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Results for the Half year to 30 September 2014

Presentation to Analysts

& Asset Managers

13 November 2014

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Presentation Outline

Item Presenter

Welcome & Introduction V.W. Zireva

Macro Environment &

Group Performance Highlights V.W.Zireva

Operations Review A.R.KatsandeOperations Review A.R.Katsande

Financials A.E.Siyavora

Outlook V.W. Zireva

Questions & Discussions All

Refreshments All

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Overview:-

Size of operation

H1 F 15 H1 F 14

48 46

8 7

2 22 2

1 0

Total stores 59 55

Number of staff 4 080 3 920

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•GDP growth has been revised downwards continuously

•A reasonable 2013/14 agricultural season

•Company closures

•High & increased unemployment

•Tighter liquidity & limited demand

Overview:-

Environment

•Tighter liquidity & limited demand

•Deflationary cycle for retail trade has not let up since +/-July 2013

•Negative growth in sales recorded in most businesses

•Low manufacturing capacity utilisation

•Inadequate utilities increased operating costs, e.g. electricity load

shedding necessitates use of generators

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Review of performance (H1 F15) :-

shrinkage control

Revenue (US$ million) 232.1

EBITDA (US$ million) 9.5

Profit after tax (US$ million) 4.3

4.8%

10.9%

-

Earnings per share (cents) 0.37

Interim dividend (US cents) 0.19

Cash from operations (US$ million) 8.8

Total assets (US$ million) 123.7

30.1%

1.2%

14.0%

5.0%

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Review of operations

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Operations review:-

supply & price of goods

•Imports still dominate the supply space. South Africa remains the

major source

•Local industry supply continues to be hamstrung by lack & cost of

capital, antiquated equipment, poor economies of scale as well

state & cost of utilities, inter alia. Buy Zimbabwe

•Import quotas were imposed for certain products, but •Import quotas were imposed for certain products, but

permits were not difficult to secure.

•Own brands expansion continues. Constitute 64 SKU’s lines;

contribution still low as volume in a number of categories is

constrained by local industry manufacturing limitations

•Suppliers reducing prices to stimulate demand (into retail)

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Operations review:-Capacity enhancement H1 F15

shrinkage control

M2Trading

Refurbishments :-

OK Gweru 1 671

OK Mutare 1 614

Meat processing plant

New shops:-

Nil

Warehousing:-

Restored warehouse destroyed by fire 3 500

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Financial services

Operations review:-

Review of growth initiatives

Financial services

Generating commission income from:-

•Money transfers

•Banking and insurance

•Electricity re-charge cards

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Operations review:-

Review of growth initiatives

Kawena :-

•Project was slow to take off

•Lately numbers are increasing at a faster rate,

registrations to date are about 12 K

•Transactions in last two months meaningful

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•Activity is still low

Operations review:-

Review of growth initiatives

•Activity is still low

•Stocking & offering is improving

•Sales generation trends are encouraging

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Operations review:-

Growth initiatives

Instore Bakeries• Full Bakeries 23

• Bake Off 7

• Mini Bake Off 7• Mini Bake Off 7

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Operations review:-Our brands and our promotions

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HOUSE BRANDS

64 SKU’s Across Categories:

Perishables

Dry Groceries

Clothing & Textiles

Housewares

Top Notch

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HOUSE BRANDS

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SHOPPERS CHOICE

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Top Notch

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Winning the customers’ following with promotions that

change lives

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•OUR IN-HOUSE IT SYSTEMS CONTINUE TO PLAY A PIVOTAL ROLE

•CONTINUED DEVELOPMENT HAS INTEGRATED ALL OPERATIONS: –

Procurement & Supply Chain,

Finance,

Store Operations,

Distribution Centre & Logistics,

Operations review:-Technology

Distribution Centre & Logistics,

Inventory Management,

Financial Services

Webstores- OKmart, up and running

OK & Bon Marche in development

•ENERGY MANAGEMENT- Cost Reduction through accurate metering

- “ “ “ energy efficiency

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First Bon Marche

Power Walk

In Bulawayo

CORPORATE SOCIAL RESPONSIBILITY

•Quarterly health Power

Walks

•Quarterly Aerobathons

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Bon Marche

Power Walk

CORPORATE SOCIAL RESPONSIBILITY

•Quarterly health Power

Walks

•Quarterly Aerobathons

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CORPORATE SOCIAL RESPONSIBILITY

Community tree nurseries

2 launched in the first half of the year

Muzogwi - Masvingo Province

Masasi - Manicaland “

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H1 F15 Results

Balance Sheet

Cash FlowCash Flow

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Statement of Comprehensive Income for the half year to 30 September 2014

$ millions H1 F15 H1 F14 Change %

Revenue 232.1 243.6 (4.8)

Net sales 231.1 243.2 (4.8)

Underlying operating profit 5.9 6.5 (10.0)

Net finance charges (0.06) 0.02 (351.6)Net finance charges (0.06) 0.02 (351.6)

Tax charge (1.5) (1.7) 12.1

Attributable Income 4.3 4.8 (10.9)

Total comprehensive income for the year 4.3 4.8 (10.8)

EBITDA 9.5 9.6 0.4

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Ratios and metrics

H1 F15 H1 F14 Change %

Net Sales 231.6 243.2 (4.8)

Gross margin 18.0% 16.8%

Overheads % sales 15.6% 14.3%

Underlying operating profit margin 2.5% 2.7%Underlying operating profit margin 2.5% 2.7%

Net Income margin 1.9% 2.0%

EBITDA margin 4.1% 3.9%

Tax Rate 25.8% 26.0%

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Share Performance

H1 F15 H1 F14 Change %

# Ordinary shares in issue (millions) 1 153.9 1 129.2 2.2

Share performance (cents):-

Attributable earnings 0.37 0.43

Headline earnings 0.37 0.43Headline earnings 0.37 0.43

Dividend per share 0.19 0.20

Net asset value per share 6.10 5.67

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• Negative revenue growth of 4.8%; average official inflation 0.09%; internal inflation year on year -5.6%

> less revenue for the same volume

• Gross margin at 18.03% (H1 F14 : 16.78%)

> efficient procurement

> product mix

• Overheads up 4.5% which was higher than sales growth

> rate of increase has slowed down significantly

> depreciation of newer equipment

Commentary

> depreciation of newer equipment

> advertising and promotional expenses to compete for retail $

> High cost of utilities

> Cost of security

> more use of the Distribution Centre to supply branches with imported

product received centrally

• Stock turn down to 9.2 against 9.6 in prior year; i.e. 39 days against standard of 30 days)

• Capital expenditure $5.5 million (H1 F14: $6.3 million)

• Cash position good – balance $14.6 million (H1 F14:- $15.9 million; March F 14:-$13.1million)

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Review of performance:-

shrinkage control Shrinkage % of sales

Shrinkage $ millions

6 months to 30 September 2014 0.83 1.5

6 months to 30 September 2013 0.82 1.66 months to 30 September 2013 0.82 1.6

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Summary Statement of Financial Position as at 30 September 2014

$ million H1 F15 H1 F14 Change %

Property, plant & equipment 55.1 49.6 11.1

Goodwill 0.4 0.4 0

Long-term investments 0.3 0.3 0

Long-term receivables 1.1 0

Inventories 46.9 47.8 (2.0)Inventories 46.9 47.8 (2.0)

Trade & other receivables 5.1 8.2 (37.3)

Cash & cash equivalents 14.6 15.9 (8.3)

Deferred tax (8.0) (6.8) (18.7)

Debt (3.6) (4.5) 20.2

Trade and other payables & provisions (41.6) (46.9) 11.2

Net assets 70.4 64.1 9.9

Stock turn 9.2 9.6

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Cash Flow at 30 September 2014

$ millions H1 F15 H1 F14

Cash from operating activities 8.8 6.8

Finance costs (0.1) 0.0

Tax payment (0.6) (1.1)

Dividend payment (2.5) (4.5)Dividend payment (2.5) (4.5)

Net cash invested (5.5) (6.2)

Net funding 1.5 0.3

Cash brought forward 13.1 15.6

Cash balance at year end 14.6 15.9

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Outlook

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•Good

OUTLOOKThe Future

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OUTLOOK

Overview

•Going forward further tariff and non tariff barriers came into law on 1st October.

•Subdued business activity expected to continue to the end of the financial year

•The market will remain very competitive. There are new entrants - Choppies &

Meikles Mega stores & expansion of wholesaling business by N Richards & Metro Peech

Operational•Focus on maintaining market position through the following initiatives:-

1. More efficient use of existing capacity

2. Continue expanding financial services offering by leveraging on good IT 2. Continue expanding financial services offering by leveraging on good IT

capabilities

3. Expand Farm it and Build it concept

4. Continue roll-out of own bakeries.

5. Continue pushing growth in fruit & vegetables as well as butcheries

•Emphasis on cost reduction & margin protection to be sustained

xpansion •Opportunities exist to enter new locations with different store formats.

•Follow through on the regional expansion initiative

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Outlook:-

Growth initiatives – new brand

This is a new department within some stores both City &

Country ( Stand alone in Marondera & Soon OKmart Harare)

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Outlook:-

Growth initiatives – new brand

This is a new department within some stores both City &

Country ( Stand alone in Marondera & Soon OKmart Harare)

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Planned Store Refurbishments

•Refurbishments :Meat Processing CentreOK RusapeOK Mbuya NehandaOK Houghton ParkBon Marche’ Chisipite

OUTLOOK

• New Stores :Bon Marche Borrowdale BrookeOK Zvishavane

• Extended Services: Farm it Build it – OKmart Harare

- OK GwandaFresh Mart – OKmart Harare

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THANK YOU

TATENDA

SIYABONGA