Mr Price Group Limited · JSE:MRP

Mr Price — H1 FY2019 Earnings Presentation

36 slides from Mr Price's earnings presentation, Nov 22, 2018

  1. Slide 1: Interim results to 29 September 2018

    group Interim results to 29 September 2018

  2. Slide 2: Group Highlights

    Group Highlights Revenue Operating EBITDA margin R10.5bn 16.2% R1.9bn +7.8% +50bps +11.1% Profit to HEPS Dividend shareholders per share R1.3bn 494.3c 311.4c +12.4% +11.6% +11.6% 1

  3. Slide 3: Macroeconomic environment

    Macroeconomic environment GDP Growth Unemployment ZAR/USD rate Inflation -0.7% Q1 2018: -2.6% 27.5% Q2 2018: 27.2% R14.06 Q2 2018: R12.65 +5.0% Q2 2018: +4.5% Q2 2017: +2.9% Q3 2017: 27.7% Q3 2017: R13.18 Q3 2017: +4.8% Q2 2018 Q3 2018 Q3 2018 Q3 2018  Two consecutive periods of declining GDP growt

  4. Slide 4: Consumer environment

    Consumer environment Consumer Household Disposable Retail sales 22 -1.3% -1.0% +3.7% confidence expenditure income Index points Q1 2018: 26 points Q1 2018: +1.0% Q1 2018: +0.9% Q2 2018: +3.8% Q2 2017: -9 points Q2 2017: +3.8% Q2 2017: +4.6% Q3 2017: +8.0% Q2 2018 Q2 2018 Q2 2018 Q3 2018  While stil

  5. Slide 5: SA retail environment

    SA retail environment Global Technical financial recession 7 crisis 5 3 % change 1 -1 -3 2008 2010 2012 2014 2016 2018 YTD Comparable sales Household expenditure GDP  Average comparable sales across 5 retailers: MSM, MRP, TFG, TRU & *WHL) over the last 10 years. Current levels reflect the tough eco

  6. Slide 6: Consumers are looking for value

    Consumers are looking for value Key reasons for choice of retailer MRP the most shopped apparel retailer in the last month Woolworths 12% Other 1% Truworths 12% Store card 2% Jet 19% Range/selection 2% Edgars 20% Checkers 21% Promos and specials 5% Ackermans 26% Brand 6% Clicks 31% Fashionability 7%

  7. Slide 7: Sound long term investment case

    Sound long term investment case Highest Return on Invested Capital (ROIC) ROE ROA 40 36 40 MRPG: 39.2% MRPG: 29.2% 30 23 30 FY’18 ROIC (%) 22 20 20 15 Market: 13.7% Market: 10.6% 13 10 10 1 10 year % change in ROIC 0 0 -10 Operating cash Debt/equity -9 flow/sales -16 -21 -20 MRPG: 19.0% MRPG: 3.3% -

  8. Slide 8: Earnings & dividend per share

    Earnings & dividend per share 2018 2017 % change Profit attributable to shareholders (R’m) 1 279 1 138 12.4% W. Avg shares in issue (000)1 258 630 258 196 0.2% Basic earnings per share 494.4c 440.9c 12.1% Addbacks (R’m)2 0.1 5 (101.9%) Headline earnings (R’m) 1 279 1 143 11.9% Headline earnings per

  9. Slide 9: Retail sales growth drivers

    Retail sales growth drivers Geography Tender type RSA Non RSA Cash Credit +6.2% +11.4% +7.5% +2.2% Channel Merchandise Store Online Unit growth RSP inflation +6.4% +30.1% +2.9% +4.5% 8

  10. Slide 10: Revenue & profit growth in all chains

    Revenue & profit growth in all chains Trading division RSOI Trading segment Contribution Growth *RSOI Operating profit Operating margin mrp 56.6% +5.9% mrpSport 6.6% +7.1% +6.2% +11.2% 16.9% Apparel Miladys 6.9% +8.3% mrpHome +7.2% +13.8% 14.3% 16.4% +8.4% +8.4% Home SheetStreet 7.0% +4.5% Financial

  11. Slide 11: Group income statement

    Group income statement R'm 2018 2017 % change Retail sales & other income (pg 11)1 10 436 9 711 7.5% Gross profit2 4 278 3 918 9.2% Expenses3 2 987 2 774 7.7% Profit from operating activities 1 693 1 526 10.9% Net finance income 101 67 49.9% Profit before taxation 1 794 1 593 12.6% Taxation4 515 454

  12. Slide 12: Revenue analysis

    Revenue analysis R'm 2018 2017 % change Retail sales1 9 738 9 135 6.6% Total other income 698 576 21.2% Financial services & cellular (pg 28)2 673 545 23.5% Other3 25 31 (18.7%) Total retail sales, interest & other income 10 436 9 711 7.5% Finance income4 103 67 54.8% Total revenue 10 539 9 778 7.8%

  13. Slide 13: Non RSA sales

    Non RSA sales Stores Local currency performance against ZAR Sales Growth Growth 120 total contr. local ZAR 115 BWP Namibia 40 35% (5.7%) (5.7%) 110 index to 100 (ZAR) KES Botswana 25 22% 5.6% 7.5% 105 NGN 100 Swaziland 11 8% 33.6% 33.6% 95 AUD GHS Lesotho 5 4% 10.7% 10.7% 90 85 ZMW Total BNLS 81 69%

  14. Slide 14: Africa

    Africa Kenya • All 12 franchise stores acquired in May ’18 Corporate owned were trading by mid June (7 apparel, 5 Home) Franchise • Performance impacted by new customs Not present processes, mode of transport requirements & duty increase. Expect better performance in H2 Ghana • Improved growth acros

  15. Slide 15: Space growth

    Space growth 1286 Closures Reductions Expansions New stores Nett space stores Stores 6 13 2 34 : w.avg -1.0% -1.4% 0.4% 3.4% 1.4% Space growth : closing -1.1% -1.7% 0.4% 3.3% 0.9% 495 178 107 301 205 stores stores stores stores stores 15 new stores 7 new stores 2 new stores 8 new stores 2 new stores

  16. Slide 16: Space growth analysis

    Space growth analysis 750 000 750000 34500 43 500 700 000 700000 32000 32 000 650 000 650000 Rm-² m² m-² 29 500 29500 5 year CAGR to FY18 600 000 600000 Sales density: +5.2% Space: +3.2% 27 000 27000 550 000 550000 2014 2015 2016 2017 2018 H1 FY'19 Sales density (LHS) Weighted avg. gross space (RHS)

  17. Slide 17: Gross profit margin

    Gross profit margin 42.0% 42.6% 39.2% 2016 2017 2018 Merchandise GP Merchandise GP Merchandise GP 39.8% 42.5% 43.3% Cellular GP Cellular GP Cellular GP 13.1% 18.8% 19.1%  Group GP% increased 60bps with gains across all divisions  Merchandise GP% improved 80bps. Gains & lower markdowns in all chain

  18. Slide 18: Overhead expenses

    Overhead expenses Selling expenses (R’m) 2018 2017 % change 2 271 2 104 7.9%  Comparable store expenses up 5.7%; non comparable store expenses up 2.2% driven by space growth, Kenya acquisition & cellular expansion  Rental costs increased 6.9% - basic store rentals & operating costs up 6.1% - highe

  19. Slide 19: Overhead expenses

    Overhead expenses Administrative expenses (R’m) 2018 2017 % change 716 670 6.9%  Employment costs up 6.2%, in line with avg. annual increases. Impact of additional staff appointments offset by lower incentive provision  Increased people investment (recruitment, talent development and learnerships)

  20. Slide 20: mrpApparel retail sales, comparable sales and unit sales

    2018 2017 % change Retail sales1 R5 887m R5 562m 5.8% Comparable sales 3.0% 7.8% Unit sales 66.8m 65.7m 1.6% RSP inflation2 5.1% 2.6% Weighted average space growth 2.9% 3.4% Trading density R39 670m-2 R37 336m-2 6.2%  Sales growth ahead of market3 growth of 2.1%  28 of 30 departments grew sales, w

  21. Slide 21: Strong value positioning

    Strong value positioning Fashion value matrix: 2018 MRP LEADER COMP A NICHE COMP B COMP C COMP D COMP E COMP I FASHION COMP G COMP H COMP F CHALLENGER UNFAMILLIAR VALUE Source: Nielsen 20

  22. Slide 22: Assortment quality & width

    Assortment quality & width Consumer quality & fashion perception* Number of options 3000 2621 MRP 13% 50% 37% 1792 2000 1341 1330 Comp A 9% 68% 23% 1235 1000 834 807 536 382 374 422 292 Comp B 7% 74% 20% 0 Comp C 13% 71% 16% Woolworths Truworths Miladys Edgars H&M Cotton On mrp Identity Jet Legit Ac

  23. Slide 23: Price position maintained

    Price position maintained Price tier analysis Price differential to average Woolworths 68% 73% Truworths 49% mrp Value International 48% competitor competitor H&M 34% 18% Cotton On 29% 29% 24% Foschini 15% upper 35% 17% Miladys 9% 1% upper 17% Identity 7% 5% middle 21% Survey Average 1% 0% 33% Edgar

  24. Slide 24: Strong eCommerce performance

    Strong eCommerce performance Revenue Online Store Orders Online users Avg. basket size +32% Ranked 2nd +26% +29% R480 Enabled by user experience Social media:  62% of in-store customers browse online before shopping  83% of mrp.com users visits the site monthly, up from 77% LY, 83% of mrp shoppers

  25. Slide 25: mrpSport retail sales, comparable sales and unit sales

    2018 2017 % change Retail sales R691m R644m 7.2% Comparable sales 2.3% (4.6%) Unit sales 5.8m 5.6m 3.6% RSP inflation 4.4% 0.9% Weighted average space growth 2.6% 6.3% Trading density R22 491m-2 R22 294m-2 0.9%  Double digit sales growth in equipment, accessories, menswear & footwear  Growth oppor

  26. Slide 26: Miladys retail sales, comparable sales and unit sales

    2018 2017 % change Retail sales R706m R652m 8.4% Comparable sales 8.2% 11.8% Unit sales 3.5m 3.4m 3.9% RSP inflation 5.2% 9.3% Weighted average space growth (1.7%) (0.5%) Trading density R24 192m-2 R22 386m-2 8.1%  Good product execution to a niche customer segment enabled further sales growth off

  27. Slide 27: mrpHome retail sales, comparable sales and unit sales

    2018 2017 % change Retail sales R1 703m R1 558m 9.3% Comparable sales 6.6% (3.4%) Unit sales 15.6m 14.7m 6.1% RSP inflation 3.9% 2.1% Weighted average space growth (1.6%) 0.3% Trading density R27 100m-2 R25 238m-2 7.5%  Bedroom, bathroom & living room softs were the best performing departments acco

  28. Slide 28: Sheet Street retail sales, comparable sales and unit sales

    2018 2017 % change Retail sales R726m R695m 4.5% Comparable sales 2.5% 1.1% Unit sales 8.2m 7.7m 6.8% RSP inflation (1.3%) 5.2% Weighted average space growth 1.9% 0.1% Trading density R30 784m-2 R29 730m-2 3.5%  Sales growth Q1 +2.4% - strong kitchen performance (+19.8%), while bathroom (+2.2%) & b

  29. Slide 29: Financial services & cellular revenue

    R’m 2018 2017 % change Cellular 296 195 52.3% mrpMobile MVNO 92 84 9.2% Cellular 119 14 733.9% Airtime sales & commission 85 96 -11.3% Insurance 131 121 7.6% Credit- interest & charges 246 229 7.5% Total revenue 673 545 23.5%  Mobile - improved performance since full ownership of MVNO from Jan 18.

  30. Slide 30: SA credit landscape

    SA credit landscape Household saving & debt to disposable income  RSA consumers have reduced their debt levels, 80 creating room for increased saving 1 0.5 78 0  Credit health has improved however downward 76 trend developing Saving to income % Debt to income % -0.5 74 -1  Accounts in early defau

  31. Slide 31: Credit performance

    Credit performance Applications & approvals 300 50% 41% 40% 40% 200 Avg credit 30% Credit sales 299 000’s basket R1.6b R341 255 20% 100 103 119 10% +2.2% +3.1% 0 0% H1 FY2018 H1 FY2019 Applications Approvals Approval rate  Active account growth & number of credit transactions in line with industry

  32. Slide 32: Trade receivables

    Trade receivables Sep/Mar Sep/Sep R’m Sep 2018 Mar 18 Sep 2017 % change % change Retail debtors 2 116 2 134 2 011 -0.8% 5.2% Mobile* & franchise debtors 81 60 74 32.8% 9.5% Total debtors book 2 197 2 194 2 085 0.1% 5.4% Retail debtors (97% of total) - NBD: book (excl collection 6.2% 5.9% 5.9% costs)

  33. Slide 33: Financial position

    Financial position R’m Sept 2018 March 2018 Non-current assets Property, plant & equip1 2 088 2 092  1Additions of R133m (incl Kenya acquisition Intangible assets 457 433 of R19m), depreciation R144m Other non-current assets2 112 103  2Higher mrpMobile long term receivables, defined benefit pensio

  34. Slide 34: Cash flow movements (R'm)

    Cash flow movements (R’m) March 2018 2 720 2016: 1 784 Cash from operations 2 720 1 595  Increase of 6.9% over H1 PY Working capital (10)  Lower receivables & creditors offset by higher inventory Operating R1.3bn Interest received 288  Higher cash balances & debtors book Taxation (600)  Includes

  35. Slide 35: Outlook

    Outlook  Global impact from emerging market sentiment & US trade negotiations  Short term economic growth in RSA likely to be muted. Consumers will continue to be constrained & the competition for market share will continue in this environment  Structural changes to boost growth in the economy li

  36. Slide 36: Thank you

Mr Price Group — H1 FY2019 Earnings Presentation on 6ix