For the 6 months
ending December 2013
Carel Goosen
Deputy Managing Director

2
Size of Operation
Dec 2013

Turnover
Total Stores
Countries
Employees
Market Capitalisation

3

R51bn
1 902
16
116 743
> R...
Financial Highlights
Turnover
Trading Profit

R2.7bn

Trading Margin

5.3%

Headline EPS

341c

NAV per Share

2 983c

Div...
Key Information per Segment
Turnover

– Total

9.7%

– Supermarkets RSA

+

7.6%

– Supermarkets NonͲRSA

+

28.1%

– Furn...
Sales Growth Analysis
Existing
Stores

Supermarkets RSA

Net new
Stores

Total

1.5%

6.1%

7.6%

18.7%

9.4%

28.1%

Furn...
Store Portfolios
Dec 2012

Opened

Closed

(12 months)

(12 months)

Dec 2013

Supermarkets RSA

68

(5)

848

Supermarket...
Key Information per Segment
Trading Profit

– Total

7.5%

– Supermarkets RSA

+

5.4%

– Supermarkets NonͲRSA

+

26.5%

...
Highlights of Results
Dec 2012

Gross Profit Margin

Dec 2013

20.46%

20.39%

• Lower nonͲfood participation
• Slower vol...
Highlights of Results
Other Operating Income
Increased by 15.4%

Dec 2012
R’m

Dec 2013
R’m

Growth
%

Finance Income Earn...
Highlights of Results
Depreciation and amortisation increased by 8%
• Continued high spend on revamps and new branches
• S...
Highlights of Results
Exchange rate differences
• Dec 2012 :
R41.38 million loss
• Dec 2013:
R4.25 million profit
Rand to ...
Highlights of Results
Dec 2012
R’m

Dec 2013
R’m

69

97

Ͳ Normal

708

731

Ͳ Deferred

(4)

40

704

771

29.2%

29.7%
...
Value Added Statement
Employees
R4 093m
53%
18%

10%
19%

Providers
of Capital
R1 367m
Tax
R771m
ReͲinvested
R1 497m

14
Highlights of Results
Capital Expenditure

Dec 2012
R’m

Dec 2013
R’m

Land and Buildings

346

195

Distribution Centres
...
Highlights of Results
Contracted Capital Commitments

Dec 2012
R’m

Dec 2013
R’m

Stores

742

1 040

Ͳ RSA

495

531

Ͳ N...
Highlights of Results
Dec 2012
R’m

Net Cash Balances
• MonthͲend closing date
• Timing of provisional tax payments

17

7...
Stockholding
Dec 2012
R’m

Inventory

10 597

• Provision for 104 net new corporate stores
• Taking on new distribution ca...
Highlights of Results
Debtors and Other
Receivables
Furniture Instalment Sales

Dec 2012
R’m

Dec 2013
R’m

Growth
%

1 30...
Highlights of Results

HEPS

20

Cash EPS*

EDITDA per share
Aubrey Karp
Divisional Director

21
Furniture – Trading Environment
• Tough trading conditions continued
• Household disposable income remains under pressure
...
Furniture – Overview
• Sales growth remained buoyant at 10.5%
• Trading profit growth of 10.9%
• OK Furniture and OK Power...
Furniture – Trading Environment
Sales

R2.1bn

+10.5%

OK Furniture

House & Home

Increase

18.1%

Ͳ3.6%

LikeͲforͲLike

...
Furniture – Trading Environment
National Credit Regulator’s – 3rd quarter report for 2013
• Only 51.9% of the 20.3 million...
Furniture continued
Debtors Book
Debtors Book (Gross)

Dec 2012

Dec 2013

+ 13.1%

R1.4bn

R1.6bn

+ 8.3%

137 284

148 7...
Furniture continued
Trading Profit: R134m (10.9% increase)
Sales

10.5%

Net Gross Income

13.2%

Total Expenses

13.6%

C...
Furniture continued
Store Numbers

Opened Since
June 13

Total
Dec 13

OK Furniture

16

282

16

OK Power Express

2

21
...
Furniture – Outlook
Low growth environment expected to continue
• Ongoing pressure on consumers’ disposable income
• High ...
30
Trading Environment
• Sales growth beat official food inflation of 5.2% for the period
• SA economy falling behind other A...
Trading Environment: RSA
• Our shopper profile represents the population
• The average SA consumer not in great shape
௅ Lo...
Trading Environment: NonͲRSA
In contrast to SA, most NonͲRSA operations had good
macroͲeconomic support
• Natural resource...
Group Overview
• NonͲRSA operations continue to perform exceptionally despite

pace of property development
• RSA sales im...
Market Share
• Opened 634 stores in the last 5 years
• SA Market share has reached 34% of formal food retail
௅ Small gain ...
Profitability
• At 5.3% our Trading Margin remains internationally competitive
௅ Top 250 global retailers average 3.1% (so...
Invested through the cycle
• Maintained our investment focus on long term growth:
௅ R1,1bn spent on new stores and revamps...
1 000th Corporate Supermarket Opened
Checkers Zevenwacht Ͳ own development

38
Supermarkets
• Shoprite’s LSM 4Ͳ7 consumer is the hardest hit

by costͲofͲliving increases
௅ Subsidised the price of basic...
Supermarkets continued
• Checkers sales growth slowed on back of closure of 15th December
௅ Better comparable (GEB) store ...
Other Operating Segments

Turnover relatively flat at 0.4% growth
• Computicket sales up 3.3%
௅ Fewer high profile live ev...
Hungry Lion

• RollͲout of refreshed branding and store design
• NonͲRSA business showing strong growth at 34%

42
43
Leverage our Strong Brands

44
Leverage our Strong Brands
Value for money means different things
to different upmarket segments

AUTHENTIC FRENCH CHAMPAG...
Keep Getting Better

TV ad
Leverage Customer Insights from Big Data
• The Group stores 70 PetaBytes of data

(=1.2bn filing cabinets worth of text)
•...
Extend Services in Africa
• 6 stores in Angola and Swaziland

performing well
• Nigeria and Mozambique to follow

• Money ...
Position for African Growth
Africa’s insatiable appetite for big brands
• Angola’s 19 stores sold more bottles of JC le Ro...
Position for African Growth
Nigeria will have more people
than the U.S. by 2050

• The combination of NonͲRSA’s rapid popu...
Position for African Growth
• Expansion focus remains on resourceͲrich countries
• Angola:
௅ Investment in own development...
52
Trading Outlook
• Trading in January and February is stronger

than the reporting period
• Although muted trading conditio...
Trading Outlook continued
• The Group will only pursue profitable market share
• 74 new corporate supermarkets committed u...
THANK YOU

Questions?
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Shoprite Holdings Ltd HY 2014 financial results presentation

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Shoprite Holdings Ltd HY 2014 financial results presentation

  1. 1. For the 6 months ending December 2013
  2. 2. Carel Goosen Deputy Managing Director 2
  3. 3. Size of Operation Dec 2013 Turnover Total Stores Countries Employees Market Capitalisation 3 R51bn 1 902 16 116 743 > R 77bn
  4. 4. Financial Highlights Turnover Trading Profit R2.7bn Trading Margin 5.3% Headline EPS 341c NAV per Share 2 983c Dividend per Share 4 R51bn 132c
  5. 5. Key Information per Segment Turnover – Total 9.7% – Supermarkets RSA + 7.6% – Supermarkets NonͲRSA + 28.1% – Furniture + 10.5% – Other Operating Segments 5 + + 0.4%
  6. 6. Sales Growth Analysis Existing Stores Supermarkets RSA Net new Stores Total 1.5% 6.1% 7.6% 18.7% 9.4% 28.1% Furniture 6.5% 4.0% 10.5% Other Divisions 9.6% Ͳ9.2% 0.4% Total 4.3% 5.4% 9.7% Supermarkets NonͲRSA 6
  7. 7. Store Portfolios Dec 2012 Opened Closed (12 months) (12 months) Dec 2013 Supermarkets RSA 68 (5) 848 Supermarkets NonͲRSA 144 20 (1) 163 Hungry Lion 165 11 (12) 164 Furniture 327 29 (6) 350 OK Franchise 400 31 (54) 377 Total Stores 1 821 159 (78) 1 902 Pharmacies 141 9 Ͳ 150 Liquor Stores 7 785 184 38 (2) 220
  8. 8. Key Information per Segment Trading Profit – Total 7.5% – Supermarkets RSA + 5.4% – Supermarkets NonͲRSA + 26.5% – Furniture + 10.9% – Other Operating Segments 8 + Ͳ 10.5%
  9. 9. Highlights of Results Dec 2012 Gross Profit Margin Dec 2013 20.46% 20.39% • Lower nonͲfood participation • Slower volume growth affected rebates 9
  10. 10. Highlights of Results Other Operating Income Increased by 15.4% Dec 2012 R’m Dec 2013 R’m Growth % Finance Income Earned 110 125 13.2 Net Premiums Earned 162 181 12.0 Operating Lease Income 130 142 9.2 Commissions Received 290 308 6.4 Franchise Fees Received 24 25 3.0 Investment Income 17 19 8.6 286 376 31.5 1 019 1 176 15.4 Sundry Income Total 10
  11. 11. Highlights of Results Depreciation and amortisation increased by 8% • Continued high spend on revamps and new branches • Spend on information technology Operating leases increased by 18.2% • Due to new stores opened in the past 12 months • Turnover rentals on sales growth Employee benefits increased by 5.9% • Resulting staff requirements due to new store openings • Productivity increased • Dec 2012 included share appreciation rights Other operating expenses increased by 14.6% • Includes electricity and water increase by > 16% • Includes increased commission on cards 11
  12. 12. Highlights of Results Exchange rate differences • Dec 2012 : R41.38 million loss • Dec 2013: R4.25 million profit Rand to US Dollar exchange rates (R:$) • Dec 2011 : R8.23 • Dec 2012 : R8.50 • Dec 2013 : R10.35 12
  13. 13. Highlights of Results Dec 2012 R’m Dec 2013 R’m 69 97 Ͳ Normal 708 731 Ͳ Deferred (4) 40 704 771 29.2% 29.7% Net Interest Expense Income Tax Expense Total Effective tax rate 13
  14. 14. Value Added Statement Employees R4 093m 53% 18% 10% 19% Providers of Capital R1 367m Tax R771m ReͲinvested R1 497m 14
  15. 15. Highlights of Results Capital Expenditure Dec 2012 R’m Dec 2013 R’m Land and Buildings 346 195 Distribution Centres 229 137 DC Equipment 111 36 DC Vehicles 107 55 Store Refurbishment 382 291 New Stores 436 774 Information Technology 201 228 Other Replacements* 253 263 2 065 1 979 Total *Motor vehicles and office furniture 15
  16. 16. Highlights of Results Contracted Capital Commitments Dec 2012 R’m Dec 2013 R’m Stores 742 1 040 Ͳ RSA 495 531 Ͳ NonͲRSA 247 509 Distribution Centres 403 481 IT Systems 139 51 1 284 1 572 Total 16
  17. 17. Highlights of Results Dec 2012 R’m Net Cash Balances • MonthͲend closing date • Timing of provisional tax payments 17 7 118 Dec 2013 R’m 7 567 Growth % 6.3
  18. 18. Stockholding Dec 2012 R’m Inventory 10 597 • Provision for 104 net new corporate stores • Taking on new distribution capacity (+R137m) • NonͲFood buy in for profit (+R200m) • Weaker Christmas trading than expected • R1bn stock reduction in January 18 Dec 2013 R’m 13 271 Growth % 25.2
  19. 19. Highlights of Results Debtors and Other Receivables Furniture Instalment Sales Dec 2012 R’m Dec 2013 R’m Growth % 1 303 1 408 8.1 Franchise 758 785 3.6 BuyͲaid Organisations 179 175 Ͳ2.2 Rental and Property Debtors 351 461 31.1 MediRite and Transpharm 432 423 Ͳ1.9 Money Market and Computicket 113 74 Ͳ34.8 Other Receivables 922 1 036 12.3 4 058 4 362 7.5 Total 19
  20. 20. Highlights of Results HEPS 20 Cash EPS* EDITDA per share
  21. 21. Aubrey Karp Divisional Director 21
  22. 22. Furniture – Trading Environment • Tough trading conditions continued • Household disposable income remains under pressure • Durables spending impacted • Product deflation due to economies of scale, demand (TVs) and price competition continued • Rand depreciation has lifted prices from January 2014 • Previous furniture and microͲlending credit extension is biting • Supply chain squeeze as several local manufacturers and importers ceased trading 22
  23. 23. Furniture – Overview • Sales growth remained buoyant at 10.5% • Trading profit growth of 10.9% • OK Furniture and OK Power Express – expansion and growth continues • House & Home – starting to perform better • Debtors book – no significant change 23
  24. 24. Furniture – Trading Environment Sales R2.1bn +10.5% OK Furniture House & Home Increase 18.1% Ͳ3.6% LikeͲforͲLike 11.2% Ͳ2.9% Internal selling price deflation 1.65% Sales Mix Dec 2012 Dec 2013 Home and Entertainment Appliances 62% Furniture, Bedding, Patio and Carpeting 37% 38% Cash 69% 68% Credit 24 63% 31% 32%
  25. 25. Furniture – Trading Environment National Credit Regulator’s – 3rd quarter report for 2013 • Only 51.9% of the 20.3 million active credit customers are in good standing • 21% of these consumers reflect adverse listings at the various retailers (more than three months in arrears) • 14% reflect adverse listings at the credit bureaus • 13.1% reflect judgements or orders for administration. 25
  26. 26. Furniture continued Debtors Book Debtors Book (Gross) Dec 2012 Dec 2013 + 13.1% R1.4bn R1.6bn + 8.3% 137 284 148 704 New Contracts • Average rand contract value increased by 0.4% Arrears Dec 2012 Dec 2013 Actual Arrears 7.4% 7.7% Balance of Contract Arrears 20.1% 20.8% Bad Debts Provision 10.6% 10.7% • High consumer debt levels could affect overall affordability and slow collections 26
  27. 27. Furniture continued Trading Profit: R134m (10.9% increase) Sales 10.5% Net Gross Income 13.2% Total Expenses 13.6% Controllable Expenses 13.4% Fixed Costs 14.8% • OK Furniture profits increased by 7.2% • House & Home profits increased by 40% • Exceptional result considering current industry trends and price deflation 27
  28. 28. Furniture continued Store Numbers Opened Since June 13 Total Dec 13 OK Furniture 16 282 16 OK Power Express 2 21 2 House & Home Ͳ 47 2 18 350 20 Total • 4 Stores closed – 2 OK Furniture and 2 House & Home 28 Confirmed June 2014
  29. 29. Furniture – Outlook Low growth environment expected to continue • Ongoing pressure on consumers’ disposable income • High debt exposure • Continuing electrical product price competitiveness Future growth drivers: • Increased store footprint (20 new stores confirmed to June 2014) • Deep discounting of high value products to drive volumes • New House & Home Gauteng DC now complete – better product handling and efficiency • House & Home and OK Furniture online shopping launched, showing exponential sales growth 29
  30. 30. 30
  31. 31. Trading Environment • Sales growth beat official food inflation of 5.2% for the period • SA economy falling behind other African countries where we trade Ͳ Continued unrest in mining industry (over 2 million man days lost up to Sept 2013) Ͳ Low GDP growth and no improvement unemployment at (24%) 5% Forecast 4.8% GDP% Growth 5% 4% 3.4% 3.3% 4% 3.0% 3% 3% 2.1% 2.5% 1.9% 2% 1.9% 2% 1.9% 1.7% 1.7% 1% 1.2% 0.7% 0.9% 1% Q1 Q2 Q3 2011 Source: STATS SA 31 Q4 Q1 Q2 Q3 2012 Q4 Q1 Q2 Q3 2013 Q4 Q1 Q2 2014
  32. 32. Trading Environment: RSA • Our shopper profile represents the population • The average SA consumer not in great shape ௅ Low income consumers spend 89% of net income to service debt, yet need 70% of income just to cover essential living expenses (source: BD Live) ௅ Access to new credit also slowed down ௅ Fuel and electricity cost hikes alone removed R9.5bn from pockets of consumers (source: SARB) ௅ Total consumer spend growing at only 2.3%, less than half of inflation 32
  33. 33. Trading Environment: NonͲRSA In contrast to SA, most NonͲRSA operations had good macroͲeconomic support • Natural resources continue to drive economic growth í Attracting more foreign investment í Filtering down to consumers’ income and spending • Middle class development and migration to the large cities is driving consumer spend • Angola, Zambia, Mozambique and Nigeria are the economic achievers with GDP growth in excess of 6% 33
  34. 34. Group Overview • NonͲRSA operations continue to perform exceptionally despite pace of property development • RSA sales impacted by: ௅ Store closures on 15th December – sales loss of R260m, 3% effect on December growth ௅ Stores in mining area catchments underperforming as a result of unrest ௅ Lack of infrastructure spending post 2010 ௅ Many new competitors and dualͲanchor shopping centres • The Group supported embattled consumers by delaying price increases ௅ Lower internal food inflation of 3.8% vs official food inflation of 5.2% 34
  35. 35. Market Share • Opened 634 stores in the last 5 years • SA Market share has reached 34% of formal food retail ௅ Small gain in market share annually to December ௅ Market share dipped marginally for the 6 month period ƒ Competitors remained open on 15 December • Seven years of uninterrupted market share growth 35
  36. 36. Profitability • At 5.3% our Trading Margin remains internationally competitive ௅ Top 250 global retailers average 3.1% (source: Deloitte) • Fuel and electricity rate hikes impacted costs negatively • Controllable cost disciplines well maintained • Saved R125m in electricity costs in 5 years from efficiency initiatives 36
  37. 37. Invested through the cycle • Maintained our investment focus on long term growth: ௅ R1,1bn spent on new stores and revamps ௅ Overall 5.2% space growth for the period ௅ Now trading from 2 272 outlets • Opened a net 98 new corporate outlets in 6 months ௅ 57 supermarkets and 41 pharmacy, liquor, Hungry Lion and furniture outlets • The Group now employs a total of 116 743 people ௅ Created 5 405 new jobs in the last 6 months 37
  38. 38. 1 000th Corporate Supermarket Opened Checkers Zevenwacht Ͳ own development 38
  39. 39. Supermarkets • Shoprite’s LSM 4Ͳ7 consumer is the hardest hit by costͲofͲliving increases ௅ Subsidised the price of basic food stuffs by R20m to help consumer ௅ Price leadership maintained, confirmed by weekly independent price surveys • Usave continues to gain market share – more than doubled in 5 years ௅ Accelerated store openings confirmed (31) for second half 39
  40. 40. Supermarkets continued • Checkers sales growth slowed on back of closure of 15th December ௅ Better comparable (GEB) store sales growth than Shoprite ௅ Profitability growth exceeded turnover growth • NonͲRSA sales growth of 28.1% (14.9% constant currencies) ௅ Contributes 16.1% to the Group’s supermarket turnover ௅ 26.5% trading profit growth despite higher store opening costs ௅ 11 new stores opened, with 163 supermarkets in total 40
  41. 41. Other Operating Segments Turnover relatively flat at 0.4% growth • Computicket sales up 3.3% ௅ Fewer high profile live events ௅ Sell R500m in flight tickets a year • Pharmacy division sales down 9.4% ௅ MediRite sales up 19.8% with 2.4m prescriptions dispensed ௅ Transpharm wholesale declined 10% • Checkers Food Services sales growth >100% • LiquorShop sales up 30% with 220 trading outlets (46 approved licenses) 41
  42. 42. Hungry Lion • RollͲout of refreshed branding and store design • NonͲRSA business showing strong growth at 34% 42
  43. 43. 43
  44. 44. Leverage our Strong Brands 44
  45. 45. Leverage our Strong Brands Value for money means different things to different upmarket segments AUTHENTIC FRENCH CHAMPAGNE 45
  46. 46. Keep Getting Better TV ad
  47. 47. Leverage Customer Insights from Big Data • The Group stores 70 PetaBytes of data (=1.2bn filing cabinets worth of text) • Dunnhumby appointed as customer science partner ௅ Data insights for better ranging, pricing and promotional decisions • Maximise opportunities to gather customer data on digital channels: ௅ Smart phone app ௅ Mobile and web sites ௅ Mobile coupons ௅ Social media – the Group has more than 1 million Facebook fans ௅ Leverage 3rd party relationships (e.g.: FNB eBucks) 47
  48. 48. Extend Services in Africa • 6 stores in Angola and Swaziland performing well • Nigeria and Mozambique to follow • Money Transfers to launch in Zambia, Lesotho and Swaziland • Computicket services launched in Botswana and launching in Mozambique and Swaziland in April 48
  49. 49. Position for African Growth Africa’s insatiable appetite for big brands • Angola’s 19 stores sold more bottles of JC le Roux than the entire RSA business • 5 Shoprite stores in Angola sold more Red Bull than all 382 Shoprite stores in RSA 49
  50. 50. Position for African Growth Nigeria will have more people than the U.S. by 2050 • The combination of NonͲRSA’s rapid population and economic growth offers infinite growth opportunity in formal food retail • Africa owns 12% of the world’s oil, 40% of the gold and 90% of the platinum reserves (source:UN)
  51. 51. Position for African Growth • Expansion focus remains on resourceͲrich countries • Angola: ௅ Investment in own developments, 12 openings confirmed until June 2015 • Nigeria: ௅ 10 store openings confirmed until end 2015 (4 before June 2014: Lagos, Kano, Abuja and Ibadan) ௅ R1.5bn property fund finalised (Resilient, Standard Bank and Shoprite) • Zambia: ௅ 9 Shoprite store openings confirmed • NonͲRSA total of 44 additional supermarkets confirmed until June 2015 ௅ 13 until June 2014 and a further 31 thereafter 51
  52. 52. 52
  53. 53. Trading Outlook • Trading in January and February is stronger than the reporting period • Although muted trading conditions will continue, we expect a better second half • Food inflation has historically benefitted Shoprite, expected to rise well above 6% ௅ Wheat and maize prices up 20% between August and December ௅ Exchange rate weakness causing input cost pressure, which can’t be absorbed by retailers • Direct eͲtoll cost for own fleet is R4m, will raise the price of food for Gauteng consumers 53
  54. 54. Trading Outlook continued • The Group will only pursue profitable market share • 74 new corporate supermarkets committed until June 2014 • Another 119 new supermarkets confirmed until June 2015 • R543m already invested in strategic land in SA for development • 1 722 Trainee Managers ready to support growth and store expansion • Serious about longͲterm investment in NonͲRSA business which continues to flourish
  55. 55. THANK YOU Questions?

×