Shoprite Holdings Limited · JSE:SHP
Shoprite — FY2013 Earnings Presentation
57 slides from Shoprite's earnings presentation, September 2013
Slide 1: For the Year Ending June 2013
For the Year Ending June 2013
Slide 2: Carel Goosen, Deputy Managing Director
Carel Goosen Deputy Managing Director 2
Slide 3: Size of Operation
Size of Operation June 2013 Turnover R92.7bn Total Stores 1 836 Countries 17 Employees 111 338 Market Capitalisation* ±R95bn *During August 2013 3
Slide 4: Financial Highlights
Financial Highlights Turnover R92.7bn Trading Profit R5.4bn Trading Margin 5.82% Headline EPS 675.4c NAV per Share 2 837c Dividend per Share 338c 4
Slide 5: Key Information per Segment
Key Information per Segment Turnover – Total + 12.1% – Supermarkets RSA + 9.8% – Supermarkets Non-RSA + 27.9% – Furniture + 4.7% – Other Operating Segments + 17.2% 5
Slide 6: Sales Growth Analysis
Sales Growth Analysis Existing Net new Total Customers Basket stores stores Supermarkets RSA 4.5% 5.3% 9.8% 2.6% 6.6% Supermarkets Non-RSA 15.3% 12.6% 27.9% 11.9% 14.6% Furniture 0.2% 4.5% 4.7% - - Other Divisions 9.5% 7.7% 17.2% - - Total 5.8% 6.3% 12.1% - - 6
Slide 7: Store Portfolios
Store Portfolios June Opened Closed June 2012 2013 Supermarkets RSA 744 62 (5) 801 Supermarkets Non-RSA 134 19 - 153 Hungry Lion 150 23 (7) 166 Furniture 314 27 (5) 336 OK Franchise 398 42 (60) 380 Total Stores 1 740 173 (77) 1 836 Pharmacies 136 13 (3) 146 Liquor Stores 165 31 (1) 195 7
Slide 8: Key Information per Segment
Key Information per Segment Trading Profit – Total + 15.6% – Supermarkets RSA + 15.8% – Supermarkets Non-RSA + 31.4% – Furniture - 25.6% – Other Operating Segments + 8.4% 8
Slide 9: Highlights of Results
Highlights of Results June 2012 June 2013 Gross Profit Margin 20.5% 21.0% • Benefit of increased international sourcing • Investment in systems and logistics 9
Slide 10: Highlights of Results
Highlights of Results Other operating income June 2012 June 2013 Growth increased by 12.2% R’m R’m % Finance Income Earned 206 228 10.5 Net Premiums Earned 295 333 12.9 Operating Lease Income 251 280 11.3 Commissions Received 486 575 18.4 Franchise Fees Received 47 52 8.7 Investment Income 82 39 -52
Slide 11: Highlights of Results
Highlights of Results Depreciation and amortisation increased by 23.9% • Continued high spend on revamps and new branches • Spend on distribution centres and information technology Operating leases increased by 15.2% • Due to new stores opened in the past 12 months • Turnover rentals on sales growth
Slide 12: Highlights of Results
Highlights of Results Exchange rate differences • June 2012 : R8.3 million loss • June 2013: R3.8 million loss Rand to US Dollar exchange rates (R:$) • June 2011 : R6.77 • June 2012 : R8.30 • June 2013 : R9.96 12
Slide 13: Highlights of Results
Highlights of Results June 2012 June 2013 R’m R’m Net Interest Expense 81 170 - Convertible Bonds - High Capital Expenditure Income Tax Expense - Normal 1 437 1 536 - STC 92 - - Deferred (90) 42 Total 1 439 1 579 Effective tax rate (excl. STC) 30.1% 30.4% 13
Slide 14: Value Added Statement
Value Added Statement Employees R7 679m 52% Providers 14% of Capital R2 126m 11% Tax 23% R1 579m Re-invested R3 391m 14
Slide 15: Highlights of Results: Capital Expenditure
Highlights of Results Capital Expenditure June 2012 June 2013 R’m R’m Land and Buildings 565 324 Distribution Centres 356 264 Store Refurbishment 350 417 New Stores 756 1 001 Information Technology 401 405 DC Equipment 107 391 DC Vehicles 155 165 Other Replacements* 447 363 Total 3 137 3 330 *Motor
Slide 16: Highlights of Results: Contracted Capital Commitments
Highlights of Results Contracted Capital June 2012 June 2013 Commitments R’m R’m Stores 1 138 1 220 - RSA 741 518 - Non-RSA 397 702 Distribution Centres 481 487 IT Systems 88 32 Total 1 707 1 739 16
Slide 17: Highlights of Results
Highlights of Results June 2012 June 2013 Growth R’m R’m % Net Cash Balances 7 916 6 131 -22.6 • Month-end closing date 17
Slide 18: Stockholding
Stockholding June 2012 June 2013 Growth R’m R’m % Inventory 8 680 10 317 18.9 • Provision for 114 net new corporate stores • Roll-out of value-added departments • Taking on new distribution capacity 18
Slide 19: Highlights of Results
Highlights of Results Debtors and Other June 2012 June 2013 Growth Receivables R’m R’m % Furniture Instalment Sales 1 114 1 257 12.8 Franchise 485 541 11.5 Buy-aid Organisations 126 121 -4.0 Rental and Property Debtors 273 396 45.1 MediRite and Transpharm 295 330 11.9 Money Market and Computicket 59
Slide 20: Highlights of Results
Highlights of Results Cash Earnings* (R’m) *Cash flow from operating activities excluding dividends paid and changes in working capital 20
Slide 21: Highlights of Results
Highlights of Results HEPS vs Cash EPS* vs EBITDA per Share (Cents) 1 276 1 120 2010 967 2011 887 2012 846 807 803 2013 675 607 633 508 455 HEPS Cash EPS* EBITDA per share *Cash flow from operating activities excluding dividends paid and changes in working capital 21
Slide 22: Aubrey Karp
Aubrey Karp Divisional Director 22
Slide 23: Furniture – Trading Environment
Furniture – Trading Environment • Toughest year in the past decade • Erosion of consumers’ disposable income affecting durables spending • Over-extension of short-term credit affecting consumers • Despite significant currency depreciation, price deflation continued − Continued growth in demand and m
Slide 24: Furniture – Trading Environment
Furniture – Trading Environment National Credit Regulator’s 1st quarter report for 2013 • Only 52.5% (Q4 2012: 53.2%) of the 20.1 million active credit customers are in good standing • 20.5% of these consumers reflect adverse listings at the various retailers (more than three months in arrears) • 13
Slide 25: Furniture
Furniture Sales R 3.5bn + 4.7% OK Furniture House & Home All Stores 9.3% -2.8% Like-for-Like 3.2% -5.1% Internal selling price deflation: -1.22% Sales Mix 2012 2013 Home Entertainment and Appliances 65.0% 63.7% Furniture, Bedding, Patio and Carpeting 35.0% 36.3% Cash 69.3% 69.6% Credit 30.7% 30.4% 2
Slide 26: Furniture continued
Furniture continued Debtors Book 2012 2013 Debtors Book +13.3% R1.28bn R1.45bn New Contracts +1.6% 247 018 251 040 Arrears 2012 2013 Actual Arrears 7.4% 8.2% Balance of Contract Arrears 19.4% 21.8% Bad Debts Provision 10.6% 10.5% 26
Slide 27: Furniture continued
Furniture continued Trading Profit: R130.7m (25.6% decrease) Sales 4.7% increase Net Gross Income 5.3% increase Total Expenses 9.4% increase Controllable Expenses 10.0% increase Fixed Costs 18.8% increase • Sales growth too low to cover existing and new store costs • Double digit sales growth for No
Slide 28: Furniture continued
Furniture continued Store Numbers Confirmed Opened Total June 2014 OK Furniture 22 268 24 OK Power Express 2 19 0 House & Home 3 49 1 Total 27 336 25 • Three new stores confirmed for Zambia and two for Angola 28
Slide 29: Furniture Outlook
Furniture Outlook Future growth drivers: • Increased store footprint − 25 new stores confirmed to June 2014 • House & Home senior management re-structure now complete, improved efficiency and profitability • Construction of new Gauteng DC – occupation January 2014 • Discounting to provide additional
Slide 30: Operational Overview
OPERATIONAL OVERVIEW
Slide 31: Trading Environment – SA
Trading Environment – SA Testing conditions for SA retailers with no macroeconomic support: • Labour unrest in mining and agriculture − 17.3 million worker hours were lost impacting R350m in consumer wages • Endless demands on disposable income − Record petrol and electricity prices − Increased cost
Slide 32: Trading Environment – Non-RSA
Trading Environment – Non-RSA Non-RSA • Natural resources driving strong economic growth − Attracting more foreign investment − Filtering down to consumers’ income and spending • 13 of the countries we operate in have a higher GDP growth rate than SA • Angola, Zambia, Mozambique, Ghana and Nigeria a
Slide 33: Group Overview
Group Overview In contrast to the weak trading environment: • The Group achieved a 12.1% turnover and 15.6% trading profit growth • Trading margin lifted to 5.8% and trading profit topped R5.3bn • Year of two very distinct halves − Sales growth of 13.8% for the first half vs 10.4 % for the second •
Slide 34: Group Overview continued
Group Overview continued • R1.4bn spent on new stores and revamps • Overall 7% space growth for the year • Now trading from 2 177 outlets • Opened 217 outlets in the past 12 months: − 81 corporate supermarkets, 19 in Non-RSA − 67 pharmacy, liquor and fast food outlets − 42 franchises − 27 furniture
Slide 35: Group Overview – Customers
Group Overview – Customers • The Group served a record 882 million shoppers(+4.3%) • 5 034 customers per minute! • Achieved volume growth of 4.1% • 70% of SA adults now do their shopping with the Group (AMPS 2012) • R8.4bn in social grants were paid out to 14.7m recipients in our stores 35
Slide 36: Supermarkets RSA
Slide 37: Supermarkets RSA
Supermarkets RSA • Remained SA’s leading food retailer • Sales growth 9.8% to R70.9bn • Gained market share for the seventh consecutive year to 35.4% • Sales growth ahead of the Nielsen’s industry growth of 7.3% • Avg. transaction value up 6.6%, ahead of internal inflation at 4.7% Source: Nielsen Ca
Slide 38: Supermarkets RSA – Brands
Supermarkets RSA – Brands Shoprite sales growth slowed during the year, averaging 7.3% • Reflects general consumer health as half of population shops at Shoprite • Still SA’s low-price leader, grew customer base to 19.5m individuals • LSM 3-7 hardest hit by cost of living increases • Larger spikes a
Slide 39: Supermarkets Non-RSA
Supermarkets Non-RSA • Sales growth of 27.9% (21.2% constant currencies) • 15.3% like-for-like sales growth (3 times SA) • Contributes 14.2% to the Group’s supermarket turnover • 31.4% trading profit growth in excess of turnover growth • 19 new stores opened, with 153 supermarkets in total • Outstan
Slide 40: Other Operating Segments
Slide 41: Other Operating Segments
Other Operating Segments • Turnover up 17.2% with all divisions performing well • Computicket sales up 20% • Pharmacy division sales grew 34.8% − MediRite sales growth 17% and Transpharm 37% − Remains loss making, however creates repeat customers • LiquorShop sales up 31%, with 195 trading outlets •
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Slide 43: Leverage Two Distinct Markets
Leverage Two Distinct Markets The Group has the 7th highest brand portfolio value in SA, with Shoprite and Checkers valued at R11.6bn (Brand Finance 2013) Higher income market • Opportunity for Checkers to capture more LSM 8-10 shoppers • Checkers will deliver better value than competitors • Consume
Slide 44: Building Strong Brands
Building Strong Brands • No compromise on our low-price promise 44
Slide 45: Building Strong Brands
TRY OUR NEW VENISON En PATTIES TRY OUR NEW PICANHA RUMP - a om = “PREMIUM UM POOR AL BUTCHER. rM "GORDON RAMSAY SHOPRITEQ} HOLDINGS LTD
Slide 46: Building Strong Brands
Building Strong Brands WE BRING TH OVER 50 WINES ‘wine route: Pow a COUNTRIES ORDER WINE IN BULK ONLINE NOW! VISIT CHECKERS.CO.ZA/WINE
Slide 47: Private Label and Global Sourcing
Private Label and Global Sourcing Enhancing ranges for consumers • Private Label growth: 18% • 265 new food and 5 320 non-food products introduced 47
Slide 48: Maximise Share of Wallet
Maximise Share of Wallet Prescriptions filled while consumers shopped Whisky now makes up a quarter of all liquor sales Money Market collections up 23% 40% growth in Money Transfers 48
Slide 49: Use Data-Driven Customer Insights
Use Data-Driven Customer Insights • Digital channels allow us to better understand what customers want − 1st and only supermarket app in SA − Mobile coupons − Airtime rewards program − Social media • Advanced analytics to optimise pricing, ranging and promotions • Mobile and digital is exploding in
Slide 50: Control the Supply Chain
Control the Supply Chain • Better on-shelf availability than direct-to-store deliveries • Now have 29 distribution centres and supply all 17 countries • Total of 557 324m² of distribution space − Added 118 000m2 of distribution space in Durban, PE and Cape Town • Introduced reverse logistics − Manag
Slide 51: Control the Supply Chain – DC’s
Control the Supply Chain – DC’s Brackenfell: 93 318m² Centurion: 150 021m² Durban: 48 000m² Port Elizabeth: 10 000m² 51
Slide 52: Position for African Growth
Position for African Growth • SA food retail is becoming saturated and more competitive • Replicating our low-price positioning in main African markets • Opportunity to satisfy consumers’ appetite for upmarket products − 7 Nigeria stores sold more Moët & Chandon than all RSA LiquorShops combined • F
Slide 53: Current African Store Footprint
3 7 Current African Store Footprint 3 1 3 Position for 5 African Growth 17 20 9 3 8 Existing Stores 1 41 9 13 10 801 1
Slide 54: Africa is Hungry for Shoprite
Africa is Hungry for Shoprite Shoprite Nigeria 54
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Slide 56: Trading Outlook
Trading Outlook • Local food inflation may start to rise with input cost pressures • SA consumer spending will remain under pressure • Realistic sales growth expectations given lack of SA macro- economic growth • Simply aim to be better than our opposition • Will continue to invest to ensure price c
Slide 57: Thank You – Questions
THANK YOU Questions