audited results presentation for the year ended 30 june 2012...conforama group consolidated for 12...

Audited results presentation for the year ended 30 June 2012

2STEINHOFF INTERNATIONAL RESULTS PRESENTATION FOR THE YEAR ENDED 30 JUNE 2012

Introduction

Dr Len Konar

Independent Chairman


Agenda

• Year in review

• Operational review

• International operations

• African operations

• Financial performance


Year in review: International operationsVALUE PROPOSITION CONTINUES TO DRIVE PERFORMANCE

Picture wall to come


Year in review: African operationsKAP INDUSTRIAL – INDUSTRY IN MOTION


Year in review: African operationsJD GROUP – IT IS ALL COMING TOGETHER

Year in review

Markus Jooste

Chief Executive Officer


Year in review

International operations

• Integration of Conforama acquisition

• Converted retail participation into underlying operations and brands

• Minority take-out in ERM

African operations

• Reverse acquisition of Steinhoff Industrial assets into KAP

• Acquired majority interest in JD through share swap with KAP

• Acquired 20% stake in PSG Group

Steinhoff International

• Expand property portfolio by further acquisitions in Europe


New group structure


Year in review: International operationsRETAIL

• Market share gains in Europe despite volatile macro economic conditions

• Continued growth in the mass market discount segment

• Resilient economies in central continental Europe

• Market share gains in the UK

• Economic uncertainty affects discretionary spending

• Italy

• Eastern Europe and Croatia

• Australia

• Continued investment in retail infrastructure and brands

• New store openings

• Franchisee buybacks

• Property investments by Steinhoff International


Year in review: International operationsINTEGRATED SUPPLY CHAIN

• Optimisation of customer base

• Additional Conforama volumes support supply chain synergies

• Merging of Steinhoff and Conforama Asian sourcing office

• Increase focus on warehouse and logistics efficiencies

Operational review



International operationsOPERATING RESULTS FOR THE YEAR ENDED 30 JUNE 2012

Operating profit increases by 31% to €483m (2011: €369m)

Gross revenue increases by 50% to €7 047m (2011: €4 698m)

Operating margin decreases to 6.9% (2011: 7.9%)


Retail



Retail: household goodsINTERNATIONAL OPERATIONS



Operating margin increases to 4.7% (2011: 4.5%)




Conforama Group consolidated for 12 months (FY11: 4 months) €3 164m €919m

European Retail Management (ERM) and other €1 094m €990m

United Kingdom (UK) €504m €564m

Pacific Rim €275m €227m

⟷ Conforama France – revenue unchanged year-on-year (despite volatile electronic household goods appliances market, market share gains in furniture and home décor markets)

↑ Conforama Switzerland, Spain and Portugal – strong growth

↓ Conforama Italy – depressed market continue to negatively impact on results

↑ ERM – discount positioning, product range and store expansion continues to drive growth

↑ UK – Harveys and Bensons report solid results. Progress made in closing unprofitable stores

↑ Pacific Rim – solid performance by Snooze despite tough trading conditions


International retail geographic breakdownREVENUE

47%

29%

10%

14%France

Central continental Europe and Switzerland

UK

Other


International retail product category breakdownREVENUE

57%24%

11%

8%

Furniture

White-Brown-Grey goods

Decoration

Other



Operating margin increases to 4.7% (2011: 4.5%)

Conforama Group consolidated for 12 months (FY11: 4 months)* €126m €25m

ERM and other* €71m €61m

UK €36m €28m

Pacific Rim €5m €7m


↑ Disclosure of separate property segment, now discloses true retail margin

↑ Margins are improving in majority of retail businesses

↑ Conforama – Increased sourcing from low-cost countries, increased sales in furniture and home décor ranges and improved geographical sales mix improve margins

↑ ERM – Increased maturity of new store network continues to drive economies of scale

↑ UK – Brand rationalisation savings and impact of new store roll outs improve margins

€238m €121m

* Includes intragroup property rentals


Retail: household goodsCONFORAMA PERFORMANCE

FY12 Pro-forma FY11

Revenue €3 164m 1.0% €3 134m

Operating profit* €153m 5.5% €145m

Operating margin 4.8% 20bps 4.6%

↑ Strong performance in all countries despite depressed electronics market

↑ Market share gains in furniture and home accessories

↑ Margin improvement lead by increased furniture and home décor sales

* Excludes intragroup property rentals


Manufacturing

Sourcing

Logistics



Manufacturing, sourcing and logisticsINTERNATIONAL OPERATIONS

Operating profit decreases by 2% to €162m (2011: €166m)






↓ HUKLA operations sold in the beginning of financial year included in prior year

↑ Increased intra-group volumes: Conforama, UK retail and ERM

↑ Weaker Polish zloty and Hungarian forint

↑ Strong performance from bathroom manufacturing plant in Germany

↑ Encouraging growth of mattress and foam manufacturing operations in UK




↓ Increased mix of sourcing volumes at a lower margin

↓ Strong US dollar

↑ Weak Polish zloty and Hungarian forint

↑ European manufacturing improvement in quality resulting in lower return of goods

↑ German manufacturing reported good growth

↑ International sourcing increased efficiencies of scale due to additional Conforama volumes

Corporate services



Retail investment participationINTERNATIONAL OPERATIONS

Investment in retail participation redeemed at year end (2011: €291m)

Retail participation contribution at €46m (2011: €45m)

Annualised return on investment of 14% (2011: 15%)


Brand managementINTERNATIONAL OPERATIONS

Total investment in Swiss-held brands €449m (2011: €451m)

Brand management contribution at €37m (2011: €36m)

Return on investment at 8.2% (2011: 8.0%)


International operationsRESULTS FOR THE YEAR ENDED 30 JUNE 2012

Gross revenue Operating profit

2012 2011 2012 2011

€’m €’m €’m €’m

International operations 7 047 4 698 483 369

Retail household goods 5 037 2 700 238 121

Manufacturing, sourcing and logistics 1 927 1 917 162 166

Corporate: Retail participation 46 45 46 45

Corporate: Brand management 37 36 37 36

R’m R’m R’m R’m

Steinhoff Europe 73 388 44 935 5 033 3 526

Operating margin 6.9% 7.9%


Group properties STEINHOFF INTERNATIONAL

Property investments R22 867m (2011: R19 150m)

Properties operating profit at R1 638m (2011: R854m)

Return on investment at 7.2% (2011: 4.5%)


Group propertiesSTEINHOFF INTERNATIONAL

• Group owned property strategy

• Manufacturing properties

• Retail properties

• Retail license attached to many of them

• Internal rentals lead to higher profitability

• Market related

• Optimise external rental and property expense

• Lease liability management

• Manage maintenance expense

PROSPECTS



• Despite uncertainty in European markets, our positioning in the discount

sector and fragmented European markets provide comfort of group’s ability

to grow

• Consolidate market share in our developed markets, grow our market share

in developing markets

• Minority take-out

• Conversion of investment participation

• Improve margins through group synergies

• Continue to invest in our store network and e-commerce platform

Prospects International operations

African operations

Danie van der Merwe

CEO: Southern Hemisphere


Year in review: African operationsMANUFACTURING AND SOURCING

KAP INTERNATIONAL

• All operations business as usual

• Acquisition has no operational impact

• Continuing increased market demand in outsourced supply chain

management and passenger solutions

• Restructuring of integrated timber operations to better align operations to

market conditions

• Increased demand in majority of manufacturing operations


KAP InternationalACCOUNTING IMPACT

KAP accounting impact

• Traditional KAP consolidated for Q4 2012 only

• Comparative consist of Steinhoff Africa Industrial assets only

SHF accounting impact

• Consolidate KAP results for last 3 months (62% subsidiary)

• Equity accounted for 9 months to end March 2012 at 34%


KAP InternationalSALIENT FEATURES

2012 2011 % change

Revenue (R’m) 11 018 8 861 24%

Operating profit (R’m) 1 106 1 029 7%

Operating margin (%) 10% 12%

Headline earnings (R’m) 490 424 16%

Headline earnings per share (cents) 24.2 22.1 10%

Dividend per share (cents) 6 n/a

Cash generated from operations (R’m) 1 906 1 460 31%


KAP International DIVISIONAL PERFORMANCE

14%

>100%

>100% (24%)

2%13%

Revenue = R6 822m

Operating profit = R701m

Revenue = R1 993m


Revenue = R2 286m


14%

>100%

>100%(24%)

2%


Year in review: African operationsRETAIL: JD GROUP

• Retail business well positioned for sustained market share growth

• Strong automotive retail environment

• Growth in furniture retail

• Deflation and increased competition in electronic and household

appliance business

• Financial services business growth due to introduction of new products

• Introduction of capped unsecured loan product to existing low-risk

customers


JD GroupACCOUNTING IMPACT

JD Group accounting impact

• 30 June 2012 results for 10 months only due to change in year-end

SHF accounting impact

• Consolidate JD Group results for last 3 months (50.1% subsidiary)

• Equity accounted for 9 months to end March 2012 at 32%


JD GroupSALIENT FEATURES

2012 (10 months) 2011 (10 months) Change

Headline earnings (R million) 884 724 22%

HEPS (cents) 409.9 335.2 22%

Dividend per share (cents) 232 n/a n/a

Revenue (R billion) 25.3 22.7 11%

Debtors’ cost (R million) 417 572 (27%)

Net asset value per share (cents) 4 026 n/a n/a


JD GroupDIVISIONAL PERFORMANCE (10 MONTHS LIKE FOR LIKE)

10%11%

4%

Revenue = R5 327m


3%

1%

Revenue = R5 053m

10%

31%

Revenue = R2 985m

15%

44%

Revenue = R12 194m

Operating profit = R177m Operating profit = R760m Operating profit = R411m


Associate earningsKAP, JD Group and PSG Group

• KAP associate earnings

• KAP profit for 9 months ended 1 April 2012

• 34% average effective holding

• JD associate earnings

• JD profit for 9 months ended 1 April 2012

• 32% average effective holding

• Other associate earnings

• Includes 5 months of PSG associate earnings and various other

associate investments

PROSPECTS

African operations


Prospects African operations

• KAP and JD group to strengthen geographical and product diversity of the

group with 12 months consolidation for the next financial year

• Mobilise our African strategy

• Supported by a clear retail and industrial platform that can drive our

growth

FINANCIAL PERFORMANCE

Ben la Grange

CFO: Southern Hemisphere


Segmental reconciliationSTEINHOFF INTERNATIONAL

Gross revenue Operating profit

2012 2011 2012 2011

R’m R’m R’m R’m

International operations 73 388 44 935 5 033 3 526

African operations 11 063 8 905 1 116 1 016

- KAP International 11 018 8 861 1 106 1 029

- Steinhoff Africa other 45 44 10 (13)

African operations: JD Group 7 451 - 639 -

Central: Group properties 1 658 871 1 638 854

Central: Treasury and other 274 424 290 435

Gross revenue 93 834 55 135 8 716 5 831

Intercompany eliminations (13 400) (12 095) (705) (407)

As shown on income statement 80 434 43 040 8 011 5 424


June 2012

8%

65%

23%

4%

21%

60%

June 2011

Continental Europe

Southern Africa Pacific Rim

United Kingdom

13%

6%

Continental Europe

Southern Africa Pacific Rim

United Kingdom

Revenue composition – geographical breakdownREVENUE


Revenue composition – segmental breakdownREVENUE

47%

33%

16%

2% 2%

Retail International M, S & L* International

M, S & L* Africa Properties

Corporate services

June 2011

56%

8%

21%

12%2% 1%

Retail International Retail Africa

M, S & L* International M, S & L* Africa

Properties Corporate services

June 2012

*Manufacturing, Sourcing and Logistics


* Cash generated from operations/operating profit

2012 2011 Change

Revenue (R’m) 80 434 43 040 87%

Operating profit (R’m) 8 011 5 424 48%

Operating margin (%) 10% 13%

Headline earnings (R’m) 5 398 3 766 43%

HEPS (cents) 317.0 239.9 32%

Diluted HEPS (cents) 288.2 225.8 28%

NAV per share (cents) 2 466 2 056 20%

Distribution per share (cents) 80 65 23%

Cash generated from operations (R’m) 10 368 7 202 44%

Cash flow/profit percentage* 129% 133%

Financial performance – continuing operationsSALIENT FEATURES


Average translation rate Closing translation rate

2012 2011 % change 2012 2011 % change

EUR:ZAR 10.41 9.56 8.9% 10.34 9.87 4.9%

EUR:PLN 4.26 3.97 7.4% 4.25 3.99 6.6%

EUR:GBP 0.85 0.86 (1.3%) 0.81 0.90 (10.2%)

EUR:AUD 1.30 1.38 (5.9%) 1.23 1.36 (9.1%)

EUR:USD 1.34 1.36 (1.7%) 1.26 1.44 (12.5%)

EUR:CHF 1.20 1.30 (7.6%) 1.20 1.20 0.4%

EUR:HUF 292.14 274.32 6.5% 287.77 265.61 8.3%

EUR:NZD 1.67 1.80 (7.4%) 1.57 1.76 (10.6%)

Financial performance ZAR DENOMINATED REVENUE: 23% (2011: 21%)


ZAR:EUR Average exchange rate Headline earnings per ordinary share from continuing operations (cents)

9.56

10.41

30 June 2011 30 June 2012

239.9

317.0

293.9

30 June 2011 30 June 2012 Constant currency

+8.9%

+23%+32%

ZAR weakness affecting earnings translation


Rand million

2012 2011

Operating profit from continuing operations before capital items 8 011 5 424

Operating profit from discontinuing operations before capital items - 380

Depreciation and amortisation 1 801 1 256

Revaluation of biological assets and other non-cash adjustments (64) (117)

Working capital changes 620 259

Inventory (927) (827)

Receivables 788 (151)

Payables 759 1 237

Net movement in instalment sale and loan receivables (523) -

Dividends, taxation and interest (2 016) (1 526)

Cash flow from operating activities 7 829 5 676

Cash flowOPERATING ACTIVITIES


Rand million

2012 2011

Cash flows from operating activities 7 829 5 676

Investing activities (9 403) (15 100)

Assets: replacement capex (602) (260)

Assets: expansion capex (10 024) (5 970)

Investments in subsidiaries (2 104) (8 165)

Increase in other investments and loans 3 724 (337)

Investments in associates (390) (763)

Treasury and other share related transactions (7) 395

Financing activities 3 038 10 307

Movement in cash and cash equivalents 1 464 883

Cash flowCONTINUED


Cash flowPROFIT UNDERPINNED BY CASH

-

2 000

4 000

6 000

8 000

10 000

12 000

June 02 June 03 June 04 June 05 June 06 June 07 June 08 June 09 June 10 June 11 June 2012

Operating profit Cash generated from operations

Rand m

illio

n


2012 2011

Total equity (R’m) 53 637 40 830

Ordinary shareholders’ funds (R’m) 43 292 33 749

Preference share capital (R’m) 3 837 4 056

Minority interest (R’m) 6 508 3 025

Net debt (R’bn) 24.2 18.8

Gearing 45% 46%

Interest cover 5.8 4.6

EBITDA cover 7.1 5.6

Closing rate ZAR:EUR 10.34 9.87

Annualised: EBITDAR cover 3.6 3.7

Capital structure


( 15)

( 10)

( 5)

0

5

10

15

Cash and cash

equivalents

Unutilised

facilities

June 2013 June 2014 June 2015 June 2016 June 2017 Thereafter

African International

Committed debt repayments and maturity profile

Liquidity and maturity profileAS AT 30 JUNE 2012

Ra

nd

bill

ion

THANK YOU

audited results presentation for the year ended 30 june 2012...conforama group consolidated for 12...

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