Presentation of consolidated results. For the 52 weeks ended 30 March 2013

Transcription

1 Presentation of consolidated results For the 52 weeks ended 30 March

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

3 Strategic and operational update 3

4 Vision Distinctive retail formats Focused customer groupings Exceptional value proposition and choice of product Creating unique experiences 4

5 Strategy key levers Revamp stores and service Store optimisation Improve product and assortment Leverage loyalty programme Comparable store growth Realise opportunities Credit New space growth Grow existing format footprint Expand into rest of Africa Rollout of tested new formats Margin expansion Sourcing Pricing management Group efficiencies 5

6 Trading environment Macro backdrop GDP growth expectations softening CPI remains within 4-6% band Repo rate at 15 year low of 5% with no expectation of change Consumer pressure remains despite sound fiscal framework Rand depreciation 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Real GDP growth (%) (1) 3.1% 2.5% 2.4% F (1) SARB - 10 May

7 Salient features for quarter ended 30 March 2013 Edgars division First period of positive LFL sales in quarter Gross profit margin of 36.9% for quarter Ave space growth of 7.6% for quarter, compared to same quarter in prior year Discount division Improved sales performance in the quarter Gross profit margin of 31.4% for quarter Ave space growth of 0.7% for quarter, compared to same quarter in prior year Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Retail sales growth (%) LFL sales growth % Retail sales growth (%) LFL sales growth (%) 7

8 Salient features for quarter ended 30 March 2013 (continued) CNA division Stronger sales performance Gross profit margin of 33.5% for quarter Ave space reduced 1.2% for quarter, compared to same quarter in prior year Group Improved sales performance in the quarter Gross profit margin of 34.4% for quarter Ave space growth of 4.0% for quarter, compared to same quarter in prior year Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Retail sales growth (%) LFL sales growth % Retail sales growth (%) LFL sales growth (%) 8

9 Salient features for the period ended 30 March 2013 Delivery against strategic plan Strategic initiatives disruptive in the short term Refurbishment on track Discount complete Edgars at Phase II Brand pipeline growing for Edgars Tested new formats and first mono-branded store launched Over 9 million loyalty customers Ave space growth 3.4% Comparable store retail sales up 0.4% Retail sales 2.0% Profitability GP margin 0.1 pts lower Pro forma adjusted EBITDA down 13.1% Gross profit 1.8% Sound capital structure management Sale of trade receivables book Unwind of securitisation program Refinance of all short term, 2014, maturities (by 20 May) Migration of funding structure to rand Foreign debt principal and coupon substantially hedged 9

10 Edgars division Comp store growth New space growth Margin expansion Phase 1 of TP successfully completed Key brands secured, not meaningfully rolled out yet Optimising marketing plans Increased quick response sourcing LFL New stores and new concepts rolled out including Edgars Active, Edgars Shoe Gallery and standalone Topshop Edgars Active format expanded to 124 stores Average m stores Increased promotional and clearance activity Input mark up improvements GP margin 39.7% 1.1% 8.0% 1.1pts 10

11 Edgars division (continued) Transformation in progress Capex FY13 (R millions) Retail sales up 4.1% Brands in Edgars and mono-branded stores in line with expectations Private label in transition Tipping point stores transformation in progress Capex investment of R810 million planned in FY14 for transformation and space growth Expansion Refurbishment 11

12 Discount division Comp store growth New space growth Margin expansion Excluding weaker Q3FY13, LFL growth up 6.3% New generation fixtures rolled out LFL Right-sizing of stores according to demand and location slowed growth Impact of Discom format closure Average m stores Improved pricing Optimal sourcing Category mix shifts GP margin 33.0% 2.1% 0.8% 1.2 pts 12

13 Discount division (continued) Improved customer perception Retail sales down 0.3%; impacted by Discom closure Improvement in product and price perception Capex investment of R233 million planned in FY14 for expansion and remaining refits Capex FY13 (R millions) Expansion Refurbishment 13

14 CNA division Comp store growth New space growth Margin expansion Lower mobile sales Product mix changing to digital Traditional categories under market pressure LFL No significant space growth planned Focus on rightsizing existing and closing unprofitable stores Average 89.6 m2 195 stores Impacted by sales mix as a higher proportion of lower margin items such as electronics and branded toys were sold GP margin 32.4% 2.4% 2.9% 0.7 pts 14

15 CNA division (continued) Retail sales up 0.7% Ongoing rationalisation Capex investment of R21 million planned in FY14 for ongoing store upgrades Capex FY13 (R millions) 4 37 Expansion Refurbishment 15

16 Group initiatives Loyalty More than 9m 70% of sales on loyalty cards Largest retail loyalty program in the country Insights will help customise offerings Sourcing Increased focus on direct supply Quick response implementation Increased local and regional sourcing Credit Sale of trade receivables System requirements completed Opportunity complicated by current environment Property Growth in average space of 3.4% (4% growth in closing space) Ongoing rightsizing of stores 16

17 Financial review 17

18 Key financial considerations Tax settlement No cash tax payments before Sep 14 Curtailment of use of R9b of assessed losses (NOL s) (1) FY13 Only 50% of future interest on 14 s and 15 s, and replacement debt, deductible 100% of interest deductible post IPO subject to post-ipo period cap Events after the reporting period Sale of trade receivables R8 667m of receivables sold to Absa on 1 November 2012 OtC (2) unwound and notes of R4 300m repaid, so deconsolidation of OtC no longer appropriate Completion of the remaining eligible receivables anticipated in FY14 Expenses associated with receivables sale included in transitional costs Credit operations (not insurance) reflected in discontinued operations Repayment of the remaining 2014 notes, financed by the R4.12 billion senior secured term loan facility and proceeds from the unwind of hedges Further R469 million of the book sold to Absa in April 2013 (1) Net operating losses (2) OntheCards Investments II (Pty) 18

19 Statement of comprehensive income (R millions) FY12 FY13 % change Retail sales Gross profit Other income Store costs (4 622) (4 990) 8.0 Transitional costs (278) (599) Other operating costs (3 552) (3 672) 3.4 Income from JV Trading Profit Derivative loss (10) (897) Foreign exchange (loss)/gain (680) (1 108) Discount on repurchase of senior secured notes 36 Impairment of brands and goodwill (126) (465) Profit/ (Loss) before net financing costs (1 107) Net financing costs (3 688) (3 013) Taxation 176 (1 107) Profit after tax from discontinued operations Net Loss (1 999) (5 028) 19

20 Pro forma adjusted EBITDA (R millions) FY12 FY13 % change Net Loss (1) (1 999) (5 028) Taxation Net financing costs Depreciation & amortisation EBITDA Asset write-off and impairment of intangible assets Net fair value movement on notes and associated derivatives Discount on repurchase of senior floating rate notes (36) Transitional costs Other (3) 96 (54) Adjusted EBITDA Net reduction resulting from pro forma transactions (2) (860) (493) Pro forma adjusted EBITDA (13.1) Pro forma adjusted EBITDA is adjusted to exclude transitional costs and to take into account the transaction with Absa 1) The results of discontinued operations are included being R463 million (FY2012) and R199 million (FY2013). 2) Pro forma income lost to Absa for the portion of the trade receivables book sold including finance charges revenue, bad debts and provisions and including a pro forma fee earned by Edcon under the new arrangement with Absa. 3) Other consists of advisory fees relating to funding and Mastercard sale 20

21 Divisional analysis Division Total retail sales growth % Comparable store sales growth % Gross profit margin % Contribution % FY12 Actual FY13 Actual FY12 LFL (1) FY13 LFL (1) FY12 Actual FY13 Actual FY13 Retail sales FY13 Gross profit Edgars (1.1) Discount 8.4 (0.3) CNA Total Retail sales: Geographic split 7% South Africa Rest of Africa 93% (1) Like-for-like (comparable store sales) 21

22 Cost analysis for FY13 Store costs Increased 8.0% for the year Key costs Rental on premises increased 11.7% affected also by a 3.4% increase in average space Water and electricity increased by 15.0% Productivity improvements Other operating costs Moderate growth of 3.4%, excluding transitional costs Transitional costs of R 599m compared to R278m in FY2012 Mainly due to sale of trade receivables to Absa Costs of administering book for Absa included from 1 November

23 Cashflow for FY Inventory Rec bles ongoing Rec bles sold Payables Total LY cashflow Operating activities Transitional costs Working capital Captial expenditure Net financing costs Taxation TY cashflow 23

24 Capex investment for FY13 Refurbishment key Total capex breakdown (R millions) Total capex of R819 million (excluding finance leases) for FY13 (FY12: R710 million) 147 stores opened (incl. 128 conversions) Store refurbishment still key to strategy across the group R431 million spent on refurbishments vs. R239 million in FY Spend on information systems infrastructure declined by 35.5% as implementation of new planning system was now completed. Edgars Discount CNA IT Other Store capex mix (R millions) Expansion Refurbishment 24

25 Movement on net debt for quarter ended 30 March Q3 FY2013 Working capital New debt raised (1) Debt repaid Hedges FX and other FY2013 (1) Including drawings from cash on hand and 300 fixed rate notes 25

26 Liquidity and capital resources As at 30 March % of all foreign debt principal and 100% of coupon hedged to ZAR between March 2014 and March 2015 Refinanced 2014 FRN s after the reporting period 2015s not urgent at this time Remaining eligible receivables classified as held-for-sale (R millions) FY2013 Drawn (1) Super senior secured Revolving credit facility in ZAR s ZAR Floating notes J+625bps Senior secured Senior 2014 s FRN s E+325bps s Fixed rate 9.5% s $ Fixed rate 9.5% s FRN s E+550bps Deferred option premium 305 Lease liabilities 313 Gross debt Derivatives (1 028) Cash on hand (669) Net debt (1) March 30, 2013 FX Rates used for translation ZAR/USD R 9.16 ZAR/EURO R

27 Events after the reporting period Ongoing management Gross debt (pro forma) Update to hedging strategy Coupon fully hedged Approximately 17% of principal remains unhedged Extension of RCF to 31 December 2016 Repayment of remaining senior secured floating rate notes Second closing of sale of the trade receivables Further R469 million of the SA book sold to Absa 37% 17% 11% 35% Expect to complete sale of remaining eligible receivables in FY14 ZAR USD (hedged) EURO (hedged) EURO (unhedged) 27

28 Events after the reporting period (continued) (R millions) FY2013 Hedges Absa sale 2 nd closing Repayment of 2014 notes Pro forma closing Super senior secured Revolving credit facility in ZAR s ZAR Floating notes J+625bps Senior secured Senior s FRN s E+325bps (4 543) s Fixed rate 9.5% s $ Fixed rate 9.5% Term loan in ZAR J+700bps s FRN s E+550bps Deferred option premium Lease liabilities Gross debt Derivatives (1 028) 581 (447) Cash on hand (669) (469) (158) (1 297) Net debt (469)

29 Looking forward 29

30 Outlook Implementation of Edgars strategy Space growth and rollout in rest of Africa Continue with Discount strategy Reduce cost base and grow loyalty / credit 30

31 Thank you For more information Our website: Edcon contacts for more information: Executive Investor Relations and Media: Debbie Millar / dmillar@edcon.co.za 31