Mr Price Group Limited · JSE:MRP
Mr Price — H1 FY2013 Earnings Presentation
43 slides from Mr Price's earnings presentation, November 2012
Slide 1: Mr Price Group Limited Interim Results September 2012
Mr Price Group Limited Interim Results September 2012
Slide 2: Group Highlights
Group Highlights RETAIL SALES AND OTHER INCOME R6.2bn 14.5% OPERATING PROFIT R825m 21.2% OPERATING MARGIN 13.7% 0.8% HEADLINE EARNINGS PER SHARE 253.2c 35.2% DIVIDEND PER SHARE 133.0c 42.1% Interim Results September 2012 1
Slide 3: Achievements And Recognition
Achievements And Recognition May: • Included in MSCI Emerging Markets Index June: • IAS Awards 2012 – voted leader in corporate reporting in consumer services sector July: • Launched Mr Price Apparel online (www.mrp.co.za) • Concluded ADR with Bank of New York Mellon September: • Included in the JSE
Slide 4: Benchmarking
Benchmarking • Finweek Top 200 Review – ranked 17th on JSE for internal rate of return and 15th for return on assets • Sunday Times – ranked top performing company on JSE for total shareholder returns over 10 years • Plimsol Analysis of global top 100 clothing retailers – ranked 64th for sales and 2
Slide 5: Overview Of The Retail Environment
Overview Of The Retail Environment • Consumer confidence levels improved, but still slightly negative and not supportive of strong growth in consumer spending • Business confidence increased from 41 to 47 in Q3, but still negative • Interest rates remain at historically low levels, unlikely to incre
Slide 6: Exchange Rates, Volatility And Performance
Exchange Rates, Volatility And Performance ZAR/US$ exchange rate and HEPS AMPS (Jul-Jun) 14 51%* 600 SA Recession 6 12 14%* 500 5 19%* No. of shoppers (m) Cents per share 400 ZAR/US$ 10 21% 4 35% 300 3 8 200 2 6 100 1 4 0 0 2001 2003 2005 2007 2009 2011 2008 2009 2010 2011 Core HEPS ZAR/US$ Rang
Slide 7: Group Performance
Group Performance 2012 2011 Growth Retail sales R6.0 bn R5.3 bn 13.9 % Comparable sales 8.5 % Unit sales 92 m 85 m 9.0 % RSP inflation 4.3 % Weighted average space growth (net) 3.7 % Trading density R23 998 m-2 R21 964 m-2 9.3 % Operating margin 13.7 % 12.9 % Stores Space* Beginning of period 962 51
Slide 8: Retail Sales Growth
Retail Sales Growth • Growth in total retail sales in RSA for 6 months to 31 March was favourably impacted by the performance of general dealers and retailers of food and beverages but has slowed in 5 months since • Stronger performance by retailers of textiles, clothing, footwear and leather goods
Slide 9: Sales Analysis
Sales Analysis 20% Total sales growth • Space reduction in 18.6% 15% 13.9% 2011 due to store 4.2% 10.8% 11.0% 10.7% closures & reductions % change 1.4% 4.3% 10% SPACE 7.8% 5.5% • Closures substantially 11.6% 9.0% 5% 9.7% complete 0% 4.1% 5.4% • Ongoing reductions, however net space -5% growth is pla
Slide 10: 2012 Group Income Statement
2012 Group Income Statement % of % of R’m 2012 sales 2011 sales Growth Retail sales 6 015 5 283 13.9 % Cost of sales 3 532 3 099 14.0 % Gross profit 2 483 41.3% 2 184 41.3% 13.7 % Other income 186 132 40.8 % Selling expenses 1 404 23.3% 1 252 23.7% 12.2 % Administrative expenses 440 7.3% 384 7.3% 14
Slide 11: Analysis Of Expenses
Analysis Of Expenses 2012 % 2011 R’m increase R’m Selling expenses 1 404 12.2% 1 252 Constitute 76% of total expenses Inflation (5.8%) and weighted average space growth (3.7%) (9.5%) 2.7% % of retail sales 23.3% 23.7% • Increase in bad debts • Electricity and rates increases well above inflation • I
Slide 12: Operating Margin Improvement
Operating Margin Improvement Gross profit Selling expenses 15% 0.3% 14% 0.6% 0.4% 0.5% 0.3% 13% 0.2% 0.1% 12% 13.7% 12.9% 11% 10% Other PMO Other income Payroll Markdowns selling expenses Operating margin Operating margin Occupancy Other 2011 2012 Interim Results September 2012 11
Slide 13: Earnings And Dividends Per Share
Earnings And Dividends Per Share 2012 2011 Growth Earnings per share Basic 247.8 c 186.6 c 32.8 % Headline 253.2 c 187.3 c 35.2 % Fully diluted headline 232.5 c 173.2 c 34.3 % • Trading update 25 Oct 2012 – HEPS growth expected to be 30-35% • HEPS growth impacted by change from STC to dividends tax
Slide 14: Performance Record
Performance Record 280 253.2 240 200 187.3 HEPS and DPS (cents) 160 153.3 120 101.5 81.6 88.2 80 67.9 48.5 40 23.6 26.0 31.5 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Headline earnings per share Dividend per share HEPS DPS 5 year CAGR 25.4% 29.5% 10 year CAGR 26.8% 36.3% March 201
Slide 15: Financial Position
Financial Position R’m 2012 2011 Non-current assets Property, plant and equipment 584 486 Intangible and other assets 212 159 Current assets Inventories 1 117 1 055 Trade and other receivables 1 342 1 056 Cash and cash equivalents 1 030 900 4 285 3 656 Equity attributable to shareholders 2 800 2 222
Slide 16: Financial Position
Financial Position Intangible assets (R’m) 16.5% • E-Commerce system 2011 92 • Human Capital Management and merchandise related 2012 108 systems • IT software licenses Inventories 5.9% • Growth in Home chains lower than sales growth 2011 1,055 • Affected by delivery problems Aug/Sep 12, but 2012
Slide 17: Accounts Receivable
Accounts Receivable ±80% of total credit in RSA reflects best ageing in last 3 years 2% decline 100 15% in last quarter 100 88.5 91.2 82.7 76.3 81.3 80 76.3 Post democracy average 80 10% 59.8 60 60 40 % 40 5% 19.3 20 20 9.6 11.3 0 0% 0 S-97 S-99 S-01 S-03 S-05 S-07 S-09 S-11 Mortgages Secured Unsecu
Slide 18: Accounts Receivable
Accounts Receivable 2012 2011 Growth Gross trade receivables R1 351 m R954 m 41.6 % Number of active accounts 1 240 k 1 111 k 11.6 % Credit sales R1 254 m R994 m 26.1 % Percentage able to purchase 89.9 % 91.1 % Annualised net bad debt - % of debtors 6.1 % 4.1 % Excludes collection costs, movement in
Slide 19: Trade Receivables
Trade Receivables • Festive campaign in Q3 FY2012 resulted in credit growth higher than desired • Reacted by reducing limits and balancing growth of 6 and 12 month books • 90% of total debtors (‘old book’ and ‘new book’ - written since Jan 2012) performing well • Independent benchmarking – MPC still
Slide 20: Capital Expenditure
Capital Expenditure Total Retail Divisional split Other Reductions Sheet Street DC New stores Mr Price Revamps Home Mr Price 4% 9% 8% 8% 9% 22% 37% Miladys 9% 27% R161m R99m R99m Mr Price 4% IT 61% Sport 70% 32% Retail Expansions and Relocations • Charge for period: Depreciation - R83m (2011: R83m)
Slide 21: Divisional Performance
Mr Price Group Limited Divisional Performance 20
Slide 22: Segmental Performance
Segmental Performance 2012 2011 Growth Retail sales* R4.3 bn R3.8 bn 13.1 % Comparable sales 7.5 % Unit sales 65.0 m 59.9 m 8.5 % RSP inflation 4.1 % Weighted average space growth 4.7 % Number of stores 600 580 Trading density R26 812 m-2 R24 687 m-2 8.6 % Operating profit R727.9 m R626.6 m 16.2 % O
Slide 23: Mr Price
Mr Price 2012 2011 Growth Retail sales* R3.3 bn R3.0 bn 11.2 % Comparable sales 4.7 % Enhanced comparable sales** 7.2 % Unit sales 56.2 m 52.5 m 7.0 % RSP inflation 3.6 % Stock turn (times) 7.3 7.9 Weighted average space growth 7.3 % Number of stores 363 344 Trading density R31 052 m-2 R29 755 m-2 4
Slide 24: Mr Price
Mr Price RLC market share (%) Contribution to sales (up to 30 June) Footwear Clothing 15% 12.4% 13.7% Footwear 8.5% 85% 9.0% Clothing • 2011 • 2012 • Digesting AMPS results – preliminary results contradict sales performance, market share, number of transactions and basket size data • Retailmap resea
Slide 25: Mr Price Sport
Mr Price Sport 2012 2011 Growth Retail sales R373 m R294 m 27.0 % Comparable sales 15.5 % Unit sales 4.6 m 3.9 m 17.7 % RSP inflation 7.9 % Stock turn (times) 5.2 5.5 Weighted average space growth 5.2 % Number of stores 49 44 Trading density R16 277 m-2 R13 553 m-2 20.1 % • Impacted by same delivery
Slide 26: Mr Price Sport
Mr Price Sport • Maxed Elite and Trail Tech tests Contribution to Sales successful - range to be Equipment and expanded accessories • Gross profit % increase due 34% Apparel to improved markdowns 50% • Growth in expenses well below sales increase 16% • New look stores exceeding sales Footwear and pr
Slide 27: Miladys
Miladys 2012 2011 Growth Retail sales R605 m R515 m 17.5 % Comparable sales 18.5 % Unit sales 4.2 m 3.5 m 19.6 % RSP inflation (2.3 %) Stock turn (times) 6.1 5.5 Weighted average space growth (3.8 %) Number of stores 188 192 Trading density R19 740 m-2 R16 269 m-2 21.3 % • Delivery issues also exper
Slide 28: Miladys
Miladys RLC market share (%) Contribution to sales (up to 30 June) Accessories Outerwear 4.7% 8% 5.1% Footwear 12% Footwear 3.1% 2.7% Intimatewear 10% Intimatewear 70% 2.9% 2.9% Accessories 8.5% Outerwear 8.0% • 2011 • 2012 • AMPS: – 9% increase in no. of shoppers, compared to AMPS universe increase
Slide 29: Segmental Performance
Segmental Performance 2012 2011 Growth Retail sales R1.7 bn R1.5 bn 15.9 % Comparable sales 10.9 % Unit sales 27.2 m 24.7 m 10.2 % RSP inflation 4.6 % Weighted average space growth 1.8 % Number of stores 389 364 Trading density R19 014 m-2 R17 258 m-2 10.2 % Operating profit R178.1 m R130.5 m 36.5 %
Slide 30: Mr Price Home
Mr Price Home 2012 2011 Growth Retail sales R1.2 bn R1.0 bn 16.6 % Comparable sales 11.5 % Unit sales 18.8 m 17.0 m 10.9 % RSP inflation 3.9 % Stock turn (times) 6.0 5.9 Weighted average space growth 1.5 % Number of stores 144 133 Trading density R17 511 m-2 R15 882 m-2 10.3 % • Home chains not as a
Slide 31: Mr Price Home
Mr Price Home RLC market share (%) Contribution to sales (up to 30 June) Accessories Domestic textiles and decor 27.7% 27.6% 32% Accessories and decor 12.5% 55% 12.1% Household utensils 13% 20.2% 19.6% Household Domestic utensils • 2011 • 2012 textiles • Per AMPS grew total shopper numbers by 25%, a
Slide 32: Sheet Street
Sheet Street 2012 2011 Growth Retail sales R541 m R469 m 15.4 % Comparable sales 9.7 % Unit sales 8.4 m 7.8 m 8.7 % RSP inflation 6.2 % Stock turn (times) 6.8 6.8 Weighted average space growth 2.6 % Number of stores 245 231 Trading density R23 368 m-2 R21 210 m-2 10.2 % • Gross profit % improvement
Slide 33: Sheet Street
Sheet Street RLC market share (%) Contribution to sales (up to 30 June) Accessories Domestic textiles and décor 21.1% 17% 21.7% Accessories and decor 3.3% 3.5% 83% • 2011 • 2012 Domestic textiles • Winner of the Ask Afrika Orange Index 2012 - customer service levels in Home & Décor category • Daily
Slide 34: The Growth Strategy
The Growth Strategy SOUTH AFRICA Space • Targeting 4-5% annual growth • Smaller store formats have been successful to date. Viable in areas previously not considered and not dependent on major centre developments • Expansion opportunity mainly in Mr Price Apparel – aim to expand 127 stores • Ongoing
Slide 35: The Growth Strategy: Online
The Growth Strategy SOUTH AFRICA Why online? • To protect and grow local market share • Lower costs associated with this model • To use platform to launch brand in prospective international markets Key differentiators • 3 delivery channels, mobile enabled, 6 payment methods • Low delivery costs rela
Slide 36: The Growth Strategy
The Growth Strategy SOUTH AFRICA • Performance metrics achieved: – Conversion rates – Average basket size – Time spent on site – Average page views – Ratio of mobile pages to web pages viewed are characteristic of a mature USA/European E-Commerce business – very unusual for a new start up • Key focu
Slide 37: The Growth Strategy: International
The Growth Strategy SOUTH AFRICA INTERNATIONAL • 14 years experience operating in Africa Botswana • Test stores in Ghana and Nigeria highlight 16 Lesotho potential of these markets 2 – Double digit operating margin in 1st year 6 Swaziland – Ghana top quartile store Rest of Africa 26 11 Nigeria • Foc
Slide 38: The Growth Strategy: Supply Chain
The Growth Strategy SOUTH AFRICA INTERNATIONAL SUPPLY CHAIN Productivity improvements • Implemented e-Tradex – paperless importing and exporting system that resulted in improved accuracy and speed • Now capable of ordering in multiple currencies for delivery to multiple destinations • Implemented PA
Slide 39: The Growth Strategy: Supply Chain
The Growth Strategy SOUTH AFRICA INTERNATIONAL SUPPLY CHAIN Consolidation centres • 3 offshore third party centres used (2 in China, 1 in Bangladesh) • Test phase – 1.5 million units from 20 factory direct suppliers • Benefits are: – Reduced freight costs – Increased visibility – Avoiding double dut
Slide 40: The Growth Strategy: Supply Chain
The Growth Strategy SOUTH AFRICA INTERNATIONAL SUPPLY CHAIN Factory direct sourcing • Increased by 69% in value in last 6 months Reduced dependence on China • Reduction of 2.5% of total purchases from China in 1st half • Approximately half of this picked up by South African manufacturers, which has
Slide 41: The Growth Strategy: Systems
The Growth Strategy SUPPLY SOUTH AFRICA INTERNATIONAL CHAIN SYSTEMS ERP system • New ERP system required to support future local and international growth • Strategic IT assessment complete • Possible vendors identified • Vendor and client site visits undertaken • Proof of concept presentations curre
Slide 42: The Growth Strategy: People
The Growth Strategy SUPPLY SOUTH AFRICA INTERNATIONAL CHAIN SYSTEMS PEOPLE • Human Capital Management system currently being implemented • Roll-out of Dayforce labour scheduling system to 50 stores in November. Balance of stores over next 12 months • Training spend increased 225% over last 3 years •
Slide 43: Thank You
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