GROUP INTERIM RESULTS for the 26 weeks ended December 2011 Agenda - PowerPoint PPT Presentation

GROUP INTERIM RESULTS for the 26 weeks ended December 2011

Agenda • The retail and economic environment • Review of the interim period • Trading and operating performance • Credit management • Capital management • African expansion • Outlook • Questions

The retail and economic environment

Retail and economic environment Impact South African retail sales rose at the fastest pace in eight months in December 2011 to 8.7% year-on-year (November 2011: 6.8%). December CPI was the highest for 2011 at 6.1% (Dec 2010: 3.5%). Positive growth in GDP, however growth is slowing. Third quarter of 2011 1.4%. Interest rates are expected to remain at current low levels for at least the remainder of the 2012 financial year. Unemployment at a high rate of 23.9% for the fourth quarter of 2011 (Second and third quarter of 2011, 25.7% and 25% respectively). At a national level, the percentage and number of consumers with impaired credit records remains high.

Review of the interim period

Financial highlights Sale of merchandise of R 4.7 billion up 11% Trading profit of R 1.4 billion up 15% Operating profit of R 1.7 billion up 14% Headline earnings of R 1.2 billion up 14% Headline earnings per share (HEPS) of 277.6 cents up 14%

Financial targets Dec 2011 Dec 2010 Jun 2012 Target Actual Actual Gross margin (%) 54-57 56.9 56.6 Operating margin (%) 33-36 36.8 35.9 Return on equity (%) 40-45 45* 44* Return on assets (%) 44-48 49* 47* Inventory turn (times) 6.0-6.5 6.2* 6.6* Asset turnover (times) 1.2-1.5 1.3* 1.3* * Annualised

Key financial ratios Dec Dec Jun 2011 2010 2011 Trading margin (%) 29.7 28.7 28.3 Profit before interest paid, tax, depreciation and (%) 38.3 37.5 38.0 amortisation (EBITDA) margin Total liabilities to total equity (%) 27 28 23 Cash and cash equivalents to total equity (%) 32 35 30 Return on capital (%) 66* 64* 61 Net asset value per share (cents) 1 326 1 182 1 192 * Annualised

Sale of merchandise and profit after tax Compound growth rates: Compound growth rates: Profit after tax: Sale of merchandise: Dec 3 year 14%, 5 year16% Dec 3 year 12%, 5 year 13% Sale of merchandise (Rbn) Profit after tax (Rbn) Jun 3 year 14%, 5 year18% Jun 3 year 12%, 5 year 16% 2.1 8 7 1.8 1.9 6 1.5 1.6 5 1.4 1.2 1.3 4 1.2 1.1 0.9 1.0 3 0.9 0.8 0.6 0.7 2 0.3 1 4.9 5.7 6.2 6.9 7.9 3.0 3.3 3.7 4.2 4.7 - - Jun 2007 Jun 2008 Jun 2009 Jun 2010 Jun 2011 Dec 2007 Dec 2008 Dec 2009 Dec 2010 Dec 2011 Sale of merchandise (Rbn) Profit after tax (Rbn)

Gross profit trend Compound growth rates: Average: Gross profit: Gross margin: Dec 3 year 14%, 5 year 14% Dec 3 year 56.7%, 5 year 56.0% Jun 3 year 13%, 5 year 17% Jun 3 year 55.7%, 5 year 55.4% Gross margin (%) Gross profit (Rbn) 5.0 60 4.5 57 57 57 56 55 55 55 55 55 55 50 4.0 3.5 40 3.0 2.5 30 2.0 20 1.5 1.0 10 0.5 2.7 3.1 3.4 3.8 4.5 1.7 1.8 2.1 2.4 2.7 - - Jun 2007 Jun 2008 Jun 2009 Jun 2010 Jun 2011 Dec 2007 Dec 2008 Dec 2009 Dec 2010 Dec 2011 Gross profit (Rbn) Gross margin (%)

Analysis of trading expenses change on prior Dec 2011 Dec 2010 period Rm Rm % Depreciation and amortisation 68 68 - Employment costs 449 445 1 Occupancy costs 369 327 13 Trade receivables costs 284 222 28 Other operating costs 213 213 - Trading expenses 1 383 1 275 8

Analysis of trading expenses (continued) Trading expenses increased 8%: • Depreciation and amortisation (unchanged on prior period): – Capital expenditure of R 86 million in the period. • Employment costs (1% growth): – Excluding non-comparable costs, fair value on interest free loans and the provision for incentive bonuses, comparable employment costs increased by 6%. • Occupancy costs (13% growth): – A net 14 stores opened from Dec 2010 to Dec 2011. – Trading space growth of 4.5% on Dec 2010 (2.3% on Jun 2011). – Excluding non-comparable store costs, comparable occupancy costs increased 8%. – Normal rental escalations averaged 8% during the period. – Electricity cost increased 33% (comparable electricity costs increased 25%).

Analysis of trading expenses (continued) • Trade receivable costs (28% growth): – Net bad debt as a percentage of gross trade receivables increased to 8.0% (Dec 2010: 7.5%, Jun 2011: 6.8%). – The doubtful debt allowance remained at 10.1% of gross trade receivables (Dec 2010: 10.1%, Jun 2011: 10.1%). – The interest income earned (including notional interest) of R 290 million (Dec 2010: R 259 million) on the debtors’ book during the period offsets net bad debts and associated costs of R 284 million (Dec 2010: R 222 million). • Other operating costs (unchanged on prior period): – Excluding non-comparable costs and foreign exchange profits of R 25 million (R 16 million unrealised and R 9 million realised), (Dec 2010: R 13 million unrealised loss and R 7 million realised loss), comparable other operating costs increased 11%.

Trading expenses as a % of sale of merchandise Compound growth rates: Average: Trading Expenses: Trading expenses to sales: Dec 3 year 10%, 5 year 12% Dec 3 year 30.3%, 5 year 30.6% Jun 3 year 9%, 5 year 15% Jun 3 year 32.0%, 5 year 32.2% % 33 33 35 32 32 31 31 31 31 30 30 30 31 * 25 20 21 20 15 12 10 11 11 10 10 8 5 6 - Jun 2007 Jun 2008 Jun 2009 Jun 2010 Jun 2011 Dec 2007 Dec 2008 Dec 2009 Dec 2010 Dec 2011 Expense % growth Trading expenses to sales % * Expense growth in the 2007 financial period: Acquisition of Uzzi (30 stores), 38 new stores and higher trade receivable costs.

Trading profit performance Compound growth rates: Average: Trading profit: Trading margin: Dec 3 year 18%, 5 year 16% Dec 3 year 28.7%, 5 year 27.6% Jun 3 year 18%, 5 year 18% Jun 3 year 26.0%, 5 year 25.6% Trading margin (%) Trading profit (Rbn) 30 29 28 2.5 30 27 26 26 26 26 24 24 25 2.0 20 1.5 15 1.0 10 0.5 5 1.3 1.4 1.5 1.8 2.2 0.8 0.8 1.0 1.2 1.4 - - Jun 2007 Jun 2008 Jun 2009 Jun 2010 Jun 2011 Dec 2007 Dec 2008 Dec 2009 Dec 2010 Dec 2011 Trading profit (Rbn) Trading margin (%)

Operating profit performance Compound growth rates: Average: Average: Operating profit: EBITDA Margin: Operating Margin: Dec 3 year 14%, 5 year 16% Dec 3 year 37.3%, 5 year 36.8% Dec 3 year 35.7%, 5 year 35.2% Jun 3 year 15%, 5 year 18% Jun 3 year 36.7%, 5 year 36.0% Jun 3 year 34.7%, 5 year 34.0% Margins Operating profit (%) (Rbn) 38 38 3.0 40 38 36 36 36 36 36 35 35 35 37 2.5 36 36 35 34 34 34 34 30 33 33 2.0 25 1.5 20 15 1.0 10 0.5 5 1.6 1.9 2.1 2.4 2.9 1.0 1.2 1.3 1.5 1.7 - - Jun 2007 Jun 2008 Jun 2009 Jun 2010 Jun 2011 Dec 2007 Dec 2008 Dec 2009 Dec 2010 Dec 2011 Operating profit (Rbn) EBITDA margin (%) Operating margin (%)

Headline earnings and dividend per share Compound growth rates: Compound growth rates: HEPS: DPS: Dec 3 year 15%, 5 year 17% Jun 3 year 22%, 5 year 24% Cents per Jun 3 year 15%, 5 year 20% share 500 456 450 400 378 338 350 296 300 278 262 249 243 250 203 200 185 200 171 160 128 144 150 120 102 88 100 72 50 * - Jun 2007 Jun 2008 Jun 2009 Jun 2010 Jun 2011 Dec 2007 Dec 2008 Dec 2009 Dec 2010 Dec 2011 DPS HEPS *Dividend deferred until after 1 April 2012

Cash flows for the period Rm 1 600 334 1 400 236 557 1 200 17 1 000 800 1 483 565 600 1 007 69 400 83 14 200 304 - EBITDA Working Interest Tax paid Capex Free Dividends Capex Share Other Net capital received maintenance cash flow expand buy-backs cash flow movement

Statements of financial position change on prior Dec 2011 Dec 2010 period Jun 2011 Rm Rm % Rm Non-current assets 1 115 1 099 1 1 093 Prepayments and derivative 36 58 (38) 79 financial assets Cash and cash equivalents 1 793 1 790 - 1 489 Trade and other receivables 3 514 3 006 17 3 033 Inventories 666 555 20 530 Total assets 7 124 6 508 9 6 224 Total equity 5 610 5 068 11 5 046 Non-current liabilities 91 101 (10) 84 Current liabilities 1 423 1 339 6 1 094 Total equity and liabilities 7 124 6 508 9 6 224

Return on equity Average: Return on equity: Dec 3 year 44.7%, 5 year 47.6% Jun 3 year 41.7%, 5 year 44.6% % 60 53 51 50 48 50 45 45 44 44 41 40 40 30 20 10 - Jun 2007 Jun 2008 Jun 2009 Jun 2010 Jun 2011 Dec 2007* Dec 2008* Dec 2009* Dec 2010* Dec 2011* * Annualised

Inventory turn Inventory turn average: Dec 3 year 6.3 times, 5 year 6.3 times Jun 3 year 6.5 times, 5 year 6.4 times Times 6.9 6.6 7 6.5 6.4 6.4 6.4 6.1 6.2 6.1 6.1 6 5 4 3 2 1 - Jun 2007 Jun 2008 Jun 2009 Jun 2010 Jun 2011 Dec 2007* Dec 2008* Dec 2009* Dec 2010* Dec 2011* * Annualised

Trading and operating performance