Robinsons Retail Holdings, Inc. (RRHI) Earnings Call Transcript & Summary

The 2023 Annual Shareholders' Meeting of Robinsons Retail Holdings, Inc. will now start. Good morning, ladies and gentlemen. Present with us this morning are all members of our Board of Directors: Mr. Lance Gokongwei, Chairman, who will preside over the meeting; Mr. James Go, Vice Chairman; Ms. Robina Gokongwei-Pe, President and CEO; Mr. Ian McLeod; Mr. Choo Peng Chee; Mr. Rodolfo Ang; Atty. Cirilo Noel; Mr. Enrico Cruz and Mr. Cesar Romero. Also present are the following key officers of Robinsons Retail Holdings, Inc.; Chief Financial Officer, Mylene Kasiban; Corporate Secretary, Atty. Rosalinda Rivera; General Counsel, Atty. Gilbert Millado, Jr.; Treasurer, Graciela Banatao; and Vice Presidents Gina Dipaling and Gabriel Tagala. We are also joined by representatives of our external auditors, SyCip Gorres Velayo & Co. We will now play the Philippine national anthem. [Presentation]

Good morning, ladies and gentlemen. Thank you for this meeting. May I request the Corporate Secretary to please certify on the sending of notices to the shareholders and to the existence of a quorum for this meeting?

Mr. Chairman, I hereby certify that notice of this meeting had been sent to the shareholders of record as of April 3, 2023, through the following methods: by publication in the Manila Standard and BusinessWorld for 2 consecutive days in both online and print formats, by sending through electronic mail in accordance with the bylaws of the corporation, by posting on the website of the corporation and by disclosure to the Philippine Stock Exchange. Thus, the shareholders have been duly notified of this meeting in compliance with applicable rules and regulations. I hereby certify that there are present in this meeting via remote communication or by proxy shareholders entitled to vote representing 82.05% of the corporation's total outstanding shares and that this meeting is therefore competent to transact the business provided for in the agenda. A quorum is present, Mr. Chairman.

There being a quorum, the Annual Meeting of the Shareholders of Robinsons Retail Holdings is hereby called to order. May I request the Corporate Secretary to share with us the rules and procedures for this meeting?

The rules and procedures are set forth in the definitive information statement. The voting results reported during this meeting will be subject to validation by SyCip Gorres Velayo & Co., and the final voting results will be reflected in the minutes of the 2023 Annual Meeting of the Shareholders. For the information of the shareholders who are with us now during this live broadcast, the corporation has requested shareholders to send their questions or comments by e-mail. Questions which were received by May 3, 2023, have been collated, and selected questions will be answered later on. The corporation will reply to the questions and comments not taken up during this meeting through e-mail.

Let us now proceed to the next item in the agenda, the approval of the minutes of the 2022 Annual Meeting of the Shareholders. May I call on the Corporate Secretary to present the results of voting for this agenda item?

Mr. Chairman, copies of the minutes have been distributed to the shareholders by providing the link to the said minutes in the definitive information statement, by making a copy of the minutes available in RRHI's website and by showing the QR code on the screen prior to the meeting. The minutes have been approved as submitted by votes representing 82.05% of the total outstanding shares of the corporation.

Thank you. The minutes are hereby approved as presented. Moving on to the next item in the agenda. May I now call on Ms. Robina Gokongwei-Pe, President and Chief Executive Officer of the corporation, to present her report together with the audited financial statements for the year ended December 31, 2022? Madam President.

Good morning to all our shareholders, Board of Directors, partners, customers and friends from the media. Today, I am pleased to share with you our story in 2022 and what's in store for 2023. For my report, I will begin with our financial highlights for 2022, then I will walk you through our various corporate and sustainability updates and cap everything off with our plans for the rest of this year. Allow me to begin with Robinsons Retail's financial performance. Our consolidated net sales reached a record high as it grew by 16.6% to PHP 178.8 billion. Blended same-store sales growth increased by 11.8%. We saw gross profit expand by 20% to PHP 42.3 billion while GP margins expanded by 60 bps to 23.6%. EBIT improved by 43.6% to PHP 8.7 billion while EBIT margins improved by 90 bps to 4.9%. Net income attributable to equity holders of the parent company grew by 29.1% to PHP 5.8 billion, also a record high, while EPS grew at a faster clip of 33.1% to PHP 3.93 per share, supported by the ongoing share buyback program. And lastly, core earnings grew substantially by 46.1% to PHP 5.6 billion for the year. Core net earnings exclude ForEx, interest income from bonds, equity in earnings of associates and others. We ended 2022 with a store portfolio of 2,310 stores and 2,151 TGP franchise branches nationwide. Our total revenues, which grew by 16.6% in 2022 already exceeded pre-pandemic levels by year-end. All of our formats from staples to the discretionary businesses had positive top line contributions for the year. The improvement in our net sales was driven by healthy blended same-store sales growth and new store openings. We also felt the windfall from an improving macroeconomic backdrop. With the rebound of our discretionary formats, their sales contribution increased to 23.5% for 2022 from the 21.6% in 2021. Moving on to our working capital. Our cash conversion cycle improved to 13.5 days in 2022 from 18.3 days in 2021. The improvement was mainly driven by lower inventories days from strong sales in the period and decreased reliance on hedging to mitigate global supply chain issues. We spent PHP 4.7 billion in organic capital expenditures in 2022 versus PHP 2.5 billion in 2021. We opened 174 new stores in 2022, with Supermarkets and Drugstores having record store openings at 40 and 101 stores, respectively. The acceleration in our store rollout last year would explain the higher spending in 2022. Meanwhile, here are the highlights of our consolidated performance in the first quarter of 2023. Our consolidated net sales grew by 13.1% to PHP 44.6 billion, blended same-store sales growth of 9.2%. Gross profit saw an expansion of 15.9% to PHP 10.5 billion with GP margins rising by 60 bps to 23.6%. EBIT of PHP 1.8 billion, up 14.8% with EBIT margin expanding by 10 bps to 4.1%. Core net earnings surged by 20.5% to PHP 1.1 billion. Store portfolio of 2,327 stores and 2,149 TGP franchise branches nationwide. Moving on, let me discuss some of our key corporate developments in the past year. The rebranding of Uncle John's is well on its way. We are delighted by the positive response of our customers. Likewise, the reinvention of Shopwise is also progressing. The first 2 reinvented stores, Shopwise Antipolo and Makati, both experienced significant uplifts in sales versus pre-renovation. We have repositioned Shopwise to become a one-stop international grocery shopping destination. In June of 2022, Southstar Drug launched its first drive-through store in the city of Muntinlupa as a way to provide a more convenient way of accessing health care products. Drive-through sales have accounted for 40% of the total sales for this store. GoTyme, one of only 6 digital banks given licenses by the BSP, continues to accelerate its rollout since launching last October 2022. GoTyme now has 165 kiosks across our supermarkets. Furthermore, GoTyme account holders can conveniently cash in and cash out for free across 800-plus Robinsons-affiliated stores. Robinsons Retail has a 28% economic interest in GoTyme. In January 2023, we acquired a 4.4% effective equity interest in BPI. This will be on top of the proposed merger between BPI and Robinsons Bank, which is expected to close by late 2023 or early 2024. Post-merger, Robinsons Retail will own 6.5% of BPI. The partnership with BPI will help accelerate our aspiration of becoming a leading retailer with excellent financial products for customers and suppliers. Through our subsidiary, we infused a total of USD 9.5 million in the Series C funding round of GrowSari, of which USD 4 million came from the conversion of convertible notes. Our stake currently is 14.1%. Pre-money valuation for the Series C funding round was 3.3x versus the Series B pre-money valuation. Our investment has gained 230% based on the post-money valuation of the company at the time. On more good news, we were recognized as one of Asia's outstanding companies in the consumer discretionary sector from Asiamoney's 2022 Outstanding Companies Poll. Over 958 fund managers, buy-side analysts, bankers and research analysts responded to the poll and ranked publicly listed companies across 12 Asian markets based on financial performance, management team excellence, investor relations and CSR activities. Now for our sustainability highlights. In September 2022, Robinsons Supermarket teamed up with Century Pacific Food and Friends of Hope for the groundbreaking event of Trees of Wellness. The joint tree planting program launched in General Santos, South Cotabato aims to plant and donate 100,000 coconut trees to farmers in Mindanao. During the reopening of Boracay last year, Robinsons Supermarkets organized a coastal cleanup and community gift-giving activity in partnership with Communities Organized for Resource Allocation or CORA. Around 300 volunteers from Robinsons Supermarket, Handyman, Rose Pharmacy and the local community participated in the coastal cleanup, gathering over 96 sacks of coastal debris. Robinsons Supermarkets, The Marketplace and Shopwise partnered with Woolworths for World Hunger Day last year. A portion of the profits from Woolworths products sold from May to June was donated to Thrive Foundation. Over PHP 400,000 was raised to provide daily meals to 66 Filipino schoolchildren for a year. We are also happy to report that 21 of our Southstar Drug Gokongwei Brothers Foundation scholars passed the November 2022 pharmacist licensure examination. The newly minted registered pharmacists came from 7 universities across the country. Since the program started in 2017, 184 pharmacy students have been supported through scholarships and career placements. We were recently recognized with one Golden Arrow by the Institute of Corporate Directors for being one of the top publicly listed companies with good corporate governance practices based on the ASEAN Corporate Governance Scorecard assessment results. Meanwhile, after 2 years, our much anticipated Annual Trade Partners Night was once again held in person last March 2023. Our Supermarkets, Drugstores and Convenience Store segments hosted the event to recognize partners for their continued support and excellent performance in 2022. TGP organized a 3-day summit in February, dedicated to both pharmacists and franchisees of the company. This was attended by 500 pharmacists and over 500 franchisees from all over the country, and it was highlighted by talks from industry experts and other learning sessions. We continue to be part of Bloomberg's Gender-Equality Index aimed at consolidating data on women's inclusion, leadership, anti-sexual harassment policies, among others. We are only 1 of 4 Philippine companies included in the index. This year, we were also recognized and included in the Philippine Daily Inquirer and Statista's list of The Philippines' Best Employers 2023. We are pleased to welcome our new Independent Director, Mr. Cesar G. Romero. He served as President and Chief Executive Officer of Shell Philippines from 2016 to 2021. Prior to that, he served in various capacities in the Shell Group of Companies, both local and international for more than 3 decades. He obtained his B.S. in Mechanical Engineering from the University of the Philippines and MBA from the University of Michigan. We continue to have 4 independent directors in our 9-seat Board with Cesar joining Mr. Enrico Cruz, Mr. Cirilo Noel and Mr. Rodolfo Ang. Finally, after all our accomplishments in 2022, we would like to show you our path into 2023. Our 2023 guidance is as follows. We are looking to accelerate our store rollout program by adding 180 to 200 net new stores across our portfolio. We are aiming for blended same-store sales growth of between 4% to 6%, and we are earmarking PHP 5 billion to PHP 7 billion for organic capital expenditures. We are also pleased to announce that the Board of RRHI has approved today the declaration of a PHP 2 per share cash dividend for all shareholders as of record date of May 23, 2023. Payment will be on June 9, 2023. Increasing shareholder value continues to be top of mind as we manage the business. This is reflected through our consistent dividend declarations and the implementation of a share buyback program. That ends my presentation. And once again, good morning to all. And as usual, happy shopping.

Thank you. May I call on the Corporate Secretary to present the results of voting for the approval of the audited financial statements for the preceding fiscal year?

Mr. Chairman, we are pleased to report that shareholders representing 82.01% of the total outstanding shares of the corporation have approved the audited financial statements of the corporation for the year ended December 31, 2022, as presented. The report of the President is hereby also duly noted.

The report of the President is accordingly noted, and the audited financial statements for the preceding fiscal year are hereby approved as presented. We now go the election of the members of the Board of Directors. May I call on our Corporate Secretary to read the names of the incumbent members of our Board of Directors?

The incumbent members of Board of Directors are Mr. James L. Go, Mr. Lance Y. Gokongwei, Ms. Robina Gokongwei-Pe, Mr. Ian McLeod and Mr. Choo Peng Chee. And the independent directors are Mr. Rodolfo P. Ang, Mr. Cirilo P. Noel, Mr. Enrico S. Cruz and Mr. Cesar G. Romero.

Thank you. May we now have the list of nominees for election to the Board of Directors and the voting results?

Mr. Chairman, in accordance with the nomination process stated in the bylaws of the corporation, the following have been nominated as members of the Board of Directors. Mr. James L. Go, Mr. Lance Y. Gokongwei, Ms. Robina Gokongwei-Pe, Mr. Ian McLeod, Mr. Choo Peng Chee and, as Independent Directors, Mr. Rodolfo P. Ang, Mr. Cirilo P. Noel, Mr. Enrico S. Cruz and Mr. Cesar G. Romero. There being no other nominations, the affirmative votes in favor of those nominated have been tabulated. And the following are the duly elected members of the Board of Directors of the corporation for 2023: Mr. James L. Go, Mr. Lance Y. Gokongwei, Ms. Robina Gokongwei-Pe, Mr. Ian McLeod, Mr. Choo Peng Chee and, as Independent Directors, Mr. Rodolfo P. Ang, Mr. Cirilo P. Noel, Mr. Enrico S. Cruz and Mr. Cesar G. Romero.

Let's move on to the next item in the agenda, which is the appointment of the external auditor of the corporation. May I call on the Corporate Secretary to present the results of the voting for this agenda item?