SPAR RESULTS PRESENTATION FOR THE YEAR ENDED 30 SEPTEMBER 2015
AGENDA INTRODUCTION: SPAR GROUP PERFORMANCE SUMMARY SALIENT FEATURES Graham O’Connor, CEO BUSINESS ENVIRONMENT SPAR VALUES AND CULTURES STRATEGIC FOCUS AREAS FINANCIAL OVERVIEW Mark Godfrey, CFO OPERATIONAL OVERVIEW Graham O’Connor, CEO LOOKING FORWARD PROSPECTS QUESTIONS 2
INTRODUCTION GRAHAM O’CONNOR, CEO
SPAR GROUP: FACTS AND FIGURES SPAR INTERNATIONAL: PRESENT IN 40 COUNTRIES FOLLOWING ENTRY INTO 10 NEW TERRITORIES IN ASIA, AFRICA AND EASTERN EUROPE DURING 2014 AND 2015 • 12 314 stores € 32bn p.a. turnover • South Africa is the second biggest SPAR country by turnover • Ireland is 10th biggest SPAR country by turnover Source: SPAR International Annual Report 2014 SOUTHERN AFRICA: BALANCED PORTFOLIO OF 1 935 STORES ACROSS EIGHT BRANDS WITH R86.9BN RETAIL TURNOVER • Groceries + fresh produce, liquor, pharmaceuticals and building materials • Offering spans consumer sectors from high to low LSMs • Seven (+ satellites) distribution centres: 242 800m³ warehousing space (including Imports) • Handle 70% of SPAR’s turnover + 30% directly from third party suppliers • 219m cases dispatched in 2015 (2014: 211m cases) • Distance travelled 30.8 m km in 2015 (vs 30.2 m kms travelled in F2014) 4
SPAR GROUP: FACTS AND FIGURES (continued) IRELAND/SOUTH WEST ENGLAND: BWG SERVICES >1 330 STORES ACROSS 6 BRANDS, ~ € 1.4BN (ZAR19.3BN) RETAIL TURNOVER • Wholesale and distribution of groceries + fresh produce, liquor to retail/catering sectors • Well established in convenience market • 22 300m² stocking 4 600 ambient SKUs, 884 alcohol SKUs and 2 200 in chilled SKUs Ireland* • 13.5m cases dispatched in the financial year in Ireland SUPPORT TO INDEPENDENT RETAILERS • Relationships, marketing and branding, product development, systems support, property management, retail operations and training • Financial: Trade credit and access to funding * Kilcarbery facility only, excludes Appleby Westward 5
PERFORMANCE SUMMARY • First full year operating in a global context • Steady year-on-year growth from existing store base • Total retail footprint increased to 3 267 stores • Efficiency improvements and innovation in warehousing, distribution and logistics • Acquisition of Londis Group (145 retail stores) completed and integration in progress • Refinancing of BWG banking facilities concluded in June 2015: Improved financing costs NET ASSET VALUE HEADLINE EARNINGS 940.0 PER SHARE (CENTS) PER SHARE (CENTS) 1 450.5 1 643.6 1 842.2 1 751.1 1 922.6 564.6 623.9 694.8 781.8 835.5 11 12 13 14 15 11 12 13 14 15 6
SALIENT FEATURES R million 2014 2015 Change (%) Turnover +34.5 54 483.0 73 258.8 Operating profit +23.0 1 864.9 2 294.2 Normalised headline earnings per share (cents) 779.8 940.0 +20.5 Dividend per ordinary share (cents) 540.0 632.0 +17.0 7
BUSINESS ENVIRONMENT SOUTH AFRICA IRELAND • Systemic economic shortcomings, social • Consistent economic recovery since global instability and infrastructural limitations financial crisis • Ongoing pressure on consumer spending • Retail market showing positive signs of a return to health ~ but food retail still lagging • Internally measured food inflation overall market relatively low at 5.2% • Positive trends in labour market • Impact of current drought on food prices › Expected to spur consumer demand • Highly competitive across all segments of › Impact of 6% increase in minimum wage SPAR ’s business 8
SPAR VALUES AND CULTURE: ETHICAL AND MORAL COMPASS / DECISION-MAKING FOUNDATION • Commitment to consumers, retailers, suppliers, brand, etc. • Displaying positive energy and attitude • Enthusiasm • Wanting to do what you currently do 9
SPAR VALUES AND CULTURE: ETHICAL AND MORAL COMPASS / DECISION-MAKING FOUNDATION • Creativity and innovation • Problem solving + accountability • Visionary leadership and taking calculated risks • Long-term focus vs short-term gain 10
SPAR VALUES AND CULTURE: ETHICAL AND MORAL COMPASS / DECISION-MAKING FOUNDATION • A sense of belonging to SPAR family ~ our people and our retailers • Recognise every person’s contribution • Personalising work/business relationships • Working together for greater good of SPAR 11
OUR COMMITMENT TOWARDS OUR FAMILY VALUES 12
SPAR VALUES AND CULTURE: ETHICAL AND MORAL COMPASS / DECISION-MAKING FOUNDATION • SPAR strategy reviewed in 2015 › Underpinned by values of passion, entrepreneurship and family values Passion • Strategic objectives › Retailer profitability › Excellence in Fresh › Centre of community › Competitive pricing › Retail relationships, leadership and support Entrepreneurship Family values › Supply chain optimisation › World class replenishment and brands › Transformation › New business opportunities 13
STRATEGIC OBJECTIVES: RETAILER PROFITABILITY • Sale of more SPAR brand – private label – product at higher margins • Joint business planning with our retailers 14
STRATEGIC OBJECTIVES: RETAILER RELATIONSHIPS, LEADERSHIP AND SUPPORT • Provide expert retail leadership and support through our service, incentives and training programmes • Regular interaction with regional DC management and operations’ teams • Regular store visits and monthly performance monitoring 15
STRATEGIC OBJECTIVES: COMPETITIVE PRICING • Group buying reviews, commodity trading and our revised promotions strategy • Peer group price surveys 16
STRATEGIC OBJECTIVES: CENTRE OF COMMUNITY • Drawing customers to our stores • Growing brand awareness • Fostering positive brand sentiment by strengthening community leadership, sponsorships, advertising and social media 17
STRATEGIC OBJECTIVES: EXCELLENCE IN FRESH Outperform in highly competitive fresh food/groceries industry • Key focus on Fresh departments: produce, HMR, bakery and butchery with store ratio >30% • Increasing product range and housebrand sales • Keeping abreast of market trends in range offerings • Remaining competitive 18
STRATEGIC OBJECTIVES: SUPPLY CHAIN OPTIMISATION • Ensuring we run a lean organisation • Collaborating closely with retailers and suppliers 19
STRATEGIC OBJECTIVES: TRANSFORMATION • Currently 245 black owned retail stores with focus on increasing this number 20
STRATEGIC OBJECTIVES: NEW BUSINESS OPPORTUNITIES • Building on the acquisition of BWG Group in Ireland (August 2014) • Integrating the acquisition of Londis • Improving store standards in South West England 21
FINANCIAL OVERVIEW MARK GODFREY, CFO
FINANCIAL OVERVIEW: TURNOVER R million 2014 2015 Change (%) SPAR/TOPS +8.5 46 225.5 50 176.8 Build it 5 509.2 6 190.8 +12.4 Total South Africa 51 734.7 56 367.6 +9.0 Liquor sales ( SPAR/TOPS ) +14.3 4 043.9 4 622.5 Ireland 2 748.3 16 891.2 - Total Group 54 483.0 73 258.8 +34.5 • Impact of BWG: first time inclusion for full year • SPAR Southern Africa: real growth achieved across all brands • Build it South Africa reported growth of 9% and 39% in neighbouring countries 23
FINANCIAL OVERVIEW: GROSS MARGINS 2015 R million 2014 (GP%) 2015 (GP%) Turnover (Rm) Normal business 7.9 8.0 55 368.8 Retail division 15.9 16.9 738.9 Imports – Build it 20.6 21.9 259.9 Total South Africa 8.2 8.2 56 367.6 Ireland 10.2 10.5 16 891.2 Total Group 8.3 8.7 73 258.8 • Stronger ex-warehouse sales: › Warehouse - Dry 46.9% vs 46.6% - Perishables 15.9% vs 15.5% 62.8% vs 62.1% › Dropshipment 37.2% vs 37.9% 24
FINANCIAL OVERVIEW: INFLATION PER SEGMENT 6 months to 2014 March 2015 2015 SPAR business 5.7% ¹ 5.5% 5.2% Liquor 5.8% 6.8% 6.4% Build it c. 3.0% ² c. 3.0% c. 3.3% 1. SPAR ’s budgeted expectations for 2016: › SA food 6.0% › Building materials 3.9% › Ireland (2.0%) – All foods (2.2%) – Alcohol (3.0%) – Tobacco 4.0% 2. Building material inflation budget at c. 3.9% for 2016 with difference between coastal region (c. 4.5%) and inland (c.3.5%) attributed to cement effect 25
FINANCIAL OVERVIEW: EXPENSES Expenses (Rm) Increase (%) SPAR business 2 844.8 +8.3%¹ Retail division 128.3 +9.8%² Build it division 139.1 (3.3%) Total South Africa 3 112.2 +7.7% Ireland 1 748.0³ * Total Group 4 860.2 +54.2% 1. SPAR : › Impacted by higher employment costs as the business addressed contract labour › Net vehicle expenses reduced 5.8% to R313m ~ Impacted by 13.4% reduction in diesel costs › Satisfactory reduction in debt impairment costs 2. Retail division › Launched PRASA Station KWIKSPAR 3. Ireland › Impacted by start up costs of new Kilcarbery chilled facility › Increases in legislated wage rates 26
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