PRESENTATION OF CONSOLIDATED RESULTS For the quarter ended 28 June - PowerPoint PPT Presentation

PRESENTATION OF CONSOLIDATED RESULTS For the quarter ended 28 June 2014

AGENDA 2 Strategic and operational update Financial review Looking forward Jürgen Schreiber Toon Clerckx Jürgen Schreiber CEO CFO CEO

STRATEGIC AND OPERATIONAL UPDATE

VISION 4 Distinctive retail Focused customer formats groupings Creating unique experiences Exceptional value proposition and choice of product

TRADING ENVIRONMENT 5 Retail sales (1) Credit extension (2) Total retail sales CFT sales Other loans & advances Debt-to-Household income 14.0% 25.0% 76.5% 12.0% 76.0% 20.0% 10.0% 75.5% 15.0% 8.0% 13.3% 75.0% 6.0% 10.0% 2.2% 74.5% 4.0% 74.5% 5.0% 2.0% 74.0% 1.5% 0.0% 0.0% 73.5% • Consumer remains under pressure • Rising use of revolving consumer credit to supplement household budgets (3) • Unsecured lending cautious • June CPI remained at 6.6% (from May) mainly driven by transport and housing utilities • MPC raised rates by 25 bps in July in an effort to strike a balance between increasing inflation and weakening economy • ZAR remains range bound following weakening in the previous quarter 1) 3mma retail sales y-o-y%; Stats SA SARB – August 2014 2) 3) TransUnion SA Consumer Credit Index Report_Q1 2014

KEY STRATEGIC LEVERS 6 • Revamp stores and service • Store optimisation Comparable • Assortment: brands and improved private label store growth • Leverage loyalty programme • Sourcing • Margin • Pricing management expansion • Group efficiencies • Grow existing format footprint • Rollout of tested new formats New space • Expand into rest of Africa growth • Right size CNA • Implement a second look credit provider Credit • Broaden financial services offering Working capital management

PERFORMANCE AGAINST STRATEGIC LEVERS 7 Sales growth Margin & space Retail Sales (%) Comp Sales (%) • GP margin of 37.5%, down 1.4 pnts 9.2 • Impacted by product mix and clearance • Average space growth of 5.1% 5.7 5.1 7.9 3.2 • Growth outside of SA of 15.5% (excl. Zimbabwe) 1.9 2.6 0.5 -0.3 0.3 FY12 FY13 FY14 1Q:FY14 1Q:FY15 Credit and cash sales growth Working capital management Credit sales (%) Cash Sales (%) • Stock investment reduced by R268 million • Trade and other payables increased by 4.5 R8 million, despite lower stock 15.3 15.1 14.0 0.7 12.2 • Sale of majority of Namibia trade receivables book on 1 July 2014 of R314 million 3.0 -4.3 -4.2 -3.3 FY12 FY13 FY14 1Q:FY14 1Q:FY15 All numbers include Edgars Zimbabwe.

EDGARS DIVISION – OPERATIONAL PERFORMANCE 8 Sales growth Margin • Cash sales growth of 19.7% • Margin expected to remain under Retail GP Sales pressure in the short term Margin • Credit sales reduced 3.3% 6.3% • Clearance activity, substantially • Sound performance of converted 40.3% complete stores • Mix changes, handsets • Brands continue rollout, including • Inflation adequately passed on LFL 1.7pts mono-branded stores 2.8 % • River Island launch Retail Sales (%) Comp Sales (%) 6.3 2.8 1.9 1.2 -2.5 -3.0 Q1:FY13 Q1:FY14 Q1:FY15

EDGARS DIVISION – CAPITAL INVESTMENT 9 Capex (R millions) New space growth • Total of R147 million (R181 million Q1:FY14) • 19 new stores opened (excl. 5 Average spent in the quarter closures) 784m 2 • Minor refinements following refurbishment • Edgars store chains completed in prior year 492 stores • 10 Edgars Active, including 5 outside of SA, 4 Edgars and 1 Boardmans • Capex being spent more on expansion, including 5.9 % existing store chains, mono-branded stores and • Rollout of 4 new mono-branded stores outside of SA stores Refurbishment Expansion 53; 36% 94; 64%

DISCOUNT DIVISION – OPERATIONAL PERFORMANCE 10 Sales growth Margin • Cash sales growth of 13.3% • Impacted by product mix and Retail GP Sales clearance Margin • Credit sales reduced 3.5% 5.8% • Continue to drive value as part of • Sound performance from ladieswear 34.8% brand formula and footwear • Childrenswear range improvements LFL 2.2 % 0.9pts getting positive customer response Retail Sales (%) Comp Sales (%) 5.8 5.1 4.7 2.2 1.8 1.7 Q1:FY13 Q1:FY14 Q1:FY15

DISCOUNT DIVISION - INVESTMENT 11 Capex FY14 (R millions) New space growth • Total of R60 million (R85 million Q1:FY14) spent • 22 new stores opened (excl. 11 Average in the quarter closures) 627m 2 • Expansion weighted to stores outside of South • 15 Jet 696 stores Africa • 1 Jet Mart • 6 Legit 5.2 % • Included in above are 8 new stores outside of South Africa Refurbishment Expansion 19; 32% 41; 68%

CNA DIVISION 12 Sales growth New space growth Margin • Continued growth • Right sizing of • Margin decrease Retail Average GP in digital Sales stores continued due to ongoing mix Margin 0.9% 85m 2 merchandise sales in quarter changes 29.0% • Credit as a sales • Capex spend of 192 stores driver limited R1m for the LFL quarter • Trading density 2.3 % 5.6 % 3.1pts improvements continue Retail Sales (%) Comp Sales (%) 4.5 3.8 3.6 2.3 1.9 0.9 Q1:FY13 Q1:FY14 Q1:FY15

FINANCIAL REVIEW

KEY CONSIDERATIONS FOR 1Q:FY15 14 During the quarter Events after the reporting period • Weak credit environment • Sale of the majority of the Namibian book on 1 July for R314 million • Credit: Cash sales ratio of 46.5%* • Cash sales grew 15.1% while credit sales declined 3.3% • Gross margins under pressure • Costs well managed • Store restructure benefits • Overhead cost reductions • Rental investments as part of space growth strategy • Working capital management showing cashflow benefits • Both stock and accounts payable improvements • Currency volatile but range bound during the quarter *Including Edgars Zimbabwe

STATEMENT OF COMPREHENSIVE INCOME 15 Q1:FY14 Q1:FY15 % change (R millions) Retail sales 6 205 6 561 5.7 Gross profit 2 412 2 458 1.9 Gross profit margin 38.9 37.5 (1.4) pts Other income 243 261 7.4 Store costs (1 295) (1 467) 13.3 Other operating costs (1 138) (1 066) (6.3) Income from joint operation 174 177 1.7 Trading profit 396 363 (8.3) Pro forma adjusted EBITDA 727 679 (6.6)

PRO FORMA ADJUSTED EBITDA 16 Q1:FY14 Q1:FY15 % change (R millions) Trading profit 396 363 (8.3) Depreciation & amortisation 268 263 Net asset write off (1) - 3 Loss before tax from discontinued operations (2) (15) (2) Non-recurring costs (3) 66 33 Adjusted EBITDA 715 660 (7.7) Net income from previous card programme (4) 3 11 Net income from new card programme (5) 9 8 Pro forma adjusted EBITDA (6) 727 679 (6.6) Pro forma adjusted EBITDA margin 11.7% 10.3% (1.4) pts (1) Relates to assets written off in connection with store conversions, net of related proceeds. (2) The results of discontinued operations are included before tax. (3) Relates to costs associated with the sale of the trade receivables book in Q1:FY15 of R15m (Q1:FY14 of R41m) and costs associated with corporate and operational overhead reductions in Q1:FY15 of R18m (Q1:FY14 of R25m). Pro forma income “lost” to Absa for the portion of the book sold including finance charges revenue, bad debts and provisions. (4) (5) Pro forma fee earned by Edcon under the new arrangement with Absa. (6) The pro forma adjustments have been made as though 100% of the book was sold through the entire period.

UPDATE ON COST PROGRAMME 17 FY15 (R millions) LTM pro forma adjusted EBITDA (reported) 2 639 Permanent adjustments: Corporate and operational overhead reductions 151 Renegotiation of contracts 97 LTM pro forma adjusted EBITDA (incl. adjustments) 2 887 Normalised pro forma net debt (1) /LTM pro forma adjusted EBITDA (times) 7.6x • Majority of savings relate to manpower savings from restructure (1) Net debt has been adjusted by trade receivables still to be sold of R665 million

COST ANALYSIS FOR 2014 18 Other operating costs Store costs • Other operating costs decreased by 6.3% • Store costs increased 13.3% • Well managed overhead costs • Rental contributes 34.4% of store costs and • Store card credit administration costs now more increased 15.3% comparable • Increased space and standard rental increases • More than 90% of the book was sold in both reported • Manpower contributes 26.6% of store costs and quarters increased 4.3% • Ongoing initiatives to increase efficiency • Positively impacted by the restructure • Lower number of credit customers • Non-recurring costs are less of a feature % Q1:FY14 Q1:FY15 change (R millions) Other operating costs 935 898 (4.0) Store card administration 137 135 Non-recurring costs 66 33 Total other operating costs 1 138 1 066 (6.3)

CAPEX INVESTMENT 19 • Total capex, excluding leases, of R267m for the Total capex breakdown quarter (R millions) • 43 new stores opened 3 7 • Investment weighted towards expansion 49 • Existing key formats, mono-branded stores as well 1 as stores outside of South Africa a priority 147 • Refurbishment project now complete in Edgars 60 • Smaller refinements ongoing • R1,051 million budgeted for FY2015 (including Edgars Discount CNA IT Other Zimbabwe Edgars Zimbabwe) Store capex mix* (R millions) 73 135 Expansion Refurbishment * Excluding Edgars Zimbabwe