Shoprite Holdings Limited · JSE:SHP
Shoprite — FY2009 Earnings Presentation
63 slides from Shoprite's earnings presentation, August 2009
Slide 1: Results Presentation
Results Presenta,on For the year ending 30 June 2009 1
Slide 2: Financial Highlights
Financial Highlights Carel Goosen Deputy Managing Director 2
Slide 3: Size of Operation
Size of Opera,on Turnover R59 bn Owned Outlets 1,079 Franchise Outlets 270 Countries 17 Employees 84,000 Market CapitalisaLon R31 bn* *During August 2009 3
Slide 4: Financial Results
Financial Results Turnover R 59,3bn Trading Profit R 2,9bn Trading Margin 4.96% Diluted Headline EPS 390.8c Dividend per share 200.0c 4
Slide 5: Key Information
Key Information ° Turnover — Total + 24.5% — RSA Supermarkets + 22.8% — Non-RSA Supermarkets + 39.9% — Furniture + 13.9% - Franchise + 26.5% ° Trading Profit — Total + 28.1% — RSA Supermarkets + 26.7% — Non-RSA Supermarkets > 50.0% — Furniture + 1.5% — Franchise + 44.5% ad SHOPRITE{3 HOLDINGS LTD
Slide 6: Key Information
Key Informa,on • Diluted Headline EPS + 30.9% to 390.8c • Dividends per share + 29.0% to 200.0c 6
Slide 7: Value Added Statement (R'm)
Value Added Statement (R’m) 7
Slide 8: Store Portfolios
Store PorEolios July Opened Closed June 2009 2008 Supermarkets 636 67 (8) 695 Hungry Lion 112 12 (4) 120 Furniture 236 30 (2) 264 Owned Stores 984 109 (14) 1,079 Franchise 256 38 (24) 270 Total Stores 1,240 147 (38) 1,349 Pharmacies 53 28 ‐ 81 Liquor Stores 32 16 ‐ 48 Countries 17 ‐ ‐ 17 8
Slide 9: Highlights of Results
Highlights of Results Gross margin decreased from 19.9% to 19.3% © Cut margins on basic foods ° Alleviate impact of high food inflation on consumers © Resulting in high sales volumes SHOPRITEQS _ HOLDINGS LTD
Slide 10: Highlights of Results
Highlights of Results Other opera,ng income June 2008 June 2009 Growth increased by 26.6% R’m R’m % Finance income earned 171 198 15.8 Net premiums earned 201 215 7.0 OperaLng lease income 197 201 2.0 Commissions received 210 278 32.4 Franchise fees received 29 37 27.6 Investment income 28 29 3.6 Su
Slide 11: Highlights of Results
Highlights of Results Deprecia,on and amor,sa,on increased 26.3% • Increased spend on replacements, revamps and new branches • Increased informaLon technology infrastructure Opera,ng lease increased 16.7% • Due to a net number of 95 corporate stores opened in financial year • Turnover rentals on high
Slide 12: Highlights of Results
Highlights of Results Trading profit increased 28.1% with turnover increasing by 24.5% ° Cut in gross margins resulted in higher sales growth ° Higher turnover growth than expense growth ° Growth in service departments ° Increased contribution from non-RSA operations ° Trading margin highest ever: 4
Slide 13: Highlights of Results
Highlights of Results Exchange rate gains decreased e June 2008: R33 million @ June 2009: R 3million Rand to US Dollar exchange rates (R:S) @ June 2007: R 7.10 ° June 2008: R 7.96 ° June 2009: R 8.02 va\\. SHOPRITE HOLDINGS LTD
Slide 14: Highlights of Results
Highlights of Results 2008 2009 R’m R’m 14
Slide 15: Highlights of Results
Highlights of Results 2008 2009 Capital Expenditure R’m R’m Land and Buildings 401 347 Store Refurbishment 458 606 New Stores 220 334 InformaLon Technology 213 242 Other Replacements* 149 290 Total 1,441 1,819 *DistribuLon Centres, Motor Vehicles, Generators & Office Furniture 15
Slide 16: Highlights of Results
Highlights of Results 2008 2009 Growth R’m R’m % 16
Slide 17: Stockholding
Stockholding 2008 2009 Growth R’m R’m % 51.5% 16.8% 11.7% 17.0% 3.1% 17
Slide 18: Highlights of Results
Highlights of Results 2008 2009 Growth Debtors R’m R’m % Furniture (net) 608 722 18.8 Franchise 375 447 19.2 Buy aid organisaLons 114 100 (12.3) Rental and property related debtors 200 150 (25.0) Insurance receivables 108 41 (62.0) Money Market and CompuLcket 41 55 34.1 Other receivables 244 224 (8.
Slide 19: Highlights of Results
HEPS Highlights of Results Cash EPS EBITDA per share HEPS vs. Cash EPS* vs. EBITDA per share (cents) 732 580 547 478 438 401 330 310 202 2007 2008 2009 *Cash flow from operaLng acLviLes excluding dividends paid and changes in working capital 19
Slide 20: Operational Overview
Opera,onal Overview Whitey Basson Chief Execu5ve Officer 20
Slide 21: Operational Overview
Opera,onal Overview • Excellent volume growth despite economic downturn • Sold almost 5bn items (8% growth) • Now more than 60m customers per month (9% growth) by being the lowest priced retailer • Assisted by high food inflaLon in all countries and 13% in currency conversion to the rand for non‐RSA
Slide 22: 3 Year Performance
3 Year Performance • Profitable market share growth, despite maintaining lowest prices • Increased margin through below‐the‐line efficiencies Return on Equity 41.5% Sales Growth 37.3% 30.6% 24.5% Trading Margin 22.3% 16.2% 4.1% 4.8% 5% 2007 2008 2009 2007 2008 2009 2007 2008 2009 22
Slide 23: International Comparison
Interna,onal Comparison • Shoprite is an internaLonal business running at world class efficiencies Food Retailers Food Manufacturers Shoprite Avg Int Avg SA Avg Int GP Margin 19.3% 24.5% 35.2% 44.3% OperaLng Profit Margin 4.96% 5.3% 12.9% 13.9% % Share of Margin 37% 36% 63% 64% 23
Slide 24: Operational Overview - RSA Supermarkets
Opera,onal Overview ‐ RSA Supermarkets • Sales growth 22.8% to R47bn (Like stores growth: 17.8%) • Lowered margins to the value of R300m • Offset by: - Increased producLvity R124m - Volume increase R119m • Customers responded to the investment in price – growing 9% • Market share reached a 9 year hig
Slide 25: Outpaced competition every month of the year
Outpaced compe,,on every month of the year* Shoprite Group Market excluding Shoprite Group (Pick n Pay, Spar, Woolworths) 25
Slide 26: Our brands cover the entire SA customer profile
Our brands cover the en,re SA customer profile 10 9 LSM 8 Target 7 Market 6 5 4 3 2 1 1000 skus 18000 skus 48000 skus Assortment size: SMALL MEDIUM LARGE 26
Slide 27: RSA overview
RSA overview • Aggressively maintained low price leadership posiLoning – paid dividends in the tougher economic Lmes • More than 14m individual shoppers, more than any other supermarket (AMPS, Released March 2009) • Extremely loyal customer base - 39% shop exclusively at Shoprite (AMPS, Released Mar
Slide 28: "Did you know?" Corporate TV Campaign
“Did you know?” Corporate TV Campaign* • Sold 105m litres of coke, enough to cover more than 1000 soccer fields • Gained 1m new customers this year • Bought enough toys for each of the 16m kids in SA who celebrated a birthday • Sold 294m nappies last year 28
Slide 29: Voted SA's No.1 Supermarket
VOTED SA's NO.1 SUPERMARKET
Slide 30: Most powerful supermarket brand
is the most powerful supermarket brand* 3.1% = internaLonal 3.3% benchmark for strong brands 2.4% 3.1% 1.5% 0.8% Shoprite Pick n Pay Spar/Superspar Woolworths Supermarket Source: Nielsen Shopper Trends Study (May 2009) 30
Slide 31: Gaining customers in core target market
is gaining customers in core target market 73% 67% 2006 2008 20% 14% 13% 13% LSM 1–3 LSM 4–7 LSM 8–10 Source: AMPS (Released March 2009) 31
Slide 32: RSA overview
RSA overview • Fastest growing store format in RSA opened 36 stores • Aim to open a store a week • Private label products now contribute 19% of turnover - On average, priced 13% below brand leaders - with 8% higher margin • Served 50m customers • ROI > 50% 32
Slide 33: RSA overview
RSA overview • The Checkers brand grew at 27.6%, faster than any other supermarket brand in RSA • ReposiLoning success story as Checkers gained affluent shoppers from compeLtors – resulLng in 12.2% customer growth • Customer profile improved and LSM 9 now makes up the largest porLon of the shopper base
Slide 34: Steakhouse Classic, Cheese World, Housebrand
Steakhouse Classic Cheese World Housebrand Cer,fied Natural Lamb Odd Bins 34
Slide 35: Checkers Winter Wines Catalogue
Checkers Winter Wines Catalogue 35
Slide 36: Gained higher LSM customers
gained higher LSM customers 2006 2008 73% 67% 20% 14% LSM 1 – 6 LSM 7 – 10 Source: AMPS (Released March 2009) 36
Slide 37: Furniture
Furniture Aubrey Karp Divisional Director 37
Slide 38: Furniture
Furniture Sales • Sales increased by 13.9% to R2,57 billion • OK Furniture and OK Power Express sales increased by 15.5% (Like store growth: 9.6%) • House & Home sales increased by 11.8% (Like store growth: ‐6.6%) • Stats SA furniture and appliance inflaLon: 14.0% • Furniture Division internal inflaLo
Slide 39: Furniture
Furniture Trading Environment • ConLnued slowdown in higher LSM expenditure resulLng from excessive consumer credit in the past (86% credit exposure) • Eroding disposable income affected spending on durables • Price deflaLon in the visual department conLnues • Small inflaLonary increases in the furnitu
Slide 40: Furniture
Furniture Merchandise Sales Mix Stable Mix 2008 2009 Home entertainment 65% 65% and appliances Furniture, bedding, paLo 35% 35% and carpeLng 40
Slide 41: Furniture
Furniture Sales Mix – Cash and Credit • Credit parLcipaLon increased across all brands • House & Home credit parLcipaLon growth of 3.6% 2008 2009 Cash 69.7% 67.8% Credit 30.3% 32.2% 41
Slide 42: Furniture
Furniture Trading Profit • Trading profit increased 1.5% to R157.5m (2008 ‐ reduced by 24.2%) - Excellent profit growth in OK Furniture and in OK Power Express - Credit business increased in all brands - Sales of imported goods, with bemer margins, increased by 15.8% (parLcipaLon up 3.2%) 42
Slide 43: Furniture
Furniture Trading Profit • Profit growths limited by: – Certain above inflaLon expenditure growths – rates and taxes, electricity and transport costs etc – Increased bad debts write‐offs – Increased bad debt provision (due to growth of debtors book) 43
Slide 44: Furniture
Furniture Store Numbers Focus on store Confirmed until expansion con,nued Opened Total June 2010 OK Furniture 23 204 8 OK Power Express 0 14 0 House & Home 7 46 2 Total 30 264 10 44
Slide 45: Furniture
Furniture Debtors Book 2008 2009 % Variance Debtors R830m R964m 16.2 # of new contracts 238 482 258 017 8.2 • Resultant from 8.2% increase in the number of new contracts and due to an increased average purchase price • Achieved notwithstanding: – A slight increase in the credit applicaLon decline ra
Slide 46: Furniture
Furniture Debtors Book 2008 2009 % Variance Actual Arrears 6.9% 8.7% ‐1.8 Balance Of Contract Arrears 28.6% 26.7% 1.9 Bad Debt and UFC Provisions 13.8% 12.9% ‐0.9 • Increased applicaLons for NCA debt administraLon • Zero UFC in South Africa (In terms of NCA, finance charges now calculated daily and d
Slide 47: Furniture
Furniture Outlook • Expect low growth environment to conLnue unLl the end of 2010 - NCA affordability calculaLon - Consumer disposable income pressure • Product prices increased dramaLcally in January 2009 resulLng from increased input costs and weaker currencies • Market compeLLveness limits scope f
Slide 48: Furniture
Furniture Outlook Future growth drivers: • Increased footprint: 10 new stores confirmed • Volume growth through discounted pricing • Further range enhancements and product innovaLon • Increased imported product sourcing, sales and parLcipaLon • Enhanced customer service levels 48
Slide 49: Non-RSA Overview
Non‐RSA Overview Whitey Basson Chief Execu5ve Officer 49
Slide 50: Non-RSA Overview
Non‐RSA Overview 2007 2008 2009 Turnover growth 29.4% 38.1% 39.9% Non‐RSA sales parLcipaLon 10.8% 12.1% 13.6% Number of stores 95 100 102 Profit growth >50% >100% >50% 50
Slide 51: Non-RSA Overview
Non‐RSA Overview • High inflaLon although lower than RSA • Net margin is higher than that of RSA • Export volume increased 36% • Shipped 19 650 containers • SADC arrangement improved our price compeLLveness vs non‐compliant vendors 51
Slide 52: Non-RSA Challenges Remain
Non‐RSA Challenges Remain • Lack of global credit inhibiLng property development – 6 confirmed new stores for 09/10 – 3 shopping centre extensions • Lead Lmes remain high (Nigeria 68 days) • Faced with unscheduled construcLon and policy changes … 52
Slide 53: Non-RSA Challenges Remain
Non‐RSA Challenges Remain 53
Slide 54: Personnel
Personnel 54
Slide 55: Personnel
Personnel • ProducLvity per employee improved 12% • 11 000 staff members appointed • Latest Electronic Scheduling System fully deployed • R138m invested in training (35% growth) • Seta Grants: 100% compliance, full rebate received • 93 233 training intervenLons • 1 209 Trainee & Designate Managers fo
Slide 56: Complimentary services
Complimentary services 56
Slide 57: We serve the nation – therefore have the ability to extend our service offering
We serve the na,on – therefore have the ability to extend our service offering 17,746 9,699 9,064 777 Shoprite Group Pick n Pay Group Spar Group Woolworths Group Source: AMPS (Released March 2009) 57
Slide 58: Send money in a hurry?
Send money in a hurry? • Money Markets processed R1.9bn worth of money transfers • Total Money Market increased 36% 58
Slide 59: Travelling? Tickets to the game?
Travelling? • Sold enough flight Lckets to fill 540 boeing 737s and enough bus Lckets to fill 30,000 buses Tickets to the game? • CompuLcket sold enough sport Lckets to fill Newlands 51 Lmes • CompuLcket increased net income 8% 59
Slide 60: Having a party?
Having a party? • LiquorShop sold enough beer to give all 14m Shoprite shoppers a beer • Number of stores increased to 48 • Turnover increased 83% • 82 Licences pending 60
Slide 61: Need medicine?
Need medicine? • We sold enough of our top pain killer to give each Shoprite shopper a tablet ater their beer (14m) • PrescripLons are up 52% • Now have 81 pharmacies trading • Sales increased by 54% (Like store growth 32%) • Margin remains low • Wholesaler acquired, pending approval 61
Slide 62: Chicken burger on the go?
Chicken burger on the go? • Sold over 30m pieces of chicken • Total sales growth 10.1% • Opened 12 stores – total of 125 • Served 1.7m customers 62
Slide 63: Outlook
Outlook • Confirmed 85 store openings (64 Supermarkets) • Job losses • Recession will last longer/Housing Loans • Food inflaLon below 10% • Increased electricity costs and property revaluaLons • Will not pursue unprofitable market share growth • Don’t change your investment amount, change your porvolio