JD Group Limited HY 2014 financial results presentation

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JD Group Limited HY 2014 financial results presentation

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JD Group Limited HY 2014 financial results presentation

  1. 1. JD Group Unaudited Interim results for the six months ended 31 December 2013
  2. 2. INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2013 1 Agenda Welcome Operational overview Financial overview Prospects JD Group interim results for the six months ended 31 December 2013 2 JD Group unaudited interim results for the six months ended 31 December 2013
  3. 3. WELCOME 2 CHANGES IN LEADERSHIP Peter Griffiths • Appointed as acting Chief Executive Officer JD Group interim results for the six months ended 31 December 2013 JD Group unaudited interim results for the six months ended 31 December 2013 4
  4. 4. OPERATIONAL OVERVIEW Peter Griffiths – Acting CEO: JD Group 3 OPERATIONAL OVERVIEW Business overview CONSUMER FINANCE AUTOMOTIVE GROUP (incl Corporate) 6 442 2 475 8 485 17 068 151 (187) 232 (21) 2.3% (7.6%) 2.7% (0.1%) 16 359 RETAIL 1H2014 (Rm) Revenue Operating profit/(loss) Operating margin Relative revenue contribution 1H2014 1H2013 37% 49% 14% 41% 46% 13% 1H2013 (Rm) Revenue 6 899 Operating profit/(loss) Operating margin 2 195 7 611 417 334 193 727 6.0% 15.2% 2.5% 4.4% JD Group interim results for the six months ended 31 December 2013 6 JD Group unaudited interim results for the six months ended 31 December 2013
  5. 5. INTERIM RESULTS IN CONTEXT Poor performance from two divisions • • Furniture Retail, including Supply Chain Services Consumer Finance Resulting from the following factors: 1. IT systems implementation 2. Centralised distribution model – non-commercial 3. Investment in unsecured lending 4. Increase in non-performing loans 7 JD Group interim results for the six months ended 31 December 2013 4 OPERATIONAL OVERVIEW Retail RETAIL CONSUMER FINANCE AUTOMOTIVE GROUP (incl Corporate) 1H2014 (Rm) Revenue Operating profit/(loss) Operating margin 6 442 2 475 8 485 151 (187) 232 17 068 (21) 2.3% (7.6%) 2.7% (0.1%) FURNITURE RETAIL CONSUMER ELECTRONICS & APPLIANCES BUILDING MATERIALS & DIY JD Group interim results for the six months ended 31 December 2013 JD Group unaudited interim results for the six months ended 31 December 2013 8
  6. 6. OPERATIONAL OVERVIEW: FURNITURE RETAIL Retail – Furniture Retail • Sale of merchandise down 14.7% (like-for-like down 13.0%) • Net number of store closures (+52; -74) : - 22 • External factors impacting results: • Reduced consumer spending on household goods • Internal factors impacting results: • Operational structure not aligned to accountability • Restructuring • New IT system • Sub-optimal Supply Chain Services model (centralised warehousing) – non-commercial JD Group interim results for the six months ended 31 December 2013 9 5 OPERATIONAL OVERVIEW: FURNITURE RETAIL Reduced consumer spending on household goods 30% Nominal retail sales year-on-year Growth (%) by type of Retail Dealer 25% 20% Percentage (%) 15% 10% 5% 0% -5% -10% -15% General dealers Specialised food, beverages and tobacco in specialised stores Pharmaceutical and medical goods,cosmetics and toiletries Textiles,clothing,footwear and leather goods Household furniture,appliances and equipment Hardware,paint and glass Jan '13 Feb '13 Mar '13 Apr '13 May '13 Jun '13 Jul '13 Aug '13 Sep '13 Oct '13 Nov '13 Dec '13 Source: Econometrix JD Group interim results for the six months ended 31 December 2013 10 JD Group unaudited interim results for the six months ended 31 December 2013
  7. 7. OPERATIONAL OVERVIEW: FURNITURE RETAIL Operational structure not aligned to accountability Restructuring: • Decentralisation of HQ functions • Cluster formation Furniture Retail Supply Chain Services Consumer Electronics & Appliances Building Materials & DIY Cluster 1 Cluster 2 Cluster 3 (Middle) (Higher) (Focused) Automotive Cluster 4 (Entry) Consumer Finance  Ownership and accountability  Focus on specific market segments  Merchandising opportunities  Property portfolio optimisation 11 JD Group interim results for the six months ended 31 December 2013 6 OPERATIONAL OVERVIEW: FURNITURE RETAIL New IT system • Implementation across business destabilised operations • Loss of focus impacted sales • Knock-on effect on merchandise and planning • Timeline of roll out to 1 038 furniture retail stores • 1H2013: 70 stores – 7% • 2H2013: 306 stores – 29% • 1H2014: 662 stores – 64% Stores: 70 1H2013 306 662 2H2013 1H2014 JD Group interim results for the six months ended 31 December 2013 JD Group unaudited interim results for the six months ended 31 December 2013 12
  8. 8. OPERATIONAL OVERVIEW: FURNITURE RETAIL Sub-optimal Supply Chain Services model Appropriate for business Service centre Supplier Customer Delivery-on-my-behalf (DOMB) Directly to the customer’s home Customer JD Group interim results for the six months ended 31 December 2013 13 7 OPERATIONAL OVERVIEW: FURNITURE RETAIL Sub-optimal Supply Chain Services model Appropriate for business but currently too expensive • Centralised distribution centres • Nine sectors • Fixed cost model • • Needs volume to optimise Logistics cost as percentage to sales non-commercial JD Group interim results for the six months ended 31 December 2013 14 JD Group unaudited interim results for the six months ended 31 December 2013
  9. 9. OPERATIONAL OVERVIEW Retail – Consumer Electronics & Appliances • Merchandise sales down 13.3% • Like-for-like revenue down 11.5% • Net number of stores opened (+3; -1) : 2 • Number of stores relocated (mall-based): 2 • Increase in gross margins • Decrease in cost base • Back-office consolidation complete JD Group interim results for the six months ended 31 December 2013 15 8 OPERATIONAL OVERVIEW Retail – Building Materials & DIY • Revenue up 51.9% • Like-for-like revenue up 15.0% • Hardware Warehouse included for full period in 1H2014 • Margin improvement • Implementation of Hardware Warehouse acquisition • Continuing synergies JD Group interim results for the six months ended 31 December 2013 JD Group unaudited interim results for the six months ended 31 December 2013 16
  10. 10. OPERATIONAL OVERVIEW Business overview RETAIL CONSUMER FINANCE GROUP (incl Corporate) AUTOMOTIVE 1H2014 (Rm) Revenue 6 442 Operating profit/(loss) Operating margin 2 475 8 485 151 (187) 232 17 068 (21) 2.3% (7.6%) 2.7% (0.1%) 17 JD Group interim results for the six months ended 31 December 2013 9 OPERATIONAL OVERVIEW Consumer Finance 1H2014 Rm 1H2013 % 2 475 Debtors’ costs 2 195 12.8 (1 097) Revenue (345) 218.0 • Increase in impairment provision (593) (161) 268.3 • Bad debts written off (504) (184) 173.9 (7.6) 15.2 1H2014 FY2013 % 10 225 9 731 5.1 Operating margin (%) Rm Gross loan book Loan book growth Impairment provision Impairment provision % JD Group interim results for the six months ended 31 December 2013 494 2 478 (80.1) 1 559 966 61.4 15.2% 9.9% 18 JD Group unaudited interim results for the six months ended 31 December 2013
  11. 11. OPERATIONAL OVERVIEW Consumer Finance – External factors impacting the quality of the loan book Real personal disposable income of households year-on-year growth (%) South African Household debt % to disposable income of households (1994 – 2013) 10 85 6 80 4 75 2 Percentage (%) Year-on-year growth (%) 8 0 -2 -4 70 65 60 -6 55 -8 Year 50 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 Source: Econometrix • Declining real disposable income of consumers • High debt-to-income levels of consumers 19 JD Group interim results for the six months ended 31 December 2013 10 OPERATIONAL OVERVIEW Consumer Finance – Internal factors impacting the quality of the loan book Increase in non-performing loans 60% 82% 50% 40% 30% 10% 43% 53% 18% 39% 32% 78% 29% 20% 17% 10% 0% 1H2014 FY2013 1H2013 Secured loans Unsecured loans JD Group interim results for the six months ended 31 December 2013 JD Group unaudited interim results for the six months ended 31 December 2013 20 Source: Econometrix
  12. 12. OPERATIONAL OVERVIEW Consumer Finance – Internal factors impacting the quality of the loan book Granting of credit Unsecured lending • Unsecured lending • Strong growth in book during 1H2013 • Disbursements decreased to R435 million in 1H2014 (1H2013: R1.4 billion) • 300 Lending criteria amended from Jan 2013 – lower risk grades only 250 Rm 200 150 100 • Secured lending 50 • Dec-13 Nov-13 Oct-13 Sep-13 Aug-13 Jul-13 Jun-13 May-13 Apr-13 Mar-13 Feb-13 Jan-13 Dec-12 Nov-12 Oct-12 Sep-12 Aug-12 Jul-12 Jun-12 May-12 Apr-12 Mature book • Re-assessing credit risk models to ensure appropriateness • - Tightened credit granting for certain categories 21 JD Group interim results for the six months ended 31 December 2013 11 OPERATIONAL OVERVIEW Consumer Finance – Internal factors impacting the quality of the loan book Collection rate 2.0% 200 1.0% 100 0.0% 0 Collections (Rm) • Central (contact centre) • Decentralised (stores) • External debt collectors Jan 14 Dec 13 300 Oct 13 3.0% Nov 13 400 Sep 13 4.0% Jul 13 500 Aug 13 5.0% Jun 13 • Collection strategy amended in Sep 2013 to a better mix between: Apr 13 600 May 13 6.0% Mar 13 700 Jan 13 • Deteriorated since July 2013 7.0% Feb 13 800 Dec 12 8.0% Collection Rate JD Group interim results for the six months ended 31 December 2013 22 JD Group unaudited interim results for the six months ended 31 December 2013
  13. 13. OPERATIONAL OVERVIEW Consumer Finance – Debtors’ cost and provisioning Provisioning methodology • Prior • General approach • Statistical calculation based on historic recoveries per delinquency profile over the preceding 24 months • Updated • Driven by deteriorating collection rates from July 2013 • More prudent approach by using 12-month historic recoveries as proxy for provision calculation • Resulted in provision increasing from 9.9% to 15.2% of book – Increased debtors’ cost yoy by R752 million – Provision increasing by R593 million to R1.6 billion JD Group interim results for the six months ended 31 December 2013 23 12 OPERATIONAL OVERVIEW Consumer Finance – Internal factors impacting the quality of the loan book • Systems • IT systems implementation – migration issues and lack of data visibility • Migration to new systems complete – focus on optimisation JD Group interim results for the six months ended 31 December 2013 JD Group unaudited interim results for the six months ended 31 December 2013 24
  14. 14. OPERATIONAL OVERVIEW Automotive RETAIL CONSUMER FINANCE GROUP (incl Corporate) AUTOMOTIVE 1H2014 (Rm) Revenue 6 442 Operating profit/(loss) Operating margin 2 475 8 485 151 (187) 232 17 068 (21) 2.3% (7.6%) 2.7% (0.1%) 25 JD Group interim results for the six months ended 31 December 2013 13 OPERATIONAL OVERVIEW Automotive 1H2014 1H2013 % 8 485 7 611 11.5 Operating profit 232 193 20.2 Operating margin (%) 2.7 2.5 0.2 Rm Revenue • Despite industry strikes – good results • New vehicle margins satisfactory, used vehicle margins slightly under pressure • Gross margin maintained • Implementation of the Reeds Motor Group acquisition (5 dealerships) • Hertz – much improved performance vs prior year JD Group interim results for the six months ended 31 December 2013 26 JD Group unaudited interim results for the six months ended 31 December 2013
  15. 15. FINANCIAL OVERVIEW Jan van der Merwe – CFO: JD Group 14 FINANCIAL OVERVIEW Key financial data 1H2014 1H2013 R17 068m R16 359m R1 097m 15,2% R345m 7,8% EBITDA R445m R1 135m Operating profit/(loss)* (R21m) R727m Headline earnings/(loss) per share (59cps) 234cps R1 317m R588m Revenue Debtors’ cost Impairment provision Cash generated by operations * Operating costs include interest costs paid to third parties by Consumer Finance JD Group interim results for the six months ended 31 December 2013 JD Group unaudited interim results for the six months ended 31 December 2013 28 R17 068m
  16. 16. FINANCIAL OVERVIEW Underlying profitability – excluding debtors’ cost 1H2014 1H2013 445 FY2013 Rm 1 135 2 199 EBITDA 1 097 9.7% 16 359 9.0% 32 210 Revenue 1 480 17 068 3 113 EBITDA excluding debtors’ cost 345 1 542 914 Add back: Debtors’ cost 9.0% 29 JD Group interim results for the six months ended 31 December 2013 15 FINANCIAL OVERVIEW Consolidated income statement 1H2014 1H2013 % Revenue 17 068 16 359 4.3 • Sale of merchandise 13 603 13 168 3.3 • Finance charges earned 984 857 14.8 • Financial services 931 835 11.5 • Other services* 1 550 1 499 3.4 Rm 1H2013 1H2014 37% 49% Retail Consumer Finance 41% 46% Automotive 14% 13% * Includes car rental, car service, club & service fees and delivery JD Group interim results for the six months ended 31 December 2013 30 JD Group unaudited interim results for the six months ended 31 December 2013
  17. 17. FINANCIAL OVERVIEW Consolidated cash flow Rm Cash generated by trading Movement in working capital Cash generated from operations 1H2014 1H2013 1 540 1 168 (223) (580) 1 317 588 (494) (1 873) (61) (841) (348) (217) 29 25 Utilisation of cash (summarised): Investment in receivables Net investing activities Total interest paid Investment income JD Group interim results for the six months ended 31 December 2013 31 16 FINANCIAL OVERVIEW Capital structure Before the impact of the rights issue 1H2014 FY2013 Shareholders’ equity 8 701 9 141 Net debt 6 879 6 767 Rm Gearing – net debt to total shareholders’ equity Net asset value per share (cents) 79% 74% 3 835 4 013 • Proposed rights issue JD Group interim results for the six months ended 31 December 2013 JD Group unaudited interim results for the six months ended 31 December 2013 32
  18. 18. PROSPECTS Peter Griffiths – Acting CEO: JD Group 17 PROSPECTS Furniture, Consumer Electronics & Appliances Retail Meaningful market share Market Share • JD 23% Leverage and optimise 23% market share Furniture Cluster optimisation • Merchandise, marketing, brands • Store footprint and trading densities • • • Other 77% • Evaluate channel expansion opportunities Minimising logistics cost Leverage possible synergies with Steinhoff Consumer electronics & appliances • • Range expansion Store growth in southern Africa Source: Stats SA & internal research JD Group interim results for the six months ended 31 December 2013 34 JD Group unaudited interim results for the six months ended 31 December 2013
  19. 19. PROSPECTS Building Materials & DIY, Automotive • Building Materials & DIY • Optimise enhanced footprint • Continued store expansion • Increase in value-added services • Automotive • Capitalise on launch of new models (Toyota) • Maintain and grow market position – traditional brands • Continue to manage gross margins JD Group interim results for the six months ended 31 December 2013 35 18 PROSPECTS Consumer Finance • Consumer landscape not expected to improve • Credit granting – Personal loans to be discontinued – Focus on appropriate credit products aligned to core business • Collections – New collection strategy to be monitored closely • Insurance – Proposed regulatory changes to insurance not yet finalised – Capping of credit life insurance rate • Impact not expected to be significant based on management’s understanding of current proposals JD Group interim results for the six months ended 31 December 2013 JD Group unaudited interim results for the six months ended 31 December 2013 36
  20. 20. THANK YOU 19 ANNEXURE 1 Liquidity and funding Repayment profile (Capital Rm) 1 250 1 107 1 078 1 050 850 658 650 JD Group interim results for the six months ended 31 December 2013 FY 2016 30 FY 2017 - Q1 Q2 - Q3 Q4 Q1 Q4 Q3 Q2 Q1 Q4 FY 2015 Q3 81 57 72 Q3 Dec Oct Nov Sep Jul Aug Jun Apr FY 2014 74 - 300 274 Q4 306 158 74 73 - May Jan -150 Feb 32 50 325 244 223 250 421 365 340 Q2 400 Mar 450 FY 2018 38 JD Group unaudited interim results for the six months ended 31 December 2013
  21. 21. ANNEXURE 2 3+ Cycles Delinquent Vintage Curves Delinquent with 3+ instalments Furniture Credit – Balances Vintages 25% 20% 15% 10% 5% 0% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Months on book Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 39 JD Group interim results for the six months ended 31 December 2013 20 ANNEXURE 3 3+ Cycles Delinquent Vintage Curves Delinquent with 3+ instalments Personal Loans – Balances Vintages 40% 35% 30% 25% 20% 15% 10% 5% 0% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Months on Book Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 JD Group interim results for the six months ended 31 December 2013 JD Group unaudited interim results for the six months ended 31 December 2013 Q1 2014 40
  22. 22. ANNEXURE 4 Debtors size and provisions Unsecured credit – Net debtors and provisions Secured credit – Net debtors and provisions 8 000 16% 14.9% 7 000 14% 6 000 12% 5 000 10.0% 8.4% 4 000 15.7% 3 000 8% 2 000 7.7% 10% 8.0% 8% 1 000 500 2% Net Debtors Provisions Rate H1 2014 FY 2013 FY-2012 Net Debtors 0 FY 2013 0% H1 2013 0 4% FY 2012 2% 6% H2 2012 1 000 H1 2014 4% H1 2013 2 000 H2-2012 6% 16% 12% 9.7% 9.2% 1 500 3 000 18% 14% 2 500 10% 7.9% 7.6% 3 500 0% Provision Rate 41 JD Group interim results for the six months ended 31 December 2013 21 ANNEXURE 5 Average loan size and term Furniture credit – Credit granting metrics 8 000 28 12 000 7 500 27 11 000 7 000 26 Personal loans – Credit granting metrics 28 27 10 000 26 9 000 5 000 22 5 000 22 Avg Deal size Avg Sales Term JD Group interim results for the six months ended 31 December 2013 25 8 000 24 Avg Loan Amount Q2 2014 Q1 2014 Q4 2013 Q3 2013 Q2 2013 Q1 2013 Q4 2012 7 000 Q3 2012 Q2 2014 23 Q1 2014 6 000 Q4 2013 23 Q3 2013 5 500 Q2 2013 24 Q1 2013 6 000 Q4 2012 25 Q3 2012 6 500 Avg Sales Term 42 JD Group unaudited interim results for the six months ended 31 December 2013
  23. 23. ANNEXURE 6 Credit disbursements Furniture credit Personal loans 100% 100% 90% 90% 80% 80% 70% 70% 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% High Risk Medium Risk Low Risk High risk Medium risk Q2-2014 Q1-2014 Q4-2013 Q3-2013 Q2-2013 Q1-2013 Q3-2012 Q4-2012 0% Q2 2014 Q1 2014 Q4 2013 Q3 2013 Q2 2013 Q1 2013 Q4 2012 Q3 2012 0% Low risk 43 JD Group interim results for the six months ended 31 December 2013 22 ANNEXURE 7 Risk appetite Personal loans Accept rates 100% 100% 90% 90% 80% 80% 70% 70% 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% New customers Existing customers Furniture credit JD Group interim results for the six months ended 31 December 2013 JD Group unaudited interim results for the six months ended 31 December 2013 Q2 2014 Q1 2014 Q4 2013 Q3 2013 Q2 2013 Q1 2013 Q4 2012 0% Q3 2012 Q2 2014 Q1 2014 Q4 2013 Q3 2013 Q2 2013 Q1 2013 Q4 2012 Q3 2012 0% Personal loans 44
  24. 24. ANNEXURE 8 Portfolio growth Number of active accounts 1 200 000 1 000 000 800 000 600 000 400 000 200 000 Furniture Credit Q2 2014 Q1 2014 Q4 2013 Q3 2013 Q2 2013 Q1 2013 Q4 2012 Q3 2012 0 Personal Loans JD Group interim results for the six months ended 31 December 2013 45 23 JD Group unaudited interim results for the six months ended 31 December 2013
  25. 25. notes 24 JD Group unaudited interim results for the six months ended 31 December 2013
  26. 26. GREYMATTER & FINCH # 8244
  27. 27. www.jdg.co.za Executive directors PM Griffiths (Acting Chief Executive Officer), ID Sussman*, JHN van der Merwe (Chief Financial Officer), KR Chauke Independent non-executive directors VP Khanyile (Independent Chairman), N Bodasing, MP Matlwa, SH Müller, JH Schindehütte Non-executive directors Dr D Konar, MJ Jooste, DM van der Merwe, AB la Grange (Jnr), AB la Grange (Snr) Company secretary JMWR Pieterse Press announcement prepared by JHN van der Merwe CA(SA) Registered office 11th Floor, JD House, 27 Stiemens Street, Braamfontein, Johannesburg, 2001 (PO Box 4208, Johannesburg, 2000) telephone +27 11 408 0408 Transfer secretaries Computershare Proprietary Limited, 70 Marshall Street, Johannesburg, 2001 telephone +27 11 370 5000 facsimile +27 11 688 5238 Sponsor PSG Capital Proprietary Limited, First Floor, Building 8, Inanda Greens Business Park, 54 Wierda Road West, Wierda Valley, Sandton, 2196 telephone +27 11 032 7400 facsimile +27 11 784 4755 Independent auditor Deloitte & Touche * On compassionate leave

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