Shoprite Holdings Limited · JSE:SHP
Shoprite — FY2022 Earnings Presentation
47 slides from Shoprite's earnings presentation, Sep 6, 2022
Slide 1: 2022 Results Presentation
2022 Results Presentation For the 52 weeks ended 3 July 2022
Slide 2: Operational review, financial results, strategy update
01 Operational review Pieter Engelbrecht 02 Financial results Anton de Bruyn 03 Strategy update Questions Pieter Engelbrecht
Slide 3: Operational Review
Operational Review Pieter Engelbrecht Chief Executive Officer
Slide 4: A record year in review
A record year in review Robust sales performance notwithstanding 53-week base period +22.1% Adjusted DHEPS R184.1bn R45.1bn +10.0% Group Sales +11.9% Gross Profit DHEPS 52 vs 52 weeks +9.6% +9.3% 600c +8.1% Like-for-like 24.5% Gross margin Record dividend Continuing operations
Slide 5: Customers voted with their wallets
Customers voted with their wallets More Increased Profitable market customers volumes share gains +4.5% +2.3% +R6.2bn Customer visits Volume growth RSA annual market share gain +5.4% +154m 40 Months of uninterrupted Basket size growth Additional products sold market share gains (NielsenIQ June 2022)
Slide 6: An extraordinary year in challenging times
An extraordinary year in challenging times Operationally, structurally and financially stronger • Proud of the daily dedication of the team and leadership • Shoprite today is reaping rewards from a multi-year transformation journey • Supermarkets RSA strong sales momentum in our core market continue
Slide 7: Affordability obsession
Affordability obsession • Laser-focused on value as customers faced unprecedented increases in the cost of living • Shielding customers from rising inflation: Internal price inflation of 3.9% well below official food inflation of 6.5% in RSA • Accessibility remains our priority as lower income custo
Slide 8: Smarter pricing and promotions
Smarter pricing and promotions Gross margin maintained without compromising price leadership • Continued investment to protect our price sensitive customers • Margin mix benefit from strong Checkers sales growth • Win-Win-Win promotions: • R9.4bn back in Xtra Savings discounts • Increased deal-seeki
Slide 9: 40 consecutive months of market share gains
40 consecutive months of market share gains Supermarkets RSA % sales growth by half vs. Rest of Market (incl. liquor – NielsenIQ) Shoprite Group Rest of Market H2 H1 H2 H1 H2 2020 2021 2022 Source: NielsenIQ, 2019- 2022. Rest of Market Universe includes Pick n Pay, Boxer, Clicks, Woolworths, Dis-Che
Slide 10: Distinct brand portfolio outperforming peers
Distinct brand portfolio outperforming peers Market Record SA market Share value share valuegain gain 2022 Limited assortment food discounter Proximity-to-home advantage offering a limited assortment of R2.9bn R6.2bn the most popular grocery items at unrivalled affordability for the most price-sensi
Slide 11: Supermarkets Non-RSA improved performance
Supermarkets Non-RSA improved performance • Continuing operations sales increased by 10.4% • Sales in constant currency increased by 5.9%*: • Zambia was the best performer, sales increased by 17.7% • Three years into our Non-RSA consolidation strategy • Madagascar and Uganda exits concluded this yea
Slide 12: Financial Results
2022 Financial Results Anton de Bruyn Chief Financial Officer
Slide 13: Significant events
Significant events Social unrest • 231 stores impacted • 37 stores have not re-opened, 10 of which have been permanently closed • Insurance claim of R1.6bn settled • R145m irrecoverable social unrest cost 01 Covid-19 231 stores impacted: 194 stores Permanent re-opened Permanent closure: 8 02 Social
Slide 14: Financial overview 52 vs 53 weeks
Financial overview 52 vs 53 weeks 52 weeks 53 weeks Change 2022 2021 Continuing operations % Rm Rm Notes to the results: Sale of merchandise 9.6 184 078 168 030 Gross profit 9.3 45 061 41 213 Other operating income growth 19.2% ● Commissions received +13.8% Other operating income 19.2 3 118 2 616 ●
Slide 15: Financial metrics
Financial metrics 2022 2021 ROIC IFRS 16 ROIC excl Week 53 52-week IFRS 16 ROIC excl ROIC impact IFRS 16 ROIC adjustment basis impact IFRS 16 Rm Rm Rm Rm Rm Rm Rm Rm Trading profit 11 030 (2 225) 8 805 10 332 (331) 10 001 (2 115) 7 886 Effective tax rate 30.8% 30.8% 32.2% Trading profit after tax 7
Slide 16: Sales growth analysis
Sales growth analysis Pro forma Pro forma H1 H2 H2 2022 2022 2022 2022 2022 change change* change change change** Continuing operations Supermarkets RSA +0.6 10.1 % % % 12.6 % 11.3 % 9.0 % 13.8 24.5% Gross margin Supermarkets Non-RSA 10.4 12.9 8.4 12.6 17.9 Furniture (1.4) 0.7 (6.5) 5.2 10.4 Other o
Slide 17: Sales growth
Sales growth 2022 Number of Sales Like-for- net new growth like stores Supermarkets RSA Continuing operations % % 12 months* Brand contribution and sales growth Supermarkets RSA 10.1 8.5 117 Supermarkets Non-RSA 10.4 8.4 3 R77.9bn R58.7bn Contribution: 52.8% Contribution: 39.8% Furniture (1.4) 0.3 5
Slide 18: Trading profit
Trading profit Trading 52 weeks 53 weeks margin Change 2022 2021 2022 Continuing operations % Rm Rm % Supermarkets RSA 7.0 10 055 9 401 6.8 Supermarkets Non-RSA 43.0 439 307 2.6 Furniture (44.8) 211 382 3.1 Other operating segments 24.7 363 291 2.8 Total continuing operating segments 6.6 11 068 10 3
Slide 19: Net finance costs
Net finance costs 52 weeks 53 weeks Change 2022 2021 Continuing operations % Rm Rm Interest received from bank account balances 0.7 270 268 Finance cost: borrowings (43.4) (353) (624) Finance cost: lease liabilities 7.1 (2 646) (2 471) Net finance costs (3.5) (2 729) (2 827) Includes R178m breakage
Slide 20: Balance sheet composition
Balance sheet composition Rbn Total assets 77.1 91.5 65.8 55.9 Total liabilities BORROWINGS AS % OF EQUITY 100% 2022: 21.5% Other assets 90% 10.9 12.5 2.2 2.1 Other liabilities 2021: 24.9% 80% Trade and other TRADE AND OTHER PAYABLES Inventories 70% 18.4 21.9 21.5 19.6 payables 2022: R21.5bn 60% Cas
Slide 21: Capital expenditure
Capital expenditure CAPITAL SPEND 2022: R5.4bn TRADEMARKS 2021: R3.2bn 4.6% LAND, BUILDINGS AND (2021: n/a) LEASEHOLD IMPROVEMENTS IT 10.4% 24.9% (2021: 9.3%) Rbn (2021: 23.2%) Capital spend 5.4 STORE MAINTENANCE AND REFURBISHMENTS Excluded from guidance: SUPPLY CHAIN 25.8% Impact of social unrest (
Slide 22: Inventories
Inventories INVENTORIES Inventories as % of sales (52 weeks) 2022 2021 2022: R21.9bn from continuing operations % % 2021: R18.4bn Supermarkets RSA 11.7 11.0 +18.9% Supermarkets Non-RSA 13.7 12.0 Furniture 24.8 24.4 SUPERMARKETS RSA R17.2bn Other operating segments 4.9 4.8 (2021: R14.4bn) Total conti
Slide 23: Treasury
Treasury Net cash Borrowings Share buyback R6.0bn R5.5bn R1.0bn -11.3% +4.4% Average share 2022 2022 2022 price: R196.69 R6.7bn R5.3bn R0.5bn 2021 2021 2021
Slide 24: Free cash flow
Free cash flow Rbn Inventories Rbn (2.8) Trade and other receivables (0.7) Trade and other payables 1.7 16.7 (3.0) Working capital changes (1.8) (2.2) (1.8) (1.9) 0.4 (3.0) 5.2 EBITDA from Income Net Changes in Capital Asset Lease liability Free cash total tax paid interest working expenditure dispo
Slide 25: 2023 guidance summary
2023 guidance summary • Group opening 275 new stores in 2023 New stores - x the proposed Masscash/Cambridge acquisition • This does not include • Masscash/Cambridge acquisition approval from Competition Tribunal is Capital allocation pending • Share buyback ongoing • Dividend policy: 1.75x DHEPS cov
Slide 26: Strategy Update
Strategy Update Pieter Engelbrecht Chief Executive Officer
Slide 27: Shoprite today
Shoprite today Multi-year transformational journey 2022 onwards Leverage 2020-2021 platform advantage to unlock value in the ecosystem A Smarter, 2019-2020 Stronger Shoprite Digital 2017-2018 transformation for customers and Single system of precision retailing record RE-PLATFORM TRANSFORM OPTIMISE
Slide 28: Nine drivers of growth remain future-fit
Nine drivers of growth remain future-fit Investing in strategic priorities to optimise our core retail capabilities and win in the long term
Slide 29: A Smarter Shoprite
A Smarter Shoprite • Digital and Data Science is powering a customer-first culture to help customers save even more • Award-winning Xtra Savings Rewards Programme continues to grow with over 1 800 swipes every minute • Unlocking value from rich consumption data Optimised mass promotions and Real-tim
Slide 30: Growth in trusted, profitable private labels
Growth in trusted, profitable private labels • Value-seeking consumers switching to private label alternatives • Supermarkets RSA Private label participation up from 18.3% to 18.8% • Building trusted exclusive brands: 30 > R100m in annual sales • Opportunity in new categories – 1 285 new products in
Slide 31: Investing through the cycle for long-term growth
Investing through the cycle for long-term growth • Expanding store network to all corners of SA from a strong brand & value foundation • Share of wallet opportunities remain from all customer segments • 275 new Group stores with closer to home, smaller formats • The Checkers store renewal programme
Slide 32: Investing through the cycle for long-term growth
Investing through the cycle for long-term growth • Prioritising best-in-class availability resulted in stockholding growth in 2022: • Supported higher sales trends and stock builds ahead of price increases • Compensated for declining supplier service levels • Adapted to global supply chain constrain
Slide 33: Embracing digital for customers
Embracing digital for customers Digital disruption & hyper-scaling of 1-hour delivery service • Sixty60 growth performance continues with 150% increase in annual sales • SA’s No.1 grocery app with 2.4m downloads available in 300 locations • 26 Innovation awards • Supporting job creation totaling 6 2
Slide 34: Sixty60 delivery proposition is post-Covid fit
Sixty60 delivery proposition is post-Covid fit 23k products at in-store 5 000 deals and Cheaper to prices personalised offers get it delivered Confirmed by the DELIVERY FEE COMPARISON (ZAR) R53 R35 Sixty60 Own Vehicle Source: Own vehicle cost = R7.01 per km to run a VW Polo Vivo x the average 7.5km
Slide 35: Embracing digital to unlock value
Embracing digital to unlock value • Continued investment into digital talent, platforms & advanced analytics • Building long-term competitive advantage and unlocking alternative revenue: ✓ Retail media network ✓ Financial services ✓ Value-added services
Slide 36: A force for good - planet
A force for good - planet Fighting climate change with a ‘Design for sustainability’ smaller carbon footprint approach to reducing plastic 100% of in-store paper Our Planet Bag is 100% 62 sites are 1 041 trailers are powered and board packaging is recycled, recyclable and generating cleaner by solar
Slide 37: A force for good - people
A force for good - people Largest private employer Launched new R8.9 billion Launched Shoprite Next YES! and Retail Readiness in RSA with 145 595 evergreen B-BBEE Capital to support future Programme supporting team members Shoprite Employee Trust entrepreneurs youth development 5.2 million meals don
Slide 38: Building our ecosystem of value for customers
Building our ecosystem of value for customers
Slide 39: Looking forward
Looking forward • Supermarkets RSA July 22 sales growth ahead of the 10.1% reported for 2022 • July 2022 selling price inflation is 7.3% • LiquorShop experienced Covid-19 trading restrictions in July 2021 base • Masscash/Cambridge acquisition awaiting final Competition Tribunal approval • Investment
Slide 40: Thank you Questions
Thank you Questions
Slide 41: Additional Information
2022 Additional Information Anton de Bruyn Chief Financial Officer
Slide 42: Diluted headline earnings per share (DHEPS)
Diluted headline earnings per share (DHEPS) 52 weeks 53 weeks Change 2022 2021 % cents cents DHEPS continuing operations 10.0 1 048.1 952.5 DHEPS discontinued operations DHEPS including discontinued operations +0.6%7.8 (93.7) 1.3 1 049.4 20.7 973.2 24.5% Gross margin DHEPS continuing operations 10.0
Slide 43: Adjusted DHEPS reconciliation
Adjusted DHEPS reconciliation 2022 Headline 2022 earnings DHEPS* Rm cents Headline earnings including discontinued operations 5 755 1 049.4 Headline earnings discontinued operations (7) (1.3) Headline earnings continuing operations 5 748 1 048.1 Adjusted for: Forex 260 47.4 Hyperinflation 38 6.9 Lea
Slide 44: Items of a capital nature
Items of a capital nature 52 weeks 53 weeks 2022 2021 Continuing operations Rm Rm Notes to the results: Impairment of PPE (46) (860) Non-financial asset 52 weeks Impairment of right-of-use assets (88) (198) impairments / (reversals) 2022 by segment Rm Impairment of intangible assets (12) (30) Superm
Slide 45: Capital spend
Capital spend TOTAL OPERATIONS Projects R904m Rm 1 800 Social unrest R126m Social unrest R364m 1 710 Other R311m Projects R35m 1 600 1 341 1 389 1 400 1 217 1 200 1 000 746 761 800 560 600 400 250 299 196 200 134 n/a - - Trademark Trademarks Information Information Store maintenance Store New Newsto
Slide 46: Exchange rate exposure
Exchange rate exposure Zambia kwacha Angola kwanza Mozambique metical 2022 2021 vs vs 2021 2020 20,0% 13.9% 13.1% 5.8% 0,0% ZAR ave 2022 VS 2021 ZAR average rates-20,0% (9.0%) ZAR ave 2021 VS 2020 -40,0% 11.1% (41.9%) (39.2%) -60,0% -10.7% 60,0% -15.8% 41.2% 40,0% 34.3% 20,0% 12.2% ZAR closing 2022
Slide 47: Ecosystem adjacencies
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