Shoprite Holdings Limited · JSE:SHP
Shoprite — FY2012 Earnings Presentation
61 slides from Shoprite's earnings presentation, 2012
Slide 1: i ee er
i ee er
Slide 2: Carel Goosen, Deputy Managing Director
Carel Goosen Deputy Managing Director 2
Slide 3: Size of Operation
Size of Opera?on June 2012 Turnover R83bn Owned Outlets 1 334 Franchise Outlets 406 Countries 17 Employees 102 137 Market Capitalisa<on* >R94bn *During August 2012 3
Slide 4: Financial Highlights
Financial Highlights Turnover R 82.7bn Trading Profit R4.7bn Trading Margin 5.64% Headline EPS 607c NAV per Share 2 382c Dividend per Share 303c 4
Slide 5: Key Information per Segment
Key Informa?on per Segment • Turnover – Total + 14.4% – Supermarkets RSA + 12.9% – Supermarkets Non-‐RSA + 25.4% – Furniture + 11.1% – Other Opera<ng Segments + 18.4% • Trading Profit – Total + 17.0% – Supermarkets RSA + 17.7% – Supermarkets Non-‐RSA + 12.2% – Furniture + 33.5% – Other Opera<ng Seg
Slide 6: Value Added Statement
Value Added Statement Employees R6.931m Providers 54% 13% of Capital R1.645m 11% 22% Tax R1.439m Re-‐invested R2.805m 6
Slide 7: Sales Growth Analysis
Sales Growth Analysis Exis?ng Net new Total Customers Basket stores stores Supermarkets RSA 7.6% 5.3% 12.9% 3.4% 8.5% Supermarkets Non-‐RSA 15.4% 10.0% 25.4% 9.7% 9.6% Furniture 8.8% 2.3% 11.1% -‐ -‐ Other Divisions 10.5% 7.9% 18.4% -‐ -‐ Total 8.5% 5.9% 14.4% -‐ -‐ 7
Slide 8: Store Portfolios
Store Por[olios June 2011 Opened Closed June 2012 Supermarkets RSA 700 50 (6) 744 Supermarkets Non-‐RSA 114 18 (1) 131 Hungry Lion 130 18 (3) 145 Furniture 300 21 (7) 314 Owned Stores 1 244 107 (17) 1 334 Franchise 276 172 (42) 406 Total Stores 1 520 279 (59) 1 740 Pharmacies 121 18 (3) 136 Liquor
Slide 9: Highlights of Results
Highlights of Results June 2011 June 2012 Gross profit margin 20.3% 20.5% • Investment in logis<cs • Higher non-‐food contribu<on • Higher internal food infla<on 9
Slide 10: Highlights of Results
Highlights of Results Other opera?ng income June 2011 June 2012 Growth increased by 25.3% R’m R’m % Finance income earned 196 206 5.2 Net premiums earned 257 295 14.5 Opera<ng lease income 232 251 8.4 Commissions received 412 486 17.8 Franchise fees received 38 47 24.0 Investment income 28 82 >190 S
Slide 11: Highlights of Results
Highlights of Results Deprecia?on and amor?sa?on increased 16.8% • Con<nued high spend on revamps and new branches • Spend on distribu<on centres and informa<on technology Opera?ng leases increased 14.1% • Due to new stores opened in the past 12 months • Turnover rentals on sales growth Employee ben
Slide 12: Highlights of Results
Highlights of Results Trading profit increased 17% with turnover increasing by 14.4% • Op<mising of margins • Contained overhead costs • Growth in in-‐store services • Effec<ve systems and logis<cal infrastructure 12
Slide 13: Highlights of Results
Highlights of Results Exchange rate differences • June 2011: R446 thousand loss • June 2012: R8 million loss Rand to US Dollar exchange rate (R:$) • June 2010: R7.75 • June 2011: R6.77 • June 2012: R8.30 13
Slide 14: Highlights of Results
Highlights of Results June 2011 June 2012 R’m R’m Net Interest Paid 31 81 -‐ High Capital Expenditure -‐ Conver<ble Bonds Income Tax Expense -‐ Normal 1 260 1 437 -‐ STC 122 92 -‐ Deferred (35) (90) Total 1 347 1 439 Effec?ve tax rate (excl. STC) 31.6% 30.1% 14
Slide 15: Highlights of Results
Highlights of Results Capital Expenditure June 2011 June 2012 R’m R’m Land and Buildings 937 921 Store Refurbishment 361 350 New Stores 610 756 Informa<on Technology 374 401 Other Replacements* 735 709 Total 3 017 3 137 *Motor vehicles, generators and office furniture 15
Slide 16: Highlights of Results
Highlights of Results Contracted Capital Commitments June 2011 June 2012 R’m R’m Stores 814 1 138 -‐ RSA 514 741 -‐ Non-‐RSA 300 397 Distribu<on Centres 449 481 IT Systems 80 88 Total 1 343 1 707 16
Slide 17: Highlights of Results
Highlights of Results June 2011 June 2012 Growth R’m R’m % (Overdrad)/cash balances (81) 7 916 >100 • Issue of R3.5 billion worth of shares • Issue of R4.5 billion worth of conver<ble bonds 17
Slide 18: Stockholding
Stockholding June 2011 June 2012 Growth R’m R’m % Inventory 7 056 8 680 23 • Stocking up 90 new corporate stores • Increase in internal food infla<on • More SKU’s through enlarged DC’s 81% Opening Stock Net New Stores -‐2% Real GEB Growth 1% Infla?on 4% Weakening rand 8% 8% Effec?ve stock reduc?on 18
Slide 19: Highlights of Results
Highlights of Results Debtors and Other Receivables June 2011 June 2012 Growth R’m R’m % Furniture Instalment Sales 798 936 17.3 Franchise 375 485 29.3 Buy-‐aid Organisa<ons 129 126 (2.3) Rental and Property Debtors 259 273 5.4 MediRite and Transpharm 157 295 87.9 Money Market and Compu<cket 102 59
Slide 20: Highlights of Results
Highlights of Results Cash earnings* (R'm) 4 084 4 119 3 187 2 756 2009 2010 2011 2012 *Cash flow from opera<ng ac<vi<es excluding dividends paid and changes in working capital 20
Slide 21: Highlights of Results
Highlights of Results HEPS vs. EBITDA per share (cents) 21
Slide 22: Aubrey Karp, Divisional Director
Aubrey Karp Divisional Director 22
Slide 23: Furniture – Overview
Furniture – Overview Trading Environment • Significant strength in the LSM 5 -‐7 market • Durable goods spending in the LSM 8-‐10 sector remained sluggish • Overall product defla<on due to economies of scale and price compe<<on Furniture Overview • Real sales growth achieved of over 16% • OK Furnitu
Slide 24: Furniture – Trading Environment
Furniture – Trading Environment Sales R3.4bn +11.1% OK Furniture House & Home All stores 15.3% 4.9% Like-‐for-‐like 11.4% 4.7% • Internal selling price defla<on -‐5.07% Sales Mix 2011 2012 Home entertainment and appliances 63.4% 65.0% Furniture, bedding, pa<o and carpe<ng 36.6% 35.0% Cash 70.5% 69
Slide 25: Furniture continued
Furniture con?nued Debtors Book 2011 2012 Debtors Book +16.7% R1.1bn R1.28bn New Contracts +8.4% 227 917 247 018 • Average rand contract value increased 15.5% Arrears 2011 2012 Actual arrears 8.5% 7.4% Balance of contract arrears 19.0% 19.4% Bad debts provision 10.7% 10.6% 25
Slide 26: Furniture continued
Furniture con?nued Trading Profit: R 175.49m (33.47% increase) Sales 11.1% increase Net Gross Income 12.5% increase Total Expenses 10.2% increase Controllable Expenses 12.0% increase Fixed Costs 4.5% increase • Sales growth exceeds expense growth •OK Furniture profits increased by 6.6% •House & Home r
Slide 27: Furniture continued
Furniture con?nued Store Numbers Confirmed Opened Total June 2013 OK Furniture 18 248 22 OK Power Express 1 17 0 House & Home 2 49 2 Total 21 314 24 • 3 stores in Angola (Lubango, Lobito and Luanda) 27
Slide 28: Furniture continued
Furniture con?nued • Low growth environment expected to con<nue un<l end of 2013, especially in higher LSMs: – Con<nuing pressure on consumers’ disposable income – Con<nuing electrical product price compe<<veness Future growth drivers: • Expansion with 24 new stores confirmed to June 2013 • Deep disc
Slide 29: Whitey Basson, Chief Executive Officer
Whitey Basson Chief Execu8ve Officer 29
Slide 30: Operational Overview Agenda
Opera?onal Overview Agenda • Trading Environment • Group Overview • Supermarkets RSA • Other Opera?ng Segments • Supermarkets Non-‐RSA • Outlook 30
Slide 31: Trading Environment
Trading Environment Macro-‐economy provided likle support to our business: • Official food infla<on dropped from 11% high in December to 5.9% in June • SA’s GDP growth slowed to 2.1% (Q1 2012) • Disappoin<ngly, unemployment showed no improvement at 24.9% (Q2) • Rand weakness affec<ng import costs and e
Slide 32: Group Overview
Group Overview • Despite economic condi<ons, the Group managed turnover growth of 14.4% (like-‐for-‐like 8.5%) and net profit growth of 20.6% • Con<nued to outperform compe<tors and grow market share • Shoprite’s turnover is now greater than the GDP of 23 African countries (out of 52) • Sold 5.9bn
Slide 33: Multiple Brands
Multiple Brands Uave SHOPRITE Checkers Hyer
Slide 34: Group Overview - Customers
Group Overview -‐ Customers • Customer growth 4.1%, represen<ng an addi<onal 39 million transac<ons • Served a total of 846m customers (4 351 customers every minute!) • South Africa’s low price champion − R763m was put into price discoun<ng − Internal food infla<on well below official food infla<on (4.
Slide 35: Group Overview
Group Overview • Maintained aggressive expansion by opening 170 corporate outlets − 68 Corporate supermarkets with 18 Non-‐RSA − 81 Pharmacy, liquor and fast food outlets − 21 Furniture stores • Now opera<ng in 17 countries aoer opening in Kinshasa, DRC • 7 042 New jobs created (1 871 outside SA) •
Slide 36: Group Overview - Distribution
Group Overview -‐ Distribu?on • Added over 3 400 SKU’s into DCs -‐ beker on-‐shelf availability • DC has a 10% service level advantage over direct supplier deliveries • The Centurion DC now distributes 2.6 million cases per week • Fleet of 500 trucks travels enough km’s to go around the world twi
Slide 37: Supermarkets RSA
Slide 38: RSA Supermarkets
RSA Supermarkets • Two thirds (23.2million people) of SA adults now shop at the Shoprite Group 2005 2011 Source: Amps 2005-‐2011 Shoprite Group : Shoprite, Checkers, Checkers Hyper, OK Foods, Grocer, Mini Mark & U Save 38
Slide 39: Shoprite: 11.6% sales growth, market share increased
• 11.6% sales growth, and accelerated to 13.5% in the last quarter • Market share increased to 19.1 % • 339 outlets served 19 million individual customers, 444m transac<ons p.a. • Numerous brand accolades: Sunday Times Top Brands Survey 2012: • No. 1 Supermarket for the 6th year running • 10th ove
Slide 40: Customer Profile
Customer Profile Shoprite strength in core target market 76.5% 67% Also has 2.8 million LSM 8-‐10 shoppers 20% 20% 13% 14.5% 9% 2006 2011 2006 2011 2006 2011 LSM 1–3 LSM 4–7 LSM 8–10 AMPS 2006 – 2011, AMPS Dec 2011 (Released March 2012) 40
Slide 41: Checkers continued to outperform market
• Checkers con<nued to outperform market at 13.2% sales growth − More innova<on (Steakhouse Classic range extension, Wines of the World) − Our famous categories have received overwhelming support • Oddbins is now the 2nd largest wine brand in Checkers • Sold 22 million litres of Wine, could fill 10 O
Slide 42: Checkers Catalogue Advert
Checkers Catalogue Advert THE WIDEST RANGE OF | EXTRA-MATURED ‘ SSE STEAKS - CHOOSE FROM.
Slide 43: Customer Profile Improvement
Customer Profile Improvement LSM Comparison over 6 years 60% 56% % Total Checkers customers 44% 40% 2006 2011 2006 2011 LSM 1 -‐ 7 LSM 8 -‐ 10 AMPS (Jan – Dec 2011) *Including Checkers Hypers 43
Slide 44: Embracing the digital revolution
Embracing the digital revolu?on Social Web Mobile Apps 44
Slide 45: Usave
• Strong RSA customer growth of 8.8% and sales growth of 19.9% • Usave trading in 10 out of 17 African countries with a total of 258 stores • Opened 37 stores during the period: 9 stores opened just aoer year end • 7.5 million customers p.m. • Growing private label porsolio, already over 420 product
Slide 46: Other Operating Segments
Slide 47: Other Operating Segments
Other Opera?ng Segments • Sales of <ckets increased 6.1% • 12.8 million <ckets sold, 50% through supermarkets • Fewer large events vs. previous year (U2 and Neil Diamond) • Sport events <cket sales declined • Profitability decreased as a result of a large capital investment in new sooware and servers
Slide 48: Other Operating Segments
Other Opera?ng Segments • Total money collected up 28% • Installed 642 new service points to meet demand • Money transfers up 44% despite increased compe<<on − Service used by more than 10 million individuals − Expanding into Zambia shortly • 3rd party account payments up 20% − 450 000 DSTV account
Slide 49: Other Operating Segments
Other Opera?ng Segments • 65% sales growth (23% like-‐for-‐like) • 45 new stores opened, total 165 stores • 105 new licences pending • S<ll aim to open 1 new store per week • House of Fine Whisky concept launched as a differen<ator • Profitability increased > 100% 49
Slide 50: Other Operating Segments
Other Opera?ng Segments • MediRite sales increased by 15% with 136 pharmacies now trading • 3.2m prescrip<ons dispensed, up 13.3% • Pharmacies s<ll loss-‐making • Creates customer loyalty and improves Health & Beauty sales contribu<on • Transpharm wholesale increased sales 17% and is profitable • 19
Slide 51: Other Operating Segments
Other Opera?ng Segments • Good performance with a 19% sales growth from a total of 398 members • 148 new Friendly/711 members were acquired and contributed 10% of sales • Opportunity to grow turnover of these members with OK rebranding • 21% increase in trading profit • Response has been posi<ve to C
Slide 52: Supermarkets Non-RSA
Slide 53: Non-RSA Supermarkets
Non-‐RSA Supermarkets • For the first <me, over 100 million customers through our <lls in a single year • New-‐store-‐opening momentum in Africa (18 new supermarkets) − Opened new stores in 9 countries: Nigeria, Angola, Mauri<us, Madagascar, Mozambique, DRC, Lesotho, Namibia and Swaziland • Opened
Slide 54: New Abuja store opened to huge support
New Abudia store opened to huge support Daily Times Nigeria 22 June 2012 54
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Slide 56: Trading Outlook
Trading Outlook • Official infla<on expecta<ons remain stable and GDP growth forecast at 2.7% • New car sales up 18% in July 2012, signalling some consumer confidence • Food infla<on likely to rise: − Maize shortage (severe US droughts -‐ maize infla<on up 50%) − Electricity costs are a concern and will
Slide 57: Shoprite Group Outlook
Shoprite Group Outlook 1) Con?nued Expansion • New store ac<vity remains strong: 104 supermarkets (vs. 68 previous year) commiked to June 2013 • More supermarket ac<vity outside RSA in the medium term − 21 opportuni<es confirmed in Angola and 9 in Nigeria 2) Available capital will enhance speed of de
Slide 58: Shoprite Group Outlook
Shoprite Group Outlook 3) Further improvement in on-‐shelf availability • Invested more than R700 million in merchandising systems 4) Reduce cost of the supply through Centralised Distribu?on expansion • New KZN DC opera<onal January 2013 • PE: started ambient distribu<on and new DC construc<on com
Slide 59: Shoprite Group Outlook
Shoprite Group Outlook Lastly: Shoprite has consistently delivered value to shareholders • R1 000 invested upon lis<ng in 1986 would be worth R1.2million today • Compounded sales growth of 28.3% since lis<ng 59
Slide 60: Trading History 2005-2012 RSA Supermarkets
Trading RSA History 2005-‐2012 Supermarkets • Market Share gains for the 6th successive year 82.7 Turnover R bn • Sales growth of 12.9% ahead of Industry growth of 8.9% (Nielsen, 12mm to June 2012) 72.3 67.4 Trading profit R bn Trading Margin % 59.3 47.7 230% 5.5 5.6 5.2 38.9 4.7 4.8 5.0 167% 33.5 4
Slide 61: Questions?
Thank You Ques?ons? 61