Pepkor Holdings Ltd. · JSE:PPH
Pepkor — FY2022 Earnings Presentation
59 slides from Pepkor's earnings presentation, Sep 30, 2022
Slide 1: 2022 Reviewed Annual Results
2022 REVIEWED ANNUAL RESULTS for the year ended 30 September 2022
Slide 2: Rich history
Rich history 1901 1916 1965 1978 1986 1989 1991 2003 2000 1998 1995 1993 SOURCING OFFICE INTERNATIONAL 2005 PEPKOR UK 2010 2011 2012 2014 2015 2016 02
Slide 3: Agenda
Agenda Overview of results Financial performance Business performance Outlook
Slide 4: Overview of results
Our purpose To make a positive difference in the lives PIETER ERASMUS – CEO of our customers Overview of results
Slide 5: FY22 in summary
FY22 in summary +15.7% +8.1% 20.1% 5.3% 123 bps normalised excl. Flash and floods HEPS growth to revenue R460m market share 162.6cps growth to lost sales – floods gains1 since R81.4bn pre-COVID 92% +11.0% R11.2bn R10.3bn R1.5bn cash sales operating profit growth Inclusion cash operating full social in
Slide 6: Pepkor at a glance
Pepkor at a glance 12m Avenida 342m 1.6bn 11 cellphones acquisition sold completed physical virtual countries transactions transactions 319 5 830 49 700 new stores opened 202k stores informal employees traders 06
Slide 7: Share price performance (five years)
Share price performance (five years) 120% 110% 100% 80% 60% 40% PPH General Retail All Share 20% +1.3% Index -9.2% +14.1% Sep 17 Sep 18 Sep 19 Sep 20 Sep 21 Sep 22 07
Slide 8: Market share growth
CFH market share growth 12 months rolling Pepkor Market share 142 bps clothing, footwear and homeware Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep 18 19 19 19 19 20 20 20 20 21 21 21 21 22 22 22 Retailers’ Liaison Committee (SA & BELN) 08
Slide 9: Financial performance
Our vision To be the best place to RIAAN HANEKOM – CFO shop, work and invest Financial performance 9
Slide 10: Financial highlights
Financial highlights +8.1% 5.3% 110 bps 11.0% excl. Flash and floods revenue gross profit operating profit1 growth to margin to growth to R81.4bn 35.4% R10.3bn 75% 3x 20.1% R11.2bn 35.1% 24.9% cash earnings conversion cover HEPS growth to cash return on dividend 162.6 cps generated net assets1 declared
Slide 11: HEPS exceeds market expectations
HEPS exceeds market expectations 162.6 cps 152.2 cps 11.9 cps 11.9 cps 150.7 cps 140.3 cps FY22 HEPS FY22 HEPS achieved consensus Bloomberg consensus 11
Slide 12: Insurance recovery update
Insurance recovery update R1 036m R1.5bn c. 50% R536m loss recovered loss recovered R800m R510m R500m R339m R396m Recognised FY22 R171m Recognised FY21 SASRIA Business Estimated Recovered interruption total loss to date Social unrest – July 2021 KZN floods – April 2022 • c. 90% looted stores reopened
Slide 13: Strong normalised HEPS growth
Strong normalised HEPS growth 15.7% 162.6 11.9 150.7 135.4 5.2 130.2 R265m R439m FY21 Properties FY21 FY22 Recovery FY22 statutory normalised statutory normalised 20.1% Rounded cents 13
Slide 14: Revenue drivers
Revenue drivers 5.3% +8.8% +6.0% +0.5% Growth excl. acquisitions -11.1% R81.4bn and disposals 3.0% R77.3bn Excl. Flash – change in product mix 7.5% Growth excl. Flash and 14% 10% floods 8.1% 66% Incl. Excl Avenida 10% Avenida +5.7% +25.2% +8.8% cash sales credit sales credit sales Cash sales mix 92%
Slide 15: Consistent revenue growth
Consistent revenue growth 7.1% 5-YR CAGR R81.4bn R77.3bn R69.6bn R70.8bn R64.2bn R57.9bn FY17 FY18 FY19 FY20 FY21 FY22 15
Slide 16: Improved gross profit margin
Improved gross profit margin 110 bps 34.6% Driven by financial services 35.4% 5-year • Higher interest rates average 34.6% 34.5% • Credit granting 34.2% 34.3% • Flash FY18 FY19 FY20 FY21 FY22 16
Slide 17: Other income
Other income 37.6% 22% other R1 448m R938m R1 052m 13% R881m +6.5% marketing excl. insurance proceeds 8% insurance R510m 57% commissions R171m Insurance proceeds FY21 FY22 17
Slide 18: Low cost of doing business
Low cost of doing business 9.4%1 Normalised opex growth operating expenses growth 3.7%2 25.3% 24.4% IAS 17 property cost 6.5% Salary cost 7.9% Depreciation and amortisation 13.0% +10.1% in non-IFRS 16 component +14.6% in IFRS 16 component FY21 FY22 1 Excludes depreciation and amortisation and debtor
Slide 19: Segmental operating profit growth
Segmental operating profit growth +9.4% +11.0% 439 +51.6% +24.5% +13.8% +6.2% 10 333 9 894 9 305 265 9 040 6% 5% 82% 7% Operating margin 12.2% FY21 Properties FY21 FY22 Recovery FY22 statutory normalised normalised statutory Before capital items (Rm) 19
Slide 20: Consistent operating profit growth
Consistent operating profit growth 11.2% 5-YR CAGR R9 894m R9 040m R6 737m R6 654m R6 391m R5 815m FY17 FY18 FY19 FY20 FY21 FY22 Normalised operating profit before capital items Incl. IFRS 16 20
Slide 21: Net finance costs in line with expectations
Net finance costs in line with expectations 7.1% R2.2bn R2.1bn R1 383m R1 400m R823m Non-IFRS 16 component R659m • Higher interest rates 24.9% • Increased net debt FY21 FY22 21
Slide 22: Lower effective tax rate
Lower effective tax rate 31.2% 26.2% ● Non-taxable recovery ● 27% new statutory rate FY22 FY22 22
Slide 23: Healthy stock
Healthy stock Advanced inflows +25.6% goods-in-transit 27.9% +R380m Avenida +9.3% 5-year CAGR R17.1bn Freshness R13.8bn R13.3bn Inflation R12.0bn 883 883 FY19 FY20 FY21 FY22 23
Slide 24: Credit book health
Credit book health 3.4 3.1 Gross book 1.9 2.2 size (Rbn) 1.5 1.5 1.7 0.7 FY21 FY22 FY21 FY22 FY21 FY22 FY22 35% Provision levels % 33% 24% 31% 24% 21% 20% 19% 19% 17% 14% 16% 13% NPL % 7% 8% FY21 FY22 FY21 FY22 FY21 FY22 FY22 24
Slide 25: Lower bad debts
Lower bad debts R1 733m 38.2% R95m Conservative credit R1 143m -R358m R1 085m R990m granting 25.5% reduction in bad debts (excl. Avenida) R785m Provision release in FY21 Provision increase in line with book growth Debtors’ Bad Movement in Debtors’ Bad Movement in Debtors’ cost debts provisions cost
Slide 26: R11.2 billion generated in cash
R11.2 billion generated in cash 5 115 611 3 336 Inventory 75% cash 1 357 conversion 14 626 2 071 11 187 EBITDA1 Debtors’ Other Net working Credit books Cash costs capital generated by EBITDA before capital items (Rm) operations 26
Slide 27: Net debt within targeted range
Net debt within targeted range R13.9bn Debt repayment profile: 30 September 2022 (Rbn) 0.7x FY23 FY24 FY25 FY26 FY27 net debt- to-EBITDA -1.1 12.3x EBITDA- R7.1bn R7.1bn interest -2.3 cover -2.5 R5.0bn -2.8 -2.8 FY19 FY20 FY21 FY22 Excluding IFRS 16 27
Slide 28: Capital expenditure
Capital expenditure PEP Hammarsdale DC R2.5bn R555m Capex split2 R1.7bn R1.9bn Other Stores R338m 22% 43% R1.4bn % of revenue Distribution centres 2.4% 15% FY22 1.8% FY21 IT 20% FY211 FY221 1 Excluding capex related to social unrest: FY22: R112m; FY21: R103m 2 Excluding capex related to Hammarsdale
Slide 29: Strengthening returns
Strengthening returns Five-year average Return on Return on Return on net assets equity net assets Return on equity 6.9% 27.5% 38.1 36.7 35.1 23.5 24.3 17.7 9.0 9.9 6.8 5.3 6.1 4.2 FY17 FY18 FY19 FY20 FY21 FY22 29
Slide 30: Capital allocation
Capital allocation 1 2 3 4 Share Organic growth M&A Dividend repurchases Capex R2.8bn (net of • R643m spent FY22 • 3x earnings 2.7% cash) Avenida • Cumulative: cover 2.4% acquisition maintained completed • 70.3m shares 1.9% repurchased and • 55.2 cps 1.8% Recapitalisation cancelled completed Growth
Slide 31: Business unit performance
Our mission To provide easy access SEAN CARDINAAL – COO to everyday products and services at the best prices Business unit performance
Slide 32: Our business
Our business Traditional retail Financial services & Telecoms Efficiency & leverage DIGITAL MARKETING GROUP CONTACT SERVICES CENTRE 32
Slide 33: Traditional retail
Traditional retail
Slide 34: PEP
PEP +4.3% +6.8% +2.4% 134 5.0% 2.7% 2 579 excl floods excl. floods 3-YR CAGR new stores sales like-for-like stores growth sales growth 61 37 bps 96% 8m 355 new stores market share Best price cellphones PEP HOME gained leadership sold stores pre-COVID1 1 Retailers’ Liaison Committee data over three yea
Slide 35: Ackermans
Ackermans +6.5% 77 2.8% 1.1% 951 3-YR CAGR new stores sales growth like-for-like stores sales growth 12 80 bps 46 Ackermans new stores Woman stores 60% market share of click-and-collect 28 gained pre-COVID1 32 Ackermans new Connect stores orders collected in small stores stores 1 Retailers’ Liaison
Slide 36: PEP Africa
PEP Africa +22% +2.3% 4 5 4.3% 5.8% 280 actual 3-YR CAGR stores rates stores closed closed sales growth like-for-like stores constant growth currency constant currency Continued repatriation of profits Improved customer reach on virtual channels 36
Slide 37: Speciality
Speciality +6.9% 48 10.3% 9.0% 864 3 -YR new CAGR stores sales like-for-like stores across growth1 sales growth 6 brands 26 bps 90.4% New markets market share online sales gained growth pre-COVID2 New concepts 1 Excluding John Craig 2 Retailers’ Liaison Committee data over three years 37
Slide 38: Avenida
Avenida +62.4% 37.5% 35.8% 30.2% actual rates sales growth like-for-like sales trading density constant growth constant improvement currency currency 5 135 new stores Pepkor group leverage stores Accelerating new store openings 38
Slide 39: JD Group
JD Group +6.2% 48 5.4% 3.9% 888 3 -YR CAGR new stores sales like-for-like stores growth sales growth +44% 137 bps 20% 10% online sales market share credit sales online gained contribution contribution pre-COVID1 in HOME in TECH 1 Growth from Knowledge data over three years 39
Slide 40: The Building Company
The Building Company +3.2% 0.5% 0.9% 7 3 -YR CAGR sales like-for-like new stores growth sales growth opened Load shedding Timbercity defranchised Brand consolidation 40
Slide 41: FinTech
FinTech
Slide 42: Flash
Flash +72% 202k 12% R6.7bn growth informal turnover cash traders growth per digitised device through 17% 60% growth in growth in cellular transactions activations with 100+ partners 42
Slide 43: Capfin
Capfin 270k 75% 54% loans 6-month new accounts loans activated from stores Conservative credit granting Non-performing loans and collections remain as expected 43
Slide 44: Efficiencies and leverage
Efficiencies and leverage DIGITAL MARKETING GROUP CONTACT SERVICES CENTRE
Slide 45: PAXI
PAXI +20% growth 4.2m 2.8m 2 800 parcels 11 500 unique store parcels a day senders footprint 24 000 Growth SMEs opportunity Interoperability 45
Slide 46: Pepkor central capabilities
Pepkor central capabilities 29 million 300+ new stores Information technology known customers per year 29 million cartons 5 700 leases 140m local units 11.7 million 1.6 million garments accounts 8m flip-flops 46
Slide 47: Outlook
Our values Support / Respect / PIETER ERASMUS – CEO Trust / Enable / Grow Outlook
Slide 48: Operating environment
Operating environment High Low GDP Increased cost unemployment growth of living 35.3% 34.5% +0.3% +4.9% +1.9% Low income growth 33.9% -6.3% Limited disposable income Q421 Q122 Q222 2019 2020 2021 2022 est SRD grant extended to 2024 ICASA Infrastructure Move to legislation challenges smartphones chan
Slide 49: Who we are
Who we are Our purpose Our mission To make a positive We make a positive difference in the lives difference to the lives of our customers of our customers and the communities in which we operate by providing easy access to everyday products and services at Our vision the best To be the best place pric
Slide 50: Our strategy
Our strategy Product Accessibility Price Variety through: Accessibility through: Affordability through: • Wanted and needed • Flexible store formats • Scale and leverage products and • Physical and digital • Low cost of doing services channels business • A wide range across • Informal traders • Lowes
Slide 51: Our immediate focus
Our immediate focus Relentless focus on the Informal customer market Value Leverage creation from our core plans competencies Formalised Leadership retail and culture 51
Slide 52: Q&A
PEPKOR Holdings Limited Q&A
Slide 53: Annexures
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Slide 54: Inclusion
60% of PEP products priced under R150 Customer enablement Independent and Solid Employee 1.8 million training hours diversified board governance development developing employees Product Price Convenience First TCFD report Environmental Community 12 300 children protection Customers support supported
Slide 55: Cash vs credit sales mix %
Cash vs credit sales mix % 1 0 5 8 99 17 100 10 43 12 20 96 92 90 89 83 80 57 Credit Cash PEP Ackermans PEP Speciality Avenida JD JD JD Pepkor Africa Group Home Tech group 55
Slide 56: Retail store footprint
Retail store footprint 30 September 2021 Openings Closures Net movement 30 September 2022 Retail area Retail area Retail area Retail stores ‘000 m2 Retail stores Retail stores Retail stores ‘000 m2 Retail stores ‘000 m2 Closing and general merchandise 4 493 1 708 394 (78) 316 140 4 809 1 848 PEP 2 4
Slide 57: FY22 - Normalised vs statutory results
FY22 - Normalised vs statutory results Statutory Non-recurring Non-recurring Normalised Year ended recovery and insurance recovery Year ended Rm 30 Sep 2022 settlement of capital items 30 Sep 2022 Operating profit before capital items 10 333 (439) – 9 894 Capital items 146 – (297) (151) Operating ite
Slide 58: FY21 - Normalised vs statutory results
FY21 - Normalised vs statutory results Statutory Non-recurring IFRS 16 Normalised Year ended gain on property Year ended Rm 30 Sep 2021 acquisition 30 Sep 2021 Operating profit before capital items 9 305 (265) 9 040 Taxation (2 208) 74 (2 134) Profit for the year 4 876 (191) 4 685 Headline earnings pe
Slide 59: Strong normalised EPS growth
Strong normalised EPS growth 15.9% 165.5 11.9 5.8 147.8 132.7 5.2 127.5 R265m R439m R297m FY21 Properties FY21 FY22 Recovery Social unrest FY22 statutory normalised statutory fixtures & fittings normalised recovery 24.7% Rounded cents 59