Spar Group Limited · JSE:SPP
Spar — The SPAR Group — FY2018 Earnings Presentation
49 slides from Spar's earnings presentation, November 2018
Slide 1: Results Presentation for the Year Ended 30 September 2018
THE SPAR GROUP LTD RESULTS PRESENTATION FOR THE YEAR ENDED 30 SEPTEMBER 2018 1
Slide 2: Agenda
AGENDA INTRODUCTION Graham O’Connor, CEO FINANCIAL OVERVIEW Mark Godfrey, CFO OPERATIONAL OVERVIEW STRATEGY UPDATE (Southern Africa) Graham O’Connor, CEO PROSPECTS QUESTIONS THE SPAR GROUP LTD RESULTS PRESENTATION 2018 2
Slide 3: Introduction
INTRODUCTION GRAHAM O’CONNOR CEO THE SPAR GROUP LTD RESULTS PRESENTATION 2018 3
Slide 4: Geographic Footprint
GEOGRAPHIC FOOTPRINT SOUTH AFRICA Growing foreign currency income streams • 2 236 stores served • 295 500m2 warehousing space • 31.9% of turnover • R68.8bn turnover • 25.1% of operating profit • R2.1bn operating profit IRELAND • 1 371 stores served • 34 560m2 warehousing space • R22.5bn turnover • R
Slide 5: Performance Scorecard 2018 Priorities
PERFORMANCE SCORECARD 2018 PRIORITIES SOUTHERN AFRICA • Organic growth and continued revamps throughout SPAR Group’s network 276 store revamps ✔ • Continue to leverage TOPS’ successful marketing and promotional campaigns “Good Advice” campaign ✔ • Investments to expand warehousing and distribution i
Slide 6: Group Highlights
GROUP HIGHLIGHTS Turnover* Operating profit* + 5.9% to + 7.9% to R101.0 bn R2.8 bn Normalised headline Dividend NAV earnings per share*# per share per share + 8.9% to + 8.0% + 8.4% to 1 063.2 cents 729 cents 3 692.2 cents * Restated prior year figures # Headline earnings adjusted for fair value adju
Slide 7: Financial Overview
FINANCIAL OVERVIEW MARK GODFREY CFO THE SPAR GROUP LTD RESULTS PRESENTATION 2018 7
Slide 8: Salient Features
FINANCIAL OVERVIEW: SALIENT FEATURES R million 2018 2017* Change % Turnover 101 018.0 95 373.1 +5.9 Operating profit 2 779.3 2 576.1 +7.9 Profit after tax 1 827.2 1 820.6 +0.4 Earnings per share (cents) 948.9 945.5 +0.4 Headline earnings per share (cents) 965.7 952.8 +1.4 Normalised headline earning
Slide 9: Restatement Effect
FINANCIAL OVERVIEW: RESTATEMENT EFFECT WESBANK Swell & RESTATE- Damages MENT IAS 2 & IAS 2/ Rmillion % 2018 IAS 39 IAS 18 IFRS 15 2018 Revenue 6.0% 103 007.5 (4.2) (95.3) 90.6 103 016.4 Turnover 5.9% 101 018.0 (95.3) – 101 113.3 Cost of sales 5.9% (90 225.0) 135.0 557.9 (90 917.9) Gross profit 5.7%
Slide 10: Key Regional Metrics
FINANCIAL OVERVIEW: KEY REGIONAL METRICS Southern SPAR Rmillion Africa Ireland Switzerland Group Income statement Turnover 68 753.4 22 495.5 9 769.1 101 018.0 Gross profit 6 190.7 2 823.6 1 778.7 10 793.0 Gross profit % 9.0% 12.6% 18.2% 10.7% Operating expenses 4 808.8 2 705.3 2 487.7 10 001.8 Profi
Slide 11: Turnover
FINANCIAL OVERVIEW: TURNOVER R million 2018 2017 Change % SPAR/TOPS 60 246.9 57 362.7 # +5.0 Liquor sales (SPAR/TOPS) 6 504.3 5 757.7 +13.0 Build it 7 577.5 7 050.1 +7.5 South Africa (Comparable base) 67 824.4 64 412.8 +5.3 S Buys – Pharmaceutical business 929.0 +100.0 Total Southern Africa 68 753.4
Slide 12: Regional Turnover
FINANCIAL OVERVIEW: REGIONAL TURNOVER R10.4bn R9.8bn R20.5bn R22.5bn 2018 2017 R68.8bn R64.4bn SPAR Southern Africa SPAR Ireland SPAR Switzerland SPAR Southern Africa: 68.1% (2017: 67.5%) SPAR Ireland: 22.3% (2017: 21.5%) SPAR Switzerland: 9.7% (2017: 10.9%) THE SPAR GROUP LTD RESULTS PRESENTATION 2
Slide 13: Gross Margins
FINANCIAL OVERVIEW: GROSS MARGINS 2018 Gross R million Turnover margin 2018 (GP%) Change 2017 (GP%) * Total South Africa 67 824.4 6 109.6 9.01% 8.89% S Buys 929.0 81.1 8.73% Total Southern Africa 68 753.4 6 190.7 9.00% 8.89% Ireland 22 495.5 2 823.6 12.55% 12.56% Switzerland 9 769.1 1 778.7 18
Slide 14: Expenses
FINANCIAL OVERVIEW: EXPENSES 2018 2017 R million Expenses % of sales Expenses % of sales % increase Total South Africa 4 723.2 7.0 4 379.6 6.8 +7.8 S Buys 85.6 9.2 Total Southern Africa 4 808.8 7.0 4 379.6 6.8 +9.8 Ireland 2 705.3 12.0 2 480.3 12.1 +9.1 Switzerland 2 487.7 25.5 2 609.1 25.0 (4.7) To
Slide 15: H1 vs H2 Comparative Trading
FINANCIAL OVERVIEW: H1 VS H2 COMPARATIVE TRADING 2018 TURNOVER (Rm) 2018 OPERATING PROFIT (Rm) 4937,2 78,4 Switzerland Switzerland 4831,9 46,2 12007,6 349,1 Ireland Ireland 10487,9 225,3 Total Total 1 035,6 34046,6 Southern Southern 1 044,7 Africa 34706,8 Africa H2 H1 H2 H1 Growth Growth First half
Slide 16: Currency Impacts (vs ZAR)
FINANCIAL OVERVIEW: CURRENCY IMPACTS (VS ZAR) Euro/Swiss Franc vs Rand EUR/GBP October 2016 - Sept 2018 0,94 Sept 2017 - Sept 2018 19 0,92 18 0,9 17 16 0,88 15 14 0,86 13 0,84 12 2017-10-13 2017-10-27 2017-11-10 2017-11-24 2017-12-08 2017-12-22 2018-01-10 2018-01-24 2018-02-07 2018-02-21 2018-03-07
Slide 17: Cash Flow
FINANCIAL OVERVIEW: CASH FLOW Rmillion 2018 2017 Cash flow from operating activities (adjusted for non-cash items) 3 555.4 3 272.7 Working capital changes 416.3 13.0 • Decrease/(Increase) in inventory 94.7 (23.7) • Increase in trade receivables (1 094.0) (221.7) • Increase in trade payables 1 415.6
Slide 18: Cash Flow
FINANCIAL OVERVIEW: CASH FLOW THE SPAR GROUP LTD RESULTS PRESENTATION 2018 18
Slide 19: Balance Sheet Regional Key Metrics
FINANCIAL OVERVIEW: BALANCE SHEET REGIONAL KEY METRICS Southern R million Africa Ireland Switzerland Group Balance sheet Property, plant and equipment 2 667.2 1 800.7 2 499.0 6 966.9 Goodwill and intangible assets 636.8 3 474.1 325.7 4 436.6 Current assets 11 750.8 4 322.3 2 093.2 18 166.3 Current l
Slide 20: Capital Expenditure
CAPITAL EXPENDITURE Rmillion 2018 2017 Investing to expand operations (456.1) (842.1) Investment to maintain operations (316.2) (248.8) • Replacement of property, plant and equipment (352.9) (330.0) • Proceeds on disposal of property, plant and equipment 36.7 81.2 Acquisition of business/subsidiarie
Slide 21: Regional Capital Expenditure
FINANCIAL OVERVIEW: REGIONAL CAPITAL EXPENDITURE Rmillion Expansion Replacement Total South Africa 172.8 85.0 257.8 Ireland 199.0 161.0 360.0 Switzerland 84.3 106.9 191.2 456.1 352.9 809.0 THE SPAR GROUP LTD RESULTS PRESENTATION 2018 21
Slide 22: Offshore Debt Overview
FINANCIAL OVERVIEW: OFFSHORE DEBT OVERVIEW R million 2018 2017 SPAR Ireland: €-denominated Balance at beginning of year 963.8 824.4 Finance costs recognised in profit or loss (6.7%) 72.3 60.1 Net exchange differences arising during the period 40.6 27.7 Fair value adjustment 139.5 51.6 Balance at end
Slide 23: S Buys Debt Overview
FINANCIAL OVERVIEW: S BUYS DEBT OVERVIEW Rmillion 2018 2017 Balance at beginning of year - - Initial recognition 54.4 - Initial recognition reducing non-controlling interest balance 27.6 - Initial recognition in equity reserve 26.8 - Finance costs recognised in profit or loss 6.4 - Fair value adjust
Slide 24: Reconciliation of Normalised HEPS
FINANCIAL OVERVIEW: RECONCILIATION OF NORMALISED HEPS* Rmillion 2018 2017 Change (%) Reported headline earnings 1 859.6 1 834.7 + 1.4 Adjusted for: • Fair value adjustment to financial liabilities 127.9 51.6 • Foreign exchange (gain)/losses on financial liabilities 43.5 (9.9) • Business acquisition
Slide 25: Reconciliation of Dividend
FINANCIAL OVERVIEW: RECONCILIATION OF DIVIDEND Rmillion 2018 Reported headline earnings 1 859.6 Adjusted for: • Forex gain on financial liability measurement (non-cash related) 43.5 • Fair value adjustment to financial liabilities 127.9 Adjusted headline earnings 2 031.0 Dividend cover 1.45 times Di
Slide 26: Performance Summary
FINANCIAL OVERVIEW: PERFORMANCE SUMMARY NET ASSET VALUE PER SHARE HEADLINE EARNINGS PER SHARE (CENTS) (CENTS) 2018 3 692,2 2018 1 063,2 965,7 2017 3 407,0 2017 976,0 952,8 2016 1 033,0 2016 3 131,7 1 020,0 2015 940,0 2015 1 922,6 835,5 2014 779,8 2014 1 751,1 781,8 Normalised Headline Earnings THE S
Slide 27: Salient Features
FINANCIAL OVERVIEW: SALIENT FEATURES R million 2018 2017* Change % Turnover 101 018.0 95 373.1 +5.9 Operating Profit 2 779.3 2 576.1 +7.9 Profit after tax 1 827.2 1 820.6 +0.4 Earnings per share (cents) 948.9 945.5 +0.4 Headline earnings per share (cents) 965.7 952.8 +1.4 Normalised headline earning
Slide 28: Operational Overview
OPERATIONAL OVERVIEW GRAHAM O’CONNOR CEO THE SPAR GROUP LTD RESULTS PRESENTATION 2018 28
Slide 29: Operational Review: Southern Africa – SPAR
OPERATIONAL REVIEW: SOUTHERN AFRICA – SPAR Total growth Like-for-like • Internally calculated food Retail sales growth % % inflation • FY18 - 1.4% SPAR +4.2 +2.3 • FY17 - 6.0% TOPS +11.3 +7.5 • Combined SPAR & TOPS up 5.1% (retail sales) Build it +9.7 +7.4 THE SPAR GROUP LTD RESULTS PRESENTATION 201
Slide 30: Operational Review: Southern Africa – SPAR Wholesale
OPERATIONAL REVIEW: SOUTHERN AFRICA – SPAR • Total house brands turnover +4.3% to R10.7 bn (incl. all brands) • SPAR private label turnover +5.8% to R8.5 bn • SPAR natural store-in-store launched 2018 • Greater opportunity to drive consumer value and quality SPAR TURNOVER ANALYSIS R billion WHOLESAL
Slide 31: Operational Review: Southern Africa – SPAR Pricing and Promotions
OPERATIONAL REVIEW: SOUTHERN AFRICA – SPAR Compelling pricing • Advertising & promotions • My SPAR Rewards & SPAR TEXT ME! • Super Saturday Sale • Six week 55th birthday promotion • Win a car & Zyliss knives THE SPAR GROUP LTD RESULTS PRESENTATION 2018 31
Slide 32: SPAR Price Perception Study 2018
OPERATIONAL REVIEW: SOUTHERN AFRICA – SPAR SPAR PRICE PERCEPTION STUDY 2018 43.7 43.4 56.3 66.1 56.3 56.6 43.7 33.9 COMPETITIVE/CHEAPER MORE EXPENSIVE 2007 2008 2017 2018 THE SPAR GROUP LTD RESULTS PRESENTATION 2018 32
Slide 33: Operational Review: TOPS at SPAR
OPERATIONAL REVIEW: SOUTHERN AFRICA – TOPS AT SPAR • “Good Advice” campaign • SIPFEST campaign • TOPS wine show • Once again recognised as sector leader • Sunday Times Liquor Store of the Year • Daily News Choice Awards Best Liquor Store TOPS TURNOVER ANALYSIS R billion 6,5 ▲13.0% 5,8 11,2 ▲11.3% 10
Slide 34: Operational Review: Southern Africa – Build it
OPERATIONAL REVIEW: SOUTHERN AFRICA – BUILD IT • Increased retailer loyalty through improved product pricing • Build it house brand sales and imports showed solid growth of BUILD IT TURNOVER ANALYSIS 11% for the year R billion • Focus on retail execution is 7,6 paying off ▲7.5% 7,1 13,3 ▲9.7% 12,2 T
Slide 35: Operational Review: SPAR Express
OPERATIONAL REVIEW: SOUTHERN AFRICA – SPAR EXPRESS • SPAR Express strategic partnership with Shell • Petrol-forecourt convenience shopping • Convenience combined with the value and quality customers trust in SPAR THE SPAR GROUP LTD RESULTS PRESENTATION 2018 35
Slide 36: Operational Review: Pharmaceutical
OPERATIONAL REVIEW: SOUTHERN AFRICA – PHARMACEUTICAL S BUYS pharmaceutical wholesale business • Acquired with effect 1 Oct 2017 • Provides full pharmaceutical wholesale service for Pharmacy at SPAR retailers Pharmacy at SPAR • Continued growth trajectory • 26 new stores during FY18 • 101 stores at y
Slide 37: Operational Review: Southern Africa
OPERATIONAL REVIEW: SOUTHERN AFRICA • Continued support of retailer profitability • GUEST customer care program well received by retailers • Changing perception of staff to treat customers as guests • Putting ‘consumers at our heart’ GREET UNIFORM ENGAGE SELL THANK THE SPAR GROUP LTD RESULTS PRESENT
Slide 38: Operational Review: Southern Africa
OPERATIONAL REVIEW: SOUTHERN AFRICA • Case volumes through distribution centres • +3.2% to 231.7m cases • reversing decline in prior year (2017: - 2.6%) • Ongoing investments to support growth • S Buys pharmaceutical wholesaler R74.4m • Knowles shopping centre R165.7m 38 New stores • Supporting reta
Slide 39: Operational Review: Ireland
OPERATIONAL REVIEW: IRELAND • Strong operational performance • EUR-denominated turnover +4.2%, with positive sales growth across all retail brands • Record case movements through Kilcarbery DC centre with turnover +6.9% • Turnover for Gillets in SW England up 6.9% (sterling denominated) • Positive c
Slide 40: Operational Review: Switzerland
OPERATIONAL REVIEW: SWITZERLAND • Core distribution centre turnover +0.6% • Turnover impacted by weak retail environment and strategic closure of and sale of unprofitable corporate retail stores • Significant improvement in logistics efficiencies, productivity and overall costs • Store delivery freq
Slide 41: Strategic Update – Southern Africa
STRATEGIC UPDATE – SOUTHERN AFRICA GRAHAM O’CONNOR CEO THE SPAR GROUP LTD RESULTS PRESENTATION 2018 41
Slide 42: Refreshing Our Strategy
REFRESHING OUR STRATEGY THE SPAR GROUP LTD RESULTS PRESENTATION 2018 42
Slide 43: Our Vision
OUR VISION 1°" CHOICE BRAND IN THE COMMUNITIES WE SERVE a ~O SPA a) @) |
Slide 44: Our Values
OUR VALUES Passion VALUES Entrepreneurship Family values THE SPAR GROUP LTD RESULTS PRESENTATION 2018 44
Slide 45: Our Purpose
OUR PURPOSE THE SPAR GROUP LTD RESULTS PRESENTATION 2018 45
Slide 46: Prospects
PROSPECTS GRAHAM O’CONNOR CEO THE SPAR GROUP LTD RESULTS PRESENTATION 2018 46
Slide 47: Prospects
PROSPECTS SOUTHERN AFRICA IRELAND SWITZERLAND GROUP Drive our retail Still good prospects Focus on retail Well-established retail business offering brands in chosen markets • Ongoing • Confident in • Maintain focus on • Board and investments in delivering further driving strategic management are dis
Slide 48: 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 49: Questions
QUESTIONS THE SPAR GROUP LTD RESULTS PRESENTATION 2018 49