Mr Price Group Limited · JSE:MRP
Mr Price — Investor Day (September 2024)
20 slides from Mr Price's investor day presentation, September 2024
Slide 1: Changing shape of the business & economy
By Praneel Nundkumar Changing shape of the business & economy The business’s evolution has provided the group with multiple earnings vectors Part 3
Slide 2: Growth and diversification
Growth and diversification FY2020 FY2024 1.4% 2.0% 3.2% 7.7 % 4.4% Retail sales Retail sales 11.3% R 21.7bn R 36.6bn 17.3% 42.2% 7.2% 58.0% 6 Divisions 20.9% 9 Divisions 7.8% (5 retail chains) (15 retail chains) 6.7% 5.4% 4.5% Mr Price Apparel Mr Price Sport Miladys Mr Price Home Sheet Street Mr Pri
Slide 3: Business evolution in a highly disruptive operating environment
Business evolution In a highly disruptive operating environment RETAIL SALES AND OPERATING PROFIT (R’M) EBITDA AND PROFIT ATTRIBUTABLE TO SHAREHOLDERS (R’M) HEADLINE EARNINGS AND DIVIDEND PER SHARE 36 586 1 286 8 226 1 047 21 165 5 608 2020 2021 2022 2023 2024 2020 2021 2022 2023 2024 2020 2021 2022
Slide 4: Business evolution: Margins
Business evolution Margins GP MARGIN (%) OPERATING MARGIN (%) 45 20 40 18 35 16 14 30 12 25 10 20 8 15 6 10 4 5 2 0 0 2020 2021 2022 2023 2024 Medium term 2020 2021 2022 2023 2024 Medium term target target LOWER GROUP MARGINS • High growth, lower margin acquisitions Margins reached cyclical low in •
Slide 5: How do we achieve targets: Margins
How do we achieve targets Margins ECONOMIC AND CONSUMER CYCLES EXPECTED TO TURN, SUPPORTING HIGHER COMP SALES AND VOLUMES GP margin Operating margin • Acquisitions: • Disciplined cost management - Growth of private label assortment (S88 & YC) - Expenses/RSOI medium-term target <28% - Increased contr
Slide 6: Defensive operating model
Defensive operating model EVERY DECISION MADE EVERY DAY MUST SUPPORT OUR VALUE ROOTS GROSS DEBT (LEASES AND LOANS) TO EBITDA 5-YEAR AVG. TOTAL EXPENSES AS A % OF SALES Spar Shoprite 34.7% Foschini DisChem Woolworths Pepkor 27.7% Mr Price Clicks Truworths - 1.0 2.0 3.0 4.0 5.0 MRPG Competitors August
Slide 7: Business evolution: Returns
Business evolution Returns 40 Return on net worth and capital employed (%) 35 ROE (%) 30 30 25 20 20 15 10 10 5 0 0 2020 2021 2022 2023 2024 2020 2021 2022 2023 2024 Medium-term target Return on net worth Return on capital employed ROE WACC • Returns profile has changed due to the impact of: - IFRS
Slide 8: Business evolution: Investing through the cycle
Business evolution Investing through the cycle CASH GENERATED (R’ MILLION) 8 000 Cash last 5 years 7 000 • Cash generated*: R21.0bn • Dividends paid: R8.6bn 6 000 • Acquisitions: R5.3bn 5 000 • Store investments: R2.2bn 4 000 • Technology and logistics: R1.0bn • Cash at year end FY2024: R2.8bn 3 000
Slide 9: How do we achieve targets: Working capital
How do we achieve targets Working capital INVENTORY OPPORTUNITY FOR GREATER OPERATIONAL EFFICIENCY • Strong focus on inventory management • Improved stock turn – currently 3.1 (3.7 excluding acquisitions) on better execution • Reduced inventory lead times through increased local sourcing and strateg
Slide 10: Working capital continued: Debtors
How do we achieve targets Working capital CONTINUED DEBTOR’S BOOK CREDIT GRANTING CRITERIA REMAINS RESPONSIBLE WITH OPPORTUNITY TO GROW IN A BETTER CYCLE • Focus on healthy debtors’ book growth • Maintaining strong collections, lowering avg debtors’ days • Improving contribution of good paying custo
Slide 11: Working capital continued: Creditors
How do we achieve targets Working capital CONTINUED CREDITORS SUPPLY CHAIN FINANCE ALLOWS EXTENDED TERMS FOR PAYMENT TO THE GROUP, ENABLING SUPPLIERS TO ACCESS PAYMENT EARLIER • High component of local suppliers on the programme, with opportunity to extend to international • In FY2024 to date, R1.5b
Slide 12: Medium-term targets
Medium-term targets • Reflect the new shape of the business and consider all divisions in the current portfolio • Targets are realistic and not falsely optimistic Key operating metrics FY2024 Medium-term target RETURNS ROE 23.3% 24% - 26% ROA 11.7% 12% - 14% Dividend payout ratio 63.0% 63.0% CASH GE
Slide 13: Capex outlook
Capex outlook EXPECTED FUTURE ALLOCATION OF CAPITAL % 2025 2026 2027 2028 Stores Technology & logistics Other CUMULATIVE CAPEX FY2025 - FY2028: ~ R5.5BN 44
Slide 14: Investing in the future
Investing in the future Dilutionary impact on returns and metrics was considered and expected as the group strategically invested to broaden its reach and to support long-term sustainable returns 45
Slide 15: Positioned for a changing economic cycle
Positioned for a changing economic cycle
Slide 16: Sales drivers: Consumer environment
Sales drivers Consumer environment 8 Forecast 7.2 6 5.7 GROWTH RATES (%) 2023 2024F 2025F 4 2 GDP 0.7 1.1 2.0 3.0 0.6 Household expenditure 0.7 0.5 1.9 0 -0.4 -1.0 -2 Real wage growth 0.4 -1.0 1.7 -4 • Higher GDP growth environment likely to support improved real wage growth and household expenditur
Slide 17: Consumer spend: Wallet share
48 12 13 14 15 Q1’18 13.1 Source: Stats SA Q2’18 13.8 Q3’18 13.6 Q4’18 14.3 Q1’19 14.2 Q2’19 14.1 Q3’19 14.1 Q4’19 14.0 Q1’20 14.8 Q2’20 13.5 Consumer spend Q3’20 13.3 Q4’20 133 Q1’21 13.7 Q2’21 14.2 Q3’21 14.2 Q4’21 14.3 Q1’22 14.3 Q2’22 14.3 Q3’22 14.3 Q4’22 14.2 Wallet share Q1’23 14.3 Q2’23 14.3
Slide 18: Supporting consumer spend: Social grants
Supporting consumer spend Social grants • 40% of individuals and 50% of SA households are social grant beneficiaries • Recent macro conditions increased reliance on grants - Has ensured a sustained income source to households - Often supplemented with other forms of income (side-hustles, etc) • Soci
Slide 19: Customer profile
Customer profile Most shopped apparel retailer with a diverse customer income profile 3.2m shoppers SA apparel unique shopper profile by income Mr Price Ackermans Pep Sportscene Truworths Markham Jet Edgars Woolworths Studio 88 Exact Shein Total Sports Foschini Pick n Pay The Fix Clothing R20 000 R1
Slide 20: The cycle is turning: Anticipated tailwinds
The cycle is turning Anticipated tailwinds • Moderating inflation across markets • Positive consumer and business sentiment • Anticipation of at least 100bps rate cuts in 2024/25 • Strong currency gains, Rand anticipated to further strengthen • Reduction of loadshedding • Higher GDP growth and incre