Shoprite Holdings Limited · JSE:SHP
Shoprite — FY2002 Earnings Presentation
49 slides from Shoprite's earnings presentation, August 2002
Slide 1: Shoprite Holdings Limited Financial Results 30 June 2002
Shoprite Holdings Limited Financial Results 30 June 2002
Slide 2: Introduction
Introduction Whitey Basson Chief Executive Officer Shoprite Holdings Limited
Slide 3: Table of Contents
Table of Contents • Corporate Management • Financial Highlights • Management & Personnel • Store Expansion & Rationalisation • Market Analysis • Questions
Slide 4: Corporate Management
Corporate MANAGING DIRECTOR JW BASSON Management B COMM, CA (SA) AGE: 56 YRS SERV: 31 YRS DEPUTY MANAGING DIRECTOR C GOOSEN PERSONAL B COMM (HONS) CA (SA) ASSISTANT AGE: 49 YRS P ENGELBRECHT SERV: 19 YRS B COMPT (HONS) CA (SA) AGE : 33 YRS SERV: 5 YRS STATUTORY FINANCIAL INFORMATION HUMAN NON FOODS
Slide 5: Corporate Operations
Corporate MANAGING DIRECTOR JW BASSON Operations B COMM, CA (SA) AGE: 55 YRS SERV: 31 YRS DEPUTY MANAGING DIRECTOR C GOOSEN B COMM (HONS) CA (SA) AGE: 49 YRS SERV: 19 YRS PORTFOLIOS OPERATIONS SUB-SAHARA FRESH PORTFOLIOS: PROJECT E NEL TECHNICAL OPERATIONS FOODS EAST COAST OF MANAGER B COMM, S LAUBS
Slide 6: Operations: Supermarkets
Operations: MANAGING MANAGING DIRECTOR DIRECTOR JWJW BASSON BASSON Supermarkets B COMM, B COMM, CACA(SA) (SA) AGE: AGE:56 56 YRSYRS SERV: SERV: 31 31 YRSYRS PORTFOLIOS PORTFOLIOS COASTAL COASTAL E NEL E NEL OPERATIONS OPERATIONS B COMM, B COMM, CA AND AND BUYING BUYING (SA) CA(SA) B ROGUT B ROGUT AG
Slide 7: Financial Results Highlights
Financial Results Highlights Presenter: Carel Goosen Deputy Managing Director Shoprite Holdings Limited
Slide 8: Financial Results Highlights
Financial Results Highlights Year Ended June 00 June 01 June 02 Revenue (Rm) 18 430 19 597 22 110 Revenue growth (%) 6,2 6,3 12,8 Operating Profit (Rm) 319 407 522 Operating Profit growth (%) 168,1 27,6 28,4 Operating Margin (%) 1,7 2,1 2,4 Headline EPS 44,6 56,7 70,4* Dividend per share 18,0 20,5 2
Slide 9: Key Points
Key Points • Turnover – Food inflation up 10% – Grow customer base by 4.6% – Growth / rationalisation –Open 24, close 9 supermarkets –Open 12, close 9 furniture stores –35 supermarkets refurbished – Closure + Refurb = Net trading space reduction of 30 000m2
Slide 10: Key Points (Cont)
Key Points (Cont) • Operating profit – Operating margin improved to 2.4% – Stock losses improved further – Effective cost control – Currency profits reduced to R 24 m – Unproductive buildings – R 82 m – Africa • 10 % of Revenue • 20 % of Operating Profit
Slide 11: Key Points (Cont)
Key Points (Cont) • Exceptional items – Impairment of assets R 39 m – Negative Goodwill R 69 m – Sale of Land & Buildings R 11 m • Investment income – Cash flush – R 736 m – Share buy back – R 453 m – Stock holding opportunity = R 500 m
Slide 12: Key Points (Cont)
Key Points (Cont) • Taxation – Current tax rate 13,5% – Tax loss of R 600 m
Slide 13: Information Technology
Information Technology Actual ‘01 Actual ’02 Budget ’03 R 108 m R 64 m R 177 m Past Year Coming Year • E-Procurement • Mainframe replacement • Scanning – 150 to 235 • E-Business Platform • SAP • Branch Systems • Wholesale • Business Intelligence • Mainframe requirement • Customer focus analysis • Su
Slide 14: Financial Statistics - 22 Years
Financial Statistics - 22 Years Comp 1980 Growth 2002 Revenue (Rm) 12 40,7% 22 110 Operating Profit (Rm) 0,9 33,5% 522
Slide 15: Share Statistics Since Listing
Share Statistics Since Listing Comp 1986 Growth 2002 Revenue (Rm) 126 38,1% 22 110 Operating Profit (Rm) 3,9 35,8% 522 NAV/share (cents) 3,4 31,9% 287 Headline EPS (cents) 0,6 34,7% 70,4 Dividend per share (cents) 0 35,7% 25,5 Market Capitalisation (Rm) 226 19,6% 3 935
Slide 16: P/E Ratio comparison
P/E Ratio comparison P/E Ratio USA: 2001 2002 Wal-Mart 36,6 31,5 Kroger 20,2 12,5 Europe: Tesco 22,9 18,4 Sainsbury 21,4 16,4 Casino 28,8 20,5 South Africa: Pick & Pay 17,2 16,2 Woolworths 13,8 13,1 Shoprite Holdings 9,9 10,5
Slide 17: Management & Human Resources
Management & Human Resources Presenter: Callie Burger Human Resources Director Shoprite Holdings Limited
Slide 18: Corporate Management
Corporate MANAGING DIRECTOR JW BASSON Management B COMM, CA (SA) AGE: 56 YRS SERV: 31 YRS DEPUTY MANAGING DIRECTOR C GOOSEN PERSONAL B COMM (HONS) CA (SA) ASSISTANT AGE: 49 YRS P ENGELBRECHT SERV: 19 YRS B COMPT (HONS) CA (SA) AGE : 33 YRS SERV: 5 YRS STATUTORY FINANCIAL INFORMATION HUMAN NON FOODS
Slide 19: Corporate Operations
Corporate MANAGING DIRECTOR JW BASSON Operations B COMM, CA (SA) AGE: 55 YRS SERV: 31 YRS DEPUTY MANAGING DIRECTOR C GOOSEN B COMM (HONS) CA (SA) AGE: 49 YRS SERV: 19 YRS PORTFOLIOS OPERATIONS SUB-SAHARA FRESH PORTFOLIOS: PROJECT E NEL TECHNICAL OPERATIONS FOODS EAST COAST OF MANAGER B COMM, S LAUBS
Slide 20: Employment Statistics
Employment Statistics 45.3 45.5 45.8 44.7 44.6 ‘000 29.4 29.1 28.7 29.1 26.6 23.5 16.0 1997 1998 1999 2000 2001 2002 FTE Permanent Employees • Process 2,316,000 pay slips per annum for 12 countries on African continent • 651 with post-matric qualifications •Average years of service 12 years
Slide 21: Sales per R1 Cost of Employment
Sales per R1 Cost of Employment R 13.00 OK Bazaars takeover R 12.00 R 11.00 R 10.00 ' 99 ' 00 ' 01 ' 02 ' 96 ' 97 ' 98 ' 93 ' 94 ' 95 More than pre-OK takeover
Slide 22: Sales per FTE
Sales per FTE 45 OK Bazaars takeover 40 35 30 25 20 15 '98 '99 '00 '01 '02 '93 '94 '95 '96 '97 Surpassed R 41 000
Slide 23: Sales per FTE v Inflation
Sales per FTE v Inflation R(000) 41,3 SALES / FTE INFLATION SALES/ FTE TREND 36,5 33,5 31,6 27,8 33,0 26,6 23,9 30,5 28,6 21,6 27,2 25,8 19,0 24,2 22,2 20,7 19,0 1994 1995 1996 1997 1998 1999 2000 2001 2002
Slide 24: Highlights
Highlights • Productivity improved more than 13% (Sales per FTE) • Sales per cost of employment back to pre- OK takeover • 2 Year Wage agreement in RSA (8% and 7%)- Negotiating wages in 6 different countries • Never had a wage strike in Shoprite
Slide 25: Highlights (cont)
Highlights (cont) • First retailer and second company in RSA to implement SAP NQF training and development modules. (Assist in recovering training levy back and developing of skills base) • Group received official accreditation as a Training Provider from Wholesale and Retail Sector Education and Tr
Slide 26: Highlights (cont)
Highlights (cont) • Successfully launched Retail Learnerships in Western Cape and Gauteng • 2 State of the art training centers for bakeries, deli’s, meat and fresh produce • 44,065 employees attended training workshops and programs • 193 Training Courses and programs
Slide 27: Highlights (cont)
Highlights (cont) • 184 Trainee Retail Managers qualified from Management Training Program. (Currently 311 in training, more than 72% from previous disadvantaged groups) • TOPP program produced a further 3 more qualified accountants • Single biggest contributor towards Skills Development Fund for th
Slide 28: Store Rationalisation
Store Rationalisation Presenter: Philip van der Merwe Managing Director Shoprite Checkers Properties Limited
Slide 29: Size of the Operation - Group
Size of the Operation - Group June 01 June 02 Supermarkets – RSA 339 346 – Non RSA 38 46 – Total 377 392 Furniture 155 158 Hungry Lion 41 48 No of own Outlets 573 598 Franchise 422 383 Total no of Outlets 995 981 No of Non RSA Countries 9 11
Slide 30: Trading Area of Supermarkets
Trading Area of Supermarkets OK Take-over Shoprite, Checkers & Hyper Checkers Take-over m2 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 No. Stores 72 238 235 231 234 243 241 402 393 378 377 392
Slide 31: Shoprite Checkers Properties
Shoprite Checkers Properties • Manages 150 properties • Market value of portfolio approximately R2.8 billion • Owns 55 properties • Market value of own portfolio approximately R950 million
Slide 32: Marketing
Marketing Presenter: Brian Weyers Marketing Director Shoprite Holdings Limited
Slide 33: Market Share Majors June 2001 June 2002
Market Share Majors Total Store – Total South Africa only 30.1% 29.0% 29.5% 27.6% June 2001 June 2002 27.6% Apr '02 May '02 Jun '02
Slide 34: Store Variances Total Market June 2001/2002
Store Variances Total Market June 2001/2002 • New stores: 332 (Sales R 2 200 m) • Closed stores: 162 (Sales R 542 m) • Net stores: 170 (Sales R 1 658 m) • Shoprite share - R 453 m Sales growth 1.98% of total turnover
Slide 35: Like for Like Market Share Corporate Majors
Like for Like Market Share Corporate Majors South Africa Only Jun 01 Jun 02 34.3 33.9 30.1 30.1 24.2 24.4 11.4 11.7 Shr Group PnP Group Spar Group WW
Slide 36: Total Store growth per channel
Total Store growth per channel Total anualised Percentage 19.1 Growth by Channel 14.9 11.1 9.1 Hypers Corp SM Franchise C Store
Slide 37: Hypermarket Preferred shopping destination
Preferred shopping destination 60.0 At which store do you currently shop? 21.7 23.9 10.4 5.7 6.7 3.9 KwikSpar Hyperama Hypermarket Pnp SM Spar Shr/Chk Pnp Fam
Slide 38: Consumer chain price ratings
Consumer chain price ratings Best Specials Competitive priced 103 103 87 91 Shoprite 84 86 PnP Spar
Slide 39: Shopper LSM Profile
Shopper LSM Profile 40 30 20 10 0 '1-3 4 5 6 7 8 9 10 Checkers 18.2 13 16.8 18.7 9.5 9 8.3 6.5 Shoprite 23.5 16.6 18.6 19.5 7.7 6.4 4.8 2.9 Shr/Chk 21.1 15.0 17.8 19.1 8.5 7.6 6.4 4.6 All Resp 37.7 13.4 11.9 12.5 6.4 6.4 6.1 5.6
Slide 40: Shopper Age Profile
Shopper Age Profile 32 27 22 17 16 - 24 25 - 34 35 - 49 50 Checkers 20 28 30.5 21.6 Shoprite 20.3 30.7 31.2 17.9 Shr/Chk 20.1 29.4 30.9 19.6 All Resp 26.3 25.2 26.5 22.1
Slide 41: Whitey Basson, Shoprite Holdings Limited
Whitey Basson Chief Executive Officer Shoprite Holdings Limited
Slide 42: Financial
Financial • Accounting principles – GAAP Requirements – Accounting concepts • Buildings – Valued R 950 m – 13% return – Book R 632 m – Undervalued R 318
Slide 43: Financial (cont)
Financial (cont) • Write off – R 39 m impairment – R 17 m depreciation • Balance - Tax negative goodwill (R 303 m) • Actual tax R 151 m – Deferred tax R 77 m – Actual payment R 74 m (13,5%) – EPS (Eff. Tax) 85,4 c
Slide 44: Financial (cont)
Financial (cont) • Rent closed stores – Unproductive buildings R 82 m • Franchise Operation – Abnormal write off R 42 m – Corporate stores as shut down not going concern
Slide 45: Personnel
Personnel • Succession Management • New foreign expansion
Slide 46: Marketing
Marketing • Market Share • Customer growth • Checkers v Shoprite
Slide 47: Africa – Existing & Future
Africa – Existing & Future • Return on investment before loss making countries = 42% • Establishment cost before interest: Current year = R 46 m • GDP - South Africa = $ 111,7 bn - Rest of Africa = $ 410,7 bn - India = $ 542,6 bn • Egypt • Mauritius • India
Slide 48: Business Check list
Business Check list Failed Succeeded Succession management ü Training ü No of Store openings (too few) ü Stock reduction ü Operating profit to 3% level ü IT & distribution ü Customer growth ü Basket size ü Overall ü Not just luck over 22 years
Slide 49: Fasten your seatbelts… Conclusion
Fasten your seatbelts… Conclusion • Corporate governance v Corporate incompetence • Plett v Angola •ENJOY THE RIDE !