Shoprite Holdings Limited · JSE:SHP
Shoprite — H1 2023 Earnings Presentation
51 slides from Shoprite's earnings presentation, Mar 7, 2023
Slide 1: 2023 Interim Results Presentation
2023 Interim Results Presentation For the 26 weeks ended 1 January 2023
Slide 2: Agenda
01 Interim Operational Review Pieter Engelbrecht 02 Interim Financial Results Anton de Bruyn 03 Strategy Update Questions Pieter Engelbrecht
Slide 3: Interim Operational Review
Interim Operational Review Pieter Engelbrecht Chief Executive Officer
Slide 4: Sales surpassed R100bn for the six months
Sales surpassed R100bn for the 6 months +R15.3bn Additional sales R106.3bn R24.9bn +10.2% Sales Gross profit DHEPS +16.8% +13.7% 248c +11.3% Like-for-like* +6.4% Dividend * Like-for-like growth represents pro forma financial information in terms of JSE Limited Listings Requirements Continuing operat
Slide 5: Customers continued to vote with their wallets
Customers continued to vote with their wallets More Increased Profitable market customers volumes share gains +12.9% Customer visits +4.9% Volume growth +R3.9bn RSA H1 market share gain +4.0% +166m 46 Months of uninterrupted Basket size growth Additional products sold market share gains (NielsenIQ D
Slide 6: Busy six months for our 152k team members
Busy six months for our 152k team members Re-opened New store format trials Continued focus into Largest Rewards Initiated next phase of supply Checkers Hyper continue, including future-fit digital talent programme with 26m chain transformation, in Brookside Mall, Checkers Outdoor at ShopriteX Xtra
Slide 7: Busy six months for our 152k team members
Busy six months for our 152k team members Record Black Friday The Group onboarded Our Rainmaker Retail Media Completed digital and festive season 3 881 new team Network completed its 8 000th signage network roll sales members in H1 media campaign for out to 150 stores advertisers NOVEMBER 2022 DECEM
Slide 8: H1 customer savings scorecard
H1 Customer savings scorecard 1 No. 1 R7bn million Customer Choice for “Lower Prices” and in instant cash savings for loaves subsidised “Good value for money” Xtra Savings consumers every week (Internal research, sample size of 5 524, October 2022) 384m Xtra Savings promotional Shoprite is cheaper L
Slide 9: Supermarkets RSA sustained high growth on a strong base
Supermarkets RSA sustained high growth on a strong base Industry-leading growth Invested for customers amid high inflation Headwinds from increased cost-to-serve Balanced customer portfolio performing well
Slide 10: Supermarkets RSA: Industry-leading growth
Supermarkets RSA Industry-leading growth • Unrivalled combination of value, fresh and online drove further share of wallet gains • Supermarkets RSA sales growth of 17.5% (H1 2022: 11.3%) and 11.1% like-for-like growth* • LiquorShop sales +35.6% (H1 2022: 49.8%) • 86.8% online sales growth on top of
Slide 11: Another period of above-market growth
Supermarkets RSA Industry-leading growth Another 6-month period of above-market growth, now 46 months of consecutive market share gains Supermarkets RSA sales growth % by half vs. Rest of Market (incl. Liquor) H2 H1 H2 H1 H2 H1 FY20 FY21 FY22 FY23 Rest of Market Shoprite Group Source: NielsenIQ, 201
Slide 12: Invested for customers amid high inflation
Supermarkets RSA Invested for customers amid high inflation • Invested in lower prices to shield our most price sensitive consumers • Deal-seeking behaviour resulting in 3.3 percentage points higher promotional sales contribution • Significant market share in essential foods which are experiencing a
Slide 13: Headwinds from increased cost-to-serve
Supermarkets RSA Headwinds from increased cost-to-serve • Macro factors increasing the cost-to-serve our customers and impacting net margin • Record diesel prices are increasing distribution costs • Keeping doors open AND food fresh 24/7 during unprecedented rolling blackouts in RSA: 144/182 days in
Slide 14: Balanced customer portfolio performing well
Supermarkets RSA Balanced customer portfolio performing well R33.9bn 16.9% 394 19.7% 9.6m Sixty60 delivery Private label contribution Xtra Savings Sales value Sales growth locations (excl. Liquor) members 255 stores Best value in fresh and premium foods Omnichannel market leader in value on fresh, g
Slide 15: Balanced customer portfolio performing well
Supermarkets RSA Balanced customer portfolio performing well R43.8bn 15.1% 21.4% 16.4m Private label contribution Sales value Sales growth Xtra Savings members (excl. Liquor) 550 stores Africa’s low price grocery leader Lowest prices on trusted grocery brands, without compromising on customer servic
Slide 16: Supermarkets Non-RSA improved performance
Supermarkets Non-RSA improved performance • Supermarkets Non-RSA (continuing operations) rand sales increased by 17.5% • Supermarkets Non-RSA (continuing operations) sales in constant currency increased by 6.9%*: • Zambia and Mozambique showed positive growth • Angola sales declined vs. comparative
Slide 17: Interim Financial Results
Interim Financial Results Anton de Bruyn Chief Financial Officer
Slide 18: Financial highlights
Financial highlights Sales Total income Total expenses Trading profit R106.3bn +15.6% +17.8% R6.0bn +16.8% +14.6% +14.0% +8.6% excl. Shoprite Employee Trust, +11.3% Like-for-like excl. loss of profit insurance claim additional diesel and additional insurance EBITDA EPS ROIC excl. IFRS 16 Interim div
Slide 19: Sales highlights
Sales highlights H1 2023 H1 2022 restated* Net new stores continuing operations 16.8% 17.5% 17.5% Net new stores +184 +8 over 12 months 16.6% 12.5% +225 11.3% 9.9% +29 11.3% 11.1% 8.6% 8.9% 7.0% 9.6% +4 Like-for-like growth 5.0% (6.5%) Group Supermarkets Supermarkets Furniture Other Continuing opera
Slide 20: Supermarkets RSA sales growth unpacked
Supermarkets RSA sales growth unpacked Space* growth (m2) over last 12 months: 5.0% Supermarkets RSA Supermarkets RSA (excl. re-openings related to social unrest) Brand contribution and sales growth Store numbers +72 620 +68 R43.8bn R33.9bn Contribution: 51.4% Contribution: 39.8% 550 Sales growth: 1
Slide 21: Trading profit: total income unpacked
Trading profit: total income unpacked Margin 26 weeks 26 weeks Change 1 Jan '23 1 Jan '23 Other operating income analysis Continuing operations % Rm % Gross profit 13.7 24 933 23.5 Other operating income 43.8 2 098 2.0 Commissions received Interest revenue 16.3 314 0.3 R567m Share of profit of equit
Slide 22: Trading profit: total expenses unpacked
Trading profit: total expenses unpacked 26 weeks 1 Jan '23 26 weeks Expenses net Change 1 Jan '23 Change of exclusions Continuing operations % Rm Exclusions % Rm Depreciation and amortisation 14.9 2 968 - 14.9 2 968 10.4% Employee benefits 15.1 8 280 (121) 13.4 8 159 Electricity and water 30.3 2 316
Slide 23: Trading profit by segment
Trading profit by segment Restated* Trading 26 weeks 26 weeks margin Change 1 Jan '23 2 Jan '22 1 Jan '23 Continuing operations % Rm Rm % Supermarkets RSA 7.7 5 370 4 985 6.3 Supermarkets Non-RSA 58.8 316 199 3.2 Furniture (34.2) 127 193 3.2 Other operating segments 26.1 227 180 3.1 Total continuing
Slide 24: Net finance costs
Net finance costs Restated* 26 weeks 26 weeks Change 1 Jan '23 2 Jan '22 Continuing operations % Rm Rm Interest received from bank account balances 98.2 222 112 Finance cost: borrowings 64.6 (260) (158) Finance cost: lease liabilities 13.6 (1 432) (1 261) Net finance costs 12.5 (1 470) (1 307) * Res
Slide 25: Balance sheet analysis
Balance sheet analysis Net cash Borrowings Change in right-of-use assets R8.7bn R6.4bn +R2.0bn R5.3bn Change in lease liabilities +59.1% H1 2022 +R2.2bn Net changes in working capital USD borrowings Borrowings to equity ratio +R2.3bn US$35m 24.5% (R1.6bn) (40.4%) 25% - 30% H1 2022 Target
Slide 26: Capital spend
Capital spend CAPITAL SPEND MAINTAINING THE BUSINESS EXPANDING THE BUSINESS H1 2023: R3 360m 32% 68% H1 2022: R2 677m +25.5% 2023 GUIDANCE: R6.3bn Store maintenance CAPITAL SPEND AS % OF SALES R976m H1 2023: 3.2% Other Sales growth H1 2022: 2.9% R42m R1 978m IT Margin expansion CAPITAL SPEND AS % OF
Slide 27: Working capital management
Working capital management 26 weeks 1 Jan '23 Total operations cash inflows/(outflows) Rm Inventories (3 591) Trade and Trade and other receivables (1 231) other Inventories payables and Trade and other payables 7 310 contract Contract liabilities (149) liabilities Changes in working capital 2 339 T
Slide 28: Inventories
Inventories INVENTORIES Inventories as % of sales (52 weeks) H1 2023 H1 2022 H1 2023: R25.4bn from continuing operations % % H1 2022: R21.5bn Supermarkets RSA 12.6 11.9 +17.8% Supermarkets Non-RSA 12.1 14.9 Furniture 27.7 29.9 SUPERMARKETS RSA Other operating segments 7.0 6.5 R20.2bn (H1 2022: R16.5
Slide 29: Free cashflow
Free cashflow FREE CASH FLOW CONVERSION RATIO Rbn H1 2023: 78.1% NORMALISED H1 2023: 83.0% OPERATING CASH CONVERSION RATIO H1 2023: 123.9% 9.1 2.3 0.4 0.5 0.1 7.6 (0.9) (1.0) 7.1 (1.6) (0.1) (1.2) Effective tax rate: 31.1% EBITDA Income Net Changes Capital Net Lease Free Diesel Shoprite Net Normalis
Slide 30: H2 2023 outlook
H2 2023 outlook Operating activities • Diesel expense to operate generators expected to remain notably elevated given load-shedding outlook • Increased maintenance costs as a result of the power outages – especially our refrigeration equipment • Additional cost of insurance cover above that offered
Slide 31: Strategy Update
Strategy Update Pieter Engelbrecht Chief Executive Officer
Slide 32: Uplifting lives every day by pioneering access to the most affordable goods and services
Uplifting lives every day by pioneering access to the most affordable goods and services A TRULY TRUSTED, UNLOCK CUSTOMER-FIRST PROFITABLE ALTERNATIVE CULTURE PRIVATE LABELS INCOME DEVELOP GROW SHARE IN FUTURE-FIT STRATEGIC FUTURE-FIT CHANNELS PREMIUM AND FRESH FOOD TALENT PRIORITIES ENABLE A STRONG
Slide 33: Data powering a customer-first culture
Data powering a customer-first culture SHOPRITEQ) — SA‘s No. 1 Retail Loyalty Programme 2021 - 2022 SA‘s Truth Loyalty Awards Deepening digital relationships and helping customers save Personalised Personalised Powering Value Recommendations New Customer Insights Platform anne from) Your ! Customer
Slide 34: A Smarter Shoprite
A Smarter Shoprite Advanced analytics is powering operational efficiencies Smarter Smarter Smarter Promotions Forecasting and Replenishment Logistics Win-Win-Win promotions Better availability, lower waste and improved Fuel consumption optimisation through AI- customer service powered driver and veh
Slide 35: Embracing digital
Embracing digital 1-hour delivery service continues strong momentum ✓ Sixty60 sales growth continues with 86.8% increase in H1 on top of growth of more than 250% in the prior year ✓ SA’s No. 1 grocery app with 3.1m downloads and enabling ‘anywhere commerce’ (customers from 12 countries) ✓ Supporting
Slide 36: Grow trusted, profitable private labels
Grow trusted, profitable private labels Private label sales participation (excl. liquor) increased from 19.7% to 20.7% ✓ 93% of all customers now shop private label as cost-of-living pressures mount ✓ Driving differentiation in line with global mega-trends • 984 plant-based vegan and vegetarian prod
Slide 37: Investing to win in the long term
Investing to win in the long term Future-fit supply chain expansion ✓ Increased supply chain capacity through Retail Logistics Fund: • Adding nimbler, regional DC infrastructure • Building 200 000m2 additional capacity over the next 2-3 years • Meeting organic growth demands and supplying new stores
Slide 38: Investing to win in the long term
Investing to win in the long term Future-fit supply chain expansion Expanding our store network to leverage proximity advantage ✓ Leverage operational excellence into new formats and extended customer offerings ✓ We will deliver 425 new, vibrant stores for the Group in the financial year
Slide 39: Investing to win in the long term
Investing to win in the long term Future-fit supply chain expansion Expanding our store network to leverage proximity advantage Amplify digital flywheel ✓ Double down on digital to maximise share of wallet and unlock alternate income
Slide 40: A force for good – people & planet
A force for good – people & planet Uplifting lives in Fighting waste Better for our planet our communities Recycled 28 402 tonnes of First in SA to purchase 100 fuel-efficient We support 193 community food gardens cardboard and plastic in H1 Scania Euro V trucks with lower CO2 and covering 4 468 224
Slide 41: Building our ecosystem of value for customers
Building our ecosystem of value for customers
Slide 42: Outlook
Outlook • Supermarkets RSA sales growth sustained in Jan ‘23: • Strong back-to-school performance • Selling price inflation pressure continued in Jan at 11.8% vs.13.8% official food inflation (StatsSA food and non-alcoholic beverages) • Rolling blackouts adding significant operational costs • 94 Mas
Slide 43: Thank you Questions
Thank you Questions
Slide 44: Interim Additional Information
Interim Additional Information Anton de Bruyn Chief Financial Officer
Slide 45: Store status from social unrest in July 2021
Store status from social unrest in July 2021 231 80 75 stores impacted 6 70 60 54 51 4 50 3 1 8 206 40 35 69 2 30 49 40 33 stores re-opened 20 7 10 7 15 2 1 - 6 Checkers Checkers Hyper Shoprite Usave LiquorShop Shoprite OK Furniture OK Franchise stores to re-open 10 Total stores re-opened Permanentl
Slide 46: Financial metrics
Financial metrics H1 2023 Restated* FY 2022 IFRS 16 ROIC excl. IFRS 16 ROIC excl. ROIC impact IFRS 16 ROIC impact IFRS 16 Rm Rm Rm Rm Rm Rm Trading profit 11 752 (2 695) 9 057 11 278 (2 241) 9 037 Effective tax rate 31.1% 31.1% 30.6% 30.6% Trading profit after tax 8 097 (1 857) 6 240 7 827 (1 559) 6
Slide 47: Trading profit analysis
Trading profit analysis Trading 26 weeks margin Change 1 Jan '23 1 Jan '23 Continuing operations % Rm % Trading profit 8.6 6 014 5.7 Exclusions: Additional diesel used for generators 465 Shoprite Employee Trust distributions to eligible employees in South Africa and equivalent awards granted by subs
Slide 48: Diluted headline earnings per share (DHEPS)
Diluted headline earnings per share (DHEPS) Restated* 26 weeks 26 weeks Change 1 Jan '23 2 Jan '22 % cents cents DHEPS continuing operations 10.2 577.5 524.1 DHEPS discontinued operations (>100) (18.8) 1.0 DHEPS including discontinued operations 6.4 558.7 525.1 DHEPS continuing operations 10.2 577.5
Slide 49: Adjusted DHEPS reconciliation
Adjusted DHEPS reconciliation 1 Jan '23 Headline 1 Jan '23 earnings DHEPS* Rm cents Headline earnings including discontinued operations 3 052 558.7 Headline loss discontinued operations 103 18.8 Headline earnings continuing operations 3 155 577.5 Adjusted for the impact of: Shoprite Employee Trust d
Slide 50: Items of a capital nature
Items of a capital nature Restated* 26 weeks 26 weeks 1 Jan '23 2 Jan '22 Continuing operations Rm Rm Notes to the results: Impairment of property, plant and equipment (9) (74) Restated* Non-financial asset 26 weeks Impairment of right-of-use assets (7) (91) impairments/(reversals) 1 Jan ‘23 by segm
Slide 51: Capital spend
Capital spend TOTAL OPERATIONS Rm 1 326 1 207 734 734 585 466 338 250 163 100 134 H1 2023 capital spend H1 2022 capital spend R3 360m R2 677m