Mr Price Group Limited · JSE:MRP
Mr Price — FY2015 Earnings Presentation
38 slides from Mr Price's earnings presentation, March 2015
Slide 1: Annual Results March 2015
Annual Results March 2015 group
Slide 2: Performance highlights
performance highlights 29 YEAR CAGR – HEPS: 23.3% & DPS: 25.0% Revenue R18.1bn 13.9% 1000 300 900 250 Operating profit R3.1bn 21.3% 800 HEPS & DPS (c) 700 Share price (R) 200 600 Operating margin 17.1% 110bps 500 150 400 Profit attributable to R2.3bn 22.8% 300 100 shareholders 200 50 Diluted
Slide 3: Performance overview
performance overview Strong performance relative to the sector: Business & consumer confidence levels low Poor retail environment which impacts higher margin business (Miladys) & discretionary buys (homewares) Continued lower level of credit sales growth MPC sales growth ahead of the market
Slide 4: Group income statement
group income statement % change 2015 2014 Annual H2 Retail sales & other income (pg 6) 18 011 15 829 13.8% 13.0% Cost of sales 10 186 8 907 14.4% 14.1% Selling expenses 3 602 3 354 7.4% 5.3% Administrative expenses 1 147 1 031 11.3% 7.7% Profit from operating activities 3 076 2 537 21.3% 20.2% Net f
Slide 5: Earnings and dividends per share
2015 2014 % change Earnings per share - Basic 917.3c 757.1c 21.2% - Headline 919.7c 765.1c 20.2% - Diluted headline 865.1c 715.1c 21.0% Consensus estimates - i-Net 867.0c - Bloomberg 874.6c Dividends per share - Interim 211.5c 168.0c 25.9% - Final 368.5c 314.0c 17.4% - Annual 580.0c 482.0c 20.3% Pay
Slide 6: Earnings growth
earnings growth Analysis of growth in profit attributable to shareholders (PAS) & diluted HEPS Growth % % H1 H2 variance PAS 23.3% 22.4% 0.9% Basic EPS 21.9% 20.7% 1.2% Higher w. avg number of shares - vested LTI’s* exceeded shares purchased HEPS 21.7% 19.2% 2.5% Higher shares per above Non-re
Slide 7: Revenue analysis
revenue analysis % change 2015 2014 Annual H2 SA - bricks 15 695 13 985 12.2% 11.6% - online 96 45 110.6% 68.4% Non-SA - bricks - corporate owned pg 28 1 377 1 085 26.9% 24.0% - franchise 100 103 (2.8%) (2.4%) - online 17 9 90.1% 54.2% Retail sales (comp growth: 9.2%) 17 285 15 227 13.5% 12.8% Finan
Slide 8: Sales growth analysis
sales growth analysis 15 6 20 16.5 Mix 12 Mix 16 14.2 Space growth % 4.4 12.8 5.0 5.1 3.4 4 15.3 9 3.0 7.7% 12 10.5 Growth % Price 13.1 11.8 % Price 4.3 6 5.3 8 9.0 9.7 8.7 2 8.2 7.9 7.5 7.6 7.6 7.1 6.9 7.4 7.0 3 4.9 5.5 4 0 0 0 2011 2012 2013 2014 2015 Q1 Q2 Q3 Q4 Unit growth RSP inflation W.
Slide 9: Costs & expenses
costs & expenses Cotton price, oil price & currency movements Merchandise GP% movements 1 0.2% (0.2%) 0.1% (0.5%) 120 13 107.41 0.4 110 12.08 0.2 0.1 0.1 0.1 0.1 0.0 Cotton price (US cents/lb) 12 % 96.95 0 Oil price (USD/barrell) 100 90 (0.2) (0.2) (0.2) ZAR/USD 11 (0.4) (0.4) 80 10.53 69.35 (1) 70
Slide 10: Continued improvement in operating margin
continued improvement in operating margin 2014 16.0% Changed basis of measurement to operating profit/RSOI Other income 0.1% Per analysis pg 6 Gross profit Merchandise GP 42.0%, down 0.2% on LY (0.3%) Group GP% including cellular of 41.6% up on H1, but lower than PY (42.0%) Employment cost
Slide 11: Financial position
financial position R’m 2015 2014 Non-current assets Property, plant & equipment 838 718 Intangible assets 328 215 Other non-current assets 198 204 Current assets Inventories 1 741 1 403 Trade & other receivables 1 874 1 673 Reinsurance assets (mainly cash) 124 98 Cash & cash equivalents 2 764 2 252
Slide 12: PPE & intangibles
ppe & intangibles R’m Total PPE Intangibles R’m Amortisation Opening 933 718 215 IT 35 10 yrs Additions 457 312 145 ERP 66 15 yrs, Rnil FY16 Disposals/impairments (16) (11) (5) Goodwill 28 Nil Depreciation/amortisation (208) (181) (27) Other 16 2-5yrs 145 Closing 1 166 838 328 Space worked per forma
Slide 13: Significant balance sheet items
significant balance sheet items Gross inventories Current liabilities +23.9% +8.8% 2 000 1 877 2 800 2 633 1 769 2 600 2 547 1 800 2 421 +6.1% 2 400 +3.4% 1 600 1 515 2 200 R’m R’m 1 400 2 000 1 200 1 800 1 000 1 600 Mar 14 Sep 14 Mar 15 Mar 14 Sep 14 Mar 15 Transition of sourcing model to direct
Slide 14: Cash generated & capital allocation
cash generated & capital allocation Cashflow movements Capital allocation 2 000 2014 25% 3% 2 252 1 800 39 17% Cash generated from 365 2 617 1 600 operations 461 21% Interest received 442 1 400 404 72% 1 200 Taxation (795) R’m 62% 1 000 Additions to PPE & (461) intangibles 800 1 340 Dividends (1 340
Slide 15: Segmental & Divisional Review
Segmental & Divisional Review f)
Slide 16: Segmental performance
segmental performance Annual H1 H2 Retail sales & other income Contribution to increase in sales - Apparel 15.4% 16.4% 14.6% - Home 8.7% 9.9% 7.8% Miladys 0.6% Sheet Street 3.1% Operating profit - Apparel 20.6% 21.6% 19.9% mrpHome 14.4% - Home 19.4% 19.5% 19.4% mrp 74.3% mrpSport 7.6% 20 35 000 Sale
Slide 17: Financial services revenue
2015 2014 % change Interest on trade receivables 355 311 14.0% Insurance premiums 177 147 20.5% Other 8 5 59.9% Airtime/mrpMobile 163 122 33.4% Commission 2 2 (23.4%) Airtime sales1, 2 132 120 10.2% Cellular - mrpMobile MVNO1, 3 29 - Total revenue 703 585 20.1% Extended cover & new products planne
Slide 18: Credit performance
credit performance 2015 2014 % change Gross trade receivables R1 914m R1 754m 9.1% Active accounts 1 413k 1 375k 2.7% Credit sales R3 137m R2 918m 7.5% Credit sales % 18.1% 19.2% Percentage able to purchase 89.2% 88.4% Net bad debt - % of debtors 6.2% 7.6% Impairment provision 8.9% 9.8% Proportion o
Slide 19: mrp division results
2015 2014 % change Retail sales1 R10 122m R8 588m 17.9% Comparable sales 12.8% - H1 15.1% - H2 11.0% Unit sales 149m 137m 9.0% RSP inflation (price 3.9%, mix 4.3%) 8.2% Weighted average space growth 8.3% Trading density R37 550m-² R34 507m-² 8.8% Strong double digit sales growth in all major categ
Slide 20: mrpSport division results
2015 2014 % change Retail sales R1 118m R962m 16.2% Comparable sales 4.5% - H1 3.5% - H2 5.3% Unit sales 12m 11m 8.7% RSP inflation 6.9% Weighted average space growth 11.2% Trading density R20 928m-² R20 036m-² 4.5% Continued development of private brands, now ~90% of business All departments ac
Slide 21: Miladys division results
2015 2014 % change Retail sales R1 396m R1 384m 0.9% Comparable sales 0.9% - H1 0.0% - H2 1.7% Unit sales 9m 9m (1.5%) RSP inflation 2.3% Weighted average space growth (0.4%) Trading density R22 987m-² R22 711m-² 1.2% Sales performance disappointing, affected by: - challenging economic environment
Slide 22: mrpHome division results
2015 2014 Annual Retail sales R3 187m R2 892m 10.2% Comparable sales 6.6% - H1 7.5% - H2 5.7% Unit sales 40m 41m (3.1%) RSP inflation (price 7.6%, mix 6.1%) 13.7% Weighted average space growth 0.7% Trading density R22 937m-² R20 956m-² 9.5% Nielsen’s research - highest top of mind awareness & stro
Slide 23: Sheet Street division results
2015 2014 % change Retail sales R1 363m R1 299m 4.9% Comparable sales 0.9% - H1 1.5% - H2 0.4% Unit sales 19m 19m 0.6% RSP inflation 4.7% Weighted average space growth 2.2% Trading density R27 136m-² R26 420m-² 2.7% RLC market share dropped marginally by 0.1% Sales growth reflective of the targe
Slide 24: Slide 24
Slide 25: Our vision is to be a top performing international retailer
our vision is to be a top performing international retailer growth customers operations people sustainability Extend our earnings Delight our World class Energised High standards of track record through customers with infrastructure to environment with ethical behaviour & local & international fashi
Slide 26: Growth - markets
growth - markets South Africa: consumption-led economy & consumers are struggling. Our fashion value positioning gives us a strong competitive advantage. To reduce concentration risk & maintain long term growth rate, increased focus is being given to growing external earnings. Africa: well establish
Slide 27: Growth - South Africa
growth - South Africa Ramping up investment in our key market Investment & innovation will benefit both current & new markets Multi faceted space strategy has previously proved successful: New stores - open 220 in next 5 years, stringent feasibility requirements Expansions - mrp could grow space
Slide 28: Growth - costs
growth - costs Profit wedge effect - aim to keep growth in cost of sales & overheads at lower rate than revenue Cost of sales Overheads Focusing on maintaining ingoing markup % in a Maintain profit wedge despite ongoing investment & period of currency volatility & weakness changing retail cycles
Slide 29: Growth - Africa
growth - Africa African sales grew by 24.3% to R1.5bn & constitute 8.5% of Group sales (10.8% of mrp) Sales growth Stores Non-SA sales contribution % Non-SA sales contribution Annual H2 Opened Total Namibia 42.7 22.1% 17.3% 8 37 mrpSport 2% Botswana 21.3 16.3% 9.4% 1 20 Miladys 5% Nigeria 10.6 32.4%
Slide 30: Growth - mrp Australia
growth - mrp Australia Online experience identified an opportunity for a fashion value player Advantage of being a southern hemisphere retailer ito assortment planning Subsequent detailed research supports our initial view - desktop studies, validated by on the ground research incorporating ex
Slide 31: Customers
customers Maintain fashion value positioning: Price - pass margin improvements through to customers PMO (markup) has decreased 0.1% from 2011 Quality - substantial improvements made, reinvesting savings from direct sourcing Fashion - on trend, own branded merchandise Engaging customer experience
Slide 32: Operations
operations ERP system implementation Just Enough replenishment & core Oracle ERP completed Next phases are to deliver JE planning modules & commence integration Test division planned go live H1 FY17 Resourcing Merchandise made in RSA >R3bn, 31% of inputs (39% including SADC) Good progress
Slide 33: Operations
operations Supply chain Improvement in Nigeria & Ghana supply lead time from 109 to 53 days Re-engineered shipping business processes to support resourcing strategy Hammarsdale Distribution Centre All necessary approvals obtained Construction, engineering & systems workstreams on track for c
Slide 34: People
people 93% of our associates are from previously disadvantaged backgrounds Set base pay at median, ability to earn higher is based on performance - comprehensive remuneration benchmarking across all levels has confirmed this intent - our philosophy is that incentivisation is applied throughout o
Slide 35: Sustainability
sustainability Founding member of SASTAC* - sustainable value chain, raw material & textile production - increased SA cotton production by 68% against 2013 baseline - 2nd year target >250%, 2 400 new jobs, incubation of 20 SME’s - cotton being acquired by mrp & mrpHome local suppliers MPC fundin
Slide 36: Looking ahead to FY16
looking ahead to FY16 Expect the challenging trading conditions to continue - sales growth in the new financial year has been impacted by a much warmer start to winter - high sales growth in Q1 base (Group 16.5%, mrp 22.0%, mrpHome 14.2%) Comparatively well positioned & expect to grow market sha
Slide 37: Thank you
A post results conference call will take place at 3pm on Monday 8 June 2015. Interested parties may dial in using one of the thank you following numbers or contact the organiser rod.salmon@barclays.com South Africa United States 0822994050 or 0800999567 (800) 706-8249 United Kingdom 08009174860 Othe
Slide 38: High growth, omni-channel, fashion-value retailer
a high growth, omni-channel, fashion-value retailer Targeting younger customers in the mid to upper LSM categories Retailing predominantly own branded merchandise 82% of sales are for cash 1 150 stores & online channels offering full product assortments 29 year CAGR in HEPS of 23% & DPS of