Mr Price Group Limited · JSE:MRP
Mr Price — H1 FY2022 Earnings Presentation
62 slides from Mr Price's earnings presentation, November 2021
Slide 1: H1 FY2022 Interim Results to 2 October 2021
H1 FY2022 Interim Results to 2 October 2021
Slide 2: Backdrop, Performance, Value creation, Looking ahead
01 Backdrop 02 Performance 03 Value creation 04 Looking ahead
Slide 3: Backdrop
01 Backdrop Retail Environment Overview and Group Performance By Mark Blair - CEO
Slide 4: External challenges
4 External challenges Adjusted Level 3 Level 4 Level 5 Civil Global supply COVID-19 and supply chain lockdown level lockdown lockdown lockdown unrest chain disruption COVID-19 COVID-19 COVID-19 1st wave 2nd wave 3rd wave (all stores closed) Adjusted Level 3 & 4 lockdown Apr 20 May 20 Jun 20 Jul 20 A
Slide 5: Rising to the challenges
5 Rising to the challenges Multiple external headwinds Group H1 FY2022 response & performance during H1 FY2022 Consumer confidence at -10 index points Earnings per share exceed pre COVID-19 levels COVID-19 third wave: Gained 210bps of market share. 50bps excl acquisitions lockdown restrictions impac
Slide 6: SA economy showing signs of recovery...
6 SA economy showing signs of recovery... Nominal wage Nominal household SA GDP growth (constant 2015 prices, seasonally adjusted) growth expenditure 1 200 1 150 +1.4 % Q2 2021 +2.6 % Q2 2021 1 100 Two consecutive periods of positive growth for the Rand (Bn) 1 050 first time since the outbreak of th
Slide 7: Civil unrest
7 Civil unrest • Stores impact: - 539 temporarily closed during the week - 111 closed due to damage (~7% of opening space) - 96 re-opened by end of November 2021 - Balance expected to be opened during FY2023 Impact and response • Financial impact: - Estimated H1 FY2022 retail sales loss of R320m (~3
Slide 8: Supporting our communities
8 Supporting our communities As a proud KZN business, we • R5 million donated to disaster relief organisations launched an • Food parcels delivered to affected associates & factory workers in our supply extensive relief chain • Mr Price Foundation raised R750k to support relief efforts package. • R7
Slide 9: Group performance
9 Group performance % change vs H1 FY2021 vs H1 FY2020 Revenue R12.4bn 35.2% 15.7% Operating Margin 13.9% 120bps (200bps) Profit after tax R1.1bn 50.7% (1.1%) Diluted HEPS 438.7c 33.5% 0.6% Normalised diluted 481.1c 46.4% 10.4% HEPS* Dividend per share 282.4c 34.4% (9.3%) * Excludes R185m asset writ
Slide 10: Performance
02 Performance Detailed Group Results By Mark Stirton - CFO
Slide 11: Unrivaled long-term returns
Unrivaled 10 year average ROE long-term 42.5% Mr Price Group JSE Top 40 13.8 % returns 35 year HEPS 35 year dividend 25 year share price CAGR CAGR CAGR Mr Price Group JSE all share index +19.4 +18.2 +16.3 +9.8 % % % % Source: Investec
Slide 12: Group Income Statement
12 Group Income Statement % Change Strong trading R’M FY2022 FY2021 vs H1 FY2021 vs H1 FY2020 Retail sales & other income (pg 54) 12 337 9 053 36.3% 16.1% performance Gross profit (pg 17) 4 745 3 660 29.6% 15.9% driving healthy Expenses (pg 19) Profit from operating activities 3 428 1 709 2 864 1 14
Slide 13: Group sales growth drivers
Total retail sales growth +37.8% 13 Group sales growth drivers Total retail sales growth excl. acquisitions Comparable stores sales growth +27.8% +27.3% Geography Channel H1 FY2022 H1 FY2022 RSA +37.6 % Bricks +37.3 % Non RSA +37.3 % Online (High base growth of 48.7%) (2.9% of retail sales) +49.9 %
Slide 14: Group sales growth drivers Continued
14 Group sales growth drivers Continued Tender type Merchandise H1 FY2022 H1 FY2022 Cash (Excl acquisitions cash +26.5%) +38.2 % Unit growth (Excl acquisitions 21.7%) +47.7 % Credit (Acquisitions do not offer credit) +34.2 % RSP inflation* (Excl acquisitions +5.3%) -6.0 % Cash % of sales 85.7 % Unit
Slide 15: Segmental performance
15 Segmental performance Divisional contribution (RSOI)# Segment RSOI vs H1 FY2021 vs H1 FY2020 oms: 7.0 % Growth elec & T Newly acquired FS % Apparel RSOI +42. 6% +15.8% .0 7.0% OP Profit +47.3% +8.4% 24 6.7% nt: me 0.6% Home Seg 16.7% 50.5% Home RSOI +27.3% +17.2% OP Profit +46.6% +32.6% 5.8% .0 %
Slide 16: Space growth
16 Space growth Weighted average space growth +11.1% Total Group Owned Store and space growth insights 1 642 stores (Refer pg 59 for detail) Apparel segment Home segment • Opened 48 new stores and 96 of 111 looted stores will be operational by end of November 2021 Mr Price 547 stores Mr Price Home 1
Slide 17: Gross profit analysis
17 Gross profit analysis: Excluding inventory write-off of R151.5m & acquisitions, GP margin was down 40bps to 41.6% Factors affecting GP margin Total GP • Inventory write-offs of R151.5m due to the civil unrest. Recoveries from insurance claims will be accounted for under other sundry income in H2
Slide 18: Mr Price Group: a defensive, low cost model
18 Mr Price Group: a defensive, low cost model Infrastructure fit for a value retailer How we compare (2016 - 2021) Strong operating leverage (2016 - 2021) 50.0% 18.1% 20.0% Competitors 43.9% 17.5% Operating margin % 40.0% 36.3% 15.0% Opex to sales 13.3% 28.2% 32.8% 30.0% 5 year opex growth CAGR 10.
Slide 19: Overhead expenses
19 Overhead expenses Total expenses Total expenses excl acquisitions +19.7% +10.3% Every decision made every day must support our value roots Total expenses excl acquisitions & non-recurring items +6.5% Total expenses (R’M): Selling expenses 71.1%; admin expenses 28.9% 2 year CAGR FY2022 FY2021 % Ch
Slide 20: Strong balance sheet
20 Strong balance sheet R’M Sep 2021 Mar 2021 Sep 2020 Inventory: fresh stock & higher stock-turn • Inventory in base year was down 9.2% against H1 FY2020 Non-current assets1 10 202 9 288 7 076 • Power Fashion & Yuppiechef not in the base Current assets 10 140 10 587 11 211 • Non-comp categories & l
Slide 21: Cash flow movements
21 Cash flow movements R’M Mar 2021 4 949 Cash from operations 2 719 Increased 38.8% due to improved trade vs PY Increased outflows: 2 Oct 2021 cut-off (rental prepayments & creditor timing) Operating Working capital (499) R1.7bn & higher inventory levels Net interest received 252 Impacted by lower
Slide 22: Capex
22 Capex CAPEX/EBITDA 2021 FY2022 30.0% 28.1% • Capex of R860m planned for the year • 59.0% allocated to stores 25.0% - Plan to open ~123 stores in FY2022 (H1: 48, H2: 75) 20.0% - Closing space for year expected 16.9% to increase by 14.2% (Excl acquisitions 4.1%) 15.0% 13.3% • 27.0% allocated to tec
Slide 23: Credit performance
23 Credit performance Credit market Mr Price Group TransUnion SA Consumer Credit Index (CCI) 70 Credit sales Improving Credit Health 65 60 R1.7bn +34.2% Index points 55 Q2 2021 50 45 40 35 Deteriorating Credit Health Credit applications 30 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 389k • Despite
Slide 24: Trade receivables
24 Trade receivables % Change R’M Sep 21 Mar 21 Sep 20 Sep/Mar Sep/Sep Total debtors book 1 990 1 970 2 031 1.0% (2.0%) NBD: book (excl collection costs) 10.1% 12.1% 8.1% Impairment provision 10.6% 13.4% 15.2% • NBD to book: - Higher than PY due to book freeze during April 2020 (customers not able t
Slide 25: Value creation
03 Value creation Strategy By Mark Blair - CEO
Slide 26: Vision: To be the most valuable retailer in Africa
Supported by 26 Vision: 6 strategic pillars To be the most valuable* retailer in Africa Stakeholder People engagement Trading divisions will focus on existing markets, removing the distraction of Growth Brand international markets while we: Promise - Strengthen our backbone: technology & innovation,
Slide 27: Shareholder returns
27 Shareholder returns To be the top performer in the retail sector Growth 01 Earnings growth 02 Rating 03 Dividends Profit wedge: PE ratio: Consistent return: Sales and GP growth > Best in class metrics and returns High cash generation overhead growth = justified premium = attractive payout ratio =
Slide 28: Execution and growth
28 Execution and growth Growth • Focused on SA and gained market share • 48 new stores opened in H1. Store • Omni-channel focus (e-comm contribution footprint can extend to whole country in SA of 2.9%, doubled since 2019). Leading • >20 new departments/categories online platform and engagement since
Slide 29: Market share performance
29 Market share performance (Latest 12 months) Growth * Total Group: +280 Basis points =R1.6bn Apparel segment*: +270bps Home segment*: -60bps Cellular segment#: +100bps • Mr Price Apparel has gained market share • Mr Price Home and Sheet Street collectively • Handsets and accessories have gained fo
Slide 30: Market share gains
30 Market share gains Since new management took office in 2019, significant market share gains have been achieved (Calendar year) Growth Market share - RLC Market share - Stats SA (Type D) +70bps +260bps +70bps +20bps +100bps +100bps 2017 2018 2019 2020 2021* 2017 2018 2019 2020 2021* Excluding PF I
Slide 31: Opportunities matrix
31 Opportunities matrix Identified opportunities Existing categories Growth Luxury Premium Aspirational Opportunity yuppiechef.com value/Niche miladys.com Opportunity Opportunity Opportunity mrprice.com mrpricesport.com Fashion Opportunity mrpricehome.com value mrpricecellular.com mrpricemoney.com s
Slide 32: Opportunities portfolio 80:20
32 Opportunities portfolio 80:20 We will always remain focused on: 80 Growth % Cash Fashion/price value Private label 20 % Credit Aspirational value Brands
Slide 33: Power Fashion acquisition
33 Growth • Effective date 1 April 2021 • Challenging period for integration to take place • H1 performance: - Most impacted division by civil unrest. Nearly 50% of space was temporarily closed - 27 stores (~15% of space) were unable to trade after the week. 22 stores re-opened by end of Sep 2021 -
Slide 34: Yuppiechef acquisition
34 Growth • Effective date 1 August 2021 • Integration & performance progressing well • Higher margin opportunities identified • Investing in appropriate infrastructure to support growth into new categories • Customer base remains robust despite challenging economy • Store expansion to begin in H2 F
Slide 35: Capital allocation
35 Capital allocation Growth Philosophy • Invest for the long term in the most attractive opportunities - returns and scalability • Company strategy is primarily targeted at revenue and earnings growth • Preserve metrics - but not at the expense of growth • Share buy-backs will be continually evalua
Slide 36: Brand promise
36 Brand promise Brand Promise Grow brand value by surprising and delighting c e Pri Qu ali ty our customers with the Exp wanted item at great erie nce Interpretation value and a satisfying of value hion Fas all-round experience. Convenience
Slide 37: 2021 Most valuable brands
37 2021 Most valuable brands No. 1 ranked most valuable fashion apparel retailer | 20th ranked overall Brand Promise 1 2 3 4 5 6 7 8 9 10 2.6 bn 2.5 bn 2.5 bn 2.3 bn 1.9 bn 1.6 bn 1.3 bn 1.2 bn 1.1 bn 1.0 bn FNB Vodacom Castle Lager Standard bank MTN Nandos Discovery DSTV Absa Woolworths 11 12 13 14
Slide 38: Brand Z strong brand index
38 Only one of 7 brands to increase in value in 2021 Mr Price brand value increased 7% | Top 30 decreased 3% Brand Promise $2.1bn 23.0% $487m Superior returns Financial value Brand contribution Brand value The collective performance of the ‘strong brands’ have delivered a return of 363% since 2006,
Slide 39: Delivering value
39 Delivering value Mr Price ranked 2nd out of the top 30 SA companies for offering consumers value Brand Promise Consumer distress It’s all about value South Africans are experiencing financial anxiety due to high Brands that continue to meet consumer needs in difficult negative impact on household
Slide 40: Fashion forward
40 Mr Price apparel continues to offer the best fashion-value Brand Promise Fashion Value-Total Apparel Fashionista Fashion-value Fashion forward Mr Price Strong fashion differentiation Woolworths Edgars Sportscene Ackermans Markham Jet Pick n Pay clothing PEP Undefined Bargain hunter Value delivere
Slide 41: Customer recognition and engagement
41 Customer recognition and engagement Brand Promise #1 Coolest clothing store in SA #2 Sportscene #3 Markham #2 Coolest online Mr Price Apparel was the most shopped fashion retailer in the last 3 months in South Africa with store in SA #1 Takealot #3 Amazon Source: Sunday Times Gennext | MAPS 2021
Slide 42: Online performance
42 Online performance Technology & innovation Sales growth Contribution to retail sales +49.9 % 2.9 % (FY2021: +48.7 ) % (Pre COVID-19: 1.5%) Online sales rands more than doubled Invested R138m into online over the against FY2020 and continue to deliver last 10 years. Key to omni-channel healthy ope
Slide 43: Strong app and customer engagement
43 Strong app and customer engagement Mr Price Technology & shows why innovation No.1 Market share of traffic it is rated (omni-channel and online retailers) 2.6% 2.0% number one. 2.9% Kaeleen Brown, rated omni-channel Equity Analyst Standard Bank 3.5% fashion app in SA 1.1% 7.1 % 1.1 million 7.1% 4
Slide 44: Intelligent Retail
44 Intelligent Retail Investing for a new digital future Technology & innovation Powered by the cloud Retail Data core insights Real-time Scale • Enhanced retail architecture & backbone • Cloud-based data warehouse • Upgraded demand & replenishment • Insight driven decisions • Transforming retail pl
Slide 45: Looking ahead
04 Looking ahead Outlook
Slide 46: Input cost pressures
46 Input cost pressures Input costs Exchange rate Shipping rates • Increasing across all sectors, • Bought cover (70%) to July 2022 • Current long term contract ends driven partly by shipping • Rates better than prior year Dec 2021 disruption and other supply helping to offset rising input • Fully b
Slide 47: Merchandise inflation
47 Merchandise inflation Customer impact • Balance strategic value positioning with margin management Market share gains • Inflation mindfully applied during H1 to avoid customer impact • H2 inflation expected to be in mid single digit range (incl acquisitions: continued deflation) • Long term outlo
Slide 48: Global supply chain
48 Global supply chain Disruption Mr Price Group impact • Global container shortage impacting vessel sailings: • High summer (Oct – Dec 2021) well stocked for key - Frequent rollings (port bypasses) festive trade - Freight rate & delivery time impact • Autumn/Winter (Jan – June 2022) production secu
Slide 49: Business response
49 Business response Agile supply chain Merchandise processes Planning based on partnership and disciplines and scale • Proved successful during height of • Enable quick decision making and early • Buffers built into order timelines to COVID-19 challenges order placement supporting shorter manage di
Slide 50: Supply chain and sourcing
50 Supply chain and sourcing Sourcing - country of manufacture (H1 FY2022) Supporting local: latest financial year (FY2021) SA accounted for 39.6% of total group 13.9% 6.6% sourcing equating to R3.9bn at cost value 79.1m units sourced (manufactured) from 53.1 % SA. Mr Price procured approximately on
Slide 51: Investment into the South African economy
51 Investment into the South African economy Employment Supply chain Youth development and job creation FY2021 >20 000 10 years: Sourced 39.6% of merchandise from SA = R3.9bn trained 23k youth Account for associates employed on retail / clothing 1/3 of all units by Mr Price Group procured in SA manu
Slide 52: Outlook
52 Outlook • Tough & unpredictable retail environment expected. Significant risks persist - COVID-19, electricity supply (SA & China) & global supply chain disruption - Potential to result in erratic stock flow & higher product inflation - Anticiapted these challenges & have responded well, demonstr
Slide 53: Appendix
06 Appendix Detailed supporting information
Slide 54: Revenue
54 Revenue % Change R’M FY2022 FY2021 vs H1 FY2021 vs H1 FY2020 Retail sales 11 879 8 620 37.8% 17.4% Other income 458 433 5.7% (8.7%) Financial services & Telecoms 400 407 (15.8%) (14.8%) Other 58 26 114.8% 79.5% Total retail sales, interest & other income 12 337 9 053 36.3% 16.1% Finance income 10
Slide 55: EBITDA reconciliation
55 EBITDA reconciliation % Change R’M FY2022 FY2021 vs H1 FY2021 vs H1 FY2020 Profit from operating activities 1 709 1 148 48.9% 1.3% Total depreciation & amortisation 951 843 12.8% 18.2% EBITDA 2 660 1 991 33.6% 6.7% EBITDA margin: 21.6 %
Slide 56: Earnings & dividend per share
56 Earnings & dividend per share % Change FY2022 FY2021 vs H1 FY2021 vs H1 FY2020 Profit attributable to shareholders (R’m) 1 135 753 50.7% (1.1%) W. Avg shares in issue (000) 258 041 259 262 Basic earnings per share 440.0c 290.5c 51.4% (0.8%) Addbacks (R’m) 22.0 111.4 Headline earnings (R’m) 1 157
Slide 57: Group sales growth drivers vs FY2020
57 Group sales growth drivers vs FY2020 Geography Channel H1 FY2022 vs FY2020 H1 FY2022 vs FY2020 RSA +17.1 % Bricks +15.3 % Non RSA +14.0 % Online +123.0 % RSA % of sales 92.7 % Bricks % of sales 97.1% Note: performance vs FY2020
Slide 58: Group sales growth drivers vs FY2020 Continued
58 Group sales growth drivers vs FY2020 Continued Tender type Merchandise H1 FY2022 vs FY2020 H1 FY2022 vs FY2020 Cash +20.8 % Unit growth +20.4 % Credit -2.2 % RSP inflation* (Excl acquisitions 9.9%) -1.9 % Cash % of sales 85.7 % Units sold 120m *Average lower RSP in Power Fashion causing deflation
Slide 59: Space growth
59 Space growth SPACE MOVEMENTS (m2) w.avg net growth Mr Price Apparel 1.5% Miladys (0.5%) Mr Price Sport 7.4% Mr Price Home 2.7% 2.8% Sheet Street Total space growth Net growth w.avg excl acquistions (0.4%) (0.4%) 0.4% 2.7% 2.3% closing excl acquisitions (0.5%) (0.5%) 0.5% 3.4% 2.9% w.avg incl acqu
Slide 60: Space growth: Store Movements
60 Space growth Store Movements Closing stores Mr Price Apparel 2 4 3 11 547 Miladys 3 4 240 Mr Price Sport 2 11 147 Power Fashion 2 15 189 Mr Price Home 1 5 6 189 Sheet Street 1 323 Yuppiechef 7 Acquired 7 Total store movements Stores 5 7 10 48 7 Total: 1 642 Closures Reductions Expansions New Stor
Slide 61: Rest of Africa
61 Rest of Africa Total % of Group sales 7.3% FY21: 7.5% 3 Ghana Kenya 13 No. of stores 41 Namibia Zambia 13 138 Corporate owned stores: 130 33 Botswana Eswatini 16 Sales growth (ZAR) Lesotho 11 37.3% FY2021: (17.5%) vs H1 FY2020: 14.0%
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