Unaudited interim results for the six months ended 31 March 2020
Our mission We make a positive difference to the daily lives of our customers and the communities in which we operate, by providing convenient access to everyday products and services at affordable prices. 2
COVID-19 group support SALARY SOLIDARITY SACRIFICE FUND • Management • Business and board support • 3 months FEEDING DO MORE FOUNDATION • GoG • 100 000 meals • Till point • CoCare donations BABY CARE DEPT OF & SANITATION HEALTH • Product • PPE donations donations • Patient admission • Kangaroo Unit • Logistics 3
Agenda 01 The six months in review 02 Financial performance 03 Segmental performance 04 Outlook
Six months in review • Constrained economy Trading • High unemployment conditions • National state of disaster • Gross margin increased 20 bps Retail • 2% growth in operating expenses • Technology platforms benefit financial services • Strong revenue growth in second quarter Growth • 90 bps CFH market share growth • Retail margin improvement • Severely tough trading conditions 5
Key indicators 6.5% 0.3% 3.8% 145 operating profit new stores revenue growth to decrease in HEPS to growth to R37.6bn 1 49.3 cents 1 opened R3.4bn 1 Debtors’ costs and finance costs Reduced profitability in PEP Africa, Speciality and The Building Company National lockdown loss in trade 1 From continuing operations, before the implementation of IFRS 16 – refer to annexure 1 6
Financial performance RIAAN HANEKOM, CFO
Statutory highlights 6.5% 17.2% 13.6% revenue growth to operating profit HEPS decline to R37.6bn 1 growth to R4.0bn 1 44.3 cents 1 Statutory results impacted by the adoption of IFRS 16: Leases 1 From continuing operations, before capital items and including the implementation of IFRS 16 – refer to annexure 1 8
Adoption of IFRS 16: Leases IAS 17 vs IFRS 16 Adopted 1 October 2019 Income statement impact Modified retrospective approach Positive Negative earnings impact earnings impact No restatement of comparatives Key statistics 5 500 leases Three- to five-year term 75% of leases in first half of term Time Historical store opening programme IAS 17 IFRS 16 Lease expense Depreciation & interest cost 9
Adoption of IFRS 16: Leases Impact on results R1.8bn R576m R846m 5.0cps R17.1bn Finance EBITDA 1 EBIT 1 HEPS 1 Lease liability costs - 10% Profit before tax impact (Rm) 2 002 - 1 266 - 846 - 202 2 584 2 272 Profit before tax Reversal of lease Additional Additional interest Other Profit before tax IAS 17 expense depreciation expense cost IFRS 16 1 From continuing operations and before capital items 10
Highlights – excluding IFRS 16 6.5% 0.3% 3.8% 22.0% revenue growth to growth in operating HEPS decline to Return on net R37.6bn profit to R3.4bn 49.3 cents assets Investment in credit books completed IFRS 9 additional provisions: R134m Increased funding costs + 6.1% PEP Africa, Speciality, The Building Company Lost revenue R476m and R150m operating profit COVID 19 1 From continuing operations, before capital items and excluding the implementation of IFRS 16 – refer to annexure 1 11
Revenue growth Rbn H1FY20 segmental composition + 6.5% 11% 37.6 36.4% 10% 1.7% -5.1% 5.4% 14% 35.3 H1FY19 H1FY20 65% R476m lost revenue COVID 19 From continuing operations 12
Gross profit margin maintained Weaker trading 34.6% 34.4% Financial services Less markdowns H1FY20 H1FY19 13
Other income Decrease to - 7.9% R408m 18% Strong growth Commissions 3% in commissions Advertising/ marketing • Bill payments Insurance 14% • Money transfers Other 65% No external distribution fee earned 14
Low CODB leader CODB composition H1FY20 25.4% 20% Salaries + 3.4% Salaries 5% 45% Property leases Depreciation + 0.1% Property 7% Advertising Other Lowest in the market 23% 15
Credit books Business objective Sales enabler Sales enabler Financial services Credit type Revolving credit Installment sale Unsecured lending Gross book 3.1 1.8 2.6 size (Rbn) Growth in gross 90% * > 100% * 21% book (YOY) No of active 1.5m 187k 333k accounts 20% 34% 18% Provision levels 17% 33% 15% Segmental sales 7% 17% N/A contribution * New internally funded credit books 16
Comparable operating profit Rm + 7.0% + 0.3% 150 134 50 3 698 - 3 455 3 414 3 405 H1FY19 IFRS 9 H1FY19 H1FY20 COVID-19 IFRS 9 H1FY20 Statutory Comparable Comparable Lost trading excluding IFRS 16 From continuing operations before capital items and excluding implementation of IFRS 16 17
Comparable operating profit growth Rm H1Y20 segmental composition + 0.3% 11.7% 1.3% 3 414 92% 3 405 -90.5% -0.5% H1FY19 H1FY20 6% 2% 0% R134m IFRS 9 impact 8% R150m lost operating profit – lockdown COVID 19 From continuing operations, before capital items and excluding implementation of IFRS 16 18
Net finance cost Funding of new + 6.1% credit books R784m R739m H1FY20 H1FY19 19
Effective tax rate Improvement in effective tax rate H1FY19 H1FY20 35.7% 34.0% Effective tax rate Irrecoverable foreign withholding taxes Non-deductible finance costs – preference shares Unrecognised tax losses 20
Cash generated H1FY20 – Rm R2.9bn 385 2 090 cash generated 1 000 excl. new credit books 4 077 1 584 1 788 Debtors’ EBITDA 1 H1FY20 Debtors cost Other non-cash Other non-cash Consumer finance Net changes NetWC IFRS 16 Net changes in Cash generated costs 2 adjustments 3 in working capital working capital from operations operations all credit books 1 Before capital items and including discontinued operations 2 Including IFRS 9 costs 3 Includes movement in provisions, share-based payment expense and unrealised foreign exchange movements, etc. 21
Net debt Debt repayment profile – Rbn Net debt R14.1bn Cash and cash equivalents Available cash facilities Debt repayments 5.0 3.9 Net 1.72 debt-to- times EBITDA -0.5 -0.2 -3.3 -5,0 EBITDA 5.30 interest times -9.0 cover Mar 2020 FY20 FY21 FY22 FY23 FY24 FY25 Excluding adoption of IFRS 16 22
Bond programme R10 billion DMTN programme launched R1 billion successfully issued R800m in three-year bonds R206m in five-year bonds Credit rating affirmed by Moody’s 23
COVID-19 impact Debt collections above expectation – expected to decline COVID 19 • Provision levels expected to increase Impairment indications COVID 19 • Expected to emerge depending on trading conditions Debt covenant waiver and amendment COVID 19 Dividend payment not expected COVID 19 Capital structure COVID 19 • Ambition to reduce gearing to 1 times net debt-to-EBITDA remains in place Performance guidance impossible due to high level of uncertainty 24
Segmental performance LEON LOURENS, CEO
Segmental performance Clothing and general merchandise
PEP and Ackermans + 7.3% + 3.6% + 4.5% + 9.8% sales LFL sales retail space core CFH growth growth growth RSP inflation 27
PEP + 44 new stores 97% 26% 2 357 best price price differential stores leadership + 15% + 20% + 21% growth in sales growth sales growth PEPmoney in PEPhome in FMCG transactions 28
Ackermans + 33 new stores 18% 837 credit sales stores contribution 19% + 15% 20 stand-alone lay-by growth in Ackermans contribution Babies’ wear Woman stores 29
PEP Africa 1 - 5.5% - 8.1% - 15.9% 320 sales growth LFL sales growth sales growth stores (constant currency) (constant currency) (actual rates) Remains profitable Zimbabwe exit nearly complete Phase of consolidation 1 Excluding discontinued operations in Zimbabwe 30
Speciality 24 stores closed - 0.8% - 2.9% 943 sales LFL sales stores growth growth Discretionary apparel and footwear market 31
Segmental performance Segmental performance Furniture, appliances and electronics
JD Group > 100% transaction growth 1.7% - 0.1% - 2.7% 6.3% LFL sales online consumer revenue growth sales decline decline electronics -1.8% retail space 921 25.2% credit mix stores in furniture 33
Segmental performance Segmental performance Building materials
The Building Company - 4.0% 120 - 5.1% Improved sales LFL sales stores retail margin decline decline 35
Segmental performance FinTech
FLASH + 20% 172k + 9% growth in virtual increase in traders turnover device turnover Informal market Technology platform expertise 37
Capfin 333k R2.6bn active credit book funding accounts completed More stringent credit granting criteria Focus on collections 38
Outlook LEON LOURENS, CEO
COVID-19 stages Risk of supply 1 • China supply exposure • Secure product supply • Alternative sources 40
COVID-19 stages Safety first • World-wide pandemic 2 • Guidelines and protocols • Adapting to work from home • Prioritise well-being of employees, customers, suppliers 41
COVID-19 stages Protection of the business Preservation of liquidity and cash flow • Prioritise employee salaries • 3 Bank facilities secured • Scenario planning • Operating costs and capex reduced • Merchandise plans adjusted • 42
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