Shoprite Holdings Limited · JSE:SHP
Shoprite — Q2 2022 Earnings Presentation
46 slides from Shoprite's earnings presentation, Mar 8, 2022
Slide 1: Interim Results Presentation 2022
2022 INTERIM RESULTS PRESENTATION FOR THE 26 WEEKS ENDED 2 JANUARY 2022
Slide 2: Shoprite group brands
SHOPRITE Checkers Checkers Hyper “save Medirite+ cp | Transpharm (Drs_.. Freshmark P=tshoo Pharmacy yp © ——— N@7'GneckersFoodSevices © WU eter raynmaker % SHOPRIT=* MoneyMarket © k’nect OH Houseg& Home OK.
Slide 3: Welcome and presentation outline
WELCOME PRESENTATION OUTLINE OPERATIONAL REVIEW Pieter Engelbrecht FINANCIAL RESULTS Anton de Bruyn STRATEGY UPDATE QUESTIONS Pieter Engelbrecht
Slide 4: Operational Review
OPERATIONAL REVIEW Chief Executive Officer PIETER ENGELBRECHT
Slide 5: 2022 Key Highlights
The Group in review 2022 KEY HIGHLIGHTS R91.1bn R22.0bn R5.4bn Sales Gross profit Trading profit +10.0% +10.1% +14.5% +9.3% Like-for-like 24.1% Gross margin 6.0% Trading margin Continuing operations
Slide 6: Supermarkets review: 2022 operational metrics
Supermarkets review 2022 OPERATIONAL METRICS MORE CUSTOMERS PROFITABLE MARKET HIGHER VOLUMES RETURNING TO STORES SHARE GAIN +4.7% +4.5% +R3.6bn Basket size growth Volume growth H1 RSA market share gain +6.0% +145m 34 Customer visits Months of uninterrupted Additional products sold market share gains
Slide 7: Supermarkets RSA: resilient operational performance
Resilient operational performance SUPERMARKETS RSA A Stronger Shoprite • Supermarkets RSA sales momentum assisted by return of liquor trade • +11.3% sales growth (+9.1% excl. LiquorShop) and trading margin improved • LiquorShop sales +49.8% (48 vs 79 trading days in the comparative period lost due t
Slide 8: Supermarkets RSA: sustained market share gains
Sustained market share gains SUPERMARKETS RSA Sales growth outpaced Rest of Market for 10 consecutive quarters Supermarkets RSA Rest of Market 0% Lockdown Stockpiling in commenced base year Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2019/20 2020/21 2021/22 Supermarkets RSA sales growth vs Rest of Market (incl. l
Slide 9: Supermarkets RSA: commitment to customers
Commitment to Customers SUPERMARKETS RSA Unwavering focus on Affordability & Accessibility for Customers • Shoprite remains Low Price Champion and rated No. 1 for Low Prices* • Internal price inflation of 2.6%, well below official food inflation of 6.2% • R4.5bn in Xtra Savings in H1 2022 • Subsidis
Slide 10: Supermarkets store brand portfolio RSA
SUPERMARKETS STORE BRAND PORTFOLIO RSA STORE NUMBERS SHOPRITE Upmarket AFRICA'S LOW PRICE LEADER Lowest prices on the trusted brands without compromising on customer service and product quality 235 CHECKERS 36 BEST VALUE IN FRESH & PREMIUM TARGET MARKET Omnichannel market leader in value on fresh pr
Slide 11: Supermarkets Non-RSA: operational resilience
Operational resilience SUPERMARKETS NON-RSA A more manageable, profitable group of core countries • Supermarkets Non-RSA sales improved 8.4% (Continuing operations) • Q2 sales growth accelerated to 14.4% • Zambia was a star performer increasing sales by 35.3% • Constant currency sales increased by 1
Slide 12: 2022 Interim Financial Results
2022 INTERIM FINANCIAL RESULTS Chief Financial Officer ANTON DE BRUYN
Slide 13: Impact of discontinued operations
Impact of discontinued operations RESTATEMENTS SINCE PREVIOUS YEAR H1 2022 H1 2021* 26 WEEKS ENDED 2 JAN ’22 26 WEEKS ENDED 27 DEC ’20 IFRS 5: NON-CURRENT ● Classify the Group’s Kenyan, Ugandan and ● Comparative statement of comprehensive ASSETS HELD FOR SALE Madagascan operations as discontinued in
Slide 14: Civil unrest impact: KwaZulu-Natal and Gauteng
KwaZulu-Natal and Gauteng CIVIL UNREST IMPACT 231 STORES IMPACTED Total stores re-opened Total stores still closed H1 2022 impact: Stores that will not re-open 186 45 7 Cost of sales ● Inventory write-downs of R968m ● Claimed R968m from insurance 75 5 Stores not 1 Store not Expenses 11 ● Civil unres
Slide 15: H1 2022 key metrics
H1 2022 key metrics FINANCIAL OVERVIEW Restated* 26 weeks 26 weeks Change 2 Jan '22 27 Dec '20 Continuing operations % Rm Rm Notes to the results: Sale of merchandise 10.0 91 125 82 820 Gross profit 10.1 21 955 19 942 Other operating income growth 15.6% ● commissions received +12.7% Other operating
Slide 16: Unpacking performance: DHEPS
Unpacking performance DHEPS Restated* 26 weeks 26 weeks Change 2 Jan '22 27 Dec '20 % cents cents DHEPS continuing operations previously reported 418.0 +0.6 % for IFRS 5: Discontinued operations Restated (3.2) 24.5% Gross margin DHEPS continuing operations 25.2 519.3 414.8 DHEPS discontinued operati
Slide 17: Segmental analysis: sales growth
Segmental analysis SALES GROWTH Total Like-for- Number of sales like net new 26 weeks 26 weeks stores Supermarkets RSA Continuing operations % % 12 months* Brand contribution and sales growth Supermarkets RSA 11.3 10.7 104 Supermarkets Non-RSA 8.4 6.2 3 R5.4bn AND OTHER Furniture (6.5) (3.9) (1) Con
Slide 18: Segmental analysis: trading profit
Segmental analysis TRADING PROFIT Trading Restated* margin 26 weeks 26 weeks 26 weeks Change 2 Jan '22 27 Dec '20 2 Jan '22 Continuing operations % Rm Rm % Supermarkets RSA 16.2 4 887 4 206 6.7 Supermarkets Non-RSA 5.9 179 169 2.1 Furniture (27.2) 193 265 5.4 Other operating segments 36.4 180 132 2.
Slide 19: Gearing impact: net finance costs
Gearing impact NET FINANCE COSTS Restated* 26 weeks 26 weeks Change 2 Jan '22 27 Dec '20 Continuing operations % Rm Rm Interest received from bank account balances (24.3) 112 148 Finance cost: borrowings (66.8) (158) (476) Finance cost: lease liabilities 17.5 (1 264) (1 076) Net finance costs (6.7)
Slide 20: Balance sheet composition
Capital allocation BALANCE BALANCE SHEET COMPOSITION SHEET COMPOSITION Rbn 84.1 85.7 62.7 64.5 BORROWINGS AS % OF EQUITY 100% H1 2022: 22.9% Other assets 90% 11.8 12.1 1.9 3.6 Other liabilities H1 2021: 27.9% 80% Trade and other TRADE AND OTHER PAYABLES Inventories 70% 19.6 21.5 21.8 27.6 payables H
Slide 21: Capital expenditure
Investing in our business CAPITAL EXPENDITURE CAPITAL SPEND H1 2022: R2.7bn TRADEMARKS LAND, BUILDINGS AND 9.3% LEASEHOLD IMPROVEMENTS H1 2021: R1.6bn (H1 2021: n/a) 6.1% (H1 2021: 9.8%) 63.2% IT 21.8% STORE CAPITAL SPEND AS RESULT MAINTENANCE AND OF CIVIL UNREST (H1 2021: 21.8%) REFURBISHMENTS H1 2
Slide 22: Inventories
Replenishing our stores INVENTORIES INVENTORIES Restated* H1 2022: R21.5bn Inventories as % of sales (52 weeks) 2 Jan '22 27 Dec '20 from continuing operations % % H1 2021: R19.6bn Supermarkets RSA 11.9 12.0 +10.0% Supermarkets Non-RSA 14.7 12.8 SUPERMARKETS RSA Furniture 29.9 28.3 R16.5bn (H1 2021:
Slide 23: Net gearing: cash vs debt
Cash vs debt NET GEARING NET GEARING NET CASH 2 Jan '22 27 Dec '20 H1 2022: R0.2bn Rm Rm H1 2021: R6.6bn Total cash position 5 437 12 076 >100% Borrowings (5 267) (5 463) US$ BORROWINGS Net cash position 170 6 613 H1 2022: US$59m Lease liabilities (30 334) (26 611) H1 2021: US$78m Net debt (30 164)
Slide 24: Free cash flow
Cash generation FREE CASH FLOW Rbn Rbn Normalised free cash flow 6.4 Rbn Dividends paid (1.9) Inventories (2.7) Capital expenditure (expanding) (1.5) 7.9 Trade and other receivables (0.8) Available for investing 3.0 Trade and other payables 1.9 Working capital changes (1.6) 4.7 6.4 (1.3) (1.1) (1.6)
Slide 25: Guidance considerations
June 2022 GUIDANCE CONSIDERATIONS SUPERMARKETS RSA • Back-to-School impact in H2 vs delayed school opening in prior year • Liquor sales growth vs lockdown restrictions in prior year • Masscash acquisition awaiting competition commission xxx approval SUPERMARKETS NON-RSACOST• Madagascar sold on 31 Ja
Slide 26: Strategy Update
STRATEGY UPDATE Chief Executive Officer PIETER ENGELBRECHT
Slide 27: Focus areas for future growth: 9 strategic drivers
Focus areas for future growth 9 STRATEGIC DRIVERS Investing in a ‘Smarter Shoprite’ with a focus on optimising our core retail capabilities in existing markets
Slide 28: Multi-year transformation journey
Multi-year Transformation Journey SHOPRITE TODAY 2022-2023 2020-2021 2019-2020 2017-2018 RE-PLATFORM TRANSFORM OPTIMISE AMPLIFY 28
Slide 29: Transformation journey: Re-platform
Multi-year Transformation Journey 2022-2023 SHOPRITE TODAY 2020-2021 2017-2018 2019-2020 ✓ SAP ERP re-platforming for single system of record ✓ Aligned operational management to supermarket banners ✓ Checkers pursuit of growth focused on affluent segment ✓ Re-imagined fresh food theatre with FreshX
Slide 30: Transformation journey: Transform
Multi-year Transformation Journey 2022-2023 SHOPRITE TODAY 2020-2021 2019-2020 ✓ Shifted from explosive expansion to Precision Retailing ✓ Significant investment in Digital Transformation for Customers ✓ Launched Xtra Savings Rewards Programme to accelerate Customer Centricity ✓ Pioneered quick comm
Slide 31: Transformation journey: Optimise
Multi-year Transformation Journey 2022-2023 SHOPRITE TODAY 2020-2021 ✓ Unrivaled operational resilience through pandemic and unrest ✓ Investment in price leadership as value-obsession intensified ✓ Evolved smaller, closer-to-home store formats ✓ Emerged as SA’s No.1 on-demand grocery app ✓ Expanded
Slide 32: Transformation journey: Amplify
Multi-year Transformation Journey SHOPRITE TODAY 2022-2023 2020-2021 ✓ A Smarter Shoprite ✓ Embracing digital ✓ Closing gaps in key segments and premium food retail ✓ Organic growth in core markets ✓ Partnerships, adjacencies and M&A in our ecosystem ✓ Clear capital allocation framework ✓ Force for
Slide 33: A Smarter Shoprite
A SMARTER SHOPRITE • Xtra Savings Rewards Programme has signed up +23.1m members • Checkers Xtra Savings has become SA's No.1 Retail Loyalty Programme • Shoprite Xtra Savings voted Best Newcomer • Customer-first culture driving innovation • Rewards integration with Sixty60: over 5 000 deals, now del
Slide 34: Embracing digital
EMBRACING DIGITAL • Sixty60 performance continues after once-in-a-generation shift to online • 250% growth in H1 online orders • 1/3 of Sixty60 customers are new to Checkers • SA’s No.1 grocery app with 2.2m downloads & 20 Innovation awards • Online supporting job creation, 4 210 opportunities since
Slide 35: Closing gaps in key segments
CLOSING GAPS IN KEY SEGMENTS • Checkers remains the fastest growing grocer in the premium food segment • R7bn in Checkers market share gains over three years • Headroom remains to grow share of wallet from upmarket customers • Checkers store renewal program leading in food theatre & paying dividends
Slide 36: Growth opportunity in adjacent retail categories
CLOSING GAPS IN KEY SEGMENTS Growth opportunity for upmarket, specialist ranges in adjacent retail categories Upmarket 224 TARGET MARKET CUSTOMER 331 sensitive 95 Price Narrow/specialist Wide range across range categories PRODUCT RANGE
Slide 37: Shoprite: a force for good
SHOPRITE: A FORCE FOR GOOD Largest private All shopping bags are employer in SA with First responder to made from recycled 161 Sustainable community food gardens 129 166 team communities in crisis content and recyclable covering more than 4 million m2 members Highest impact YES youth employment crea
Slide 38: Building out our ecosystem
C BUILDING OUT OUR ECOSYSTEM Medirite+ Pharmacy fb | Transpharm LIVEKINDLY 20 Collective ZaPoP* Google ‘Sand out where counts” rajnmaker ? Fj kK’nect fou) MoneyMarket © oS (s} SuperSwift &OMNISIENT dunnhunby SARA AWS) + BlueYonder
Slide 39: Looking forward: sustained momentum
Sustained momentum LOOKING FORWARD ✓ Supermarkets RSA trading in line with H1, boosted by earlier Back-to-School ✓ Inflation pressures inevitable, although Jan ‘22 RSA internal price inflation 2.5% ✓ Non-RSA expected to sustain profitability and benefit from higher oil prices ✓ Online grocery demand
Slide 40: Thank you, questions
THANK YOU QUESTIONS
Slide 41: 2022 Interim Additional Information
2022 INTERIM ADDITIONAL INFORMATION Chief Financial Officer ANTON DE BRUYN
Slide 42: Adjusted DHEPS reconciliation
Unpacking performance ADJUSTED DHEPS RECONCILIATION Headline earnings DHEPS* Rm cents Headline earnings including discontinued operations 2 885 525.1 Headline earnings discontinued operations (32) (5.8) Headline earnings continuing operations 2 853 519.3 Adjusted for: Forex 127 23.1 Hyperinflation 1
Slide 43: Items of a capital nature
Unpacking the impact ITEMS OF A CAPITAL NATURE Restated* 26 weeks 26 weeks 2 Jan '22 27 Dec '20 Continuing operations Rm Rm Notes to the results: Impairment of PPE (74) (607) 26 weeks Non-financial asset 2 Jan '22 impairments by segment Rm Impairment of right-of-use assets (91) (73) Impairment of in
Slide 44: Return on average invested capital
Return on average invested capital ROIC H1 2022 FY 2021 H1 2021 Rm Rm Rm 12-months trading profit from continuing operations 11 017 10 322 9 008 Effective tax rate at period-end 30.8% 32.2% 29.5% Trading profit after tax 7 620 7 004 6 349 Invested capital 62 099 55 426 52 887 -843 Net asset value 23
Slide 45: Capital spend
Capital allocation CAPITAL SPEND TOTAL OPERATIONS Rbn 1.4 -38.8% 1.2 1.2 1.0 0.8 0.8 0.6 0.6 0.4 0.3 0.3 0.3 0.2 0.2 0.2 0.2 0.1 0.1 n/a - - Trademark Trademarks Information Information New New Stores stores Store maintenance Store Land, buildings Land, buildingsand Supply chain Supply technology te
Slide 46: Exchange rate exposure
Currency impact EXCHANGE RATE EXPOSURE Zambia kwacha Angola kwanza Mozambique metical H1 H1 2022 2021 vs vs H1 H1 2021 2020 10.0% 0.4% 1.9% 0.0% -10.0% (3.4%) ZAR ave 2022 VS 2021 (8.1%) -20.0% ZARZAR aveaverage 2021 VSrates 2020 -30.0% (32.7%) -40.0% 8.5% (39.7%) 11.1% -50.0% -10.7% -15.8% 40.0% 27