consolidated results q3:fy17 · • new holding company, edcon acquisition company limited, which...
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CONSOLIDATED RESULTS Q3:FY17
BERNIE BROOKES CHIEF EXECUTIVE OFFICER
21 February 2017
EDGARS
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EXECUTIVE SUMMARY
CAPITAL STRUCTURE & TRANSACTION
MACRO ECONOMIC ENVIRONMENT
FINANCIAL REVIEW
STRATEGY & TURNAROUND INITIATIVES
WAY FORWARD
AGENDA
EDGARS EDGARS 1
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EXECUTIVE SUMMARY • Transaction closed 1 February 2016, resulting in a deleveraging of the business reducing gross
operating company debt from R29.2 billion to R5.3 billion ─ Gross leverage circa 3.6x ─ Cash interest cover circa 3.9x
• New holding company, Edcon Acquisition Company Limited, which is to be renamed • Appointment of new Board • Sale of Legit effective 29 January 2017
CAPITAL RESTRUCTURING
AND NEW BOARD
Q3:FY17 • Retail sales declined by 2.8% to R8,441 million • Retail cash sales increased by 0.7% • Retail credit sales decreased by 8.7% • Controllable costs continue to be well managed • Adjusted EBITDA decreased by 16.3% to R963 million • Excluding the one-off net gain realised as a result of the Group’s Exchange Offer concluded in
the third quarter 2016, the net loss for the period would have decreased by R732 million from R1,092 million to R360 million
FINANCIAL REVIEW
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EXECUTIVE SUMMARY (CONTINUED)
RECENT DEVELOPMENTS
• Team: Dedicated Strategy and Program Management resources allocated across Edcon Journey Initiatives
• Edgars: Initiatives underway – New Look & Feel, Dedicated Service, Range construction
• Discount Division: Initiatives underway – In-store experience, Every Day Low Price & Cost Savings
• Specialty: Legit sale complete. Portfolio strategy review underway including diagnostic on CNA and Cellular chains
• IT: Strategy complete with transformation (cost out initiatives, core systems replacement) mobilization underway including market engagement
• Supply Chain: Strategy and roadmap complete and roll-out underway
• Customer/Loyalty: Strategy developed and initial value target identified
• Cost Savings Initiatives: Savings being realized across LeanHQ, GNFR, COGS and Property Initiatives
STRATEGY & TURNAROUND
INITIATIVES
3
• R1.5 billion cash injection representing balance of R2.3billion in additional shareholder funding net of bridge funding already received
• Settlement of circa R400 million in fees representing transaction closing fees and arranging fees associated with new facilities
• Decision taken to discontinue River Island as an international brand
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NEW BOARD OF DIRECTORS
• Rhodes Scholar at Oxford, graduating with a Masters in Philosophy, Politics and Economics.
• He spent twenty two years with De Beers and Anglo American, the last five of which he was Group CEO of De Beers.
• Gareth serves as a director and in some instances chairman of South African and international mining and resource companies.
• He is also a non executive Director of Julius Bär Holding Limited Listed Swiss bank, and serves on the Senior Advisory Board of TowerBrook Capital Partners.
GARETH PENNY NON-EXECUTIVE CHAIRMAN
BERNIE BROOKES CHIEF EXECUTIVE OFFICER
• CEO of Edcon since September 2015.
• He has an extensive and highly successful career in retail spanning over 40 years.
• Bernie has a strong philanthropic ethic serving both the industry and charitable endeavours through his involvement with the World Retail Congress, the Salvation Army of Australia and various institutions supporting cancer and other medical research.
• In January 2017, Bernie was awarded the Order of Australia for his service to Australian business, and in recognition of his numerous philanthropic contributions.
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NEW BOARD OF DIRECTORS
• Rhidwaan obtained a B.Compt. Honours degree in 1983, before passing the South African Chartered Accounting Board Examination in 1984.
• Rhidwaan joined Mobil Oil Southern Africa in 1986 as a Project Accountant. He was later appointed as the Chief Executive Officer of Energy Africa Limited.
• He is currently the Chief Executive Officer of Rapid African Energy Holdings. He also serves as a director on boards of various companies.
RHIDWAAN GASANT NON-EXECUTIVE DIRECTOR
DAPHNE MOTSEPE NON-EXECUTIVE DIRECTOR
• Daphne obtained her Master of Business Administration in 1996.
• She is a seasoned consumer finance executive who worked for ABSA as Chief Executive for the Unsecured Lending Cluster.
• Prior to this, Daphne held a number of senior finance and operational positions in the FMCG, petroleum and SME development sectors.
• She has also held executive roles at the South African Post Office, and was the Managing Executive for ABSA Small Business.
• Daphne currently serves on the boards of a number of companies.
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NEW BOARD OF DIRECTORS
• Grant graduated from the University of Cape Town with a B.Sc. Hons in Electrical Engineering in 1992.
• After four years with the Anglo American Group and two years in strategy consulting with The Monitor Group, Grant joined Massmart as Executive Assistant to the Executive Chairman.
• In 2005, he was appointed the Deputy Chief Executive Officer, and Chief Executive Officer in July 2007.
• Grant serves on the boards of various companies.
GRANT PATTISON NON-EXECUTIVE DIRECTOR
KEITH WARBURTON NON-EXECUTIVE DIRECTOR
• After qualifying as a Chartered Accountant, Keith started his business career at an audit firm, after which he embarked on a broad career in business and commerce.
• He has previously served as the Chief Financial Officer, Chief Operating Officer, and as an Executive Director of the Clicks Group.
• He has been involved in the retail industry since 1990, working for companies like Truworths, Foschini, Homechoice and the Metro group, among others.
• He also serves on the boards of various companies.
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NEW BOARD OF DIRECTORS
• Marti has an MBA and is a Certified Valuation Analyst.
• Over a 35 year career, Marti has served in a variety of leadership roles at both investment management and financial advisory firms.
• She was the Founder and President of Murray Analytics, Inc. a professional services firm.
• Prior to founding Murray Analytics, Marti was Senior Managing Director at Goldin Associates.
• She has authored several articles on restructuring and risk management, and has been a frequent speaker at investor conferences worldwide on distressed debt and activist investing.
MARTI P MURRAY NON-EXECUTIVE DIRECTOR
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MANAGEMENT TEAM
ANDREW LEVERMORE Chief Executive: Edgars
ANDY JURY Chief Executive: Specialty Stores
URIN FERNDALE Chief Executive: Jet
RICHARD VAUGHAN Chief Financial Officer
MELANIE NAIDU Chief Human Resources & Transformation Officer
ANTHONY COELHO Chief Information Officer: Group Information Technology
MARIANNE JONES Chief Customer Officer, Investor Relations & Strategic Assignments
JASON JACKSON Chief Strategy Officer & Strategic Assignments
CHARLES VIKISI Chief Legal Counsel & Group Secretary
BERNIE BROOKES Chief Executive Officer
ANDREW THORNDIKE Chief Operations Officer
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EXECUTIVE SUMMARY
CAPITAL STRUCTURE & TRANSACTION
MACRO ECONOMIC ENVIRONMENT
FINANCIAL REVIEW
STRATEGY & TURNAROUND INITIATIVES
WAY FORWARD
AGENDA
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TRANSACTION OVERVIEW
10 EDGARS | WINTER 16
SUBSTANTIAL NEW MONEY INJECTION
• Existing creditors committed to fund up to R2,870 million to significantly shore up the Group’s liquidity position
• R575 million New Revolving Credit Facility(1)
• R2,295 million-equivalent USD-denominated New Holdco 1 PIK A-1 Notes(2)
MATERIAL DELEVERAGING
OF THE OPERATING COMPANY
• Senior secured creditors to equitise 50% of their outstanding claims and novate their reinstated claims to a holding company
• c. R3,200 million of second and third-ranking super senior claims to be novated to a holding company
• Pro forma for the transaction, gross leverage at the operating company to decline to 3.6x from 18.9x
REDUCTION OF CASH INTEREST
BURDEN
• New commitments and novated claims at the holding companies to be PIK-only instruments
• Pro forma for the transaction, cash interest coverage at the operating company to increase to 3.9x from 0.6x
EXTENSION OF MATURITIES
• Most indebtedness at the operating company to mature December 2019(3)
• New commitments and novated claims at the holding companies to mature December 2022
(1) Raised at Edcon Limited. (2) Raised at [New Holdco 1] (3) The Super Senior Liquidity Facility will mature in December 2017, with a one year extension BOARDMANS
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PRO-FORMA CAPITAL STRUCTURE
FX rates as at 24 December 2016: R14:05:$ and R14.67:€ 1 Converted RCF Facility is R1,250m
2 New RCF Facility is R575m
CASH INTEREST INTEREST EXPENSE
P.A
DRAWN AMOUNT (ZARM) LEVERAGE CURRENCY MATURITY BASE RATES MARGIN PIK MARGIN CASH PIK
Edcon Limited (Operating company) Super Senior Credit Facility (Converted RCF Facility)1 - ZAR 31-Dec-19 JIBAR 5.0% 3.0% Super Senior Credit Facility (New RCF Facility) 2 - ZAR 31-Dec-19 JIBAR 5.0% 3.0% Super Senior Credit Facility (Term) 2,115 1.4x ZAR 31-Dec-19 JIBAR 5.0% 3.0% 274 63
Super Senior Liquidity Facility A1
627 0.4x EUR 31-Dec-17 EURIBOR 4.0% 8.0% 25 50 Super Senior Liquidity Facility A2 1,987 1.3x EUR 31-Dec-17 EURIBOR 4.0% 8.0% 79 159 First ranking Opco debt 4,729 3.2x 378 272 Capital leases 315 0.2x ZAR Other debt 277 0.2x ZAR Total Opco debt 5,321 3.6x 378 272 LTM pro forma adjusted EBITDA (Dec-16) 1,475
Gross leverage at Edcon Limited will decrease to 3.6x from 18.9x using LTM pro-forma adjusted EBITDA, and yearly cash interest expense will approximate R378 million.
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• Legit chain identified as potential asset for sale in strategic review
• Strong interest from range of potential trade and financial purchasers
• Disposal improves Edcon’s liquidity position and intensifies focus on core department stores and value chain offerings
• Sale of business for R637 million cash
• Cash-free, debt-free sale
• Sale of assets, going concern basis
• Retailability - fashion retail holding company: ~200 stores across SA, Namibia, Botswana, Zambia
• Partnered by material shareholder Metier Private Equity: ~R6 billion funds under management
• Flagship chains Beaver Canoe, Style
SALE OF LEGIT
12
Purchase consideration of R637m, sale effective 29 January 2017
Deal overview Purchaser details Transaction mechanics
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EXECUTIVE SUMMARY
CAPITAL STRUCTURE & TRANSACTION
MACRO ECONOMIC ENVIRONMENT
FINANCIAL REVIEW
STRATEGY & TURNAROUND INITIATIVES
WAY FORWARD
AGENDA
BOARDMANS
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22 23 24 25 26 27 28
(1)
-
1
2
3
03-2
014
05-2
014
07-2
014
09-2
014
11-2
014
01-2
015
03-2
015
05-2
015
07-2
015
09-2
015
11-2
015
01-2
016
03-2
016
05-2
016
07-2
016
09-2
016
Real GDP (y-o-y %) Unemployment rate (%)
GDP GROWTH AND UNEMPLOYMENT RATE
5 6 7 8 9
10 11
04-2
014
06-2
014
08-2
014
10-2
014
12-2
014
02-2
015
04-2
015
06-2
015
08-2
015
10-2
015
12-2
015
02-2
016
04-2
016
06-2
016
08-2
016
10-2
016
12-2
016 4
5.5
7
8.5
10
11.5
12-2
014
02-2
015
04-2
015
06-2
015
08-2
015
10-2
015
12-2
015
02-2
016
04-2
016
06-2
016
08-2
016
10-2
016
12-2
016
EXCHANGE RATES
PRIVATE SECTOR CREDIT EXTENSION (Y-O-Y %) REPO AND PRIME RATE
Source: SARB & StatsSA 14
MACRO BACKDROP
EXCHANGE RATES
01-2
016
02-2
016
03-2
016
04-2
016
05-2
016
06-2
016
07-2
016
08-2
016
09-2
016
10-2
016
11-2
016
12-2
016
USDZAR EURZAR
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4.0% 4.5% 5.0% 5.5% 6.0% 6.5% 7.0%
Q1:20
15
Q2:20
15
Q3:20
15
Q4:20
15
Q1:20
16
Q2:20
16
Q3:20
16
Q4:20
16
Q1:20
17
Q2:20
17
Q3:20
17
INFLATION
-16 -14 -12 -10
-8 -6 -4 -2 0
Q4:20
14
Q1:20
15
Q2:20
15
Q3:20
15
Q4:20
15
Q1:20
16
Q2:20
16
Q3:20
16
Q4:20
16
-5%
0%
5%
10%
06-2
015
07-2
015
08-2
015
09-2
015
10-2
015
11-2
015
12-2
015
01-2
016
02-2
016
03-2
016
04-2
016
05-2
016
06-2
016
07-2
016
08-2
016
09-2
016
10-2
016
11-2
016
Retail trade sales Textiles,footwear and leather goods
74 75 76 77 78 79 80
09-2
014
11-2
014
01-2
015
03-2
015
05-2
015
07-2
015
09-2
015
11-2
015
01-2
016
03-2
016
05-2
016
07-2
016
09-2
016
FNB/BER CONSUMER CONFIDENCE INDEX
RETAIL SALES HOUSEHOLD DEBT TO GROSS DISPOSABLE INCOME RATIO
Source: SARB & StatsSA 15
MACRO BACKDROP
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EDGARS
EXECUTIVE SUMMARY
CAPITAL STRUCTURE & TRANSACTION
MACRO ECONOMIC ENVIRONMENT
FINANCIAL REVIEW
STRATEGY & TURNAROUND INITIATIVES
WAY FORWARD
AGENDA
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Q3:FY17 Q3:FY16
• Retail sales ↓ 2.8% ↓ 1.7%
• Cash sales ↑ 0.7% ↑ 4.0%
• Credit sales ↓ 8.7% ↓ 9.9%
• LFL Sales ↓ 2.9% ↓ 3.2%
Q3:FY17 Q3:FY16
• Gross profit ↓ 3.1% ↓ 3.0%
• Adjusted EBITDA ↓ 16.3% ↓ 7.5%
• Transaction with creditors finalised with control transferred on 1 February 2017
• Debt in Edcon Limited significantly reduced
• Legit sale previously announced effective 29 January 2017
Trading environment challenging, increased competition, macro-economic factors continue to weigh on customers & credit granting remains restricted
Deliberate competitive entry price points. Markdown reduction in the Edgars division. Discount division markdowns in line with comparative period whilst Specialty increased markdowns in line with strategy to exit select international brands
Transaction with creditors finalised, balance sheet post 1 February 2017 no longer laden with debt, new ownership and appointment of the new Board
SALE
S PR
OFI
TS
STR
ATEG
Y
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KEY FEATURES
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• Retail sales decreased 2.5% - Cash sales increased 4.8% and credit sales
decreased 10.2%
- November and December retail sales flat, compared to negative 8.3% in October 2016 compared to Q3:FY16
- Trading across all merchandise categories improved compared to the first half of fiscal 2017
• Gross margin of 38.6% down from 42.4% - Planned decease through competitive entry
price points
- Discounts offered to customers in form of gift cards
- Reduction in value of markdowns
• 2 new Edgars stores opened and 2 stores closed
• Aged inventory at acceptable levels
Q3:FY17 Q3:FY16
Retail sales growth (%) (2.5) (2.0)
LFL sales growth (%) (3.1) (3.2)
GP margin (%) 38.6 42.4
Total number of stores 206 206
Capex spend (R’m) 17 56
Av space (‘000sqm) 725 727
206 stores* · LSM 6-10
*Includes 1 Edgars sales store and 1 Edgars Emporium store
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EDGARS DIVISION – Q3:FY17
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394 stores · LSM 4-7
128 stores · LSM 4-7
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DISCOUNT DIVISION – Q3:FY17 • Sales decreased 4.9%
- Cash sales decreased 3.0% and credit sales decreased by 9.2%
- Customers sensitive to macro-economic climate
- Ladieswear showed positive growth whilst remaining categories still negative
• Gross margin percentage decreased by 1.9% - Better entry price points
- Enhanced price perception and brand franchise
- Markdowns still high in light of better entry price points
• 5 new Jet stores opened and 1 store closed
• Inventory ageing profile at acceptable levels
Q3:FY17 Q3:FY16
Retail sales growth (%) (4.9) (2.1)
LFL sales growth (%) (3.8) (3.3)
GP margin (%) 32.2 34.1
Total number of stores 522 526
Capex spend (R’m) 40 10
Av space (‘000sqm) 579 589
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SPECIALTY DIVISION – Q3:FY17
MONO-BRANDED STORES
186 stores · LSM 4-7
38 stores · LSM 7-10
197* stores · LSM 7-10
50 stores · LSM 5-10
87 stores · LSM 5-10
*Includes 11 Samsung stores
210 stores · LSM 5-8
20
• Retail sales decreased 0.4% - Cash sales increased 1.1%, credit sales
decreased 4.7%
- Positive growth in categories such as ladieswear, menswear, childrenswear, cosmetics and homeware
- Footwear, cellular and CNA underperformed
• Margin impacted by: - Aggressive markdown and clearance
activity particularly in Boardmans, CNA and monobrands
• 10 new stores opened - 5 Edgars Active, 1 Red Square, 2 CNA (1
Samsung) and 2 mono-branded stores
• 15 stores closed - 1 Edgars Active, 2 Edgars Shoe Gallery, 2
Legit, 5 CNA and 5 Mono-branded stores
• Exits - Shoe Gallery format exited - Geox, Tom Tailor, Express, CR7, One-
Green Elephant, DIGEL, Lucky Brand, Express, River Island etc.
Q3:FY17 Q3:FY16
Retail sales growth (%) (0.4) (0.1)
LFL sales growth (%) (1.5) (3.6)
GP margin (%) 29.2 33.2
Total number of stores 768 766
Capex spend (R’m) 7 30
Av space (‘000sqm) 257 258
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KEY FINANCIALS
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EDGARS
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STATEMENT OF COMPREHENSIVE INCOME
22
(R millions) Q3:FY17 Q3:FY16 % change
Retail sales 8 441 8 685 (2.8)
Gross profit 2 901 3 259 (11.0)
Gross profit margin 34.4 37.5 (310)pts
Other income 317 340 (6.8)
Store costs (1 813) (1 795) 1.0
Other operating costs(1) (1 349) (1 145) 17.8
Share of profits of associates and insurance business 197 122 61.5
Trading profit 253 781 (67.6)
Adjusted EBITDA 963 1 151 (16.3)
EDGARS JET (1) Includes non-recurring costs of R410 million in Q3:FY17 (Q2:FY16 – R116 million). See cost analysis – Q3:FY17.
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PRO FORMA ADJUSTED EBITDA
23
(R millions) Q3:FY17 Q3:FY16 % change
Trading profit(1) 253 781 (67.6)
Depreciation & amortisation 234 248 Net asset write off(2) 10 3
EBITDA losses/(gains) from Edgars Shoe Gallery(3) 1 (1)
EBITDA losses from brands exited(4) 55 4 Non-recurring costs(5) 410 116
Adjusted EBITDA 963 1 151
(16.3)
EBITDA losses from brands planned to be exited(6) Legit EBITDA(7)
9 4 (72) (66)
Pro forma adjusted EBITDA 900 1 089 (17.4)
(1) Q3:FY16 has been re-presented as a result of ceasing to classify the trade receivable card portfolio in Lesotho, Namibia, Botswana and Swaziland as held-for-sale. (2) Relates to assets written off in connection with store conversions, net of related proceeds. (3) The Group is exiting the Edgars Shoe Gallery retail format. This adjustment removes the EBITDA profit or loss generated from the Shoe Gallery formats. (4) Adjustment to remove the EBITDA gain or loss from certain brands being Express, Geox, Lucky Brand, One Green Elephant, Tom Tailor and a number of other international brands which the Group is strategically exiting. (5) Relates to transitional project related expenditure in Q3:FY17 of R55 million, strategic initiative costs in Q3:FY17 of R370 million of which, R319 million relates to the transaction with creditors (Q3:FY16: R78 million was incurred for
strategic initiatives), a R42 million credit in Q3:FY17 which reverses a prior provision raised in fiscal 2016 relating to a penalty which has not materialised, R7 million in Q3:FY17 relating to brand penalty cost incurred and a non-recurring cost of R20 million incurred in respect of our agreement with Absa. In Q3:FY16, the non-recurring costs additionally included, R7 million head office restructure costs, a R33 million lease cost adjustment and an onerous lease credit of R2 million.
(6) The Group has strategically identified an additional international brand it has planned to exit. This adjustment reflects the EBITDA profit or loss associated with this brand. (7) EBITDA relating to the Legit business which during the second quarter of 2017, the Group announced it has agreed to sell.
RED SQUARE
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OTHER OPERATING COSTS STORE COSTS
• Other operating costs decreased 4.5% - Decease in fees to Bain capital affiliate
- Reduction in manpower costs following head office restructure
• Non-recurring costs increased primarily due to the various strategic initiatives of which R319 million relates to transaction with creditors.
• Store costs well managed increasing by 1.0%. • Rental costs were up 6.4% • Manpower costs were up 8.4% • Stock loss, printing and stationery, security and
operating lease adjustment reductions during the quarter
• Rental and manpower constitute 62.6% of total costs for Q3:FY17 (58.8% in Q3:FY16).
24
COST ANALYSIS – Q3:FY17
BOARDMANS
(R millions) Q3:FY17 Q3:FY16 %
change
Other operating costs 877 918 (4.5)
Store card administration 62 111 (44.1)
Non-recurring costs 410 116
Total other operating costs 1 349 1 145 17.8
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25
1 260
(263) (35)
(341) 668
3 115
529
1 297
Working Capital
Trade receivables, other receivables &
prepayments
Trade and other
payables
CASH FLOW – Q3:FY17
25
Opening cash balance
Operating activities(a)
Net financing costs
Tax Capex Working capital
Closing cash balance
Financing activities
R’m
(35) (316)
1 611
Inventories
(a) Includes R302 million outflow relating to transaction with creditors
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26 EDGARS
EXECUTIVE SUMMARY
CAPITAL STRUCTURE & TRANSACTION
MACRO ECONOMIC ENVIRONMENT
FINANCIAL REVIEW
STRATEGY & TURNAROUND INITIATIVES
WAY FORWARD
AGENDA
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27
ROADMAP WITH STRATEGIC INITIATIVES
27 JET
2016 2017 INITIATIVE
STATUS UPDATE OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP
GROWTH
ENABLERS
COST
LEAN HQ & OPERATING MODEL
GNFR
COGS REDUCTION
PROPERTY
EDGARS CHAIN: TURNAROUND/CUSTOMER CENTRICITY
JET CHAIN: LEAN DISCOUNT RE-POSITIONING
SPECIALTY CHAINS: STRATEGY REVIEW AND REFRESH
CREDIT SALES
LOYALTY PROGRAM
CUSTOMER CENTRICITY
IT STRATEGY AND RENEWAL PLAN
SUPPLY CHAIN & LOGISTICS ROADMAP
TRADING TERMS
INVENTORY
Savings realized and locked in
Savings being realized
Savings being realized
Savings being realized
Initiatives underway – new look & feel, dedicated service, range construction
Initiatives underway – In-store experience, every day low price & cost savings
Legit sale complete Portfolio strategy review underway
Own book sales picking up ( over R400m)
Strategy developed and initial value target identified
NPS roll-out underway
Strategy and roadmap complete. RFP’s launched Strategy and roadmap complete. Roll-out underway
Review underway
Review underway
1
2
3
4
5
6
7
8
9
10
11
12
13
14
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EDGARS: STRATEGIC AND TACTICAL INITIATIVES
28
EDGARS BRAND BUILDING
• Re-invest in Edgars brand and private Labels
• Reduce focus on promotions: Everyday low price items and simplified promotions
• Further roll out of Kelso stand-alone store (Bedford Centre)
• Launched Edgars transactional website
CUSTOMER EXPERIENCE
• Simplified administration work in stores and focus on customer facing activities
• Continued implementation of NPS (100 stores YTD), showing positive uplifts
• Roll out dedicated service (30 stores) and new look and feel (23 stores)
CATEGORY MANAGEMENT
• Transitioned to 4 seasons for more flexibility
• Introduced range pyramid to manage risk
• Finalise brand positioning across categories
• Create strong KVIs at attractive prices
• Reduce number of suppliers to improve scale benefits and simplify assortments
• Adopting systematic approach to markdowns to clear stock
CREDIT & FINANCIAL SERVICES • Drive sales of FS products with new account openings
CHANGE MANAGEMENT • Communicate regularly on transformation programme and achievements to Edgars employees
• Employee engagement launched and recognition programs relaunched
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DISCOUNT: STRATEGIC AND TACTICAL INITIATIVES
29
SALES GROWTH
• In-store experience: New store lay-out, stronger price call-outs and simplified signage rolling out to stores - improvements in sales and GP growth vs. Chain being realised
• Optimal allocation: Matching supply and demand through depot hold-backs, resulting in positive sales vs. other stores (only SA)
• Lay-by: Continue to drive lay-by offer
• Marketing: Framework for marketing strategy developed with stronger focus on price call-outs
• General merchandise: 40 top food SKU’s selling in JetMart stores and offering customers bulk deals at great prices
• Omni-channel: Launched Jet online and Jet Click-and-Collect in November 2016
GP IMPROVEMENT
• Product ranges: Selective price increases and continued range rationalisation in Home Hards and Female
• Pricing: Re-establishing price perception in the market through increased contribution and focus on everyday low price items and key entry price points
CREDIT & FINANCIAL SERVICES
• Credit: Revised agreement with ABSA resulting in more control over new business credit sales
• FS: Continue to drive additional income on insurance products through the operations channel
COST SAVINGS
• Advertising: Continued advertising savings on costs through POS reduction, media optimisation, less campaigns and integrated campaigns with Credit & Financial Services
• Operations: Continued focus on cost savings on controllable costs
• Jet Club: Celebration of the Stars campaign successfully re-launched
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SPECIALTY: STRATEGIC AND TACTICAL INITIATIVES
30
• Full-scale review of customer value proposition initiated in January 2017: simplify and clarify what CNA stands for • Refocus of business around core categories (stationery, reading/learning, gifting supplies) • Rationalise store footprint
• Onboarding new brands • Key focus on customer satisfaction and in-store experience, with higher-intensity product and service training • Continued push for online sales through click and collect online functionality • Focus on categories that differentiate from, and compliment, Edgars cosmetics offering
• Overhaul online sales supporting processes and logistics to improve lead times and customer satisfaction • Review and refocus customer target market to deliver tailored product offering and refreshed brand message • Rationalise store footprint
• Drive differentiated private label product to improve profitability and support global brands • Marketing and promotional strategies to clarify and enhance athlesuire wear brand identity • Continue to improve store performance and customer experience • Re introduction of Converse
Cellular • Develop complimentary strategic relationships with Mobile Network Providers to ensure tailored product offerings and enhanced in-store experience
• Review product range to improve offering in cellular accessories
International Brands
• Review portfolio to exit underperforming brands and leverage high performing brands • Improve product flow and seasonality to drive alignment with South African cycles • Review pricing model to ensure customer value
• Sale of business completed
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CREDIT & FINANCIAL SERVICES
31
CREDIT PORTFOLIO
• Successfully implemented a revised new account acquisition strategy between Edcon and ABSA: Edcon acquires ~80% of new accounts on balance sheet since November 2016 resulting in more control over new business credit sales
• Successfully implemented revised new account credit limit strategy: Increase credit limits offered on new account to align with competitors
• Implemented revised new account application process, in line with new affordability regulations without significantly impacting on volume and turn around times
• Introduced focused credit marketing campaigns, resulting in increased shopping frequency
• Enhanced collections efficiencies, resulting in improved portfolio performance
• Successfully tested various regulatory aligned credit limit increase strategies
FINANCIAL SERVICES PRODUCTS
• Continued strong performance of Hollard insurance partnership
• Successfully implemented revised credit limit strategy thereby supporting future growth
COMMERCIAL SALES GROWTH
• Successfully introduced new commercial sales unit with positive sales contribution over festive period
• Strong growth in gift card sales on the back of new corporate partnerships
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32 EDGARS
EXECUTIVE SUMMARY
CAPITAL STRUCTURE & TRANSACTION
MACRO ECONOMIC ENVIRONMENT
FINANCIAL REVIEW
STRATEGY & TURNAROUND INITIATIVES
WAY FORWARD
AGENDA
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WAY FORWARD
33
• Transaction with creditors completed, focus now shifted to business operations
• Continue to drive the 3 pillars of the strategy: customer centricity, empowerment and simplicity
• Strategy starting to impact with sales improvement each quarter
• Continued focus on credit sales initiatives
• Continued focus on strategic and tactical initiatives of each division
• Finalise the rationalisation of international brands in the Specialty division
• Continue to enhance private label offering
• Store optimisation and service delivery model rolled out to further stores including NPS
• Range rationalisations continued
• Supply chain and logistics initiatives to be implemented
• Journey to improved IT infrastructure
• Enhance loyalty offering to customers
JET
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THANK YOU Q3:FY17 CONSOLIDATED RESULTS
For more information Our website: www.edcon.co.za Edcon contacts for more information: Chief Customer Officer, Investor Relations & Strategic Assignments Marianne Jones [email protected]
EDGARS