Pepkor Holdings Ltd. · JSE:PPH
Pepkor — Merger or Acquisition (February 2022)
26 slides from Pepkor's merger presentation, Feb 3, 2022
Slide 1: Acquisition of Grupo Avenida
ACQUISITION OF GRUPO AVENIDA 3 February 2022
Slide 2: Pepkor Today
PEPKOR TODAY JSE R88.4bn 47 000 5 470 Largest non- market employees2 stores2 grocery retailer1 capitalisation1 R77.3bn R9.3bn R11.0bn 0.5 revenue3 operating cash times net debt- profit3 generated3 to-EBITDA2 (1) As at 28 January by market capitalisation (2) As at 30 September 2021 (3) Financial year
Slide 3: Our Vision, Purpose and Offering
OUR VISION PURPOSE is to make a positive is to be a difference in the globally lives of our customers. respected discount and OUR value retailer – OFFERING by being the best Pepkor gives customers access to place to shop, value-for-money products and services work and invest. at the lowest prices, a
Slide 4: Our International Experience
OUR INTERNATIONAL EXPERIENCE 1998 2003 2012 2014 2016 2021 Australia Poland Australia New Zealand Poundland Successful listings (92 Stores) (14 stores) (50 stores) (82 stores) (928 stores) (3 500 stores) (245 stores) Lower risk of Discount and value Strength in baby and exposure to high market child
Slide 5: Why Brazil
WHY BRAZIL Total GDP US$1.4trn1 US$0.3trn1 GDP per capita US$6.8k 1 US$5.7k1 Population size 211.8m2 59.3m1 Unemployment 13.5%2 29.2%3 Top 10 largest Enormous Biggest Relatively Federal apparel & growth economy in stable tax footwear market opportunity Latin America currency structure in the world 4
Slide 6: Brazil Value Market
BRAZIL VALUE MARKET BRAZILIAN POPULATION BY INCOME CLASS1 CLOTHING, FOOTWEAR & HOME MARKET SIZE # of People Income Class % of Total Population 30.5 A+B million 14.4% US$25.6bn 2 US$7bn 3 Brazil South Africa 117.2 C million 55.3% + = 85.6% • Fragmented market with 14.5% 64.2 formal retail4 D+E millio
Slide 7: Introduction to Grupo Avenida
INTRODUCTION TO GRUPO AVENIDA
Slide 8: Corporate History
CORPORATE HISTORY Over 42 years of experience in the lower end of the market Rodrigo Caseli becomes the CEO Opening of the Period of Material Changes first store Change from installment plan to outside Mato Purchase and private label card Grosso state rent of Opening of Christian (located in Change
Slide 9: Financial Highlights
FINANCIAL HIGHLIGHTS BRL 773m BRL 5.1m 14% growth on 20191 net revenue Average turnover in FY212,3 per store2,4 1.2m 7.5m Future months transactions2 stock holding5 47% 2 475 (1) Financial year ended 31 December 2019 – balanced reflection pre-COVID-19. (2) Preliminary results for the financial year
Slide 10: Store Network
STORE NETWORK 130 11/26 STORES STATES 16 4 2 10 8 • Leadership in central regions 33 5 • Presence in tier 1 & 2 cities 19 3 • Flexible size & locations 12 18 • Avenida - 110 stores • Giovanna - 20 stores • 680 cities with >50 000 inhabitants • Network expansion along 3 corridors 10
Slide 11: Grupo Avenida's Market Positioning
GRUPO AVENIDA’S MARKET POSITIONING One-stop-shop for clothing and home to the average Brazilian consumer family APPAREL1 FOOTWEAR1 Price + Price + Upper mass market Mass market Value Discount Price - Price - WIDE ASSORTMENT WITH A STRONG WOMEN AND MEN OFFERING Women Men Baby & Kids Footwear Home Acc
Slide 12: Operations and Management
OPERATIONS AND MANAGEMENT CEO Director Christian Caseli • 2 Pepkor executives to Rodrigo Caseli join Exco • Dedicated Pepkor retail 26 years’ service 29 years’ service expert advisor CFO COO DIGITAL Ernane Abrahão Martijn Winkel TRANSFORMATION OFFICER Jonas Ferreira 4 years’ service 2 years’ service
Slide 13: Corporate Governance, Compliance and Reporting
CORPORATE GOVERNANCE, COMPLIANCE AND REPORTING Pre-Acquisition Board • 2 x Caseli family • 2 x Kinea • 2 x Independent members Finance Investment People Committee Committee Committee Audited by Ernst & Young New Board • Pepkor CEO & CFO • 2 x Caseli family • Head of Pepkor Brazil • 1x Retail Directo
Slide 14: Transaction Summary
TRANSACTION SUMMARY SUMMARY PAYMENT DUE DILIGENCE • Cash • Extensive due diligence (DD) - 2 • Acquire c.87% • Strong Pepkor balance sheet year period • Working capital injection • <4% of Pepkor market cap • Avenida visit to SA • Family commitment – 7 yrs • Put and call options • Online DD & physical
Slide 15: Strategically Aligned Acquisition
STRATEGICALLY ALIGNED ACQUISITION Attractive country with large 1 population 6 Culture resonates with Pepkor Top 10 largest apparel & Highly regarded & experienced 2 footwear market in the world 7 local management team High levels of governance, Defensive & resilient discount 3 and value fit 8 compl
Slide 16: Initial Value Creation Plan
INITIAL VALUE CREATION PLAN 1 Adequately capitalise the business 2 Prepare the business for growth 3 Expand sourcing capabilities 4 Differentiate price positioning 5 Store expansion 16
Slide 17: Acquisition of Grupo Avenida – Thank You
ACQUISITION OF GRUPO AVENIDA Thank You
Slide 18: Appendix
APPENDIX AVENIDA
Slide 19: Brazil Snapshot
BRAZIL SNAPSHOT AVENIDA
Slide 20: Fragmented Apparel Market with Potential for Consolidation
FRAGMENTED APPAREL MARKET WITH POTENTIAL FOR CONSOLIDATION Strong consolidation potential outside of the major metropolises BRAZILIAN APPAREL & FOOTWEAR TOTAL ADDRESSABLE MARKET1 (2021) OUTSTANDING GROWTH POTENTIAL IN FOCUS DEMOGRAPHICS High Market Fragmentation yields opportunity to grow with lower
Slide 21: Snapshot of the Brazil Economy
SNAPSHOT OF THE BRAZIL ECONOMY One of the largest global economies, with solid macroeconomic fundamentals GDP BY COUNTRY IN 2020 (CURRENT US$TLN) GDP REAL GROWTH (%)2,4 GDP per capita (US$k)1 Brazil South Africa 63.4 10.4 40.2 46.2 41.1 1.9 39.0 31.7 6.8 5.7 5.0% 4.5% 20.9 1.9% 2.0% 2.3% 1.8% 1.9% 2
Slide 22: Brazilian Demographics
BRAZILIAN DEMOGRAPHICS Brazil’s population is currently the 6th largest in the world and is expected to grow c. 9% in the next 20 years POPULATION BY COUNTRY IN 20201 (MILLION) BRAZIL’S POPULATION PER REGION (MILLION)2 One of the largest economies in the world with a sizeable population… …and high g
Slide 23: Retail Sector in Brazil
RETAIL SECTOR IN BRAZIL Apparel and footwear sales are expected to grow globally in coming years, with Brazil showing higher potential when compared to other sizeable economies APPAREL AND FOOTWEAR MARKET GROWTH CAGR (2020A-2025E)3 A&F1 EXPENDITURE 20A (USD PER CAPITA) 12.5% 48.0 Chart Title Chart T
Slide 24: Vaccination Through the World
VACCINATION THROUGH THE WORLD Brazil has one of the largest vaccinated populations in the world FULLY VACCINATED POPULATION (MILLION) % of the population fully vaccinated Chart Title 85.0% 50.1% 63.4% 70.0% 79.1% 35.9% 59.1% 73.3% 47.6% 73.3% 35.9% 52.4% 63.4% 61.6% 27.6% 1 227,4 698,1 4th 35th 211,
Slide 25: Exchange Rate Evolution
EXCHANGE RATE EVOLUTION Positive moment to invest in Brazil when considering the implied exchange rate between the Brazilian Real and the Rand EXCHANGE RATES EVOLUTION 20.00 18.00 16.00 15.64 14.00 12.00 10.00 8.00 6.00 5.40 4.00 2.90 2.00 ZAR/USD BRL/USD Implied ZAR/BRL – 31-Dec-15 31-Dec-16 31-Dec
Slide 26: Acquisition of Grupo Avenida – Thank You
ACQUISITION OF GRUPO AVENIDA Thank You
Pepkor Holdings — Merger or Acquisition (February 2022) on 6ix