Final Results Presentation for 52 weeks ended 28 December 2014
Operating Model Massmart is a high-volume, low-cost, omni-channel distributor of Food, Liquor, General Merchandise and Home Improvement in sub-Saharan Africa + Africa’s second largest retailer / distributor + Market leader in General Merchandise and Home Improvement + Market leader in Liquor and Wholesale Food + 3 rd largest in Liquor & Food (retail & wholesale) + Fastest growing Retail Food proposition Game in 2014 + Highest sales densities in SA retail at R190m/store + Lowest Operating Costs as % of sales in SA retail at 16.2% + Great retail and wholesale brands and formats Makro, Game, DionWired, Builders, Jumbo + Deep, wide penetration across LSM 3-10 and Retail, Wholesale & Commercial customers + Owned by Walmart Final Results Presentation February 2015 2
Retail Leadership team Team has combined total of 54 years’ experience in Massmart operations Robin Wright Neville Dunn Doug Jones Llewellyn Walters Kevin Vyvyan-Day (59) (46) (42) (51) (50) BCom, CA (SA) Bcom CA(SA) BCom, PGDA CA (SA) BA (LLB) BCom, BAcc, CA (SA) 17 years with 13 years 8 years 6 years 10 years with Massmart with Massmart with Massmart with Massmart Massmart Founder CCW Stores Chief Financial Manager The Hub Operations Financial Manager Divisional Managing Director Group Chief Executive Executive Masscash Group Financial Director Masscash SAB Ltd Softdrinks Division Super Group, African Operations Officer UPD Food Executive Operations Director Masscash Finance Director Makro Chief Executive Chief Executive Masswarehouse Chief Executive Chief Executive Commercial Director Makro Massbuild Chief Executive Massdiscounters Masscash Wholesale Chief Executive Cambridge Food Masswarehouse Final Results Presentation February 2015 3
Consumer environment Tough but an improved second-half + Low economic growth, soft job creation, 12 unsettled labour market, high utility costs, 10 % Growth year-on-year weak currency, and electricity disruptions. Nominal Sales Low consumer confidence 8 + Constrained discretionary spending 6 with focus on exceptional value amongst 4 low- & middle-income customers Real Sales + Steady demand amongst higher-income 2 customers in Builders and Makro 0 Jan 13 Apr 13 Jul 13 Oct 13 Jan 14 Apr 14 Jul 14 Oct 14 + Wholesale affected by commodities’ -2 deflation and dis-inflation across basket + Disruption in electricity supply impacts negatively on foot traffic in shopping centers, benefits our stand-alone stores? Final Results Presentation February 2015 4
Performance highlights Scale, Growth and Innovation + Game SA had a good H2, growing profit. Game Africa declined from weaker economies, new stores and currency devaluations (-R40m) + Game Retail Food growth continues, is now R3.2 billion. Positive impact on General Merchandise sales + Great performances from Makro, Builders Warehouse and Builders Express as they leverage skills, scale, SAP and supply chain. Profit acceleration in H2 + Margin recovery in Masscash Wholesale through focus on direct distribution and larger stores + Market research confirms high consumer brand affiliation with Cambridge Food. Great trading performance + Great performance by new Builders Warehouse, Maputo + Successful launch of Makro online in General Merchandise and Liquor Final Results Presentation February 2015 5
Performance highlights at a glance Great sales growth, good margin management and decent cost control in tough environment 52 weeks 52 week 52 weeks December Comparable Estimated December 2014 % of 2013 % of 52 week % sales % sales Rm (Reviewed) sales (Pro forma) sales % growth growth inflation Sales 78,173.2 70,790.7 10.4 7.5 4.8 Massdiscounters 17,955.2 16,294.2 10.2 4.8 3.1 Masswarehouse 21,554.8 19,271.7 11.8 10.7 5.5 Massbuild 10,822.8 9,441.3 14.6 9.1 5.9 Masscash 27,840.4 25,783.5 8.0 6.3 4.8 Trading profit before interest and tax 2,061.7 2.6 1,994.4 2.8 3.4 Massdiscounters 180.7 1.0 326.9 2.0 (44.7) Masswarehouse 1,044.3 4.8 939.5 4.9 11.2 Massbuild 537.6 5.0 467.6 5.0 15.0 Masscash 299.1 1.1 260.4 1.0 14.9 Final Results Presentation February 2015 6
Did You Know? + 98 private label brands generate sales of R7.2 billion across the Group + Our retail brands have the highest spontaneous awareness for household appliances, electronics, outdoor & patio, home improvement + Load-shedding products comprise 1.5% of Builders Warehouse sales and grew 36% (generators, solar, gas, emergency lighting) + Game sells 1/3rd of all TVs sold in South Africa + Makro online had one million active visitors in 30 days to mid-December + Makro Liquor sold 108m cans / bottles beer, 43m cans cider and 5m bottles whiskey Final Results Presentation February 2015 7
Financial Performance Three divisions had a strong performance with Game SA showing improved trading in + the second half of the year + Total sales growth increased to 10.4% (Dec 2013: 7.5% 52 weeks) and comparable sales increased by 7.5% (Dec 2013: 3.8%) + Gross margin increased to 18.63% (Dec 2013: 18.44% 52 weeks) + Comparable expense growth of 7.1% is lower than comparable sales growth of 7.5% + Foreign exchange loss of R49.8m (Dec 2013: R67.8 m gain) + Operating profit before foreign exchange movements and interest increased by 4.3% (Dec 2013: -0.3% 52 weeks) Final Results Presentation February 2015 8
Sales Real comparable volume growth 52 weeks 52 week December 52 weeks Comparable Estimated 2014 December 2013 52 week % sales % sales Rm (Reviewed) (Pro forma) % growth growth inflation Total 78,173.2 70,790.7 10.4 7.5 4.8 Massdiscounters 17,955.2 16,294.2 10.2 4.8 3.1 Masswarehouse 21,554.8 19,271.7 11.8 10.7 5.5 Massbuild 10,822.8 9,441.3 14.6 9.1 5.9 Masscash 27,840.4 25,783.5 8.0 6.3 4.8 + Rest of Africa businesses’ sales growth: 8.1% Sales in ZAR grew by 16.2% + Higher inflation in General Merchandise and Home Improvement + Wholesale business is experiencing deflation in some 91.9% Food commodities in 2015 S.A. Sales Rest of Africa Sales Final Results Presentation February 2015 9
Operating profit before forex and interest 0.5 1.0 1.5 2.0 2.5 3.0 3.5 Rbn 2013 + Operating profit before forex of R1,933.7m Sales-related gross margin + A strong trading performance in Makro, Massbuild and Masscash Retail; offset by: Price-and-mix-related gross margin + Greater Food contribution across the Group + A softer margin performance in Massdiscounters attributable to the overstock position Other income + Prior year included insurance proceeds + Total increase of 14.0% / Comparable increase of 8.5% Employment costs + Increase in staff (Full-Time Equivalents) of 8.3% to +/- 41,000 FTE’s + Total increase of 5.3% / Comparable increase of 3.6% + 3.9% increase of net new trading space to a total of 1,539,295m² Occupancy costs + Electricity, rates and taxes increased by approximately 15% + Property acquisitions resulting in a reduction of occupancy costs + Depreciation growth of 15.8% is greater than sales growth of 10.4% Depreciation, Amortisation and + The opening of new stores, DC’s and the acquisition of key properties is driving the increase Impairment of Assets + Rate of increase should reduce significantly from 2015 + Total increase of 12.6% / Comparable increase of 7.8% Other operating costs + Credit card commission increased by 15.5% - increased usage + Operating profit before forex of R2,015.9 million 2014 + Increase of 4.3% Final Results Presentation February 2015 10
EBITDA 52 weeks 52 weeks December 2014 December 2013 52 week Rm (Reviewed) (Pro forma) % growth Operating profit before foreign exchange 2,015.9 1,933.7 4.3 movements and interest Depreciation and amortisation 846.6 731.1 15.8 Impairment of assets 24.6 41.6 EBITDA before foreign exchange movements 2,887.1 2,706.4 6.7 Final Results Presentation February 2015 11
Foreign Exchange Movements 52 weeks 52 weeks December 2014 December 2013 (Reviewed) (Pro forma) Massdiscounters (5.7) 82.4 Other (44.1) (14.6) Total (loss)/gain (49.8) 67.8 + Rand weakened by 12.7% against the USD + Ghanaian New Cedi and the Nigerian Naira devalued against the Rand Final Results Presentation February 2015 12
Inventories and Creditors December 2014 December 2013 (Reviewed) (Audited) Inventories (Rm) 11,228.8 10,115.5 Inventory Days 64 64 Trade Creditors (Rm) 14,841.5 13,702.4 Creditors’ Days 75 76 + Good inventory management. Growth of 11.0% is marginally ahead of sales growth + New stores + Massdiscounters, while improving, remains overstocked + Trade Creditors increased by 8.3% + Creditors’ Days slightly tighter Final Results Presentation February 2015 13
Capital Expansion 2 500 4.0% 3.5% 2 000 Capex as a % of sales 3.0% 1 500 2.5% Rm 1 000 2.0% 500 1.5% 1.0% 0 Dec 2010 Dec 2011 Dec 2012 Dec 2013 Dec 2014 Investment to maintain operations Investment to expand operations Property acquisitions Businesses acquired Total capex as a % of sales Total capex as a % of sales excl business and property acq's + Total Capex as a % of sales: 2.7% (Dec 2013: 3.3%) + Total Capex excl. business and property acq’s as a % of sales: 1.6% (Dec 2013: 1.8%) 14 Final Results Presentation February 2015
Capital Expansion Sales split between owned and leased stores 31% 27% 13% Final Results Presentation February 2015 15
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