Shoprite Holdings Limited · JSE:SHP
Shoprite — FY2007 Earnings Presentation
83 slides from Shoprite's earnings presentation, 2007
Slide 1: Financial results for the year ended 30 June 2007
Financial results for the year ended 30 June 2007
Slide 2: Agenda
Agenda 2 1. Financial Highlights 2. Operating Highlights 3. Furniture 4. Business Overview 5. Questions
Slide 3: Financial Results
Financial Results Carel Goosen Deputy Managing Director
Slide 4: Size of Operation
Size of Operation 4 Jun 2007 Turnover R 39 bn Owned outlets 917 Franchise outlets 264 Countries 17 Employees 69 000
Slide 5: Financial Results
Financial Results 5 • Turnover + 16.2% R 38,95bn •Trading Profit +27.6 % R 1,597bn • Trading Margin from 3.7% to 4.1 % • Diluted Headline EPS + 33.3% 194.3c • Dividend per share Cover = 2x 101.0c
Slide 6: Key Information
Key Information 6 • Turnover – Total + 16.2% – Furniture + 14.1% – Franchise + 14.1% – Non-RSA (Rand terms) + 29.4% • Trading profit – Total + 27.6% – Furniture + 3.1% – Franchise > 20.0% – Non-RSA (Rand terms) > 50.0%
Slide 7: Key Information
Key Information 7 • Diluted Headline EPS + 33.3% to 194.3c • Dividends per share + 38.4% to 101.0c • NAV per share + 19.9% to 717.3c
Slide 8: Value Added Statement (R million)
Value Added Statement (R million) 8 • Employees 3 314 • Providers of Capital 494 • Tax 623 • Re-invested 1 208 Re-invested 21% Employees Tax 11% 59% 9% Providers of Capital
Slide 9: Sales Growth Analysis
Sales Growth Analysis 9 Existing New stores Total stores RSA 9.1% 5.9% 15.0% Supermarkets Non-RSA 18.6% 10.8% 29.4% Supermarkets Furniture 8.0% 6.1% 14.1% Franchise 9.0% 5.1% 14.1%
Slide 10: Store Portfolios
Store Portfolios 10 July 2006 Opened Closed June 2007 Supermarkets 574 41 (11) 604 Hungry Lion 74 26 (3) 97* Furniture 198 18 - 216 Own Store 846 85 (14) 917 Franchise 255 36 (27) 264 Total Store 1,101 121 (41) 1,181 Pharmacies 32 12 - 44 Liquor Store 7 11 - 18 Countries 17 - - 17
Slide 11: Highlights of Results
Highlights of Results 11 Gross margin increased • Sales of non-food lines • Increased contribution of high-margin perishable and value-added products
Slide 12: Highlights of Results
Highlights of Results 12 Other operating income increased by 4.3% Made up as follows: % increase/ To R’m (decrease) Commission received 37.6 169 Finance income earned 4.5 163 Operating head-lease (3.6) 175 income Net premiums earned 12.4 186 Franchise fees received 15.0 24 Sundry income (31.3) 81
Slide 13: Highlights of Results
Highlights of Results 13 Depreciation increased • Increased spend on revamps and new branches Operating leases increased • Cancellation and maturing of head-leases • New leases (Straight-line effect) Staff cost increased • GEB increase • Productivity increased • New stores Other expenses increased •
Slide 14: Highlights of Results
Highlights of Results 14 Trading profit increased 27.6%, higher than turnover growth of 16.2% • Higher turnover growth than expense growth • Increase in contribution of non-RSA operations
Slide 15: Highlights of Results
Highlights of Results 15 Exchange rate gains increased by R15,28m • Rand to US Dollar exchange rates – June 2005 R6.73 – June 2006 R7.11 – June 2007 R7.10 Capital items R’m • 2007 – Profit on disposal of properties 24 – Profit on disposal of listed investment 33 • 2006 – Profit on disposal of proper
Slide 16: Highlights of Results
Highlights of Results 16 Net interest received increased • Improved cash flows • Increased interest rates Tax R’m • Normal 593 • STC 57 • Deferred (31) • Capital gains tax 4 • Total 623
Slide 17: Highlights of Results
Highlights of Results 17 Capital expenditure R’m • Land & Buildings 308 • Store Refurbishment 463 • New Stores 239 • Information Technology 159 • Other Replacements * 95 • Total 1 264 * Distribution Centres, Motor Vehicles & Office Furniture
Slide 18: Highlights of Results
Highlights of Results 18 Inventory • Increased by 13.1% vs turnover growth of 16.2% • Buoyant sales • New stores • Higher food inflation • Decrease in supplier service levels Cash balances vs Trade creditors • Balance sheet closing date
Slide 19: Highlights of Results
Highlights of Results 19 Debtors 2006 2007 R’m R’m Furniture (net) 528 571 Franchise 261 285 Buy aid organisations 98 96 Other receivables 555 550 Total 1,442 1,502
Slide 20: Highlights of Results
Highlights of Results 20 Cash earnings* (R’m) 1800 1600 + 32.7% 1400 1,673 + 33.8% 1200 1000 1,260 800 600 942 400 200 0 2005 2006 2007 *Cash flows from operating activities excluding dividends paid and changes in working capital
Slide 21: Highlights of Results
Highlights of Results 21 HEPS vs Cash EPS* vs EBITDA per share (cents) HEPS Cash EPS EBITDA per share 500 438 400 371 330 281 300 248 186 202 200 136 152 100 0 2005 2006 2007 *Cash flows from operating activities excluding dividends paid and changes in working capital per share
Slide 22: Operating Highlights
Operating Highlights Whitey Basson Chief Executive Officer
Slide 23: Introduction
Introduction 23 You may recall that I told you a year ago that we focused our attention on: • Our 3 distinct formats in RSA • Our Non-RSA operations • Professionalism I think that the result of this is even more apparent this year than it was last year.
Slide 24: Historical event list
Historical event list 24 1979 Acquire 8 Shoprite stores 1983 Shoprite opens its first new store outside the W/Cape 1986 Shoprite with 27 stores is listed on the JSE 1990 Shoprite gains control of Grand Bazaars and its 27 stores
Slide 25: Historical event list
Historical event list 25 1991 The chain of 169 Checkers stores is acquired 1992 1st Store in Namibia (ex Model supermarket) 1995 The first Shoprite store trading in Zambia Locally the Group acquires Sentra Buying Organisation 1997 Shoprite acquires OK Bazaars consisting of 157 super and hyper stores
Slide 26: Historical event list
Historical event list 26 1997 (continue) Mozambique, Swaziland, Lesotho, Botswana 1st Hungry Lion 1998 Introduce Money Market 2000 Zimbabwe, Uganda 2001 Egypt, Malawi, Tanzania
Slide 27: Historical event list
Historical event list 27 2002 Madagascar, Mauritius Shoprite is listed on the Namibian Stock Exchange 1st Usave opens in Stellenbosch (December 2002) 1st instore Medirite Pharmacy 2003 Ghana, Angola List on the Zambian Stock Exchange
Slide 28: Historical event list
Historical event list 28 2004 India 2005 Closed Egypt Opened Nigeria Opened 1st Shoprite Liquor Shop Acquired Computicket Acquired Foodworld with 13 stores
Slide 29: Turnover
1980 1981 1982 1983 1984 1985 JSE Listing 1986 1987 Turnover 1988 1989 Grand Bazaars 1990 Checkers 1991 1992 1993 1994 Zambia 1995 1996 OK Bazaars 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 29
Slide 30: Trading profit
1980 1981 1982 1983 1984 1985 JSE Listing 1986 1987 1988 1989 Grand Bazaars 1990 Trading profit Checkers 1991 1992 1993 1994 Zambia 1995 OK Bazaars 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 30
Slide 31: Presentation Agenda
Presentation Agenda 31 The sequence of today’s presentation will be: 1. Non-RSA 2. Supermarket Complimentary Services: – Money Market – Computicket – MediRite – LiquorShop – Hungry Lion – OK Franchise 3. Personnel
Slide 32: Presentation Agenda
Presentation Agenda 32 4. IT 5. Furniture – Etienne Nel 6. Supermarkets – Shoprite – Usave – Checkers
Slide 33: Non-RSA
ITEQ < d 9) oc Non
Slide 34: Non-RSA
Non-RSA 34 • 12 years since our first store opening… • Turnover has grown by 29.4% (GEB 18.6%) • Non-RSA participation to total sales 11% • Number of stores – 95 (10 opened, 4 closed) • Exports to non-RSA grew 33% • Non Food participation up 1.3% as % of sales • 50% improvement in shrinkage • Profit
Slide 35: Non-RSA Turnover Growth
Non-RSA Turnover Growth 35 Jun 03 Jun 04 Jun 05 Jun 06 Jun 07
Slide 36: Exchange Rates
Exchange Rates 36 Currency 30 June 2006 1 July 2007 % Change Appreciated Value Per 1 Rand Value Per 1 Rand Angola Kwanza 11.28 10.53 -6.6% India Rupee 6.48 5.74 -11.4% Uganda Shilling 260.20 223.96 -13.9% Madagascar Ariary 304.31 260.96 -14.2% Depreciated Zambia Kwacha 485.23 526.79 8.6% Mozambique
Slide 37: Supermarket Complimentary Services
Supermarket Complimentary Services
Slide 38: Money Market
38 • Now a business in excess of R5bn • 12% growth (excluding lotto 16%) • Computicket fully integrated in all RSA stores • 25% of Computicket tickets collected at the Money Market inside stores
Slide 39: Computicket
39 • Distribution now over 500 outlets • Sales growth of 7% • Volume growth of 15%
Slide 40: MediRite pharmacies
40 • 12 Pharmacies opened, now a total of 44 • GEB growth 17% • Prescriptions up 146% to 521 000 • Opportunities with Health & Beauty integration • Pharmacist shortage – cost doubled during last year
Slide 41: Liquor Shop
41 • 18 Stores trading at year-end • Opened another 3 stores since June • Shoprite liquor outlets enjoys great acceptance in previously disenfranchised areas • Profitable
Slide 42: Hungry Lion
42 • Opened 28 stores now a total of 101 • KFC 400, Chicken Licken 220 • Total sales growth 37% • Like-for-like sales increased 7.3% • Non-RSA trading profit increased 51% • Moved from 10th to 8th position in the Markinor brand survey • Plan to open another 30 stores in 2007/2008 • 10th Anniversary
Slide 43: OK Franchise
43 • Sales growth 14.1% • 34 new members, 27 non-profitable members closed • Debtors 42 days • Trading profit up 21.1% • Challenge is to establish the OK Brand in higher urban LSM’s
Slide 44: Personnel
Personnel mA tsi SHOPRITE€) 44 % 14
Slide 45: Personnel
Personnel 45 • Group: Sales per FTE +7.9% • New electronic scheduling system in 20 stores show good results • 3 year wage agreement up to April 2009 • 4406 direct new jobs created for the year • Total number of employees – 68 987 (55% females) • Succession program in place,1 518 graduates employed
Slide 46: Personnel Training
Personnel Training 46 • The Shoprite Group is largest training provider in the retail/wholesale sector • 62 208 training interventions in 2006/07 • 625 learnerships completed this year – biggest number of learners to qualify from any one company in the retail sector ever. • 770 managers in training
Slide 47: Learnerships - List
Learnerships - List 47 • TOPP Programme – Chartered Accountants • Certificate in Retail/Wholesales Sales Practices (NQF 2) • Certificate in Furniture Retail Sales Practices (NQF 3) • Certificate in Professional Driving (NQF 3) • Certificate in Retail Supervision (NQF 4) • Certificate in Craft Bread
Slide 48: Information Technology
SHOPRITE ©) Information Technology
Slide 49: Extensive changes in IT environment
IT 49 Extensive changes in IT environment: • New Back Office and Stock Management System installed in 53 stores • New Point of Sale system in all stores by end Sept • Advanced Store Replenishment – 1st store 1 Dec • New Transport Management System – installed in Brackenfell DC
Slide 50: IT (continue)
IT (continue) 50 • Latest version of Warehouse Management System - completed • New Network Traffic Management System – implemented • Deployment of exception based management through Store Portals - still over 7000 reports daily
Slide 51: Furniture
51 Furniture Etienne Nel Executive Director
Slide 52: Furniture Highlights
Furniture 52 Highlights • Sales increased 14.1% to R2.1bn • 18 new stores opened • Business NCA compliant from 1 June 2007 • Debtors book quality remains high, with low arrears
Slide 53: Furniture Trading environment
Furniture 53 Trading environment • Sales negatively affected by introduction of NCA and strikes • Product price deflation continues in the Furniture related departments, with only small inflation in the Appliance and Home Entertainment Departments
Slide 54: Furniture store openings
Furniture 54 Confirmed Stores Opened Total until June 2008 OK Furniture 12 171 11 OK Power 2 14 - Express House and 4 31 6 Home Total 18 216 17 Target – 233 stores by June 2008
Slide 55: Furniture sales growth
Furniture 55 • Sales growth (Strikes and NCA implementation) 2006 2007 (R’bn) (R’bn) Increased by 14.1% 1,875 2,139 • OK Furniture increased by 14.69% (GEB 4.7%) • House and Home RSA increased by 13.28% (GEB 12.2%)
Slide 56: Furniture sales mix
Furniture 56 • Sales Mix – Cash and Credit 2006 2007 Cash 66.23% 67.90% Credit 33.77% 32.10% # of new contracts (2.95% 242 000 249 134 increase)
Slide 57: National Credit Act
Furniture 57 National Credit Act • Furniture Division was ready to go “live” on 1 June 2007 • Reduction of credit participation in June 2007 of 5.76% and 3.02% in July 2007
Slide 58: Furniture segment trading profit
Furniture 58 • Segment trading profit 2006 2007 (R’000) (R’000) Increased by 3.12% 198 633 204 839 • Profits also affected by prolonged Shoprite strike, the Public Sector strike and final NCA implementation in June 2007.
Slide 59: Furniture debtors book
Furniture 59 % Debtors Book 2006 2007 Variance Debtors Book Balance R 921 R 1.02 - Increase R99 million million billion Actual Arrears 3.57% 4.04% -0.47 Balance Of Contract Arrears 15.10% 18.44% -3.34 (Affected By Month-End Cut-off) Bad Debt and UFC 19.94% 19.27% -0.67 Provisions
Slide 60: Furniture Prospects & Growth
Furniture 60 Prospects & Growth • Slower growth expected to continue – affected by interest rate increases, rising cost of living, food inflation and NCA affordability issues • Expect some level of product inflation, due to increased raw materials and transport costs and weaker exchange rate • Negat
Slide 61: Furniture Prospects & Growth
Furniture 61 Prospects & Growth Focus Points: • Store expansion • Volume growths through use of discounted pricing • Continual updating and introduction of new products and ranges • Increased imported product participation (margin advantage) • Ongoing staff training and development programmes to pro
Slide 62: Supermarkets
Supermarkets Whitey Basson
Slide 63: RSA Overview
RSA Overview 63 • Supermarkets achieved sales growth of 15% • Total Customer growth of 7.3% • Total Basket Size growth of 7.1% • Productivity growth 7.9% in number of sales items per employee • International Trade up 28% to ± 20 000 containers (inbound) • Distribution Centres – Improved productivity
Slide 64: Supermarkets opened in 2007
Supermarkets opened in 2007 64 Planned: Actual: Brand Difference June 2007 June 2007 Shoprite 24 20 (4) Checkers 9 5 (4) Usave 25 16 (9) Total 58 41 (17)
Slide 65: Current Supermarket Stores
Current Supermarket Stores 65 June 2007 99 Shoprite 24 Checkers CH Hyper USave 366 115 Total: 604
Slide 66: Shoprite
HOLDINGS LTD!
Slide 67: RSA Shoprite Overview
RSA Shoprite Overview 67 • Sales growth 14.4% • Market leader: 297 stores RSA • 12 new stores opened • Basket size growth of 7.2% • Grown customer base 6.5%
Slide 68: Retailer support in seven informal settlements
Retailer support measured amongst the 68 residents of seven informal settlements Woolworths 10% Q: Who do you support most? Checkers 16% SPAR 20% Pick 'n Pay 39% 60% Shoprite 0% 10% 20% 30% 40% 50% 60% Source: Infusion My Shopping June 2007
Slide 69: Emerging Black Market - Barometer
Emerging Black Market - Barometer 69 75 Q: Stores visited the Soweto and Alexandra past month? 32 21 15 5 6 Checkers or Checkers Shoprite Pick 'n Pay Woolworths Spar Checkers Hyper/Hyperama Source: Roots 2007
Slide 70: Emerging Black Market
Emerging Black Market 70 • We have good penetration • Our responsibility to ensure the correct merchandise and market appeal to retain these customers • We understand the Brand Loyalty and preferences of these customers • There also exist a fair number of myths about this group – Question: Do black
Slide 71: Market Position – The Shoprite Price!
Market Position – The Shoprite Price! 71 • 30 million customers per month • More shoppers than any other supermarket - over 10 million individuals (Amps 2006) • Highest customer loyalty - over 39% of customers shop exclusively at Shoprite (Amps 2006)
Slide 72: 72
72
Slide 73: Usave Number of Stores
Usave Number of Stores 73 Jun 06 Jun 07 - Jun 07 - Total Open Closed RSA 68 14 5 77 Non-RSA 24 2 4 22 Total 92 16 9 99
Slide 74: Usave Overview
Usave Overview 74 • Total sales growth 35.2% (GEB 21%) • Basket size growth 15.1% • Customer Growth 16.9% • ROI in excess of 30% • Leaner cost structure than previous year • Making a little too much profit
Slide 75: Usave Overview
Usave Overview 75 • Introduced 71 private label products • This created additional GP of 9.5% • Total basket of private labels now 50/50 with brand leaders • But outperforming brand leaders in: – Vinegar: 100% – Bleach: 73.8% – Frozen Veg: 73% – Sugar: 71% – Oil: 64.9% – Tomato Sauce: 38.8%
Slide 76: 76
76
Slide 77: RSA Checkers Overview
RSA Checkers Overview 77 • Sales growth 15% • 5 new stores opened • Basket size growth 6.7% • Customer growth 7.8% • Trading profit increased by 35.5%
Slide 78: Checkers
Checkers 78 • Transaction growth indicative of Avoiders being attracted • Enhancing our leadership in key categories: – Wine – Cheese – Meat Steakhouse Classic Certified Natural Lamb Boerewors • Perishable basket grew 21% • In Checkers freshness and convenience foods determine perception • Receives
Slide 79: Confirmed store openings until June 2008
2008 79 Confirmed store openings until June 2008 Total RSA Non-RSA 2008 Shoprite 13 3 16 Checkers 11 0 11 Usave 11 2 13 Total 35 5 40
Slide 80: Competitors
Competitors 80 • SPAR • Woolworths • PnP
Slide 81: Economic Prospects
Economic Prospects 81 • Forecasts indicate slow down in GDP • Inflation remains high • Interest rates higher than past 2 years • Rand depreciates
Slide 82: Our focus
Our focus 82 • Maintain level of staff training to improve customer experience • Have our global sourcing keeping everyone honest • Deliver on Freshness product and perception • Expand Non-RSA • Non-RSA – Angola – Cabinda, Huambo, Lubango property – Nigeria – 4 new developments – Ghana – opening Nov
Slide 83: Questions?
Questions?