Mr Price Group Limited · JSE:MRP
Mr Price — H1 2014 Earnings Presentation
46 slides from Mr Price's earnings presentation, Nov 14, 2013
Slide 1: Interim Results Presentation 13/14 November 2013
Mr Price Group INTERIM RESULTS PRESENTATION 13/14 NOVEMBER 2013 Mr Price Group Limited Interim Results - September 2013
Slide 2: Solid performance in challenging conditions
SOLID PERFORMANCE IN CHALLENGING CONDITIONS 26.3% 22.0% 100bps 22.8% Diluted 14.8% Headline Operating Operating Earnings Dividend Revenue Profit Margin per Share per Share Mr Price Group Limited Interim Results - September 2013 1
Slide 3: Awards and accolades
AWARDS AND ACCOLADES Finalist in Emerging Market 6th in Sunday Times Top 100 3rd in Financial Mail Top Retailer of the Year Companies 2013 Companies 2013 Category (2nd year) (5 year CAGR in share price (5 year IRR on share price) and dividends) Top placed retailer Investment Analysts Society Mr Pric
Slide 4: Retail environment remains constrained
RETAIL ENVIRONMENT REMAINS CONSTRAINED Currency weakness Real wage growth 1.8% - RSP inflation trending higher (Q2 2013) however ‘gap’ - General inflationary effects Slowing credit growth has shrunk Largest employer (Govt.) under pressure to curb costs Continued growth of Consumer confidence - Emplo
Slide 5: Group performance
GROUP PERFORMANCE 2013 2012 % change Retail sales R6 892 m R6 015 m 14.6 % Comparable sales 9.6 % 8.5 % 1.1 % Unit sales 98 m 92 m 5.8 % RSP inflation 8.3 % 4.3 % 4.0 % Net space - weighted average 537 359 m² 522 066 m² 2.9 % - closing 539 366 m² 522 913 m² 3.1 % Space added*¹ - weighted average 4.0
Slide 6: Space, inflation and unit growth
SPACE, INFLATION AND UNIT GROWTH HIGHER RSP INFLATION RESULTED IN LOWER UNIT GROWTH THAN LAST YEAR… 15% 18,000 8.3% 16,000 Unit growth and inflation % 12% 4.3% 14,000 1.4% 5.5% 12,000 9% 10,000 m² 8,000 6% 7.8% 9.2% 6,000 3% 9.0% 5.8% 4,000 5.4% 4.1% 2,000 0% 0 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Uni
Slide 7: MPC vs. market sales performance
MPC vs. MARKET SALES PERFORMANCE CONSISTENT OUTPERFORMANCE OF THE MARKET HAS RESULTED IN STRONG MARKET SHARE GAINS 20% 18.6% 18% Apr to Aug ‘13 16.1% 16% 14.6% 13.9% 14% 11.2% 12.4% Sales growth % 12% 10.8% 11.0% 10.4% 10.7% 10.6% 9.4% 8.6% 10% 7.3% 7.0% 8% 7.4% 4.7% 6% 4.1% 4% 2% 0% 2009 2010 2011
Slide 8: Credit sales vs. cash sales growth
CREDIT SALES vs. CASH SALES GROWTH STRONG GROWTH IN CASH SALES… 3 FY2012 FY2013 1 MPC increase in credit 900 14.6% sales lower than market 800 11.8% but higher than desired 13.9% 700 2 Restricted credit growth: Sales growth – R’m 9.9% • Downside risks in RSA 600 credit environment 10.7% 500 11.0% 15
Slide 9: 2013 group income statement
2013 GROUP INCOME STATEMENT % of % of % R’m 2013 sales 2012 sales change Retail sales 6 892 6 015 14.6% Cost of sales 4 015 3 532 13.7% Gross profit 2 877 41.7% 2 483 41.3% 15.9% Other income 228 186 22.7% Selling expenses 1 603 23.3% 1 404 23.3% 14.2% Administrative expenses Pg 9 489 7.1% 440 7.3%
Slide 10: Analysis of expenses
ANALYSIS OF EXPENSES 2013 % R’m Change Increase in retail sales 14.6% Total expenses 2 092 13.4% +1.2% Selling 1 603 14.2% Administrative 489 11.2% Adjustments for significant items: Reduce selling expenses for space growth (41) Investment for future growth – Online, people, human capital management
Slide 11: Continued improvement in operating margin
CONTINUED IMPROVEMENT IN OPERATING MARGIN 2013 2013 13.7% • Currency uncertainty & improved resourcing P.M.O 0.3% • Mark-up increased in 4 of 5 divisions Markdowns 0.1% • Improvement in Mr Price Apparel Other • Carriage and distribution centre efficiencies 0.1% • 43.0% increase in premium income Oth
Slide 12: Earnings and dividends per share
EARNINGS AND DIVIDENDS PER SHARE Guidance 2013 2012 % change provided Earnings per share Basic 303.8 c 247.8 c 22.6 % 20 – 24 % Headline 305.0 c 253.2 c 20.4 % 18 – 22 % Diluted headline 283.6 c 232.5 c 22.0 % 20 – 24 % Dividend per share Interim 168.0 c 133.0 c 26.3 % Dividend payout ratio (%) 55.1
Slide 13: Consistent performance
CONSISTENT PERFORMANCE Operating profit (R’m) Headline earnings per share (cents) - HEPS 2013 1 013 2013 305.0 2012 825 2012 253.2 2011 679 2011 187.3 2010 539 2010 153.3 2009 342 2009 101.5 Dividend per share (cents) - DPS Compound annual growth rate 28.2% 2013 168.0 HEPS 28.3% 2012 133.0 2011 93.6
Slide 14: Financial position
FINANCIAL POSITION Sep Mar R’m 2013 2013 Non-current assets Property, plant and equipment 681 660 Intangible and other assets 344 267 Current assets Inventories 1 324 1 236 Trade and other receivables 1 631 1 513 Cash and cash equivalents 1 585 1 221 5 565 4 897 Equity attributable to shareholders 3
Slide 15: Financial position
FINANCIAL POSITION Intangible assets (R’m) 86.0% Sep-13 195 • ERP project R73.7 million • E-commerce R10 million - international launch and Mar-13 105 roll-out other divisions Sep-12 108 • Additional IT software R18.5 million, offset by current period amortisation charge R15 million Inventories
Slide 16: Capital allocation
CAPITAL ALLOCATION 1,000 7% 70 800 24% 229 46 211 600 161 R’m 184 138 400 66 69% 666 79 552 200 436 320 233 - 2009 2010 2011 2012 2013 Dividends Capital expenditure Net treasury share purchases Mr Price Group Limited Interim Results - September 2013 15
Slide 17: PPE and intangibles
PPE AND INTANGIBLES Total additions 400 R364m Division Space 4 350 Miladys Other 73 New stores 300 11% Mr Price 12% Sheet Street 14% 31% 250 R229m 41% Reductions 6 19% 132 R’m 200 8% Mr Price 117 1 Sport 150 26% 38% 100 18 155 Mr Price Home Expansions and revamps 50 2 88 - 2013 2012 1st Half 2nd Hal
Slide 18: Trade receivables – ageing profile of total credit in RSA
TRADE RECEIVABLES – AGEING PROFILE OF TOTAL CREDIT IN RSA 95 Unsecured credit: 90 • Still growing but at a slower pace Retailers • Focus shifted to 85 included here % current by value higher incomes 80 Sig. improvement in ageing in short 75 term unlikely • Will take time to 70 work through the Sourc
Slide 19: Accounts receivable
ACCOUNTS RECEIVABLE Sep Mar Sep % 2013 2013 2012 change Gross trade receivables R1 676 m R 1 550 m R1 351 m 8.1 % Number of active accounts 1 361 k 1 308 k 1 240 k 4.1 % Credit sales contribution 20.8 % 19.6 % 20.9 % Interest bearing book 95.1 % 95.0 % 94.1 % Able to purchase 88.8 % 86.5 % 89.9 % Ne
Slide 20: Trade receivables
TRADE RECEIVABLES Focus going forward • So far successfully managed our way through a difficult credit environment. Now clear of high credit sales growth in base – credit sales growth YTD 11.6% • Comfortable at current cash/credit sales split of 80/20 • Financial Services still a profit centre, but
Slide 21: Highly cash generative business model
HIGHLY CASH GENERATIVE BUSINESS MODEL 3 000 +119% 175 302 2 500 Sale of property 229 2 000 1466 666 R’m 26 1 500 106 1 000 Includes purchase of 901 747 shares at average price of R123.90 1585 for share trusts 1221 500 0 Mar-13 Cash Interest Taxation Additions to Dividend Treasury Other Sep-13 Mar-13
Slide 22: Divisional performance
DIVISIONAL PERFORMANCE Mr Price Group Limited Interim Results - September 2013 21
Slide 23: Segmental performance
SEGMENTAL PERFORMANCE Retail sales and other income % 8 000 contribution 6 000 +16.4% 5 161 73% R’m 4 000 4 435 2 000 +11.2% 1 760 1 957 27% 0 2012 2013 Operating profit 1 500 1 000 +19.0% R’m 866 79% 500 728 +27.0% 178 226 21% 0 2012 2013 Home Apparel Mr Price Group Limited Interim Results - Septem
Slide 24: Mr Price Apparel
MR PRICE APPAREL 2013 2012 % change Retail sales R3 828 m R3 271 m 17.0 % Comparable sales 10.3 % 4.7 % 5.6 % Unit sales 60.7 m 56.2 m 8.0 % RSP inflation 8.5 % 3.6 % 4.9 % Weighted average space 243 930 m² 224 578 m² 8.6 % Trading density R32 518 m-2 R31 052 m-2 4.7 % • Sales growth aided by increa
Slide 25: Mr Price Apparel - our customers
MR PRICE APPAREL - OUR CUSTOMERS LSM 2/3 LSM 4 30% 82% 3% 26% 5% 80% 25% 80% LSM 10 10% 20% LSM 5 20% 78% LSM 6-10 LSM 1-5 LSM 9 12% 15% 15% 76% 74% 10% 74% LSM 8 5% 72% 12% LSM 6 29% 0% 70% LSM 7 2010 2011 2012 2013 15% LSM 1-5 6-106-10 1-5 LSM • Strong representation of customers • Continue to
Slide 26: Mr Price Sport
MR PRICE SPORT 2013 2012 % change Retail sales R431 m R373 m 15.7 % Comparable sales 8.2 % 15.5 % -7.3 % Unit sales 4.8 m 4.5 m 7.5 % RSP inflation 7.7 % 7.9 % -0.2 % Weighted average space 46 625 m² 47 444 m² -1.7 % Trading density R19 070 m-2 R16 277 m-2 17.2 % • Strong performance by higher techn
Slide 27: Miladys
MILADYS 2013 2012 % change Retail sales R665 m R605 m 9.9 % Comparable sales 9.5 % 18.5 % -9.0 % Unit sales 4.4 m 4.2 m 3.9 % RSP inflation 5.7 % -2.3 % 8.0 % Weighted average space 61 000 m² 62 508 m² -2.4 % Trading density R22 027 m-2 R19 740 m-2 11.6 % • All non-performing stores now closed. 30 s
Slide 28: Mr Price Home
MR PRICE HOME 2013 2012 % change Retail sales R1.3 bn R1.2 bn 11.9 % Comparable sales 10.5 % 11.5 % -1.0 % Unit sales 19.1 m 18.8 m 1.6 % RSP inflation 9.9 % 3.9 % 6.0 % Weighted average space 136 900 m² 138 996 m² -1.5 % Trading density R19 986 m-2 R17 511 m-2 14.1 % • Trading density improvement i
Slide 29: Mr Price Home - our customers
MR PRICE HOME- OUR CUSTOMERS LSM 0/5 5% 10% 97% 100% LSM 6 13% LSM 10 8% 95% 90% 19% 6% 80% LSM 6-10 LSM 1-5 5% LSM 7 4% 3% 70% 13% LSM 9 2% 60% 29% LSM 8 0% 50% 21% 2010 2011 2012 2013 LSM 1-5 0-5 LSM 6-106-10 • 95% of customers in target market LSM 6-10 • Attracts higher LSM customers • 69% of
Slide 30: Sheet Street
SHEET STREET 2013 2012 % change Retail sales R588 m R541 m 8.6 % Comparable sales 4.8 % 9.7 % -4.9 % Unit sales 8.4 m 8.4 m -0.1 % RSP inflation 8.6 % 6.2 % 2.4 % Weighted average space 48 904 m² 48 541 m² 0.7 % Trading density R25 332 m-2 R23 368 m-2 8.4 % • Lower LSM customers (5-8) more sensitive
Slide 31: Outlook for 2nd half
OUTLOOK FOR 2ND HALF 25% Prior Year Soft MPC Total sales growth % 1 2 Higher 20% base base 17.2% 14.5% 14.6% 15% 13.3% 10.9% 10.0% 10% 5% 0% Q1 Q2 Q3 Q4 FY2013 FY2014 1 Shift of Easter from April 2012 to March 2013 • Pressure on consumers unlikely to ease in short term 2 Shift of school holidays fro
Slide 32: Strategy
Beach pic here STRATEGY Mr Price Group Limited Interim Results - September 2013 31 31
Slide 33: Strategy: Fix, Invest, Grow
STRATEGY Objective Focus Area Address areas of weakness in • Market share Well on track, FIX underperforming divisions • Trading density further gains • Operating margin expected Enhanced processes, systems and • Supply chain INVEST infrastructure to support the next • Systems phase of growth • DC T
Slide 34: Invest - supply chain
INVEST - SUPPLY CHAIN Objectives • Greater transparency of production pipeline. Enable increased flexibility • Improve on-time and in-full deliveries from 80% - 95% • Consolidate inventory at source, deliver direct to end market, avoiding unnecessary handling and double duty • Improve efficiency by
Slide 35: Invest - systems
INVEST - SYSTEMS Objectives • To support business strategy of Group going global and online: – Multi currency – Multi channel – Multi place of delivery for merchandise ERP – More accurate integrated planning and response times – Improved business intelligence Progress • On track for implementation i
Slide 36: Grow
GROW Vision • To be a top performing international retailer Objectives • Invest in and continue to grow home base – a solid foundation to finance the ‘invest’ and ‘grow’ phases of our strategic plan • Expand internationally through multi channel approach: – reduce dependence on one market – extend t
Slide 37: Growth drivers
GROWTH DRIVERS Last 5 Years Next 5 Years 7000 Division Territory Format 251 Bricks Online 6000 457 Incremental Sales R’m 5000 1 001 349 4000 603 3000 73% of total 3 653 2000 1000 5 year CAGR 15%* 0 2008-2013 Mr Price Apparel Mr Price Sport *Includes Africa and online. Miladys Mr Price Home Financial
Slide 38: Grow - RSA
GROW - RSA Objective Progress • Opportunity for increased proportion • Slowed intended implementation due to PRICE MIX of merchandise at existing higher price current economic environment. points Remains a future opportunity • Review of sport sponsorships • Sharks contract not renewed EFFICIENCIES •
Slide 39: Grow - RSA: space and store openings
GROW - RSA Objective Progress • Target new space of 5% pa • New space added of 6% SPACE • Planned reductions of oversized • 14 810m² reduced/ closed since Sept 2012 stores to continue • Targeting rental negotiations • Renewed 92 leases YTD with an average increase of 3% 35 43 stores confirmed for 2n
Slide 40: Grow – Africa
GROW – AFRICA Stores Sales South Africa 980 92.6% Africa: 87 7.4% Owned 61 6.5% Franchise 26 0.9% 1 067 100% Nigeria Divisional splits of non SA sales Ghana Kenya Growth Contribution on LY Uganda Mr Price Apparel 74.0% 50.1% Tanzania Rwanda Mr Price Sport 1.6% 23.4% Zambia Miladys 4.5% 15.4% Mr Pric
Slide 41: Grow – Africa: the rise of the African consumer
GROW GROW–- AFRICA AFRICA The Rise of the African Consumer*¹ • Single largest opportunity in Africa will be its rising consumer market • Africans exceptionally optimistic about the economic future • Internet usage is far greater than anticipated, mobile devices key • Consumers are highly value consc
Slide 42: Grow - Africa: key markets
GROW - AFRICA Focus on key markets: • RSA will continue to benefit from consumers moving into higher LSM brackets • Expected to play out in the rest of Africa Nigerian LSM Profile* Population* 60 2010 2050 LSM 10 South Africa 52m 64m 50 LSM 9 Angola 20m 54m 40 LSM 7&8 Ghana 24m 46m Million LSM 6 Nig
Slide 43: Grow – Online SA
GROW – ONLINE SA • Launched online in SA in July 2012 to establish our capability • Performance to date: – Comparable sales growth: SA only Total August 106.5% 144.5% September 67.7% 110.2% October 85.0% 127.3% – 30% of traffic via mobile devices – Average 700k visitors and 5.5 million page views pe
Slide 44: Grow – Online International
GROW – ONLINE INTERNATIONAL • Key enabler in foreign markets where: – Available space a constraint – High rental costs and landlord influence • Avoids costly investment in tests in new markets • mrp.com launched internationally in June 2013 • Currently represents 19% of total online sales • Have shi
Slide 45: Thank you
THANK YOU Mr Price Group Limited Interim Results - September 2013 44
Slide 46: Mr Price Group Limited Interim Results - September 2013
Mr Price Group Limited Interim Results - September 2013