EXPERIENCE LONG4LIFE LIMITED RESULTS PRESENTATION FOR THE YEAR - - PowerPoint PPT Presentation

LIVING THE EXPERIENCE

LONG4LIFE LIMITED

RESULTS PRESENTATION

FOR THE YEAR ENDED 29 FEBRUARY 2020

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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

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AGENDA

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

Colin Datnow – Group COO

• Sport and Recreation
• Beverages
• Personal Care and Wellness

Mireille Levenstein – Group CFO

• Financials

Q&A

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Brian Joffe CEO

Long4Life in a COVID-19 world and beyond

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• 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)

Long4Life in a COVID-19 world and beyond

The year that was

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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

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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

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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

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Colin Datnow COO

Operations

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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

• 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

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%)

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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

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*

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• 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
• f 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

Beverages

Revenue R1 487m (+10%), trading profit R139.8m* (-9%), trading margin 9.4% vs. 11.3%

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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

Long4Life in a COVID-19 world and beyond

What we are doing about it at Beverages, 36% of revenue, 27% of trading profit*

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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

Personal Care and Wellness

Revenue R310m (+78%), trading profit R67.2m* (+73%), trading margin 21.7% vs. 22.4%

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Sorbet, Lime Light, ClaytonCare

• Challenges

› Sorbet franchisees have been hit hard by lockdown, with no revenue, whilst staff have no commission and tips › waiver and deferral of all franchise related fees and support provided in liaising with landlords and accessing government relief schemes › the possibility exists that some salons will not re-open their doors › Lime Light supplies equipment, consumables and branded goods to beauty and hair salons and future demand is uncertain › goods are predominantly sourced from abroad hence there will be adverse FX effects › although least affected, ClaytonCare occupancy has been impacted due to the embargo on elective surgeries during level 5 lockdown

• Opportunities

› Sorbet recovery is difficult to gauge as it depends on when stores can re-open, relatively resilient customer base, run by motivated franchisees › Lime Light well positioned to increase market share in what remains a very fragmented market › ClaytonCare foresee an increase in the need for post-acute care services flowing from a surge in the at-risk population as a result of Covid-19

* Pre IFRS 16 Leases and before corporate costs

Long4Life in a COVID-19 world and beyond

What we are doing about it at Personal Care and Wellness – represents 8% of revenue and 13% of trading profit*

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Mireille Levenstein CFO

Financial

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39,3% 39,7% 11,4% 12,5% F2020 F2019 F2020 F2019 Gross profit (%) Trading margin (%)

Profit & loss

Solid trading performance in a tough consumer environment

* Pre IFRS 16

R’million 2020 2019 % change Revenue 4 091 3 642 12 Gross profit 1 607 1 446 11 Trading profit* 467 454 3 HEPS* cents 43.8 38.7 13

• IFRS 16 introduced in current year – proforma results provided to enable like for like

comparatives, small impact on HEPS (0.4 cents)

• Revenue up 12% : organic revenue up 10% (Sport & Recreation up 9%,

Beverages up10%), 2% from Personal Care and Wellness acquisitions

• Trading profit* R467.2m up 3%: Sports & Recreation, Inhle, Personal Care satisfactory,

Chill underperformed

• Trading margin* of 11.4% from 12.5% in prior year, decrease a function of:

› Gross margin decrease – Sport & Recreation margin down by 1% to 47.0% (increased mark downs and mix), Beverages GP impacted by suboptimal capacity utilisation at Chill › Expenses* growth 15% year on year: 4% growth from inclusion of acquisitions › Staff and premises* comprise 76% of total expenses

• Net fair value profit on sale of Spur shares R27.7m (10.4m shares sold before year-end

and 3.3m shares sold on 3 March – total cash profit R34m)

• Share based pmt expense : non-cash expense, FSP scheme introduced late in 2019,
• nly small portion of the CSP expense will vest
• HEPS* of 43.8 cents up 13% – weighted shares 839m (2019: 902m)

Shares in issue net of treasury 774.4m (2019: 877.4m) after buy back

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Balance sheet

Strong cash positive Balance Sheet provides optionality

• Robust Balance Sheet
• IFRS 16 ROU asset R523m and ROU long and short-term liability R643m
• Cash R829m, borrowings R83m (Chill bond), Spur shares R75m (subsequently realised)
• ROFE 38% decreased from 42% in 2019 mainly due to Chill
• ROE 7.7% (2019: 7.6%)
• Net working capital of R657m up 8%, reduction in payables in Beverages of R35m
• Improvement in inventory, but still not optimal
• Majority of debtors (90%) not > 30 days – Sportsmans and Outdoor Warehouse do not
• ffer credit

* Pre IFRS 16

Ratios 2020 2019 Inventory days 129 135 Inventory turnover 3.0x 2.7x Current ratio* 4.1 4.2 NAV per share* (cents) 618 548 Tangible NAV per share* (cents) 223 202 Working capital (R’000) 2020 2019 Sport and Recreation 516 517 Beverages 105 83 Personal Care and Wellness 47 20 Corporate (12) (13) Total 657 607

77% 16% 7% Sport and Recreation Beverages Personal Care and Wellness

2020 working capital per division

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Cash flow

Underlying cash flow generation remains good

• Excellent cash conversion at 112% and cash generated after working capital up 14%
• Seasonality evident, 78% of cash generated in second half
• Significant improvement in free cash flow: R221m (2019: R155m)
• Capital expenditure at R179m up15% (R94m maintenance, R85m expansion)
• Cash for acquisitions R41m (2 bolt-ons in Personal Care and Wellness)
• Share buy backs R426.5m (cumulative since 2019 – R586.1m)

* Pre IFRS 16

Operational cash flows* 2020 2019 % change Cash generated before changes in working capital 557 027 536 944 Changes in working capital (25 585) (71 854) Cash generated by operations* 531 442 465 090 14% Cash flows from operating activities* 438 445 390 195 12% Cash flows from investing activities (258 302) (566 462) 54% Cash flows from financing activities* (438 653) (427 250) 3%

40% 55% 5% Sport and Recreation Beverages Personal Care and Wellness

2020 capex per division

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Financial analysis

L4L has the capacity to remain liquid during COVID-19 lockdown

Conclusion

• Financial priority is cash conservation
• Action plans in place continuously updated, including:

› ongoing detailed review of inventory and purchases strategy for different lockdown scenarios › costs across the board being scrutinised and reduced where possible › Capex curtailed deferred unless committed

• Cash flow projections continuously reassessed for different lockdown developments
• Focus on realisation of inventory, realignment of working capital
• Managing the business for cash flow, not for accounting profits
• As at today’s date, group cash balances have not declined materially

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Questions

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THANK YOU