Shoprite Holdings Limited · JSE:SHP
Shoprite — H1 FY2017 Earnings Presentation
40 slides from Shoprite's earnings presentation, Feb 21, 2017
Slide 1: Results Presentation for the Six Months Ended December 2016
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED DECEMBER 2016
Slide 2: Agenda
AGENDA 1. WELCOME 2. FINANCIAL HIGHLIGHTS| Marius Bosman 3. OPERATIONAL HIGHLIGHTS| Pieter Engelbrecht 4. STRATEGIC FOCUS AREAS| Pieter Engelbrecht 5. QUESTIONS| Executive Team
Slide 3: 9
9
Slide 4: Financial Highlights
~ = mee FINANCIAL HIGHLIGHTS MARIUS BOSMAN CHIEF FINANCIAL OFFICER S
Slide 5: Financial Highlights
ANANCIAL HIGHUGHTS 140% Turnover growth to R71.3bn 19.27% Trading profit grow “wihie R3.9bn
Slide 6: Trading Margin
TRADING MARGIN Dec 2016 Dec 2015
Slide 7: Financial Highlights
ANANCIAL HIGHUGHTS Chit. 15.5% SE Diluted HEPS growth to 460c 15.4% Dividend per share growth to 180c
Slide 8: Financial Highlights: Sales Growth per Segment
FINANCIAL HIGHLIGHTS Existing Net new Sales growth per segment stores stores Total Supermarkets RSA 7.4% 3.3% 10.7% Supermarkets Non-RSA 14.2% 18.1% 32.3% Furniture 3.9% 6.1% 10.0% Other Operating Segments - - 10.5% Total 8.6% 5.4% 14.0% • Supermarkets Non-RSA at constant currencies 51.7%
Slide 9: Gross Profit Margin
GROSS PROFIT MARGIN
Slide 10: Financial Highlights: Other Operating Income
FINANCIAL HIGHLIGHTS Dec 2015 Dec 2016 Other operating income Rm Rm Growth Finance Income Earned 159 162 1.9% Net Premiums Earned 206 192 -6.8% Operating Lease Income 192 210 9.4% Commissions Received 388 398 2.6% Sundry Income 243 245 0.8% Total 1 188 1 207 1.6%
Slide 11: Financial Highlights
FINANCIAL HIGHLIGHTS • Depreciation and amortisation: 11.1% • Operating leases: 8.9% • Employee benefits: 14.7%
Slide 12: Key Information per Segment
KEY INFORMATION PER SEGMENT Dec 2015 Dec 2016 Trading Profit Rm Rm Growth Supermarkets RSA 2 665 2 992 12.3% Supermarkets Non-RSA 459 746 62.5% Furniture 98 95 -3.1% Other Divisions 57 74 29.8% Total 3 279 3 907 19.2%
Slide 13: Exchange Rate Differences
EXCHANGE RATE DIFFERENCES Rand appreciation against the US Dollar • Dec 2015: R15.20/$ • Dec 2016: R13.64/$
Slide 14: Inventory Levels
R18.481bn R16.892bn Dec 2015 | Dec2016
Slide 15: Financial Highlights: Capital Expenditure
FINANCIAL HIGHLIGHTS Dec 2015 Dec 2016 Capital expenditure Rm Rm Land, Buildings & Leasehold Improvements 536 516 Store Refurbishment 378 368 New Stores 665 429 Information Technology 571 683 Other Replacements* 414 587 Total 2 564 2 583 * Vehicles, office furniture and DC equipment
Slide 16: Financial Highlights: Net Cash Balances
FINANCIAL HIGHLIGHTS Dec 2015 Dec 2016 Growth Rm Rm Net Cash Balances 8 154 6 034 -26.0% • Month-end closing date • Dollar-linked Government bonds in Angola
Slide 17: Operational Overview
2. a ws OPERATIONAL OVERVIEW PIETER ENGELBRECHT CHIEF EXECUTIVE OFFICER 'S
Slide 18: Customers Voted with Their Wallets
CUSTOMERS VOTED WITH THEIR WALLETS • Excellent sales growth in weak environment • R71.3bn for six months = full year turnover in 2011 • Trading profit growth > Sales growth • Fitting tribute from the team to Whitey Basson
Slide 19: RSA Supermarkets
RSA SUPERMARKETS • Strong festive trading − Three year market share high in December 32.9% • Offensive promotional approach was successful • Internal inflation more than doubled − 7.4% this year versus 2.7% last year − Seven year high in December at 9.1% − Drought and frozen chicken brining
Slide 20: Non-RSA Growth
NON-RSA GROWTH Non-RSA trading margin from 4.7% to 5.8% • 60.1% sales growth • Improved stock levels • 10.6% like-for-like customer growth Like-for-like customer growth • 9% sales growth • Exceptional performance • Like-for-like sales doubled • Challenging economic climate • Helped by inflation • 21
Slide 21: Complementary Business
COMPLEMENTARY BUSINESS uorS 26.17% Turnover growth 415 Stores (including franchise) across the continent, opening more than a store a week Le ehoEcen PROBLEM 17% Turnover growth rouse Making Your House a Home -8% Turnover growth Breathing new life into brand and offer 105% Turnover growth
Slide 22: Moving Forward
MOVING FORWARD Business as usual, driven by culture “Culture eats strategy for breakfast” Strong management team with wealth of experience
Slide 23: Moving Forward
MOVING FORWARD Business as usual, driven by culture Strong management team with wealth of experience Low price leadership is in our DNA Source: Brand Tracker 2016 | n=1500
Slide 24: Business with Heart
/ BUSINESS WITH HEART SUPPORTING FIRE FIGHTERS CUS OF Sour ame : f SUSTAINABLE’ BREAD oS .. COMMUNITY || SUBSIDY Sea PRIVATE EMPLOYER LOAVES “ DISBURSING BURSARIES WORTH INFOOD AT NO CHARGE TO SURPLUS eS) RECIPIENTS SINCE INCEPTION Pa
Slide 25: Strategic Focus Areas
J STRATEGIC FOCUS AREAS 'S
Slide 26: Six Drivers of Growth
SIX DRIVERS OF GROWTH = : 27m 3. ing LSM Developing / rie ols Private Label - - we wallet ETT OS SHOPRITE 5 aan aa5 ° 6. Strategic African tes Footprint Advantage Expansion
Slide 27: Building a Customer-First Culture
1. BUILDING A CUSTOMER-FIRST CULTURE a. Customer science supporting smarter decision making b. Organisation-wide understanding of customers’ expectations c. Empowered team: No customer leaves the store unhappy • Building the business around ‘The 98%’ • 30% reduction in customer complaints
Slide 28: Our Customers' Response
OUR CUSTOMERS’ RESPONSE Record levels of customer satisfaction Source: Brand Finance 2016 Source: Brand Tracker 2016 | n=1500
Slide 29: Growing LSM 8-10 Share of Wallet
2. GROWING LSM 8-10 SHARE OF WALLET • Checkers has seen the largest gain in LSM 8-10s since 2011 • Currently serve only 44.7% versus main competitor at 67.1% • Opportunity to further grow share of wallet of upmarket customers % Customers also shopping at Checkers and Checkers Hyper Source: AMPS
Slide 30: Growing LSM 8-10 Share of Wallet
2. GROWING LSM 8-10 SHARE OF WALLET Our success in Fresh Foods • Trend toward fresh, convenience and added-value foods • Culture of Fresh: Supply chain, speed to market and quality control • Mission: Match taste and quality of market leader at better value
Slide 31: Turnaround of Fresh Departments
TURNAROUND OF i <a FRESH DEPARTMENTS ry Fi + ma ‘oRh CONVENIENCE PRODUCTS LAUNCHED IN 2016 = = 7 moZzZ = ¥ Aves
Slide 32: What We Sell
oS WE SEL? hs MORE a oo IN A DAY /=# THAN WESOLD = INA SEA Lp
Slide 33: Products Currently in Development
T10 PRODUCTS CURRENTLY IN DEVELOPMENT Wholesome options fora HEALTH-CONSCIOUS LIFESTYLE ® wellness
Slide 34: ree Re
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Slide 35: Developing Private Label
3. DEVELOPING PRIVATE LABEL Win-win-win • Driving choice at better value and better margin • De-leverage supplier power Success in difficult categories • Zip Cola, Lovies • Untapped Non-RSA opportunity 500 New products launched Source: Nielsen 2016
Slide 36: Stronger Franchise Offer
4. STRONGER FRANCHISE OFFER Opportunities for growth • Private label • General merchandise • Money Market services • Turn-key system solution 13.7% 36% Turnover growth Increase in issues from Shoprite DCs
Slide 37: Strategic Footprint Expansion
5. STRATEGIC FOOTPRINT EXPANSION New stores • 39 new supermarkets to open in next 6 months • 165 will have opened in the 24 months to June 2018 (116 RSA and 49 Non-RSA) Store formats optimised • Flexible formats to better serve each market Own the supply chain • 123 000m2 Cape Town Cilmor DC - Sept
Slide 38: The African Advantage
6. / THE AFRICAN ADVANTAGE now in Non-RSA Population to double Long term forecast Africa's Top 18 cities to 2.4bn by 2050 GDP growth inallour will have combined Non-RSA countries spending power of higher than SA $1.3tn by 2030 1,246, 505,
Slide 39: Six Drivers of Growth
SIX DRIVERS OF GROWTH . —,8 \ ing LSM Developing / rey emg Private Label eS wallet TTT AS A Stronger Customer- : Franchise first culture sds Ne. oy , Strategic African "amass Footprint Advantage Expansion
Slide 40: Thank You
GEERE THANK YOU / cvesrons