Presentation for 26 weeks ended 28 June 2015 The Environment Its - - PowerPoint PPT Presentation

▶
presentation
SMART_READER_LITE
LIVE PREVIEW

Presentation for 26 weeks ended 28 June 2015 The Environment Its - - PowerPoint PPT Presentation

Mar 10, 2024 92 likes •522 views

Results Presentation for 26 weeks ended 28 June 2015 The Environment Its tough gh out ther ere! South Africa: Consumer confidence at 14-year low CPI range-bound but Food inflation soon to increase Manufacturing sector in

slide-1
SLIDE 1

Results Presentation

for 26 weeks ended 28 June 2015

slide-2
SLIDE 2

In Interim results Presentation August 2015 2

It’s tough gh out ther ere!

The Environment

South Africa:

  • Consumer confidence at 14-year low
  • CPI range-bound but Food inflation soon to increase
  • Manufacturing sector in technical recession. Load-shedding. Job losses
  • And entering a 12–18 month interest up-cycle (+50bps?)
  • Increasing legislative & regulatory demands

Africa:

  • Many countries affected by double-dip of lower Commodities’ prices and USD strength
  • Weak & volatile currencies
  • USD is de facto currency
  • But long-term potential remains intact
slide-3
SLIDE 3

In Interim results Presentation August 2015 3

Dive vergent rgent behavi viour ur. . Place ce your bet ets! s!

Retail Environment

  • Upper-income consumers stable but confidence falling.

Lower asset prices now to compound this?

  • Middle-income affected by job losses. Direction of the credit cycle unclear?
  • Lower-income sustained by Commodities’ deflation, buffeted by job losses
  • National sales data seems ok – are majors holding share at expense of weaker businesses?
  • Time for caution in South Africa – too much space, too little volume growth?
  • Intense competition in Retail Food
  • Commodities in deflation, likely to reverse soon
  • Weak demand and cost-inflation causing pressure along entire retail value chain
  • Some retailers benefitting from weaker / failed formal competitors
  • Retailers seeking new growth avenues: ex-SA, ex-Africa, new formats, new categories
slide-4
SLIDE 4

In Interim results Presentation August 2015 4

Trust our model.

  • el. Supe

perb b executio ution. . Be patient ent and d measur asured ed.

Massmart Response

  • Grow market share in our major categories
  • Very deliberate about our South African new space growth (only 0.8% space growth in H1)
  • Invest in skills & capability – people, IT & Supply Chain – for the longer-term
  • Customer traffic & loyalty through omni-channel
  • African growth – Game, Builders Warehouse, and Cash & Carry –

measured and steady pace

  • Reduce operating costs as % of sales (12-mth rolling Opex as % of sales is 16.3%)
  • Maintain positive price-gap
  • Acquire strategically significant prime real estate – avoids future cost inflation &

permanently secures retail site

  • Supplier collaboration
  • Private label
slide-5
SLIDE 5

In Interim results Presentation August 2015 5

Financial Performance

Great sales growth, good margin management and decent cost control in tough environment.

26 weeks June 2015 (Reviewed) % of sales 26 weeks June 2014 (Reviewed) % of sales Period % growth Comparable % sales growth Estimated % sales inflation

Sales

38,917.4 35,659.8 9.1 6.9 3.7 Massdiscounters 8,973.6 8,225.8 9.1 4.1 2.1 Masswarehouse 10,759.2 9,659.4 11.4 11.4 4.3 Massbuild 5,637.1 4,847.9 16.3 10.6 5.1 Masscash 13,547.5 12,926.7 4.8 3.9 3.6

Trading profit before interest and tax

806.7 2.1 729.9 2.0 10.5 Massdiscounters 29.6 0.3 27.4 0.3 8.0 Masswarehouse 461.3 4.3 406.5 4.2 13.5 Massbuild 243.9 4.3 186.2 3.8 31.0 Masscash 71.9 0.5 109.8 0.8 (34.5)

slide-6
SLIDE 6

In Interim results Presentation August 2015 6

Short-term:

  • Improving SA performance
  • Food roll-out: 19 new / converted Fresh stores since June ‘14.

Sales participation now 19%

  • Weak African environment. Negative Rand comparable sales growth
  • Merchandise renewal – rationalise categories & merchandise ranges
  • Improving in-stock service levels, and SA inventory below June ‘14
  • Positive price-gap in GM and Food

Longer-term:

  • Category renewal – Gen Merch & Food – younger, female, family
  • Optimise supply chain utilisation
  • SAP GK point-of-sales implementation in 2016, and SAP ERP likely

for 2017 Short-term erm trading ding recover very. . Longer er-term m busines ness s renewal al.

Perspective on Game

slide-7
SLIDE 7

In Interim results Presentation August 2015 7

Short-term:

  • Commodities (25% participation) in deflation – caused margin pressure.

Vibrant market

  • Gained market share, despite soft market
  • ARCH Enterprise IT system enabling regional buying & pricing
  • Africa tough trading

Longer-term:

  • We are a relationship business – very close to our customers
  • Largest participant in SA formal Wholesale, and wholesale market

remains 20%-25% of total South African FMCG

  • Drive lower operating costs from fewer & larger stores, Shield B2B,

logistics & DCs

  • Be suppliers’ preferred distribution partner – an efficient & effective

route to market Fluid d mark rket t – consolida dati tion n opportu tuni nity

  • ty. Transformi

rming ng the e business ness.

Perspective on Masscash Wholesale

slide-8
SLIDE 8

Financial performance

slide-9
SLIDE 9

In Interim results Presentation August 2015 9

Positive gearing of 3.6% from Sales to Operating Profit.

Strong performance

9,1% 10,9% 12,7%

Growth in Sales Growth in Gross profit Growth in Operating profit before foreign exchange movements and interest

+3.6% +1.8% +1.8%

slide-10
SLIDE 10

In Interim results Presentation August 2015 10 10

Real comparable volume growth of 3.2% (June 2014: 2.3%).

Sales

Rm 26 weeks June 2015 (Reviewed) 26 weeks June 2014 (Reviewed) % growth Comparable % sales growth Estimated % sales inflation Real comparable volume growth

Total

38,917.4 35,659.8 9.1 6.9 3.7 3.2 Massdiscounters 8,973.6 8,225.8 9.1 4.1 2.1 2.0 Masswarehouse 10,759.2 9,659.4 11.4 11.4 4.3 7.1 Massbuild 5,637.1 4,847.9 16.3 10.6 5.1 5.5 Masscash 13,547.5 12,926.7 4.8 3.9 3.6 0.3

8,2% 91.8%

Rest of Africa sales SA sales

  • Rest of Africa businesses’ sales growth:

Sales in ZAR grew by 14.6% and in constant local currencies grew by 16.9%

  • General Merchandise inflation remained steady at 3.6%,

Food & Liquor and Home Improvement inflation decreased to 3.3% and 5.2% respectively

slide-11
SLIDE 11

In Interim results Presentation August 2015 11 11 0,2 0,4 0,6 0,8 1,0 1,2 1,4 Jun-14 Sales-related gross margin Price-and-mix- related gross margin Employment costs Occupancy costs Depreciation, Amortisation and Impairment of Assets Other operating costs Jun-15

Operating profit before forex and interest

  • June 2014: Operating profit before forex of R702.9m
  • Total Group sales for the period increased by 9.1%
  • Gross profit for the period increased by 10.9%
  • A strong trading performance in Makro and Massbuild
  • Total increase of 12.2% / Comparable increase of 8.5%
  • Increase in staff (Full-Time Equivalents) of 3.2% to +/- 44,000 FTE’s
  • Total increase of 8.0% / Comparable increase of 2.6%
  • 3.4% increase of net new trading space since June 2014 to a total of

1,551,613m²

  • Electricity, rates and taxes increased by approximately 9.5%
  • Depreciation growth of 12.8% / Comparable increase of 8.2%
  • Total increase of 7.2% / Comparable increase of 8.7%
  • June 2015: Operating profit before forex of R791.9 million
  • Increase of 12.7%
slide-12
SLIDE 12

In Interim results Presentation August 2015 12 12

Good Operating profit growth impacted by forex and interest

Rm June 2015 (Reviewed) June 2014 (Reviewed) % change

Operating profit before foreign exchange movements and interest

791.9 702.9 12.7 Foreign exchange loss (106.7) (7.9) Net finance costs (234.8) (154.9) Taxation (143.7) (164.1)

Profit for the period

306.7 376.0 (18.4) Profit attributable to non-controlling interests (25.1) (26.0) Profit and loss on disposals (12.3) 14.1

Headline earnings

269.3 364.1 (26.0)

slide-13
SLIDE 13

In Interim results Presentation August 2015 13 13

Foreign Exchange Movements

80 85 90 95 100 105 110 Average African currency rate

  • Majority of the forex loss is as a result of the weakening of the average basket of African

currencies against the Rand

  • The strength of the US Dollar against the Rand exacerbated this loss

82% 12% 6%

Group loans and other monetary balances Hedges Other

slide-14
SLIDE 14

In Interim results Presentation August 2015 14 14

Interest

Rm June 2015 (Reviewed) June 2014 (Reviewed) % change

Finance costs (252.5) (176.6) Finance income 17.7 21.7

Net finance costs

(234.8) (154.9) (51.6)

46% 19% 35% Increase in finance costs attributable to:

Property acquistions Increased cost of funds Expansions and working capital

slide-15
SLIDE 15

In Interim results Presentation August 2015 15 15

Working Capital

June 2015 (Reviewed) June 2014 (Reviewed)

Inventories (Rm) 10,530.8 9,774.7 Inventory Days 61 61 Trade Debtors (Rm) 2,295.7 1,907.0 Debtors’ Days 10 9 Trade Creditors (Rm) 11,388.5 10,849.2 Creditors’ Days 58 60

  • Good inventory management. Growth of 7.7% is below sales growth
  • Supply chain efficiency efforts starting to yield
  • Significant focus on and efforts to clear older stock in Massdiscounters continues
  • Trade Creditors increased by 5.0% while Creditors’ days decreased
slide-16
SLIDE 16

In Interim results Presentation August 2015 16 16

Capital Expansion

0,0 500,0 1 000,0 1 500,0 2 000,0 2 500,0 0,0% 0,5% 1,0% 1,5% 2,0% 2,5% 3,0% 3,5% 4,0% June 2011 June 2012 June 2013 June 2014 June 2015

Property acquisitions Businesses acquired Investment to expand operations Investment to maintain operations Total capex as a % of sales Total capex as a % of sales excl. business and property acqs

Capex as a % of sales

  • Total Capex as a % of sales: 2.7% (June 2014: 2.3%)
  • Total Capex excl. business & property acquisitions as a % of sales:

1.7% (June 2014: 1.5%)

Rm

slide-17
SLIDE 17

In Interim results Presentation August 2015 17 17

Strong investment in past continues into the future.

Capital Allocation

  • Heavy Capex spent in past and future
  • Committed to Africa
  • African Real Estate will be different (i.e. Acquisition based)
  • Investment into SAP and Supply Chain
  • High degree of economic uncertainty and volatility
  • Move to more conservative balance sheet
slide-18
SLIDE 18

In Interim results Presentation August 2015 18 18

In summary

  • For the first half of the year the Group managed to maintain or

gain market share in all of the major categories in which it trades

  • Total sales growth was 9.1% (Jun 2014: 10.2%) and comparable sales growth was

6.9% (Jun 2014: 7.1%)

  • Gross profit increased by 10.9%, bringing our margin to 18.9% (June 2014: 18.6%)
  • Comparable expenses were well-controlled
  • Foreign exchange loss of R106.7m (Jun 2014: R7.9m loss)
  • Interest increased in line with expectation
  • Operating profit before foreign exchange movements and interest increased by

12.7% (Jun 2014: -3.8%)

slide-19
SLIDE 19

Strategic priorities

Improve Profitability Grow Builders and Retail Food in South Africa Grow into Africa Grow Online

slide-20
SLIDE 20

Improve profitability

Strategic Priority 1

Fast fact Massmart has the highest annual sales densities in SA retail at R205m/store and the lowest operating costs as a %

  • f sales at 16.3%
slide-21
SLIDE 21

In Interim results Presentation August 2015 21 21

  • Drive comparable sales with a clear and well executed

value proposition

  • Private labels – Trojan, CampMaster, LOGIK, Fired Earth,

ECONO, Builders Pride, Marketside, Great Value, Equate, M, etc. – total sales penetration now 9.5%

  • Existing & new stores – measured SA roll-out, selected
  • wnership, lower cost of construction
  • Leverage SAP and RDC investments
  • Reduce non-trading space
  • And focus on higher growth non-SA markets, Retail Food

& Omni-channel A foc focus on Sales, es, Oper erat ating ng Margi gin n and Expens nses. es.

Improve Profitability

slide-22
SLIDE 22

Grow Builders and Retail Food in South Africa

Strategic Priority 2

Fast fact Recent Game research indicates that 20% of customers shop the store as a food destination

slide-23
SLIDE 23

In Interim results Presentation August 2015 23 23

  • Great total sales growth of 16.3% shows strength of this format
  • Upweighting focus on our commercial & contractor customers
  • Launched 2nd Pricelock campaign in March ‘15
  • Private label 17.9% of the total sales – great innovation & value
  • Gauteng RDC (opened in 2013) performing superbly. Replenishment 84% of total orders and

critical part of inventory optimisation

  • Flexible Builders Warehouse store layout
  • And Builders Express stores effective as a market “filler”
  • Good learnings & success from new Superstore format. Approved another 10 stores

Leve verage rage our inve vestme stment nt in management, nagement, structur cture e & SA SAP.

Grow Builders’ formats in SA

slide-24
SLIDE 24

In Interim results Presentation August 2015 24 24

  • Retail Food annualised sales now R15bn
  • New Cambridge stores performing well. Disruptive format bringing Intense

competition in that market segment

  • Continued positive customer response to Makro offering. Sales growth of 9.2%
  • Game Food grew at 20%. Approx 40% of customers on Food mission bought
  • ther non-Food items. Clearer range & assortment
  • Better leverage of Fruitspot across Cambridge, Makro and Game stores in
  • Gauteng. Great price & quality
  • Our Marketside brand now across fresh produce, bakery and butchery in Game,

Makro and Cambridge Food Build d a Ret etai ail Food pro ropositi tion n on the e Gener eral al Merc rchan andi dise se and Wholesal sale e platf tforms. ms.

Grow Retail Food in SA

slide-25
SLIDE 25

In Interim results Presentation August 2015 25 25

Game Food Case Study

slide-26
SLIDE 26

Grow into Africa

Strategic Priority 3

Fast fact Average sales in each Massmart store ex-SA is typically 3.5 times greater than that of SA retail peers

slide-27
SLIDE 27

In Interim results Presentation August 2015 27 27

  • Currently 35 stores in Africa, representing R6.5bn sales, in 13 countries
  • Currency devaluations and related consequences difficult to manage
  • New Game stores in Kitwe, Zambia, & Nairobi, Kenya, in H1
  • Yesterday opened first multi-format (Builders & Game) development in Matola, Mozambique
  • Builders Warehouse performing very well in Botswana & Mozambique.

Will open first store in Lusaka, Zambia, in Q4

  • 20% of Masscash Wholesale sales are ex-SA, mainly Botswana. Exploring further C&C sites

in Mozambique and Zambia

  • Anticipate opening 8 new stores in next two years. Nigeria, Ghana & Zambia
  • Bespoke African Retail Potential study confirms significant potential of our formats across

key African countries To leve verage rage South h African an mark rket t leade dershi hip p and operatin ating g strengt ngths hs in sub-Saharan Saharan Africa. . Large ge prize but measur asured ro roll-out. ut.

Grow into Africa

slide-28
SLIDE 28

Grow online

Strategic Priority 4

Fast fact Makro online has had 8.4 million unique visitors since launching in April 2014

slide-29
SLIDE 29

In Interim results Presentation August 2015 29 29

To build d a pro rofit fitable able omni-chann hannel el presenc sence e syner ergi gistic stic with th Massma mart t categ egory y mark rket t leade dersh ship p and customer

  • mer needs.

ds.

Grow online

  • Total online sales (including Masscash B2B) are 5.1% of Group sales
  • Visits to DionWired site are up 17%, average basket size is up 7%
  • Makro GM online launch annualised, and Q2 visits were up 61%, with sales up 148%
  • Field-testing Makro pick-up lockers at selected Sasol and McDonalds' sites
  • Makro’s commercial online platform to launch in October ‘15
  • Masscash trialling store-based online ordering capability
  • Initiating SAP online project in Builders Warehouse targeting trade customers.

Launch in mid-2016

  • Together with major telco, are developing innovative FMCG digital solution for

Wholesale customers

slide-30
SLIDE 30

In Interim results Presentation August 2015 30 30

H1 Sustainability Highlights

  • 14 000 MWh of electricity saved, increasing total

saved since January 2014 to 83 000 MWh

  • 1 325 environmentally responsible products added,

achieving sales of R260m

  • Estimated 9 415 tons of paper, plastic and board

recycled, representing 53% of primary waste produced during the period

  • 20 million meals prepared in 280 Massmart

sponsored mobile kitchens, serving in excess of 200 000 primary school learners

  • Great achievements in Supplier Development Fund

(see booklet)

slide-31
SLIDE 31

Prospects

  • For the 33 weeks to 16 August 2015, total sales increased by

8.7% and comparable sales by 6.8%

  • We are confident about delivering our strategic priorities, but

the economic environment may be a constraining factor in FY15 & FY16

Any reference to future financial performance included in this document has not been reviewed or reported on by the Group’s external

  • auditors. The auditor’s report does not necessarily report on all of the information contained in this announcement/financial results.

Shareholders are therefore advised that in order to obtain a full understanding of the nature of the auditor’s engagement they should

  • btain a copy of the auditor’s report together with the accompanying financial information from the issuer’s registered office.
slide-32
SLIDE 32

For further details, go to massmart.co.za/interimresults2015

slide-33
SLIDE 33

Additional information

  • Condensed Consolidated Income Statement
  • Tax rate reconciliation
  • Cash Flow Statement
  • Store portfolio
  • Store portfolio including location of stores
  • Forecast stores: July 2015 – June 2017
  • Capex per category
  • Number of shares
slide-34
SLIDE 34

In Interim results Presentation August 2015 34 34

Condensed Consolidated Income Statement for the 26 Weeks ended 28 June 2015

Rm 26 weeks June 2015 (Reviewed) 26 weeks June 2014 (Reviewed) % growth

Revenue 38,980.7 35,756.5 9.0

Sales

38,917.4 35,659.8 9.1 Cost of sales (31,545.8) (29,010.2) (8.7)

Gross Profit

7,371.6 6,649.6 10.9 Other income 63.3 96.7 (34.5) Depreciation and amortisation (461.7) (409.2) (12.8) Impairment of assets (3.4) (14.9) 77.2 Employment costs (3,236.8) (2,885.1) (12.2) Occupancy costs (1,415.7) (1,311.0) (8.0) Other operating costs (1,525.4) (1,423.2) (7.2)

Operating profit before foreign exchange movements and interest

791.9 702.9 12.7 Foreign exchange (loss) / gain (106.7) (7.9)

Operating profit before interest

685.2 695.0 (1.4) Net finance costs (234.8) (154.9) (51.6)

Profit before taxation

450.4 540.1 (16.6) Taxation (143.7) (164.1) 12.4

Profit for the year

306.76 376.0 (18.4)

slide-35
SLIDE 35

In Interim results Presentation August 2015 35 35

Tax Rate Reconciliation

% 26 weeks June 2015 (Reviewed) 26 weeks June 2014 (Reviewed)

Standard tax rate 28.0 28.0 Non-taxable income and disallowable expenses 4.7 3.3 Allowances on lease premiums and improvements (0.1) (0.1) Assessed loss not utilised 4.8 3.1 Other - including foreign tax adjustments (5.5) (3.9)

Group tax rate

31.9 30.4

slide-36
SLIDE 36

In Interim results Presentation August 2015 36 36

Cash Flow Statement

Rm June 2015 (Reviewed) June 2014 (Reviewed)

Operating cash before working capital movements 1,308.0 1,137.5 Working capital movements (2,925.3) (2,519.9)

Cash utilised by operations

(1,617.3) (1,381.8) Net interest and tax paid (523.1) (616.0) Net investment to maintain operations (365.5) (326.1)

Free cash flow

(2,505.9) (2,323.9) Dividends paid (622.8) (597.0) Investment to expand operations and other net investing activities (290.0) (256.1)

Cash outflow before financing activities

(3,418.7) (3,177.0)

slide-37
SLIDE 37

In Interim results Presentation August 2015 37 37

Store Portfolio

December 2014 Opened Closed June 2015

Number of stores

392 10

  • 4

398 Massdiscounters 153 5

  • 158

Masswarehouse 19

  • 19

Massbuild 100 2

  • 3

99 Masscash 120 3

  • 1

122

Massdiscounters:

  • Opened 4 Game stores (one in Kenya and one in Zambia) and one DionWired store

Massbuild:

  • Opened one Builders Warehouse store and one Builders Express store
  • Closed one Builders Express store and two Builders Trade Depot stores

Masscash:

  • Opened three and closed one Retail stores
slide-38
SLIDE 38

In Interim results Presentation August 2015 38 38 Massdiscounters Masswarehouse Massbuild Masscash Total

December 2014

153 19 100 120 392 Opened: 5 – 2 3 10 Game: 2 Africa stores Game: 2 SA stores DionWired: 1 SA store BWH: 1 SA store BEX: 1 SA store Retail: 3 SA stores Closed – – –3 –1 –4 BEX: 1 SA store BTD: 1 SA store Retail: 1 SA store

June 2015

158 19 99 122 398

Store Portfolio including location of stores

slide-39
SLIDE 39

In Interim results Presentation August 2015 39 39 June 2015 Forecast new stores Jul 2015 – Jun 2017 June 2017

Number of stores

392 51 449 Massdiscounters 158 14 172 Masswarehouse 19 2 21 Massbuild 99 18 117 Masscash 122 17 139

% increase

Trading space (m2)

1,551,613 155,282 1,706,895 10.0 Massdiscounters 521,892 43,032 564,924 8.2 Masswarehouse 195,794 24,000 219,794 12.3 Massbuild 434,534 46,500 481,034 10.7 Masscash 499,393 41,750 441,143 10.5

  • Massdiscounters: Game SA – 6; DionWired – 4; and Game Africa - 4 (Mozambique 1, Nigeria 2 and Zambia 1)
  • Masswarehouse: Makro – 2
  • Massbuild: BWH SA - 3; BEX – 3; BSS - 9; BW Africa - 1 (Zambia 1); and BSS Africa – 2 (Mozambique 1 and Zambia 1)
  • Masscash: Retail – 15; Wholesale SA – 1; and Wholesale Africa - 1 (Mozambique 1)
  • The 10.0% increase in trading space above includes a 21.9% increase in our Rest of Africa trading space

Forecast stores: July 2015 – June 2017

slide-40
SLIDE 40

In Interim results Presentation August 2015 40 40

Capex per category

Rm 26 weeks June 2015 (Reviewed) 26 weeks June 2014 (Reviewed)

Land and buildings/leasehold improvements 155.0 85.6 Vehicles 6.3 7.5 Fixtures, fittings, plant and equipment 110.9 147.7 Computer hardware 8.1 6.0 Computer software 8.9 9.4 Other – 6.8

Investment to expand operations

289.2 263.0 Land and buildings/leasehold improvements 56.6 31.3 Vehicles 26.6 40.1 Fixtures, fittings, plant and equipment 214.3 196.8 Computer hardware 47.6 47.8 Computer software 20.4 16.3

Investment to maintain operations

365.5 332.3

slide-41
SLIDE 41

In Interim results Presentation August 2015 41 41

Number of shares

‘000

At December 2014 217,118 Shares issued 18 At December 2015 217,136 Weighted-average at June 2015 216,764 Diluted weighted-average at June 2015 220,020