Pepkor Holdings Ltd. · JSE:PPH
Pepkor — FY2020 Earnings Presentation
56 slides from Pepkor's earnings presentation, Nov 23, 2020
Slide 1: Annual Results
ANNUAL RESULTS for the year ended 30 September 2020
Slide 2: Overview of Results
OVERVIEW OF RESULTS 01 The year in review 02 Financial performance 03 Segmental performance 04 Outlook
Slide 3: Our Mission
OUR MISSION 3 We make a positive difference to the daily lives of our customers and the communities in which we operate by providing convenient access to everyday products and services at affordable prices
Slide 4: The Year in Review
THE YEAR IN REVIEW Leon Lourens, CEO
Slide 5: Operating Environment
OPERATING ENVIRONMENT 5 Unemployment GDP 2.2m +0.2% -8.3% +3.4% 30.8% jobs lost 2019 2020 2021 Consumer confidence 26 Social grant 22 stimulus 7 7 5 2 -8 -7 -7 -9 -9 COVID-19 impact -23 Bleak outlook -33 Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep 2017 2017 2018 2018 2018 2018 2019 2019 2019
Slide 6: Year in Review Continuing Operations (excl IFRS 16)
YEAR IN REVIEW CONTINUING 6 OPERATIONS (EXCL IFRS 16) 3.6% 13.2% growth in revenue R63.7bn reduction in inventory levels 18.4% decline 136% in operating profit1 to R5.3bn cash conversion3 21.0% R6.9bn reduction decline in HEPS to 75.4 cents net debt to R7.1 bn 3 3.4% 230 cost increase2 new stores op
Slide 7: Cellular market size and share
Nov 17 - Oct 18 -0,3 Dec 17 - Nov 18 -0,4 0,0 Jan 18 - Dec 18 -0,8% Feb 18 - Jan 19 -0,1 1 GFK Mar 18 - Feb 19 0,0 0,0 Apr 18 - Mar 19 May 18 - Apr 19 0,1 - May 19 0,1 Jun 18 Share Pepkor Market Jul 18 - Jun 19 0,0 21,0 22,0 23,0 24,0 25,0 Cellular 1 +0,2% Aug 18 - Jul 19 Rolling 12 Month Period -0,
Slide 8: Financial Performance
FINANCIAL PERFORMANCE Riaan Hanekom, CFO
Slide 9: Statutory Highlights
STATUTORY HIGHLIGHTS 9 INCLUDING IFRS 16 Continuing operations 3.6% 0.3% decrease in growth in revenue to operating profit to R63.7bn R6.5bn1 >100% 34.4% decrease in EPS to decrease in HEPS to -80.3 cents 62.6 cents 1 Before capital items
Slide 10: Implementation of IFRS 16 – Leases
IMPLEMENTATION OF 10 IFRS 16 – LEASES Adopted 1 October 2019 Impact on continuing operations Modified retrospective approach No restatement of comparatives R3.5bn R1.2bn R1.6bn Key statistics increase in increase in increase in 1. 5 500 leases EBITDA1 EBIT1 finance costs 2. 3 – 5 year terms 3. 75% o
Slide 11: Impact of IFRS 16 on HEPS
IMPACT OF IFRS 16 ON HEPS 11 FROM CONTINUING OPERATIONS -21% -34% 12.8 75.4 62.6 FY20 Implementation of IFRS 16 FY20 Statutory HEPS Pro Forma HEPS EPS and HEPS within guided ranges
Slide 12: Pro Forma Results
Holdings Limited << = oO eo) LL O oO O RESULTS MMMM!
Slide 13: Pro Forma Highlights
PRO FORMA HIGHLIGHTS 13 EXCLUDING IFRS 16 Continuing operations 3.6% 18.4% >100% 21.0% decrease in growth in revenue to operating profit to decrease in EPS to decrease in HEPS to R63.7bn R5.3bn1 -62.5 cents 75.4 cents COVID-19 impact Lost revenue c.R5bn Increased debtors’ costs Increased provision l
Slide 14: Pro Forma Highlights
PRO FORMA HIGHLIGHTS 14 EXCLUDING IFRS 16 Continuing operations R700m R320m 136% opex savings reduced capex cash vs budget vs budget conversion1 R9.2bn R1.9bn R6.9bn cash generated raised in accelerated reduction in net from operations1 book-build debt1 to R7.1bn 1 Including discontinued operations
Slide 15: COVID-19 Impact on Goodwill and Intangibles
COVID-19 IMPACT ON 15 GOODWILL AND INTANGIBLES R4.8bn COVID-19 impairment Annual R3.0bn impairment tests – IFRS WACC R1.6bn increased Conservative R103m approach
Slide 16: Discontinued Operations
DISCONTINUED OPERATIONS 16 Disposal announced 4 August 2020 Zimbabwe exit completed Completion H1FY21 R74m Break-even EBIT EBIT R165m FCTR R172m realised – EPS impacted impairment
Slide 17: Revenue Growth
REVENUE GROWTH 17 FY20 – Rbn FY20 segmental composition +3.6% R5bn 20.4% 63.7 lost revenue 72% FY19 1.4% Clothing 73% 1.4% Furniture 15% 61.5 FinTech 12% 15% FY19 FY20 13% From continuing operations
Slide 18: Gross Profit Margin
GROSS PROFIT MARGIN 18 36.4% 35.3% Product mix Markdowns maintained FY20 FY19
Slide 19: Other Income
OTHER INCOME 19 Decrease to 17.1% R735m Commissions 68% FY19 Other Commissions 60% Impacted by reduced 17% Other 19% footfall Advertising/ 7% marketing No external Insurance Capfin 9% distribution fee distribution 8% Insurance 5% fee Advertising/ marketing 7%
Slide 20: Low Cost of Doing Business
20 LOW COST OF DOING BUSINESS EXCLUDING DEBTORS’ COST Salaries 27.4% 27.2% 42% CODB FY20 CODB FY19 Property leases FY19 23% Salaries 44% 3.4% Growth in opex Other Property leases 23% Other 19% 22% Depreciation 8% Advertising 6% R92m Additional COVID-19 costs Advertising 8% Depreciation R700m Cost sa
Slide 21: Debtors' Cost
DEBTORS’ COST 21 Increase to COVID-19 uncertainty 48.3% R1.7bn Non-comparative provisions and bad debts Increase in bad debts Increase in provisions
Slide 22: Credit Books
CREDIT BOOKS 22 Business objective Sales enabler Sales enabler Financial services Credit type Revolving credit Instalment sale Unsecured lending No of accounts 1.4m 187k 219k Sales contribution 15% 13% 0% Group sales mix Credit 7% Lay-by 8% Cash 85%
Slide 23: Segmental Operating Profit
SEGMENTAL OPERATING PROFIT 23 FY20 – Rm 6 544 -15.6% -18.4% (>100%) (>100%) (5.8%) 5 371 FY19 FY20 Before capital items From continuing operations
Slide 24: Net Finance Cost
NET FINANCE COST 24 -13.3% Lower interest rates R1.6bn Reduction in net debt R1.4bn FY21 R500m saving expected FY20 FY19 Excluding implementation of IFRS 16
Slide 25: Reduction in Inventory Levels
REDUCTION IN INVENTORY LEVELS 25 -13% Inventory R12.3bn R1.6bn R10.7bn Strong trading Conservative provision levels Expected recovery in inventory levels FY20 FY19 Excluding discontinued operations
Slide 26: Credit Books
CREDIT BOOKS 26 3.1 3.0 Gross book size 2.8 2.6 Gross development books 2.2 (Rbn) 1.8 1.9 R6.5bn 1.5 1.6 FY19 H1FY20 FY20 FY19 H1FY20 FY20 FY19 H1FY20 FY20 42% Provision Increased 33% 34% provision levels % 26% levels 22% 20% 17% 18% 15% FY19 H1FY20 FY20 FY19 H1FY20 FY20 FY19 H1FY20 FY20
Slide 27: Cash Generated
CASH GENERATED 27 FY20 – Rm 935 1 367 730 12 912 3 670 2 011 10 603 9 243 1 EBITDA 1 Debtors’ 2 3 Other non-cash 4 Net changes 5 Net changes in 6 Statutory 7 16 IFRS Pro 8forma costs2 adjustments3 in working capital working capital cash generated cash generated operations all credit books from from
Slide 28: Capital Structure
CAPITAL STRUCTURE 28 DMTN programme launched Accelerated book-build R10bn 172.5m programme shares issued at R11.00 R1bn R1.9bn issued raised 4x 5x oversubscribed oversubscribed Diversification Proceeds of funding used to sources reduce debt
Slide 29: Substantial Reduction in Net Debt
SUBSTANTIAL REDUCTION 29 IN NET DEBT Net debt- EBITDA Debt repayment profile – Rbn Net debt to-EBITDA interest cover R7.1bn 1.02 5.38 5.7 5.8 Cash and cash equivalents Available cash facilities times times Debt repayments Refinance process completed -0.2 Covenants amended Target of 1x net-debt to EB
Slide 30: In Summary
IN SUMMARY 30 Balance sheet strengthened Future remains uncertain – no dividend declared Refinance completed Debt covenants amended Credit risk managed R Provision levels raised Credit granting curtailed Gearing reduced Strong trading Good collections Accelerated book-build
Slide 31: Segmental Performance
SEGMENTAL PERFORMANCE Leon Lourens, CEO
Slide 32: Clothing and General Merchandise
32 SEGMENTAL PERFORMANCE CLOTHING AND GENERAL MERCHANDISE
Slide 33: PEP and Ackermans
PEP AND ACKERMANS 33 33 2.6% 0.5% sales LFL sales increase decrease 2.5% 145 9.4% retail space new stores CFH RSP growth opened inflation
Slide 34: PEP and Ackermans
PEP AND ACKERMANS 34 Like-for-like sales growth (year-on-year) 20% 13% 10% 13% 6% -0.5% May to Sep +13% yoy -94% * Post-lockdown 3 May to end Sep: +17% yoy April May June July August September FY20
Slide 35: PEP
PEP 35 83 new stores 2 384 97% 28% stores best price pricing gap leadership 680 10m 1.9m new mobile parcels employees handsets delivered sold
Slide 36: Ackermans
ACKERMANS 36 62 8th new year stores running 861 No1 17% stores children’s lay-by clothing retailer contribution 26 2.5m 17% Ackermans mobile credit sales Woman stores handsets contribution sold
Slide 37: PEP Africa
PEP AFRICA 37 -7.0% -16.2% sales growth sales growth (constant (actual currency) rates) 23 13 stores closed stores -20% 301 Uganda cost reduction stores operations to in FY21 cost be closed base 1 Excluding discontinued operations in Zimbabwe
Slide 38: Speciality
SPECIALITY 38 35 stores closed -3.6% 829 sales stores growth E-commerce -4.6% Disposal of accelerated LFL sales John Refinery and growth Craig Shoe City
Slide 39: Speciality
SPECIALITY 39 Like-for-like sales growth (year-on-year) 17% 11% 12% 9% 6% -5% May to Sep +11% yoy -99% * Post-lockdown 3 May to end Sep: +16% yoy April May June July August September FY20
Slide 40: Furniture, Appliances and Electronics
40 SEGMENTAL PERFORMANCE FURNITURE, APPLIANCES AND ELECTRONICS
Slide 41: Furniture and Electronics
FURNITURE AND ELECTRONICS 41 1.4% -1.6% 7% revenue LFL sales online sales growth growth contribution (CEAD) 67 stores closed 13% -9.2% Abacus credit mix retail space acquisition reduced growth from 19%
Slide 42: JD Group
JD GROUP 42 Like-for-like sales growth (year-on-year) 31% 24% 23% 23% -2% -12% Jun to Sep +25% yoy -99% April May June July August September FY20 * Post-lockdown includes trading performance from June to September 2020 – when most lockdown trading restrictions were lifted
Slide 43: FinTech
43 SEGMENTAL PERFORMANCE FINTECH
Slide 44: Flash Group
FLASH GROUP 44 194 000 4.5m traders daily transactions 25.7% 13 600 virtual CoCare revenue vouchers per aggregation growth month of goods and services
Slide 45: Capfin
CAPFIN 45 6/12 Curtailed month credit product granting focus 55% 26% Approval Provision rate level reduced Consolidation of back office functions
Slide 46: Building Materials – Discontinued Operations
46 SEGMENTAL PERFORMANCE BUILDING MATERIALS DISCONTINUED OPERATIONS
Slide 47: The Building Company
THE BUILDING COMPANY 47 -12.6% -11.3% sales LFL sales growth growth Consolidation Margin improvement
Slide 48: The Building Company
THE BUILDING COMPANY 48 Like-for-like sales growth (year-on-year) 5% 7% -1% -3% -11% -32% Jun to Sep +2% yoy -98% April May June July August September * Post-lockdown includes trading performance from June to September 2020 – when most lockdown trading restrictions were lifted
Slide 49: Outlook
Holdings Limited < Q 3 al 5 E 3 — = O 3 @ MMMM!
Slide 50: Our Strategy
OUR STRATEGY 50 50 Product Convenience Everyday needed and Footprint and channels wanted products and In communities services Price Leadership Discount and value positioning and culture
Slide 51: Growth Drivers
GROWTH DRIVERS 51 Expansion Adult wear Formats Fintech Explore opportunities Digital ecosystem
Slide 52: Growth Drivers
GROWTH DRIVERS 52 Footprint Informal Space E-commerce leverage market growth
Slide 53: The Year Ahead
THE YEAR AHEAD 53 Capital Restore allocation 2019 profitability Market positioning Stronger Portfolio balance sheet review Cost management Growth opportunities
Slide 54: Pepkor
. \ NGS \ NS S WINS, SANANS:
Slide 55: Thank You
PEPKOR Holdings Limited
Slide 56: Disclaimer
DISCLAIMER 56 This presentation contains forward-looking statements about the company’s operations and financial conditions. These are based on Pepkor Holdings Limited’s (Pepkor) best estimates and information at the time of writing. They are nonetheless subject to significant uncertainties and cont