are all gone now. The guys really know, they understand the rice industry. They understand where it comes from. They are close to the suppliers out of Thailand, where most of the rice comes from. We get the price points and the trading right. That is what you need to do. The same goes for pasta. The same goes for Jungle.
Okay. Thank you. Can we get the mic here, please? As we get the mic, I'll take a question online. This comes from Titanium Capital, and they're asking, can you provide some additional insight to the reasons why Tiger Brands is exiting maize as well as chocolate confectionery?
Is it a function of how these markets have developed, or is it rather Tiger's positioning or market share in the markets in which we operate?
Maize and chocolate. Maize and chocolate. The maize industry has just proliferated. There are 350 maize millers in the country. And if you sit as a regional maize miller, you buy the local maize around you, you mill it, and you sell it locally. You have got no distribution costs. You have got no overhead costs. That is what started happening in the maize industry. I do not think the maize business is a corporate business anymore where you have got big brands. If you walk into any wholesaler here in town, you will probably find 20-25 brands of maize, and it sells only on price. I do not think it is a business strategically that you can build a big brand, build big distribution.
It just doesn't work like that anymore. We haven't made money in maize forever, and we hung on to maize because it carried standard costs, and that's not a good reason. That's the reason for maize going. In chocolate, we haven't made money in chocolate for years. We've looked at the category that we have, S&T, snacks and treats before we put there. You look at snacks and treats, good business, but it's subsidized by other subcategories. Subsidized Maynards, the stuff, yeah, we can give you a lot of Maynards here because the margins are big enough. The Maynards business makes very good margins. Sometimes I think maybe a bit too high because we want to subsidize chocolate with it because that's how the costing was done. We really understand now how these subcategories work.
I also don't think in chocolate we really have the right to play. I think our competitors are very big. Our big purple competitor is just big. I think the offerings are better than ours. I think the chocolate tastes better than ours. It is a business that really hasn't performed for many, many years. Slabs as a category is not attractive anyway. You can see Nestlé got out of slabs. It is just not an attractive offering. I think you must be specific in it. If you're specific and that's what you do and that's all you do, then it can work.
We just got the opportunity that we can get out of it and really focus on those products that really centralize or optimize the site, the CapEx that Tushen spoke about, and really get the cost down even further, get some new technologies in for Fizzers, for instance, that's in that CapEx. We are also looking at new technologies in making jellies and stuff, which is a major improvement on yields, costs. That will come in the next couple of years, and I think that's where the real growth and the real money is. That is why we have to take these bold decisions and just decide to get out of that category.
Thank you. Last question in the room.
Yeah. Good morning. It's Samuels Hiraj from Standard Bank Securities. Congratulations on a very strong set of results.
If you could just, you mentioned that you were gaining market share in bread, in informal and in formal trade, so coffee and grocer. But your volumes were down 2%. Is that correct? Is the category in negative growth again?
The category is slightly negative. I think what you must also, if we look at these things almost on a daily basis, and last year in the first half of the year, we had some massive deals with some retailers, which we're not going to repeat. It was not clever deals. If you look at quarter on quarter, if you look at three months and six months, we gain. If you look year on year, it's probably pretty flat.
If you look at the category, and remember, this is the one category that's very poorly read from a market share point of view because probably about 65-70% in the informal trade, and that's really not measured. You can, there's an attempt that we measure it through Grain SA's number or SAGE's numbers where you look at wheat sales and stuff, and it's indicative. If I say market share growth, we probably move 0.5-0.8% on growth if you look at three months and look at six months. For the year, the volume down is that last year there was funny stuff in the first half. Net, we are increasing in informal. Yeah. Yeah.
The whole strategy, you want to drive your whole strategy in bread to be significantly, your significant part of your volume has gone through the informal trade because that is more, the entry barriers are much higher there. If you can get that right and you do that well, your bread gets there and the consumer prefers your brand, which is the case still in most markets, you sell it. A lot of bread is sold in the informal market. We drive that strategy very hard. It is all about, you must get to all these stores, and I think we deliver to about 40,000 stores every day.
You must get to, and you can't get to all the stores 6:00 A.M., but you must get to all these stores reliably at the same time every day because what happens in a sparser store quite often is if the first guy arrives, the first of the big three, the first guy arrives, they say to him, "No, we'll take Albany, not yours," because we know Albany will be here 9:00 A.M. or 8:00 A.M. or 7:00 A.M., whatever the time. If you aren't reliable in getting to these stores, then they'd rather buy what they need for the day from the first guy because they don't know whether you're coming or not. That's the efficiency you need in the general trade. You need to do this efficiently.
We know that if you look at a year ago, if you look at the geomapping of our trucks, it goes like this. Our trucks drive all over the place. If you get that sorted out, you cut out many, many kilometers. You look at loads per kilometer utilization of trucks. I mean, some of the numbers that you saw on the presentation, damages, returns, those are big numbers. If you reduce damages by 0.5%, that is probably ZAR 50 million-ZAR 60 million a year. Y
our margin improved in milling and baking, but how much further do you think you have to go?
I was going to double digits.
How soon do you think you can get that?
After pound till 2028. I think a key enabler is the super bakery that we refer to.
That will allow us to expand our margin with the consolidation of the bakery footprint and reducing the overheads. Sorry. And just on that, it would be fully commissioned by end of next year, next calendar year. It should come into FY2027 results. Thank you. All right. Thank you so much. We unfortunately cannot get to all the questions online, but we do promise you that we will respond in writing. Thank you so much to everyone online. Thank you to everyone here at the JSC. If you are here in person, at least you have the ability to grab some snacks along the way. Please do not forget your wonderful loaf of Albany bread as well. Till next time.