Mr Price Group Limited · JSE:MRP
Mr Price — H1 FY2024 Earnings Presentation
49 slides from Mr Price's earnings presentation, November 2023
Slide 1: Interim Results to 30 September 2023
Interim Results to 30 September 2023 2023
Slide 2: Backdrop, Performance, Value Creation
Backdrop 01 Retail Environment By Mark Blair Performance 02 Group Performance By Praneel Nundkumar Value Creation 03 Strategy & Outlook By Mark Blair
Slide 3: Backdrop: Retail Environment
BACKDROP 01 Retail Environment By Mark Blair - CEO
Slide 4: What we said in June 2023
What we said in June 2023 Anticipated a challenging H1 FY24: External • Sectoral inventory carry and allied markdowns and promotions • Intensified loadshedding was not in the base and could have a significant impact on winter trade • Cost of living pressures continued MRPG • H1 RSOI growth will not
Slide 5: Economic Overview
Economic Overview GDP Unemployment CPI Exchange growth rate avg. rate avg. SA Economy (Q2 2023) (Q3 2023) (Q3 2023) H1 FY2024 +0.6 % 31.9 % 5.0% +14.3 % Q2 2022: -0.8% Q3 2022: 32.9% Q3 2022: 7.6% H1 FY2023: R16.37 Business High inventory Loadshedding Consumer credit confidence levels & markdowns im
Slide 6: Consumer Overview
Consumer Overview Inflation Interest rate 11.75 12 • Rising cost pressures have Average (October 2022 - September 2023) 10 shifted wallet spend (%) 8 • Value customers have been Food 7.0 most impacted 6 11.7 % 4 Sep Mar Sep Mar Sep Public transport 12.5 % Real wage Consumer Fuel growth confidence 7.
Slide 7: Group Interim Results
Group Interim Results Revenue EBITDA* Operating Profit^ R16.8bn R3.3bn R1.9bn +26.4 % +14.7 % -0.4 % Operating Margin Diluted HEPS# Dividend Per Share -320bps 439.5c 283.5c 11.5 % -9.6 % pay-out ratio maintained 63 % 7 *EBITDA reconciliation on pg 44 | #HEPS reconciliation on pg 43 | ^Incl non contr
Slide 8: What we said in June 2023: H2 outlook
What we said in June 2023 Anticipate an improved H2: - Significantly reduced disruption – ERP system change and loadshedding in the base - 100% back-up power in all stores - Sectoral inventory levels and promotional activity moderating, as a result internal improvement of clarity of offer - EDLP mod
Slide 9: Core performance (excl. S88)
Core performance (excl. S88*) Trends improved in Q2 across all sales channels, geographies and tender types Sales growth Q2 insights (excl S88) 16 • Group 100% back-up power by end Q1 Level 6 loadshedding in base 14 - Beginning of anticipated recovery - 7.1% sales growth (comp +2.6%) 12 4x more load
Slide 10: Core performance improvement in Q2 (excl. S88)
Core performance improvement in Q2 (excl. S88) GEOGRAP HY TE NDE R TYPE RSA Rest of Africa Cash Credit Cash Q2 +6.8 % Q2 +10.4 % Q2 +7.5 % Q2 +4.1 % Movement +620 bps Movement +600 bps 85.8 % Movement +600 bps Movement +680 bps of sales Bricks Online Units GP margin (%) Q2 +7.4 % Q2 -3.6 % Market sh
Slide 11: Performance: Group Performance
PERFORMANCE 02 Group Performance By Praneel Nundkumar - CFO
Slide 12: Revenue
Revenue H1 % FY2024 FY2023 Retail sales growth change Retail sales 16 087 12 590 27.8% H1 FY2024 Q2 FY2024 Other income 607 536 13.3% Total retail sales growth 27.8% 34.4% Financial services & Telecoms 523 473 10.6% Total retail sales growth excl S88 3.8% 7.1% Other 84 63 33.1% Comparable stores sal
Slide 13: Group Income Statement
Group Income Statement R’m FY2024 FY2023 H1 % change Revenue (pg 12) 16 751 13 254 26.4% Gross profit (pg 16) 6 245 5 099 22.5% Expenses (pg 17) (4 849) (3 630) 33.6% Profit from operating activities 1 923 1 932 (0.4%) Net finance (expense) (336) (179) 88.3% Profit before taxation 1 587 1 753 (9.5%)
Slide 14: Segmental Performance
Segmental Performance Divisional Contribution (Retail sales) Segment Analysis Contribution H1 FY2024 1.4% 3.3% Apparel Segment (LY: 73.0%) Retail sales +37.9% 78.8 % Mr Price Apparel Retail sales excl S88 +5.1% Mr Price Sport Retail sales base +8.5% Miladys 4.7 % OP Profit +6.5% Studio 88 Power Fash
Slide 15: Space Growth
Space Growth Divisions Store movements Closing stores W.avg net growth (m2) 1 4 13 608 3.9% Store and space growth insights 3 4 7 259 0.2% 3 3 172 1.7% • 121 new stores: - Existing business: +63 (5 trading chains) 9 58 874 100.0% - S88: +58 2 18 280 22.7% - Split across 13 trading chains - Performin
Slide 16: Gross Profit Analysis
Gross Profit Analysis Total GP Merchandise GP Telecoms GP FY2024 FY2023 FY2024 FY2023 FY2024 FY2023 38.6% 40.3% 39.4% 41.2% 20.0% 19.8% Factors affecting GP margin • Total GP margin down 170bps • Telecoms: - Inclusion of S88 and high growth from other acquired businesses - Further increase in contri
Slide 17: Overhead Expenses
Overhead Expenses Total expenses: Selling expenses 74.5%; admin expenses 25.5% % change Cont. to R’m FY2024 FY2023 % change excl S88 RSOI# Depreciation* and amortisation 1 364 936 45.6% 7.6% 8.2% • Excluding S88 expenses up 6.1% • Employment costs: Employment costs 1 944 1 465 32.7% 5.4% 11.6% - Con
Slide 18: Balance Sheet Analysis
Balance Sheet Analysis Inventories (excl. S88) +2.1 % Debtors book +5.0 % Trade & other payables +80.9 % • Exited winter in a clean inventory position • Higher credit sales and 50bps repo • Supply chain finance • Stock freshness 81.7% rate increase programme momentum Net working capital improvement
Slide 19: Cash Flow Movements
Cash Flow Movements R’m Strong cash generation and improvement in working capital 60 000 Operating R2 712 Investing Financing R2 528 R495 241 5 000 324 3 055 4 000 -908 Includes -504 3 000 R263m relating to FY2023 1 134 provisional -1 171 -4 2 000 tax payment 1 442 FY2023 final 11 1 000 dividend of
Slide 20: Allocation of CAPEX
Allocation of CAPEX Funded wholly from cash reserves Capital expenditure H1 FY2024 8.0% 22.0% 33.0 % R637 m • Primarily allocated to stores (76.0%) Capital • R140m allocated to loadshedding back-up power solutions Allocation 7.0% Key 9.0% 9.0% 12.0% New stores Expansions Revamps Technology Logistics
Slide 21: Credit Growth Performance
Credit Growth Performance Credit contributes 12.2% of sales Mr Price Group trends • Existing customer spend increased 3.7% • New accounts sales declined 26.3% due to rejections of new account applications • Interest and fees increased 14.5% due to a higher average debtors book, and 50bps increase in
Slide 22: Trade Receivables
Trade Receivables % Change Principa Face of Credit report R’m Sep 23 Mar 23 Sep 22 Clothing Retail Mar/Sep Sep/Sep Mr Price Group Credit Industry Total Good/Total Total gross debtors’ book 2 440 2 475 2 324 (1.3%) 5.0% Bad balance ratio Good: <1 month arrears; Bad: >2 months arrears 7.9 3.8 NBD: boo
Slide 23: Financial Outlook
Financial Outlook H2 FY2024 • Black Friday and festive season likely to drive promotional environment • Expected H2 recovery: - Improved sales trend - Improved GP % levels towards targeted range • Continued focus on lean inventory position - anticipate negative inventory growth by year-end • Cash ge
Slide 24: Value Creation: Strategy & Outlook
VALUE CREATION 02 Strategy & Outlook By Mark Blair - CEO
Slide 25: Vision: To be the most valuable retailer in Africa
Vision: To be the most valuable retailer in Africa Supported by six strategic pillars Stakeholder Growth Brand Promise Engagement Stakeholder relationships are based on To be the top performer in total shareholder Grow brand value by surprising and the true spirit of partnership and the returns in t
Slide 26: How do we achieve our vision?
How do we achieve our vision? Profitable Market leading Sustainability growth metrics commitment • Focus on core operations • Fiscal discipline is in our DNA • It’s about doing good, not just profits • Extract value from recent acquisitions and • We have a proven history of delivering • Our initiati
Slide 27: Focus on the core
Focus on the core M A R K E T LE A D I N G M E TR I C S S U S TA I N A B I LIT Y CO M M ITM E NT PROFITA B LE G ROW TH Comparable sales growth and profitable market share gains New store growth opportunities across all retail chains Omni channel strategy enables: • Profitable online growth to suppor
Slide 28: Power of our brands: Pricing Power
Power of our brands M A R K E T LE A D I N G M E TR I C S S U S TA I N A B I LIT Y CO M M ITM E NT PROFITA B LE G ROW TH Kantar BrandZ: Strategic pricing view | Mr Price: Recognised as the value champion Great Value Margin Opportunity Justified Premium Pricing Power Value Average High Price Commodot
Slide 29: Power of the Brand
Power of the Brand M A R K E T LE A D I N G M E TR I C S S U S TA I N A B I LIT Y CO M M ITM E NT PROFITA B LE G ROW TH In the hearts of South Africans Most shopped #1 coolest clothing store in SA apparel retailer 4.2m customers #5 coolest clothing brand No.1 Ranked #4 Nike #3 Adidas most valuable a
Slide 30: Power of the Brand: Highest in segment
Power of the Brand M A R K E T LE A D I N G M E TR I C S S U S TA I N A B I LIT Y CO M M ITM E NT PROFITA B LE G ROW TH June 2023 Report Brand equity Fashion-Value matrix Highest in Conversion to purchase segment Total mind awareness 30 Source: Borderless Access | Nielsen
Slide 31: Core Business: Apparel Segment
Core Business: Apparel Segment M A R K E T LE A D I N G M E TR I C S S U S TA I N A B I LIT Y CO M M ITM E NT PROFITA B LE G ROW TH RLC market share +40bps +40bps -80bps FY2021 - FY2022 FY2023 - Q1 FY2024 Q2 FY2024 • FY2021-FY2022: market share gains • FY2023 - Q1 FY2024: market share losses • Q2 FY
Slide 32: Mr Price Kids Stand-alone
Mr Price Kids Stand-alone M A R K E T LE A D I N G M E TR I C S S U S TA I N A B I LIT Y CO M M ITM E NT PROFITA B LE G ROW TH Why we did it • Strong Mr Price brand halo effect • Evolved a new model combining Mr Price Baby and Mr Price Kids into a Mr Price Kids standalone concept • Opportunity to ma
Slide 33: Core Business: Home Segment
Core Business: Home Segment M A R K E T LE A D I N G M E TR I C S S U S TA I N A B I LIT Y CO M M ITM E NT PROFITA B LE G ROW TH Structural change • Rate of competitor store openings is slowing • Competitor discounting & promotions remains at elevated levels • Improved sales and margin growth in Q2
Slide 34: Acquisitions Performance
Acquisitions Performance M A R K E T LE A D I N G M E TR I C S S U S TA I N A B I LIT Y CO M M ITM E NT PROFITA B LE G ROW TH • Short term focus on achieving business case performance and integration of Power Fashion, Yuppiechef and Studio 88 • In the past 12 months, the acquired businesses have add
Slide 35: Additional growth opportunities
Additional growth opportunities M A R K E T LE A D I N G M E TR I C S S U S TA I N A B I LIT Y CO M M ITM E NT PROFITA B LE G ROW TH Diversify product and market segments by introducing profitable and scalable growth opportunities – both organic and acquisitions 35
Slide 36: Ensuring we are a resilient and agile business
Ensuring we are a resilient and agile business M A R K E T LE A D I N G M E TR I C S S U S TA I N A B I LIT Y CO M M ITM E NT PROFITA B LE G ROW TH Technology investments modernising our tech environment, enhanced use of AI, RPA, data driven decision making Further investment in supply chain (~38% s
Slide 37: Strong Investment Case
Strong Investment Case PRO FITA B LE G ROW TH S U S TA I N A B I LIT Y CO M M ITM E NT M A RK E T LE A D I NG M E TRIC S Market leading metrics (last three years) • Leading metrics • Cash generative ROE ROA Debt/equity • Strong balance sheet • Debt free • Consistent dividend policy 28.7 % 16.5 % 7.7
Slide 38: Achieving growth and preserving our top quartile metrics
Achieving growth and preserving our top quartile metrics PRO FITA B LE G ROW TH S U S TA I N A B I LIT Y CO M M ITM E NT M A RK E T LE A D I NG M E TRIC S Key operating metrics FY2023 Medium-term target RETURNS ROE 24.8% 30.0% ROA 12.5% 15.0% Dividend payout ratio 63.0% 63.0% CASH GENERATION Cash co
Slide 39: Sustainability framework
Sustainability framework PRO FITA B LE G ROW TH M A R K E T LE A D I N G M E TR I C S S U S TA I N A B I LIT Y CO M M ITM E NT • We aim to remain market leading and transparent in our communication - Achieved #1 for Investor Relations in the Consumer sector - Intellidex 2023* - Investor Relations en
Slide 40: Prospects
Prospects Operating environment • Consumers likely to remain constrained into 2024 • Electricity supply risk remains but is moderating • RSA port and logistics instability increasing • Trading update: - October: Group retail sales +2.3% & gained 70bps market share Total comparable market sales decli
Slide 41: Appendix
APPENDIX 04
Slide 42: A history of building brands
A history of building brands Sales Acquisition Organic launch 35 000 30 000 25 000 SALES (R’ MILLIONS) mrp.com 20 000 15 000 10 000 5 000 0 GFC COVID-19 1987 1996 1998 2006 2007 2009 2012 2014 2015 2017 2020 2021 2022 2023 42
Slide 43: Earnings & Dividend Per Share
Earnings & Dividend Per Share FY2024 FY2023 % Growth Profit attributable to shareholders (R’m) 1 154 1 287 (10.3%) W. Avg shares in issue (000) 257 186 257 304 Basic earnings per share 448.8c 500.1c (10.3%) Addbacks (R’m) 2.9 (10.6) Headline earnings (R’m) 1 157 1 276 (9.3%) Headline earnings per sh
Slide 44: EBITDA Reconciliation
EBITDA Reconciliation FY2024 FY2023 % Growth Profit from operating activities 1 923 1 932 (0.4%) Total depreciation & amortisation 1 408 972 44.9% EBITDA 3 331 2 904 14.7% 44
Slide 45: Group Sales Growth Drivers
H1 FY2024 Group Sales Growth Drivers Total retail sales growth Total retail sales growth excl S88 27.8% 3.8% Comparable stores sales growth (0.8%) Geography Tender Type RSA Rest of Africa Cash Credit Excl S88: 3.8% 26.6 % 43.5 % Cash 32.0 % 3.3 % % of sales 92.0 % % of sales 8.0 % % of sales 87.8 %
Slide 46: Rest of Africa
Rest of Africa Total % of group sales H1 FY2024 H1 FY2023: 7.2% 8.0 % No. of stores 3 Ghana Kenya 13 Corporate owned stores: 226 234 Zambia 15 Botswana 63 Sales growth 74 Namibia Mozambique 11 (ZAR) H1 FY2024 Eswatini 25 Lesotho 22 H1 FY2023: +2.4% +43.5 % 46
Slide 47: Input Costs
Input Costs ZAR/$ exchange rate Cotton and oil prices R19.20 R18.15 R15.18 Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep 2021 2022 2023 2021 2022 2023 Max of High Min of Low Cotton Oil Shanghai Container Freight Index Rate - Africa Route Summary • ZAR depreciation of 14.3% • Cotton and oil prices
Slide 48: Balance Sheet
Balance Sheet R’m Sep 2023 Mar 2023 Sep 2022 Non-current assets 16 796 17 003 11 707 Current assets 12 326 11 778 11 850 Inventories 7 820 7 321 4 843 Trade & other receivables 2 674 2 733 2 983 Cash & cash equivalents 1 463 1 442 3 315 Cell captive structure/ Reinsurance assets^ 127 219 260 Other 2
Slide 49: Thank You
Thank You FY2024 Interim Results