Mr Price Group Limited · JSE:MRP
Mr Price — H1 2015 Earnings Presentation
34 slides from Mr Price's earnings presentation, November 2014
Slide 1: Interim results presentation
interim results presentation —
Slide 2: About Mr Price Group
about mr price group a high growth, omni-channel, fashion-value retailer Targeting younger customers in the mid to upper LSM categories Retailing predominantly own branded merchandise 81% of sales are for cash 1 115 stores & online channels offering full product assortments 28 year CAGR in
Slide 3: Group performance
group performance 14.7% 22.6% 23.0% 25.9% Revenue Operating profit Diluted HEPS DPS R8.3bn R1.2bn 349.0c 211.5c SENS notice 24 Oct Closer alignment of interim guidance range 20-24% & annual payout ratios: Interim increased to 57% HEPS +21.7% to 371.1c (PY: 55%) No change expected to annu
Slide 4: SA retail environment is constrained
SA retail environment is constrained Continued slowdown in credit growth, impact of ABIL Inflationary pressures - weak currency & high utility costs Moderating wage settlements & impact of strikes Impact of potential government fiscal discipline uncertain - job freezes, moderating salary inc
Slide 5: Revenue analysis
revenue analysis R’m 2014 2013 % change Retail sales SA - bricks 7 147 6 326 13.0% - online 45 15 195.3% Non-SA - bricks - corporate owned 633 485 30.4% - franchise 49 62 (20.6%) - online 9 4 142.3% Retail sales (Comp growth 10.6%) 7 883 6 892 14.4% Interest on trade receivables 170 148 15.0% Insura
Slide 6: Sales growth analysis
sales growth analysis W.avg space growth % 15 40 36 6 Net stores opened Mix 30 27 5.3 5 12 4.0 4.3 1.4 8.3 9.6 20 4 9 12 5.5 Price 7 % 10 3 5.6 6 9.2 9.0 0 2 3 5.4 5.8 4.8 (10) 1 (19) 0 (20) 0 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 Net stores opened Weighted average space growth Unit gr
Slide 7: Group income statement
group income statement 2014 2013 % change Retail sales & other income (pg 4) 8 228 7 173 14.7% Cost of sales 4 663 4 068 14.6% Selling expenses pg 7, 8 1 784 1 603 11.3% Administrative expenses 539 489 10.2% Profit from operating activities 1 242 1 013 22.6% Net finance income 38 31 24.2% Profit bef
Slide 8: Continued improvement in operating margin
continued improvement in operating margin Changed basis of measuring operating margin to operating profit/retail sales & other income 2014 2014 14.1% (PY based on retail sales 14.7%) Other Other 0.1% Per analysis on pg 4 income income Overall GP% is in line with the prior year at 41.4% Gross G
Slide 9: Costs & expenses
costs & expenses Cotton price, oil price & currency movements Gross profit 120 11.54 12 42.0 41.8 Cotton price (US cents/lb) 111.62 Consistent GP% despite weakening ZAR 41.7 Oil price (USD/barrell) 110 11 41.5 41.3 41.3 100 41.2 USD/ZAR 90.09 90 97.34 10 41.0 % 10.04 80 9 40.5 70 73.38 60 8 40.0 Sep
Slide 10: Financial position
financial position R’m Sep 2014 Mar 2014 Sep 2013 Non-current assets Property, plant & equipment 770 718 681 Intangible assets 290 215 195 Other non-current assets 185 204 149 Current assets Inventories 1 654 1 403 1 324 Trade & other receivables 1 771 1 673 1 630 Reinsurance assets (cash) 163 98 12
Slide 11: PPE & intangibles
ppe & intangibles R’m Total PPE Intangibles Opening 933 718 215 Store Additions (R’m) 97 Additions 230 142 88 IT (POS) 23 Disposals/impairments (4) (4 ) - DC Total Depreciation/amortisation (99) (86 ) (13) 22 R230m Closing 1 060 770 290 Other Goodwill 2 IT (ERP, E-Comm) 28 Retail capex split 58 Divi
Slide 12: Significant balance sheet items
significant balance sheet items Gross inventories Current liabilities 1 800 +23.4% 1 768 2 600 +25.8% 2 547 2 421 2 400 1 600 1 515 +5.2% 1 433 2 200 +16.8% R’m 1 400 2 025 R’m 2 000 1 200 1 800 1 000 1 600 Sep 13 Mar 13 Sep 14 Sep 13 Mar 14 Sep 14 Input inflation 10%, space growth 5.3% = 15.3%
Slide 13: Trade receivables
trade receivables 2014 2013 % change Gross trade receivables R1 801m R1 676m 7.5% Active accounts 1 389k 1 361k 2.1% Credit sales - contribution 19.1% 20.8% - growth 4.2% 11.6% Improvement from 7.6% at Mar 2014 Net bad debt to book 7.2% 6.8% Bad debt less recoveries Impairment provision (Mar 201
Slide 14: Cash generative business model
R’m 1 500 2 000 3 000 3 500 4 000 2 500 March 2014 2 252 Cash generated 976 from operations Interest received 210 Taxation paid (372) Additions to PPE & intangibles (234) Dividend paid (798) Treasury share 22 cash generative business model transactions 3 Other September 2014 2 059 13
Slide 15: Divisional performance
divisional performance (mr pricegrouplimited
Slide 16: Segmental performance
segmental performance 31 766 18 32 000 17.5 16 Sales growth & operating margin % 14.8 23 136 24 000 14 21 998 12.6 12 Sales density R/m2 16 000 14 644 10 8 8 000 6.0 6 4 0 000 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 Apparel Home Sales growth Sales growth % Operating % LHS) margin Opera
Slide 17: Divisional performance
divisional performance Contribution to increase in sales Divisional sales splits Sheet Street Home Home 3.3% 15.2% 18.8% Sport Sheet 6.7% Street Miladys 90.6% 77.4% Apparel 7.9% Apparel -0.6% Sport 75.4% 58.6% 6.3% Miladys 8.4% 16
Slide 18: Mrp division results
2014 2013 % change Retail sales R4 582m R3 828m 19.7% Comparable sales 15.1% 10.3% Unit sales 65.9m 60.7m 8.5% RSP inflation (price 5.6%, mix 4.7%) 10.3% 8.5% Weighted average space growth 8.1% 8.6% Trading density R36 104m-² R32 518m-² 11.0% Omni-channel strategy proving successful - online posit
Slide 19: Sport division results
2014 2013 % change Retail sales R497m R431m 15.3% Comparable sales 3.4% 8.2% Unit sales 5.2m 4.8m 7.1% RSP inflation 7.8% 7.7% Weighted average space growth 10.8% (1.7%) Trading density R20 342m-² R19 070m-² 6.7% Shift in school holidays had a greater impact than expected Opened 6 new stores, an
Slide 20: Miladys division results
2014 2013 % change Retail sales R659m R665m (0.8% ) Comparable sales 0.0% 9.5% Unit sales 4.3m 4.4m (2.7% ) RSP inflation 2.7% 5.7% Weighted average space growth (1.3%) (2.4%) Trading density R22 547m-² R22 027m-² 2.4% Performance impacted by: - Incorrect merchandise calls in casualwear department
Slide 21: Home division results
2014 2013 % change Retail sales R1 474m R1 318m 11.8% Comparable sales 7.6% 10.5% Unit sales 18.4m 19.1m (3.9%) RSP inflation (price 9.4%, mix 7.5%) 16.9% 9.9% Weighted average space growth 2.3% (1.5%) Trading density R21 831m-² R19 986m-² 9.2% Consistent performance across majority of departments
Slide 22: Sheet Street division results
2014 2013 % change Retail sales R621m R588m 5.6% Comparable sales 1.5% 4.8% Unit sales 8.5m 8.4m 0.5% RSP inflation 5.5% 8.6% Weighted average space growth 2.2% 0.7% Trading density R26 804m-² R25 332m-² 5.8% Target customer segment (LSM 5-8) more affected by economic environment Opened 11 store
Slide 23: Strategy
Slide 24: Strategy - to be a top performing international omni-channel retailer
strategy - to be a top performing international omni-channel retailer growth customers operations people reputation Extend our earnings Delight our World class Energised High standards of track record through customers with infrastructure to environment with ethical behaviour & local & international
Slide 25: Growth - South Africa
growth - South Africa Introduce quality space Focus on cash sales 30 000 40 000 30 83 Strong ROGA 26.1 Space added/ reduced Sales contribution % 25 Sales growth % 20 000 Group space growth 5.3%, SA 3.3% 30 000 80.9 81 Density R/m2 20 10 000 79.0 17.5 15 79 m2 20 000 0 10 11.3 10 000 77 (10 000) 5 4.
Slide 26: Growth - Africa
growth - Africa Non-SA sales contribution Analysis Sales growth Stores ZAR Local Opened Total Swaziland 16.5% 16.5% 7 International sales 8.8% of Group, 11.1% of mrp Lesotho 19.0% 19.0% 4 Nigeria RSP’s decreased, comp unit growth 19.5% Namibia 27.9% 27.9% 4 32 Nigeria online 2.7% of country sa
Slide 27: Growth - beyond Africa
growth - beyond Africa Potential for mrp, mrphome & in time, mrpsport to expand internationally Research in progress Marketing test of mrp.com (online) in Australia highlights brand acceptance: - Print campaign completed, TV in progress - 85% of increase in sales is from new customers - Returning
Slide 28: Customers
customers Target market Fashion-value Brand experience Maintain focus on LSM 6-10 Fashionable/contemporary Consistent across formats, (Sheet Street 5-8) own branded merchandise at channels & markets everyday low prices Anticipate & respond to evolving customer expectations mrp 24% mrp R59.99
Slide 29: mrp new generation store
mrp new generation store New mrp brand Marketing & brand iPad kiosks offer Sub-brands clearly Key focal areas positioning New MRP brand communication via customers the differentiated through created to showcase positioning & logo digital screens & social opportunity to shop or strong signage, use of
Slide 30: Operations
operations ERP system implementation Distribution centre Project tracking well, mrpsport planning to go live Alternative site selected, supported by KZN Premier in Aug 2015 Awaiting approval for re-zoning from agriculture Forecasting & replenishment module implemented in Expected go live d
Slide 31: People
people Human Capital Management system rollout nearing completion Store employment contracts from casual to flexi well progressed 76% of head office appointments are ACI Learning & development - Executive appointed to provide integrated approach for merchants - Retail operations blueprint be
Slide 32: Reputation
reputation Promote local industry - Founding member of SASTAC (commenced activities May 2014) - Covers value chain from cotton growers to manufacturing to retail Manufacturing skills development programme - Pre production (pattern making, design, sample production) 1st intake Jan 2014 - Producti
Slide 33: Prospects
prospects Expect trading conditions to remain challenging well into the new year Sales growth in 2nd half base is high: - Group 15.2% (Comp 11.3%) - mrp 20.4% (Comp 15.3%) Sales growth Oct 2014 17.6% (Comp 13.1%) aided by school holiday shift Plan to open 41 stores (net 39) in 2nd half Posit
Slide 34: Thank you