Mr Price Group Limited · JSE:MRP
Mr Price — FY2014 Earnings Presentation
38 slides from Mr Price's earnings presentation, March 2014
Slide 1: Annual results presentation
annual results. < \ presentation (mr pricegrouplimited
Slide 2: Who we are
who we are A high growth, omni-channel, fashion value retailer Targeting younger customers in the mid to upper LSM categories Retail predominantly own branded merchandise +80% of sales are for cash 1 079 stores & online channels offering full product assortments 28 year CAGR in HEPS & divi
Slide 3: Solid performance in a tough retail environment
solid performance in a tough retail environment revenue R15.9bn +15.2% operating profit R2.5bn +22.6% operating margin 16.7% +110bps diluted headline 715.1c +22.4% earnings per share dividends per share 482.0c +21.1% 2
Slide 4: Earnings & dividends per share
earnings & dividends per share 2014 2013 % change Earnings per share - Basic 757.1c 626.5c 20.8% - Headline 765.1c 634.8c 20.5% - Diluted headline 715.1c 584.2c 22.4% Consensus estimates - i-Net 709.0c - Bloomberg 713.8c Dividends per share - Interim 168.0c 133.0c 26.3% - Final 314.0c 265.0c 18.5% -
Slide 5: Strong track record of growth
strong track record of growth COMPOUND ANNUAL GROWTH RATE 28 years HEPS: 23.4% DPS: 25.2% SP: 27.1% 10 years HEPS: 24.0% DPS: 30.0% SP: 34.7% 5 years HEPS: 24.9% DPS: 29.4% SP: 45.1% 800 160 700 140 600 120 HEPS & DPS (c) Share price (R) 500 100 400 80 300 60 200 40 100 20 0 0 1994 1996 1998 2000 20
Slide 6: 2014 group income statement
2014 group income statement 2014 2013 % change R’m R’m Annual 2nd half Retail sales & other income 15 829 13 744 15.2% 15.3% Cost of sales 8 907 7 744 15.0% 15.8% Selling expenses 3 354 2 996 11.9% 10.0% Administrative expenses 1 031 935 10.3% 9.6% Profit from operating activities 2 537 2 069 22.6%
Slide 7: Revenue analysis
revenue analysis 2014 2013 % R’m R’m change Retail sales SA - bricks 14 065 12 441 13.1% - online 45 14 230.2% Non SA - bricks - corporate owned 1 005 717 40.2% - franchise 103 94 9.2% - online 9 - Total retail sales 15 227 13 266 14.8% Financial services 583 455 27.8% Other sundry income 19 23 (17.
Slide 8: Sales growth outperforming the market
sales growth outperforming the market 2014 2013 % change Units sold 216.9m 206.8m 4.9% New stores opened 68 77 Net new stores (after closures) 50 67 RSP inflation (price 5.3%, mix 4.4%) 9.7% 5.1% Weighted average space growth 3.4% 3.7% Space growth in stores & expansions 4.8% 4.8% South African reta
Slide 9: Continued improvement in operating margin
continued improvement in operating margin 2013 2013 15.6% Other Debtors interest & fees R316m,+19.2% Other 0.3% Insurance products R147m, +38.1% Refer pg 6 income income Airtime sales R120m, +41.7% Gross Merchandise GP 42.2% & net of airtime 42.0% in both years Gross 0.0% Gains in Apparel
Slide 10: Financial position
financial position R’m 2014 2013 Non-current assets Property, plant & equipment 718 660 Intangible & other assets 419 267 Current assets Inventories 1 403 1 236 Trade & other receivables 1 673 1 513 Reinsurance assets (cash) 98 72 Cash & cash equivalents 2 252 1 150 6 563 4 898 Equity attributable t
Slide 11: PPE & intangibles
ppe & intangibles R’m Total PPE Intangibles Opening 765 660 105 Licences Additions 405 253 152 ERP Disposals/impairments (46) (34) (12) E-Commerce Depreciation/amortisation (191) (161) (30) E-Learning Closing 933 718 215 Total Additions Retail capex split Other Divisional DC R15m Apparel Home Sport
Slide 12: Significant balance sheet items
significant balance sheet items Other non-current assets (R’m) 25.1% 2013 162 Increase in deferred tax assets of R18m relating to provisions Defined benefit pension fund asset +R25m 2014 204 Inventories 13.5% 2013 1 236 Gross inventory up 12.3%, lower than sales growth of 14.8% Stock tur
Slide 13: Trade receivables
trade receivables 2014 2013 % change Gross trade receivables R1 754m R1 550m 13.1% Active accounts 1 375k 1 308k 5.2% Credit sales contribution 19.2% 20.1% Net bad debt to book 7.6% 6.5% Impairment provision 9.8% 9.0% Proportion of book interest bearing 96.6% 95.0% Credit sales +26.2% +18.9% +9.6% 3
Slide 14: State of the consumer
state of the consumer National Credit Regulator (movement y/y) Credit granted % current by % current % growth value change Mortgages 21.4% 90.8% 1.6% Secured 2.8% 91.1% 0.5% Credit facilities (2.5%) 82.9% 1.6% Unsecured (25.6%) 71.9% (3.8%) Total credit granted in SA down 1.1% & gross debtors book
Slide 15: Trade receivables positive signs in 2nd half
trade receivables positive signs in 2nd half Focus on ‘through the door’ & ‘web’ credit applications is working. New accounts opened in last year performing significantly better than previously 82% % of balances ‘current’ 80% Seasonal drop in collections post 78% festive season less pronounced in
Slide 16: Highly cash generative business model
highly cash generative business model 5 000 Includes R365m 4 500 purchase of shares at 374 403 4 000 avg price of R137.70* 405 3 500 3 000 1 094 R’m 2 500 2 891 289 28 2 000 1 500 Includes sale of 2 252 1 000 property R23m 500 1 150 0 Mar-13 Treasury share Mar-14 Taxation paid Other Interest receive
Slide 17: Capital allocation
capital allocation 1 800 52% 55 51% 16% 46% 47% 289 1 500 23% 45 213 405 36% 1 200 233 35 61% 338 ROE (%) R’m 900 301 161 25 600 156 1 094 % contribution 163 888 15 300 670 512 349 5 0 2010 2011 2012 2013 2014 ( 300) -5 Dividends Capex Net share repurchases 16
Slide 18: Divisional performance
divisional performance (mr pricegrouplimited
Slide 19: Segmental performance
segmental performance 1st half 2nd half Annual Retail sales & other income Apparel 16.4% 17.4% 17.0% Home 11.2% 9.4% 10.2% Operating profit Apparel 18.9% 23.7% 21.7% Home 27.0% 16.3% 20.2% 12% 10.9% 9.3% 9% % change 7.2% 6% 5.4% 3% -0.7% -0.3% 0% Units RSP Space Units RSP Space -3% inflation inflati
Slide 20: Mr Price
mr price 2014 2013 % change Retail sales R8.6bn R7.2bn 18.9% Comparable sales - 1st half 10.3% - 2nd half 15.3% Unit sales 7.4% RSP inflation 11.0% Weighted average space growth 8.4% Trading density R34 507m-2 R31 466m-2 9.7% Opened 24 stores & closed 4 - annualised new store ROGA 90.6%. Expanded
Slide 21: Mr Price Sport
mr price sport 2014 2013 % change Retail sales R962m R843m 14.2% Comparable sales - 1st half 9.5% - 2nd half 4.0% Unit sales 8.0% RSP inflation 6.0% Weighted average space growth 0.8% Trading density R20 036m-2 R17 678m-2 13.3% Opened 9 stores, increasing trading area by 6 050m². Closed 1 store &
Slide 22: Miladys
2014 2013 % change Retail sales R1.4bn R1.3bn 7.0% Comparable sales - 1st half 9.5% - 2nd half 5.1% Unit sales 2.8% RSP inflation 4.1% Weighted average space growth (2.0%) Trading density R22 731m-2 R20 794m-2 9.3% Disappointing sales (& markdown) performance in 2nd half, but expenses very well co
Slide 23: Mr Price Home
mr price home 2014 2013 % change Retail sales R2.9bn R2.6bn 10.5% Comparable sales - 1st half 10.5% - 2nd half 6.4% Unit sales (1.3%) RSP inflation 12.0% Weighted average space growth (0.8%) Trading density R20 956m-2 R18 820m-2 11.3% More discretionary merchandise, however high LSM customers are
Slide 24: Sheet Street
2014 2013 % change Retail sales R1.3bn R1.2bn 8.9% Comparable sales - 1st half 4.8% - 2nd half 5.9% Unit sales 0.6% RSP inflation 8.3% Weighted average space growth 0.9% Trading density R26 342m-2 R24 469m-2 7.7% Economic environment challenging shoppers in targeted segment Merchandise range and
Slide 25: Strategy
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Slide 26: Realising our vision
realising our vision To be a top performing international, omni-channel retailer Remain true to our business model - fashion, value, cash Protect & grow SA market Focus on offshore growth & become a global player Which will be enabled through: Our people Superior customer engagement Oper
Slide 27: Our business model
our business model Clear & precise positioning Fashion Fashion leadership through in-house trending, product development & designer collaborations Focused assortments that are dominant in wanted fashion items of the season In-store brand & sub-brand clarity Not only merchandise, but the enti
Slide 28: Entrench our position in SA
entrench our position in SA Operating margins now all >10% - revised medium term targets for Home divisions & Sport >15%, Apparel & Miladys >20% Target quality net trading space growth of 3-4% p.a. (4-5% new space): New stores Open 200 stores in SADC region over next 4 years. Apparel will consti
Slide 29: International growth
international growth Our business model & strategy positions us well to unlock the potential of new markets Reduced dependence on one primary market Proven fashion-value brands of Apparel, Home, Sport Mainly southern hemisphere, Home less constricted Mainly organic growth: - Acquired Zambian
Slide 30: International growth
international growth A different approach is required ERP system Multi currency, channel & place of delivery capability More accurate planning & improved response times & BI Design of new ERP & planning systems complete, currently in build phase. Design of BI by June ‘14. Sport to go live Apri
Slide 31: Online growth
online growth 10 Monthly sales (R'm) 8 6 4 2 0 Mar-13 Mar-14 Jan-13 Jan-14 Jul-12 Jul-13 Nov-12 May-13 Nov-13 Sep-12 Sep-13 Apparel SA Apparel International Home Sheet Street Total annual growth of 293%. Apparel total growth 204% (SA 140%, SA comp 74%) Launched Apparel internationally in
Slide 32: Online enhancements
online enhancements Improved customer experience New App on iOS & Android platforms - mobile & tablet Swipe, pinch, zoom functionality Integrates with bricks environment by locating 5 closest stores in stock of SKU. If item not in required size, in store shopper can scan barcode & locate neare
Slide 33: Our people
our people An energised environment where associates are empowered & motivated Employee engagement Communication via ‘Comm Times’, internal TV broadcasts, results presentations & social media ‘Culture & climate’ interventions during a time of high growth & significant change Capacity building
Slide 34: Customer engagement
customer engagement Creating an emotional attachment Maintain fashion value positioning Be at the forefront of retail technology - Mobile POS rollout - E-Commerce - Store of the future launch V&A Waterfront in July ‘14 All customer touch-points must be consistent & seamless - Store & online ex
Slide 35: Operational excellence
operational excellence Good progress, with operating margin increasing from 9.6% to 16.7% in the last 5 years Move to more responsive suppliers Improved in-season planning to maximize sales & improve markdowns & space management Self service model in store, however need to establish well inf
Slide 36: Good corporate citizenship
good corporate citizenship Promote high standards of ethical behaviour & sustainable performance Repositioned governance functions (secretarial, ERM, legal & compliance) Introduced leading risk & legal compliance frameworks Enhanced identification & measurement of risks & alignment to strategy S
Slide 37: Looking ahead
looking ahead Consumer environment to remain challenging In previous downward economic cycles our positioning has led to market share gains Inventory in good shape going into the new year RSP inflation expected to be in upper single digits Positive start in new year in sales and debtor col
Slide 38: Thank you
thank you (.mrpricegrouplimited