Long4Life Limited ANNUAL RESULTS PRESENTATION 2019
AGENDA • Brian Joffe – Group CEO • Overview and year in review • Mireille Levenstein – CFO • Financial analysis • Brian Joffe – Group CEO • Operational analysis - Sport and Recreation - Personal Care and Wellness • Grant Hobbs – CEO Beverages • Operational analysis - Beverages • Brian Joffe – Group CEO • Strategy and Outlook • Q&A • Supplementary information Long 4 Life Annual Results Presentation 2019 Long 4 Life Annual Results Presentation 2019 2 2
Overview and year in review Brian Joffe – Group CEO Long 4 Life Annual Results Presentation 2019 3
OVERVIEW Two years as a listed company on the JSE • There are areas where we could have done better but in general we are proud of the result • A full year of contribution from acquired businesses • HEPS growth of 28% to 38.7 cents • A strong balance sheet that is currently underinvested but which can accommodate considerably more scale • Corporate office costs are arguably too high but this is deliberate as we create a well-resourced support foundation for growth in future • No dividends for this period as we bought back shares as a mechanism to enhance shareholder return Long 4 Life Annual Results Presentation 2019 Long 4 Life Annual Results Presentation 2019 4 4
YEAR IN REVIEW F2019 was a year of achievement with much to look forward to • Establishing ourselves as a lifestyle-themed group • Decentralised business model • Acquisitions have integrated well and the management team is confident in our future • Exploiting opportunities in both mature and emerging consumer categories • Returns on trading assets in each of the businesses trending to meet expectation • Substantial balance sheet capacity gives us the capability to be opportunistic • We are actively assessing acquisitive possibilities but we are disciplined in our strategy and seek value Long 4 Life Annual Results Presentation 2019 Long 4 Life Annual Results Presentation 2019 5 5
Financial analysis Mireille Levenstein – CFO Long 4 Life Annual Results Presentation 2019 6
GROUP FINANCIAL HIGHLIGHTS A sound financial performance Revenue Gross Trading profit before margin depreciation and amortisation R53 4 . 9 million R3.6 billion 39.7% Trading Trading Cash generated margin profit from operations 12.5% R454.2 million R465.1 million HEPS Effective tax rate Positive first half trajectory continued to second half, 38.7 cents 28.6% with strong finish for the year Long 4 Life Annual Results Presentation 2019 7
ACQUISITION TIMELINE First full 12 months of trading • F2018: • Raised R2 billion on listing in April 2017 • Holdsport, Sorbet and Inhle acquired effective 1 November 2017 • F2019: • Chill Beverages acquired for R493 million effective 1 March 2018 (cash R368 million and shares R125 million) • Other smaller acquisitions: - Limelight acquired for R25.1 million effective 1 March 2018 - ClaytonCare acquired effective 1 September 2018 for R 39.9 million (36% economic effective interest) • Comparatives not meaningful Long 4 Life Annual Results Presentation 2019 Long 4 Life Annual Results Presentation 2019 8 8
PROFIT & LOSS All three operating segments performed well Revenue Trading profit Trading Rm Rm margin Unpacking margins and expenses Sport and Recreation 2 113.0 321.1 15.2% • Gross profit R1.4 billion, gross margin 39.7% (H1: 40.9% and H2: 38.8%) Beverages 1 355.5 153.8 11.3% • GP margins maintained overall despite consumer price Personal Care and Wellness 173.8 38.9 22.4% sensitivity, manufacturing cost pressure, Central / corporate (59.6) - VAT increase Total 3 642.3 454.2 12.5% • Corporate costs reflect investment in corporate office capability for expansion in the future Contribution to revenue Contribution to trading profit (excluding Central) • Major expense categories 30% 37% • Staff R445 million (48% of total expenses) 8% 5% • Occupancy R271 million (29% of total expenses) • Depreciation R81 million (2.2% of turnover) 62% 58% Sport and Recreation Beverages Personal Care and Wellness Long 4 Life Annual Results Presentation 2019 9
PROFIT & LOSS Trading margin assisted by H2 operating leverage 40,9% 39,7% 38,8% • Results weighted to second half due to seasonality 27,4% 25,5% 24,1% • All three operational segments experience increase trading in summer months 13,1% 12,5% 11,6% • Approx 40/60 H1 H2 split in trading profit • Operating leverage in second half clearly evident H1 F2019 H2 F2019 F2019 • Trading margin 12.5% Gross profit % Expenses % Trading margin % (H1: 11.6% and H2: 13.1%) • Gross margin 39.7% (H1: 40.9% and H2: 38.8%) (H2 Revenue Trading profit typically lower due to markdown sales) 2019 H2 H1 H2 H1 Sport and Recreation 56% 44% 60% 40% Beverages 59% 41% 63% 37% Personal Care and Wellness 68% 32% 61% 39% Group (before central costs) 58% 42% 61% 39% Long 4 Life Annual Results Presentation 2019 10
PROFIT & LOSS Operating earnings of 40.4 cents per share, 16.1 cents in H1 and 24.3 cents in H2 • HEPS of 38.7 cents Cents • Unpacking operating headline earnings* per share Group HEPS on R348.8 million 38.7 Net interest income after tax (5.7) Corporate costs after tax (central, acquisition and share based payments 7.4 Operating headline earnings 40.4 • Weighted average no. of shares: 902.1 million • No of shares in issue: 913.9 million (net of treasury shares 877.4 million) • Treasury shares acquired: 36.4 million shares (at R4.38 per share), with 13.2 million shares for the 2018 FSP share scheme * Detailed computation provided in supplementary information Long 4 Life Annual Results Presentation 2019 Long 4 Life Annual Results Presentation 2019 11 11
FINANCIAL POSITION Measuring our performance and returns • Return on funds employed (ROFE) • Internal measure of trading performance - measures operational efficiencies of trading assets, separates investment and financing decisions • Group ROFE at 42% • Cash conversion ratio • Cash generated by operations was 102% of trading profit • Enhanced by large depreciation charge • Return on Equity (ROE) • 7.6% after tax return on average for the year • Reflective of infancy of group, not fully invested, no gearing, two-year period of acquisition and capital raising • Creating a total asset base of R5.8 billion and equity of R4.8 billion • Significant balance sheet capacity to grow and achieve future optimal return objectives Long 4 Life Annual Results Presentation 2019 Long 4 Life Annual Results Presentation 2019 12 12
FINANCIAL POSITION Asset, equity and liability position R’000 2019 2018 • Group is not fully invested ASSETS 5 796 663 5 144 377 Property, plant and equipment 526 502 198 955 • Working capital: Goodwill & Intangibles 3 038 741 2 571 733 • Stock turnover - 2.7 x cost of sales Tax receivables & deferred tax 29 509 12 040 • Trade debtors - no retail credit offering Associate 3 428 - Other investments & loans 6 045 22 982 • Detailed working capital breakdown provided in Inventory 812 525 580 363 supplementary information Receivables 291 768 66 642 • Borrowings - Bond on Chill property Cash 1 088 145 1 691 662 EQUITY & LIABILITIES 5 796 663 5 144 377 Capital & reserves 4 871 375 4 523 863 Tax payables & deferred tax liabilities 238 823 162 320 Borrowings 92 944 160 338 Provisions - 2 126 Put option liability 48 000 48 000 Lease smoothing liability 48 026 47 353 Payables 497 495 200 377 Long 4 Life Annual Results Presentation 2019 13
CASH FLOWS The group is inherently cash generative • Strong operating cash flows • Cash generated by operations before working capital R537.0 million • Working capital • Absorption of R71.9 million • Typical w/c cycle is absorption in H1 and generation in H2 • Operations manage their w/c to suit their particular requirements • Cash generated by operations after working capital R465.1 million (102% of trading profit) • Cash outflows from investing activities of R566 million • Capex expenditure R155.3 million (R76 million expansion capex) • Acquisition of subsidiaries consumed R426 million • Cash outflows from financing activities of R427 million • Repayment of borrowings R216 million (Holdsport R160 million and Chill R56 million) • Treasure shares acquired R159.6 million Long 4 Life Annual Results Presentation 2019 Long 4 Life Annual Results Presentation 2019 14 14
FINANCIAL GUIDANCE Firepower to expand and increase scale • Strong financial position • R1.1 billion in cash on hand • Cash acquisition capacity is approximately R2 billion, by introducing gearing • Operational cash generation • Current portfolio of businesses is generating approximately R590 million in trading profit before depreciation • Seasonality and operating leverage - H2 revenue and trading profit significantly higher than H1 • Investment in capex planned in year ahead at similar levels to support growth • The group is targeting real growth in earnings in F2020 Long 4 Life Annual Results Presentation 2019 Long 4 Life Annual Results Presentation 2019 15 15
Operational analysis Brian Joffe – Group CEO Long 4 Life Annual Results Presentation 2019 16
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