Shoprite Holdings Limited · JSE:SHP
Shoprite — FY2021 Earnings Presentation
57 slides from Shoprite's earnings presentation, Sep 7, 2021
Slide 1: 2021 Results Presentation
2021 RESULTS PRESENTATION For the 53 weeks ended 4 July 2021
Slide 2: Shoprite brand portfolio
SHOPRITE Checkers Checkers Hyper Ugeve iquorShop LiquorShop sixiy6Q) >, o Freshmark’2 K nect MoneyMarket @ OK blouse &l1ome f@ 3 Medirite* cb | Transpharm FS ‘Checkers Food Services FRANCHISE DIVISION
Slide 3: Welcome / Presentation Outline
WELCOME PRESENTATION OUTLINE OPERATIONAL REVIEW Pieter Engelbrecht FINANCIAL RESULTS Anton de Bruyn STRATEGY UPDATE QUESTIONS Pieter Engelbrecht
Slide 4: Operational Review
2021 OPERATIONAL REVIEW Chief Executive Officer PIETER ENGELBRECHT
Slide 5: Unwavering Commitment to Customers
UNWAVERING COMMITMENT TO CUSTOMERS
Slide 6: Unwavering Commitment to Customers
UNWAVERING COMMITMENT TO CUSTOMERS Proud of our team’s display of agility and resilience in challenging trading environment • 530 days of new COVID-19 protocols since first lockdown • Liquor sales increased despite trading bans and restrictions • 148 stores re-opened in record time after unrest Shop
Slide 7: Unwavering Commitment to Customers
UNWAVERING COMMITMENT TO CUSTOMERS
Slide 8: 2021 The Group in Review
2021 THE GROUP IN REVIEW SALES GROSS PROFIT TRADING PROFIT R168.0bn R41.2bn R10.3bn +8.1% R12.6bn +10.6% +24.9% +5.9% Like-for-like in additional sales 24.5% Gross margin 6.1% Trading margin TOTAL EXPENSES DHEPS DIVIDEND PER SHARE CONTINUING OPERATIONS R34.0bn 952.5c 544.0c +6.7% +20.1% Record divid
Slide 9: 2021 Supermarket RSA Highlights
2021 SUPERMARKET RSA HIGHLIGHTS FEWER, LARGER HIGHER PROFITABLE SHOPPING TRIPS VOLUMES MARKET SHARE GAIN +13.6% BASKET GROWTH +3.2% VOLUME GROWTH +R4.5bn MARKET SHARE GAIN (NielsenIQ, 2021) +178m 28 -3.8% VISITS ADDITIONAL MONTHS OF UNINTERRUPTED MARKET SHARE GAIN PRODUCTS SOLD (NielsenIQ, 2021) SUP
Slide 10: Supermarkets RSA
SUPERMARKETS RSA ● Strong Supermarkets RSA sales momentum despite liquor trade disruptions: ○ +9.3% for 53 weeks (52 weeks: 6.9%) ○ Like-for-like sales +7.3% (52 weeks: 4.9%) ● Benefitted from customer behaviour shifts: ○ Better value, better range and better stock availability ○ More accessible loc
Slide 11: Supermarkets RSA
SUPERMARKETS RSA • Sales growth outpaced Rest of Market over 8 consecutive quarters Rest of Market Supermarkets RSA 15% 5% 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 +0.94% ANNUAL RSA MARKET -5% 2019/20 2020/21 SHARE GAIN (NielsenIQ, June 2020 - July 2021) Supermarkets RSA sales growth vs Rest of Market (incl. liqu
Slide 12: Supermarkets RSA
SUPERMARKETS RSA Brand portfolio effect – each of our supermarket brands gained market share Gained share on top of commanding base during lockdown Improved sales at 2x the pace of other retailers (NielsenIQ, 2021) Leading our gains notwithstanding some pantry loading last year Continued to benefit
Slide 13: Gross Margin: Supermarkets RSA
GROSS MARGIN: SUPERMARKETS RSA ● Higher margin achieved whilst maintaining price leadership o Internal price inflation slowed in H2 ● Higher Checkers contribution and positive volume growth ● Strong team collaboration achieved end-to-end operational excellence o Improved supply chain efficiencies ac
Slide 14: LiquorShop RSA Performance
LIQUORSHOP RSA PERFORMANCE Liquor sales +4.4% ● Positive sales growth despite 20.3% fewer customer visits ● 144 trading days lost ● +2.5% market share gain in RSA (NielsenIQ, 2021) ● Online sales growth increased 151% 53.6% +37 Net new stores opened H1 H2 -21.8% LiquorShop RSA sales growth on prior
Slide 15: Supermarkets Non-RSA Performance
SUPERMARKETS NON-RSA PERFORMANCE • Supermarkets Non-RSA sales declined 7.5% (Continuing operations) ○ Currency devaluations, COVID-19 regulations and trading challenges • Offset by a fourfold increase in trading profit to R307m (Continuing operations) o Goal of a more manageable core group of countr
Slide 16: Furniture & Other Operating Segments
FURNITURE & OTHER OPERATING SEGMENTS Furniture Other operating segment sales +24.6% segments sales +10.0% R6.8bn R11.9bn Once-off demand for home improvement after lockdown: ● OK Franchise sales remained resilient +8.2% ● Like-for-like sales increased 13.5% (H1: 17.3%, H2: 7.3%*) o Total 513 stores
Slide 17: Working Together for a Sustainable Future
WORKING TOGETHER FOR A SUSTAINABLE FUTURE
Slide 18: Financial Results
2021 FINANCIAL RESULTS Chief Financial Officer ANTON DE BRUYN
Slide 19: Restatements Since June 2020
RESTATEMENTS SINCE JUNE 2020 JUNE 2021 JUNE 2020* IFRS 5: NON-CURRENT ● Classify the Group’s Kenya, Uganda and ● Comparative statement of comprehensive ASSETS HELD FOR SALE Madagascar subsidiaries as discontinued income restated for newly classified AND DISCONTINUED operations discontinued operation
Slide 20: Financial Overview
FINANCIAL OVERVIEW Restated* Change Continuing operations 2021 2020 % Notes to the results: Sale of merchandise R168.0bn R155.4bn 8.1 Gross margin: 55 basis points increase in gross margin due to a Gross margin 24.5% 24.0% combination of contribution mix, improved operational execution, impact of th
Slide 21: DHEPS
DHEPS Restated* 2021 2020 Change cents cents % DHEPS continuing operations previously reported 765.8 Restated for IFRS 5: Discontinued operations 27.6 DHEPS continuing operations 952.5 793.4 20.1 DHEPS discontinued operations 20.7 (37.7) >100 DHEPS including discontinued operations 973.2 755.7 28.8
Slide 22: Sales Growth per Segment
SALES GROWTH PER SEGMENT Total Like-for- Net new Total sales like stores sales 53 weeks 53 weeks 53 weeks 52 weeks Supermarkets RSA % % % % Brand contribution and sales growth Supermarkets RSA 9.3 7.3 2.0 6.9 Restated Supermarkets Non- R7.4bn AND OTHER RSA* (7.5) (8.7) 1.2 (9.5) Contribution: 5.5% S
Slide 23: Trading Profit by Segment
TRADING PROFIT BY SEGMENT Trading Change margin 2021 2020 53 weeks 2021 Rm Rm % % Supermarkets RSA 9 401 8 024 17.2 7.0 Restated Supermarkets Non-RSA* 307 73 >100 2.0 Furniture 382 (15) >100 5.6 Other operating segments 291 316 (7.9) 2.4 Total continuing operating segments 10 381 8 398 23.6 6.2 Hype
Slide 24: Net Finance Costs
NET FINANCE COSTS Previously reported 2021 2020* 2021 2020 Rm Rm Net finance costs cover 18.3x 15.3x Interest received from bank account Finance costs cover 10.4x 8.4x balances 268 443 Covenants well within bank limits Finance cost: borrowings ( 624) ( 966) of 5.0x and 3.5x respectively Finance cost
Slide 25: Balance Sheet Composition
BALANCE SHEET COMPOSITION Rbn BORROWINGS AS % OF EQUITY 100% 82.7 77.1 2021: 24.9% Other assets 11.1 10.9 62.7 2020: 60.1% 90% 55.9 2.1 5.1 Other liabilities 80% Trade and other TRADE AND OTHER PAYABLES Inventories 70% 18.8 18.4 19.6 20.2 payables 2021: R19.6bn 2020: R20.2bn 60% Cash and cash equiva
Slide 26: Capital Expenditure
CAPITAL EXPENDITURE LAND, BUILDINGS AND CAPITAL SPEND IT LEASEHOLD IMPROVEMENTS 2021: R3.2bn 23.2% 9.3% 2020: R3.2bn (2020: 19.6%) (2020: 18.7%) -0.3% RSA STORE R3.0bn MAINTENANCE AND (2020: R2.5bn) REFURBISHMENTS 37.8% NON-RSA SUPPLY CHAIN (2020: 41.0%) R0.2bn 6.1% (2020: R0.7bn) (2020: 8.2%) CAPIT
Slide 27: Inventories
INVENTORIES INVENTORIES SUPERMARKETS RSA SUPERMARKETS NON-RSA 2021: R18.4bn R14.4bn R1.8bn 2020: R18.8bn (2020: R13.9bn) (2020: R2.8bn) R0.4bn↓ FURNITURE -2.4% R1.6bn (2020: R1.5bn) INVENTORIES AS % OF SALES OTHER OPERATING (52 weeks) SEGMENTS 2021 2020 R0.6bn Inventory % of sales % % (2020: R0.6bn)
Slide 28: Net Gearing
NET GEARING NET CASH/(BORROWINGS) 2021: R1.5bn 2021 2020 2020: -R2.0bn Rm Rm >100% Total cash position 6 729 10 019 USD BORROWINGS 2021: US$68m Borrowings (5 279) (12 009) 2020: US$433m -84.3% Net cash position/(borrowings) 1 450 (1 990) TOTAL CASH POSITION Lease liabilities (27 722) (23 271) Reflec
Slide 29: 2021 Cash Flow Statement
2021 CASH FLOW STATEMENT Rbn Rbn Net cash decrease (2.4) + Net borrowings repaid 5.9 + Trade payables and tax due to cut-off 5.9 - Capex underspend (1.6) Includes proceeds on - Proceeds from disposals (2.1) disposal of PPE, Normalised cash increase 5.7 intangible assets, discontinued 16.1 operations
Slide 30: Post Balance Sheet Event
POST BALANCE SHEET EVENT 231 Total stores closed on Burnt Looted 22 Aug 2021 stores stores Checkers Hyper 2 2 - Total stores Shoprite 19 15 4 Impacted by looting/fire 23 17 6 148 Usave Liquire 19 3 16 Furniture 17 9 8 KwaZulu-Natal & Gauteng OKFD 3 1 2 Stores open by 22 August 2021 Protest action 9-
Slide 31: Capital Allocation Considerations
CAPITAL ALLOCATION CONSIDERATIONS COMPLETED IN PROGRESS WORKING CAPITAL ✓ Inventory reduction – target achieved ● Inventory remains a focus area ● FY22-25 Inventory to sales target: 11.0% - 11.5% BORROWINGS ✓ US dollar borrowings reduced by ● Remaining US$68m balance remains in US$365m to US$68m pla
Slide 32: Strategy Update
STRATEGY UPDATE Chief Executive Officer PIETER ENGELBRECHT
Slide 33: Strategy Remains Future-Fit
STRATEGY REMAINS FUTURE-FIT Investing in a ‘Smarter Shoprite’ with a focus on optimising our core retail capabilities in existing markets -
Slide 34: A Truly Customer-First Culture
A TRULY CUSTOMER-FIRST CULTURE • Fastest growing rewards programme: 20m+ Xtra Savings members, ahead of expectations • Customer insights from 1 500 swipes per minute powering a “Smarter Shoprite” • Shifting focus to long-term customer lifetime value CUSTOMER HEARTBEAT 20+ Million members R5.3bn Inst
Slide 35: Develop Future-Fit Channels
DEVELOP FUTURE-FIT CHANNELS Formats and channels that are responsive to rapidly changing customer needs SMALLER FORMATS LOW COST, CHECKERS FRESH ONLINE MICRO CLOSER TO HOME ACCESSIBLE FOOD THEATRE FULFILMENT 42 FreshX Stores (80 target) ALTERNATIVES
Slide 36: Develop Future-Fit Channels
DEVELOP FUTURE-FIT CHANNELS Investing in Digital Channels in the Race For Reach 15m Monthly reach on digital channels RACE FOR 81m REACH Monthly supermarket store visits
Slide 37: Develop Future-Fit Channels
DEVELOP FUTURE-FIT CHANNELS • Strong performance from Checkers Sixty60: Award-winning 1hr grocery delivery innovation • No.1 grocery delivery app in SA: 1.5m app downloads • Leading the Quick Commerce revolution :1.5m of the orders delivered in under 30min • Live in 233 sites and fully integrated in
Slide 38: Enable Precision Retailing
ENABLE PRECISION RETAILING ~1 200 CATALOGUE PROMOTIONS → PERSONALISED VALUE +750m Personalised offers Checkers Xtra Savings
Slide 39: Closing the Gap in Key Segments
CLOSING THE GAP IN KEY SEGMENTS HEADROOM IN FRESH, TRUSTED, PROFITABLE UPMARKET CHOICE & CONVENIENCE AND PRIVATE LABELS FOOD PARTNERSHIPS WELLNESS Super premium Forage & Continued Fresh share gains: Feast range launched with R204m Michelin Star Chef Jan 18.3% (Checkers and Hyper, 12m NielsenIQ ) 17.
Slide 40: Nine Strategic Focus Areas Unlocking Alternative Revenue
NINE STRATEGIC UNLOCKING FOCUS AREAS ALTERNATIVE REVENUE • Investing in digital and media revenue • Expanded value-added services for customers
Slide 41: Winning in the Long-Term: Meet ShopriteX
WINNING IN THE LONG-TERM Meet ShopriteX • Digital innovation hub accelerating digital transformation • Fusing the best of data, tech and talent for a Smarter Shoprite • Co-located with Group IT in purpose-built offices • Building precision retail capabilities for future growth: o E-commerce and digi
Slide 42: Future-Fit Talent
FUTURE-FIT TALENT • Largest private employer in SA • 142 602 team members, created 3 897 new jobs • No. 1 Graduate Employer of Choice (SAGEA) • Highest impact employment creator through the Yes programme • Equipping retail teams to thrive in new retail landscape
Slide 43: Leverage Platform Advantage
LEVERAGE PLATFORM ADVANTAGE Shoprite’s right to win Largest customer 17 powerful and Unbeatable Unrivalled supply base trusted brands proximity advantage: chain know-how ~1 billion transactions Shoprite “Brand of the 2 898 stores decade” (Sunday Times, 2021) 80% of the population live Checkers “Most
Slide 44: Leverage Platform Advantage
LEVERAGE PLATFORM ADVANTAGE Growing our ecosystem of value for customers
Slide 45: Outlook
OUTLOOK • Non-RSA actions taken are expected to sustain the segment’s profitability • RSA internal price inflation 3.9% for month of July 2021 • Supermarkets RSA trading remains ahead of internal inflation despite unrest impact • Unaffected stores maintaining good momentum and volume growth • Furnit
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Slide 47: Questions
QUESTIONS s ; A
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Slide 49: Additional Information
2021 ADDITIONAL INFORMATION Chief Financial Officer ANTON DE BRUYN
Slide 50: Discontinued Operations
DISCONTINUED OPERATIONS KENYA Last store closed Jan 2021 Profit after tax: R10m NIGERIA UGANDA Sale of assets Effective date 23 May 2021 Estimated transfer H1 2022 Selling price: R531m Loss after tax: R21m Cash received to date: R441m Receivable in 4 instalments over 29 months: R90m Profit on sale:
Slide 51: 2021 Adjusted DHEPS Reconciliation
2021 ADJUSTED DHEPS RECONCILIATION Headline earnings DHEPS* Rm cents Headline earnings including discontinued operations 5 391 973.2 Headline earnings discontinued operations ( 115) (20.7) Headline earnings continuing operations 5 276 952.5 Adjusted for: Forex 27 4.8 Hyperinflation 49 8.8 Lease modi
Slide 52: Forex
FOREX Rm LOSS GAIN 2021: R27m loss -400 -300 -200 -100 0 100 200 300 2020: R577m gain 1 374 Government Government bonds bonds and bills and bills 209 ● R876m invested in AOA, USD Index Linked, -843 Angola Government Current Current intercompany intercompany loan accounts loan accounts -279 Bonds for
Slide 53: Items of a Capital Nature
ITEMS OF A CAPITAL NATURE 2021 2020* Rm Rm Notes to the results: Impairment of PPE (860) (455) Non-financial asset impairments/(impairment 2021 reversals) by segment Rm Impairment of right-of-use assets (198) (448) Supermarkets RSA 125 Impairment of intangible assets (30) (99) Supermarkets Non-RSA 4
Slide 54: Return on Average Invested Capital (ROIC)
RETURN ON AVERAGE INVESTED CAPITAL (ROIC) 2021 2020 2019 Rm Rm Rm Trading profit from continuing operations 10 332 8 272 Effective tax rate at year-end 32.2% 31.4% Trading profit after tax 7 004 5 675 Invested capital -843 55 426 57 369 59 515 Net asset value 21 204 19 994 22 207 Borrowings 5 279 12
Slide 55: Assets and Capital Spend
ASSETS AND CAPITAL SPEND TOTAL OPERATIONS Rm 1 400 1 321 -38.8% 1 400 1 2171 321 1 200 1 217 1 200 1 000 1 000 800 746 761 800 746634 761 604 600 634 604 600 403 400 403 299 400 299 268 196 268 200 196 200 0 0 Information technology New Stores Store maintenance Land, buildings and Supply chain Infor
Slide 56: Exchange Rate Exposure
EXCHANGE RATE EXPOSURE Zambia kwacha Angola kwanza Mozambique metical 2021 2020 vs vs 2020 2019 20.0% 5.1% 0.0% ZAR ave 2021 VS 2020 (9.0%) ZAR Average rates -20.0% (15.5%) ZAR ave 2020 VS 2019 -40.0% 8.5% 11.1% (41.9%) (39.2%) (39.3%) -60.0% -10.7% -15.8% 20.0% 8.5% 0.0% ZAR closing 2021 VS 2020 -2
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