RESULTS for the year ended 31 May 2017
Group highlights for the year ended 31 May 2017 2 Group Gross Profit » Earnings continue to escalate: 2,500,000 • Revenue to R26.3 billion 2,000,000 • Gross Profit by 19% to R2.2 billion 1,500,000 • EBITDA by 7% to R1.3 billion 1,000,000 • Earnings per share by 14% to 117.92 cents 500,000 • Headline earnings per share by 18% to 117.98 cents 0 • Core headline earnings per share by 17% to 120.09 cents 2013 2014 2015 2016 2017 • Dividend declared by 11% to 40 cents per share Dividends declared per share » A new era dawns in developing a rich ecosystem - acquisitions 45 40 35 30 Cents 25 20 40 36 31 15 27 25 10 5 0 2013 2014 2015 2016 2017 HIGHLIGHTS
South Africa Distribution Brett Levy – Joint CEO South African Distribution Segment: • Prepaid Airtime, Data and Starter/SIM packs • Handsets and Tablets • Market • Retail Distribution Channel • Prepaid Electricity, Water and Gas • Ticketing • Fintech and other Value Added Services Acquisitions of 45% of Cell C and 100% of 3G Mobile Shareholder Profile
Financial and Operational Highlights 4 Prepaid Airtime Revenue Growth 3,500 Millions » Revenue consistent at R25.7 billion 3,000 » PINless top-up revenue increases by R2 billion to R6.1 billion, 2,500 2,000 when imputed to revenue effective growth is 7% 1,500 2017 » Gross profit up 21% to R1.9 billion 1,000 2016 500 » Gross profit margins expand from 6.15% to 7.43% - » Core net profit up 19% to R893 million Direct Top Up - PINless Airtime Growth 700 Millions 600 500 400 300 2017 200 2016 100 - SOUTH AFRICAN DISTRIBUTION
Prepaid Airtime, Data, Starter/SIM packs 5 Airtime » Maintaining 700k to 1m new SIM connections per month: 10% 20% • consumers improving understanding of market dynamics 10% Corporate Sales • changing cell number rather than porting Independents • MNOs migrating 2G users to 3G devices and smartphone uptake Formal Retail Petroleum 60% » Growth in sales: • convergence of voice, data and content with network offerings • benefits of utilising data analytics Data • rolling-out new Android terminals • airtime from corporate/banking channel 10% 35% 24% • data from independent and corporate channels Corporate Sales Independents Formal Retail Petroleum 31% SOUTH AFRICAN DISTRIBUTION
Handsets and Tablets 6 » Existing Tier 3 hardware selling under Boost, Verssed and Blaupunkt brands : • comprising handsets, phones, tablets, phablets and POS devices • augmented with smart watches, fitness bands and educational robots • Boost brand redesigned and features upgraded » Existing Tier 4 bolt-on, Reware : • sources, refurbishes and distributes pre-owned smartphones • rapidly growing market • outlets in Sandton and Braamfontein » Acquisition of 3G Mobile brings new Tiers 1 and 2 constituting a complete hardware business, housed under one roof SOUTH AFRICAN DISTRIBUTION
Market 7 » “Magnet for foot traffic” » Main market/informal - 85% of revenue: • achievements in direct distribution methods in rural areas • truck & footsoldier/gig-rig reach • retention and acquisition of quality merchants • shifts in consumer buying patterns to prepaid • ensuring our merchants do more our products and services » Formal market - 15% of revenue: • growth in food and pharmaceutical sectors • Chat 4 Change sales up 30% • growing distribution in retail channel » Strengthening our management team SOUTH AFRICAN DISTRIBUTION
Retail Distribution 8 » Integration strategy of distributing hardware products in retail channels » Route to market includes Edcon, Ideals, Choppies, Dischem and Take-a-lot » Edcon customers utilise cash or group approved credit facilities » Challenging and competitive retail landscape Blue Label Connect: » • merchandise includes post paid, hybrid, VAS - wholesale and retail • mobile wallet and money transfer services » Edgars Connect: • “One stop connectivity destination store across the nation” • Extensive range of mobile products and services, specialising in: • mobile devices, tablets, wearables, accessories, gadgets, home automation & security, wifi routers and laptops • Cell C post paid contracts • airtime, data, prepaid electricity, bill payments • ticketing, including sport, travel, events, expos, entertainment & lifestyle shows, and Hollywood bets • rolling-out stand alone stores in rural areas, centres and malls, 64 stores currently open SOUTH AFRICAN DISTRIBUTION
Prepaid Electricity 9 Prepaid Electricity - Revenue 1,400 Millions » Market*: 10m prepaid meters installed in addressable market of 19m 1,200 » Commissions earned up 9% to R215 million 1,000 800 » Equates to R14 billion in sales revenue 2017 600 » Growth drivers: 2016 400 2015 • Prepaid24 – enhancing retail online reach 200 - • Utilities World - back-end integration into municipalities • re-award of distribution contracts • distribution on behalf of additional municipalities Electricity • retail and corporate/banking channels 15% 32% Corporate Sales Independents 36% *Source: Eskom Formal Retail 17% Petroleum SOUTH AFRICAN DISTRIBUTION
Prepaid Electricity, Water and Gas 10 UniPIN Redemptions 100 900 » UniPIN’s redeemed: R’millions Thousands 90 800 80 700 • value R825 million 70 600 60 500 • quantity (volume) 8.3 million vouchers 50 400 40 300 30 » 8 years of growth 200 20 100 10 » Prepaid Water and Gas: - - • increasing interest from service providers Quantity (thousands) Value (R millions) Prepaid Electricity – 8 year perpetual growth in revenue 1,400,000,000 1,200,000,000 1,000,000,000 800,000,000 R’ 600,000,000 400,000,000 200,000,000 - Jun-09 Aug-09 Oct-09 Dec-09 Feb-10 Apr-10 Jun-10 Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17 Apr-17 SOUTH AFRICAN DISTRIBUTION
Ticketing 11 » Ticketing solutions for events, sports and transport sectors » Ticketpro strategy - market differentiation; brand awareness; market share » Raising national presence: • available in >1,000 stores • entrenched in our merchant base and across retail channels • ticketing and access management for ~600 events, such as: • Premier soccer league, Telkom Knockouts, DSTV Delicious, Getaway Show, Joburg Day, MTN Joyous Celebration 21, Miss SA 2017, FIA World Rallycross of South Africa, The TOPS at Spar Wine Show, Whisky Live, Wedding Expo, Mama Magic Expo, Decorex • Growth in transport ticketing sales - Putco: • commuter bus service, available through >200 outlets in rural areas • serving >250,000 passengers/month » Launched Ticketpro consumer mobile app and Ticketpro Travel » >2.3 million event tickets sold » 74 different venues » Revenue increasing SOUTH AFRICAN DISTRIBUTION
Fintech Products and other Value Added Services 12 » Bill Payments • transaction volumes increasing ~200% • striving to meet enhanced requirements of bill issuers • constantly adding more issuers to bill payments engine » Debit and Credit Card Acquiring • white labelling for loyalty programmes » Wallets and Money Transfers* • money transfers launched across Edcon Group • evolving into payment ecosystem: • replacing debit and credit cards • greater convenience and lower pricing for consumers • tailwinds from low-cost smartphones * Frost & Sullivan estimates 60% of adults in Africa are unbanked SOUTH AFRICAN DISTRIBUTION
Acquisition of 45% stake in Cell C 13 » Strategy for developing a rich ecosytem » 45% stake in Cell C for R5.5 billion effective 2 August 2017 » Rationale for vertical integration with Cell C: • creating value: ROI in medium term • margin defence: existing trading relationship • commercial synergies: multiple shared services » Funding through hybrid of own cash and vendor placements » ‘ Business as usual ’ in constructive relationships with other MNOs SOUTH AFRICAN DISTRIBUTION
Acquisition of 3G Mobile 14 » Announced 27 June and effective 2 August 2017 » Distributor of all major Tier 1 & 2 mobile device and handset manufacturers: • Apple, Samsung, Huawei, ZTE and Nokia » Also offers financing for the mobile handset element of post paid contracts » Earnings accretive » R1.9 billion acquisition structured in two stages: • initial: 47.37% for R900 million (R250 million in BLU shares + R650 million in cash) • subsequent: 52.63% for R1 billion » 3G Mobile complements our existing new and refurbished hardware business » Integrates our approach to distributing complete range of handsets and tablets » Enhances our ecosystem SOUTH AFRICAN DISTRIBUTION
Shareholder Analysis as at 11 August 2017 15 Top Shareholders: Notes: » Shareholders holding >2% of issued capital account » Allan Gray – 18.31% for ~60% of total issued share capital » Shotput – 11.43% » ADR programme through BNY Mellon » B Levy – 7.25% » Market capitalisation R14.5 billion » M Levy – 6.41% » 36One – 4.89% » Sanlam – 3.41% » Richmark – 3.14% » Investec – 2.52% Beneficial Shareholders – 31 May 2017 » Alexander Forbes – 2.27% Free Float – 31 May 2017 Free float 57% Strategic holders 41% Below threshold 2% South Africa 86% USA 9% UK 3% Rest of World 2% SOUTH AFRICAN DISTRIBUTION
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