CHOPPIES ENTERPRISES LIMITED ANNUAL RESULTS PRESENTATION 2017 1 - - PowerPoint PPT Presentation

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CHOPPIES ENTERPRISES LIMITED ANNUAL RESULTS PRESENTATION 2017

AGENDA

• GROUP OVERVIEW
• FINANCIAL HIGHLIGHTS
• OPERATIONAL HIGHLIGHTS
• EXPANSION PLANS

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FOOTPRINT

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Geographic spread

Kenya 11 stores 2 DCs Tanzania 1 store

Uganda

Botswana 84 stores 4 DCs

Mozambique 1 store South Africa (North West) 50 stores 2 DCs Zambia 12 stores 1 DC Zimbabwe 32 stores 2 DCs Namibia FY 18 KZN (Durban) 21 stores 1 Production plant 1 DC

Number of stores 30 Jun 17 30 Jun 16 Increase Current Botswana 84 79 5 84 South Africa 71 61 10 74 Zimbabwe 32 30 2 32 Zambia 12 5 7 14 Kenya 11 8 3 11 Tanzania 1

• 1

1 Mozambique 1

• 1

1 Total 212 183 29 217

FINANCIAL HIGHLIGHTS

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Financial Metrics (Group) 2017 2016 Movement

• No. of stores

212 183

• 29

Revenue (BWP millions) 8,852 ** 6,660

• 33%

Gross profit (BWP millions) 1,873 1,445

• 30%

Gross profit margin 21.16% 21.7%

• 0.54%

EBITDA (BWP millions) 342 297

15.15%

EBITDA margin 3.86% 4.46%

• 0.60%

PAT (BWP millions) 75 105

28.57%

PAT margin 0.85% 1.58%

• 0.73%

Normalised EBITDA (BWP millions) 342 246 39.02% EBITDA margin 3.86% 3.69%

• 0.17%

PAT (BWP millions) PAT margin 75 0.85% 65 0.98% 15.38%

• 0.13%

Normalised EBITDA and PAT :- In 2016 operating results benefited from the profit on sale of aircraft amounting to P20m which was included in other income. In the current year there was a reduction in realised foreign exchange gains amounting to P 31m. Normalised EBITDA and PAT is obtained after eliminating P 51m from FY 2016 including its tax impact. ** Eliminating effects of Money Transfer accounted for as sales in FY 2016, for comparison purposes. Including Money Transfers yields FY 2016 revenue of P7,369m.

REVENUE SPLIT BY REGION

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2017 2016

• Reduced dependency on Botswana (from 77% revenue contribution in FY 2013,

reduced to 46% contribution currently).

• New regions scaling up and contributing to diversified growth.

Botswana 45.75% Rustenburg 22.32% Jwayelani 9.99% Zimbabwe 15.41% Zambia 3.09% Kenya 3.27% Tanzania 0.07% Mozambiqu e 0.09% Botswana 60.67% Rustenburg 18.30% Jwayelani 3.54% Zimbabwe 16.31% Zambia 0.55% Kenya 0.63%

REVENUE

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P 3302 m P 4029 m P 5012 m P 5945 m P 6660 m P 8852 m 2012 2013 2014 2015 2016 2017

Demonstrated track record of strong, consistent revenue growth

REVENUE GROWTH

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Like for like (%) Overall (%) Botswana

0% 5%

South Africa North West

31% 57%

KZN

18% 234%

Zimbabwe

(3)% 17%

Zambia

1% 540%

Kenya

77% 555%

Tanzania

N/A N/A

Mozambique

N/A N/A

Total Sales

7% 33% Revenue post elimination of impact of Money Transfers accounted for as revenue in FY 2016

Like for like analysis 2017 2016 Movement

Sales (BWP millions) 6902 6469 7% Footfall (millions) 131 131

• Basket size (BWP)

52.7 49.4 7%

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GROSS PROFIT

23.9% 19.6% 22.1% 17.7% 14.2% 21.2% 24.0% 19.5% 22.0% 15.7% 16.3% 21.7% Botswana SA - North west SA - KZN Zimbabwe Other regions Total

2017 2016

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NORMALISED EBITDA

• P 96 m i.e. 39%

P 321 m

• P 2 m

P 35 m P 39 m

• P 51 m

P 342 m P 302 m

• P 52 m

P 9 m P 8 m

• P 21 m

P 246 m

Botswana SA - North west SA - KZN Zimbabwe Other regions Total

2017 2016

South Africa segment total

• P 76 m
• P 31 m
• P 30 m

After eliminating extra-ordinary items

• P 19 m

• Botswana EBITDA was affected by two significant

non-trading items:

• P31 m reduction in realised foreign exchange

transaction gains in the first half of the year due to unpredicted strengthening of ZAR.

• P20 m profit realised on the sale of an aircraft

accounted for in FY 2016.

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• South Africa achieved an overall EBITDA profit.

North West region achieved EBITDA profit in the second half of FY 2017

SA (North West) 1st Half FY 17 2nd half FY 17 EBITDA (P millions) (11) 9

• Zimbabwe EBITDA grew by P31 m compared to

FY 2016.

SEGMENTAL EBITDA

P 321 m P 302 m P 353 m 2017 2016 Normalised 2016

EBITDA Botswana region

P 39 m P 8 m 2017 2016

EBITDA Zimbabwe region

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• EBITDA of mature regions (combining Botswana, South Africa, Zimbabwe) grew by P76 m.
• Removing the impact of non trading items amounting to P51m, Normalised EBITDA grew by

P127 m.

• EBITDA margins achieved are as follows:

SEGMENTAL EBITDA

3.86% 3.69% 4.46% 2017 2016 Normalised 2016

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SEGMENTAL EBITDA

• 8.91%
• 24.04%

2017 2016

EBITDA new regions

4.76% 4.06% 4.83% 2017 2016 Normalised 2016

EBITDA mature regions

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PROFITABILITY ANALYSIS

• P45 m increase in EBITDA
• Profitability impacted due to:-
• P55 m increase in depreciation

charge.

• P21 m increase in net interest

costs.

• P1 m decrease in tax charge.
• Due to these factors, profit after tax is

down by P30 m

Note: deferred tax asset for Mozambique amounting to P2 m is not recognised.

P 105 m P 22 m P 127 m P 21 m P 149 m P 297 m P 75 m P 21 m P 96 m P 43 m P 203 m P 342 m PAT Tax PBT Net Interest Depreciation EBITDA

2017 2016

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PROFITABILITY ANALYSIS (NORMALISED)

• P96 m increase in Normalised EBITDA.
• Profitability impacted due to:
• P55 m increase in depreciation charge.
• P21 m increase in net interest costs.
• P10 m increase in tax charge.
• If we exclude the impact of extraordinary

items and their consequential tax impact, PAT P10 m

Note: deferred tax asset for Mozambique amounting to P2 m is not recognised.

P 65 m P 11 m P 76 m P 21 m P 149 m P 246 m P 75 m P 21 m P 96 m P 43 m P 203 m P 342 m PAT Tax PBT Net Interest Depreciation EBITDA

2017 2016

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PROFITABILITY ANALYSIS (MATURE REGIONS)

• P127 m increase in EBITDA.
• Profitability impacted due to:-
• P40 m increase in depreciation

charge.

• P23 m increase in interest costs.
• P22 m increase in tax charge.
• Increase in profit after tax by P42 m.

Note: Workings are after eliminating extra-

• rdinary items in Botswana regions.

P 90 m P 18 m P 108 m P 13 m P 146 m P 267 m P 133 m P 40 m P 173 m P 36 m P 185 m P 394 m PAT Tax PBT Net Interest Depreciation EBITDA

2017 2016

SEGMENTAL EARNINGS BEFORE INTEREST AND TAX (EBIT)

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1.57% 1.47% 2.23% 2017 2016 Normalised 2016

EBIT (Group)

2.52% 1.85% 2.63% 2017 2016 Normalised 2016

EBIT mature regions

• 12.07%
• 27.75%

2017 2016

EBIT new regions

SEGMENTAL RETURN ON EQUITY (ROE)

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4.93% 4.42% 7.12% 2017 2016 Normalised 2016

ROE (Group)

9.70% 5.91% 8.75% 2017 2016 Normalised 2016

ROE mature regions

• 24.85%
• 25.28%

2017 2016

ROE new regions

SEGMENTAL RETURN ON ASSETS (ROA)

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6.19% 6.09% 9.81% 2017 2016 Normalised 2016

ROA (Group)

11.91% 8.31% 12.30% 2017 2016 Normalised 2016

ROA mature regions

• 36.45%
• 24.86%

2017 2016

ROA new regions

WORKING CAPITAL POSITION

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• Inventory days

increased due to

• pening of new stores in

South Africa and new geographies.

• The majority of the

group’s sales are in cash.

• Receivables are

associated with credit availed to buying groups.

• Payable days increased

due to increase in inventories for South Africa and new geographies.

• The group’s working

capital management was able to sustain NWC days at zero or negative.

• New regions are

expected to meet these targets once they mature.

2017 2016 2015 45 38 37

Inventory days

2017 2016 2015 4 3 6

Receivable days

2017 2016 2015 49 40 31

Payable days

2017 2016 2015

1 12

Net Working Capital days

CASH FLOW SUMMARY

BWP Millions 2017 Cash flows generated from operating activities 212 Investing activities (286)

• New store capex

(211)

• Replacement capex

(75) Financing activities 99

• New loans

261

• Loan repayments (including interest)

(162) Net movement 25 Opening cash & cash equivalents 52 Closing cash & cash equivalents 77

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BALANCE SHEET HIGHLIGHTS AND NET DEBT POSITION

BWP Millions 2017 2016 Long term debt 672 518 Bank overdraft 111 80 Total debt 783 598 Cash 188 132 Net Debt 595 466 EBITDA 342 297 Equity 1,515 1,474 Total Debt to Equity 0.52 0.41 Net Debt to EBITDA 1.74 1.57

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OPERATIONAL HIGHLIGHTS

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RETAIL SPACE GROWTH

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Region 2017 2016

• Growth

Botswana 117,963 103,795 14,168 South Africa 116,240 95,734 20,506 Zimbabwe 37,841 35,841 2,000 Zambia 14,488 6,506 7,982 Kenya 20,199 14,199 6,000 Tanzania 469

• 469

Mozambique 1,504

• 1,504

Total 308,704 256,075 52,629 21%

• 5 New stores added during the year

with 5% revenue increase.

• Botswana performance is affected by

the following non trading items:

• Reduction in realised forex gain

:: P31 million

• Profit realised on sale of aircraft

included in other income :: P20 million

• EBITDA up by P19 million eliminating

the impact of the above items

• Added clothing section in 9 stores in

Botswana.

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BOTSWANA

BOTSWANA

• Lobatse distribution centre moved to Francistown in Jan

2017 which has increased the efficiency of northern Botswana operations.

• In-store subletting under way in stores with excess

space.

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• CFC brand well accepted.
• Rolled out CFC counters in 23 Botswana stores and

achieved 49% sales growth in last 12 months.

• Added 12 SKUs to the range, including a range of 5

types of burgers.

• In South Africa rolled out CFC counters in 11 Jwayelani

stores; currently constitutes 1% of revenue.

• Also started rolling out CFC counters in 15 stores in the

North West region.

BOTSWANA

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• Value added services:
• Value added services include Money transfer, Airtime, Data, Prepaid electricity.

Included DStv subscription payments in FY 2017.

• 18% growth in value added services during FY 2017.
• Post year end, in partnership with Blue Label Telecoms, Choppies launched the

following services in 4 Hyper stores in Botswana for the following South African services:

• South African DStv subscription payments, Sports and events tickets, Utility

payments, Airtime and Traffic fines.

SOUTH AFRICA – North West Region

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• Achieved strong sales growth.
• 10 new stores added in the North West region.
• Overall sales growth of 57%.
• Like for like sales growth of 31%.
• Increase in footfall of 12% and basket size of 17%.
• Value added services:
• In partnership with Blue-Label Telecoms installed

“Choppies Money” counters across 48 stores.

• Volume grew from R52 m to R142 m mainly by

adding more services in addition to airtime and lottery compared to FY 2016.

• Services offered:
• Airtime, Data, Electricity, Bill payments, Bus tickets,

Handset, Cellphone starter packs, Betting, Sports and events tickets.

SOUTH AFRICA – KZN Region

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Like for like revenue growth of 18%. Increase in footfall of 10% and increase in basket size of 8%.

ZIMBABWE

Overall revenue growth of 17%, with like for like sales down by 3% amid

extremely challenging trading conditions.

Cash crisis in the economy is a primary matter of concern. However, the business continued to do well in spite of this. Expansions in the country have been slowed down in response to the

challenges being experienced.

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OTHER REGIONS

• Adding an additional 7 more stores in Zambia.
• Profitability now improving.
• Expected to be EBITDA positive in FY 2018.

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• Signed more leases, opening 4 more stores before 31 December 2017.
• A few more sites expected to be available, considering the current retail

issues being experienced in Kenya.

ZAMBIA KENYA

OTHER REGIONS

• Negotiating 2 existing sites in Tanzania, one new site will be opened in

November 2017 to take the store footprint to 4.

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TANZANIA MOZAMBIQUE

• Signed leases in Maputo, Xai Xai and Chimoyo.
• Taking very cautious approach for expansion in this region.

NAMIBIA

• Two new stores are planned to open in November 2017 in Northern

Namibia.

EXPANSION PLANS

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Planned New Stores

Country FY 2018 Botswana 3 South Africa 13 Zimbabwe 2 Zambia 8 Kenya 4 Tanzania 3 Namibia 3 Mozambique 4 Total new stores planned 40 Cumulative no. of stores 252

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Capex

Country FY 2018 Botswana 19.5 South Africa 88.2 Zimbabwe 12.0 Zambia 55.0 Kenya 40.0 Tanzania 27.0 Mozambique 18.0 Namibia 28.0 Total 287.7

Pula millions Nos.

FUNDING

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Funding requirements Proposed acquisition of supermarket chain in KZN R100 m P78 m Expansion capex P288 m Total capex requirement P366 m Net inflow from debt restructuring P205 m Cash in hand and internally generated funds P161 m

• Debt restructuring planned to be executed in November 2017.
• Due to the attractive interest rate environment, Choppies intends to access the

capital markets as a key funding source over the coming financial year.

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THANK YOU