Spar Group Limited · JSE:SPP
Spar — The SPAR Group — FY2020 Earnings Presentation
51 slides from Spar's earnings presentation, November 2020
Slide 1: Results Presentation
THE SPAR GROUP LTD RESULTS PRESENTATION THE SPAR GROUP LTD for the year ended 30 September 2020 RESULTS PRESENTATION 2020 1
Slide 2: Agenda
AGENDA OUR PURPOSE TO INSPIRE PEOPLE TO DO AND BE MORE OVERVIEW Graham O’Connor, CEO FINANCIAL REVIEW Mark Godfrey, CFO OPERATIONAL UPDATE LOOKING AHEAD Graham O’Connor, CEO QUESTIONS THE SPAR GROUP LTD RESULTS PRESENTATION 2020 2
Slide 3: Overview
OVERVIEW Graham O’Connor, CEO THE SPAR GROUP LTD RESULTS PRESENTATION 2020 3
Slide 4: SPAR International Overview
SPAR INTERNATIONAL OVERVIEW €37.1bn 48 wholesale turnover countries Independent wholesalers and retailers working together 4.35% Sales growth using SERVING constant annual average COMMUNITIES exchange rates 253 AROUND THE WORLD distribution centres Uniting global partners 14m to be and act customers
Slide 5: SPAR Group Overview – FY20
SPAR GROUP OVERVIEW – FY20 SOUTHERN IRELAND** SWITZERLAND POLAND AFRICA* Stores 2 414 1 391 333 219 Warehousing 305 537 m2 35 000 m2 33 000 m2 32 091 m2 Turnover R78.6bn R29.9bn R13.6bn R2.1bn • All markets significantly impacted by COVID-19 pandemic due to lockdown measures and changing consumer be
Slide 6: Financial Highlights
FINANCIAL HIGHLIGHTS STRONG PERFORMANCE Group turnover Operating profit +13.5% +15.6.% to R124.3bn to R3.4 bn Normalised diluted headline EPS# Normalised diluted headline EPS# (EXCLUDING POLAND) +8.8% +21.9% to 1 262.6 cents to 1 432.4. cents • Final dividend of 665 cents declared • Total dividend f
Slide 7: FY20 – A Year in Crisis
FY20 – A YEAR IN CRISIS • Strong performance amid global pandemic • Head start given shared learnings from SPAR International • Crisis response o Protection of employees, retailers, suppliers, consumers o Managing supply chain / retailers’ shelves stocked o Supporting our communities • Anticipating
Slide 8: Well Positioned
WELL POSITIONED • Resilience of our retailers • Determination of our people • Lessons learnt and ‘new normal’ embraced • Community is at the heart of what we do THE SPAR GROUP LTD RESULTS PRESENTATION 2020 8
Slide 9: Financial Review
FINANCIAL REVIEW Mark Godfrey, CFO THE SPAR GROUP LTD RESULTS PRESENTATION 2020 9
Slide 10: Financial Overview – Salient Features
FINANCIAL OVERVIEW SALIENT FEATURES Change R million 2020 2019 % Turnover" 124 277.4 109 477.1 13.5 Operating profit 3 442.6 2 978.9 15.6 Profit after tax 1 956.2 2 163.4 (9.6) Earnings per share (cents) 1 078.7 1 124.1 (4.0) Headline earnings per share (cents) 1 135.3 1 129.1 0.5 Normalised* headli
Slide 11: Impact of Polish Losses on Headline Earnings
FINANCIAL OVERVIEW IMPACT OF POLISH LOSSES ON HEADLINE EARNINGS Change R million 2020 2019 % Headline earnings 2 183.6 2 173.0 0.5% Adjusted for fair value adjustment to, and foreign exchange effects on financial liabilities, and business acquisition costs 253.1 71.6 253.5% Normalised* headline earn
Slide 12: Effect of IFRS Adoption – 2020
FINANCIAL OVERVIEW EFFECT OF IFRS 16 ADOPTION – 2020 As reported Pre IFRS 16 R million 2020 IFRS 16 2020 2019 Net operating expenses (13 912.9) 79.5 (13 992.4) (10 939.4) Operating profit 3 442.6 79.5 3 363.1 2 978.9 Operating profit% 2.8% 2.7% 2.7% Other non-operating items (278.7) (278.7) (28.1) I
Slide 13: Effect of IFRS Adoption – 2020 continued
FINANCIAL OVERVIEW EFFECT OF IFRS 16 ADOPTION – 2020 continued As Reported 2020 Estimated at R million 2020 Poland excl. Poland Sep 2019* Statement of comprehensive income Depreciation 1 052.1 175.7 876.4 780 Profit before interest and tax 79.5 (113.6) 193.1 180 Finance income 438.9 12.3 426.6 350 F
Slide 14: Key Regional Metrics
FINANCIAL OVERVIEW KEY REGIONAL METRICS Group Southern Switzer- excl. R million Africa Ireland land Poland Poland Group Income statement Revenue – sale of merchandise 78 605.4 29 896.7 13 641.9 122 144.0 2 133.4 124 277.4 Gross profit 7 796.9 3 994.5 2 515.4 14 306.8 473.1 14 779.9 Gross profit % 9.
Slide 15: Turnover
FINANCIAL OVERVIEW TURNOVER Change R million 2020 2019 % Ireland SPAR – core grocery business 62 851.2 57 566.2 9.2 • Turnover +6.3% (EUR); contributions from TOPS/Liquor sales 6 436.5 7 646.9 (15.8) o BWG Foods +3.4% SPAR & TOPS 69 287.7 65 213.1 6.2 o Acquisitions +2.2% Build it 7 965.0 8 035.1 (0
Slide 16: Regional Turnover
FINANCIAL OVERVIEW REGIONAL TURNOVER Southern Africa Ireland Switzerland Poland 63.2% 24.1% 11.0% 1.7% (2019: 67.8%) (2019: 22.7%) (2019: 9.5%) (2019: 0.0%) FY20 FY19 R2.1bn R1.2m R13.6bn R10.4bn R29.9bn R24.9bn R78.6bn R74.3bn THE SPAR GROUP LTD RESULTS PRESENTATION 2020 16
Slide 17: Gross Margins
FINANCIAL OVERVIEW GROSS MARGINS 2020 Gross 2020 2019 R million Turnover margin (GP%) Change (GP%) Total South Africa 77 252.7 7 329.8 9.49 +59 bps 8.90 S Buys 1 072.8 94.5 8.81 +3 bps 8.78 SPAR Encore 279.9 372.6 ** Total Southern Africa 78 605.4 7 796.9 9.92 +102 bps 8.90 Ireland 29 896.7 3 994.5
Slide 18: Expenses
FINANCIAL OVERVIEW EXPENSES 2020 2019 % % % R million Expenses of sales Expenses of sales increase Total South Africa 5 736.5 7.4 5 167.5 7.1 11.0 S Buys 101.4 9.4 95.9 9.3 5.7 SPAR Encore 292.2 11.3 Total Southern Africa 6 130.1 7.8 5 263.4 7.1 16.5 Ireland 3 557.8 11.9 3 034.1 12.2 17.3 Switzerlan
Slide 19: Finance Income & Costs
FINANCIAL OVERVIEW FINANCE INCOME & COSTS 2020 2019 R million Finance income Loans 96.3 93.0 Bank deposits 21.0 25.9 Trade and other 62.0 66.6 Lease receivables – IFRS16 438.9 – 618.2 185.5 Finance costs Loans 146.7 127.7 Bank overdraft 91.5 64.0 Deposits and other 12.3 9.9 Lease liabilities – IFRS
Slide 20: Reconciliation of Effective Tax
FINANCIAL OVERVIEW RECONCILIATION OF EFFECTIVE TAX Percentage 2020 2019 South African current income tax rate 28.0 28.0 Change in federal tax rate in Switzerland – (1.9) Temporary differences relating to share plans (0.7) – Fair value, forex & finance cost adjustments arising on financial liabilitie
Slide 21: H1 vs H2 Comparative Trading
FINANCIAL OVERVIEW H1 VS H2 COMPARATIVE TRADING 2020 TURNOVER (Rm) 2020 OPERATING PROFIT (Rm) Poland 1 169 -166 Poland -305 964 SA 38 366 SA 1 306 40 240 1 267 Ireland 17 160 Ireland 693 12 737 286 Switzerland 7 833 Switzerland 275 5 809 H2 H1 87 H2 H1 Growth Growth First half First half Southern Af
Slide 22: Currency Impacts (vs ZAR)
FINANCIAL OVERVIEW CURRENCY IMPACTS (VS ZAR) EURO/SWISS FRANC VS RAND SEP 2019 - SEP 2020 21 20 19 18 17 16 15 14 EUR:ZAR CHF:ZAR Linear (EUR:ZAR) Linear (CHF:ZAR) Ireland (€) Switzerland (CHF) 2020 2019 2020 2019 Year end rate 19.65 16.51 18.16 15.18 Average rate 18.31 16.17 17.01 14.42 THE SPAR GR
Slide 23: Balance Sheet Regional Key Metrics
FINANCIAL OVERVIEW BALANCE SHEET REGIONAL KEY METRICS Southern R million Africa Ireland Switzerland Poland Group Balance sheet Property, plant and equipment 2 665.6 2427.8 3 265.6 366.3 8 725.3 Right-of-use asset 793.9 2 586.7 2 626.8 598.5 6 605.9 Finance lease receivable 4 134.6 77.0 – 501.8 4 713
Slide 24: Balance Sheet Regional Key Metrics – continued
FINANCIAL OVERVIEW BALANCE SHEET REGIONAL KEY METRICS - continued Impact of IFRS 16 adoption Southern R million Africa Ireland Switzerland Poland Group Balance sheet Right-of-use asset 793.9 2 586.7 2 626.8 598.5 6 605.9 Finance lease receivable 4 134.6 77.0 – 501.8 4 713.4 Current portion 611.0 15.
Slide 25: Offshore Debt Overview – Ireland
FINANCIAL OVERVIEW OFFSHORE DEBT OVERVIEW TOTAL FINANCIAL LIABILITIES R million 2020 2019 SPAR Ireland: €-denominated Balance at beginning of year 1 326.3 1 216.2 Finance costs recognised in profit or loss (8.0%) 105.7 69.1 Net exchange differences arising during the period (33.5) 6.4 Partial settle
Slide 26: Offshore Debt Overview – Switzerland
FINANCIAL OVERVIEW OFFSHORE DEBT OVERVIEW TOTAL FINANCIAL LIABILITIES R million 2020 2019 SPAR Switzerland: CHF-denominated Balance at beginning of year 840.9 777.5 Finance costs recognised in profit or loss (0.8%) 13.5 22.5 Net exchange differences arising during the period (CHF to €) 7.9 37.1 Fore
Slide 27: Local Debt Overview
FINANCIAL OVERVIEW LOCAL DEBT OVERVIEW TOTAL FINANCIAL LIABILITIES continued R million 2020 2019 S Buys: ZAR-denominated Balance at beginning of year 37.2 49.2 Finance costs recognised in profit or loss 12.5 7.2 Fair value adjustment - (19.2) Balance at end of year 49.7 37.2 Total financial liabilit
Slide 28: Cashflow
FINANCIAL OVERVIEW CASHFLOW R million 2020 2019 Cash flow from operating activities (adjusted for non-cash items) 5723.0 3 857.8 Working capital changes : 698.5 (2 016.3) - Increase in inventory (205.4) (425.5) - Increase in trade and other receivables (1 201.6) (1 110.3) - Increase/(decrease) in tr
Slide 29: Cashflow continued
FINANCIAL OVERVIEW CASHFLOW continued • Cash generated from operations R6.4bn – R million significant increase from the prior year due to working capital payment timings and cashflow on rental now disclosed as financing and investing activities under IFRS16 • Dividends of R1.4bn paid to shareholders
Slide 30: Capital Expenditure
FINANCIAL OVERVIEW CAPITAL EXPENDITURE R million 2020 2019 Investing to expand operations (929.9) (685.8) Investment to maintain operations (368.1) (374.0) Replacement of property, plant and equipment (449.1) (423.5) Proceeds on disposal of property, plant and equipment 81.0 49.5 Acquisition of busi
Slide 31: Reconciliation of Normalised HEPS
FINANCIAL OVERVIEW RECONCILIATION OF NORMALISED HEPS* Change R million 2020 2019 % Reported headline earnings 2 183.6 2 173.0 + 0.5 Adjusted for: Fair value adjustment to financial liabilities 255.6 15.4 Foreign exchange (gain)/losses on financial liabilities (25.6) 43.5 Business acquisition costs 2
Slide 32: Reconciliation of Dividend
FINANCIAL OVERVIEW RECONCILIATION OF DIVIDEND R million 2020 Reported headline earnings 2 183.6 Adjusted for: Fair value and forex loss on financial liability measurement - non-cash related) 230.2 Adjusted headline earnings 2 413.8 Shares ranking for dividend at declaration date (million) 192.509 Ad
Slide 33: Performance Summary
FINANCIAL OVERVIEW PERFORMANCE SUMMARY NET ASSET VALUE PER SHARE HEADLINE EARNINGS PER SHARE (CENTS) (CENTS) 1 266.9 2020 4 102.2 2020 1 135.3 1 166.3 2019 3 879.9 2019 1 129.1 1 063.2 2018 3 692.2 2018 965.7 976.0 2017 3 407.0 2017 952.8 1 033.0 2016 3 140.1 2016 1 020.0 940.0 2015 1 922.6 2015 835
Slide 34: Salient Features – In Closing
FINANCIAL OVERVIEW SALIENT FEATURES – IN CLOSING Change R million 2020 2019 % Revenue – sale of merchandise 124 277.4 109 477.1 +13.5 Operating profit 3 442.6 2 978.9 +15.6 Profit after tax 1 956.2 2 163.4 -9.6 Earnings per share (cents) 1 078.7 1 124.1 -4.0 Headline earnings per share (cents) 1 135
Slide 35: Operational Update
OPERATIONAL UPDATE Graham O’Connor, CEO THE SPAR GROUP LTD RESULTS PRESENTATION 2020 35
Slide 36: Southern Africa
SOUTHERN AFRICA SERVING AND SUPPORTING OUR RETAILERS • Well-executed COVID-19 protocol ENTREPRENEURIAL VALUES • Virtual members meetings DRIVING AGILITY AND RESPONSIVENESS • Agile and world-class supply chain IN THE WAY WE DO THINGS o Collaboration with suppliers o Fulfillment rate low of 81% (usual
Slide 37: Operational Review
OPERATIONAL REVIEW GROWING OUR BUSINESS • New store openings +15 impacted by pandemic Number of stores +20 822 842 960 975 • Net new stores 65 +2 +28 390 392 • ‘Other’ includes 177 205 o SPAR Express 15 Other Build it Tops Spar o Pharmacy 12 BEFORE FY19 FY20 o Savemor 16 AFTER • 310 upgrades, includ
Slide 38: Southern Africa – Retail Sales Performance
SOUTHERN AFRICA RETAIL SALES PERFORMANCE Growth LFL FY20 % % SPAR +8.5 +7.3 TOPS AT SPAR -17.8 -19.7 BUILD IT +1.8 +1.7 CORE TURNOVER – SPAR (R’bn) FY20 FY19 % Wholesale 62.9 57.6 +9.2 ROBUST SALES GROWTH Retail 91.2 84.1 +8.5 IN A CHALLENGING ENVIRONMENT • Internally calculated food inflation (whol
Slide 39: Southern Africa – SPAR Retail Marketing Support
SOUTHERN AFRICA – SPAR RETAIL MARKETING SUPPORT • Brand deeply rooted in communities • One simple consumer message o We’re here for you • SPAR rewards programme • Strong growth in house brands and SPAR private label Growth Turnover R’bn % *% House brands 15.0 12.1 23.9 SPAR private label 10.5 14.1 1
Slide 40: Southern Africa – TOPS at SPAR
SOUTHERN AFRICA – TOPS AT SPAR TOPS AT SPAR – LIQUOR • Severely impacted by liquor ban • Lost > 30% of trading days for FY20 • Despite ban, incredible marketing effort and remains the sector’s leading liquor brand TOPS AT SPAR TURNOVER (R’bn) FY20 FY19 % Wholesale 6.4 7.6 -15.8 Retail 10.5 12.8 -17.
Slide 41: Southern Africa – Build it
SOUTHERN AFRICA – BUILD IT BUILD IT • Trading restriction - 5 weeks of lockdown • Strong trading activity post lockdown • Drive on home improvements and refurbishments • 65 store upgrades BUILD IT TURNOVER (R’bn) FY20 FY19 % VASTLY IMPROVED Wholesale 8.0 8.0 -0.9 CUSTOMER IN-STORE Retail 14.4 14.1 +
Slide 42: BWG Foods (Ireland and SW England)
BWG FOODS (Ireland and SW England) • Turnover growth of 6.3% in EUR terms • Strong performance amid mixed COVID- 19 trading impact o Cash & Carry and Foodservice severely impacted o Maximised retail neighbourhood and EUROSPAR opportunity • EUROSPAR turnover up 11.5% in local currency • Comprehensive
Slide 43: SPAR Switzerland
SPAR SWITZERLAND • Excellent performance • Sales growth of 11.6% in CHF terms • Noticeable change in retail landscape with closure of borders during hard lockdown • Community driven stores preferred over big supermarkets • TOP CC boosted by restaurant open during summer months • PAM & Edelweiss inte
Slide 44: SPAR Poland
SPAR POLAND KEY PLAYERS IN FOOD RETAIL WHERE DOES SPAR FIT IN? Supermarkets and proximity Hypermarkets 12% supermarkets • High quality at competitive prices • Quality private label offering Discounters 31% • Good presence of regional suppliers • Differentiated from discounters Supermarkets by world-
Slide 45: SPAR Poland continued
SPAR POLAND continued • Contribution of R2.1bn to group turnover • Establishing the right team • Focused on business culture • Onboarding of SPAR retailers complete • Conversion of Piotr i Pawel stores • Business rescue proceedings almost complete • Online offering gaining traction • Breakeven – end
Slide 46: Other Opportunities – Sri Lanka
OTHER OPPORTUNTIES – SRI LANKA • Joint venture with Ceylon Biscuits • Population 22 million o Formal trade (15%) / informal trade (85%) o No real structure or support for independents • Six stores open; five stores in the pipeline • Stores actively involved in local communities • All stores currentl
Slide 47: Looking Ahead
LOOKING AHEAD Graham O’Connor, CEO THE SPAR GROUP LTD RESULTS PRESENTATION 2020 47
Slide 48: Priorities – The Year Ahead
PRIORITIES – THE YEAR AHEAD SOUTHERN AFRICA IRELAND SWITZERLAND POLAND Contingency plans in place to deal with pandemic • Driving retailer • Complete integration • Build on the momentum • Achieve breakeven profitability of Corrib Foods and gained from new • Bed down business • Driving organic growth
Slide 49: Questions
FROM VISION TO REALITY QUESTIONS Thank you for joining us THE SPAR GROUP LTD RESULTS PRESENTATION 2020 49
Slide 50: 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
Slide 51: www.spar.co.za
www.spar.co.za THE SPAR GROUP LTD RESULTS PRESENTATION 2020 51