Shoprite Holdings Limited · JSE:SHP
Shoprite — H1 2024 Earnings Presentation
52 slides from Shoprite's earnings presentation, Mar 5, 2024
Slide 1: 2024 Interim Results Presentation
2024 Interim Results Presentation For the 26 weeks ended 31 December 2023 SHOPIIHfD !]J!~
Slide 2: Agenda
Operational Review Pieter Engelbrecht Financial Resu Its Anton de Bruyn Strategy Update Questions Pieter Engelbrecht
Slide 3: Operational Review
Operational Review Pieter Engelbrecht Chief Executive Officer SHOPll!l!~~
Slide 4: Executing with precision and impact in H1
Executing with precision and impact in H1 Launched Xtra Delivered the Savings Plus, South African SA's first grocery spirit to the RWC subscri tion Ian in France in support of the Springboks Launched a leadership 4 t,/'- SHOPRITE development Supported 23 2 community food LEADERSHIP programme with ga
Slide 5: Executing with precision and impact in H1
Executing with precision and impact in H1 34 new innovation and retail awards in 6 months -. :.-;.p ,,. 1;' Delivered Xtra joy to Mo,.-;,.~ J., the flood-stricken Inspired children with community of the best-selling, Stanford with a locally made, Sixty60 Christmas installation toy bikes of 2.7m ligh
Slide 6: R121.1bn sales, R28.6bn gross profit
+R14.8bn additional sales Sales Gross profit DHEPS R121.1bn R28.6bn +7.6% +14.7% Sales growth Gross margin 267c dividend +13.9% 23.6% +7.7% +6.5% Like-for-like* +10 bps • Like-for-like sales g rowth constitutes proforma financial informat ion in terms of the JSE Limited Listings Requirements Continu
Slide 7: Customer visits, volumes and share gains
Customer visits Item volume Share gains +6.9% +5.1% +R4.0bn H 1 RSA market share* Basket size Products sold 58 +6.4% 3.5bn months of uninterrupted RSA market share • ZAR gains
Slide 8: Winning with customers, outpacing competitors
Winning with customers, outpacing competitors • Supermarkets RSA sales growth +14.6% (6.3% like-for-like) Supermarkets RSA Internal Inflation • ~2x the pace of the rest of the market* vs Official Food Inflation • Exel. Massmart acquisition sales increased 11.2% 13.0% • Checkers remains the fastest g
Slide 9: Price Champion for Customers: Every Rand Matters
Price Champion for Customers: Every Rand Matters 454m AFFORDABILITY PERSONALISED OFFERS OBSESSION sent directly to customers +1.Sm RS products subsidised every week XTRASAVINGS REWARDS CHEAPEST R8.4bn ON SHELF in instant cash savings back 2.8m new shoppers to members purchasing entry-level Private L
Slide 10: Execution against strategy delivered record market share
Execution against strategy delivered record market share ✓ New stores, new customers, increased shopping frequency and higher adoption of online ✓ Investment into inventory for on-shelf availability ✓ RS00m diesel cost for generators to keep stores open and food fresh ✓ Record Black Friday and festi
Slide 11: Established RSA brand portfolio with distinct customer propositions
Established RSA brand portfolio with distinct customer propositions SHOPRITE Store positioning and numbers Africa's low-price grocery leader Lowest prices on trusted grocery brands, without .... jl compromising on customer service and product ... (U quality for price-conscious customers. E a. ::::>
Slide 12: Established brand portfolio with distinct customer propositions
Established brand portfolio with distinct customer propositions Store positioning and numbers Upmarket pet shop specialist store stocking premium ]... Outdoor 131 n, food and pet accessories. E a ::::, P::tst}gp littleiiie Outdoor Medirit'ir UNIQ Specialist outdoor store with exclusive ranges of out
Slide 13: Supermarkets RSA excl. LiquorShop
& Supermarkets RSA excl. LiquorShop DIFFERENTIATED PRIVATE LABEL SMARTER BEST SORTMENT VALUE ... ••• (Nielsen IQ, EFFORTLESS • FRESH ONVENIENCE &HEALTHY PERSONALISED
Slide 14: Supermarkets RSA excl. LiquorShop
& : - - . : : - - - - - - - - - -- Supermarkets RSA excl. LiquorShop LOWEST PRICES AFFORDABLE HYGIENIC PRIVATE & FRESH LABEL = •••• I El a BASICS & • PROMOTi ONA MORE EXCITEMEN SORTMENT ONE-STOP-SHOP FOR FINANCIAL SERVICES ,• .,._ ,' I ·~~~~ ,.:_
Slide 15: Supermarkets Non-RSA, Furniture and Other Operating Segments
Supermarkets Non-RSA, Furniture and Other Operating Segments Supermarkets Non-RSA Supermarkets Non-RSA Narrowed regional scope (9 countries) reducing operational complexity trading profit R434m +6.2% • Trading profit increased by 37.3% to R434m Sales growth • Visit growth +9.8% +20.0% Constant curre
Slide 16: Financial Results
Financial Results Anton de Bruyn Chief Financial Officer SHOPJIH !!M:H -
Slide 17: Sales, total income, expenses and trading profit
Sales Total income Total expenses Trading profit R121.1bn R31.4bn R24.7bn R6.7bn +13.9% +13.9o/o +14.8% +10.7o/o +6.5% Li ke-for-like* EBITDA DHEPS ROIC excl. IFRS 16 Interim dividend per share R10.2bn +7.6% 17.0% +7.7% +10.3o/o +4.6o/o 13.7o/o 25.4o/o EPS WACC ROE
Slide 18: Sales unpacked
Sales unpacked 26 weeks 26 weeks Like-for- Change 31 Dec '23 1 Jan '23 like Supermarkets RSA Brand contribution and sales growth Sales % Rm Rm % Supermarket s RSA 14.6 97 517 85 084 6.3 Supermarket s Non- Ch -s 6.2 SHOPRITE Checkers Hyper RSA 10 606 9 987 4.8 (E- - R38.5bn Furnit ure 1. 7 3 975 3 90
Slide 19: Supermarkets RSA store expansion
Supermarkets RSA store expansion Space growth (m 2 )* Last 12 months excl. Massmart: 5.0% Net Number of Last 6 months: 2.2% movement Number of stores Dec '22 - stores Dec '22 Store movement Dec '23 Dec '23 SHOPRITE 553 1 25 51 75 628 Checkers 252 16** 16 268 CheckerSHyper 38 38 5 1 G!:. . . . 429 24
Slide 20: Trading profit: total income unpacked
Trading profit: total income unpacked 15.5% Restated* Margin excl. non-recurring income relating to loss of 26weeks 26 weeks 26weeks profit insurance claim** Change 31 Dec '23 1 Jan '23 31 Dec '23 Continuing operations % Rm Rm % Gross profit 14.7 28 599 24 933 23.6 Other operating income* 1.8 2 102
Slide 21: Other operating income analysis
Other operating income analysis Restated* 26weeks Change 1 Jan '23 % Rm 0 Commissions received* 8.6 606 558 q s!ONIIION ~ Entry Nlnjo 8 Sundry income** (23.3) 514 670 Delivery recoveries 32.5 379 286 ~.......... PROPERTIES COM PUTICKET SHOPRITE ~ e e Marketing and media 24.0 (3.7) 279 232 225 241 5
Slide 22: Trading profit: total expenses unpacked
Trading profit: total expenses unpacked Restated* 26 weeks Change 1 Jan '23 Continuin o erations % Rm Depreciation and amortisation 16.9 3 471 2 968 Employee benefits 14.2 9 453 8 280 Electricity and water 14.5 2 651 2 316 Insurance service expense* 21.9 78 64 Other operating expenses* 14.6 9 083 7
Slide 23: Trading profit by segment
Trading profit by segment Trading Restated* margin 26 weeks 26 weeks Change 1 Jan 1 23 31 Dec 1 23 Continuin o erations % Rm % Supermarkets RSA 8.8 5 844 5 370 6.0 Supermarkets Non-RSA 37.3 434 316 4. 1 Furniture* (3. 1) 125 129 3. 1 Other operating segments 18. 1 268 227 3.0 Total continuing operat
Slide 24: Net finance costs
Net finance costs Restated* 26 weeks 26 weeks Change 31 Dec '23 1 Jan '23 % Rm Rm The impact of increasing rates on finance costs Interest rece ived fro m ba nk Rbn 16.0% account ba lances 16. 7 259 222 1.8 Bo rrowings and other fin ance 11.75% 1.6 10.50% 12.0% charges* 39.7 (366) (262) 10.00% (1 69
Slide 25: Borrowings and net cash
Borrowings Borrowings to equity US dollar borrowings R6.3bn 23.8% US$28m R6.4bn 8.2% H1 2023 of tota l borrowings Change in right-of-use assets Net changes in working capital* Net cash +R3.7bn Inventories R2.4bn (R4.5bn) R8.3bn +R5.2bn Trade and other receivables (R0.8bn) Change in lease liabilit ie
Slide 26: Capital spend
Capital spend MAINTAINING EXPANDING THE BUSINESS THE BUSINESS CAPITAL SPEND 29% 71'% H1 2024: R3 727m H1 2023: R3 360m � 'maintenance R904m CAPITAL SPEND AS% OF SALES H1 2024: 3.1 % Other - Sales growth H1 2023: 3.2% R22m R:2 .282m Margin expansion EXCLUDING1 CAPITAL SPEND ON IT R178m MASSMART AN1D
Slide 27: Distribution centre expansions
Canelands DC (KwaZulu-Natal) Riverfields DC (Gauteng) Expansion funded through Retail Logistics Fund (RF) (Pty) Ltd Expansio n fu nded t hrough Equites Property Fund Ltd Lease commencement date F-eb 2024 Lease commencement date Jul2024 Size 41 208m 2 Size 94 223m 2 Shoprite funded capex cR74m Shopri
Slide 28: Inventories
Inventories Inventories as % of sales (52 weeks) H1 2023 INVENTORIES from continuin o erations % H1 2024: R29.3bn Supermarkets RSA 12. 7 12.6 H1 2023: R25.4bn Supermarkets Non-RSA 11. 7 12.1 +15.4% Furniture 28.6 27.7 ·----------- ----------------------------------------- ---------- ----------··-···
Slide 29: Free cash flow
Free cash flow FREE CASH FLOW CONVERSION RATIO Rbn H1 2024: 88.6% OPERATING CASH CONVERSION RATIO H1 2024: 122.3% 2.4 10.2 0.7 (0.1) (1 .2) (1 .3) 9.0 ,------------------------------ (1 .7) Effective tax rate: (2.6) 30.8% 2.5 (2.3) (1 .4) (0.2) EBITDA from EBITDA from Income Changes in working Capit
Slide 30: H2 2024 Guidance considerations
H2 2024 Guidance considerations Sales Massmart is in the base from H2 2024. Supermarkets RSA January 2024 inflation measured 6.3%. Operating margin Diesel generator expense to continue, in the base. Insurance claim included in 2023 other income, will not repeat. Tax Effective tax rate 30% - 31 %. Ca
Slide 31: Strategy
Strategy Pieter Engelbrecht Chief Executive Officer SHOPJIH !!M:H
Slide 32: Strategic priorities remain future-fit for long-term growth
Strategic priorities remain future-fit for long-term growth A Smarter Target headroom Winning in the Shoprite opportunities long term SHOJ>R!~D 2024 Interim Financial Results
Slide 33: Digital platforms: Sixty60, retail media, analytics, rewards
Retai l Media Network Checkers Sixty SBOPRIT::x Digital Commerce Advanced Platform Ana lytics ~RA SAVINGS Customer Rewards Platform
Slide 34: Pioneering rapid grocery delivery
cnec1cers Pioneering rapid grocery delivery Sixty • Sales momentum of 1-hour delivery service continues • Sixty60 sales increased 63.1 % despite rising competition, as on line adoption and frequency improved Sixty60 Sales Value by half (FY20-FY24) No.1 Grocery App (4.Sm downloads) 505 Locations 9903
Slide 35: Customer relevance is building brand advocacy
Customer relevance is building brand advocacy WHO WORE IT BEST? PIC•COLLACE #Springboks Checkers squad delivered in 60 minutes! ~ QOV • 18-3 93 likes claircbaillic24 #ElfAntics has never looked THIS cute! #RWC2023 Jolly McJingles must have some elf-buddies working dO'Nn at •he @chec::kers_sixty60 HQ
Slide 36: A sustainable digital advantage
A sustainable digital advantage Building SA's largest, most profitable, omnichannel retailer ✓ Defended position as No.1 online grocery platform, adding advanced capabilities in new categories ✓ Data from an integrated customer platform with 29.4m members and 2 500 swipes per minute ✓ Personalisatio
Slide 37: Growing higher margin, data-driven alternative income
Growing higher margin, data-driven alternative income ✓ Customer Insights monetisation through own insights platform for FMCG partners ✓ Rainmaker Retail Media Network commercialising precision targeting capabilities and increasing return on ad spend ✓ Affordable and accessible Financial Services -
Slide 38: Maximising share of wallet with every shop
Maximising share of wallet with every shop New sales opportunities identified in under-indexed categories SHOJ>R!~D 2024 Interim Financial Results
Slide 39: Building lighthouse private label brands
Building lighthouse private label brands • Building customer loyalty with differentiated own brands EI Checkers RITEBRAND FORAGE ~ FEA.$T housebrand • 25 own brands now exceed R1 00m in sales each in H1 STEAKHOUSE - c1us1c- FOREIGN GROUND L._,IES • Forage and Feast brand building momentum with +21.9
Slide 40: Stronger partnerships
Stronger partnerships Winning together with partners aligned to our customer values ... L..-=:::z::::==:.a--- FRANCHISE DIVISION • Market share gains with industry-leading franchise sales growth • 605 stores ( + 70 net new stores over 12 months) SHOJ>R!~D 2024 Interim Financial Results
Slide 41: Future-Fit Supply Chain Expansion
Future-Fit Supply Chain Expansion Canelands DC, KwaZulu-Natal • Increasing centra lised supply cha in capacity 4 1 208m2 through Reta il Log istics Fund by over 200 000m 2 over t he next 12 months Centurion Transport Facility, Gauteng 9012m2 Riverfields DC, Gauteng l&illlliii;;;_...._.;;::.;;,_..w 9
Slide 42: Supply chain expansion and store network
Future-Fit Supply Chain Expansion Build Our Store Network To Leverage • Increasing centralised supply chain capacity Proximity Advantage through Retail Logistics Fund by over 200 000m 2 over the next 12 months • Enterprise point-of-sale upgrade commenced - modernising store checkout system and proce
Slide 43: Force for Good: Society
Force for Good: Society 754 000 nutritious meals served to. 7 300 children at 113 early childhood development centres ™ R117m worth of surplus food and goods donated in H1 enpe 60 535 4.1 million community members benefitting from 232 community food gardens and 3 750 household food gardens meals ser
Slide 44: Force for Good: Planet
Force for Good: Planet 9 Recycled and reused 36.0 MW 100% P 5.8% éfintstoreipapenand board 32 487 tons installed solar PV capacity, packaging ucetiinidelley equivalent to more than J of cardboard and plastic of our electricity is now bakeries and fresh fish (414.4% ) P 7 000 homes sourced from depar
Slide 45: Leveraging our ecosystem of value
Leveraging our ecosystem of value SHOPRIT:x •:• BlueYonder ( :Circana. 8 ZULZi OO Meta ~ NielsenIQ Go gle cJ- M~ f! ra 1• nmaker 1 @Discovery . ,• v'i#rJA#tj MoneyMarket ($ pay it.~ff si~ cred'" tl·HlihiHiii El tORAGt A'Dft,.\$~ I eJ tntry Hlnj,I Checkers - '-:: RITEBRAND housebrand POTOtCOLD • UNIQ
Slide 46: Our Outlook
Our Outlook Shoprite is more Customer-centric and Digitally-fit than ever before • Supermarkets RSA sales growth rate for the first six weeks achieved low double digits and ahead of the market, albeit lower than H1 • H2 sales growth will be impacted by: • Supermarkets RSA internal inflation for Febr
Slide 47: Thank You Questions
Thank You Questions SHOPIIH !Et;H
Slide 48: Additional Information
.. ··;;;:;::::::;-,-·"- - --· '- ...::....,___,~: -- . ,,_;:::::" ·-~ - ~== ·- Additional Information Anton de Bruyn Chief Financial Officer SHOPJIH !!M:H
Slide 49: Financial metrics
Financial metrics Restated* H1 2023 IFRS 16 ROIC excl. ROIC impact IFRS 16 Rm Rm Rm Trading profit 12 563 (2 568) 9 995 11 754 (2 695) 9 059 Effective tax rate 30.8% 30.8% 3 1.1% 3 1.1% Trading profit after tax 8694 (1 776) 6 918 8 099 (1 857) 6 242 Invested capital 72 501 (30 758) 41 743 66 142 (26
Slide 50: Diluted headline earnings per share (DHEPS)
Diluted headline earnings per share (DHEPS) 26 weeks Change 1 Jan '23 % cents DHEPS continuing operations 7.6 621.4 577.5 DHEPS discontinued operations (28. 7) (13.4) (18.8) DHEPS including discontinued operations 8.8 608.0 558.7 DHEPS continuing operations 7.6 621.4 577.5 Adjusted for the impact of
Slide 51: Adjusted headline earnings reconciliation
Adjusted headline earnings reconciliation Headline earnings DHEPS* 31 Dec '23 31 Dec '23 Rm cents Headline earnings including discontinued operations 3 322 608.0 Headline loss from discontinued operations 73 13.4 Headline earnings from continuing operations 3 395 62 1.4 Adjusted for t he impact of:
Slide 52: Items of a capital nature
Items of a capital nature 26weeks 26 weeks 31 Dec '23 1 Jan '23 Continuin o erations Rm Notes to the results: Impairment of property, plant and equipment (7) (9) Non-financial asset 26weeks (7) impairments/(reversals) by 31 Dec '23 Impairment reversal/(i mpairment) of ri g ht-of-use assets 7 segment