Shoprite Holdings Limited · JSE:SHP
Shoprite — FY2017 Earnings Presentation
38 slides from Shoprite's earnings presentation, August 2017
Slide 1: Results Presentation for the Year
RESULTS PRESENTATION FOR THE YEAR
Slide 2: Welcome to Cilmor DC
WELCOME TO CILMOR DC SW . FINANCIAL HIGHLIGHTS Marius Bosman . OPERATIONAL HIGHLIGHTS Pieter Engelbrecht . STRATEGIC FOCUS AREAS Pieter Engelbrecht / Photy Tzellios . QUESTIONS Executive Team Iw KV iS
Slide 3: In the 7 years since the 2010 World Cup
IN THE 7 YEARS SINCE THE 2010 WORLD CUP
Slide 4: Track record of growth
TRACK RECORD OF GROWTH DOUBLED TURNOVER TO & TRADING PROFIT TO | R141bn R8bn R 141bn R 67bn a iP = 2010 2011 2012 2013 2014 2015 2016 2017 2010 2011 2012 2013 2014 2015 2016 2017 R 8bn
Slide 5: Africa's No. 1 retailer
AFRICA’S NO. 1 RETAILER CREATED OVER INCREASED OUR FOOTPRINT TO 95000 & P{s:)7 JOBS 143 802 sree 1532 88 000 A 2010 2011 2012 2013 2014 2015 2016 2017 2010 2011 2012 2013 2014 2015 2016 2017
Slide 6: Financial Highlights
FINANCIAL HIGHLIGHTS MARIUS BOSMAN Chief Financial Officer
Slide 7: Financial Highlights
FINANCIAL HIGHLIGHTS | ee R141bn R8.1bn
Slide 8: Trading Margin
TRADING MARGIN
Slide 9: Financial Highlights
FINANCIAL HIGHLIGHTS 19% Diluted HEPS growth to 1007.4c 11.5% Dividend per share growth to j 504c
Slide 10: Financial Highlights
FINANCIAL HIGHLIGHTS Existing Net Total Total Sales growth per segment stores new stores 52 weeks 53 weeks Supermarkets RSA 6.9% 3.6% 10.5% 8.0% Supermarkets Non-RSA 1.0% 12.5% 13.5% 11.7% Furniture 1.9% 4.3% 6.2% 4.3% Other Operating Segments - - 7.7% 7.0% Total 5.8% 4.8% 10.6% 8.4% • Supermarkets
Slide 11: Gross Profit Margin
GROSS erat eee 23, 98% § 2016
Slide 12: Financial Highlights (53 weeks)
FINANCIAL HIGHLIGHTS (53 weeks) 2016 2017 Other operating income Growth Rm Rm Finance income earned 327 325 -0.6% Net premiums earned 416 384 -7.7% Operating lease income 426 435 2.1% Commissions received 784 811 3.5% Franchise fees received 65 75 16.1% Investment income 111 189 68.8% Sundry income
Slide 13: Financial Highlights
FINANCIAL HIGHLIGHTS • Depreciation and amortisation: 7.5% • Operating leases: 9.6% • Employee benefits: 10.5%
Slide 14: Key Information per Segment
KEY INFORMATION PER SEGMENT KEY INFORMATION PER SEGMENT 2016 2017 53 week 52 week Trading Profit Rm Rm growth growth Supermarkets RSA 5 828 6 424 10.2% 14.1% Supermarkets Non-RSA 1 227 1 407 14.7% 18.9% Furniture 91 123 35.2% 38.0% Other Divisions 135 173 28.1% 30.0% Total 7 281 8 127 11.6% 15.7%
Slide 15: Exchange Rate Differences
EXCHANGE RATE DIFFERENCES Rand appreciation against the US Dollar • June 2015: R12.13/$ • June 2016: R14.78/$ • June 2017: R13.04/$ R46.1m loss R235.9m loss 2016 2017
Slide 16: Inventory Levels
INVENTORY LEVELS Growth in inventory: 18.2% ● R687m lower than December ● Excl. Supermarkets Non-RSA = 8.9% ● Provisioning Cilmor DC ● Angola stock clearance issue
Slide 17: Financial Highlights
FINANCIAL HIGHLIGHTS 2016 2017 Capital expenditure Rm Rm Land, Buildings and Leasehold Improvements 1 051 1 129 Store Refurbishment 698 740 New Stores 966 790 Information Technology 1 125 1 276 Other Replacements* 912 1 232 Total 4 752 5 167 * Includes new Cilmor DC equipment, vehicles and office fu
Slide 18: Financial Highlights
FINANCIAL HIGHLIGHTS KEY INFORMATION PER SEGMENT 2016 2017 Growth Rm Rm Net Cash Balances 3 819 2 709 -29.1% • Investment in USD Index Linked Angolan Government Bonds
Slide 19: Operational Overview
OPERATIONAL OVERVIEW PIETER ENGELBRECHT
Slide 20: Winning the Battle for Customers
WINNING THE BATTLE FOR CUSTOMERS Relentless focus on customers reaping rewards 52 week comparison
Slide 21: Supermarkets RSA
SUPERMARKETS RSA ● Double digit sales growth of 10.5% (5.9% internal inflation) ○ R100bn sales milestone achieved ○ Sales growth outstripped market every quarter ○ Record share in June ‘17 at 33.2%
Slide 22: Focus on Affordability
FOCUS ON AFFORDABILITY STILL BUYS A LOT AT SHOPRITE
Slide 23: Supermarkets Non-RSA
SUPERMARKETS NON-RSA ● 13.5% sales growth conceals strong constant currency growth of 33.8% ● Currency devaluations vs Rand in all countries ● Slowing GDP growth and forex shortages Non-RSA Constant Currency growth
Slide 24: Non-RSA Supermarkets
NON-RSA SUPERMARKETS Angola ● Trade normalising after exceptional half year growth of 130.2% ● Loyalty of new customers: +23% like-for-like Nigeria ● Import restrictions, local products now 80% of sales ● Shopping centre developments have stalled Namibia ● Turnover increased by 11.5% Zambia ● Politi
Slide 25: Complementary Brands
COMPLEMENTARY BRANDS ● 438 total stores (incl. franchises) ● Trading Profit +38% ● 36% Sales growth ● 0.72% share gains
Slide 26: Cost Leadership
COST LEADERSHIP ● Expense growth well controlled ● Shrinkage well below global benchmark
Slide 27: Strategic Focus Areas
STRATEGIC FOCUS AREAS
Slide 28: 6 Drivers of Future Growth
6 DRIVERS OF FUTURE GROWTH i—a. 2.Growing 3. Developing LSM 8-10 share _ Private Label of wallet = os SISTS TT 4. A Stronger Franchise 1. Customer- Offer first culture cu mpeee ne 6. Strategic ! 5. Leverage Expansion African Advantage
Slide 29: 1. Customer-First Culture
1. CUSTOMER-FIRST CULTURE ● “No customer leaves the store unhappy” ○ Operational management aligned to brands ○ Invested two million training days (+12%) ○ 35% reduction in customer complaints ● Invested in customer science and data capabilities ○ More relevant ranging and pricing ○ On-shelf availab
Slide 30: 2. Growing Upmarket Share of Wallet
2. GROWING UPMARKET SHARE OF WALLET Chasing share of wallet of 1.9m LSM 8-10 cross-shoppers ● Dismantling the monopoly in premium food retail ● Accelerating market share gain in upmarket segment ● Record high share in June ‘17
Slide 31: Awards by the Sunday Times
BY THE SUNDAY TIMES = food \ AWARDS aN ite .¢ [VOTED SWS 1 Des N bas ¥) “ FRESH CONVENIENCE FOODS SALES DOUBLED = we zee MORE THAN A 100 NEW © == PRODUCTS LAUNCHED ¢ Kids ready-to-eat category doubled since launch A B ‘ 4X MORE VALUABLE ee) THAN AVERAGE SHOPPER ) \
Slide 32: 3. Developing Private Label
3. DEVELOPING PRIVATE LABEL ● Participation +1% to 14.7% in SA ● Private Label Margin up 2.3 percentage points ● Opportunity: Industry participation 18.5%* *Source: Nielsen, July 2017
Slide 33: 4. Stronger Franchise Offer
4. STRONGER FRANCHISE OFFER ● Increased appeal: 29 net new members ● Gained market share ● Rebranded stores growing 2x other stores ● Retailer Margin improved 0.5% ● Profit growth ahead of Turnover growth
Slide 34: 5. Leveraging African Advantage
5. LEVERAGING AFRICAN ADVANTAGE McKinsey Global Institute, 2016 ● Headroom to grow in untapped formal market ○ 21 new stores opened, 35 confirmed, 116 further opportunities
Slide 35: 6. Strategic Expansion
6. STRATEGIC EXPANSION Amplify value chain on the continent - Photy Tzellios- ● Sizeable competitive advantage in Supply Chain: ○ Learnings from 24 years experience ○ R40bn of investment ○ 750,000m2 of distribution space ● Source from 43 countries and export to 14 countries ● Optimising inventory an
Slide 36: New Generation Cilmor DC
NEW GENERATION CILMOR DC 16 000 SKUs ~ STATE-OF-THE ART ECHNOLOGY wl) CONSOLIDATION OF SUPPLY FROM 500+ Vendors <>
Slide 37: 6. Strategic Expansion
6. STRATEGIC EXPANSION Capitalise on bricks-and-mortar ● Extend footprint lead in Africa - advantage for omni-channel (Amazon/Wholefoods) ● Optimised store size with improved ROI New agile technology enables scalability ● ERP replatforming for rapid deployment (acquisitions) ● Going Google enhancing
Slide 38: Thank You
THANK YOU QUESTIONS