Mr Price Group Limited · JSE:MRP
Mr Price — FY2022 Earnings Presentation
56 slides from Mr Price's earnings presentation, June 2022
Slide 1: Annual results to 2 April 2022
FY 20 Annual 22 results to 2 April 2022
Slide 2: Backdrop, Performance, Value creation, Looking ahead
01 03 Backdrop Value creation 02 04 Performance Looking ahead
Slide 3: Backdrop
R E TAI L E N VIRON MEN T OVER VIEW & GR O UP PERF ORMA N C E 01 Backdrop By Mark Blair - CEO
Slide 4: Strong performance despite many external challenges FY2022
S TRONG PERFORMANCE DESPITE MANY EXTERNAL CHALLENGES FY2022 Opened 130 new stores, acquired 7 and 01 Revenue* growth 25.9% 06 re-opened 96 of the 111 looted stores Operating profit exceeded R4bn for the 02 276m units sold, up 35.3% 07 first time. Operating margin* up 100bps Organic new departments a
Slide 5: Operating from a position of strength
OP ERATING FROM A POSITION OF STRENGTH External challenges COVID-19 Civil unrest Load shedding Global supply chain Input costs & inflation Constrained consumer Mr Price Group is well positioned to respond K E Y D I F F E R E N T I AT O R S Clear To be the most valuable retailer in Africa “Among the
Slide 6: Civil unrest
CIVIL UNREST Stores impact Insurance claims P R E V I O U S LY R E P O R T E D - SASRIA: received payment of R296.1m for stock, cash and PPE losses - 539 temporarily closed during the week - PPE replacement claim net of book value added back for HEPS - 111 closed due to damage (~7% of opening space)
Slide 7: Group performance
GRO UP PERFORMANCE % change FY2022 52/53 weeks 52/52 weeks H2 (26 weeks) Revenue R28.1bn 23.0% 25.9% 19.3% EBITDA* R6.9bn 23.6% 27.7% 24.5% Operating profit R4.9bn 28.3% 34.4% 27.7% Operating Margin 17.7% 60bps 100bps 20.8% | 130bps HEPS# 1 282.1c 20.1% 25.9% 21.2% Dividend per share 807.7c 20.1% *E
Slide 8: Retail sales growth
S TRO NG PE RF OR M AN CE A GA I NST DEM A N DI N G H2 BASE Retail sales growth EXCL ACQ. INCL ACQ. • H2: +7.3% and Q4: +10.3% sales growth up against firm bases of FY2022 +8.2% and +12.4% respectively ANNUAL 15.6% 26.0% • Market declined 0.5% in H2 H1 27.6% 37.6% FY2021 (RLC) H2 7.3% 18.0% • MRPG 2
Slide 9: Performance
DE TAI LE D GROU P RESU LTS 02 Performance By Mark Stirton - CFO
Slide 10: Group income statement & growth drivers
GRO UP INCOME STATEMENT & GROWTH DRIVERS % change Strong H2 despite tough base R’M 2022 2021 Annual H1 36.2% Continuing operations RSOI H2 19.6% Retail sales & other income (pg 50) 27 865 22 032 26.5% H2 FY2021 7.4% Gross profit (pg 15) 10 999 9 307 18.2% Expenses (pg 16) 7 099 6 087 16.6% H1 29.6%
Slide 11: Group sales growth drivers: geography and channel
FY2022 GRO UP SALES GROWTH DRIVERS Total retail sales growth +26.0% Total retail sales growth excl. acquisitions +15.6% Comparable stores sales growth +14.1% Geography Channel FY2022 H2 FY2022 FY2022 H2 FY2022 RSA Bricks +26.3 % +18.5 % +25.4 % +17.3 % Rest of Africa Online (High base growth of +64.
Slide 12: Group sales growth drivers continued
GRO UP SALES GROWTH DRIVERS Continued Tender type Merchandise FY2022 H2 FY2022 FY2022 H2 FY2022 Cash (Excl acquisitions cash +14.3%) Units sold (Excl acquisitions +10.0%) +26.4 % +18.4 % +35.3 % +27.1 % Credit RSP inflation* (Excl acquisitions 5.5%) +23.6 % +15.7 % -6.4 % -6.8 % Cash % of sales Unit
Slide 13: Segmental performance
Strong Apparel and FS & Telecoms performance continues. S EG MENTAL PERFORMANCE Home segment was up against significant sales & profit base in H2 Divisional contribution (RSOI) # Segment growth FY2022 H2 H2 FY2021 1.1% Apparel Segment: 69.9% 6.7% Mr Price Apparel Apparel RSOI 30.9% 23.1% 5.9% Mr Pri
Slide 14: Space growth: 1 721 stores
Industry leading trading density of R36 316m2 S PACE GROWTH Highest one year store openings on record T O TA L G R O U P O W N E D T O TA L G R O S S S PA C E 1 721 stores 884 758m 2 Apparel segment 1 175 stores Home segment 545 stores Cellular segment 1 store Mr Price 558 stores Mr Price Home 205 s
Slide 15: Gross profit analysis
GRO SS PROFIT ANALYSIS Total GP Factors affecting GP margin 2020 2021 2022 41.2% 42.5% 41.0% • Inventory write-offs of R159.3m due to the civil unrest. Recoveries from insurance claims accounted for under other income • Lower margin acquisitions not in the base Merchandise GP • Excluding inventory w
Slide 16: Overhead expenses
Total expenses +16.4% OVERHEAD EXPENSES Total expenses excl acquisitions +6.2% Every decision made every day must support our value roots Total expenses excl acquisitions: 2 year CAGR +4.6% Total expenses (R’M): Selling expenses 71.1%; admin expenses 28.9% FY2022 FY2021 % Change PY 2 year CAGR % (Ex
Slide 17: Strong balance sheet
S TRONG BALA NCE SHEET R’M Mar 2022 Sep 2021 Mar 2021 Inventory: growth within targeted range Non-current assets1 11 296 10 202 9 288 • Higher stock level held to mitigate supply chain & ERP go-live risk Current assets 11 381 10 140 10 587 • New categories & higher cellular handset stock held to sup
Slide 18: Cash flow movements
CASH FLOW MOVEMENTS R’M Mar 2021 4 949 Cash from operations before 6 764 Profit from operating activities increased 28.0% working capital changes Working capital Refer pg 19 for detail Operating (1 059) R4.8bn Net interest received 504 Impacted by higher working capital, dividend and acquisition out
Slide 19: Net working capital
NET WORKING CAPITAL Key initiatives to drive improvement: • Normalised inventory holding based on global supply chain recovery • Reduce inventory lead time through increased local sourcing & strategic partnerships • Strong cash generation from trade (>80% of sales are cash) • Healthy debtors’ book g
Slide 20: Credit growth performance: strong recovery and healthy metrics
CREDIT GROWTH PERFORMANCE: STRONG REC OVERY & HEALTHY ME TRICS Mr Price Group trends • Strong credit sales growth from H1 continues, up 23.6% in FY2022 • High new account sales due to successful customer campaigns • Existing base growth of 19.7% driven by: - increased credit activity & higher basket
Slide 21: Credit growth performance: early signs of industry deterioration
CREDIT GROWTH PERFORMANCE: EARLY SIGNS OF INDUSTRY DETERIORATION TransUnion SA Consumer Credit Index (CCI) Principa Face of Credit February 2022 report Clothing Retail TransUnion SA Consumer Credit Index (CCI) Mr Price Group Credit Industry 70 65 IMPROVING CREDIT HEALTH Total Good/Total Bad balance
Slide 22: Trade receivables
TRADE RECEIVABLES % Change R’M Mar 22 Sep 21 Mar 21 Mar/Sep Mar/Mar Total gross debtors’ book 2 265 1 990 1 970 12.7% 15.0% NBD: book (excl collection costs) 6.0% 10.1% 12.1% Impairment provision 9.1% 10.6% 13.4% • Factors affecting the credit environment in FY2022: - Increased consumer appetite for
Slide 23: Value creation
STR ATE GY 03 Value creation By Mark Blair - CEO
Slide 24: Vision: to be the most valuable retailer in Africa
VISIO N To be the most valuable retailer in Africa 24
Slide 25: A history of building brands
A HIST ORY OF B UILDING BRANDS +17.5 % 36 year sales CAGR Sales Acquisition Organic launch 30 000 25 000 20 000 SALES (R’ MILLIONS) mrp.com 15 000 10 000 5 000 GFC COVID-19 0 1987 1996 1998 2006 2007 2009 2012 2014 2015 2017 2020 2021 2022 2023 25
Slide 26: Strategic pillars
STRATEGY 6 strategic pillars STAKEH OL D ER EN G A G EM E N T GROW T H B R A ND P R O MI SE P EOP L E T E C H N OLOGY & IN NO VAT I O N SUSTA I NA B I L I T Y 26
Slide 27: Stakeholder engagement
S TAKEHOLDER ENGAGEMENT Our ability to deliver value I N T EL L I D EX I N VEST O R R EL AT I O N S AWARD S depends on our relationships with The group was rated in stakeholders. We do not win at their the inaugral Intellidex expense, we win with them. Investor Relations Awards across the Johannesbu
Slide 28: Growth
GRO WTH A growth mindset will energise our workforce, maintain a winning culture and provide room for all stakeholders to prosper Objective To be the top performer in total shareholder returns in the retail sector Progress • Strong sales & profit growth recovery since COVID-19 restrictions • Three s
Slide 29: Execution and growth
E XECUTION A ND GROWTH Driven by a multi-pronged strategy Comparative growth Non-comparative growth • Focused on SA and gaining market share • New store growth. All divisions, store footprint • Retail science applied to maximise densities and margins can extend to the whole country • Omni-channel fo
Slide 30: Opportunities matrix
OP P ORTUNITIES MATRIX FY2023 • Strong execution in existing divisions • On-boarding Studio 88 Group focus areas: • Integration of Power Fashion and Yuppiechef • Testing new organic concepts Identified opportunities Existing categories Awaiting fulfillment of conditions precedent Recently acquired L
Slide 31: Power Fashion: exciting growth prospects
Clear strategy and strong H2 growth momentum • Effective date 1 April 2021 (FY2021) • Tough first half due to civil unrest impact • Strong H2 performance: - Gained market share in 5/6 months - Opened 36 new stores (previously 20 per year on avg.) - Powercell growing strongly • Earnings accretive in
Slide 32: Yuppiechef: investment rationale and growth plans
• Effective date 1 August 2021 • Performing in line with management expectation • Growth drivers: - Omni-channel expansion - Wider merchandise assortment - Increased margins (private label) • Management change: - Unexpected management change navigated. Strong management team remain with a new leader
Slide 33: Studio 88 Group
S O U T H A F R I C A’ S largest independent retailer of branded leisure, lifestyle and sporting apparel & footwear Revenue* Stores* Studio 88 R5.6bn 711 Management remain in place Group & co-invested *12 months to September 2021 33
Slide 34: E-commerce
E -CO MMERCE Online sales 5-year CAGR: 39 % 3% contribution 1% contribution FY2018 FY2019 FY2020 FY2021 FY2022 Performance • Online sales, aided by YC inclusion, grew 48.2% against a base of 64.1% • Upgraded e-commerce platform to Magento 2 in September 2021 Future • COVID-19 removed some online bar
Slide 35: Customer engagement
CUSTOMER ENGA GEMENT Traffic market share FY2022 (omni-channel & online retailers) 1.9% 1.3% #1 Ranked 5.9 million 2.8% 2.6% Omni-channel fashion app in SA social media followers (Group) 3.5% 7.0% 1.1million Mr Price Group: 7.5% avg. monthly app users 2nd highest 48.6% market share 87% 11.5% of traf
Slide 36: Capital allocation
CAPITAL ALLOCATION Philosophy • Invest for the long term in the most attractive opportunities - returns and scalability FY2023 outlook • Company strategy is primarily targeted at revenue and earnings growth - remain focused on metrics • Capex of R900m planned for the year • Share buy-backs will be c
Slide 37: Brand promise
BRAND PROMISE O U R DEFINITION OF VA L U E e Objective ri c P Qu Grow brand value by surprising and delighting our customers with the wanted ali ty item at great value and a satisfying all-round experience Exp Progress erie nce 1. RLC market share increased 140bps 2. Increased brand equity, NPS and
Slide 38: Most valuable South African brands
MO ST VALUA BLE SOUTH AF RICAN BRAND S MR PRICE IS RANKED MR PRICE IS RANKED No.1 most No.1 most valuable valuable fashion apparel apparel retailer retailer 38
Slide 39: Fashion-value driving customer engagement
FA SHION-VA LUE DRIVING CUSTOMER ENGAGEMENT I N T H E L A S T 3 M O N T H S M R P R I C E A P PA R E L was the most shopped fashion retailer in South Africa with 5.7m shoppers Source: MAPS May 2022 39
Slide 40: Recognised as the value champion
RECOGNISED AS THE VAL UE CHAMPION Mr Price Apparel and Mr Price Home May 2022 report hold the M R P R I C E A P PA R E L MR PRICE HOME highest brand Brand equity equity and the leading position on the fashion- Fashion-Value matrix Highest in value matrix in Conversion to purchase segment their respe
Slide 41: People
PEOP LE Significantly increased Employment Equity goals. Objective In FY22, our African, Coloured & Indian appointments were: - 99% of hires in stores & 84% in head office (an 8% increase) Our energised environment and unique culture drives our performance and - 71% of promotions in head office posi
Slide 42: Innovation and technology
INNOVATION AND TECHNOLOGY Objective Entrench group culture and differentiation by leading with innovation and technology Progress 1. Roadmap in place to ensure strategic needs can be met & acquisitions appropriately integrated 2. FY2022: • New ERP - multi year implementation (go-live April 2022) - O
Slide 43: Sustainability
S USTAINABILITY Objective ta b ilising L dS t Qua A an l Impac lity T g cin ment a Ed N u uc We aim to be recognised by our stakeholders as a relevant, d on Primary at Re nvir 5 14 1 E SDG io NM 1 3 s n E 12 1 ethical & sustainable Proudly South African company RO 7 4 6 Reduce VI Helping children to
Slide 44: Sustainability performance
S USTAINABILITY PERFORMANCE R32.9 million 29.2 million 35.9 million plastic shopping bags removed products contain ENVIRONMENTAL donated to Mr Price Foundation from circulation sustainable materials 850 000 100% 25% zero of energy used at items of clothing donated DC water supply from plastic shoppi
Slide 45: Looking ahead
LO O K I NG A H EA D 04 Looking ahead By Mark Blair - CEO
Slide 46: Prospects
PROSP ECTS V O L AT I L E G L O B A L A N D D O M E S T I C L A N D S C A P E D R I V I N G I N F L AT I O N - Global: Russia-Ukraine war, China lockdown, supply chain, US inflation - Domestic: Load shedding, unemployment, social unrest, natural disasters, rising CPI - Hedged freight & exchange rate
Slide 47: Superior returns and metrics
S UP ERIOR RETURNS AND METRICS 10-year returns Last 12 months metrics 12.0% Mr Price Group Competitors* 10.0% Mr Price 8.0% ROE 28.9% 14.0% 10 year HEPS CAGR 6.0% 4.0% Comp 3 ROA 15.5% 5.8% Comp 1 2.0% 2.0% Comp 2 -6.0% -4.0% -2.0% 6.0% 8.0% 10.0% 12.0% EBITDA margin 25.8% 15.8% -2.0% -4.0% Net debt
Slide 48: Earnings performance
E ARNINGS PERFORMANCE +19.5 % 36 year HEPS CAGR HEPS CAGR (2017 - 2021) 10.0% 4.3% • Only retailer to report positive 4 year CAGR 0.0% • Delivering consistently despite -1.0% -5.8% -4.9% significant external challenges -10.0% • Quality of earnings driven mainly by strong trade -20.0% • No financing
Slide 49: Appendix: detailed supporting information
DE TAI LE D S U PPORTIN G IN F ORMATIO N 05 Appendix
Slide 50: Revenue
REVENUE R’M 2022 2021 % Change Retail sales 26 683 21 172 26.0% Other income 1 182 860 37.5% Financial services & Telecoms 1 012 810 25.0% Other 170 50 241.1% Total retail sales, interest & other income 27 865 22 032 26.5% Finance income 218 274 (20.4%) Total revenue 28 083 22 306 25.9% 52/52 week b
Slide 51: EBITDA reconciliation
E BITDA RECONCILIATION 53 WEEKS 52 WEEKS H2 R’M FY22 FY21 % growth FY22 FY21 % growth FY22 FY21 % growth Profit from operating activities 4 946 3 856 28.3% 4 946 3 687 34.1% 3 236 2 539 27.4% Total depreciation & amortisation 1 931 1 699 13.7% 1 931 1 699 13.7% 981 849 15.5% EBITDA 6 877 5 555 23.8%
Slide 52: Earnings & dividend per share
E ARNINGS & DIVIDEND PER SHARE 2022 2021* % Change Profit attributable to shareholders (R’m) 3 347 2 648 26.4% W. Avg shares in issue (000) 257 778 258 671 Basic earnings per share 1 298.6c 1 023.6c 26.9% Addbacks (R’m) (42) 114 Headline earnings (R’m) 3 305 2 762 Headline earnings per share 1 282.1
Slide 53: Space growth
S PACE GROWTH Space Movements (m ) 2 w.avg net growth M R P R I C E A P PA R E L 2.2% MILADYS 0.7% MR PRICE SPORT 8.5% MR PRICE HOME 4.2% SHEET STREET 3.0% Total space growth Net growth w.avg excl acquistions (0.1%) (0.2%) 0.3% 3.2% 3.2% closing excl acquisitions (0.3%) (0.4%) 0.6% 4.2% 4.2% w.avg i
Slide 54: Space growth: store footprint increased by 137 stores
S PACE GROWTH Divisions Store Movements Closing stores M R P R I C E A P PA R E L 4 5 9 24 558 MILADYS 3 1 15 251 MR PRICE SPORT 4 21 157 P O W E R FA S H I O N 1 3 36 209 MR PRICE HOME 3 6 22 205 SHEET STREET 2 11 2 333 YUPPIECHEF 1 7 7 Acquired MR PRICE CELLULAR 1 1 Total store movements Stores 8
Slide 55: Rest of Africa
REST OF AFRICA K E N YA 13 Total % of Group sales 7.2% FY21: 7.4% 3 GHANA No. of stores 12 ZAMBIA 138 Corporate owned stores: 130 42 NAMIBIA E S WAT I N I 16 33 B O T S WA N A Sales growth (ZAR) 22.0% FY2021: (17.5%) LESOTHO 11 55
Slide 56: Thank you
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