Marius Bosman Chief Financial Officer 2 Size of Operation June - PowerPoint PPT Presentation

Marius Bosman Chief Financial Officer 2

Size of Operation June 2015 Turnover R113.7bn Total Stores 2 111 Countries 15 Employees 132 942 ± R92bn Market Capitalisation* * During August 2015 3

Financial Highlights Turnover R113.7bn R6.3bn Trading Profit 5.57% Trading Margin 769.1c Diluted Headline EPS Dividend per Share 386c 4

Store Portfolios Opened Closed June 2014 June 2015 (12 months) (12 months) Supermarkets RSA 877 49 (11) 915 Supermarkets Non-RSA 169 23 (3) 189 Hungry Lion 167 20 (11) 176 Furniture 368 105 (2) 471 OK Franchise 367 28 (35) 360 Total Stores 1 948 225 (62) 2 111 Pharmacies 150 7 (1) 156 Liquor Stores 241 52 – 293 5

Sales Growth per Segment Growth % Supermarkets RSA 10.5% Supermarkets Non-RSA 13.5% Furniture 13.0% Other Divisions 13.8% Total 11.2% Like-for-Like 4.3% 6

Highlights of Results Other Operating Income June 2014 June 2015 Growth Rm Rm % Finance Income Earned 260 296 13.9 Net Premiums Earned 370 409 10.3 Operating Lease Income 300 335 11.9 Commissions Received 635 695 9.4 Franchise Fees Received 51 58 12.2 Investment Income 36 99 >100 Sundry Income 1 188 1 536 29.4 Total 2 840 3 428 20.7 7

Highlights of Results Depreciation and amortisation increased by 13.6% • New branches and IT • Exchange rate weakness driving store opening costs Operating leases increased by 15.2% • Renewals and new stores opened at higher rentals Employee benefits increased by 10.2% • Staff requirements for new stores • Like-for-like increase only 5% Other operating expenses increased by 12.7% • Electricity costs increased • Includes increased commission on bank cards 8

Key Information per Segment Trading Profit June 2014 June 2015 Growth Rm Rm % Supermarkets RSA 4 751 5 268 10.9 Supermarkets Non-RSA 673 741 10.1 Furniture 196 205 4.6 Other Divisions 94 114 21.3 Total 5 714 6 328 10.7 9

Highlights of Results Exchange rate differences • June 2014: R9.4 million loss • June 2015: R131.6 million loss Angolan and Nigerian currencies affected by falling oil price Rand to US Dollar exchange rates (R:$) • June 2013: R9.96 • June 2014: R10.62 • June 2015: R12.13 10

Highlights of Results Net Interest Expense June 2014 June 2015 Rm Rm Net Interest Paid 120 69 IFRS Adjustment – Convertible Bonds 116 130 Total 236 199 Income Tax Expense Normal 1 767 1 897 Deferred (40) (49) Total 1 727 1 848 Effective Tax Rate 31.6% 30.9% 11

Highlights of Results Diluted HEPS vs Cash EPS* vs EBITDA per share (cents) June 2013 1 508 1 384 June 2014 1 330 1 273 1 216 June 2015 884 769 698 675 Diluted HEPS Cash EPS* EBITDA per share • Dilution due to full share grants awarded * Cash flow from operating activities excluding dividends paid and changes in working capital 12

Highlights of Results Capital Expenditure June 2014 June 2015 Rm Rm 354 542 Land and Buildings 202 280 Distribution Centres 200 375 DC Equipment and Vehicles 580 354 Store Refurbishment 1 600 1 928 New Stores - RSA 1 047 823 - Non-RSA 553 1 105 551 796 Information Technology 434 356 Other Replacements* Total 3 921 4 631 * Motor vehicles and office furniture 13

Highlights of Results Debtors and Other June 2014 June 2015 Growth Receivables Rm Rm % 1 413 1 557 10.2 Furniture Instalment Sales 681 834 22.5 Franchise 119 102 -14.3 Buy-aid Organisations 535 518 -3.2 Rental and Property Debtors 334 328 -1.8 MediRite and Transpharm 125 87 -30.4 Money Market and Computicket 873 1 593 82.5 Other Receivables* 4 080 5 019 23.0 Total * Includes Palanca insurance claim receivable 14

Stockholding June 2014 June 2015 Growth Rm Rm % Inventory 12 344 13 689 10.9 Rm Effective Stock Reduction Sales Growth 15,000 R747m Strengthening Palanca Fire Inflation Rand 14,000 New Stores 13,000 Closing Stock Opening 12,000 Stock 11,000 10,000 9,000 15 15

Highlights of Results June 2014 June 2015 Growth Rm Rm % Net Cash Balances 8 100 7 058 -12.9 • Month-end closing date • Timing of provisional tax payments 16

Highlights of Results Contracted Capital June 2014 June 2015 Commitments Rm Rm Stores 2 200 1 297 - RSA 697 679 - Non-RSA 1 503 618 Distribution Centres 239 - IT Systems 38 298 Total 2 477 1 595 17

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Furniture – Overview NEGATIVES • Household disposable income continues to remain under pressure • Market severely disrupted by the demise of Ellerines Sold products for up to 70% of cost to generate cash - • Closure of local manufacturers Not getting paid by Ellerines - • Had to import more > weakening of the rand lead to higher costs 19

Furniture – Overview continued POSITIVES • Sales growth remained buoyant at 13% • Internal inflation of 0.13% • Trading profit growth of 4.67% • Strong sales performance in OK Furniture and OK Power Express due to the opening of 105 new stores • House & Home has improved substantially 20

Furniture continued Store Numbers Opened Since Total Confirmed July 2014 June 2015 June 2016 OK Furniture 80 374 20 OK Power Express 9 33 - OK Furniture Dreams 12 12 2 House & Home 4 52 1 Total 105 471 23 - Closed one OK Furniture store and one OK Power Express - No Ellerines store deals concluded with business practitioners - Concluded 54 deals directly with landlords on previous Ellerines stores 21

Furniture – Trading Environment Sales R4.5bn +13.01% OK Furniture House & Home Increase 13.6% 11.7% Like-for-Like 0.7% 8.0% Sales Mix June 2014 June 2015 Home and Entertainment Appliances 63.9% 63.1% Furniture, Bedding, Patio and Carpeting 36.1% 36.9% Cash 69.6% 71.6% Credit 30.4% 28.4% 22

Furniture – Debtors Book Debtors Book June 2014 June 2015 Debtors Book (Gross) +11.8% R1.7bn R1.9bn New Contracts +0.08 % 268 956 269 181 - High debt levels affect affordability and collections - Stricter affordability regulations Arrears June 2014 June 2015 Actual Arrears 9.9% 10.9% Balance of Contract Arrears 29.7% 32.3% Bad Debts Provision 12.0% 11.8% 23

Furniture – Outlook • Increased store footprint: 23 new stores confirmed to June 2016 • Current turnover growths encouraging • Ongoing product range refreshing • NCR interest rate reductions were published for comment • Talk in market of capping credit risk insurance 24

Whitey Basson Chief Executive Officer 25

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Trading Environment • SA economy not growing and no real job creation - Weak rand and low commodity prices - Unemployment at 25% - 23 000 mining jobs lost since April • Shoprite, however, created 9 842 new jobs in the last 12 months! 132 942 Employees 123 100 + 48 942 jobs 111 338 created in 102 137 95 050 past 6 years 88 000 84 000 2009 2010 2011 2012 2013 2014 2015 27

Trading Environment continued • Load-shedding impacted growth - 1% impact on GDP - A total of 139 000 hours of store downtime  Equates to 1 full week of trading lost in each store in the Group!  R33m spent on diesel for generators since December 2014 • No significant increases in social grants affects Shoprite • More and more retailers adding food ranges and space • 13 of 14 Non- RSA countries’ GDP growing ahead of RSA 28

Group Overview – New Stores • Good sales growth of 11.2%, up from 10.5% last year Net New Supermarkets 92 Non-RSA 76 16 RSA 61 58 19 54 8 17 20 44 57 76 46 38 2011 2012 2013 2014 2015 29

Group Overview • RSA growth ahead of opposition - 9 th year in a row of market share gain • Non-RSA sales growth 21.2% excluding Tanzania disposal and Palanca store (constant currencies) • Selectively invested into price - Good volume growth – supermarkets sold almost 6 billion items • Trading density increased 30

Supermarkets RSA RSA sales ahead of peers (10.5% vs 8.6%) • Total market share at 32.1% for the year (+0.4%) • Internal food inflation stable at 4.6% • Weekly price surveys confirm we are the cheapest supermarket in SA • Attracting a record 32 million additional feet (+4.2%) • 72% of all adults now shop with us, nearly double that of our nearest rival Percentage of SA that shops at the Shoprite Group’s stores 2008 2015 Sources: AMPS and Nielsen 31

Supermarkets RSA • USave’s winning formula – a record 100 million people through the doors • Checkers customers’ spending remained more resilient - 1 out of 2 of LSM 8 – 10 shoppers now choose Checkers • Shoprite’s sales improved and is South Africa’s most decorated retailer 32

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Supermarkets Non-RSA • Non- RSA contributed 16% to the Group’s supermarket turnover • Compound growth is double RSA’s over last 4 years: 18.1% vs 8.2% Supermarket Sales Contribution Non-RSA +5% 11% 16% RSA 89% 84% 2011 2015 34