Afg International Company · TADAWUL:4240
Afg International — Cenomi Retail — Q3 2023 Earnings Presentation
34 slides from Afg International's earnings presentation, Sep 30, 2023
Slide 1: Cenomi Retail Earnings Presentation Q3 23
Cenomi Retail Earnings Presentation For the quarter ended 30 September 2023 (“Q3 23”)
Slide 2: Disclaimer
Disclaimer This presentation has been prepared solely for use as an investor presentation for Cenomi Retail. (the “Company”). By attending or by reading this presentation, you agree to be bound by the following limitations. The information contained in this presentation is for background purposes on
Slide 3: Table of Contents
Table of Contents 05 13 16 25 03 Q3 23 Earnings Presentation
Slide 4: Cenomi Retail at a glance
Cenomi Retail at a glance SAR 4.2 BN SAR 347 MN SAR 89.1 MN Revenues EBITDA Net loss SAR 1.2 BN (Q3) SAR -39.2 MN (Q3) SAR -203 MN (Q3) 5.5% YOY 9M 2023 13.6% YOY Q3 2023 7.7% YOY 9M 2023 SAR 836 MN SAR 242 MN SAR 933 MN International Revenue Online Sales Inventory SAR 298 MN (Q3) SAR 64 MN (Q3) SAR
Slide 5: The Saudi market represents a secular growth opportunity
The Saudi market represents a secular growth opportunity 01 Youthful demographics with 63% of population under 30 02 A booming consumer outlook 500 - 900 KSA population: 3% 2 – 3x +4 million (+12%) 250 - 300 25% Tourism: 100 MN annual visits 73% 2019 2030 KSA Discretionary consumer spend Potential E
Slide 6: Healthy KSA consumer spending trends with seasonal challenges in Q3
Healthy KSA consumer spending trends with seasonal challenges in Q3 POS Transactions* - KSA Market POS Transactions* - Select Sectors (SAR Million) (SAR Million) +10% +13% -7% -3% -7% +8% 559,135 +10% vs 154,492 9M’22 Q3'22 142,871 Q3'23 473,258 +8% 456,253 23,786 20,434 22,528 21,102 +32% 9,846 9,1
Slide 7: Strategic Review
01 Cenomi Retail Strategic Review Q3 23 Earnings Presentation Q1 23 Earnings Presentation 7 07
Slide 8: Strategic pillars underpinning long-term return to profitability and growth
Strategic pillars underpinning long-term return to profitability and growth ▪ Exit non-strategic markets of US, and the Balkans Geography ‘Saudi First’ Strategy ▪ Double down on Saudi market and wider MENA region Evolve from apparel ▪ Defend & maintain Fashion & Accessories market leadership Categor
Slide 9: Charting the course to maximized potential and profitability
Charting the course to maximized potential and profitability Focus Phase 1: Phase 2: Phase 3: Fix The House (2023-2024) Embark on Growth (2024-2026) Achieving Optimal Potential (2027+) Turnaround Growth Scale existing brands to maximum potential Rationalize brand and store portfolio Invest to scale
Slide 10: Solid progress made across all fronts towards turnaround strategy
Solid progress made across all fronts towards turnaround strategy Market Brand Store Operational Governance Rationalization Rationalization Rationalization Enhancement • Successfully exited the • Defining roles and Balkans through the • LOI to divest 22 brands • Closure of 319 stores in • Cut down o
Slide 11: Rolled out a full-fledged program to deliver best in class governance and controls
Rolled out a full-fledged program to deliver best in class governance and controls Topic Achieved so far Next Steps • Developed new simplified plug & play model to establish consistent • Operationalize the design by introducing the new organizational Cenomi Retail Way of Operating model People • Def
Slide 12: Operational Overview
02 Operational Overview Q3 23 Earnings Presentation 12
Slide 13: Continued efforts towards optimizing market, brand & store footprint
Continued efforts towards optimizing market, brand & store footprint Retail Market Rationalization ▪ 13 stores opened Q3’23 Retail ▪ 56 stores closed ▪ 43 net closures Successfully exited the Balkans through the closure of 8 stores ▪ 6 stores opened LOI signed to sell US operations Q2’23 Retail ▪ 85
Slide 14: Tangible progress in store optimization evident in network evolution
Tangible progress in store optimization evident in network evolution Store network Saudi retail store F&B store evolution network evolution network evolution 1,684 1,676 1,047 1,042 1,052 1,030 322 318 314 325 1,668 1,659 1,002 908 1,560 1,465 1,389 257 1,340 835 823 250 254 251 322 318 314 325 250
Slide 15: Financial Overview
03 Financial Overview Q3 23 Earnings Presentation Q1 23 Earnings Presentation 15 15
Slide 16: Financial performance overview
Financial performance overview Financial highlights Revenues experienced a 5.5% YTD YoY decline with increase in the international revenues (+8.2%) offset by a 6.5% decline in KSA Non-F&B revenues SAR 346.7 million EBITDA in 9M ‘23, up 7.7% SAR 4.2 BN SAR 347 MN compared to SAR 322.0 in 9M ‘22 Reven
Slide 17: Softening of top line amid store rationalization, retail market challenges, and seasonal trends
Softening of top line amid store rationalization, retail market challenges, and seasonal trends Revenue, SAR million LFL consolidated sales growth, % ▪ Retail sales continues to dominate the revenue pool contributing almost ▪ Recorded a drop in LFL consolidated sales owing to weakened 93% of the tot
Slide 18: Resilient Brand Champions amidst softening LFL, with sustained international growth momentum
Resilient Brand Champions amidst softening LFL, with sustained international growth momentum LFL Saudi retail sales growth % LFL International Retail growth % ▪ LFL has weakened in Q3 2023 as a result of a drop in top-line, mostly ▪ International LFL growth maintained positive momentum during the dr
Slide 19: Champion brands continue to perform positively while tail brands weaken overall fashion performance
Champion brands continue to perform positively while tail brands weaken overall fashion performance Fashion & Apparel Revenues (SAR Million) +6% LFL +4% LFL -18% LFL 9M'22 1,450 9M'23 1,246 1,139 1,103 1,102 1,038 Zara Inditex Fashion Q3 23 Earnings Presentation 19
Slide 20: Continued strength in online sales marked by 32% YoY growth in Q3'23
Continued strength in online sales marked by 32% YoY growth in Q3'23 and 35% YoY in 9M'23 Online revenues, SAR MN E-commerce, % of total retail sales 93 91 88 84 6.3% 6.2% 5.6% 64 5.4% 4.9% 55 48 48 3.7% 3.5% 3.4% Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 Q3'23 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2
Slide 21: Sales per SQM efficiency gains persist despite softness in Q3'23
Sales per SQM efficiency gains persist despite softness in Q3’23 Sales per SQM Sales per SQM (exc. F&B & Online) (exc. Online) 12,814 12,605 12,573 12,397 12,318 12,175 12,171 11,899 11,732 11,790 11,749 11,658 11,722 11,468 446 451 442 439 423 408 408 479 484 485 465 448 433 432 Q1'22 Q2'22 Q3'22 Q
Slide 22: Online and international experience growth as a part of revenue mix
Online and international experience growth as a part of revenue mix Revenue by division Revenue by channel Revenue by geography 1% 8% 5% 5% 10% 4% 19% 16% 4% 1% 25% 21% 69% 67% 79% 96% 75% 95% KSA Retail Int'l Retail F&B Stores Online KSA CIS Egypt Others Q3-23 - Outer circle Q3-22 - Inner circle Q3
Slide 23: Impact of softer retail market reflected in gross profit and EBITDA decline in Q3'23
Impact of softer retail market reflected in gross profit and EBITDA decline in Q3’23 Gross Profit, SAR MN – GPM, % EBITDA, SAR MN – EBITDA Margin, % • A decrease in gross profit, which fell by 61.1% y-o-y from SAR 182.2 • EBITDA decreased by 137% to SAR 39.18 million on YoY basis. This million in Q3
Slide 24: Softening market and increased finance costs overshadow improving fundamentals
Softening market and increased finance costs overshadow improving fundamentals Operating impact: SAR -73m Net Store Closure impact: Q3 KSA Fashion Market slow-down - SAR +15m 7.1%: SAR -35m Net Profit Closures Staff Rent Other Savings Operational Q3 KSA HO Staff Cost Finance Cost One Offs Other Net
Slide 25: Inventory management delivers stability despite softer sales
Inventory management delivers stability despite softer sales Inventory balance (SAR MN) Inventory efficiency ratios ▪ Inventory continues to shrink as a part of optimization efforts to ▪ This quarter, inventory remained stable at 18 weeks, showing signs of stability as compared to the previous quart
Slide 26: Appendix
04 Appendix Q3 23 Earnings Presentation Q1 23 Earnings Presentation 26 26
Slide 27: Income statement
Income statement SAR Million Q3 2023 Q3 2022 % Change 9M Q3'23 9M Q3'22 % Change Revenue 1,186.8 1,372.9 -13.6% 4,220.8 4,465.2 -5.5% Cost of Revenue -1,116.0 -1,190.6 -6.3% -3,663.8 -3,861.6 -5.1% Gross Profit (Loss) 70.9 182.2 -61.1% 557.0 603.6 -7.7% Gross Profit Margin 6.0% 13.3% (7.3pp) 13.2% 1
Slide 28: Balance sheet
Balance sheet SAR Million Sept ‘23 Dec ’22 % Change SAR Million Sept ‘23 Dec ‘22 % Change Assets Equity & Liabilities Share Capital 1,148 1,148 0.0% Property, Plant and Equipment 1,417.0 1,324.3 7.0% Reserves ( Statutory, Foreign Currency and Fair -559 -524 6.7% Value) Right-of-Use Assets 2,228.5 2,
Slide 29: Cenomi Retail brand portfolio
Cenomi Retail brand portfolio Q3 23 Earnings Presentation Q1 23 Earnings Presentation 29 29
Slide 30: Market context: Saudi retail sector headwinds and growth outlook
Market context Historical vs. Future Projected Retail Spend (CAGR) 16,8% 14,2% 16.8 14.2 9,2% 6,5% 6,4% 8,2% 6,8% 7,3% 7,1% 4,9% 5,1% 4,6% 5,1% 5,4% 4,6% 6,3% 8.2 9.2 The Saudi Retail sector has faced 7.1 1,7% 4.9 6.5 2,8% 6.4 3,9% 5.1 4.6 5.1 7.3 5.4 4.6 6.3 6.8 3.9 key headwinds over the past five
Slide 31: Unparalleled opportunity
Unparalleled opportunity The birth of The New Saudi Consumer presents unique growth prospects Birth of the New Saudi Consumer KSA Retail Spend Overview (2022-2027, in SAR MN) Market Size Market Size CAGR Category Shift to lifestyle categories: 2022 2027 2022-2027 More demand for F&B, Groceries 179,2
Slide 32: Consumer Trends
Consumer Trends: Consumer trends Moving forward, Cenomi Retail will need to cater to new consumer trends with significant implications for the future of the industry. Increasing digital / Scale digital e-commerce channels & adoption reinvent role of stores Shift towards Re-mix portfolio to experienc
Slide 33: Moving towards best-in-class governance to foster greater transparency and management control
Moving towards best-in-class governance to foster greater transparency and management control Audit • Closer collaboration with Audit Committee Related Party • Commitments from major shareholders to Committee and the Board of Directors to revamp Balances settle SAR 272 million in outstanding policie
Slide 34: Thank You
Cenomi Retail THANK YOU Contacts Investor Relations Department Email: IR.retail@cenomi.com For more information, visit Tel: +966 (11) 825 2080 https://ir.cenomiretail.com/