Pepkor Holdings Ltd. · JSE:PPH
Pepkor — FY2018 Earnings Presentation
58 slides from Pepkor's earnings presentation, May 2019
Slide 1: Audited results for the year ended 30 September 2018
Audited results for the year ended 30 September 2018
Slide 2: Agenda
Agenda 01 Chairman’s remarks 02 Overview 03 Significant matters 04 Financial performance 05 Segmental performance 06 Outlook
Slide 3: Chairman's opening remarks
Chairman’s opening remarks JAYENDRA NAIDOO CHAIRMAN
Slide 4: Overview
y nw © CROSS MEDIA he Overview
Slide 5: Year in review
Year in review 10.9% 10.7% 1.9% growth in operating growth in operating revenue growth to profit to R6.4bn profit to R5.9bn R64.2bn (excluding one-off costs) (including one-off costs) 3.6% R18bn 27.8 cents per share maiden Growth in retail refinanced and dividend declared space guarantees released (
Slide 6: What we do
What we do Provide The right everyday products product adds value to An extensive product range focusing customers’ lives on everyday needs At Customer affordable prices loyalty through value Best price leadership ensures product for money differentiation At customers’ Enhanced convenience customer
Slide 7: Who we are
Who we are 12 African 2.4+ million m2 total 5 200+ countries retail space stores 400+ million + 48 000+ employees transactions annually 1 billion units sold 7
Slide 8: Who our customers are
Who our customers are It is important for our customers to look and feel good. We want to make their lives better and easier. Everyone, rich and poor, deserves the same access to products, services and friendly customer service from people who treat them with dignity and respect. Leon Lourens, Pepko
Slide 9: Milestones achieved
Milestones achieved Published 2017 full audited financial results Strengthened board composition Appointed new auditors Retention scheme implemented Completed refinancing and release from guarantee 9
Slide 10: Milestones achieved (continued)
Milestones achieved (continued) Terminated SNH services Pepkor name change Credit book agreements 2018 audited financial results New segmental reporting 10
Slide 11: Significant matters
Significant matters LEON LOURENS CEO
Slide 12: 1. Sourcing office
1. Sourcing office FY18 sourcing of Clothing, Footwear and Home (CFH) via PGS SA local 35% Imports 65% PGS 29% • CFH sourcing from PGS: 15% for Pep and Ackermans 12
Slide 13: 2. Tekkie Town
2. Tekkie Town 20% Like-for-like growth 0% -20% 13
Slide 14: 3. Credit agreements
3. Credit agreements Terminate Own the Build new Maintain commercial customer book profitability relationship experience with Fulcrum 1 2 3 4 14
Slide 15: 4. Dividend policy
4. Dividend policy 3 x cover Gearing Capital Strategic commitments investments 1 x net debt-to- EBITDA 15
Slide 16: Financial performance
Financial performance RIAAN HANEKOM CFO
Slide 17: Highlights
Highlights Statutory Revenue Operating profit Operating margin HEPS 10.9% 1.9% 90 bps 36.7% to to to to R64.2bn R5.9bn 9.2% 84.5 cps Comparable Revenue Operating profit Operating margin HEPS 10.9% 10.7% maintained 4.2% to to at to R64.2bn R6.4bn 10.0% 99.3 cps COMPARABLE: FY18: Add-back of R511 mill
Slide 18: Highlights (continued)
Highlights (continued) Return on net Cash Refinanced 3 Refinanced assets generated R18bn 23.4% R5.3bn and guarantees 27.5% excl. one-off costs released Maiden dividend Effective Consumer declared of tax rate finance 27.8c 38.4% @ 3 times cover 18
Slide 19: Consumer finance
Consumer finance Pepkor will collect existing loan ➔ books owned by CenCap: • JD secured credit: c.R1.6bn – average 27-month term • Capfin unsecured loans: c.R1.7bn – average eight-month term ➔ Market-related collection fee Capital investment required ➔ in FY19: R2.2bn 19
Slide 20: Comparability of earnings
Comparability of earnings Statutory vs comparable headline earnings per share (HEPS) – cents 133,6 29,9 -4.2% 103,7 99,3 14,8 84,5 FY17 statutory Impact of 882m FY17 FY18 Impact of one- FY18 statutory HEPS shares issued comparable comparable off costs HEPS HEPS HEPS 20
Slide 21: Effective tax rate up
Effective tax rate up FY18 % South African standard rate of taxation 28.0 Effect of other African countries’ tax rates 0.5 (Utilisation of unrecognised taxation losses)/taxation losses generated unrecognised 3.4 Withholding tax 3.3 One-off items 3.0 Other adjustments 1.2 Effective tax rate 38.4 21
Slide 22: New reporting segments
New reporting segments FinTech 22
Slide 23: Segmental revenue growth
Segmental revenue growth FY18 – Rm FY18 revenue +10.9% segmental composition 35.5% 64 168 19.9% 10.6% 7.2% 8% 13% 57 850 13% 66% FY17 FY18 23
Slide 24: Credit sales
Credit sales FY18 merchandise sales 100% 18% 8% 30% 8% 64% 14% 92% 92% 82% 86% 70% 36% PEP & PEP Ackermans Speciality Furniture Electronics & Building Pepkor group Africa Appliances materials Cash sales Credit sales 24
Slide 25: Gross profit margin
Gross profit margin 35.3% 34.5% • Increased markdowns and discounts • Building materials discounts and reduced rebates FY17 FY18 25
Slide 26: Other income
Other income FY18 Marketing and advertising 24.8% income 8% Insurance and other income Commission 25% 50% Distribution fee Growth to 17% R875m 26
Slide 27: Lowest cost of doing business
Lowest cost of doing business FY18 26.6% Property 25.8% 26% Personnel Depreciation 47% 7% Other 17% CODB CODB Including Excluding one-off costs one-off costs 27
Slide 28: Segmental operating profit growth
Segmental operating profit growth FY18 – Rm FY18 operating profit +10.7% segmental composition 10.6% 55.8% (11.9%) 6 439 (511) 3% 4% 0% 8.1% +1.9% 5 928 5 815 93% FY17 FY18 One-off FY18 comparable costs statutory Before capital items 28
Slide 29: Balance sheet considerations
Balance sheet considerations +R1.9bn Inventory Goodwill and Net working intangibles capital R61.0bn R5.4bn Trade +R1.1bn receivables Trade +R0.4bn payables 29
Slide 30: Net debt
Net debt Net debt Net EBITDA: Interest (contractual) debt-to-EBITDA cover R12.6bn 1.64 6.51 8 6 Net cash Unutilised facilities 4 Debt repayments 2 R billions 0 -2 -4 -6 -8 FY18 FY19 FY20 FY21 FY22 FY23 30
Slide 31: Cash generated from operations
Cash generated from operations FY18 – Rm 376 451 489 1 134 ( 3 331) 302 5 891 5 312 Operating Debtors' cost Amortisation Inventory Provision: Other non- Net changes Cash profit and write-downs One-off costs cash in working generated depreciation and adjustments capital from provisions operations 31
Slide 32: Capex
Capex Capex % of revenue 2.9% R1 869m Expansion Replacement Depreciation % of revenue 66% 34% 1.8% R1 134m 32
Slide 33: Segmental performance
Segmental performance LEON LOURENS CEO
Slide 34: Clothing & general merchandise
Clothing & general merchandise
Slide 35: PEP & Ackermans
PEP & Ackermans 8.0% Sales growth 3.3% 4.5% Like-for-like sales CFH growth deflation 9.0% 5.0% Volume growth Retail space growth 35
Slide 36: PEP
PEP 2 231 Stores 97.5% 294m Best Price Number of Leadership transactions 12 000 137 Number of New stores employees opened 36
Slide 37: Ackermans
Ackermans No.1 Value Retailer for women with kids in their lives 731 80 New stores Stores opened 17% 58m Number of Lay-byes transactions 7 000 12% Number of Credit sales employees growth 37
Slide 38: PEP Africa
PEP Africa -1.8% 347 Sales Stores growth 3 000 Number of 3 000 employees 23m Number of transactions 38
Slide 39: Speciality
Speciality 12.5% 911 Sales growth Stores 6 000 82 Number of New stores employees opened 14m Number of transactions 39
Slide 40: Furniture, appliances & electronics
Furniture, appliances & electronics
Slide 41: Furniture, appliances & electronics
Furniture, appliances & electronics 9.7% 892 81 Sales New stores Stores growth opened 7 000 Number of employees 3.5m Number of transactions 41
Slide 42: Furniture, appliances & electronics
Furniture, appliances & electronics Furniture retail Appliances and electronics Niche Top-end Value Mass market Discount Bedding Furniture Supply Chain Services Supply Chain Services Financial Services JD GROUP LIMITED 42
Slide 43: Building materials
Building materials
Slide 44: Building materials
Building materials -3.1% Sales 1 2 3 General decline SBM – SBM – building Retail Wholesale materials 124 Stores 7 000 Number of employees 44
Slide 45: FinTech
FinTech
Slide 46: FinTech
FinTech 145 000 Active traders 23m Monthly consumers 2.8m Daily transactions 46
Slide 47: Initiatives
Initiatives LEON LOURENS CEO
Slide 48: Adult wear
Adult wear PEPKOR Holdings Limited ACKERMANS WOMAN 48
Slide 49: Discount variety – Dealz
Discount variety — Dealz MONEY BACK 4 < en J BY Goo iS aD... a PEPKOR Holdings Limited 49
Slide 50: FMCG
FMCG PEPKOR Holdings Limited PEP STORES SA YOUTUBE} CHANNEL” 50
Slide 51: PAXI
PAXI PEPKOR Holdings Limited send | collect | return NAMIBIA ve 7 days a week Early until late Over 2000 PAX! points in SA-onein every PEP store! 51
Slide 52: Cellular – direct imports
Cellular -— direct imports PEPKOR Holdings Limited 52
Slide 53: Outlook
Outlook LEON LOURENS CEO
Slide 54: Outlook
Outlook ➔ Back to retail ➔ Future performance ➔ Store openings ➔ Portfolio strategy ➔ Leadership and culture 54
Slide 55: Putting the customer at the centre of what we do
Putting the customer at the centre of what we do
Slide 56: Audited results – Thank you
am ee ee Audited results PEPKOR Thank you Holdings Limited
Slide 57: PEP – Historic performance
PEP – Historic performance Revenue 19-year CAGR 15% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Operating profit 19-year CAGR 28% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 57
Slide 58: Ackermans – Historic performance
Ackermans – Historic performance Revenue 18-year CAGR 16% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Operating profit 18-year CAGR 23% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 58