Analyst Presentation for the year ended 28 February 2014
Agenda 1. General commentary on the period � Kevin Hodgson 2. Financial commentary � Cobus Loubser 3. Questions Page 2 Analyst Presentation - 9 May 2014
General Commentary
Review of the period • Group sales increased 3.1% to R1 417.5 million • Operating profit increased 2.8% to R250.0 million • Profit before tax of R242.5 million increased by 3.3% from comparative R234.8 million • Core headline earnings per share increased 1.9% to 423.3 cents per share • Final gross dividend of 145.0 cents per share, up 11.5% from last year Page 4 Analyst Presentation - 9 May 2014
Review of the period • Sportsmans Warehouse - sales increased by 4.3% (2.9% like-for-like) - increased operating profit by 9.0% from last year - good growth in online sales • Outdoor Warehouse - 0.2% increase in sales (3.9% decrease like-for-like) - operating profit 6.6% lower than last year - launched online sales • Performance Brands - 1.5% lower sales to external customers - Intergroup sales up 26.9% - Capestorm strategy successful - Operating profit 18.8% lower than last year due to lower gross margin and capacity investment • Trading space - Two new stores - One expansion and one store closed Page 5 Analyst Presentation - 9 May 2014
Financial Commentary
Financial highlights • Low sales growth in a tough economic environment • Increase in gross margin and tight control over expenses maintained operating margin at 17.6% (2013: 17.7%) • Cash generated from operations increased by 14.6% • Investment in distribution facilities completed • Gross final dividend declared of 145.0 cents Page 7 Analyst Presentation - 9 May 2014
Income Statement review Year ended on Year ended on 28 February 28 February 2014 2013 Change Audited Audited R � % R � 000 000 3.1 Sales 1,417,584 1,374,531 2.2 (734,035) (717,971) Cost of sales 4.1 Gross profit 683,549 656,560 49.2 5,470 3,667 Other income 5.3 (439,010) (416,937) Trading expenses Operating profit 250,009 243,290 2.8 (21.4) 2,441 3,104 Finance income (14.2) (10,000) (11,652) Finance cost Profit before taxation 242,450 234,742 3.3 3.8 (68,740) (66,226) Taxation Profit for the period and total comprehensive income for the period attributable to equity holders of the company 173,710 168,516 3.1 • Low sales growth despite higher price inflation • Gross profit margin increased to 48.2% from 47.8% in the previous year due to change in sales mix. • Trading expenses tightly controlled • Aggregate foreign exchange loss for the year of R0.4m (2013: R1.8m) • Net finance cost lower in line with reduction in net debt and interest rate charged. Page 8 Analyst Presentation - 9 May 2014
Sales Like-for- Sales by Sales by like Store segment segment 2014 Change Growth 2014 2013 2013 R � % % % % R � m m 4.3% 2.9% 73.5% 72.7% Sportsmans Warehouse 1,042.0 999.0 0.2% -3.9% 22.8% 23.4% 323.1 322.3 Outdoor Warehouse 3.3% 1.1% 96.3% 96.1% Retail sales 1,365.1 1,321.3 -1.4% 3.7% 3.9% 52.5 53.2 Performance Brands 3.1% 100.0% 100.0% Total sales 1,417.6 1,374.5 • Challenging year with low levels of consumer confidence translating into weak demand • Total sales increased by 3.1% - Total retail sales increased by 3.3% - Like for like retail sales increased by 1.1% Performance Brands external sales decreased by 1.4% but sales to rest of group up 26.9% - • Sales mix broadly consistent with last year with greater share of apparel assisting margin • Performance Brands - Continue to expand ranges - Good demand for Capestorm Page 9 Analyst Presentation - 9 May 2014
Sales 2009 2010 2011 2012 2013 2014 Increase in retail sales (%) 11.4 4.3 Sportsmans Warehouse 6.0 9.7 10.5 9.2 11.1 8.1 14.8 7.3 7.4 0.2 Outdoor Warehouse Total 7.2 9.3 11.6 8.7 10.4 3.3 Like-for-like sales increase (%) 9.3 2.9 Sportsmans Warehouse 0.5 6.5 10.8 7.5 2.3 4.1 16.1 3.7 5.2 (3.9) Outdoor Warehouse Total 0.9 5.9 12.1 6.6 8.3 1.1 • Price inflation of 4.9% (2013: 2.9% inflation) • Weighted space growth of 5.6% Page 10 Analyst Presentation - 9 May 2014
Growth in stores & trading density Change % 2009 2010 2011 2012 2013 2014 Number of stores 32 32 32 33 35 35 Sportsmans Warehouse 17 18 17 18 19 20 Outdoor Warehouse Total 49 50 49 51 54 55 Trading density (R'000s per m2) 13.6 14.3 15.8 16.9 18.0 18.0 Sportsmans Warehouse 0.0% 15.5 15.8 18.1 18.9 19.7 18.6 Outdoor Warehouse -5.6% Total 14.0 14.7 16.4 17.4 18.4 18.1 -1.6% • Added Outdoor Warehouse store in Rondebosch • Added new Sportsmans Warehouse store in Sea Point and closed Sportsmans Warehouse in Amanzimtoti • Lower demand for big ticket items, especially outdoor equipment Page 11 Analyst Presentation - 9 May 2014
Expenses 28 February 28 February Like-for- 2014 2013 Ratio to like Ratio to Change Audited turnover turnover change Audited R � % % % % R � 000 000 167,711 11.8 159,888 11.6 4.9 3.3 Staff costs 123,625 8.7 113,791 8.3 8.6 3.2 Occupancy cost 138 0.0 2,480 0.2 (94.4) (94.4) Straightlining of leases 29,762 2.1 25,110 1.8 18.5 12.1 Depreciation 12,963 0.9 12,963 0.9 - - Amortisation of intangibles 19,639 1.4 20,818 1.5 (5.7) (5.7) Advertising costs (862) (0.1) (461) (0.0) 86.9 86.9 Foreign exchange losses 86,034 6.1 82,348 6.0 4.5 2.7 Other operating costs 439,010 31.0 416,937 30.3 5.3 3.0 • Total expenses increased by 5.3% on prior year, and 3% like-for-like as a result of rigorous cost control. • Occupancy costs benefited from various electrical savings initiatives. • Depreciation calculated over 4 years. • Advertising costs lower due to substitution of print cost with greater electronic distribution. • The group recorded R0.8m of foreign exchange gains compared to foreign exchange profits of R0.4m in the previous year. • Other operating costs include banking costs and credit card commission (which are linked to sales), security, IT, telephones, insurance, cleaning and maintenance. Page 12 Analyst Presentation - 9 May 2014
Staff costs 28 February 28 February Like-for- 2014 2013 Ratio to Ratio to like Store Change Audited Audited turnover turnover Growth % R � % % % R � 000 000 151,537 10.7 143,455 10.4 5.6 3.9 Salaries & Wages 8,633 0.6 11,534 0.8 (25.2) (26.3) Incentives 160,170 11.3 154,990 11.3 3.3 1.6 Staff costs before share plan expense 7,541 0.5 4,898 0.4 54.0 54.0 Forfeitable share plan expense Total staff costs 167,711 11.8 159,888 11.6 4.9 3.3 • Maintained the ratio of staff costs to sales at 11.3% before accounting for the share plan expense as a result of lower incentives than last year • The like-for-like increase in staff costs exclude stores opened since March 2012 • The forfeitable share plan expense is calculated in terms of IAS 2 � Share based payments over the vesting period, which generally is five years. Page 13 Analyst Presentation - 9 May 2014
Balance Sheet 28 February 28 February 2014 2013 Audited Change Audited R � R � 000 % 000 • Plant and equipment include the land and Assets Non-current assets construction cost of the new retail and wholesale 150,265 98,282 52.9 Plant and equipment distribution centers and two new stores. 620,336 633,299 (2.0) Goodwill and other intangibles 5.3 Total non-current assets 770,601 731,581 • Intangibles reduced by the annual amortisation Current assets 2.4 354,436 346,054 Inventories charge 24,782 22,346 10.9 Trade and other receivables 857 - Taxation • Inventory is higher due to additional store space. 57,577 36,284 58.7 Cash and cash equivalents - 402 Derivative instruments Trade and other payables are lower than last Total current assets 437,652 405,086 8.0 year due to timing of stock purchases and Total assets 1,208,253 1,136,667 6.3 imports with Easter being three weeks later. Equity and liabilities Capital and reserves • Other reserves consist of the shares purchased 229,312 229,312 - Share capital (12.6) (17,926) (20,521) Other reserves for the Forfeitable Share Plan, with a further 689,544 604,291 14.1 Retained earnings R4.9m purchased and awarded in the first half Equity attributable to owners of the 900,930 813,082 10.8 and R7.5m expensed. company Non-current liabilities • The derivatives consist of FEC � 130,000 - Loans s marked to (13.7) 42,806 49,623 Deferred taxation market. 24,590 24,452 0.6 Straight-lining lease liability Total non-current liabilities 197,396 74,075 166.5 • Term debt of R124.3m was repaid on 30 August Current liabilities 109,843 125,085 (12.2) Trade and other payables 2013 and replaced with a new 3-year bullet loan 84 - Derivative instruments of R130m. Net debt reduced to R72.4m at year (100.0) - 124,282 Short term portion of loans end, from R87.9m at end of last year. - 143 (100.0) Taxation Total current liabilities 109,927 249,510 (55.9) (5.0) Total liabilities 307,323 323,585 Total equity and liabilities 1,208,253 1,136,667 6.3 Page 14 Analyst Presentation - 9 May 2014
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