Pepkor Holdings Ltd. · JSE:PPH
Pepkor — H1 FY2022 Earnings Presentation
49 slides from Pepkor's earnings presentation, May 27, 2022
Slide 1: 2022 Interim Results
2022 INTERIM RESULTS for the six months ended 31 March 2022
Slide 2: Agenda
AGENDA 1 Six months in review Our purpose is 2 Financial performance to make a positive difference in the lives of our customers. 3 Segmental performance 4 Outlook
Slide 3: Six months in review
SIX MONTHS IN REVIEW +12.7% +31.2% +80.5% 2-YR 2-YR 2-YR +3.3% +19.1% +28.3% R4.1bn growth growth2 growth2 growth in growth in growth in cash revenue to operating profit1 HEPS to generated R42.0bn to 5.7bn 91.5 cents +10.1% +12.1% normalised2 normalised2 +144 189 bps new stores market share Grupo AV
Slide 4: Strategy delivers consistent results
STRATEGY DELIVERS CONSISTENT RESULTS REVENUE GROWTH H1FY22 TOTAL SALES GROWTH OVER 2 YEARS 25.8% 25.3% +6.1% Excl. John +3.7% 15.4% Craig 13.1% +1.8% Excl. John Craig Excl. John 12.5% Craig 5.8% 3.3% 1.3% Q1 Q2 H1FY22 Group1 PEP & Speciality1 JD Group The Building2 Ackermans Company Resilient perfor
Slide 5: R4.9bn gained through market share growth over 2 years
R4.9BN GAINED THROUGH MARKET SHARE GROWTH OVER 2YRS Pepkor +130 bps Market CFH 2-YR growth1 RLC (SA + BELN) 12-month rolling size and share Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar 18 19 19 19 19 20 20 20 20 21 21 21 21 22 +189 bps +274 bps +259 bps +243 bps +334 bps +562 bps consumer
Slide 6: KwaZulu-Natal floods – PEP Durban DC
KWAZULU-NATAL FLOODS – PEP DURBAN DC 1 2 3 PEP DC 4 5 6 7 8 9 6
Slide 7: Financial performance
FINANCIAL PERFORMANCE Riaan Hanekom, CFO PEPKOR MISSION We make a positive difference in the daily lives of our customers and the communities in which we operate by providing convenient access to everyday products and services at affordable prices.
Slide 8: Highlights
HIGHLIGHTS +3.3% +100 bps +5.0% growth in increase in growth in revenue to gross margin to opex1 R42.0bn 35.3% +10.1% +12.1% 70 bps normalised3 normalised3 lower rates +19.1% +28.3% R4.1bn R5bn growth in increase in HEPS cash debt operating profit to 91.5 cents generated refinanced to R5.7bn2 1 Excl
Slide 9: Civil unrest update
CIVIL UNREST UPDATE R1.4bn total loss R803m insurance 479 (87%) of proceeds received looted stores R1bn to date reopened Insurance cover R500m reinstated R440m R132m Recognised in H1FY22 R171m Received in FY21 SASRIA Business SASRIA Business interruption interruption Estimated based on claims submit
Slide 10: Steinhoff global settlement implemented
STEINHOFF GLOBAL SETTLEMENT IMPLEMENTED Rm EXPOSURE COMMUNICATED AND FULLY PROVIDED FOR IN FY18 Funds recovered +80 +12 cps -180 HEPS 529 All related litigation settled 429 Recovery Repayment of Litigation Net benefit of BVI loan associated loans settlement 10
Slide 11: Revenue growth
REVENUE GROWTH Rbn +12.7% +8.4% 2-YR 5-YR growth1 CAGR1 +4.9% +8.8% -1.6% -8.7% 42.0 40.7 +4.2% Cash sales growth +16.7% Credit sales growth Stable credit mix: H1FY21 H1FY22 Cash 93% Credit 7% Contribution 66% 15% 10% 9% 1 Comparable interim period – excluding disposals and rationalisation 11
Slide 12: Consistent 5-year revenue growth
CONSISTENT 5-YR REVENUE GROWTH Rm +8.4% +3.7% 5-YR +8.7% CAGR +6.7% +7.1% +16.0%1 42 010 40 499 37 273 43 942 32 627 28 126 H1FY17 H1FY18 H1FY19 H1FY20 H1FY21 H1FY22 Comparable – excluding disposals and rationalisation 1 +13.1% including pre-acquisition contribution from Tekkie Town 12
Slide 13: Gross profit margin on target
GROSS PROFIT MARGIN ON TARGET +100 bps +10 bps +90 bps in in financial 35.3% merchandise services 34.6% 34.3% H1FY20 H1FY21 H1FY22 13
Slide 14: Other income
OTHER INCOME +47.7% increase to R551m Excluding R132m one-off insurance proceeds +12.3% increase to R419m Commission – Commission – Commission – bill payments: 37% money transfers: 14% other: 11% Marketing: 16% Other: 22% 14
Slide 15: Cost of doing business
COST OF DOING BUSINESS +5.0% growth in operating +4.5% expenses1 increase in salary cost 25.0% 24.2% 24.2% +7.6% increase in depreciation & amortisation Non-IFRS 16 component: +3.3% to R736m H1FY20 H1FY21 H1FY22 IFRS 16 component: +10.0% at R1.3bn Excluding IFRS 16 +3.1% 26.0% 25.9% 26.6% Increase i
Slide 16: Operating profit growth
OPERATING PROFIT GROWTH Rm +19.1% +10.1% 3% 7% +6.1% +64.6% +26.4% +17.0% 429 5 681 5 252 4 769 8% 82% +12.5% Normalised operating profit margin +11.7% H1FY21 H1FY21 H1FY22 Non- H1FY22 Normal- recurring Statutory ised net benefit Before capital items 16
Slide 17: Net finance costs remain consistent
NET FINANCE COSTS REMAIN CONSISTENT +0.1% R1.1bn R1.1bn Interest component Interest +13.5% component R378m interest XX% R333m component H1FY21 H1FY22 17
Slide 18: Lower effective tax rate
LOWER EFFECTIVE TAX RATE H1FY21 Tax rate 26.8% Non-recurring net benefit: -200 bps 18
Slide 19: Inventory levels
INVENTORY LEVELS +16.6% Normalisation post-COVID R15.4bn R13.8bn R13.3bn Supply chain disruption +R290m H1FY20 H1FY21 H1FY22 AVENIDA 19
Slide 20: Credit book health
CREDIT BOOK HEALTH 3.2 3.2 Gross 1.9 2.1 book size 1.6 1.5 1.5 (Rbn) 0.7 H1FY21 H1FY22 H1FY21 H1FY22 H1FY21 H1FY22 H1FY22 40% Provision levels % 33% 33% 21% 21% 29% 20% 20% 16% 18% 18% 13% NPL % 8% 7% H1FY21 H1FY22 H1FY21 H1FY22 H1FY21 H1FY22 H1FY22 20
Slide 21: Satisfactory debtors' costs
SATISFACTORY DEBTORS’ COSTS +15.9% to R506m R411m R95m Bad debts Movement in provisions -30.1% bad debt decrease 21
Slide 22: R4.1 billion cash generated
R4.1 BILLION CASH GENERATED 53% 71% H1FY22 – Rm cash cash conversion conversion +500 LTM +696 -3 737 7 758 -1 135 4 082 EBITDA1 Debtors’ Other2 Net working Credit books Cash generated costs capital from operations 1 Before capital items 2 Other includes inventory provisions, unrealised foreign excha
Slide 23: Net debt well within targeted levels
NET DEBT WELL WITHIN TARGETED LEVELS 0.94 times net debt-to-EBITDA R5.0bn refinance completed Debt repayment profile: 31 March 2022 (Rbn) 13.42 times EBITDA-interest cover FY22 FY23 FY24 FY25 FY26 FY27 R14.1bn 0 -1.2 R8.9bn -2.4 -2.5 -2.7 R6.1bn -2.8 H1FY20 H1FY21 H1FY22 Excluding IFRS 16 23
Slide 24: Capital investment for growth
CAPITAL INVESTMENT FOR GROWTH 1.5% 2.1% of revenue of revenue R612m R861m DC DC R88m development development civil unrest capex R73m R201m R593m R660m CAPEX SPLIT Stores 55% IT 19% Distribution centres 15% H1FY21 H1FY22 Other 11% 24
Slide 25: Capital allocation
CAPITAL ALLOCATION Organic growth ● New stores and expansion ● Distribution network Mergers and ● Avenida acquisition acquisitions completed ● 40m shares repurchased & cancelled Share buy- ● R796m spent to date backs ● Average price of R19.98 Dividends ● 3 times earnings cover 25
Slide 26: Segmental performance
SEGMENTAL PERFORMANCE Leon Lourens, CEO PEPKOR VISION To be a globally respected discount and value retailer by being the best place to shop, work and invest.
Slide 27: Clothing and general merchandise
SEGMENTAL PERFORMANCE CLOTHING AND GENERAL MERCHANDISE
Slide 28: PEP and Ackermans
PEP AND ACKERMANS +12.5% 2-YR +3.4% growth +2.4% +102 like-for-like new stores sales growth sales growth opened +3.2% +4.6% 111bps market share CFH RSP space growth gained over inflation 2-YRS1 1 Source: Retailers’ Liaison Committee (RLC) 28
Slide 29: PEP
PEP 72 2 526 new 97% +11% stores stores 1 637 Best Price sales growth in 557 Leadership FMCG 332 38 new stores 11 000 61% +27% parcels smartphone unit sales growth per day contribution in 29
Slide 30: Ackermans
ACKERMANS 29 new 916 42 stores +21% 2-YR CAGR in Ackermans stores Cellular Woman stores Click & 10 16% collect Ackermans Connect footprint stores credit mix leverage 30
Slide 31: PEP Africa
PEP AFRICA +3.1% +4.9% +13.3% sales growth like-for-like sales growth constant sales growth actual currency currency constant currency 283 stores cash repatriation profitability 31
Slide 32: Speciality
SPECIALITY +25.3% +19% 2-YR 2-YR +7.6% growth +7.3% +16.7% CAGR sales like-for-like increase in growth sales growth operating profit 13 3D new 840 23 stores stores integration Product R45k trading density stores differentiation 85% local Lead times Cost savings R141 ave RSP 32 Excluding John Craig
Slide 33: Avenida acquisition
AVENIDA ACQUISITION 55% sales growth 130 stores – established Gearing the business for YTD brand growth – Babies/Kids/Cell Recapitalising the Proven business model business Discount & value focus Dedicated Pepkor support Local management Meaningful size which is retained easily digestible by Pepkor
Slide 34: Furniture, appliances and electronics
SEGMENTAL PERFORMANCE FURNITURE, APPLIANCES AND ELECTRONICS
Slide 35: JD Group
JD GROUP +25.8% 2-YR +8.1% growth +7.2% 41% sales growth like-for-like 2-YR CAGR sales growth profit growth 49% 20% 10% growth 264bps market share credit mix improved online sales gained over from 16% contribution 2-YRS in appliances1 1 Source: Growth from Knowledge (GfK) 35
Slide 36: Building materials
SEGMENTAL PERFORMANCE BUILDING MATERIALS
Slide 37: The Building Company
THE BUILDING COMPANY +13.1% 2-YR -1.6% growth1 -0.5% +0.2% sales growth like-for-like sales growth excluding sales growth rationalisation Timbercity +26.4% growth in growth plan operating profit 1 Comparable – excluding disposals and rationalisation 37
Slide 38: Fintech
FINTECH
Slide 39: Flash
FLASH >20% -11% +20% increase in decrease in growth in operating profit revenue Eezi airtime 205 000 +10% Eezi 2022 58% average turnover traders per device 39
Slide 40: Capfin
CAPFIN Good positive book back office collections growth consolidation 42% >5% 251k growth in 6-month loans accounts operating profit +17% 40
Slide 41: Outlook
OUTLOOK Leon Lourens, CEO
Slide 42: Operating environment
OPERATING ENVIRONMENT CONSUMER PRESSURE 35.3% 5.9% Limited rising rising household unemployment1 inflation1 income SUPPLY CHAIN DISRUPTION COVID-19 cost increase KZN floods 1 Statistics SA 42
Slide 43: Unparalleled value & affordability for customers
UNPARALLELED VALUE & AFFORDABILITY FOR CUSTOMERS Obsession with price PRICE FREEZE on PEP school uniform – & lowest cost of 20% of PEP’s cheaper than in 2020 doing business products since 2020 43
Slide 44: Unparalleled value & affordability for customers
UNPARALLELED VALUE & AFFORDABILITY FOR CUSTOMERS 5.4m 8.1m 17.1m babygrows sold school shirts flip-flops 40.5m 17.5m T-shirts denims 44
Slide 45: Taking our business to our customers
TAKING OUR BUSINESS TO OUR CUSTOMERS Widest reach – 25% of PEP’s stores Technology & cash 205 000 trade where no digitisation via informal traders – group 5 708 stores competition exists 1 Voucher virtual transactions R1.8bn virtual transactions 45
Slide 46: Outlook
OUTLOOK Resumption of H2FY21 sales base tourism and events Product affordability Product inflation focus DC resumption Growth mindset – 350 and investment new stores 46
Slide 47: Thank you
THANK YOU
Slide 48: Annexure: Retail store footprint
ANNEXURE: RETAIL STORE FOOTPRINT Continuing operations 30 September 2021 Openings Closures Net movement 31 March 2022 Retail area Retail area Retail area Retail stores ‘000 m2 Retail stores Retail stores Retail stores ‘000 m2 Retail stores ‘000 m2 4 493 1 708 245 (27) 218 119 4 711 1 827 PEP (incl.
Slide 49: Annexure: Steinhoff global settlement
ANNEXURE: STEINHOFF GLOBAL SETTLEMENT Statutory Normalised Six months ended Steinhoff global Six months ended Rm 31 March 2022 settlement recovery 31 March 2022 Operating profit before capital items 5 681 429 5 252 Capital items (71) – (71) Operating items after capital items 5 610 429 5 181 Profit