Audited results for the year ended 30 September 2018 Agenda
01 Chairman’s remarks 02 Overview 03 Significant matters 04 Financial performance 05 Segmental performance 06 Outlook Chairman’s opening remarks
JAYENDRA NAIDOO CHAIRMAN Overview
LEON LOURENS CEO Year in review
10.9% 10.7% 1.9% growth in operating growth in operating revenue growth to profit to R6.4bn profit to R5.9bn R64.2bn (excluding one-off costs) (including one-off costs)
3.6% R18bn 27.8 cents per share maiden Growth in retail refinanced and dividend declared space guarantees released (dividend cover of 3 times)
5 What we do
Provide The right product adds everyday products value to An extensive product range focusing customers’ on everyday needs lives
At Customer affordable prices loyalty through value Best price leadership ensures product for money differentiation
At customers’ Enhanced convenience customer shopping Largest footprint in African market experience
6 Who we are 12 2.4+ African million m2 total countries 5 200+ retail space stores
400+ million + transactions + 48 000 annually 1 billion employees units sold
7 Who our customers are
It is important for our customers to look and feel good. We want to make their lives better and easier. Everyone, rich and poor, deserves the same access to products, services and friendly customer service from people who treat them with dignity and respect. Leon Lourens, Pepkor CEO
8 Milestones achieved
Published 2017 full audited financial results
Strengthened board composition
Appointed new auditors
Retention scheme implemented
Completed refinancing and release from guarantee
9 Milestones achieved (continued)
Terminated SNH services
Pepkor name change
Credit book agreements
2018 audited financial results
New segmental reporting
10 Significant matters
LEON LOURENS CEO 1. Sourcing office
FY18 sourcing of Clothing, Footwear and Home (CFH) via PGS
SA local 35% Imports 65%
PGS 29%
• CFH sourcing from PGS: 15% for Pep and Ackermans
12 2. Tekkie Town
20% Like-for-like growth
0%
-20%
13 3. Credit agreements
Terminate Own the Build new Maintain commercial customer book profitability relationship experience with Fulcrum
1 2 3 4
14 4. Dividend policy
3 x cover
Gearing Capital Strategic 1 x net debt-to- commitments investments EBITDA
15 Financial performance
RIAAN HANEKOM CFO Highlights
Statutory Revenue Operating profit Operating margin HEPS 10.9% 1.9% 90 bps 36.7% to to to to R64.2bn R5.9bn 9.2% 84.5 cps
Comparable Revenue Operating profit Operating margin HEPS 10.9% 10.7% maintained 4.2% to to at to R64.2bn R6.4bn 10.0% 99.3 cps
COMPARABLE: FY18: Add-back of R511 million one-off costs / FY17: Use WANOS of 3 450 million
17 Highlights (continued)
Return on net Cash RefinancedRefinanced 3 assets generated R18bn 23.4% R5.3bn and guarantees 27.5% excl. one-off costs released
Maiden dividend Effective Consumer declared of tax rate finance 27.8c 38.4% @ 3 times cover
18 Consumer finance
Pepkor will collect existing loan ➔ books owned by CenCap: • JD secured credit: c.R1.6bn – average 27-month term • Capfin unsecured loans: c.R1.7bn – average eight-month term
➔ Market-related collection fee
Capital investment required ➔ in FY19: R2.2bn
19 Comparability of earnings
Statutory vs comparable headline earnings per share (HEPS) – cents
133,6 29,9 -4.2%
103,7 99,3 14,8 84,5
FY17 statutory Impact of 882m FY17 FY18 Impact of one- FY18 statutory HEPS shares issued comparable comparable off costs HEPS HEPS HEPS
20 Effective tax rate up
FY18 %
South African standard rate of taxation 28.0
Effect of other African countries’ tax rates 0.5
(Utilisation of unrecognised taxation losses)/taxation losses generated unrecognised 3.4
Withholding tax 3.3
One-off items 3.0
Other adjustments 1.2
Effective tax rate 38.4
21 New reporting segments
FinTech
22 Segmental revenue growth
FY18 – Rm FY18 revenue +10.9% segmental composition
35.5% 64 168
19.9%
10.6% 7.2% 8% 13%
57 850 13% 66%
FY17 FY18
23 Credit sales
FY18 merchandise sales
100% 18% 8% 30% 8% 64% 14% 92% 92% 82% 86%
70%
36%
PEP & PEP Ackermans Speciality Furniture Electronics & Building Pepkor group Africa Appliances materials Cash sales Credit sales
24 Gross profit margin
35.3% 34.5% • Increased markdowns and discounts • Building materials discounts and reduced rebates FY17 FY18
25 Other income
FY18
Marketing and advertising income 24.8% 8%
Insurance and other income Commission 25% 50%
Distribution fee Growth to 17% R875m
26 Lowest cost of doing business
FY18
26.6% Property 25.8% 26%
Personnel Depreciation 47% 7%
Other 17% CODB CODB Including Excluding one-off costs one-off costs
27 Segmental operating profit growth
FY18 – Rm FY18 operating profit +10.7% segmental composition
10.6%
55.8% (11.9%) 6 439 (511) 3% 4% 0%
8.1%
+1.9%
5 928
5 815 93%
FY17 FY18 One-off FY18 comparable costs statutory Before capital items
28 Balance sheet considerations
+R1.9bn Inventory
Goodwill and Net working intangibles capital Trade R61.0bn R5.4bn +R1.1bn receivables
+R0.4bn Trade payables
29 Net debt
Net debt Net EBITDA: Interest (contractual) debt-to-EBITDA cover R12.6bn 1.64 6.51
8
6 Net cash Unutilised facilities 4 Debt repayments 2
0 R billions R -2
-4
-6
-8 FY18 FY19 FY20 FY21 FY22 FY23
30 Cash generated from operations
FY18 – Rm
376 451 489 1 134 ( 3 331 ) 302 5 891 5 312
Operating Debtors' cost Amortisation Inventory Provision: Other non- Net changes Cash profit and write-downs One-off costs cash in working generated depreciation and adjustments capital from provisions operations
31 Capex
Capex % of revenue 2.9% R1 869m
Expansion Replacement Depreciation % of revenue 66% 34% 1.8% R1 134m
32 Segmental performance
LEON LOURENS CEO Clothing & general merchandise PEP & Ackermans
8.0%
Sales growth
3.3% 4.5%
Like-for-like sales CFH growth deflation
9.0% 5.0%
Volume growth Retail space growth
35 PEP
2 231
Stores
97.5% 294m
Best Price Number of Leadership transactions
12 000 137
Number of New stores employees opened
36 Ackermans No.1 Value Retailer for women with kids in their lives
731 80
New stores Stores opened
17% 58m Number of Lay-byes transactions
7 000 12%
Number of Credit sales employees growth
37 PEP Africa
-1.8% 347
Sales Stores growth
3 000 3 000 Number of employees
23m
Number of transactions
38 Speciality
12.5% 911
Sales growth Stores
6 000 82
Number of New stores employees opened
14m
Number of transactions
39 Furniture, appliances & electronics Furniture, appliances & electronics
9.7% 892 81
Sales Stores New stores growth opened
7 000
Number of employees
3.5m
Number of transactions
41 Furniture, appliances & electronics
Furniture retail Appliances and electronics end Niche - Top Value Mass market Discount Bedding Furniture
Supply Chain Services Supply Chain Services Financial Services
JD GROUP LIMITED
42 Building materials Building materials
-3.1% 1 2 3 Sales General decline SBM – SBM – building Retail Wholesale materials 124
Stores
7 000
Number of employees
44 FinTech FinTech
145 000
Active traders
23m
Monthly consumers
2.8m
Daily transactions
46 Initiatives
LEON LOURENS CEO Adult wear
48 Discount variety – Dealz
49 FMCG
50 PAXI
51 Cellular – direct imports
52 Outlook
LEON LOURENS CEO Outlook
➔ Back to retail
➔ Future performance
➔ Store openings
➔ Portfolio strategy
➔ Leadership and culture
54 Putting the customer at the centre of what we do Audited results Thank you PEP – Historic performance
Revenue 19-year CAGR 15%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Operating profit
19-year CAGR 28%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
57 Ackermans – Historic performance
Revenue 18-year CAGR 16%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Operating profit
18-year CAGR 23%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
58