LIVING THE EXPERIENCE LONG4LIFE LIMITED RESULTS PRESENTATION FOR THE YEAR ENDED 29 FEBRUARY 2020
Long4Life in a COVID-19 world and beyond “ I have experienced many challenging events during my 50-year working career, but nothing comes close to the experiences of the first few months of 2020 following the outbreak of the COVID-19 pandemic. This extraordinary time will shape a new future. It will forever be known as the period in which we changed paradigms, changed ways of working and changed the way we relate and interact with one another ” Brian Joffe CEO 1
Long4Life in a COVID-19 world and beyond Brian Joffe – Group CEO • The year that was • Reimagining the future • What we are doing about COVID-19 at L4L AGENDA Colin Datnow – Group COO • Sport and Recreation • Beverages • Personal Care and Wellness Mireille Levenstein – Group CFO • Financials Q&A 2
Long4Life in a COVID-19 world and beyond Brian Joffe CEO 3
Long4Life in a COVID-19 world and beyond The year that was • The 2020 result is what it is, judge it for yourselves • Local economic backdrop was weak but we reckon we boxed smart and weren’t deflected • F2020 non-IFRS 16 trading profit grew by 3% and HEPS by 13% • R221m invested in capex and acquisitions • Balance sheet strength maintained › equity of almost R5bn › net cash of R821m › R586m spent on share buy backs over two years (139m shares) 4
Long4Life in a COVID-19 world and beyond Reimagining the future COVID-19 pandemic and responses to it will have lasting consequences Business models will need to adapt A post COVID-19 world will bring futuristic trends rapidly forward to the present day Consequences for a retail business • bricks & mortar vs clicks (online) + store size, design, configuration • lease reductions due to bankruptcies, increased vacancies and growth in online • working capital if the rand stays weak – new stock at a higher rand cash cost, replacement and management • willingness of banks to fund companies through the crisis – retail closures/consolidation • potential deflation (rather than inflation) if spending depressed • value associated with brands, range rationalisation • supply chains – backlogs short term, long term rethinking of offshore vs localisation • acceleration of electronic transactions, digital, mobile and contactless payment 5
Long4Life in a COVID-19 world and beyond Reimagining the future Consequences for consumers • length of lock down – habits formed during this time spent indoors may endure • behavioural shifts – physical vs virtual preferences • spending power, smaller and poorer consumer base • merchandise preferences • price sensitivity • challenges of higher levels of unemployment • economic decline • difficult fiscal choices • catalyst for policy reform 6
Long4Life in a COVID-19 world and beyond What we are doing about COVID-19 at L4L • Prepare for the worst and hope for the best • Applying our best judgement to a situation without precedent • Management focusing on, inter alia › staff motivation and personal safety › reworking budgets › prioritising cash › monitoring liquidity headroom and cash balances › taking all means possible to protect the asset base › assessing working capital requirements and inventory management – stock commitments › cost savings, such as rent deferrals/concessions, capex & opex, salaries • At L4L we have the flexibility and imagination to shape our own future 7
Operations Colin Datnow COO 8
Sport and Recreation Revenue R2 294m (+9%), trading profit R316.7m* (-1%), trading margin 13.8% vs. 15.2% A disciplined trading year across merchandise, marketing, operations and e-commerce with working capital well-controlled 2020 2019 Year-on-year Stores Growth in sales Same store Stores Growth in sales Same store Sports retail^ 44 9.2% 5.8% 43 10.1% 4.0% Outdoor Warehouse 27 8.8% 8.2% 26 3.3% 4.1% Total retail 71 9.1% 6.3% 69 8.4% 4.0% Performance Brands N/A (2.6%) N/A (2.5%) • Strong execution, range appeal, innovation and a cautious approach to footprint is serving Sportsmans Warehouse well • Outdoor Warehouse is a unique destination chain with a comprehensive product line up offering specialised advice to the outdoor enthusiast – a highly satisfactory performance over the past year • Performance Brands reengineering its business processes to improve flexibility, increase local manufacture, optimise inventory • Retail price inflation subdued, retail trading density 6.6% higher, weighted space 2.6% higher and average spend 3.1% higher ^ Sports Retail division consists of Sportsmans Warehouse and Shelflife (OTG in 2019) * Pre IFRS 16 Leases 9
Long4Life in a COVID-19 world and beyond What we are doing about it at Sport & Recreation – represents 56% of revenue and 60% of trading profit* Sportsmans Warehouse, Outdoor Warehouse and Performance Brands • Challenges › anticipating reduced foot count in stores › anticipating revenue contraction › to speedily implement cost containment measures, including rent deferrals/remissions, capex cuts › supply chain disruptions • Opportunities › our destination stores footprint potentially more appealing venues for shoppers seeking “social distancing” › whilst we cannot accurately forecast the future, we believe that we have the skills and agility to reshape and resize the business units to what may be the “new normal” › Sportsmans ’ merchandise offering ideally suited to the now much sought after healthier lifestyle › increased demand for home gyms and related exercise equipment › acceptance of work from home implies higher future demand for athleisure apparel › actively increase marketing mediums such as digital, TV, radio or print to encourage return of store footfall › upscale our online shopping experience and logistics * Pre IFRS 16 Leases and before corporate costs 10
Beverages Revenue R1 487m (+10%), trading profit R139.8m* (-9%), trading margin 9.4% vs. 11.3% • Chill and Inhle have modern manufacturing plants • Despite the harsh macro environment and heightened competition from more established players we are strongly positioned to exploit market opportunities in their respective niches, both individually and in collaboration • Revenue grew by 10%, case volumes broadly flat with Chill having weaker H2 sales and Inhle maintaining its volumes by serving new customers and different market segments • Chill’s trading profit declined as a result of a lower GP%, suboptimal capacity utilisation, with a deliberate initiative to ramp up the marketing spend • Chill’s primary focus is on its own -brands, with ongoing product innovation and the introduction of new pack sizes in its much favoured mixer offering • Inhle trading profit up like-for-like, due to a change in the nature of the product packed for its customer base • R26m capex spend at Inhle, including new PET filler line and additional warehousing generating storage income from customers • Inhle provides Chill brands a springboard to cost-effective growth in the north of South Africa through on-site production and logistics * Pre IFRS 16 Leases 11
Long4Life in a COVID-19 world and beyond What we are doing about it at Beverages, 36% of revenue, 27% of trading profit* Chill Beverages and Inhle Beverages • Challenges › falls within essential service although this has had little practical advantage › plants continued production since 26 March but at reduced volume and cost recovery due to low utilisation and productivity › on-premise consumption of mixers, often with alcohol has fallen, no certainty when volumes will return › own brand energy drink sales (Score) through retail channels have maintained volumes, co-pack volumes reduced › cost cuts are in place but important to retain skills and keep integrity of manufacturing plant through preventive maintenance • Opportunities › successfully working on reducing materials costs and introducing PET bottles at keener prices › opportunity to reassess own-brand range, target markets, pricing and market segmentation, geographic reach › Chill has been opening up export markets and lower FX gives added competitive advantage › tough times is an impetus to innovation, new products * Pre IFRS 16 Leases and before corporate costs 12
Personal Care and Wellness Revenue R310m (+78%), trading profit R67.2m* (+73%), trading margin 21.7% vs. 22.4% Revenue growth of 78% assisted by 2 acquisitions and inclusion of ClaytonCare (sub-acute hospitals) for twelve months, like-for-like up 28% • Sorbet › net revenue up 22% driven by increased services rather than merchandise sales in a constrained consumer environment › aggregate salon sales exceeding R1 billion for the first time since inception › new stores include 8 Salons, 2 Dry Bars and 4 Sorbet Man › store closures include 3 salons and SK-N concept store • Lime Light › revenue growth of 172% boosted by Hands Down and Smart Buy acquisitions (wef June 2019) › like-for-like sales up 20% • ClaytonCare › ClaytonCare revenue up by 29% driven by increased occupancy and patient acuity › L4L has an effective 36% economic interest and 100% ownership of the Clayton House facility › Clayton House and Care@Midstream back-office functions merged * Pre IFRS 16 Leases 13
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