Presentation of consolidated results For the quarter ended 29 - PowerPoint PPT Presentation

Presentation of consolidated results For the quarter ended 29 December 2012

Overview Operational Financial Looking and review forward strategic update Mark Bower Jürgen Schreiber Jürgen Schreiber CEO Deputy CEO and CFO CEO 2

Operational and strategic update

Vision Distinctive retail formats Focused customer groupings Exceptional value proposition and choice of product Creating unique experiences Holistic experience supported by credit, loyalty, club, financial services and broadest footprint in Africa. 4

Trading environment Macro backdrop  GDP growth of 2.6% for 3Q2012  CPI inflation 5.7% (Dec 2012) and 5.4% (Jan 2013)  Housing & utilities biggest contributors  Repo rate remains at 15 year low of 5% with no expectation of short term increase  FNB/BER Consumer Confidence Index down 2 points in 4Q2012 5

Salient features for the quarter Commitment to strategic initiatives negatively Delivery against strategic commitments impact quarter‟s results progressing to plan  Phase 1 of Edgars refurbishment  Same store retail sales down 3.4% completed on time  Pro forma adjusted EBITDA down Ave space  Piloting new specialty 6.4% Retail store, Edgars Shoe Gallery growth sales  Changes to direct sourcing and  First mono-branded store launched quick response  Sale of trade receivables finalised 3.7% 0.4%  8.8 million loyalty customers Changes in product mix improve profitability Capital structure management well progressed  Gross profit up 1.7%  Sale of receivables and securitisation debt of R4.3 billion repaid  Closure of Discom and lower GP margin  Issuance of a further € 300 million of 2018 notes cellular sales  Repayment of € 754 million of the 2014 notes 0.8pts  Conclusion of a R4.12 billion senior secured term loan facility to be used to call the remaining 2014 notes 6

Operational and strategic update Edgars division Capex (R millions) Sales Sales  Sales positively impacted by Up 4.1% Up 4.1% • Continued rollout of Edgars Active (Q2:4.9%) (Q2:4.9%) 24 stores LFL LFL • Increased promotional activity 41 Down 2.1% Down 2.1% (Q2:-2.4%) (Q2:-2.4%)  Strategic change disruptive, but GP margin GP margin manageable Expansion Refurbishment Down 0.1 pts to Down 0.1% pts to • Sourcing changes 41.0% 41.0% • Phase I refurbishment of all 72 (Q2:38.9%) (Q2:38.9%) stores now completed Stores Stores  Increased space due to new stores Net increase of 80 Net increase of 80 to 383 to 383 rolled out • Edgars Active Space Space Ave up 8.4% Ave up 8.4% • Standalone Topshop stores to 723,381m 2 Closing 723,381m 2 • Edgars Shoe Gallery stores All numbers are compared to same quarter in prior year, unless denoted otherwise 7

Operational and strategic update Discount division Capex (R millions) Sales  Sales growth negatively impacted Down 5.9% 8 • Strategy execution (Q2:-0.1%) • Stock delivery delays LFL Down 5.8% • Lower mobile phone sales (Q2:4.9%) 83 • Discontinuation of Discom format GP margin  Margins supported by Expansion Refurbishment Up 1.6 pts to 34.3% • Lower promotional activity (Q2:31.3%) • Changes in product mix Stores • Sourcing initiatives Net decrease of 39  Large investment in refurbishment to 641 of stores in FY13 Space  Space down due to closure of Ave down 0.4% to 581,445m 2 Discom All numbers are compared to same quarter in prior year, unless denoted otherwise 8

Operational and strategic update CNA Division Capex Sales  Sales negatively impacted by (R millions ) Down 1.5% • Continued closure of stores (Q2:-1.1%) 1 • Lower mobile phone sales LFL Down 0.6%  Stable same-store retail sales (Q2:2.7%)  Store optimisation and 10 GP margin rationalisation projects on existing Down 0.3 pts to Expansion Refurbishment stores 31.8% (Q2:30.7%) Stores Net decrease of 4 to 196 Space Ave down 3.0% to 89,631m 2 All numbers are compared to same quarter in prior year, unless denoted otherwise 9

Strategy – key levers Comp store New space Margin Credit growth growth expansion Revamp stores Grow existing Retail price Realise and service format footprint management opportunities Improve Sourcing and Introduce new products and input price formats assortment management Leverage Expand into Store loyalty rest of Africa optimisation programme Group support function efficiencies 10

Financial review

Key financial considerations Sale of trade receivables Tax settlement  OtC (1) unwound, so deconsolidation of OtC (1) no  No cash tax payments until Sep ‟14  Curtailment of use of R9b of assessed losses longer appropriate (NOL‟s), FY13  Discontinued operation post 1 Nov „12 only includes  Only 50% of future interest on 14‟s and 15‟s, and portion of the book not sold (R1.367 billion)  Expenses associated with credit included in “other replacement debt, deductible operating costs”  100% of interest deductible post IPO •  Re-issue of Q2:FY2013 financial statements required Fee from Absa • Cost of administrating the book Events after the reporting period  Issuance of € 300 million of senior secured 2018 notes  Repayment of € 754 million of the 2014 notes  Conclusion of a R4.12 billion senior secured term loan facility to be used to call the remaining 2014 notes  Hedges on repaid 2014 notes realised (1) OntheCards Investments II (Pty) Ltd 12

Statement of comprehensive income Q3:2012 Q3:2013 % change YTD:2012 YTD:2013 % change (R millions) 8 386 8 355 -0.4 Retail sales 19 602 19 808 1.1 3 102 3 155 1.7 Gross profit 7 226 7 339 1.6 37.0% 37.8% 0.8pts Gross profit margin 36.9% 37.1% 0.2pts 151 195 29.1 Other income 420 628 49.5 -1 316 -1 367 3.9 Store costs -3 504 -3 719 6.1 -1 056 -1 666 57.8 Other operating costs -2 775 -3 568 28.6 128 167 30.5 Income from JV 377 482 27.9 1 009 484 Trading Profit 1 744 1 162 1 370 1 283 -6.4 Pro forma adjusted EBITDA 2 700 2 419 -10.4 13

Pro forma adjusted EBITDA Q3:2012 Q3:2013 % change (R millions) EBITDA 1 747 161 Transitional projects expenditure 57 566 Advisory fees in relation to debt issuance 92 Net fair value movement on notes and derivatives -229 530 Net asset write off 5 5 Write off of intangible assets 79 adjusted EBITDA 1 672 1 341 Net income from prev. card programme (1) -311 -74 Net income from new card programme (2) 9 16 Pro forma adjusted EBITDA 1 370 1 283 -6.4 • Pro forma adjusted EBITDA is adjusted to exclude transitional costs and to take into account the transaction with Absa Income “lost” to Absa for the portion of the book sold incl. finance charges revenue, bad debts and provisions 1) 2) Fee earned by Edcon under the new arrangement with Absa 14

Divisional analysis Total retail sales Same store sales Gross profit Revenue contribution growth % growth % margin % Division Q3:12 Q3:13 Q3:12 Q3:13 Q3:12 Q3:13 Actual Actual LFL (1) LFL (1) Actual Actual 38% Edgars 13.0 4.1 8.7 -2.1 41.1 41.0 54% Discount 11.7 -5.9 12.7 -5.8 32.7 34.3 CNA 11.1 -1.5 11.2 -0.6 32.1 31.8 8% Total 12.3 -0.4 10.5 -3.4 37.0 37.8 Edgars CNA Discount  Strong prior year comparative sales compound Edgars and GP contribution Discount performance  Group GP margins improved despite heavy promotional activity in Edgars, boosted by product mix changes within 34% Discount  African sales contributed 6.5% of retail sales for 3Q FY13 59% 7% Edgars CNA Discount (1) Like-for-like 15

Cost analysis Store costs  Well managed, increasing 3.9% (YTD: 6.1%)  Certain costs increasing above sales growth • Rental on premises increased 9.8% (YTD:11.3%), affected also by a 3.7% increase in average space • Water and electricity increased by 13.7% YTD  Stable workforce and improved productivity Other operating costs  Excluding transitional costs, increased by 10.1%  Transitional related expenditure increased from R57m to R566m (YTD increased from R109m to R705m) • Mainly due to sale of the trade receivables including fees and IT costs related to modification of trade debtors system 16

Cashflow for Q3 FY13 45 10,222 83 24 1,389 235 9,681 509 9,681 257 8,833 966 -375 Rec‟bles Rec‟bles Inventories Payables Total ongoing sold LY cashflow (1) TY cashflow (1) Operating Transitional Working Capital Net financing Taxation activities costs capital expenditure costs (1) Net cashflow from operating activities less investment in capital expenditure 17

Capex investment Refurbishment key Capex breakdown (R millions)  Total capex of R211 million for Q3 16 FY13 (YTD: R579 million) 28 65 • 56 stores opened (incl. 3 conversions) 11 • 9 stores closed  Store refurbishment still key to 91 strategy across the group Edgars Discount CNA IT Other corporate capex • R134 million (YTD R318 million) spent Capex mix on refurbishments vs. R69 million in (R millions ) Q3 FY12 33  Spend on information systems infrastructure declined by 24.3% 134 Expansion Refurbishment All numbers are compared to same quarter in prior year, unless denoted otherwise 18