PRESENTATION OF CONSOLIDATED RESULTS for the quarter ended 26 - PowerPoint PPT Presentation

PRESENTATION OF CONSOLIDATED RESULTS for the quarter ended 26 September 2015

Q2 : FY16 RESULTS Strategic egic and op operatio tional l update Financial Review Looking forward

Consolidated results for the quarter ended 26 September 2015 Source: SARB & StatsSA MACRO BACKDROP 10.0 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 2013-06-01 2013-09-01 2013-07-01 PRIVATE SECTOR CREDIT EXTENSION (Y-O-Y %) 2013-10-01 2013-08-01 2013-11-01 GDP GROWTH AND UNEMPLOYMENT RATE 2013-09-01 2013-12-01 2013-10-01 2014-01-01 2013-11-01 2014-02-01 2013-12-01 2014-03-01 2014-01-01 2014-04-01 2014-02-01 2014-05-01 2014-03-01 2014-06-01 2014-04-01 2014-07-01 2014-05-01 2014-08-01 2014-06-01 Real GDP (y-o-y %) 2014-09-01 2014-07-01 2014-10-01 2014-08-01 2014-11-01 2014-09-01 2014-10-01 2014-12-01 2014-11-01 2015-01-01 2014-12-01 2015-02-01 2015-01-01 2015-03-01 Unemployment rate (%) 2015-02-01 2015-04-01 2015-03-01 2015-05-01 2015-04-01 2015-06-01 2015-05-01 2015-07-01 2015-06-01 2015-08-01 22.0 23.0 24.0 25.0 26.0 27.0 2015-09-01 10 10.0 12.0 14.0 16.0 18.0 0 2 4 6 8 8.0 2013/07 2014-10-29 2014-11-29 2014-12-29 2014/01 2015-01-29 REPO & PRIME RATE EXCHANGE RATES 2015-02-28 2015-03-31 2014/07 2015-04-30 2015-05-31 2015-06-30 2015/01 Prime rate 2015-07-31 USDZAR 2015-08-31 2015-09-30 Repo rate EURZAR 2015/07 3

Consolidated results for the quarter ended 26 September 2015 Source: SARB & StatsSA MACRO BACKDROP 10.0% 12.0% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 2013/07 Q2:2013 Q3:2013 2014/01 Q4:2013 Total retail sales RETAIL SALES INFLATION Q1:2014 2014/07 Q2:2014 Q3:2014 CFT sales 2015/01 Q4:2014 Q1:2015 2015/07 Q2:2015 76.0 77.0 78.0 79.0 80.0 81.0 -20 -15 -10 HOUSEHOLD DEBT TO GROSS DISPOSABLE INCOME RATIO -5 0 5 2013-03-01 Q3:2013 2013-04-01 2013-05-01 FNB/BER CONSUMER CONFIDENCE INDEX 2013-06-01 Q4:2013 2013-07-01 2013-08-01 2013-09-01 Q1:2014 2013-10-01 2013-11-01 2013-12-01 Q2:2014 2014-01-01 2014-02-01 Q3:2014 2014-03-01 2014-04-01 2014-05-01 Q4:2014 2014-06-01 2014-07-01 2014-08-01 Q1:2015 2014-09-01 2014-10-01 2014-11-01 Q2:2015 2014-12-01 2015-01-01 2015-02-01 Q3:2015 2015-03-01 4

KEY FEATURES FOR THE QUARTER  Retail sales ↓ 0.1% Constrained consumer SALES  Cash sales ↑ 5.6% environment continues to  Credit sales ↓ 7.6% impact top line  LFL Sales ↓ 2.2%  Pro forma adjusted EBITDA ↑ 3.1% PROFITS 5 th consecutive quarter of  Gross Profit ↓ 1.3% EBITDA growth  Edgars clearance well managed  Controlled costs well managed STRATEGY  Data-set gathering well advanced Vision in progress  Metamorphosis Consolidated results for the quarter ended 26 September 2015 5

GROUP INITIATIVES PEOPLE PRODUCT  An accredited Merchant Development Programme provides  Additional international brands launched shop-in-shop: entry level merchant talent to Edgars  Apparel: Vero Moda, Only and Jack Jones  Implementation of changes required under legislation  Cosmetics: Benefit, Dolce & Gabbana Colour & Treatment  Flexible labour force  Introduction of Verssed in Discount Division  Prioritisation of retention strategies  Entry level private label tablets  Coaching for senior leadership  Renewed focus on stationery in CNA  De-prioritisation of music and visual ranges  Boardmans “own - brand” offer expanded and improved SERVICE PROPERTY  Positive shift in Edgars customer experience ratings following  New concept Jet store launched in Cresta  Nationwide “Lets Connect” staff engagement sessions  Approved implementation of a new CNA concept  In-store voice of the customer feedback daily  Courier, printing, scanning and binding services through shop-in-shop planned  Focus on staff recognition for living the Edcon Values  Discount stores closed to consolidate space predominantly  NCR affordability requirements rolled out to all stores within CBDs  Lay-buy options to assist customers  Initiation of 100% LED illumination of trading floor  Service/Product specialists in CNA  Skills and knowledge improvements Consolidated results for the quarter ended 26 September 2015 6

EDGARS DIVISION 203 Edgars stores · LSM 6-10 175 Edgars Active stores · LSM 4-7 34 Boardmans stores · LSM 7-10 Q2:FY16 Q2:FY15 Retail sales growth (%) (0.3) 3.0  Cash sales grew 6.0% while credit sales reduced 6.7% LFL Sales growth (%) (2.6) (1.7)  Mono-branded stores performance GP Margin (%) 36.9 38.2 continues to be positive No. of stores  Margin impacted by 549 510  Aggressive winter clearance Capex spend (R’m) 81 171 introduced early  Underlying margins remain sound  5 new stores opened, with 78% of capex spend on expansion  Two River Island flagship stores opened 43 Red Square stores - LSM 5-10 7 Edgars Shoe Gallery stores · LSM 5-10 85 Mono-branded stores · LSM 7-10 Consolidated results for the quarter ended 26 September 2015 7

DISCOUNT DIVISION 391 Jet stores · LSM 4-7 208 Legit stores · LSM 5-8 129 Jet Mart stores · LSM 4-7 Q2:FY1 :FY16 Q2:FY1 :FY15  Cash sales grew 6.1% while Retail sales growth (%) (0.1) 2.0 credit sales reduced 10.7% LFL Sales growth (%) (2.0) (1.0)  Margin accretion due to GP Margin (%) 33.5 32.7  Improved pricing  Stock levels well managed No. of stores 728 702  6 new stores in the quarter, Capex spend (R’m) 31 42 71% of capex on new stores  New concept store being trialled at same time new brand launched Consolidated results for the quarter ended 26 September 2015 8

CNA DIVISION 197* CNA stores · LSM 7-10 Q2:FY1 :FY16 Q2:FY1 :FY15  Cash and credit sales declined Retail sales growth (%) (4.3) (3.7) by 0.9% and 14.4% respectively LFL Sales growth (%) (5.6) (4.6)  Margin impacted by GP Margin (%) 28.8 30.8  Product mix No. of stores 197 193 Capex spend (R’m) 5 2 * Includes 6 Samsung stores Consolidated results for the quarter ended 26 September 2015 9

Q2 : FY16 RESULTS Strategic and operational update Financial cial Revi view Looking forward

KEY HIGHLIGHTS FOR Q2:FY16  5th consecutive quarter of positive EBITDA growth PRO FORMA ADJUSTED EBITDA IMPROVING  Strong cash sales offset by continued weakness in credit sales  Credit: Cash sales ratio of 40.3% from 43.5% in Q2:FY15* % change on previous period  Own book continues to supplement offering 11.1%  Underlying margin well ahead of last year, positioning us well for peak quarter 4.2%  Aggressive clearance of aging winter stock resulting in healthy profile and 3.1% 2.5% stock levels 1.0%  Cost continues to be well managed in all areas  More opportunity exists  Continued focus on working capital management -6.6% Q1:FY15 Q2:FY15 Q3:FY15 Q4:FY15 Q1:FY16 Q2:FY16 * Including Edgars Zimbabwe Consolidated results for the quarter ended 26 September 2015 11

STATEMENT OF COMPREHENSIVE INCOME (R millions) Q2:FY15 Q2:FY16 % change Retail sales 6 190 6 181 (0.1) Gross profit 2 215 2 187 (1.3) Gross profit margin 35.8 35.4 (0.4)pts 277 359 Other income 29.6 Store costs (1 506) (1 565) 3.9 Other operating costs (1 019) (1 127) 10.6 Share of profits of associates 168 264 57.1 135 118 Trading profit (12.6) Pro forma adjusted EBITDA 486 501 3.1 Consolidated results for the quarter ended 26 September 2015 12

PRO FORMA ADJUSTED EBITDA (R millions) Q2:FY15 Q2:FY16 % change Trading profit 135 118 (12.6) 263 251 Depreciation & amortisation Net asset write off (1) 3 3 Profit from discontinued operations (2) 25 4 Non-recurring costs (3) 93 133 519 509 Adjusted EBITDA (1.9) Net income from previous card programme (4) (35) (36) Net income from new card programme (5) 2 28 Pro forma adjusted EBITDA 486 501 3.1 Pro forma adjusted EBITDA margin 7.9% 8.1% 0.2 pts (1) Relates to assets written off in connection with store conversions, net of related proceeds . (2) The results of discontinued operations are included before tax. (3) Relates to costs associated with various strategic initiatives in Q2:FY16 of R119 million, onerous lease charges of R14 million in Q2:FY16 (R53 million in Q2:FY15),restructuring credit of R1 million in Q2:FY16 (R6 million charge in Q2:FY15), lease cancellation cost of R1 million in Q2:FY16 and R34 million in costs associated with the trade receivables book in Q2:FY15. (4) Net income derived from 100% of the trade receivables including finance charges revenue, bad debts and provisions. (5) Pro forma fee earned by Edcon under the new arrangement with Absa, based on 100% of the trade receivables book. Consolidated results for the quarter ended 26 September 2015 13