Presentation of consolidated results For the quarter ended 28 - PowerPoint PPT Presentation

Presentation of consolidated results For the quarter ended 28 September 2013 1

Agenda Strategic and Financial review operational update Looking forward Jürgen Schreiber Jürgen Schreiber Mark Bower CEO CEO Deputy CEO & CFO 2

3 Strategic and operational update

Trading environment Macro backdrop Credit growth versus retail sales (1) 35.0% • Unsecured lending growth still slowing 30.0% • Apparel sales growth continues to outperform 25.0% total retail sales 20.0% • Consumer confidence muted 15.0% • Different higher and lower LSM considerations 10.0% • ZAR volatility 5.0% 0.0% • Interest rates remain low • Inflation within 3-6% range Retail sales Household - unsecured credit CTF sales (1) Stats SA and Nedbank – September 2013 4

Key strategic levers remain priority • Revamp stores and service • Store optimisation Comparable store growth • Assortment: brands and improved private label • Leverage loyalty programme • Sourcing • Margin • Pricing management expansion • Group efficiencies • Grow existing format footprint New space • Rollout of tested new formats growth • Expand into rest of Africa • Leverage customer database to broaden financial Credit services offering 5

Performance against strategic levers Margin expansion (1) Sales growth Retail sales Comp sales 37.4% 8.6% 7.4% 6.1% 36.9% 36.8% 4.5% 36.6% 5.3% 36.5% 2.5% 2.0% 1.4% 0.4% 0.5% 2011 2012 2013 H1:FY13 H1:FY14 2011 2012 2013 H1:FY13 H1:FY14 New space growth (2) Credit and cash Credit sales Cash sales 4.7% 4.1% 14.9% 9.5% 3.4% 3.0% 5.5% 0.7% 1.4% 2.8% 13.2% 3.3% -1.6% 0.4% -4.9% 2011 2012 2013 H1:FY13 H1:FY14 2011 2012 2013 H1:FY13 H1:FY14 Note: All FY numbers for 2011, 2012 and 2013 exclude Edgars Zimbabwe; (1) Gross profit margin; (2) Average space growth for the period 6

Highlights for Q2:FY14 • Improved Improved Delivery against operational performance Profitability strategic plan • Retail sales up 5.9% to • Gross profit up 6.2% • Increase in average R6.0 billion to R2.2 billion space of 5.1% • Cash sales growth • Pro forma adjusted • Edgars refurbishment of 17.4% EBITDA up 9.3% to almost complete R481 million • Retail sales from • Discount divisional operations outside South performance remains Africa up 25.5% sound 7

Edgars division performance for Q2:FY14 Sales growth New space growth Margin expansion • Retail sales growth • 16 new own stores • Margin pressure Retail Average GP driven by new in the quarter (and 4 expected to Sales margin 750.1m 2 Edgars Active and closures) continue in the 3.4% 38.6% • 7 Edgars Active, 3 clearance activity short term 466 stores Red Square, 1 Edgars • Cash sales growth • Operating profit and 1 Edgars Shoe of 15.3% down as absolute Gallery • 46 new mono- • Refurbishment cost investment LFL branded stores, 43 project progressing associated with due to acquisition on schedule change programme 1.6% 5.6% 0.3pts • “New Edgars” impacted a small marketing initiated quarter in October Main contributor Edgars still impacted by change programme … 8

Capital investment key to transformation Capex Q2:FY14 • Total of R356m spent in the quarter (R millions) • R528 million spent for H1:FY14 • R810m budgeted for FY14 • Edgars refurbishment project on track 56 • Completed 61 of the 72 stores and cumulative spend of R443m at end of Q2:FY14, Q2:FY14 spend of R328m • Remain on track to complete all but one of the stores before the start of the Christmas trading period • Total capex cost in FY14 for 72 stores of R527m 300 • Inglot, La Senza and Accessorize acquisition effective 1 September 2013 Expansion Refurbishment Store optimisation and people support progressing well 1 2 3 Refurbishment Store optimisation People support � � � Standardise store layouts Optimise all processes from Stores appropriately staffed � � receiving to replenishment Optimise space allocation Improved training programmes � � � Enhance daily store functionality Implement new fixture set and Construct store talent pipeline Description and � visual merchandising Improve transaction speed and key objectives � customer service New product content (brands) “Deliver a refreshed, consistent and “Drive standardisation and efficiency “Ensure the right people with right skills compelling theatre of shopping” improvements in enabling store processes” are serving our customers” 9

Discount division performance for Q2FY14 Sales growth New space growth Margin expansion • Retail sales growth • Space growth • Improved GP Sales Average GP driven by cash sales through 18 new margin as strategic margin 10.3% of 21.5% stores (and 10 600.5m 2 initiatives continue closures): to deliver results 32.3% • Benefits of 666 stores • 3 Jet turnaround • Operating profit measures starting to • 3 Jet Mart increased due to LFL • 2 Legit come through cost management 5.4% 5.1% 1.0 pts improvements and • Strong performance leveraging impact of in ladies and a small quarter menswear Sound performance… 10

Measured capital expansion programme Capex Q2:FY14 • Total of R64 million spent in the quarter • R141 million spent for H1:FY14 (R millions) • R233 million budgeted for in FY14 • Strong performance in Rest of Africa • Number of stores increased to 154 from 115 in 2Q:FY13 24 40 Expansion Refurbishment Note: African performance includes Edgars, Edgars Active, Jet and Jet Mart stores 11

CNA division performance for Q2FY14 Sales growth New space growth Margin • Retail sales up 3.6% Sales • Space decrease in Average • Margin maintained GP margin line with strategy of despite unfavorable • Growth in digital 3.6% 89.0 m 2 right sizing and product mix supportive of sales 30.9% store conversions growth • Operating profit 194 stores • Capex spend of increased R5m LFL • R11m H1:FY14 1.6% 0.4% 0.2 pts Priority is optimisation of space and product selection… 12

Financial review 13

Key financial considerations for Q2:FY14 Sale of book Events after the reporting date • Portion of the trade receivables book sold thus • During October 2013 Edcon extended hedges far of 93% on coupon for € 317m and $250m notes to 15 March 2015 through cross currency swaps • R683 million remains classified as held-for-sale • Only foreign trade receivables still to be sold • On 14 November 2013 Edcon Holdings Limited (Botswana, Namibia, Botswana, Lesotho and closed the offering for € 425m of fixed rate Swaziland) senior notes due May 2019. • Pro forma adjusted EBITDA adjusted to give • Tender offer and redemption (to close 14 effect to Absa transaction as if 100% of the December 2014) of all outstanding floating rate book has been sold senior notes due June 2015 from the proceeds of the 2019 notes • Reported numbers remain relevant • Expect to sell or collect all trade receivables 14

Statement of comprehensive income Q2:FY13 Q2:FY14 % change H1:FY13 H1:FY14 % change (R millions) 5 683 6 017 5.9 Retail sales 11 696 12 222 4.5 2 029 2 154 6.2 Gross profit 4 307 4 566 6.0 Gross profit margin 35.7 35.8 0.1pnt 36.8 37.4 0.6pnt 164 259 Other income 322 502 (1 205) (1 320) Store costs (2 412) (2 615) Other operating costs (984) (1 116) (1 805) (2 254) 165 184 Income from joint operation 315 358 169 161 Trading profit 727 557 440 481 9.3 Pro forma adjusted EBITDA 1 109 1 208 8.9 15

Growth in pro forma adjusted EBITDA Q2:FY13 Q2:FY14 % change H1:FY13 H1:FY14 % change (R millions) 169 161 Trading profit 727 557 261 286 Depreciation & amortisation 533 554 2 2 Net asset write off 16 2 Profit/(Loss) before tax from discontinued 211 1 306 (14) operations Non-recurring (income)/costs (1) 85 46 (2) 112 728 496 Adjusted EBITDA 1 580 1 211 Net income from previous card (364) (28) (609) (25) programme (2) Net income from new card programme (3) 76 13 138 22 440 481 9.3 Pro forma adjusted EBITDA 1 109 1 208 8.9 7.7% 8.0% 0.3pts Pro forma adjusted EBITDA margin 9.5% 9.9% 0.4pts 1) Relates to one off strategic initiatives in Q2:FY13 of R83m, expenses on termination of the Mastercard agreement in Q2:FY13 of R2m, costs associated with the sale of the trade receivables book in Q2:FY14 of R36m and costs associated with corporate and operational overhead reductions in Q2:FY14 of R10m 2) Pro forma income “lost” to Absa for the portion of the book sold including finance charges revenue, bad debts and provisions 3) Net income derived from 100% of the trade receivables including finance charges revenue, bad debts and provisions. 16

Update on cost programme Q2:FY14 (R millions) LTM pro forma adjusted EBITDA (reported) 2 859 Permanent adjustments: Corporate and operational overhead reductions 58 94 Renegotiation of contracts LTM pro forma adjusted EBITDA (incl. adjustments) 3 011 Normalised pro forma net debt/LTM pro forma adjusted EBITDA (times) 6.7 • No new cost initiatives included, but further work required • Benefit of approx R74 million included in the quarter’s profit 17