Mr Price Group Limited · JSE:MRP
Mr Price — H1 FY2016 Earnings Presentation
34 slides from Mr Price's earnings presentation, September 2015
Slide 1: Interim Results Presentation September 2015
Interim Results Presentation September 2015
Slide 2: Highlights
Highlights group! 1
Slide 3: Macroeconomic environment
GDP growth weakened in Q2 to 1.2% y/y & -1.3% q/q Weak & volatile currency CPI within targeted range (4.6% in Sep 15), but under pressure Market growth in credit granted remains muted at 4-5% Consumer confidence picked up, particularly in mid-high earners (now net positive). Q3 15 business
Slide 4: Highlights summary
Page Demanding sales base in the prior year 7 MRPG sales growth higher than the market 7 Positive results in core RSA market 4 Africa - long term potential, short term pain 8 Responded rapidly to trade & generated a profit wedge 9,11 5 of 6 trading divisions delivered double digit profit
Slide 5: Group Income Statement
Group Income Statement R’m 2015 2014 % change Retail sales & other income (RSOI) 8 983 8 228 9.2% Cost of sales 5 194 4 663 11.4% Selling expenses1 1 815 1 761 3.1% Administrative expenses1 529 562 (5.9%) Profit from operating activities2 1 445 1 242 16.3% Net finance income 47 38 22.2% Profit befor
Slide 6: Earnings per share and payout ratio
Cents 2015 2014 % change Earnings per share Basic 426.2 370.5 15.0% Headline 427.6 371.1 15.2% Diluted headline 406.8 349.0 16.6% Weighted average share price up 16.6% & number of shares up 1.6% Share options outstanding 16.6% lower Dividend per share 248.0 211.5 17.3% 65 62.4 62.7 63.0 63.1 O
Slide 7: Retail sales and other income
R'm 2015 2014 % change RSA - bricks 7 738 7 147 8.3% - online 63 45 41.8% Non-RSA - bricks - corporate owned 698 633 10.2% - franchise 54 49 8.8% - online 5 9 (40.3%) Retail sales (comp growth 4.0%) 8 558 7 883 8.6% Financial services (page 20) 410 336 22.2% Other1 15 9 63.8% Other income 425 345 23
Slide 8: Sales growth
15 6 10 8.3 4.0 3.9 9.4 Space growth % 4.3 8 8.9 8.6 4 Growth % y/y 8.3 10 7.8 7.4 7.9 7.5 7.4 5.5 9.6% 5.6 6 9.0 % Mix 2 4.1 4 5 5.8 7.1% 5.4 4.8 Price 0 2 3.0 0 1.4 (2) 0 2011 2012 2013 2014 2015 Q1 Q2 H1 Unit growth RSP inflation Weighted average space growth Group Group Total Total Tota
Slide 9: Non-SA sales contribution and Nigeria
Non-SA sales contribution % Nigeria ZAR Stores Sales growth Opened Total Central Bank of Nigeria (CBN) Circular Namibia 39.5 (0.1%) 0 37 Jun 15: restricted certain importers from Botswana 21.8 8.2% 1 21 accessing FX market to pay for goods Subsequently restricted processing of Nigeria 11.5 27.9%
Slide 10: Continued Improvement In Operating Margin
Continued Improvement In Operating Margin 2014 15.1% Operating profit / RSOI Other Analysis of Financial Services & other income 0.1% income per page 6. Excludes cellular as included in GP Gross 40.1%* Merchandise GP% refer page 10 (1.2%) profit (PY 41.4%) Cellular GP% refer page 22 Employ
Slide 11: Cotton price, oil price & currency movements
Cotton price, oil price & currency movements 120 14 13.51 Cotton & oil price 97.35 13 100 ZAR/USD 12.08 11.54 12 80 11 73.38 69.35 68.74 60 10 55.79 48.88 40 9 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Oil ($/barrel) Cotton Cotton (US cents/pound) ($c/pound) ZAR/USD Oil ($/barrel) ZAR/USD Rand 17%
Slide 12: Operating margin and profit wedge
MRPG identified as 1 of 6 JSE ‘thriving’ companies MRPG has increased operating profit in 29 successive between 1997 & 2013.* Common characteristics: reporting periods - agility - constantly innovating, speed & flexibility, able 29 year CAGR in annual HEPS 23.3% & Dividends 25.0% to dictate ow
Slide 13: Financial Position
Financial Position September March September R’m 2015 2015 2014 Non-current assets Property, plant & equipment 1 083 838 770 Intangible assets 368 328 290 Other non-current assets 153 198 185 Current assets Inventories 1 887 1 741 1 654 Trade & other receivables 2 037 1 874 1 771 Reinsurance assets
Slide 14: PPE & Intangibles
PPE & Intangibles R’m Total PPE Intangibles R’m 2015 2014 Opening 1 166 838 328 IT 42 23 Additions 399 337 62 New DC 188 22 Disposals & impairments (7) (3) (4) Stores 107 97 Depreciation & amortisation (107) (89) (18) 337 142 Closing 1 451 1 083 368 H2 forecast capex 816 - Space worked per format 7.
Slide 15: ERP system implementation and distribution centre
ERP system implementation Merchandise planning - replenishment live in 3 divisions - full suite in mrpSport in May 16 ERP - installed Oracle V14.1 - data cleanse in progress (mrpSport completed) - fundamentals (masterdata) operational in Apr 16 Business intelligence - production & development
Slide 16: Hammarsdale Distribution Centre
Hammarsdale Distribution Centre €smr pricegrouplimited
Slide 17: Inventories and current liabilities
Gross inventories Current liabilities 2 200 3 000 +14.6% +9.8% 2 028 2 796 1 877 2 633 2 547 1 800 1 769 +8.0% 2 500 +6.2% R’m R’m 1 400 2 000 1 000 1 500 Sep 14 Mar 15 Sep 15 Sep 14 Mar 15 Sep 15 Earlier ownership due to higher FOB purchases Trade payables up 14.5%, in line with inventories I
Slide 18: Cash Generated & Capital Allocation
Cash Generated & Capital Allocation Cashflow movements (R'm) Capital allocation 1 800 March 2015 2 764 22% 1 600 Share schemes Cash generated from Acquired 1.97m shares at average 372 1 284 price of R224.71. Sold R71m operations 1 400 23% Interest received 235 1 200 399 Taxation (432) 1 000 R’m 80%
Slide 19: Segmental & Divisional Review
Segmental & Divisional Review
Slide 20: Apparel and Home segment results
R'm 2015 2014 % change Retail sales & other income Contribution to increase in sales Apparel 6 616 6 007 10.1% Home 2 293 2 150 6.6% Miladys (0.7)% Sheet Street 4.8 % Operating profit Apparel 1 194 1 052 13.4% mrpHome 14.3 % Home 334 270 23.5% mrp 72.4 % mrpSport 9.2 % 20 35 000 Sales density R/m2 O
Slide 21: Financial services and cellular revenue
R'm 2015 2014 % change Credit - interest & charges 192 174 10.4% Insurance 100 86 16.1% Cellular 118 76 55.9% - Commission 1 1 - Airtime sales 69 65 - mrpMobile (cellular MVNO) 48 10 Total revenue 410 336 22.1% Building a more diversified business 450 5 year revenue CAGR: 29.4% 160 R133m R410m Total
Slide 22: Credit performance and National Credit Act
Credit Continued improvement in performance of book 10 30 9.3 Cash sales 81.4% of total, credit 18.6% Gross trade receivables up 7.8% to R1.9bn 25 Active accounts up 2.6% to 1.4m Impairment provision / Net bad debt % Excellent collections performance Cash & credit sales growth % 8 7.3 NCR
Slide 23: Insurance and Cellular
Insurance Good sales growth, but now being impacted by slowdown in new account growth Introduced new insurance products in Oct 15 Tested sales to cash customers - improving processes before scaling Credit life customer protection plan benefit is not compulsory: - represents 6% of insurance i
Slide 24: mrp division results
2015 2014 % change Retail sales1 R5 071m R4 582m 10.7% Comparable sales 5.1% 15.1% Unit sales 67.4m 65.9m 2.2% RSP inflation (Price: 3.4%, Mix: 4.8%) 8.2% 10.3% Weighted average space growth 7.5% 8.1% Trading density R37 975m-2 R36 104m-2 5.2% 11 new stores opened (ROGA2 104%) & 10 expanded (ROGA
Slide 25: H&M and Cotton On store impact
Cotton On H&M 1 3 Opened 4 500m2 store in V&A Waterfront on 17 Oct 15 Same grade store sales growth* (% change) Adjacent stores Adjacent stores Same grade stores Same grade stores Not negatively impacting mrp sales growth: - 3 weeks preceeding opening 11% - 3 weeks post opening 26% + P
Slide 26: Store technology and omni-channel initiatives
mrpEmpower Store refresh Leveraging mobile technology to improve in Touch screen POS rollout underway store processes Bandwidth increase to support technology Visual merchandising, communication, KPI based initiatives dashboard, customer feedback Mobile POS Tap n Go Reduced queues & transa
Slide 27: Australia test stores
Opened 2 test stores in Melbourne, Australia in Oct 15 - Melbourne Central Shopping Centre, Corner Swanston & LaTrobe Street, Melbourne (1 050m2) - Eastland Shopping Centre, Maroondah Highway, Ringwood, Melbourne (850m2) Evaluate trade & business model in Q1 16 & firm up rollout strategy
Slide 28: mrpSport division results
2015 2014 % change Retail sales R560m R497m 12.6% Comparable sales 3.6% 3.4% Unit sales 5.7m 5.2m 9.5% RSP inflation (Price: 1.8%, Mix: 1.0%) 2.8% 7.8% Weighted average space growth 7.0% 10.8% Trading density R21 382m-2 R20 342m-2 5.1% 3 stores opened. Exited 1 276m2 unproductive space (ROGA 84.2%
Slide 29: Miladys division results
2015 2014 % change Retail sales R654m R659m (0.8%) Comparable sales (1.7%) 0.0% Unit sales 4.0m 4.3m (5.4%) RSP inflation (Price: 6.7%, Mix: -1.4%) 5.3% 2.7% Weighted average space growth 1.4% (1.3%) Trading density R22 748m-2 R22 547m-2 0.9% Impacted by low credit growth (56% of sales) & tough tr
Slide 30: mrpHome division results
2015 2014 % change Retail sales R1 567m R1 474m 6.3% Comparable sales 3.4% 7.6% Unit sales 18.0m 18.4m (2.0%) RSP inflation (Price: 6.5%, Mix: 2.0%) 8.5% 16.9% Weighted average space growth (2.1%) 2.3% Trading density R23 828m-2 R21 831m-2 9.1% Opened 3 stores, expanded 4 Exited 8 500m2 unproduc
Slide 31: Sheet Street division results
2015 2014 % change Retail sales R653m R621m 5.2% Comparable sales 3.1% 1.5% Unit sales 8.5m 8.5m 0.8% RSP inflation (Price: 3.1%, Mix: 1.2%) 4.3% 5.5% Weighted average space growth 1.5% 2.2% Trading density R27 571m-2 R26 804m-2 2.9% Opened 5 new stores, ROGA 67% Sales growth continues to reflec
Slide 32: Outlook
Economic situation in RSA unlikely to improve in short term: - inflation expected to breach 6% in Q1 16 - interest rates expected to increase by 100bpts in 2016 - poor employment & wage increase prospects, including the public sector - possible further currency weakness H2 sales base still high,
Slide 33: Thank You
Thank You Forthcoming market communication - 24 November 2015 Interim results conference call (3pm) - 15 January 2016 Q3 trading update release on SENS - 18 January 2016 Q3 trading update conference call Contact priscilla.leroux@Barclays.com or dial South Africa: 0800 994050 United Kingdom: 0800 0
Slide 34: About Mr Price Group
About Mr Price Group A high growth, omni-channel, fashion-value retailer Targeting younger customers in the mid to upper LSM categories Retailing predominantly own branded merchandise 81% of sales are for cash 1 166 stores & online channels offering full product assortments 29 year CAGR