Opportunity in RETAILMENT ARTEE Industries Limited March 2013

Opportunity in RETAILMENTARTEE Industries LimitedMarch 2013

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Head points

Nigeria – Africa’s burgeoning economy

RETAILMENT – The future

The Opportunity

The Challenges

ARTEE Industries Limited – One of Nigeria’s leading conglomerates

ARTEE Industries Limited - Proprietary & Confidential

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NIGERIA – Africa’s burgeoning economy A brief overview


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Nigeria – GDP & GDP Growth


2004 2005 2006 2007 2008 2009 2010 2011 2012 -

50.00

100.00

150.00

200.00

250.00

67.65 87.84

112.24

145.42

165.92

207.11

168.59

228.64

243.98 Nigeria - GDP (in USD billions)

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42008 2009 2010 2011 2012 2013

0

1

2

3

4

5

6

7

8

9

10

5.7 5.76.1

7.8

6.5 6.76.13

7.1

4.5

7.457.37.67

7.367.697.86

8.6

7.697.727.4 7.68

6.176.6 6.9 7.1

GDP % growth rate

% growth rate

Data Source: www.tradingeconomics.com / WORLD BANK

http://www.tradingeconomics.com/

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Nigeria’s Global Competitiveness

• Ranked 115 amongst 144 countries (improved from 127 / 142)

• Market size ranking – 33

• Improved rankings:– Macro Economic environment :: 39 from 121– Labour market efficiency :: 55 from 70


Market size

Macroeconomic environment

Labour market efficiency

Business sophistication

Financial market development

Median rank

Innovation

Goods market efficiency

Technology readiness

Higher eductaion & training

Institutions

Infrastructure

Health & primary education

020406080100120140

33

39

55

66

68

73

78

88

112

113

117

130

142

Nigeria's Ranking - Competitive Pillars

Data Source: WEF – GCR :: 2009 – 10, 2010 – 11, 2011 – 12; NESG Research

2009 - 10

2010 - 11

2011 - 12

2012 - 13

0

20

40

60

80

100

120

140

99

127 127115

105 111 114 115

Nigeria's Global Competitiveness Rank

NigeriaLowest Quintile Rank

Year

Rank

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Global Competitiveness :: Nigeria v/s Emerging Economies

• Amongst the ‘Next – Eleven’ Nigeria ranks 9th. , ahead of Bangladesh & Pakistan

• Amongst the BRINCS, Nigeria ranks 6th.


Data Source: WEF – GCR :: 2009 – 10, 2010 – 11, 2011 – 12; NESG Research

South Korea

Turkey

Indonesia

Mexico

Phillippines

Iran

Vietnam

Egypt

Nigeria

Bangladesh

Pakistan

020406080100120140

19

43

50

53

65

66

75

107

115

118

124

Nigeria's Ranking - Next 11

CHINA

BRAZIL

SOUTH AFRICA

INDIA

RUSSIA

NIGERIA

020406080100120

29

48

52

59

67

115

Nigeria's Ranking - BRINCS

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Sectoral contribution to GDP (2010 – 2011)

• Agriculture, Wholesale & Retail, Crude account for more than 70% of the GDP


Data Source: NBS Outlook – 2010 :: 2015

Agriculture

Wholesale & Retail trade

Crude oil & Gas

Others

Telecommunciation & Post

Manufacturing

Finance & Insurance

Building & Construction

Real Estate

Business & Other services

Hotels & Restaurants

Solid Minerals

- 5.00 10.00 15.00 20.00 25.00 30.00 35.00 40.00 45.00

Sectoral contribution to GDP : 2010 - 2011

20112010

Telecommunciation & Post

Building & Construction

Hotels & Restaurants

Solid Minerals

Wholesale & Retail trade

Real Estate

Business & Other services

Real Growth (Annual)

Manufacturing

Agriculture

Others

Finance & Insurance

Crude oil & Gas

(5.00) - 5.00 10.00 15.00 20.00 25.00 30.00 35.00 40.00

Sectoral growth : 2010 - 2011

2011 2010

• Non-oil sectors like Telecommunication & Post (34%); Wholesale & Retail (11%), Hotels & Restaurants (12 %+), Real Estate (12%+), building & Construction (12%+) recorded double digit growth

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The future :: 2013 – 2015

• The slow down in growth in 2012 is a resultant effect of external shocks (slow down in US & Europe, China); lower output of crude production, subsidy removal on PMS and its effect on household incomes

• Projected Real GDP growth are:– 2013 :: 8.04 %– 2014 :: 7.43 %– 2015 :: 7.25 %

• Nominal GDP for 2012 – NGN 43,134.77 bn, a 15.63% growth over 2011

• Projected Nominal GDP growth rates are:– 2013 :: 17.28 %– 2014 :: 15.53 %– 2015 :: 14.19 %


Data Source: NBS Outlook – 2010 :: 2015

2013 2014 2015 -

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

18.00

20.00

Projected GDP Growth rates

Real GDPNominal GDP

% a

ge g

row

th

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RETAILMENT – The futureThe BIG Impact


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The Evolution of RETAILARTEE Industries Limited - Proprietary & Confidential

SHOPPING MALLS / HYPER MARKETS

RETAILMENT

SUPER MARKET

S

DEPARTMENT STORES STANDALONE STORES

MOM & POP

STORES

STREETVENDOR

S

WEEKLY MARKET

S

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The Organised Retail Industry – A macro overview

In developed economies; the composition of organised retail is much larger than the unorganised retail.

Therefore; it would be safe to presume that ...

Economic growth has a direct correlation to Increase in organised retail

Percentage of Organized Retail:

United States of America: 80% United Kingdom: 80%Japan: 66%Australia: 78%India: 10%

Nigeria: 3%



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27% of the Global GDP is contributed by organised retail; 20% of the US economy is supported by retail

Across the globe; retail employs 17.1% of the workable population and in the US it accounts for 14%

Organised retail supports the development of various sectors across the economic environs of the country

Organised retail conserves foreign exchange

The Organised Retail Industry – A macro overviewSource: Retail Trends and Economic Dependencies – www.marc.org


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The BIG IMPACT of Retail

Organised Retail

Agriculture

Manufacturing

Real estate

Banking

TechnologySME

Human Capital

Tourism

Government


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Current estimated yield loss is around 39% - primarily due to an inefficient value chain & cold chain

Effecting a loss in earning and increase in cost

RETAIL & AGRICULTURE

Organised retail would help improve the efficiencies of the value chain- Reduces wastage- Increase revenue- Effectively lowering down inflation rates


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Organised retail helps increase the presence of brands in all categories

Launching of new products & concepts to test markets leading to eventually setting up local manufacturing facilities

RETAIL & MANUFACTURING

Manufacturing infrastructure improves as technology transfer is facilitated

Creates an improved platform for direct interaction with the consumers


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• Organsied retail is the major impetus of realty developments– India case study:

• 2001 – 142,000 m² of modern retail• 2006 – 2.7 million m²• From 30 malls in 2003 to 230 malls in 2007

• Organised retail has moved from mere shopping to ‘RETAILMENT’

RETAIL & REAL ESTATE


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RETAIL & BANKING

Case Point 1

Increase in organised retail

Increase in consumer spend

Increase in consumer finance

Case Point 2

Increase in organised retail

Increase in capital investment

Increase in project finance

SME Finance through a Supply Chain Contract with major Retailers


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Technology is the backbone of organised retail

The boom in retail will give an impetus to the IT industry in sphere of both hardware and software development

Increase in telecom and IT infrastructure facilitates a cashless economy

RETAIL & TECHNOLOGY


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RETAIL & SME

Organsied retail helps develop the value chain in the system Value Chain entities are SME drivers Development of ancillary units


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Organised retail is by far one of the single largest employers in any economy

In developed economies, 30sqm is managed by one person

RETAIL & HUMAN CAPITAL

Organised retail generates 17% of total employment globally

Organised retail develops entrepreneurship Franchise model employees become employers


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DUBAI :: 2010 – 10 million tourist 2015 – Estimated 15 million 25% - 40% visitors to Mega malls are tourists Average spend is 2 – 3 times higher than residents

RETAIL & TOURISM

Organised retail and tourism are interdependent

In Nigeria organised retail will develop domestic tourism


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Organsied retail increases the revenue base for the government

RETAIL & FEDERAL REVENUE

TAX - Agriculture

Sector

TAX - SME

TAX - Manufacturing

TAX - Real Estate

TAX - Technology

TAX- Bankin

gGOVT. TAX INCOME

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RETAIL IndustryBroad Market Sizing


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Nigeria – Consumption patternARTEE Industries Limited - Proprietary & Confidential

Zone Food Exp % age of Food Exp

Non-Food Exp.

% age of Non-Food

TOTAL % age of TOTAL

North – Central

2,395.704 15.27 1,138.410 13.29 3,534.114 14.57

North – East

1,942.853 12.39 763.166 8.91 2,706.019 11.16

North – West

3,938.239 25.11 1,459.677 17.04 5,397.916 22.26

South – East

1,935.051 12.34 984.137 11.49 2,919.188 12.04

South – South

1,908.387 12.17 1,628.646 19.24 3537.033 14.67

South – West

3,566.435 22.74 2,573.147 30.04 6,139.582 25.31

TOTAL 15,686.67 8,567.00 24,253.67

•Figures in NGN billion• Source: NBS 2009/2010 Consumption Report

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Nigeria – FX SpendARTEE Industries Limited - Proprietary & Confidential

2012 – Total no. of International Travellers :: 2.90 million

Average spend per traveller – USD 4000

TOTAL Outflow of FX – USD 11.6 billion

•Estimated figures based on secondary research – Source - FDCL

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South Africa – A retail comparison - IARTEE Industries Limited - Proprietary & Confidential

In South Africa, a leading grocery chain (world’s largest) closed 2011 with a turnover of USD 6.00 billion

This chain constituted 850 shops, and amassed a market share of 25%

The TOTAL GROCERY RETAIL SALE in SA for 2011 – USD 24 billion; comprising 3800 outlets

TOTAL South African Population – 65 million

TOTAL SHOPPER Population – 45 million

•SPAR SA – Handbook 2011

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South Africa – A retail comparison - IIARTEE Industries Limited - Proprietary & Confidential

• Grocery Sales – USD 24 billion• Fashion / Electronics etc (ratio presumed 1:1) – USD 24 billion• Entertainment (avg spend ratio to grocery 1:4) – USD 6 billion• Food / Restaurants' etc (1 : 4 ratio) – USD 6 billion

• AN ESTIMATED TURNOVER OF USD 60 billion only from

RETAILMENT

THE RETAILMENT FIGURE for SOUTH AFRICA

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The Challenges



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RETAIL … recognition as a ECONOMIC SECTOR

Infrastructure

Consistency

Human resource

The Challenges

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ARTEE Industries LimitedCredentials


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Genesis & Evolution - RETCO

• Started in 1988 … one of the first organised supermarket in Nigeria … 250 m² ... branded as

• 2011 – Nigeria’s largest Supermarket & Department Store with presence in Pan – Nigeria and in excess of 20,000 m² of retail space

• Evolved as the most comprehensive supermarket and department stores in Nigeria


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Evolution – RETCO

2010 – SPAR Nigeria introduced


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Business interestsARTEE Industries Limited - Proprietary & Confidential

ARTEE Group

PROPCO

Residences Commercial

RETCO

SPAR PARK – n - SHOP

MANCO

Furniture

Table Water & PET &

Preforms

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MANCO

Started in 1999; with over 6,000 m², CASCADE is one of the leading brands of Table Water in Nigeria


2006 – the largest & the most comprehensive furniture manufacturing facility in Nigeria spanning

over 10,000 m² and over 85 CNC machines. This facility was commissioned within 11 months of

starting the project from scratch

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PROPCO

Developing one of the largest community type living residential complexes spanning over 23 hectares – 50 houses built within 12 months of start of work


2010 – Ultra modern shopping complex measuring over 6,000 m² completed with 14 months of start

36ARTEE Industries Limited - Proprietary & Confidential

The opportunity is there for the taking

But will only happen if we make it happen


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Thank you

Documents

Opportunity in RETAILMENT ARTEE Industries Limited March 2013