Mr Price Group Limited · JSE:MRP

Mr Price — H1 FY2018 Earnings Presentation

33 slides from Mr Price's earnings presentation, September 2017

  1. Slide 1: Interim Results FY2018 September 2017

  2. Slide 2: Group Highlights

    Interim results FY2018 GROUP HIGHLIGHTS 01

  3. Slide 3: Trading environment overview

    Trading environment overview  Sept 17 headline CPI 5.1% (avg March – Sept 5.1%)  Interest rates between 10.25% & 10.50% since Jan ‘16  Labour force up 696k (employed +358k, unemployed +338k). Unemployment rate 27.7%  Q2 17 GDP grew 2.5%, previous two quarters declined  ZAR / USD exchange rate s

  4. Slide 4: Growth drivers

    Growth drivers * Excludes franchise stores 03

  5. Slide 5: Segment analysis

    Segment analysis Apparel segment Home segment Financial Services Division RSOI Growth 9.7 11.7 1.5 -1.8 2.1 3.9 mrp Miladys Sport Home SS FS & Cellular Segment RSOI Growth 9.0 -0.6 3.9 RSOI Contribution 71.0% (PY 69.2%) 23.3% (PY 25.0%) 5.6% (PY 5.7%) Operating profit growth 42.5% (PY -26.7%) -16.2%

  6. Slide 6: Earnings per share

    Earnings per share 2017 2016 % change Profit attributable to shareholders (R’m) R1 138m R921m 23.6% W. Avg shares in issue (000)1 258 196 254 562 Basic earnings per share 440.9c 361.8c 21.9% Addbacks (R’m)2 R5m R1m Headline earnings (R’m) R1 143m R922m Headline earnings per share 442.9c 362.3c 22.2%

  7. Slide 7: Comparable performance

    Comparable performance HEPS 5 year CAGR % ROOA MRP Competitor A Competitor B 12.6 4.7 9.5 49.3% Competitor C 7.3 Competitor D 5.0 RONW Costs as a % of sales 33.6% MRP 28.3 Competitor A Competitor B 39.2 32.9 ROCE Competitor C Competitor D 45.7 33.6 49.3% Information pertains to most recent full fina

  8. Slide 8: Dividends per share and payout ratio

    Dividends per share Cents 2017 2016 % change Interim dividend 279.0c 228.2c 22.3%  Interim & annual payout ratio aligned at 63% at interim stage last year  Annual FY17 payout ratio higher due to maintaining dividends despite an earnings decline  Normalised payout ratio is 63% 75 Interim Annual 66

  9. Slide 9: Group income statement

    Group income statement R'm 2017 2016 % change Retail sales & other income (pg 9) 9 711 9 131 6.3% Total costs 8 185 7 880 3.9% Cost of sales1 5 411 5 347 1.2% Expenses2 2 774 2 533 9.5% Profit from operating activities 1 526 1 251 22.0% Net finance income 67 35 89.5% Profit before taxation 1 593 1 2

  10. Slide 10: Revenue analysis

    Revenue analysis R'm 2017 2016 % change Retail sales1 9 135 8 588 6.4% Financial services & cellular (pg 22) 545 525 3.9% Other2 31 18 67.8% Total other income 576 543 6.0% Total retail sales, interest & other income 9 711 9 131 6.3% Finance income3 67 35 89.5% Total revenue 9 778 9 167 6.7%  1 Tot

  11. Slide 11: RSA online sales

    RSA online sales R90.6m represents 1.3% of divisional sales. Increase of 6.4% mrpApparel +29.7% 46% of total sales mrpSport +3.1% 4% of total sales mrpHome -7.5% 50% of total sales 10

  12. Slide 12: Online/digital review

    65% OF MRP.COM USERS BROWSE ONLINE BEFORE SHOPPING INSTORE SITE VISITS 10% GROWTH VS H1 F17 00% GROWTH FOR ACTIVE APP USERS SINCE JANUARY 2017 50% OF ALL ORDERS ARE COLLECTED IN STORE 20% OF ONLINE CUSTOMERS MAKE AN ADDITIONAL PURCHASE WHILE INSTORE ONLINE BASKET SIZE IS DOUBLE THAT OF INSTORE

  13. Slide 13: International sales growth

    International sales growth 50 46.0 Local currency ZAR Sales Stores 39.3 contribution Change Total 40 Botswana 23% 2 24 29.4 Lesotho 4% -1 5 30 Namibia 41% - 37 26.0 Swaziland 7% 1 8 Total BLNS 75% 2 74 % 20 Nigeria 6% - 5 10.8 10.8 Zambia 8% - 9 10 6.0 6.0 Ghana 4% -2 4 4.0 3.4 3.4 1.4 2.5 Australia

  14. Slide 14: Gross profit margin

    Gross profit margin 100 50 Cotton price (US cents per lb) 87 42.0 42.5 Oil price (USD per barrel) 39.2 39.8 77 79 40 80 14.67 ZAR / USD 13.46 13.61 GP (%) 30 60 13.43 12.36 12.81 20 18.8 52 55 46 13.1 40 10 20 0 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 2017 2016 Cotton Oil ZAR/USD (monthly high/low) Total

  15. Slide 15: Selling expenses

    Selling expenses R'm 2017 2016 % change Total selling expenses 2 104 1 914 9.9%  Weighted average space growth of 2.3%  Retail bad debts written off up 9.0%, mrpMobile net bad debts down 18.6%  Employment costs up 13.6% - excluding lower ETI & higher performance based incentives, costs increased

  16. Slide 16: Administrative expenses

    Administrative expenses R'm 2017 2016 % change Total admin expenses 670 619 8.1%  Employment costs up 19.1% Excluding higher performance based incentives, increase is 6.2%  Foreign exchange loss R536k vs R33.7m in PY  Excluding impact of incentives, foreign exchange costs & once off credits in th

  17. Slide 17: mrp Apparel results

    2017 2016 % change Retail sales1 R5 562m R5 046m 10.2% Comparable sales 7.8% (4.1%) Unit sales 65.7m 61.2m 7.4% RSP inflation 2.6% 8.8% Weighted average space growth 3.4% 5.0% Trading density R37 336m-2 R37 594m-2 (0.7%)  Positive results reflective of focus on assortment & value proposition  Doub

  18. Slide 18: Impact of foreign retailers

    Impact of foreign retailers Sales growth is generally higher in locations where we compete with:  H&M: - mrp sales growth in locations where H&M trade (13 stores) exceeds divisional large store average  Cotton On: - mrp sales growth in locations where Cotton On trade is ahead of locations where th

  19. Slide 19: mrpSport results

    2017 2016 % change Retail sales R644m R634m 1.5% Comparable sales (4.6%) 2.1% Unit sales 5.6m 5.5m 1.1% RSP inflation 0.9% 16.9% Weighted average space growth 6.3% 6.7% Trading density R22 294m-2 R23 113m-2 (3.5%)  Sales muted due to discretionary nature of sports merchandise  Footwear - recorded

  20. Slide 20: Miladys results

    2017 2016 % change Retail sales R652m R582m 11.9% Comparable sales 11.8% (12.4%) Unit sales 3.4m 3.3m 3.0% RSP inflation 9.3% 10.4% Weighted average space growth (0.5%) 0.4% Trading density R22 386m-2 R21 158m-2 5.8%  Clear view of our niche customer  Extended sizes in all stores from July ‘17  A

  21. Slide 21: mrpHome results

    2017 2016 % change Retail sales R1 558m R1 590m (2.0%) Comparable sales (3.4%) (0.7%) Unit sales 14.7m 15.3m (3.5%) RSP inflation 2.1% 19.1% Weighted average space growth 0.3% (3.4%) Trading density R25 238m-2 R25 529m-2 (1.1%)  Sales growth indicative of continued pressure on the homeware sector 

  22. Slide 22: Sheet Street results

    2017 2016 % change Retail sales R695m R680m 2.1% Comparable sales 1.1% 3.3% Unit sales 7.7m 7.9m (2.7%) RSP inflation 5.2% 12.7% Weighted average space growth 0.1% (0.3%) Trading density R29 730m-2 R28 818m-2 3.2%  Strongest sales growth in livingroom department of 8.2%  Decline of 1.4% in bedroom

  23. Slide 23: Financial services and cellular

    R’m 2017 2016 % change Credit- interest & charges 229 215 6.6% Insurance 121 105 15.2% Cellular 195 205 (5.0%) - mrpMobile MVNO 84 113 - Cellular (Hello mrp) 14 - - Airtime sales & commission 96 92 Total revenue 545 525 3.9%  Credit- higher credit sales & debtors book. Monthly service fees increase

  24. Slide 24: Credit performance

    Credit performance Applications vs approvals Credit sales growth 20 15.4 16.7 350 14.9 15 300 288 8.7 270 10 250 5 200 0 000’s % -5 New accounts 2-6 MOB 150 7-12 MOB 13-24 MOB 25-36+ 104 104 -10 100 -15 50 -20 -25 0 H1 FY2017 H1 FY2018 -30 -28.8 Applications Approvals  Credit sales grew by 5.1% & c

  25. Slide 25: Trade receivables

    Trade receivables R’m 2017 2016 % change Retail debtors 2 011 1 882 6.9% Mobile* & franchise debtors 74 116 (37.1%) Total debtors book 2 085 1 998 4.3% Retail debtors (97% of total) - Net bad debts: book 5.9% 5.6% - Impairment provision 7.3% 7.4%  Per the National Credit Regulator, the number of co

  26. Slide 26: Financial position

    Financial position Sept March R’m 2017 2017 Non-current assets Property, plant & equip (pg 27) 2 076 2 130 Intangible assets (pg 27) 448 356  1 Lower deferred tax assets Other non-current assets1 76 91  2 Increase of 2.7% due to higher GIT, excl which, Current assets inventories were 8% lower. Inv

  27. Slide 27: Restatement of comparative information

    Restatement of comparative information  In H2 FY17 voluntarily changed the treatment of amounts previously recognised in equity for cash flow hedge accounting from the recycling method to the basis adjustment method  When a hedged item is a non-financial asset/liability, amounts recognised in OCI

  28. Slide 28: PPE & intangibles and store movements

    PPE & intangibles R’m Total PPE Intangibles Opening April 2017 2 486 2 130 356 Additions 203 140 63 Disposals, impairments, revaluations & reclassification (7) (62) 55 Depreciation & amortisation (158) (132) (26) Closing Sep 2017 2 524 2 076 448 Store movements 10 5 7 8 7 Number 2 3 4 0 -1 1 -2 -1 1

  29. Slide 29: Cash flow movements

    Cash flow movements (R’M) March 2017 2018 1 784 2016: 1 419 Cash from operations 1 492  Increase of 28.7% on H1 FY 17 R1.3bn (+16.0%) Operating Working capital (1)  Increases in receivables & inventory offset by increase in payables Interest received 251  Higher debtors book & cash balances Taxat

  30. Slide 30: Hammarsdale Distribution Centre

    Hammarsdale Distribution Centre Annual depreciation Cost R’m % Land & buildings R620m R11m 1.8% Equipment R548m R33m 6.0% Computer software R74m R7m 10.4% Total spend R1 242m R51m 4.1%  Exiting Riverhorse facility 3 months earlier than anticipated (Dec ’17) 29

  31. Slide 31: Outlook

    Outlook  Politics will continue to take centre stage - cabinet reshuffle in October ‘17 weakened ZAR/USD - ratings agencies’ reviews – maintain investment grade status? - ANC leadership conference – voting on new leadership & party policies (including economic for next 5 years) on 19 Dec ’17?  Out

  32. Slide 32: Outlook

    Outlook  Concerned about congestion at Durban port: - shipping lines re-routing to Coega in Eastern Cape - working on plans to minimise disruptions  On track to achieve annual target of opening 43 stores  Expect an uncertain & difficult trading environment given the macro issues, however encourag

  33. Slide 33: Thank you

Mr Price Group — H1 FY2018 Earnings Presentation on 6ix