Marius Bosman Chief Financial Officer 2 Size of Operation June - - PowerPoint PPT Presentation

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Marius Bosman

Chief Financial Officer

June 2015

Turnover R113.7bn Total Stores 2 111 Countries 15 Employees 132 942 Market Capitalisation* ± R92bn

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Size of Operation

* During August 2015

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R113.7bn R6.3bn 5.57% Turnover Dividend per Share Trading Margin Trading Profit 386c

Financial Highlights

769.1c Diluted Headline EPS

June 2014 Opened

(12 months)

Closed

(12 months)

June 2015

Supermarkets RSA 877 49 (11) 915 Supermarkets Non-RSA 169 23 (3) 189 Hungry Lion 167 20 (11) 176 Furniture 368 105 (2) 471 OK Franchise 367 28 (35) 360 Total Stores 1 948 225 (62) 2 111 Pharmacies 150 7 (1) 156 Liquor Stores 241 52 – 293

Store Portfolios

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Growth %

Supermarkets RSA 10.5% Supermarkets Non-RSA 13.5% Furniture 13.0% Other Divisions 13.8% Total 11.2% Like-for-Like 4.3%

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Sales Growth per Segment

June 2014 Rm June 2015 Rm Growth % Finance Income Earned 260 296 13.9 Net Premiums Earned 370 409 10.3 Operating Lease Income 300 335 11.9 Commissions Received 635 695 9.4 Franchise Fees Received 51 58 12.2 Investment Income 36 99 >100 Sundry Income 1 188 1 536 29.4 Total 2 840 3 428 20.7

Other Operating Income

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Highlights of Results

Depreciation and amortisation increased by 13.6%

• New branches and IT
• Exchange rate weakness driving store opening costs

Operating leases increased by 15.2%

• Renewals and new stores opened at higher rentals

Employee benefits increased by 10.2%

• Staff requirements for new stores
• Like-for-like increase only 5%

Other operating expenses increased by 12.7%

• Electricity costs increased
• Includes increased commission on bank cards

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Highlights of Results

June 2014 Rm June 2015 Rm Growth %

Supermarkets RSA 4 751 5 268 10.9 Supermarkets Non-RSA 673 741 10.1 Furniture 196 205 4.6 Other Divisions 94 114 21.3 Total 5 714 6 328 10.7

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Key Information per Segment

Trading Profit

Exchange rate differences

• June 2014:

R9.4 million loss

• June 2015:

R131.6 million loss

Rand to US Dollar exchange rates (R:$)

• June 2013:

R9.96

• June 2014:

R10.62

• June 2015:

R12.13

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Highlights of Results

Angolan and Nigerian currencies affected by falling oil price

June 2014 Rm June 2015 Rm

Net Interest Paid 120 69 IFRS Adjustment – Convertible Bonds 116 130 Total 236 199

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Highlights of Results

Net Interest Expense

Normal 1 767 1 897 Deferred (40) (49) Total 1 727 1 848 Effective Tax Rate 31.6% 30.9%

Income Tax Expense

675 884 1 273 698 1 216 1 384 769 1 330 1 508 12

Highlights of Results

* Cash flow from operating activities excluding dividends paid and changes in working capital

Diluted HEPS vs Cash EPS* vs EBITDA per share (cents)

Diluted HEPS Cash EPS* EBITDA per share June 2013 June 2014 June 2015

• Dilution due to full share grants awarded

June 2014 Rm June 2015 Rm

Land and Buildings

354 542

Distribution Centres

202 280

DC Equipment and Vehicles

200 375

Store Refurbishment

580 354

New Stores

1 600 1 928

• RSA

1 047 823

• Non-RSA

553 1 105 Information Technology

551 796

Other Replacements*

434 356 Total 3 921 4 631

* Motor vehicles and office furniture

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Highlights of Results

Capital Expenditure

June 2014 Rm June 2015 Rm Growth %

Furniture Instalment Sales

1 413 1 557 10.2

Franchise

681 834 22.5

Buy-aid Organisations

119 102

• 14.3

Rental and Property Debtors

535 518

• 3.2

MediRite and Transpharm

334 328

• 1.8

Money Market and Computicket

125 87

• 30.4

Other Receivables*

873 1 593 82.5

Total

4 080 5 019 23.0

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Highlights of Results

* Includes Palanca insurance claim receivable

Debtors and Other Receivables

9,000 10,000 11,000 12,000 13,000 14,000 15,000

Palanca Fire

Rm

R747m

Closing Stock Opening Stock New Stores Sales Growth Inflation Strengthening Rand Effective Stock Reduction

Inventory 12 344 13 689 10.9

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Stockholding

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June 2014 Rm June 2015 Rm Growth %

June 2014 Rm June 2015 Rm Growth %

Net Cash Balances 8 100 7 058

• 12.9

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• Month-end closing date
• Timing of provisional tax payments

Highlights of Results

June 2014 Rm June 2015 Rm

Stores 2 200 1 297

• RSA

697 679

• Non-RSA

1 503 618

Distribution Centres 239

• IT Systems

38 298 Total 2 477 1 595

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Highlights of Results

Contracted Capital Commitments

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• Household disposable income continues to remain under pressure
• Market severely disrupted by the demise of Ellerines
• Sold products for up to 70% of cost to generate cash
• Closure of local manufacturers
• Not getting paid by Ellerines
• Had to import more > weakening of the rand lead to higher costs

Furniture – Overview

NEGATIVES

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• Sales growth remained buoyant at 13%
• Internal inflation of 0.13%
• Trading profit growth of 4.67%
• Strong sales performance in OK Furniture and

OK Power Express due to the opening of 105 new stores

• House & Home has improved substantially

Furniture – Overview continued

POSITIVES

Opened Since July 2014 Total June 2015 Confirmed June 2016

OK Furniture 80 374 20 OK Power Express 9 33

• OK Furniture Dreams

12 12 2 House & Home 4 52 1 Total 105 471 23

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Store Numbers

• Closed one OK Furniture store and one OK Power Express
• No Ellerines store deals concluded with business practitioners
• Concluded 54 deals directly with landlords on previous Ellerines stores

Furniture continued

June 2014 June 2015

Home and Entertainment Appliances 63.9% 63.1% Furniture, Bedding, Patio and Carpeting 36.1% 36.9% Cash 69.6% 71.6% Credit 30.4% 28.4%

OK Furniture House & Home

Increase 13.6% 11.7% Like-for-Like 0.7% 8.0%

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Sales Sales Mix R4.5bn +13.01%

Furniture – Trading Environment

June 2014 June 2015 June 2014 June 2015

Debtors Book (Gross) +11.8% R1.7bn R1.9bn New Contracts +0.08 % 268 956 269 181 Actual Arrears 9.9% 10.9% Balance of Contract Arrears 29.7% 32.3% Bad Debts Provision 12.0% 11.8%

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Debtors Book Arrears

Furniture – Debtors Book

• High debt levels affect affordability and collections
• Stricter affordability regulations

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• Increased store footprint: 23 new stores confirmed to June 2016
• Current turnover growths encouraging
• Ongoing product range refreshing
• NCR interest rate reductions were published for comment
• Talk in market of capping credit risk insurance

Furniture – Outlook

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Whitey Basson

Chief Executive Officer

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Trading Environment

84 000 88 000 95 050 102 137 111 338 123 100 132 942

2009 2010 2011 2012 2013 2014 2015

• SA economy not growing and no real job creation
• Weak rand and low commodity prices
• Unemployment at 25%
• 23 000 mining jobs lost since April
• Shoprite, however, created 9 842 new jobs in the last 12 months!

Employees

+ 48 942 jobs created in past 6 years

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• Load-shedding impacted growth
• 1% impact on GDP
• A total of 139 000 hours of store downtime
• Equates to 1 full week of trading lost in each store in the Group!
• R33m spent on diesel for generators since December 2014
• No significant increases in social grants affects Shoprite
• More and more retailers adding food ranges and space
• 13 of 14 Non-RSA countries’ GDP growing ahead of RSA

Trading Environment continued

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Group Overview – New Stores

• Good sales growth of 11.2%, up from 10.5% last year

46 44 57 76 38 8 17 19 16 20 54 58 92 76 61

2011 2012 2013 2014 2015

Net New Supermarkets

Non-RSA RSA

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Group Overview

• RSA growth ahead of opposition
• 9th year in a row of market share gain
• Non-RSA sales growth 21.2% excluding Tanzania disposal

and Palanca store (constant currencies)

• Selectively invested into price
• Good volume growth – supermarkets sold almost 6 billion items
• Trading density increased

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RSA sales ahead of peers (10.5% vs 8.6%)

• Total market share at 32.1% for the year (+0.4%)
• Internal food inflation stable at 4.6%
• Weekly price surveys confirm we are the cheapest supermarket in SA
• Attracting a record 32 million additional feet (+4.2%)
• 72% of all adults now shop with us, nearly double that of our nearest rival

Supermarkets RSA

Percentage of SA that shops at the Shoprite Group’s stores

Sources: AMPS and Nielsen

2008 2015

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Supermarkets RSA

• USave’s winning formula – a record 100 million people through the doors
• Checkers customers’ spending remained more resilient
• 1 out of 2 of LSM 8–10 shoppers now choose Checkers
• Shoprite’s sales improved and is South Africa’s most decorated retailer

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Supermarkets Non-RSA

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+5%

• Non-RSA contributed 16% to the Group’s supermarket turnover
• Compound growth is double RSA’s over last 4 years: 18.1% vs 8.2%

Supermarket Sales Contribution

2011 2015

Non-RSA RSA 84% 89% 11% 16%

Supermarkets Non-RSA

• Non-RSA trading from 189 supermarkets (20 net new stores)
• 17 958 employees and 2 100 local suppliers
• Zambia showed sales growth of 21.4% despite a total of

33 South African competitor stores

• Nigeria’s sales up 19.7% regardless of challenges
• Lower oil revenues affected spending
• Fuel shortage in May
• Forex restrictions affecting the import of key items
• Dollar strength pushing up rental costs
• Focused on building our own brands – private label growth of 22%

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Collectively contributed R13.2bn to turnover

• Money Markets: collections increased 18.2%
• Computicket: less high profile events due to weak rand
• Travel up 16.6% (sold enough tickets to fill 51 000 busses)
• Pharmacy/Transpharm: filled 5.5m prescriptions, up 15%
• Efficiencies resulted in a reduced operating loss
• OK Franchise: improved supply chain through DC’s
• Sales up 15.8%
• Checkers Food Services: profitable & expanding to
• ther regions

Other Operations

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• LiquorShops
• Standout performer with 38% sales growth
• Largest corporately owned liquor outlet with 293 stores
• Opened 112 stores in 112 weeks
• Freshmark
• Increased focus on fresh
• 21.4% profitability growth despite only 1.7% inflation

Other Operations continued

• Savings on new interchange rates R38.5m since March 2015
• Staff costs increased below turnover growth – 3 year deal concluded
• Cost of security is over R1bn and exceeds transport costs
• Almost 3 stores every week hit by armed robberies
• Electricity cost increased 18.5% and now is almost R2bn
• R160m worth of additional generators procured

Expenses

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Delivering Real Value

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• Limit sell price increases below official food inflation

Delivering for our customers

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Our Promise of Lower Prices

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Delivering for our customers

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Delivering for Shareholders

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• Consistent trading profit growth in line with turnover

– Trading profit has more than doubled since recession in 2009

R 59 R 67 R 72 R 83 R 92.5* R 102.2 R 113.7

2009 2010 2011 2012 2013 2014 2015

R2.9 R3.5 R4.0 R4.7 R5.4 R5.7 R6.3

Trading Profit (Rbn) Turnover (Rbn)

* Restated for IFRS 11 “equity accounting for joint ventures“

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• Aim remains to take world-class food retailing into underserved areas
• 96 new supermarkets confirmed in next 12 months
• R6.6bn strategic property portfolio including R2.2bn in Non-RSA
• R24bn has been invested into centralised distribution, entrenching
• ur competitive advantage
• Continued investment in the medium term

Expanded Centurion Centre

Keep Building for the Future

Vergelegen Plein (Somerset West) Opened March 2015

AUGUST 2014 NOW

Opened May 2015 Namibe (Angola)

Keep Building for the Future

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Enabling Future Growth

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• Investing in enterprise IT platform over the next 5 years
• Large-scale SAP retail implementation
• Simplifies landscape and replaces outdated systems
• Agile system for quick deployment following acquisitions

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Outlook

• No help expected from RSA economy
• Greater contribution from 226 net supermarkets opened over the last 3 years
• Will not chase unprofitable market share but will remain the cheapest
• Price perception gives us the upper hand as consumers take strain

Who do you associate most with lower prices?

SHOPRITE CHECKERS HYPER CHECKERS COMPETITOR A COMPETITOR B COMPETITOR C COMPETITOR D COMPETITOR E Sample Size: 1 600 Source: WhyFIVE, July 2015 Indexed against shopper base

Outlook – Continued Expansion

46 44 57 76 38 61 8 17 19 16 20 35 54 58 92 76 61 96

Net new stores vs Group Turnover growth

Confirmed Non-RSA RSA

2011 2012 2013 2014 2015 2016

• Higher number of new supermarkets opening in next 12 months
• Record number of Non-RSA stores in a year planned

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African Consumerism is Alive

2015 2016

DRC 9.2 8.4 Zambia 6.7 6.9 Mozambique 6.5 8.1 Namibia 5.6 6.5 Malawi 5.5 5.7 Uganda 5.4 5.6 Madagascar 5.0 5.0 Nigeria 4.8 5.0 Angola 4.5 3.9 Botswana 4.2 4.0 Lesotho 4.0 4.4 Mauritius 3.5 3.5 Ghana 3.5 6.4 South Africa 2.0 2.1 Swaziland 1.9 1.8

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Outlook – African Economic Growth

• African economies where we trade are still forecast to grow well

Source: IMF

Forecast GDP growth (%)

9%

230 million

16% 25% 40%

1.2 billion 2.4 billion 4.2 billion 1950 2015 2050 2100 2.5 billion 7.3 billion 9.5 billion 11 billion Africa’s Population Accounts for

By the end of the century, 40% of people will be African

World’s Population

* Sources: UNICEF & Mashable Statista

• Nigeria could have a consuming class of 160 million by 2030 (Mckinsey Global Institute)

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