Shoprite Holdings Limited · JSE:SHP
Shoprite — H1 2007 Earnings Presentation
65 slides from Shoprite's earnings presentation, February 2007
Slide 1: Shoprite Holdings Limited Interim Financial Results – December 2006
1 Shoprite Holdings Limited Interim Financial Results – December 2006
Slide 2: Carel Goosen, Deputy Managing Director
2 Carel Goosen Deputy Managing Director
Slide 3: Size of Operation
3 Size of Operation Dec 2006 Turnover R19 bn Owned outlets 886 Franchised outlets 265 Countries 17 Employees 66,000
Slide 4: Financial Results
4 Financial Results Dec 2005 Dec 2006 Growth % Turnover (R’m) 16,621 19,105 14.9 Trading Profit (R’m) 561 717 27.9 Trading Margin (%) 3.4 3.8 Diluted HEPS (cents) - All operations 64.3 82.8 28.8 - Continued operations 65.7 82.8 26.0 Dividend per share proposed (cents) 27.0 35.0 29.6 NAV per share (c
Slide 5: Highlights of Results
5 Highlights of Results Dec 2005 Dec 2006 Gross margin 19.3% 20.1% Increase due to: • Higher margin perishable foods and • Service departments • Larger non-food sales contribution • Central Distribution
Slide 6: Highlights of Results
6 Highlights of Results Other operating income increased 14.3% Dec 2005 Dec 2006 Growth R’m R’m % Commission received 54 79 45.0 Finance income earned 79 78 (1.0) Franchise fees received 10 11 9.0 Operating head-lease income 77 86 11.7 Net premiums earned 80 89 10.8 Investment income 4 6 41.5 Sundry
Slide 7: Highlights of Results
7 Highlights of Results • Depreciation and amortisation increased 25.3% – Increased spend on revamps and new branches in previous financial year • Operating leases increased 26.5% – Due to 68 stores opened in last 12 months • Employee benefits increased 11.8% – Productivity increased – New stores
Slide 8: Highlights of Results
8 Highlights of Results • Trading profit increased 27.9% with turnover increasing by 14.9% – Increased margins – Contained overhead costs – Consumer convenience services and ticket sales – Trading margin of 3.8% highest ever
Slide 9: Highlights of Results
9 Highlights of Results Exchange rate gains / (losses) • Dec 2005: R28.7 million loss • Dec 2006: R19.5 million gain Rand to US Dollar exchange Rates (R:$) • June 2005 R6.73 • December 2005 R6.37 • June 2006 R7.11 • December 2006 R6.97
Slide 10: Highlights of Results
10 Highlights of Results Dec 2005 Dec 2006 R’m R’m Income of a capital nature 8.2 21.8 – Mainly due to sale of land and buildings Net interest received 3.1 2.5 – Almost unchanged due to investment in new stores Tax – Normal and deferred 166.9 267.0 – STC 19.0 31.6 Total 185.9 298.6
Slide 11: Highlights of Results
11 Highlights of Results Capital Expenditure Dec 2005 Dec 2006 R’m R’m Land and buildings 111.5 142.8 Store refurbishment 97.7 160.1 New stores 211.5 146.0 Information technology 23.1 26.7 Other replacements* 82.3 183.2 Total 526.1 658.8 * Other replacements represent amongst others refrigeration, m
Slide 12: Highlights of Results
12 Highlights of Results Dec 05 Dec 06 Growth R’m R’m % Inventory 3,622 4,074 12.5 Provisioning 40 new stores Avoid “out-of-stock” over festive season Back to School 2007 Cash balances vs. Trade Creditors Increases due to balance sheet closing date
Slide 13: Highlights of Results
13 Highlights of Results Debtors Dec 2005 Dec 2006 Growth R’m R’m % Furniture 696 672 (3.4) Franchise 277 346 24.9 Buy aid organisations 162 162 0.0 Other receivables 597 562 (5.7) Total 1,732 1,742 0.6
Slide 14: Highlights of Results
14 Highlights of Results Cash flow reconciliation R’m Cash at June 2006 537 Cash from operations 961 Changes in working capital 1,176 Net interest received 9 Dividends paid (235) Tax paid (287) Purchase of assets and other investments (663) Proceeds on disposal of assets and investments 79 Other (14
Slide 15: Whitey Basson
Whitey Basson SHOPRITE HOLDINGS LTD Ss 15
Slide 16: Introduction
16 Introduction At our last presentation we told you that we are: 1. Clearly positioning our 3 distinct formats in supermarket retailing 2. Refining our Non-RSA business I trust that in today’s presentation the results we present is testimony of our focus and that our clearly defined formats will co
Slide 17: Introduction
17 Introduction The sequence of today’s presentation will be: 1. Non RSA 2. Complimentary businesses: – Money Market – Computicket – MediRite – LiquorShop – Hungry Lion 3. Furniture 4. RSA: – Shoprite – Usave – Checkers
Slide 18: Non RSA
18 Non RSA
Slide 19: Non RSA
19 Non RSA • Not too long ago… • Turnover has grown by 28% (GEB 19.15%) • Non RSA participation to total sales increased to 11% • The next slide illustrates the continued progress since 2002
Slide 20: Non RSA Turnover Growth
20 Non RSA Turnover Growth Dec-02 Dec-03 Dec-04 Dec-05 Dec-06
Slide 21: Non RSA
21 Non RSA • Trading profit increased by 189% with Zambia now matured, the largest monetary contributor • Gross profit as % to turnover increased by 1.05% • 6 new stores opened • Good progress in under performing countries where losses were reduced to R12 million – Uganda 98% – Tanzania 40% – Madaga
Slide 22: India – Sales Graph
22 India – Sales Graph Dec-04 Dec-05 Dec-06
Slide 23: Excellent performer - Angola
Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06 Excellent performer - Angola Oct-06 Nov-06 Dec-06 23
Slide 24: Excellent performer - Nigeria
Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06 Excellent performer - Nigeria Oct-06 Nov-06 Dec-06 24
Slide 25: Currencies against the Rand
25 MADAGASCAR MOZAMBIQUE BOTSWANA MAURITIUS TANZANIA UGANDA ANGOLA MALAWI NIGERIA ZAMBIA GHANA 2006/12/25 2006/12/18 2006/12/11 2006/12/04 2006/11/27 Currencies against the Rand 2006/11/20 2006/11/13 CURRENCIES AGAINST RAND 2006/11/06 2006/10/30 2006/10/23 2006/10/16 2006/10/09 2006/10/02 2006/09/25
Slide 26: Supermarket complementary services
26 Supermarket complementary services
Slide 27: Supermarket Complimentary Services
27 Supermarket Complimentary Services • Money Market – Money Transfers database – The beginning of Supermarket Banking ? • Computicket – Fully integrated in all SR/CH Money Markets – 20% of tickets are being sold through these Money Markets – Distribution outlets increased to over 500 – Trading prof
Slide 28: Supermarket Complimentary Services
28 Supermarket Complimentary Services • Medirite – 7 Pharmacies opened, now a total of 40 – GEB growth 24% – Prescriptions up 37% on 152% previous year – Revised legislation should result in profitability • Liquor Shops – 14 Stores – Slow expansion due to a 12 month backlog of License Authorities –
Slide 29: LiquorShop
ne 29 LiquorShop
Slide 30: Supermarket Complimentary Services
30 Supermarket Complimentary Services • Hungry Lion – Opened 19 stores with a total of 94 – Like-for-like sales increased 6.9% (strike) – Total sales growth 42% – Non-RSA Trading Profit increased 68% – First selling price increase since 2004 – Plan to open 25 stores in 2007 – 10th Anniversary and 10
Slide 31: Aubrey Karp
31 Aubrey Karp
Slide 32: Furniture
32 Furniture • Key highlights (26 weeks) – Sales increased 14.23% to R1.180bn – Trading profit increased 14.83% to R123.7m – Trading profit margin increased 0.05% – 8 new stores opened – House and Home website launched (Purchase on-line in both Chains) – Quality of debtors book remains high
Slide 33: Furniture
33 Furniture • Trading environment – Slowdown in the lower income groupings continued in the first three months of the financial year, but improved dramatically from October 2006 – Consumer confidence remains positive – Movement into higher LSM’s continues – Product price deflation continued in the
Slide 34: Furniture
34 Furniture • Trading environment continued – Financial Institutions continue to advance substantial amounts of credit, thus limiting opportunities for retail credit growth
Slide 35: Furniture
35 Furniture • Store expansion – Opened 8 stores – OK Furniture : 6 stores – House & Home : 2 stores Store numbers – Total 206 – OK Furniture : 165 – OK Power Express : 12 – House & Home : 29 – First new format Furniture only House and Home – To open in April 2007 – Target – 215 stores by June 2007
Slide 36: Furniture
36 Furniture • Revenue growths 2006 2005 Increased by 14.23% 1 180 431 1 033 350 • OK Furniture increased by 9.57% (strike) • House and Home increased by 20.38% • Sales growths since 2000 - 34.80%, 10.29%, 92.70%, 18.75%, 24.54%, 18.24% and 13.75%
Slide 37: Furniture
37 Furniture • Turnover segmentation 2006 2005 Merchandise sales 88% 87% Insurance Premiums 6% 7% earned Finance income 6% 6%
Slide 38: Furniture
38 Furniture • Inflation (July 2006 to December 2006) – Plugs : -2.5% to + 1% – Furniture : -2% to -0% • Sales mix 2006 2005 Home entertainment & 64% 64% appliances Furniture, bedding, patio & 36% 36% carpeting
Slide 39: Furniture
39 Furniture • Merchandise sales 2006 2005 Cash 66.62% 63.96% Credit 33.38% 36.04% # of new contracts (1.28% decline) 183 006 185 373
Slide 40: Furniture
40 Furniture • Trading Profits 2006 2005 Increased by 14.83% 123 719 107 739 • After enduring difficult trading conditions in the OK Furniture Chain in the first three months of the current financial year; and • With a prolonged strike.
Slide 41: Furniture
41 Furniture Debtors Book Balance and 2006 2005 % Variance Arrears Debtors Book Balance R 1.06 R 1.01 - Increase R53.51 million billion billion Actual Arrears 3.07% 3.19% 0,12 Balance Of Contract Arrears 12.58% 13.43% 0.15 Bad Debt and UFC Provisions 19.57% 18.83% 0.74
Slide 42: Furniture
42 Furniture • Prospects & Growth Continued • Strategy remains focused on: – Store expansion – Volume growths and discounted pricing – Continual updating and introduction of new product ranges – Staff training and development programmes – Providing better service to customers • Effects of the Nation
Slide 43: Furniture
43 Furniture • Prospects & Growth – Movements into higher LSM’s expected to continue – Expect some level of inflation, due to increased raw material costs and weaker exchange rate – Trading buoyancy should continue to May 2007 and Store openings will provide opportunity for further growth – Retailer
Slide 44: Whitey Basson
Whitey Basson SHOPRITE HOLDINGS LTD Ss 44
Slide 45: RSA
45 RSA
Slide 46: RSA Overview
46 RSA Overview • Sales Growth of 13.8% • Total Customer growth of 6.1% • Total Basket Size growth of 7.3% • 25 new stores opened for the 6 months to Dec • Gross Margin gain - result of sales mix change to more fresh produce in Checkers and non food participation overall
Slide 47: Shoprite Group Non Foods Sales Participation
47 Shoprite Group Non Foods Sales Participation 2001/2002 2002/2003 2003/2004 2004/2005 2005/2006
Slide 48: Current Supermarket Stores
48 Current Supermarket Stores Number of stores Turnover Shoprite Checkers Checkers Shoprite 110 Checkers Hyper 26% 24 348 92 15% 57% Checkers Usave Hyper 2% Usave
Slide 49: Shoprite Group RSA growth trend vs food inflation
Shoprite Group 49 RSA growth trend vs food inflation Trended Food Inflation an dShoprite Group % Growth 25 Food Shr Grp % Growth 22.13 20 17.79 17.11 17.19 16.14 15.73 15.53 15 15.08 14.45 14.56 13.78 14.16 13.41 12.07 12.17 11.24 11.27 10.9 11.03 Strike 11.11 Period 10 10.12 9.4 9.28 8.68 8.86 7.93
Slide 50: RSA
50 RSA
Slide 51: Shoprite
ne Shoprite BREAKING NEWS ToP BRANDS — ates te 23 ieee gets ahead — z stays just up your: — suoparts NOW OFFICIALLY THE No.1 SUPERMARKET IN SOUTH AFRICA! The result of Low Prices Consistently, Daily, Weekly, Monthly and Always SHOPRITE LOWER PRICES YOU CAN TRUST Aleays OPRITE( * 4 X10 FULL PAGE SUND
Slide 52: RSA Shoprite Overview
52 RSA Shoprite Overview • Sales growth 11.5% • Market leader: 292 stores RSA • 7 new stores opened • Basket size growth of 6.77% – Low inflation on basic food categories • Customer count growth of 4.49% – Shoprite has grown its customer base despite 12 week strike
Slide 53: Shoprite Price Perception
53 Shoprite Price Perception Shoprite is the clear leader in low price perception Pick 'n Pay 19 Shoprite 48 Spar 8 0 20 40 60 80 100 Q.14c Which of the following stores would you say, normally offers the lowest prices for food, groceries and personal care products? Base: All informants who shop the
Slide 54: Shoprite Price Perception
54 Shoprite Price Perception • Price lead results in massive volume growths – a sign of healthy retail • In order to give you a feel for the size of the business here are some examples of volume sales growth • For the 6 months: – Chickens – 7 million more than last year – Rice - 5 thousand tons more
Slide 55: Shoprite Customer Loyalty
55 Shoprite Customer Loyalty • Increased customer loyalty to over 39% • Highest exclusive shopper % of any supermarket 2005 2006 % of Exclusive shoppers 38% 39.1% • Second store of choice for all competitor’s 1st choice shoppers Source: Amps 2006
Slide 56: Shoppers By Group
56 Shoppers By Group South Africa’s most frequented supermarket chain In which of these stores do you currently do your shopping? Up 2% from last year 64 46 29 7 Shoprite Group Pick 'n Pay Group Spar Group Woolworths Group Base: All informants n=2487, 2458, 2465 Omnibus Oct’06 Source: ACNeilsen
Slide 57: RSA
57 RSA
Slide 58: Usave Overview
58 Usave Overview • Total of 92 stores • GEB sales growth 28.1% • Basket size growth 15.6% (GEB) • Customer Growth 13.9% (GEB) • ROI of 27% • More aggressive approach to areas currently not covered by SR/CH
Slide 59: Usave Overview
59 Usave Overview • Introduced 60 private label products • Own labels outperforming brand leaders – Dishwashing Liquid - 66.41% Share – Frozen Veg - 87.81% Share – Salt - 54.83% Share – Vinegar - 98.75% Share – Tomato Sauce - 34.22% Share
Slide 60: Usave
60 Usave
Slide 61: RSA
61 RSA
Slide 62: RSA Checkers Overview
62 RSA Checkers Overview • Sales growth 16.1% • 3 New stores opened • Basket size growth 6.9% • Customer growth 8.6% • Trading margin increased • Increased market share in 2006 by 0.15% (0.04% in Dec)
Slide 63: Checkers LSM
63 Checkers LSM • To attract high LSM we did the following: – Improved store design – emphasis on fresh – Integrated Computicket – Advertising product selection for appeal higher LSM less sensitive to price – Became known for specific categories – Steakhouse Classic, Wine Route, Cheese of the World,
Slide 64: Checkers LSM 8 - 10
64 Checkers LSM 8 - 10 CHECKERS SHOPPERS : LSM 8-10 Profile 2001 - 2006 Increased Higher LSM Customers AMPS 2001BP - Main AMPS 2002AT - Main AMPS 2005A6 - Main AMPS 2006A6 - Main Branded
Slide 65: Confirmed openings to Dec ‘07
65 Confirmed openings to Dec ‘07 RSA Non-RSA Total Shoprite 12 5 17 Usave 8 2 10 Checkers 3 - 3 23 7 30