Mr Price Group Limited · JSE:MRP
Mr Price — FY2021 Earnings Presentation
71 slides from Mr Price's earnings presentation, Apr 3, 2021
Slide 1: A year like no other
FY2021 Annual Results to 3 April 2021 A year like no Siya Kolisi - Springbok Rugby Captain other. Mr Price Brand Ambassador
Slide 2: Backdrop, Performance, Vision & Strategy
Backdrop Performance Vision & Strategy 01 02 03
Slide 3: Backdrop
01 Backdrop Retail Environment Overview and Group Performance BY MARK BLAIR - CEO
Slide 4: A year like no other
4 A year like no other We are proud We proved that our business model is resilient in the worst of times and that our people are highly adaptable OUR KEY PRIORITIES WERE • Staff: to ensure their physical, psychological and financial safety • Customers: to create a safe shopping environment in our st
Slide 5: Group performance
5 Group performance HIGHLIGHTS PERFORMANCE AHEAD OF THE MARKET • Gained R1.2bn (150bps) market share Mr Price Group RSA market Vs • Delivered R500m new sales growth through organically sales growth# growth launched departments • Online sales grew by 64.1% and nearly doubled in contribution to 2.4% o
Slide 6: Operating environment
6 Operating environment Economic recovery could be slower than expected Low growth environment Recovering but still low relative SA GDP GROWTH BUSINESS CONFIDENCE long before COVID-19 to prior years 50 44 5 3.8 1.4 1.3 1.1 0.9 40 0.7 0.1 0.0 0.1 0.1 40 35 0 Index points -0.5 30 28 -5 -4.1 24 % -6.2
Slide 7: Consumer environment
7 Consumer environment Unpredictable consumer environment likely to continue in 2021 EVIDENCE OF CONSUMER SPENDING VOLITILITY HOUSEHOLD IMPACT Q4 2020 Q4 2019 30 Real wage -2.5 % +1.0 % Sales growth % 25 20 growth 10 5 0 -5 -10 -15 Disposable income growth +3.0 % +5.0 % May 20 Jun 20 Jul 20 Aug 20 S
Slide 8: Group performance
8 Group performance 53 weeks 52 weeks H2 Revenue R22.8bn (0.6%) (2.9%) 7.3% EBITDA* R5.6bn (1.0%) (4.2%) 8.6% Profit after tax R2.7bn (2.6%) (7.3%) 12.1% Operating Margin 17.1% (40bps) 16.7% | (80bps) 19.6% | 70bps 26 weeks: 13.2% Total diluted HEPS 1 049.0c 1.9% (2.8%) 27 weeks: 21.4% Dividend per
Slide 9: Annual market share performance
9 Annual market share performance MARKET SHARE ANALYSIS R1.2BN MARKET SHARE GAIN IN FY2021 H1 Market share gains despite level 5 lockdown in April & merchandise H1: Retail sales -14.8% H2: Retail sales +8.5% restrictions in May, indicating consumers’ preference for value. Agile supply chain enabled
Slide 10: Performance: Detailed Group and Divisional Results
02 Performance (52/52 weeks) Detailed Group &and Divisional Results BY MARK STRITON STIRTON - CFO
Slide 11: Group Income Statement & Growth Drivers
11 Group Income Statement & Growth Drivers % Change Strong second half performance R’M 2021 2020 creating a healthy profit wedge Annual H2 Continuing operations H1 (14.8%) Retail sales & other income (pg 62)1 22 032 22 708 (3.0%) 7.4% *RSOI H2 7.4% Gross profit (pg 15)2 9 067 9 047 0.2% 9.2% Expense
Slide 12: Group sales growth drivers
• Despite the challenges of COVID-19 the group sold 12 Group sales growth drivers ^ >200m units during the year. Significant change in momentum in H2 GEOGRAPHY TENDER TYPE CHANNEL MERCHANDISE FY21 H2 FY21 FY21 H2 FY21 FY21 H2 FY21 FY21 H2 FY21 RSA *CASH BRICKS UNIT GROWTH -2.6 % +8.1 % -0.2 % +10.4
Slide 13: Divisional performance and insights
13 Divisional performance and insights *RETAIL SALES & OTHER INCOME Contribution Growth Insights FY21 H2 Retail sales up 8.2% in H2 at higher GP margin. Gained market share every month MR PRICE 55.0% -3.4% +8.4% & achieved highest monthly market share on record between Aug 20-Jan 21. Online sales do
Slide 14: Space growth
14 Space growth Total Group Owned 1 418 stores APPAREL SEGMENT HOME SEGMENT Store & space growth insights (Refer pg 65 for detail) • Intentionally opened less stores in H1 (17) due to COVID-19 capex Mr Price 538 stores Mr Price Home 183 stores considerations. Opened 37 new stores in H2, totaling 54
Slide 15: Gross profit analysis
15 Gross profit analysis Merchandise GP Telecoms GP Total GP 2019 2020 2021 2019 2020 2021 2019 2020 2021 43.6% 42.1% 43.5% 19.1% 18.7% 19.0% 42.9% 41.2% 42.5% • Increase driven by lowest markdown levels • Intentional changes to sales contribution mix • Gains driven by Apparel, Homeware & in the las
Slide 16: Overhead expenses
16 Overhead expenses Total expenses Total expenses excl. impairment +3.7% +1.4% Selling expenses (R’M) Administrative expenses (R’M) % Change % Change 2021 2020 2021 2020 Annual H2 Annual H2 4 340 4 482 (3.1%) 0.0% 1 747 1 391 25.6% 21.3% • W.avg space growth of 1.6% (new space growth of 2.5%) • Exc
Slide 17: Strong balance sheet
17 Strong balance sheet R’M Mar 2021 Mar 2020 • Power Fashion (PF) effective date fell within 53rd week • Inventory excl PF increased 10.5%. Non-comp categories Non-current assets1 9 288 6 950 impacted growth • Freshness & stock turn improved. Current assets 10 587 10 244 Strong clearances post-lock
Slide 18: Cash flow movements
18 Cash flow movements R’M Mar 2020 4 726 Cash from operations 5 428 Increased 4.8% on PY despite Apr 20 store closures Operating R4.8bn Working capital 192 Higher inventory balance offset by sales in week 53 trade Net interest received 564 Interest received impacted by lower interest rates & debtor
Slide 19: Mr Price Group credit performance
19 Mr Price Group credit performance Credit R2.9bn sales (14.5%) • High double digit credit declines in H1 (-27.3%) slowed to low single digit declines in H2 (-4.0%). Home segment & Cellular reported positive credit growth in H2 of 2.1% & 17.2% respectively • Transactions were 30.7% lower but basket
Slide 20: Trade receivables
20 Trade receivables % Change R’M Mar 21 Sep 20 Mar 20 Mar/Sep Mar/Mar Total debtors book 1 970 2 031 2 300 (3.2%) (14.0%) NBD: book (excl collection costs) 12.1% 8.1% 6.3% Impairment provision 13.4% 15.2% 10.5% • Factors effecting credit environment: - Distressed low to mid LSM consumer - Interest
Slide 21: Vision & Strategy
03 Vision & Strategy BY MARK BLAIR - CEO
Slide 22: Market leaders
22 Market leaders Market leading metrics for an extended period of time Profitability* Performance & returns Return on Equity Return on Assets HEPS growth 19.4 % * 14.0 % * 2.0 % 30.0 % 19.1 % 35 year CAGR 10 year CAGR 10 year CAGR Competitors Total shareholder returns JSE Top 40 Competitors JSE Top
Slide 23: Delivered superior returns over last 10 years
23 Delivered superior returns over last 10 years 20.0% 15.0% Mr Price 10 year HEPS growth (CAGR) 10.0% Peer 1 5.0% Peer 3 -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% Peer 2 -5.0% -10.0% 10 year share price growth CAGR Source: Bloomberg | Size of circle represents market capitalisation | FY2020 for comparison
Slide 24: A history of building brands & delivering returns
24 A history of building brands & delivering returns... but ‘spiky’ last 5 years 350 1 400 300 1 200 250 1 000 200 mrp.com 800 Share price (Rand) HEPS (Cents) 150 600 237 stores GFC Recovery from internal 100 challenges 400 COVID-19 200 50 0 0 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1
Slide 25: So what's changed?
25 So what’s changed? Last 5 years Now Didn’t do enough in the good years to protect us from a cycle Detailed research to develop new long term vision & of economic headwinds strategy (future proofing the business) Good balance between operations & strategy. Extraction Operational mindset from detai
Slide 26: Vision: most valuable retailer in Africa
Vision To be the most valuable* retailer in Africa Trading divisions will focus on existing markets for next 3-5 years, removing the distraction of international markets while we: - Strengthen our backbone: technology & innovation, sustainability - Acquire & launch new businesses & categories locall
Slide 27: Defining success
27 Defining success What we will look like in the future: • Multiple growth opportunities with sector leading sales growth 84 bn 90 • Double the number of trading divisions & exponentially grow e-comm • Strong test mentality: 80 - Implement innovative concepts & grow the best performers either organ
Slide 28: Purpose: Your Value Champion
Purpose Your Value Champion
Slide 29: Mr Price apparel continues to offer the best fashion-value
29 Mr Price apparel continues to offer the best fashion-value... Fashion Value-Total Apparel FASHIONISTA FASHION VALUE Mr Price Woolworths Edgars H&M Fashion Truworths Ackermans Cotton On Jet Markham PEP Pick n Pay clothing UNDEFINED BARGAIN HUNTER Value Source: Borderless Access Summer 2020 Expand
Slide 30: As does Mr Price Home & Sheet Street
30 ... as does Mr Price Home & Sheet Street Fashion Value-Total Homeware NICHE LEADER Mr Price Home @Home Woolworths Sheet Street Home Choice Fashion Game Makro Clicks PEP Home Volpes Ackermans Checkers Inspire Jet PNP Ackermans UNFAMILIAR CHALLENGER Value Source: Nielsen Summer 2020
Slide 31: Our strategy is working
Our strategy is working • Strengthened our culture & organisational health • Increased visibility of our brands • Added >R4bn to annualised revenue: - gained R1.2bn market share FY21 - introduced many new categories adding ~R500m in non comp revenue - lay-bys/ RCS/ tender types - concluded market re
Slide 32: +size
+size
Slide 33: oh hey
oh hey
Slide 34: EXciting
EXciting
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Slide 38: Mr Price Home
(mr pricehome Af} Wy tid
Slide 39: Online launched
online launched
Slide 40: Our strategic pillars
Strategy Our 6 strategic pillars Stakeholder Brand Technology People Growth Sustainability engagement Promise & innovation
Slide 41: Stakeholder engagement
41 Stakeholder engagement Our ability to deliver value depends on our relationships with stakeholders. We do not win at their expense, we win with them. Our stakeholder relationships are based on the true spirit of partnership and we are ranked as the leading Objective retailer in ‘engagement and de
Slide 42: People
42 People Significantly increased Employment Equity goals. In FY21, our African, Coloured & Indian appointments were: - 99% of hires in stores - 76% of hires & 70% of promotions at head office In a thriving growth business, there will be career opportunities for all who perform Having acquired Yuppi
Slide 43: Growth
43 Growth Growth mindset will engage our workforce, produce 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. Earnings growth Rating (PE ratio) Dividends • Sales growth • Consistency of performance
Slide 44: Opportunities to grow
44 Opportunities to grow Luxury 80:20 We will always remain focused on: Premium Cash : Credit Opportunity Fashion/price value : Aspirational value Aspirational Private label : Brands Opportunity Yuppiechef miladys.com value/Niche mrprice.com Opportunity mrpricesport.com Fashion mrpricehome.com value
Slide 45: Power Fashion acquisition
45 • Effective date 1 April 2021 • Purchase consideration R1.5bn net of cash acquired • Founder retired, management team fully retained • Senior managing director appointed from Mr Price Group • 174 stores (RSA 165, Lesotho & Eswatini 9) at take on (~64 000m-2) • Revenue last 12 months R1.7bn which
Slide 46: Yuppiechef acquisition
Opportunity to increase contribution of 46 private label at higher margins Select Brands • Submission to competition commission on 15 April 2021. Brands Private label Expected effective date of July/August 2021 • Wholesale 5%; Retail 95% (75% online, 21% stores) • Strong credentials in kitchen, MRPG
Slide 47: Group e-commerce - FY21 performance
Group e-commerce - FY21 performance REVENUE Group online revenue ORDERS Every 58 seconds was the equivalent of three 674 Group achieved online growth of k 64.1 % & nearly doubled in an order was processed contribution to (LY every 1m40s) 2.4% of sales orders processed. flagship stores Average orders
Slide 48: Mr Price Apparel has the highest market share of web traffic in SA
48 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% miladys.com 2.3% mrprice.com 16.7% mrpricesport.com 3.2% archivestore.co.za 2.2% donna.co.za Source: Similar Web (Apr 20- Mar 21) 1.4% duesouthescapes.co.za 0.1% exact.co.za fabiani.co.za 2.1% 1.3% foschini.co.za 5.5% foschiniforbeauty.co.za 1.8% g-star.com 0.9%
Slide 49: Mr Price Home has the highest market share of web traffic in SA
49 Mr Price Home has the highest market share of web traffic in SA Omni-Channel Homeware Brands April 2020 - March 2021 40% 34.7% 35% 30% 28.0% 24.8% 25% +170 20% 15% 10% 6.5% 4.9% 5% 0.5% 0.3% 0% mrpricehome.com sheetstreet.com home.co.za mywedding.co.za homechoice.co.za houseandhome.co.za homeetc.
Slide 50: Capital allocation
50 Capital allocation • Invest for the long term in the most attractive opportunities - returns & scalability • Company strategy is primarily targeted at revenue & earnings growth • Leading metrics - but not at the expense of growth • Share buy-backs will be continually evaluated against market cond
Slide 51: Brand promise
51 Brand promise Price • Expand our traditional interpretation of value, particularly for our new ‘aspirational Experience Quality value’ segment • CRM business case developed & currently being evaluated. Data to provide actionable insights to serve our customers better & grow sales Convenience Fash
Slide 52: Increase brand equity scores for each division
52 Increase brand equity scores for each division & for company from 2.7 to 3.2 by 2026 Brand Equity Mr Price Apparel has the highest brand equity - one of two brands to gain +0.2 +0.2 4 3.4 Strong 2.7 3 2.4 2.2 2.1 1.9 1.9 Moderate 2 1.4 1.3 1.3 1.3 1.2 1.2 1.0 0.9 0.7 0.7 0.6 1 0.4 Weak 0 Mr Price
Slide 53: Mr Price has the highest conversion: awareness to purchasing
53 Mr Price has the highest conversion: awareness to purchasing Unaided awareness > bought in last 3 months 40 Mr Price 30 Bought in last 3 months Ackermans Pep 20 Woolworths Jet Pick n Pay clothing 10 Truworths Edgars Sportscene Markham H&M The Fix Cotton On Superbalist 0 10 20 30 40 50 60 Unaided
Slide 54: Retail brand value ranking
Retail brand value ranking 5 th 4 th 54 most innovative most loved Increased brand value per BrandZ most $2bn 22 % $455m valuable RSA brands Financial value Brand contribution Brand value 1 2 3 4 5 6 7 8 9 9 10 2031 2.7 bn 2.7 bn 2.7 bn 2.5 bn 1.9 bn 1.8 bn 1.1 bn 1.0 bn 959 mn 892 mn FNB Standard b
Slide 55: Retail brand value ranking explained
55 Retail brand value ranking explained GOAL ACTION Purpose • Establish divisional plans to communicate our purpose & ESG so that customers know what we stand for Brand is perceived to make people’s lives better Win • Continue to improve quality & fit • Maintain Fashion-Value positioning Innovation
Slide 56: Mr Price Sharks Marathon
mrp to The Comrade’s SA Olympic Mr Price Sharks Marathon Team
Slide 57: Technology & innovation
57 Technology & innovation • Transtion tech focus from infrastructure & applications to innovation • Agile & secure platform & systems to support our strategic needs: - Bed down Retail Modernisation Programme (foundation of our core functions) - Finance ERP successfully implemented - Key FY22 delive
Slide 58: Sustainability
58 Sustainability We aim to be recognised by our stakeholders as a relevant, ethical & sustainable Proudly South African company Working towards inclusion in FTSE/JSE Repsponsible investment Top 30 index ESG activities recently consolidated under director leadership 1. Environmental 2. Social 3. Gov
Slide 59: Outlook
59 Outlook • Tough & unpredictable retail environment expected: - RSA COVID-19: 3rd wave - Most impactful on Mr Price Sport & Miladys - Mid single digit RSP inflation expected in H1 • Capex of ~R700m including Power Fashion: - Plan to open ~100 new stores - W. avg space growth 12.0%, excluding Power
Slide 60: Thank you
Thank you
Slide 61: Appendix: Detailed supporting information
04 Appendix Detailed supporting information
Slide 62: Revenue
62 Revenue Continuing operations 2021 2020 % Change Retail sales 21 172 21 687 (2.4%) Other income 860 1 021 (15.7%) Financial services & Telecoms 804 950 (15.3%) Other 56 71 (21.1%) Total retail sales, interest & other income 22 032 22 708 (3.0%) Finance income 274 257 6.4% Total revenue 22 306 22
Slide 63: EBITDA reconciliation
63 EBITDA reconciliation 53 weeks 52 weeks H2 R’M FY21 FY20 % growth FY21 FY20 % growth FY21 FY20 % growth Profit from operating activities 3 863.8 3 979.0 (2.9%) 3 687.2 3 979.0 (7.3%) 2 539.3 2 290.0 10.9% Depreciation incl ROUA 1 609.5 1 567.6 2.7% 1 609.5 1 567.6 2.7% 800.0 790.0 1.3% Amortisati
Slide 64: Earnings & dividend per share
64 Earnings & dividend per share 2021 2020 % Change Profit attributable to shareholders (R’m) 2 648 2 704 (2.1%) W. Avg shares in issue (000) 258 671 259 419 Basic earnings per share 1 023.6c 1 042.4c (1.8%) Addbacks (R’m) 114 12 Headline earnings (R’m) 2 762 2 716 Headline earnings per share 1 067.
Slide 65: Space growth
SPACE MOVEMENTS (m2) w.avg net growth Space 65 Mr Price Apparel 1.5% growth Miladys 2.6% Mr Price Sport 3.4% Mr Price Home 0.7% Sheet Street 1.3% Total space growth Net growth w.avg (0.6%) (0.3%) 0.1% 2.4% 1.6% closing (0.9%) (0.6%) 0.3% 2.4% 1.2% Closures Reductions Expansions New Stores STORE MOVE
Slide 66: Segment performance
66 Segment performance *RSOI CONTRIBUTION RSOI GROWTH SEGMENT GROWTH Apparel Annual H2 Mr Price Apparel Mr Price Sport Miladys Apparel 6.9% (3.4%) (10.0%) (20.1%) RSOI (5.8%) 5.9% 17.6% Operating profit 2.5% 31.5% Operating margin 18.4% 21.9% 8.0% Home Home Mr Price Home Sheet Street 5.7% 55.0% 3.5%
Slide 67: Apparel segment
67 Apparel segment Mr Price Apparel Miladys Mr Price Sport 2021 2020 % Change 2021 2020 % Change 2021 2020 % Change Retail sales1 R12 065m R12 499m (3.5%) R1 233m R1 550m (20.5%) R1 511m R1 679m (10.0%) Comparable sales growth (4.8%) (3.3%) (23.8%) 1.4% (16.7%) 4.6% Unit sales 136m 148m (8.3%) 6.1m
Slide 68: Home segment
68 Home segment Mr Price Home Sheet Street 2021 2020 % Change 2021 2020 % Change Retail sales1 R3 871m R3 739m 3.5% R1 753m R1 666m 5.2% Comparable sales growth 2.2% 0.3% 4.3% 1.7% Unit sales 32.7m 33.1m (1.3%) 17.2m 17.7m (2.7%) RSP inflation2 4.9% 4.2% 8.1% 6.2% Weighted avg. space growth 0.7% (0.
Slide 69: Mr Price Money
69 Mr Price Money Mr Price Money R’m 2021 2020 % Change Telecoms 862 773 11.6% Financial services 653 764 (14.5%) Total revenue 1 515 1 536 (1.4%)
Slide 70: Rest of Africa
70 Rest of Africa Total % of Group sales 7.6% FY20: 7.6% No. of stores 128 Corporate owned stores: 120 Sales growth (ZAR) (2.7%) FY20: (2.2%) H2: +10.0%
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