Spar Group Limited · JSE:SPP
Spar — The SPAR Group — H1 2015 Earnings Presentation
47 slides from Spar's earnings presentation, Mar 31, 2015
Slide 1: SPAR Results Presentation
SPAR RESULTS PRESENTATION for the six months ended 31 March 2015
Slide 2: Agenda
AGENDA INTRODUCTION: SPAR GROUP PERFORMANCE SUMMARY Graham O’Connor, CEO SALIENT FEATURES BUSINESS ENVIRONMENT FINANCIAL OVERVIEW Mark Godfrey, CFO OPERATIONAL REVIEW LOOKING FORWARD Graham O’Connor, CEO PROSPECTS QUESTIONS 2
Slide 3: Introduction
INTRODUCTION Graham O’Connor CEO
Slide 4: SPAR Group: Facts and Figures
SPAR GROUP: FACTS AND FIGURES SPAR International: Present in 40 countries following entry into 10 new territories in Asia, Africa and Eastern Europe during 2014 • 12 314 stores €32bn p.a. turnover • South Africa is the second biggest SPAR country by turnover • Ireland is fifth biggest SPAR country b
Slide 5: SPAR Group: Facts and Figures (continued)
SPAR GROUP: FACTS AND FIGURES (continued) Ireland/South West England: BWG services >1 100 stores across 4 brands, ~€1.2bn (ZAR16.8bn) retail turnover • Wholesale and distribution of groceries + fresh produce, liquor to retail/catering sectors • Well established in convenience market • 22 300m² stock
Slide 6: Performance Summary
PERFORMANCE SUMMARY Good trading performance from SPAR South Africa in spite tough trading environment First full period of consolidation for BWG/SPAR Ireland: Trading results in line with expectation Robust results reported by SPAR: Ex-warehouse distribution up & strong uptake of house brands TOPS
Slide 7: Salient Features
SALIENT FEATURES R million H1 2015 H1 2014 Change (%) Turnover 36 024.4 25 605.8 +40.7 Gross profit 3 089.7 2 053.5 +50.5 Gross profit (%) 8.6 8.0 Operating profit 1 150.2 889.3 29.3 Profit after tax 783.6 642.9 21.9 Headline earnings per share (cents) 455.5 372.0 22.4 Dividend per share (cents) 239
Slide 8: Business Environment
BUSINESS ENVIRONMENT South Africa Ireland • Pedestrian economic growth • 4.8% GDP growth in 2014: Forecast 4.0% in • Power supply disruptions 2015 • Continued pressure on consumer spending • Decreasing unemployment › High levels of unemployment › Lowest rate since 2009 › Indebtedness and rising util
Slide 9: Financial Overview
FINANCIAL OVERVIEW Mark Godfrey CFO
Slide 10: Financial Overview: Turnover
FINANCIAL OVERVIEW: TURNOVER R million H1 2015 H1 2014 Change (%) SPAR/TOPS 25 442.5 22 938.9 +10.9 Build it 2 918.5 2 666.9 +9.4 Total South Africa 28 361.0 25 605.8 +10.8 Liquor sales (SPAR/TOPS) 2 442.5 2 090.2 +16.9 Ireland 7 663.4 - - Total Group 36 024.4 25 605.8 +40.7 • SPAR Southern Africa:
Slide 11: Financial Overview: Gross Margins
FINANCIAL OVERVIEW: GROSS MARGINS Turnover (Rm) H1 2015 (GP%) H1 2014 (GP%) Normal business 28 145.2 7.82 7.84 Retail division (net) 92.1 16.78 15.58 Imports – Build it 123.7 21.48 20.21 Total South Africa 28 361.0 8.08 8.02 Ireland 7 663.4 10.42 - Total Group 36 024.4 8.58 8.02 Stronger ex-warehous
Slide 12: Financial Overview: Inflation per Segment
FINANCIAL OVERVIEW: INFLATION PER SEGMENT H1 2015 H1 2014 SPAR business 5.5%¹ 4.7% Liquor 6.8% 5.7% Build it c. 3.0%² 4.5% 1. SPAR’s budgeted expectations for 2015 remain: › SA food 6.0% › Building materials 3.5% › Ireland 0.5% 2. Building material inflation tracking at c. 3.0% for first half inclus
Slide 13: Financial Overview: Expenses
FINANCIAL OVERVIEW: EXPENSES H1 2015 H1 2014 Increase (%) South Africa 1 494.8 1 382.8 +8.1 Ireland 796.6 - - Total Group 2 291.4 1 382.8 +65.7 South Africa: •Lower fuel prices despite strong volume growth •Higher cross-border transport costs due to demand in Namibia and Botswana absorbed fuel benef
Slide 14: Financial Overview: Cashflow
FINANCIAL OVERVIEW: CASHFLOW (1 123.0) (1 687.9) • Operating profit up 29.3%: Turnover growth + BWG acquisition • Net working capital changes and timing of payments • Resumed capex programme : Investments to increase capacity at KZN and South Rand + SPAR Ireland 14
Slide 15: Financial Overview: Cash Flow (continued)
FINANCIAL OVERVIEW: CASH FLOW (continued) Rm H1 2015 H1 2014 Cash flow from trading 1 351.7 998.0 Working capital changes (1 123.0) (995.9) - Decrease/(increase) in inventory (348.8) (306.4) - (Increase) in trade receivables (74.2) (118.8) - (Decrease)/increase in trade payables (700.0) (570.7) Cash
Slide 16: Financial Overview: Comparative Trading
FINANCIAL OVERVIEW: COMPARATIVE TRADING Growth: Growth: Growth: •SPAR South Africa: +10.8% •SPAR South Africa: +12.0% •SPAR South Africa: +13.1% •Group (Incl BWG) +40.7% •Group (Incl BWG) +19.3% •Group (Incl BWG) +21.9% 16
Slide 17: Impact of SPAR Ireland: Key Metrics
FINANCIAL OVERVIEW: IMPACT OF SPAR IRELAND: KEY METRICS SPAR SPAR R million Southern Africa Ireland Group Income statement Turnover 28 361.0 7 663.4 36 024.4 Gross profit 2 291.5 798.2 3 089.7 Gross margin 8.1% 10.4% 8.6% Operating expenses (1 494.8) (796.6) (2 291.4) Profit before tax 996.0 65.1 1
Slide 18: Impact of SPAR Ireland: Key Metrics
FINANCIAL OVERVIEW: IMPACT OF SPAR IRELAND: KEY METRICS SPAR SPAR R million Southern Africa Ireland Group Balance sheet Property, plant and equipment 1 825.8 1 006.4 2 832.2 Goodwill 420.2 1 963.4 2 573.2 Current assets 8 818.8 2 530.0 11 348.8 Current liabilities 8.290.9 2 770.3 11 061.2 Long-term
Slide 19: Capital Expenditure: Increasing Distribution Capacity
CAPITAL EXPENDITURE: INCREASING DISTRIBUTION CAPACITY Rm H1 2015 H1 2014 Investing to expand operations (150.6) (64.8) Investment to maintain operations (63.3) (31.0) - Replacement of property, plant and equipment (68.1) (31.3) - Proceeds on disposal of property, plant and equipment 4.8 0.3 Acquisit
Slide 20: Operational Review
OPERATIONAL REVIEW Graham O’Connor
Slide 21: Operational Review: Retail Performance: Turnover
OPERATIONAL REVIEW: RETAIL PERFORMANCE: TURNOVER Total growth Like for like SPAR +9.2% +7.7% TOPS +19.6% +14.9% Build it +9.0% +7.2% • Continued development of SPAR house brands paying off: Up 20.8% • TOPS gaining further market share: Retail growth of 19.6% • Wholesale growth exceeded Build it reta
Slide 22: Operational Performance: SPAR
OPERATIONAL PERFORMANCE: SPAR Wholesale turnover growth continues to exceed retail turnover growth ▲9.2% • Continued recognition of SPAR’s ▲10.3% merchandising, distribution and logistics services • 20.8% growth from house brands to R3.2bn Same store turnover up 7.7%: Exceptional result • Food infla
Slide 23: Operational Performance: TOPS
OPERATIONAL PERFORMANCE: TOPS TOPS maintained strong growth trajectory • 19.6% increase in retail turnover ▲19.6% Exceptional same store retail growth of 14.9% ▲16.9% Wholesale turnover up 16.9% 21 new stores opened: Total of 639 stores Remains the consumer’s Liquor Retailer of Choice 23
Slide 24: Operational Performance: Build it
OPERATIONAL PERFORMANCE: BUILD IT Performance impacted by tough markets • Cement prices impacted by supplier ▲9.0% competition ▲9.4% • Constrained consumer spending, especially in rural markets • 9.0% retail sales growth • Strong growth in neighbouring countries Solid same store growth of 7.2% Whole
Slide 25: Operational Performance: BWG Group
OPERATIONAL PERFORMANCE: BWG GROUP First full period of consolidation • 2.3% Euro-denominated revenue growth vs reported -1% food deflation in convenience market • Lower seasonal revenues during Northern hemisphere winter • Gross margin up to 10.4% due to product mix • Operating profit in line with
Slide 26: Operational Performance: BWG Group
OPERATIONAL PERFORMANCE: BWG GROUP SPAR and Mace • Grew market share in forecourt and convenience sectors EUROSPAR • Pressure across supermarket sector affected trading performance • Management interventions to address issues Chilled product distribution brought in-house • Construction of new chille
Slide 27: Operational Performance: BWG Group
OPERATIONAL PERFORMANCE: BWG GROUP Agreement to acquire ADM Londis • Trading business purchased for €23m • 200 convenience, forecourt and supermarket store throughout Ireland with annual sales ~€200m • Offer accepted by shareholders • Irish Competition Authority approval expected by June 2015 • BWG
Slide 28: Operational Performance: Distribution (South Africa)
OPERATIONAL PERFORMANCE: DISTRIBUTION (SOUTH AFRICA) IMPORTS WAREHOUSE NORTH RAND LOWVELD WESTERN CAPE SOUTH RAND EASTERN CAPE KZN DRY KZN PERISHABLES 28
Slide 29: Operational Performance: Distribution (South Africa)
OPERATIONAL PERFORMANCE: DISTRIBUTION (SOUTH AFRICA) Volumes handled up 5.6%: 111.8 million cases despatched Expanding distribution capacity to service independent retailers’ growing volume requirements • Progress with extension to KwaZulu-Natal perishable facility: Completion expected by September
Slide 30: Looking Forward
LOOKING FORWARD Graham O’Connor
Slide 31: Looking Forward: Group Priorities
LOOKING FORWARD: GROUP PRIORITIES Entrench our values: Passion, Entrepreneurship and Family Top priority is to drive SPAR’s organic growth •Continue SPAR store upgrades: 180 planned in 2015 (56 completed) 31
Slide 32: Future Together
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Slide 33: Stores
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Slide 34: Avonmore SuperSPAR store upgrades and revamps
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Slide 35: Avonmore SuperSPAR store upgrades and revamps
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Slide 36: Looking Forward: Group Priorities
LOOKING FORWARD: GROUP PRIORITIES Entrench our values: Passion, Entrepreneurship and Family Top priority is to drive SPAR’s organic growth •Continue SPAR store upgrades: 180 planned in 2015 (56 completed) •Drive Fresh food offering: Fresh produce, HMR, Butchery and Bakery 36
Slide 37: Growing our Future Together
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Slide 38: Growing our Future Together
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Slide 39: Growing our Future Together
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Slide 40: Growing our Future Together
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Slide 41: Looking Forward: Group Priorities
LOOKING FORWARD: GROUP PRIORITIES Entrench our values: Passion, Entrepreneurship and Family Top priority is to drive SPAR’s organic growth •Continue SPAR store upgrades: 180 planned in 2015 (56 completed) •Drive Fresh food offering: Fresh produce, HMR, Butchery and Bakery •Support retailer profitabi
Slide 42: Growing our Future Together
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Slide 43: Growing our Future Together
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Slide 44: Growing our Future Together
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Slide 45: Prospects
PROSPECTS Continued pressure on consumer spending in South Africa anticipated •Subdued economic growth and resultant lack of job creation •Increased likelyhood of food inflation impact of drought on maize pricing •Risk of increased load-shedding in winter could pose additional pressure on retail sal
Slide 46: Questions
QUESTIONS | SPARIO) SPARIQ) EUROSPARIQ KWIKSPARIY BRL) ® 6BWG SUPERSPARIQD ALTess ws FOODS Pharmacy &a) ALUE CENTRE Your Local Cash & Carry 46
Slide 47: 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