Shoprite Holdings Ltd

Good morning and welcome to our financial results presentation for the 2023 financial year. By now you would have become used to our format, a bit like our strategy, doesn't often change. We stick to our plans. So as usual, I'll do a bit of an overview. Then Anton will give you as much disclosure as we possibly can to ensure that you can make informed decisions from the information that we are providing. I will then just give you a little bit of a view of what we currently are busy with. And then, of course, right at the end, we will take some questions. ShopRite is a very big business. It's large. It has over 3,000 stores, 150,000 people, but yet it's the small things that's important. So today we've elected that I'm talking to you from the Tenran truck. That's the truck that we, together with our soup trucks, sent out when disaster strikes. Anton gives his part of the presentation. You will see at his backdrop our homegrown range. That is the range specifically designed to help our small suppliers.

And one of our success stories in there is our Kailitsa cookies.

I'm extremely proud of the daily dedication of our team across the entire business. And a real sincere thank you to each and every one of you. It's the team, Team ShopRite, that makes the difference. Our people have learned to embrace resilience. Resilience meaning fix, do something, agility, adapt to the situation, like the solar or COVID, whatever comes our way. And then staying relevant. The launch of Prime, still trying to be innovative. Our partnership with our world champion, Brad Binder. It's our people that makes the difference. And one can look through these pictures and you can see from the looting right through to maybe the fun side, that it's only because of the people from ShopRite that has an attitude of it can be done. That is what makes the difference for this organization. We have now surpassed the $200 billion sales milestone. And by quite some margin, it hasn't come just by accident. It came by plan, by continuous investment over the long term. And unfortunately, the negative part of this is that the $1.3 billion that's now very... topical that we had to spend on the diesel to keep our stores open and to make sure our customers get product and still getting good prices, is that that is actually the money that should have gone as a profit increase for our shareholders. The $200 billion in revenue I just referenced, so the actual number was $215 billion for the year. But what makes this exceptional is that the additional revenue that that equates to, that we had to add during the year, is $31 billion. And $31 billion is probably as large as some organizations in total. The gross profit is also an enormously large amount of $51 billion And you will remember that in the first six months of the year, we dropped below 24% in our gross profit percentage margin. And in the last six months have managed to creep a little bit back so that we could end at 24.1% for the year. It is so that globally all of our retailers has to absorb some of the inflation. The pressure on cost increases from manufacturers and all of the cost factors, especially our experience in South Africa, has resulted in that we have to protect our customers to some degree. And we have done that. Very pleasing for me is that we are still able to increase the dividend for the year by 10.5%. illustrative of the ability of the organization to positively generate cash. Very telling is that we are still gaining in customers. Our customer visits are by 13.2%. But as I've always have explained is that the very telling number is the volume growth. The positive volume growth that we've been able to achieve of 4.9%. which equates to more than 335 million additional items being sold during the past year. Even excluding the mass-case stores, this number is still a positive 3.8% in volume growth. This resulted in an R8.1 billion gain in market share. It's the fifth year in a row, financial year in a row, that the group have gained market share and also now 52 months of uninterrupted market share gains. About six, seven years ago, we very clearly have separated our consumer brands between the checkers, shop producer brands, with a very clear position. And That balanced portfolio has really proven in good stead for us. If we look at the Checkers brand, $70 billion in revenue, growing a staggering 18% last year. By far the highest growth retailer in the premium segment of the market, with a market share currently sitting at 14.8%. And on that point, I'd just like to mention that we do believe there's still a lot of headroom, given that we only act basically 15% market share. And then very telling in this whole scenario over the last couple of years is the 10.6 million extra savings customers that we have. the data points actually that we have on them. And what makes it really powerful is the fact that the data is so relevant because of the frequency of interaction that customers have with our brand. Primarily because it's food related, but the data is very current and that drives our decision making. And if you look at the wheel on the right hand side, you can see that our customer value proposition is very clearly defined. I'm not going to go into each of the details, but you can understand that we do fit them in each of the blocks that they belong when we execute. Then the ShopRite brand, that still equates to 60% of the South African supermarket revenue at $90 billion. That is the big one. Growing at In my view, a very solid 15.6% in the last year, which equates to just under 20% in market share. Here, even more so, the criticalness of having 17.2 million extra savings members, which includes previously excluded data points for cash customers. And again, I just want to reiterate that the ShopRite group story is not a checker story only. We do as much innovation, there is as much creativity going into the ShopRite brand. And if you look at that wheel again, very clear in our customer proposition, it's just different. That's why we have 500 meals and that's why we can surprise and delight people with, here behind me, one rand, a biscuit, a sweet treat. You almost can't imagine you can still buy something for one rand. The year that was was really a telling story of an industry-leading growth for supermarkets in Africa. I'll get to the inflation graph now, but first I just want to mention that supermarkets in South Africa growing at 17.8% on a very high base, really, is a very, very strong result. And without any economic tailwinds, it almost feels like we have to create our own oxygen to mobilize such a growth across the entire business. And hence again, I want to repeat that it's not only a single brand story. It's a momentum across the entire business. Even excluding the sales from the mass cash acquisition, still a combined growth of 16.2%. Liquor stores had an outstanding result this year, outgrowing the market by 1.3 times. 60-60 stays a good story, growing 81% on top of 150% last year. Then I think it's important that the position what the ShopRite group has always maintained is our value offer to consumers, that we could consistently throughout the 12 months of the financial year have been below the official food inflation. That is, meaning our own internal inflation has been below the official food inflation. Customers are really stretching their budgets. So, very clearly over the last two years, we've seen the participation of promotional items in the basket increasing by more than 5%. Clearly, customers are looking for value. Also so that customers are starting to combine their purchases. And that's why we also have these combination purchases or deals to assist customers to get even better value. And I always say, don't underestimate the customer. They are very creative to make their budgets work. And because of our data and our ability, we use that to deliver the consumer's what they expect from us. As an example, 50% of tuna that we now sell is from our right brand private label. Unfortunately, I have to show you this graph. We're not well known for making excuses. We deal with what comes our way. But 88% of the last financial year, we had rolling blackouts. That now has resulted in that well-publicized $1.3 billion in diesel costs that we had to incur. But I want to emphasize here that it's not us only as the retailer, but it's the entire value chain that gets affected by this. So really, from farm to fork, It's additional security costs. It's the food waste. You can imagine if any production line is interrupted midway, all of that food production has to be wasted. So it's something really, really critical for the entire country that we get this thing sorted so that we can get our economy back on track again. And then what's our promise? What is it that ShopRite does? And when I talk ShopRite, of course I include all of the consumer brands, is our unconditional savings for consumers. We don't do double points and special conditions and funny names. We give instant cash at the checkout. And that this year amounted to a staggering $13.5 billion. And I believe in anyone's language, that's an incredible large amount of discounts. And we're very proud. And we're not shying away from this. The fact that consumers are actually demanding and asking for more promotions on the earlier slide, we're embracing that to entrench our position as the leading value provider for consumers worldwide. in South Africa. I have mentioned earlier the 10 rand items. So we sold over 150 million under 10 rand products in the last year. And then we have this affordability obsession. We've never shied away from that. So just as an example, since 2016, we have now sold over 600 million 5 rand meals and loaves of bread for seven years now with a zero inflation. I think quite commendable and appreciated by our consumers. When I spoke about the market share earlier, I thought this picture actually illustrates exactly what I'm trying to say. So firstly, if we look at the $8.1 billion in the black, you can see it has come from both of the consumer brands, ShopRite and Checkers. So it's not a one-pony story. But I think the graph on the right-hand side clearly shows the multi-year investment, our ability to now start utilizing the tools in which we invested in terms of pricing, whether it's personalization, et cetera, to really meet the needs of the consumers, get our pricing right, and customers are voting with their wallets. And we can clearly see that gap increasing over time. The rest of the operating segment that we don't talk about that often, including the rest of Africa operations, we still trade out of nine countries. We still managed to, in the last year, restrict the capital allocation to that segment. and managed to achieve our medium-term guidance that we've gave you before, just missing $600 million in profit contribution. Very happy that we are still limiting the capital allocation to that, but still achieve a decent number. On furniture, furniture slightly flat, pretty much in line with what's happening in the industry. What development we have achieved, been improving on here is our ability to advance credit, improve the process, easier to apply, quicker turnaround time, and we've seen an uptick in the credit participation. Although cautiously so, we understand where the credit advancement in South Africa currently is and how in debt the consumer is. On the other operating segments, I mean, Okay, franchise as a division is really becoming meaningful. 535 stores and also innovation and development on that side of the business. Requests from our members have assisted us integrating another brand that we're trialing in terms of the franchise and we see constantly an increase in the direct purchases from the group by the franchisees because of that we are forming with them. Transform and MediRite have performed fairly well. Double digit, we're also there, are trialing some more innovation and different formats. So, as I mentioned earlier, all parts of the business currently has some form of creativity or innovation. Now, of course, this is what you've all been waiting for. The The detail that Anton is going to give you around the disclosure so that you can, as best as you can, perfect your operating models. So I'm going to hand you over to our very fine CFO, Anton de Bruyne.