Spar Group Limited · JSE:SPP
Spar — The SPAR Group — FY2021 Earnings Presentation
52 slides from Spar's earnings presentation, Nov 1, 2021
Slide 1: The SPAR Group Ltd Results Presentation 2021
THE SPAR GROUP LTD RESULTS PRESENTATION 2021 1
Slide 2: Presentation Outline
PRESENTATION OUTLINE OVERVIEW Brett Botten, CEO FINANCIAL REVIEW Mark Godfrey, CFO OPERATIONAL & STRATEGIC UPDATE OUTLOOK Brett Botten, CEO QUESTIONS THE SPAR GROUP LTD RESULTS PRESENTATION 2021 2
Slide 3: Overview
OVERVIEW Brett Botten, Chief Executive Officer THE SPAR GROUP LTD RESULTS PRESENTATION 2021 3
Slide 4: Review of the Period
REVIEW OF THE PERIOD • Group o Robust performance during disruptive times • Southern Africa o Core grocery result impacted by COVID-19 dynamics and civil unrest o TOPS at SPAR liquor business impacted by liquor bans o Excellent performance from Build it, driven by rural and urban home improvement •
Slide 5: Review of the Period
REVIEW OF THE PERIOD • Switzerland o Excellent performance once again o Holding core business growth, even with Covid-19 restrictions lifting o Integration of 60 petro-convenience stores acquired from Store Service AG (SSAG) • Poland o Underestimated the impact of various pandemic related setbacks o
Slide 6: Highlights
FINANCIAL HIGHLIGHTS +2.9% -1.5% Group turnover Operating profit R127.9bn R3.4bn +5.5% 816 cents Diluted HEPS Dividend per 1 193.7 cents share THE SPAR GROUP LTD RESULTS PRESENTATION 2021 6
Slide 7: Civil Unrest in South Africa
CIVIL UNREST IN SOUTH AFRICA 9th to 18th JULY 2021 • Quick to take action o Safety of our people o Safeguarding of our assets • Wholesale business well protected o South Rand DC closed for one day o KZN DC closed for a week • Deliveries from other DCs in the interim • Support for impacted SPAR retai
Slide 8: My SPAR, Our Tomorrow
MY SPAR, OUR TOMORROW • Priority for the business with dedicated leadership and team • Sustainability pledge to create authentic shared value for our stakeholders • Greater focus on preserving natural resources and our planet • Working with suppliers to reduce our impact • Greater awareness, guidanc
Slide 9: Financial Review
FINANCIAL REVIEW Mark Godfrey, Chief Financial Officer THE SPAR GROUP LTD RESULTS PRESENTATION 2021 9
Slide 10: Financial Overview: Salient Features
FINANCIAL OVERVIEW SALIENT FEATURES Change R million 2021 2020 % Turnover" 127 940.5 124 277.4 2.9 Gross profit 15 359.0 14 779.9 3.9 - Gross profit (%) 12.0% 11.9% Operating profit 3 392.6 3 442.6 (1.5) - Operating margin (%) 2.7% 2.8% Profit after tax 2 208.5 1 956.2 12.9 Headline earnings per sha
Slide 11: Key Regional Metrics
FINANCIAL OVERVIEW KEY REGIONAL METRICS Southern Switzer- R million Africa Ireland land Poland Group Income statement Revenue – sale of merchandise 81 261.4 30 332.1 13 983.2 2 363.8 127 940.5 Gross profit 8 256.8 4 092.6 2 633.5 376.1 15 359.0 Gross profit (%) 10.2% 13.5% 18.8% 15.9% 12.0% Operatin
Slide 12: Southern Africa Turnover
FINANCIAL OVERVIEW Southern Africa TURNOVER • Reflects weak consumer spend, Change high base effect, disruptions to the liquor business and impact of R million 2021 2020 % civil unrest SPAR – core grocery business 62 608.1 62 851.2 (0.4%) • SPAR Encore included for 12 months, versus 7 months in 2020
Slide 13: Regional Turnover Contribution
FINANCIAL OVERVIEW REGIONAL TURNOVER CONTRIBUTION Turnover generated in foreign currency: Southern Africa Ireland Switzerland Poland (2021: 36.5%) 63.5% 23.7 % 10.9 % 1.9 % (2020: 36.8%) (2020: 63.2%) (2020: 24.1%) (2020: 11.0%) (2020: 1.7%) FY21 FY20 R2.4bn R2.1bn R14.0bn R13.6bn R29.9bn R30.3bn R8
Slide 14: Gross Margins
FINANCIAL OVERVIEW GROSS MARGINS 2021 2021 Gross 2021 Change 2020 R million Turnover margin (GP%) (bps) (GP%) South Africa 79 601.9 7 488.3 9.41% -8 bps 9.49% S Buys 1 175.0 102.5 8.72% -9 bps 8.81% SPAR Encore 484.5 666.0 ** ** Total Southern Africa 81 261.4 8 256.8 10.16% +24 bps 9.92% Ireland 30
Slide 15: Operating Expenses
FINANCIAL OVERVIEW OPERATING EXPENSES 2021 2020 % % % R million Expenses of sales Expenses of sales increase South Africa 6 213.2 7.8 5 775.6 7.5 7.6 S Buys 104.8 8.9 101.4 9.4 3.3 SPAR Encore 421.7 9.4 253.1 9.8 66.6 Total Southern Africa 6 739.7 8.3 6 130.1 7.8 9.9 Ireland 3 655.7 12.1 3 557.8 11.
Slide 16: Finance Income and Costs
FINANCIAL OVERVIEW FINANCE INCOME AND COSTS 2021 2020 R million Finance income Loans 47.1 96.3 Bank deposits 18.2 21.0 Trade and other 53.9 62.0 Lease receivables – IFRS16 453.8 438.9 573.0 618.2 Finance costs Loans 148.8 146.7 Bank overdraft 83.2 91.5 Deposits and other 35.5 12.3 Lease liabilities
Slide 17: Reconciliation of Effective Tax Rate
FINANCIAL OVERVIEW RECONCILIATION OF EFFECTIVE TAX RATE 2021 2020 R million South African current income tax rate 28.0 28.0 Temporary differences relating to share plans (0.7) (0.7) Fair value, forex & finance cost adjustments arising on financial liabilities (0.1) 2.7 Other exempt and non-deductibl
Slide 18: Currency Impacts (vs ZAR)
FINANCIAL OVERVIEW CURRENCY IMPACTS (VS ZAR) EURO/SWISS FRANC VS ZAR OCT 2020 - SEP 2021 21 20 19 18 17 16 15 14 EUR:ZAR CHF:ZAR Linear (EUR:ZAR) Linear (CHF:ZAR) Ireland (€) Switzerland (CHF) 2021 2020 2021 2020 Closing spot rate 17.47 19.65 16.20 18.16 Average rate 17.94 18.31 16.51 17.01 THE SPAR
Slide 19: Currency Impacts (vs ZAR): PLN
FINANCIAL OVERVIEW CURRENCY IMPACTS (VS ZAR) PLN VS RAND OCT 2020 - SEP 2021 4,6 4,4 4,2 4 3,8 3,6 3,4 PLN:ZAR Linear (PLN:ZAR) Poland (PLN) 2021 2020 Closing spot rate 3.79 4.34 Average rate 3.95 4.14 THE SPAR GROUP LTD RESULTS PRESENTATION 2021 19
Slide 20: Currency Impacts (vs ZAR): EUR
FINANCIAL OVERVIEW CURRENCY IMPACTS (VS ZAR) EUR VS RAND 22 21,5 21 20,5 20 19,5 19 18,5 18 17,5 17 16,5 16 15,5 15 01-10-20 01-11-20 01-12-20 01-01-21 01-02-21 01-03-21 01-04-21 01-05-21 01-06-21 01-07-21 01-08-21 01-09-21 FY2021 FY2020 THE SPAR GROUP LTD RESULTS PRESENTATION 2021 20
Slide 21: Comparative Trading (ZAR)
FINANCIAL OVERVIEW COMPARATIVE TRADING (ZAR) TURNOVER (Rm) OPERATING PROFIT/LOSS (Rm) H2 2021 H2 2021 1 089 H1 2021 Poland -255 H1 2021 1 275 Poland -222 39 789 1 173 SA SA 41 472 1 313 15 903 570 Ireland Ireland 399 14 429 195 6 919 Switzerland Switzerland 221 7 065 2021 Growth YoY 2021 Growth YoY
Slide 22: Comparative Trading - Foreign Regions in Local Currency
FINANCIAL OVERVIEW COMPARATIVE TRADING - FOREIGN REGIONS IN LOCAL CURRENCY TURNOVER (‘m) OPERATING PROFIT/(LOSS) (‘m) H2 2021 H1 2021 H2 2021 284 Poland -66 H1 2021 315 Poland -55 907 Ireland 32 784 Ireland 22 431 Switzerland 12 416 Switzerland 13 2021 Growth YoY 2021 Growth YoY Ireland +3.5% Irelan
Slide 23: Balance Sheet Regional Key Metrics
FINANCIAL OVERVIEW BALANCE SHEET REGIONAL KEY METRICS Southern R million Africa Ireland Switzerland Poland Group Balance sheet Property, plant and equipment 2 731.9 2 203.9 2 979.3 277.4 8 192.5 Right-of-use asset 705.3 2 491.6 3 627.7 310.9 7 135.5 Finance lease receivable – Non-current 4 560.0 133
Slide 24: Group Net Debt and Geographical Split of Borrowings
FINANCIAL OVERVIEW GROUP NET DEBT AND GEOGRAPHICAL SPLIT OF BORROWINGS R million 2021 2020 Bank overdrafts 2 415.5 1 210.4 Total borrowings 7 649.8 7 055.9 Financial liability 50.1 2 152.2 Bank balances (1 370.7) (1 670.7) Total 8 744.7 8 747.8 *Irish and Swiss financial liabilities now settled 2021
Slide 25: Cashflow
FINANCIAL OVERVIEW CASHFLOW R million 2021 2020 Cash flow from operating activities (adjusted for non-cash items) 5 568.7 5 723.0 Working capital changes : (693.2) 698.5 - Increase in inventory (110.9) (205.4) - Increase in trade and other receivables (688.9) (1 201.6) - Increase in trade payables a
Slide 26: Cashflow continued
FINANCIAL OVERVIEW CASHFLOW continued • Cash generated from operations R4.9bn down on prior year due to timing of working capital settlements • Dividends of R1.8bn paid to shareholders • Net borrowings of R1.3bn largely representing funds raised for the settlement of Swiss and Irish minority interes
Slide 27: Capital Expenditure
FINANCIAL OVERVIEW CAPITAL EXPENDITURE R million 2021 2020 Investing to expand operations (978.4) (929.9) Investment to maintain operations (394.7) (368.1) Replacement of property, plant and equipment (463.9) (449.1) Proceeds on disposal of property, plant and equipment 69.2 81.0 Acquisition of busi
Slide 28: Capital Expenditure continued
FINANCIAL OVERVIEW CAPITAL EXPENDITURE continued Regional capital expenditure R million Expansion Replacement 2021 Southern Africa (471.1) (181.9) (653.0) Ireland (252.9) (122.7) (375.6) Switzerland (226.8) (159.3) (386.1) Poland (27.6) - (27.6) (978.4) (463.9) (1 442.3) Southern Africa • Investment
Slide 29: Reconciliation of Dividend
FINANCIAL OVERVIEW RECONCILIATION OF DIVIDEND R million 2021 Reported headline earnings 2 303.9 Adjusted for: Forex gain on financial liability measurement – non-cash related (23.6) Adjusted headline earnings 2 280.3 Shares ranking for dividend at declaration date (million) 192.599 Adjusted headline
Slide 30: Performance Summary
FINANCIAL OVERVIEW PERFORMANCE SUMMARY NET ASSET VALUE PER SHARE HEADLINE EARNINGS PER SHARE (CENTS) (CENTS) 2021 1 187,3 2021 4 350,5 1 196,2 2020 1 266,9 2020 4 102,2 1 135,3 2019 1 166,3 2019 3 879,9 1 129,1 2018 1 063,2 2018 3 692,2 965,7 2017 976,0 2017 3 407,0 952,8 2016 1 033,0 2016 3 140,1 1
Slide 31: Salient Features - In Closing
FINANCIAL OVERVIEW SALIENT FEATURES – IN CLOSING Change R million 2021 2020 % Turnover" 127 940.5 124 277.4 2.9 Gross profit 15 359.0 14 779.9 3.9 - Gross profit (%) 12.0% 11.9% Operating profit 3 392.6 3 442.6 (1.5) - Operating margin (%) 2.7% 2.8% Profit after tax 2 208.5 1 956.2 12.9 Headline ear
Slide 32: Operational and Strategic Update
OPERATIONAL AND STRATEGIC UPDATE Brett Botten, Chief Executive Officer THE SPAR GROUP LTD RESULTS PRESENTATION 2021 32
Slide 33: Southern Africa: Wholesale & Retail Sales Growth
SOUTHERN AFRICA SPAR WHOLESALE & RETAIL SALES GROWTH TOPS SPAR CORE LIQUOR BUILD IT % % % Wholesale -0.4 +11.2 +23.5 Retail +0.5 +7.7 +18.3 Retail LFL +0.5 +6.4 +17.2 • Internally measured food inflation (wholesale) o Groceries – 4.9% (FY20 3.9%) o Building materials – 4.6% • Wholesale cases dispatc
Slide 34: Southern Africa: Core Grocery & Liquor Business
SOUTHERN AFRICA CORE GROCERY & LIQUOR BUSINESS • FY21 store growth hampered by civil unrest • Aggressive store-upgrade programme o Retailers commitment to reinvest in the brand o 219 SPAR stores upgraded • House brands +1.2% to R15.2bn o SPAR private label down 0.4% to R10.5bn o 5 suppliers severely
Slide 35: Southern Africa: Build it
SOUTHERN AFRICA BUILD IT • Excellent performance • Strength of supply chain • Focused on retail execution o Driving in-store concepts o ‘Yes we can’ brand essence • Organic growth through store upgrades o Continued roll out of new image and conversion to Build it plus NEW VERSUS OLD FORMAT o 68 stor
Slide 36: Other Businesses
OTHER BUSINESSES PHARMACY AT SPAR • New leadership in place • Growing trend of self-care and personal health presents greater opportunity SPAR EXPRESS • Increased travel during 2021 has boosted format • 14 new stores (Shell fuel courts) • Coffee and on-the-go food offering performing well S BUYS • S
Slide 37: Strategic Outcomes and Focus Areas
STRATEGIC OUTCOMES AND FOCUS AREAS STRATEGIC OUTCOMES Sustainable Loved & respected as Affordable & stakeholder value a brand nutritious food STRATEGIC FOCUS AREAS Embed diversity and transformation Provide Build our nutritious brands in and hearts and affordable minds food Put consumers at our hear
Slide 38: Digital Transformation
DIGITAL TRANSFORMATON WHAT WE ARE WORKING TOWARDS Digitally Empowered People and Culture Embed new ways of working within SPAR Integrated Data & Analytics Leverage digital solutions & data science to unlock value & realise gains of collaboration across the business Data-Driven Marketing Store of the
Slide 39: Southern Africa: E-Commerce
SOUTHERN AFRICA E-COMMERCE • SPAR2U • Shared value eco-system (wholesale and retail) • Highly flexible platform to support SPAR operating model • Unique consumer value proposition • Piloting new platform in the coming weeks THE SPAR GROUP LTD RESULTS PRESENTATION 2021 39
Slide 40: Group-Wide SAP Implementation
GROUP-WIDE SAP IMPLEMENTATION UPDATE BUILD CORE PLATFORM FOR THE FUTURE • CAPEX – R1.8 billion • Highly experienced SAP leadership and team • Urgency to replace aging and out of • Ambitious timeline but solid execution plan maintenance systems • Accelerate execution and value • Limiting the risk cre
Slide 41: BWG Foods (Ireland & SW England)
BWG FOODS (Ireland & SW England) • Impressive performance despite pandemic restrictions, brexit and labour shortages • Credit to team in a year of management changes • Wholesale o Driving capacity efficiencies given human capital shortage • Retail o All retail symbols performing strongly • Hospitali
Slide 42: SPAR Switzerland
SPAR SWITZERLAND • Convenience brand of choice o World class retail and in-store concepts • Quality fresh offering • Coffee and food-to-go attraction o Private label relaunch • No 1 / Core / Premium • Business development o Expanding wholesale reach o EUROSPAR launch o Key partner in petro-convenien
Slide 43: SPAR Poland
SPAR POLAND Koninko HQ - Poznan Czeladz Czeladz Czeladz QUALITY ASSETS AND STORES FOUNDATION FOR FUTURE GROWTH THE SPAR GROUP LTD RESULTS PRESENTATION 2021 43
Slide 44: SPAR Poland
SPAR POLAND QUALITY ASSETS AND STORES FOUNDATION FOR FUTURE GROWTH THE SPAR GROUP LTD RESULTS PRESENTATION 2021 44
Slide 45: SPAR Poland: Operational Checklist
SPAR POLAND OPERATIONAL CHECKLIST • Underestimated the impact of pandemic related setbacks • Achieve breakeven • Slowly growing retailer loyalty • Significant cost base with scale-related inefficiencies • Business rescue creditor settlements finalised • Stabilise business operations • Stable but imp
Slide 46: SPAR Poland: Plan of Action
SPAR POLAND PLAN OF ACTION • Address loyalty issue o Changes to contracts • Improve logistics o Cost rationalisation of warehousing and transport • Actively pursuing new retailers now that business is stabilised o Targeting 30% more stores in 2022 o Exploring petro-convenience space • Drive TOPS and
Slide 47: SPAR Sri Lanka
SPAR SRI LANKA • Business impacted by severe pandemic restrictions • Broke even in October 2021 • Expected to be profitable in 2022 • Launching first independent retailer BRINGING WORLD-CLASS RETAIL TO SRI LANKA THE SPAR GROUP LTD RESULTS PRESENTATION 2021 47
Slide 48: Outlook
OUTLOOK Brett Botten, Chief Executive Officer THE SPAR GROUP LTD RESULTS PRESENTATION 2021 48
Slide 49: Outlook
OUTLOOK Across all markets a degree on uncertainty remains around the pandemic Group-wide roll out of SAP starts in 2022 • Consumer expected to remain under pressure • Strong pipeline of new stores and store upgrade programme • Launch and roll out new online offering to support retailers RSA • Drive
Slide 50: Better Together
BETTER TOGETHER OUR PURPOSE To inspire people to do and be more OUR VISION To be the first-choice brand in the communities we serve OUR VALUES ENTREPRENEURSHIP FAMILY VALUES PASSION COMMUNITY AT THE HEART THE SPAR GROUP LTD RESULTS PRESENTATION 2021 50
Slide 51: Disclaimer
DISCLAIMER This presentation contains forward-looking statements about the company’s operations and financial conditions. They are based on SPAR Group Limited’s best estimates and information at the time of writing. They are nonetheless subject to significant uncertainties and contingencies, many of
Slide 52: The SPAR Group Ltd Results Presentation 2021
THE SPAR GROUP LTD RESULTS PRESENTATION 2021 52