Mr Price Group Limited · JSE:MRP
Mr Price — H1 FY2021 Earnings Presentation
59 slides from Mr Price's earnings presentation, Nov 26, 2020
Slide 1: FY21 Interim Results to 26 September 2020
FY21 Interim Results to 26 September 2020
Slide 2: Backdrop, Performance, Value creation & growth
01 Backdrop 02 Performance 03 Value creation & growth
Slide 3: Backdrop
01 Backdrop Retail Environment, Group Performance & COVID-19 Insights by Mark Blair - CEO
Slide 4: Macro-economic challenges
The impact of COVID-19 Macro-economic challenges has been devastating on all economies across the world SA GDP growth GDP growth Q2 2020 0.9 1.1 1.6 1.6 1.4 1.3 1.1 0.9 0.7 0.1 0.0 0.1 0.1 -0.5 -13.7 -12.2 % % -15.5 -14.4 -17.1 -17.0 -16.3 -16.3 -18.9 -18.7 -17.7 -22.1 -21.7 -23.9 -17.1 -30.2 Q4’16
Slide 5: Consumer challenges
Consumers continue to be Consumer challenges under pressure - unlikely to ease in the near term SA retail sales growth 20.0 0.0 Unemployment 30.8 % Q3 2020 | 170bps increase -20.0 Highest level in 17 years -40.0 % -60.0 -80.0 -100.0 2.2m jobs lost in Q2 2020. Potentially haven’t felt the full Jan ‘2
Slide 6: Group performance
“Post Lockdown”: May to Sep 2020. April Group performance 2020 excluded due to all RSA stores closed under level 5 restrictions Revenue (14.4 ) % R9.2bn Operating Margin* (150 bps) 14.4 % Post Lockdown: +3.2 % R8.9bn Post Lockdown: +40bps 16.0 % EBITDA (20.1 ) % R2.0bn HEPS (24.8 ) % 333.5c Post Loc
Slide 7: Group performance
Interim Results FY2021 - Backdrop Group performance Unprecedented challenges Response enablers Health & safety Fashion-value product Stores Cash preservation Diverse merchandise categories Diversified location strategy Lockdown levels Operations Online Science of retail applied Strong omni-channel S
Slide 8: Group performance highlights
Interim Results FY2021 - Backdrop Group performance Highlights • Higher cash generation than anticipated despite estimated ~R1.8bn in lost sales • Stock on hand down 16.7% at the end of Sep 2020 • Strong cash balance to execute operationally, invest in growth & return to shareholders • Home segment
Slide 9: Performance
02 Performance Detailed Group & Divisional Results By Mark Stirton - CFO
Slide 10: Group income statement
Interim Results FY2021 - Performance Group income statement R’M 2020 2019 % Change Continuing operations Retail sales & other income (pg 52)1 9 053 10 622 (14.8%) Gross profit (pg 14)2 3 660 4 096 (10.6%) Expenses (pg 15)3 2 864 2 801 2.2% Profit from operating activities 1 148 1 688 (32.0%) Net fin
Slide 11: Group sales growth drivers
• Post Lockdown starkly different to the full H1 period Group sales growth drivers ^ • Bricks transactions down but Rands & units per basket up by double digits • Strong online growth partly offset foot traffic decline • Higher inflation driven by improved markdowns Geography Tender type Channel Mer
Slide 12: Divisional performance & insights
Interim Results FY2021 - Performance Divisional performance & insights Retail sales & other income Contribution Growth Insights H1 May to Sep 2020 Gained market share every month since March 2020. Mr Price 53.5% -16.5% +1.4% Aug 2020 market share was the highest level achieved in the last two years
Slide 13: Space growth
Interim Results FY2021 - Performance Space growth Numbers (Refer pg 53 for detail) • Annualised: 3.1% new space growth & 2.2% net growth (w.avg) Total Group • H1: 1.7% new space growth & 1.3% net growth (w.avg) 1 386 stores • 17 new stores added. 10 stores less than original capex plan • Strategic p
Slide 14: Gross profit analysis
Gross profit analysis Merchandise GP Telecoms GP Total GP 2019 2020 2021 2019 2020 2021 2019 2019 2021 43.3% 40.8% 43.2% 19.1% 17.7% 20.3% 42.6% 40.0% 42.0% Post Lockdown: Gross profit Rands up 8.7% Post Lockdown: Gross profit Rands up 49.3% Post Lockdown: Gross profit Rands up 9.4% • Increase drive
Slide 15: Overhead expenses
Overhead expenses Total Total excl. impairments & additional debtors’ provision +2.2% (4.5%) Selling expenses* (R’M) Administrative expenses* (R’M) 2020 2019 % Change 2020 2019 % Change 1 993 2 134 (6.6%) 871 667 30.5% • COVID-19 costs of ~R20m (PPE, cleaning & data costs) • Impairment of IT assets
Slide 16: Market leading balance sheet
Interim Results FY2021 - Performance Market leading balance sheet • Inventory on hand excl R’M Sep 2020 Sep 2019 GIT decreased 16.7% (Including GIT -7.3%). Agile supply chain Non-current assets 7 076 6 969 enabled stock inputs to decrease in line with sales Current assets 11 211 9 472 • GIT up 44.0%
Slide 17: Cash generation
Interim Results FY2021 - Performance Cash generation R0.5bn R0.5bn R0.5bn R2bn cash burn R5.9bn R1.5bn Liquid R4.1bn R0.5bn Liquid R3.5bn Operating Cashflow Operating Cashflow Liquid R2.0bn Liquid R0.6bn illiquid R0.5bn illiquid R0.5bn illiquid R0.5bn illiquid Mar’20 Apr’20 May’20 Sep’20 Cash resour
Slide 18: Cash flow movements
Interim Results FY2021 - Performance Cash flow movements R’M Mar 2020 4 726 Cash from operations 1 959 Decreased 18.2% on PY due to Apr 20 store closures. Post lockdown up 3.7% Operating Working capital 980 Improved payment terms & creditor timing. Lower stock & debtors’ balances R2.7bn Net interest
Slide 19: Credit performance
Interim Results FY2021 - Performance Credit performance Credit market Mr Price Group Consumer Credit Index (CCI) 70 Improving Credit Health 65 60 55 R1.3bn (27.4%) (27.3%) 50 Applications 45 40 35 Deteriorating Credit Health Credit sales 30 07 08 09 10 11 12 13 14 15 16 17 18 19 20 • Break-even leve
Slide 20: Trade receivables
Interim Results FY2021 - Performance Trade receivables % Change R’M Sep 20 Mar 20 Sep 19 Sep/Mar Sep/Sep Total debtors book 2 031 2 300 2 200 (11.7%) (7.7%) NBD: book (excl collection costs) 8.1% 6.3% 7.6% Impairment provision 15.2% 10.4% 7.5% • Credit sales deteriorated in line with market. April s
Slide 21: Value creation & growth
03 Value creation & growth Capital allocation & Outlook by Mark Blair - CEO
Slide 22: Strategy & capital allocation journey
Interim Results FY2021 - Value creation & growth Strategy & capital allocation journey Undertook a detailed review of merchandise processes & structures, areas for improvement identified What we said Most significant immediate opportunity is for Mr Price apparel to re-gain market share in May 2019 C
Slide 23: Capital allocation
Capital allocation ROIC EBITDA margin 30 30 25% 23% 25 24% 21% 20 17% 20 16% 15 6% 9% 10 10 8% 6% 5 0 0 Mr Price Truworths Woolworths Foschini Pepkor Mr Price Truworths Woolworths Foschini Pepkor Sales to invested capital ROIC-WACC 1.9x 2.0x 1.7x 10 1.6x 8% 4% 1.1x 0.9x 0% 0 -5% -5% 0.0x -10 Mr Pric
Slide 24: Capital allocation: Frontline
Interim Results FY2021 - Value creation & growth Capital allocation Frontline • Investment back into the Mr Price Brand & unique people culture • Store enhancements & navigation • Customer experience & blended retail • Product quality: fabric, fit & sizing • Brand sponsorship 24
Slide 25: Cotas a "08 <
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Slide 26: Retail brand value ranking
Retail brand value ranking 5 th most innovative 4 th most loved Brandz™ South African Top 30 and Most Valuable Brands 2020 (USD bn) 1 2 3 4 5 6 7 8 9 10 2.7 bn 2.7 bn 2.7 bn 2.5 bn 1.9 bn 1.8 bn 1.1 bn 1.0 bn 959 mn 892 mn FNB Standard bank Castle Lager Vodacom Nandos MTN Absa Discovery Woolworths D
Slide 27: Capital allocation: Enablers
Interim Results FY2021 - Value creation & growth Capital allocation Enablers • Resourcing & supply chain capabilities - Supplier grading tool fully integrated in to business process. Used extensively to improve supply chain performance - Increased local sourcing & committed to CTFL Master Plan 2030
Slide 28: Strong e-commerce performance
Will continue to invest in the e-Commerce growth Strong e-commerce performance channel at an appropriate level that considers consumer trends & profitability Online sales contribution Mr Price Apparel online vs store sales H1 FY21 Post Lockdown growth +71.5% Actual sales 2.6% 5 year CAGR +23.5% 1.5%
Slide 29: The power of traffic & mobile
The power of traffic & mobile Mr Price has been the most searched apparel retailer in South Africa for the last 5 years Google Trends “ The future of mobile is the future of online. It is how people access online ” Total group traffic (web + app) increased by 78.6% Cotton On 8% content now. 45 18% W
Slide 30: Capital allocation: Share buyback
Interim Results FY2021 - Value creation & growth Capital allocation Share buyback Once trading had become more ‘stable’ & the level of potential acquisition became clear: • Commenced share buyback during Sep 2020 & closed period • R165m re-purchased to date (1.3m shares at R126.50) • Anticipated rep
Slide 31: Capital allocation: Growth vehicles
Interim Results FY2021 - Value creation & growth Capital allocation Growth vehicles Last 12 months H2 FY21 • Delivered ~R400m non comp • mrpBaby (R3.8bn market) merchandise sales growth • mrpSchoolgear (R4.5bn market) • Scarlett Hill Beauty • mrp&co • Extended sizes • Tender types introduced: • Acti
Slide 32: Key non-comp launches
Interim Results FY2021 - Value creation & growth Key non-comp launches Scarlett Hill Beauty • Launched in Nov’19 in 40 stores • Jul’20 = 80 stores full assortment plus another 100 stores with Tools • Sep’20 = 120 stores full assortment plus another 60 stores with Tools • Performing well ahead of pla
Slide 33: mrpBaby launch
Cue the ooh, because there’s a new baby in town! Mr Price launched mrpBaby in 188 stores and online on the 5th of November. Our aim is to gain our customer’s TRUST by giving them QUALITY at GREAT PRICES & delivering on our promise to always EXCITE & DELIGHT! We will do this through our fashionabilit
Slide 34: baygrow &
\ baygrow & J headband set: ty * body vests % get R100 off SAD reat ity » for baby, © great price for yout
Slide 35: Watch this space!
Ready to make friends? Because, there’s a new kid in school! Mr Price will be launching Schoolgear in all stores and online from mid-December. watch this space!
Slide 36: mrp Schoolgear
mrp SCHOOLGEAR re €xmrprice
Slide 37: Key novelty and gifting categories
Key novelty and gifting categories including Tech, Pool & Beach, Lunch Club, Stationery and more!
Slide 38: EXCiting
EXCiting
Slide 39: Capital allocation: The Future
Interim Results FY2021 - Value creation & growth Capital allocation The Future • Geography • New concepts • New sectors • Acquisition
Slide 40: Sizing up the opportunity
Interim Results FY2021 - Value creation & growth Sizing up the opportunity 2019 - Retail Sales by Category (R’bn) General dealers R124bn • Stats SA reported total retail sales in Food beverages & tobacco R81bn in specialised stores 2019 of ~R1.1t • Focusing on gaining a greater share Pharmaceutical
Slide 41: If our customers got to chose what we should invest in...
If our customers got to chose what Interim Results FY2021 - Appendix we should invest in... 41
Slide 42: Mr Price Group and beyond
Existing business well positioned to capture Mr Price Group and beyond market share. Each division has identified additional growth opportunities Luxury Mr Price was the most shopped apparel retailer in ladies & mens in the last 3 months Premium Most shopped retailer for womens clothing last 3 month
Slide 43: Mr Price Group and beyond: Opportunity
Mr Price Group and beyond Luxury Premium Opportunity Opportunity Aspirational Opportunity miladys.com value/Niche mrprice.com mrpricesport.com Fashion mrpricehome.com value mrpricemoney.com mrpricecellular.com sheetstreet.com Price Acquisition value Apparel Homeware FS & Telecoms e-Commerce New sect
Slide 44: Mr Price Group and beyond: Growth vehicles
Interim Results FY2021 - Value creation & growth Mr Price Group and beyond Growth vehicles • Research undertaken has identified new retail concepts & detailed business cases are currently being developed • In due course, will further explore the opportunity to extend the Red-Cap halo beyond the oppo
Slide 45: Slide 45
Slide 46: Acquisition
Interim Results FY2021 - Value creation & growth Acquisition Meets our strict investment criteria: 1 Value focused fashion business, cash-based. Aligned to our core capabilities Durban based head office, 3rd 2 Transaction size ~4% of market cap, bolt on. Aligned to capital allocation strategy - to b
Slide 47: Introducing Power Fashion
Interim Results FY2021 - Value creation & growth Introducing Power Fashion Customer • Low to mid income households • More value (price) than fashion focused • Offers product for the whole family Value proposition • Value price positioning aligned to target market • Fashionable but not fashion forwar
Slide 48: Introducing Power Fashion
Interim Results FY2021 - Value creation & growth Introducing Power Fashion Agility • Trading mentality with quick decision making • Avoid complexities that introduce cost with limited benefit to the model • Potential clearing house for Mr Price Group merchandise if needed Performance metrics • Turno
Slide 49: H2 outlook
Interim Results FY2021 - Value creation & growth H2 outlook • COVID-19 second wave uncertainty • Stronger gross margin base in H2 • W.avg annual space growth to be between 1%-2%. 50 new stores planned (31 confirmed) in H2 • Double digit sales growth in first 6 weeks of H2. Sales growth flat in the w
Slide 50: Appendix
04 Appendix Detailed supporting information
Slide 51: Earnings & dividend per share
Interim Results FY2021 - Appendix Earnings & dividend per share 2020 2019 % Change Profit attributable to shareholders (R’m) 753 1 148 (34.4%) W. Avg shares in issue (000) 259 262 258 881 Basic earnings per share 290.5c 443.6c (34.5%) Addbacks (R’m) 111.4 (0.9) Headline earnings (R’m) 865 1 147 Head
Slide 52: Revenue
Interim Results FY2021 - Appendix Revenue R’M 2020 2019 % Change Retail sales 8 620 10 120 (14.8%) Other income 433 502 (13.6%) Financial services & Telecoms 407 475 (14.3%) Other 26 27 (1.8%) Total retail sales, interest & other income 9 053 10 622 (14.8%) Finance income 150 134 11.9% Total revenue
Slide 53: Space growth
Space growth Space movements (m2) w.avg net growth Mr Price Apparel 2.3% Miladys 4.1% Mr Price Sport 3.6% Mr Price Home 0.7% Sheet Street 1.1% Total space growth Net growth w.avg (0.6%) (0.3%) 0.3% 2.8% 2.2% closing (0.8%) (0.5%) 0.3% 2.7% 1.7% Closures Reductions Expansions New Stores Store movemen
Slide 54: Segment performance
Interim Results FY2021 - Appendix Segment performance *RSOI Contribution RSOI Growth Segment Apparel H1 8.3% Mr Price Apparel Mr Price Sport Miladys Apparel H2 17.6% (16.5%) (22.3%) (32.1%) RSOI (18.8%) Operating profit (26.4%) Operating margin 13.3% 53.5% 8.1% Home Home 5.8% Mr Price Home Sheet Str
Slide 55: Apparel segment
Apparel segment Mr Price Apparel Miladys Mr Price Sport 2020 2019 % Change 2020 2019 % Change 2020 2019 % Change Retail sales1 R4 835m R5 819m (16.9%) R513m R764m (32.8%) R603m R775m (22.3%) Comparable sales growth (18.4%) (4.3%) (36.5%) 3.3% (25.6%) 6.1% Unit sales 53.2m 66.7m (20.3%) 2.6m 3.8m (31
Slide 56: Home segment
Home segment Mr Price Home Sheet Street 2020 2019 % Change 2020 2019 % Change Retail sales1 R1 586m R1 758m (9.8%) R735m R763m (3.6%) Comparable sales growth (11.2%) 1.8% (4.4%) 2.5% Unit sales 13.3m 15.0m (11.3%) 7.3m 7.8m (6.4%) RSP inflation2 1.7% 7.5% 3.0% 11.0% Weighted avg. space growth 0.7% (
Slide 57: Mr Price Money
Mr Price Money Mr Price Money R’m 2020 2019 % Change Telecoms 425 357 18.9% Financial services 328 385 (14.8%) Total revenue 753 743 1.4% 57
Slide 58: Rest of Africa
Interim Results FY2021 - Appendix Rest of Africa Total % of Group sales 7.5% FY20: 7.7% No. of stores 124 Corporate owned stores: 116 Sales growth (ZAR) (17.5%) FY20: (2.2%) 58
Slide 59: mr price
mr price