Mr Price Group Limited · JSE:MRP
Mr Price — H1 FY2017 Earnings Presentation
37 slides from Mr Price's earnings presentation, September 2016
Slide 1: Interim Results - September 2016
Interim Results - September 2016
Slide 2: Performance Overview
Performance Overview Statutory Normalised* Revenue R9.17bn 1.5% Operating profit R1.25bn (13.4%) R1.29bn (4.2%) EBITDA R1.37bn (11.5%) R1.41bn (2.9%) Diluted HEPS 351.2c (13.7%) 360.4c (4.9%) Dividends per share 228.2c (8.0%) * Normalised earnings - explanation pg 2 - detailed reconciliation pg 36 1
Slide 3: Normalised Earnings Adjustment
Normalised Earnings Adjustment Foreign exchange contracts (FEC’s) are entered into to hedge the importation of merchandise in USD H1 FY16 - on fair value accounting basis - mark to market adjustments on FEC’s accounted for in administrative expenses - total translation gains of R102.8m H1 FY17
Slide 4: Overview of Retail Environment
Overview of Retail Environment Political environment impacting currency and broader economy - GDP growth y/y Q1 -0.1%, Q2 0.6% - inflation currently 6.1%, food 11.3% - unemployment rate up to 26.6% y/y - demographic tailwinds slowed Consumers are feeling the strain - diverting spend to essential
Slide 5: Group Income Statement
Group Income Statement % change R’m 2016 2015 Statutory Normalised Retail sales & other income (RSOI) 9 131 8 983 1.6% Cost of sales 5 347 5 194 3.0% Selling expenses 1 914 1 815 5.5% Administrative expenses 619 529 17.0% (7.4%) Profit from operating activities 1 251 1 445 (13.4%) (4.2%) Net finance
Slide 6: Earnings Per Share
Earnings Per Share % change 2016 2015 Statutory Normalised Profit attributable to shareholders R921m R1 076m (14.4%) (5.7%) W. avg number of shares in issue (000)1 254 562 252 439 0.8% Basic earnings per share 361.8c 426.2c (15.1%) (6.5%) Addbacks R1m R4m (62.0%) Headline earnings R922m R1 080m (14.
Slide 7: Dividend Per Share
Dividend Per Share Previously communicated our intention to align interim & annual payout ratios Interim payout ratio increased from 58% to 63% Alignment objective now achieved Interim dividend of 228.2c (LY: 248.0c), down 8.0% FY16 annual dividend was based on 53 week HEPS 70 Payout ratio
Slide 8: Interim HEPS & DPS History
Interim HEPS & DPS History 450 400 350 Cents per share 300 250 200 150 100 50 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 DPS Statutory HEPS Normalised HEPS Reported HEPS DPS Heps Normalised 10 YEAR CAGR IN HEPS OF 18.2% & DPS OF 22.3% 7
Slide 9: Revenue Analysis
Revenue Analysis R'm 2016 2015 % change Retail sales1, 2, 3 8 588 8 558 0.4% Financial services (pg 21) 525 410 27.9% Other4 18 15 28.1% Other income 543 425 27.9% Total retail sales & other income 9 131 8 983 1.6% Finance income (bank interest)5 36 47 (24.0%) Total revenue 9 167 9 030 1.5% 1 Unit
Slide 10: Retail Sales Analysis
Retail Sales Analysis 100% Growth Growth Growth Sheet Street 7.9% 4.2% Other 8.4% (4.5%) Credit 17.4% (6.2%) mrpHome 18.6% 1.5% 80% Miladys 6.8% (11.0%) mrpSport 7.4% 13.3% 60% 40% mrp 59.3% (0.5%) RSA 91.6% 0.8% Cash 82.6% 1.9% 20% MRPG growth lower than 7.9% for Type D retailers per Stats SA, Aug
Slide 11: Retail Sales Growth per Stats SA is Slowing
Retail Sales Growth per Stats SA is Slowing 13% Company trading update 31 Aug 16 - advised 11% of shifts in consumer spending patterns 9.7% 10.0% 9% Subsequent results have confirmed - Holdsport HEPS -19% 7% - Edcon sales growth -8.1%, GP% -200bps, Sales growth % 5.8% adjusted EBITDA -54% 5% - T
Slide 12: International Performance
International Performance Sales contribution % (bricks) Sales Stores R’m Growth Change Total Australia Lesotho Namibia 276 (7.0%) 37 2.1 4.0 Ghana Botswana 165 0.2% 22 4.3 Nigeria 46 (46.0%) 5 Swaziland Zambia 57 13.7% 1 9 Namibia 6.5 Swaziland 46 4.0% 7 Ghana 31 3.2% 6 38.4 Zambia Lesotho 29 10.5%
Slide 13: Merchandise Gross Margin
Merchandise Gross Margin Cotton & Oil Price vs USD/ZAR Cotton price (US cents per lb) 100 17 Oil price (USD per barrel) 97.34 16.04 90 16 77.9 80 15 USD/ZAR 69.4 68.7 14.88 70 14.67 14 73.4 14.01 60 55.79 65.5 13 13.19 13.43 50 11.28 12.42 12 40 11.71 47.23 46.19 11 10.67 39.07 30 10 Sep-14 Mar-15 S
Slide 14: Expense Growth & Operating Margin
Expense Growth & Operating Margin Selling Expenses +5.5% Bad debt net of recoveries up 5.4% Increase in S & A 2.2% Release of impairment provision in base of R19m expenses excluding FX Employment costs up 3.0% - lower overtime & incentives - higher ETI allowance 0.2 Rentals up 3.9% (7.9% exc
Slide 15: Segmental Performance
Segmental Performance % change 2016 2015 Statutory Normalised Retail sales & other income Apparel 6 319 6 338 (0.3%) Home 2 281 2 229 2.3% Financial services & cellular 524 412 27.2% Operating profit Apparel 779 1 063 (26.7%) (16.8%) Home 364 302 20.4% 24.8% Financial services & cellular 181 174 4.1
Slide 16: Financial Position
Financial Position September March R’m 2016 2016 Non-current assets 1 Pension fund asset, deferred Property, plant & equipment 1 903 1 672 tax asset R60m, long term Intangible assets 399 373 receivables R20m Other non-current assets1 156 196 2 Inventories 3.8% lower Current assets (excluding
Slide 17: PPE & Intangibles
PPE & Intangibles R’m Intangibles PPE Total Additions include Opening 373 1 672 2 045 Hammarsdale Distribution Centre Additions 45 350 395 - project on track for Jun 17 go live Disposals & impairments (3) (3) - 84% of total cost of R1.25bn spent to date Depreciation & amortisation (19) (104) (123)
Slide 18: Hammarsdale Distribution Centre
Hammarsdale Distribution Centre 58 000m2 construction, ability to expand to 100 000m2 when required 17
Slide 19: Hammarsdale Distribution Centre
Hammarsdale Distribution Centre 18
Slide 20: Cash Flow Movements
Cash Flow Movements (Rm) March March 2016 2016: 1 419 2015: 2 764* R1 516m including cash in reinsurance assets Cash from operations 1 159 Decrease of 9.7% on H1 FY16 Operating Receivables R38m, Inventories R101m, Payables -R315m R1.1bn# Working capital ( 176 ) Interest received 206 Lower ca
Slide 21: Divisional Review
Divisional Review 20
Slide 22: Financial Services & Cellular Revenue
Revenue R'm 2016 2015 % change Credit - interest & charges 215 192 11.9% Credit Insurance 105 100 4.7% Lower interest offset by account charges Cellular 205 118 73.9% - Commission 1 1 (3.5%) Insurance - Airtime sales 91 69 31.6% Positive growth despite lower account openings - mrpMobile (cellula
Slide 23: RSA Credit Environment
RSA Credit Environment NCR Consumer Credit Market Report - Jun 16 Ageing Total book Change y/y Current Change y/y Mortgages 52.1% 1.1% 90.7% (0.6%) Secured 22.5% 4.9% 89.9% (1.4%) Credit facilities* 13.2% 3.5% 83.0% 0.4% Unsecured 9.8% 0.0% 73.4% 3.9% Other 2.4% 100% * Includes retailers - book de
Slide 24: Credit
Credit Good progress made with new account applications in mrp (credit specialist stores) 32 000 24 000 16 000 8 000 0 April May June July August September 2016 Received 2015 Received Approved2015 2016 Received 2015 Received Approved Approved 2016 Approved Dedicated credit specialists in 2
Slide 25: mrp Division Results
2016 2015 % change Retail sales1 R5 046m R5 071m (0.5%) Comparable sales (4.1%) 5.1% Unit sales 61.2m 67.4m (9.2%) RSP inflation 8.8% 8.2% Weighted average space growth2 5.0% 7.5% Trading density2 R37 594m-2 R37 975m-2 (1.0%) Economic environments in RSA & Africa, credit regulations & weather were
Slide 26: mrp Merchandise Review
Consumer environment is constrained, however there are merchandise opportunities Best performance in menswear. Largest department, ladieswear, underperformed Weak currency impacted product execution in certain categories Under-invested in heavier weight product in the height of winter Did no
Slide 27: Average price (full RSP) of shopping bag
retailmap Survey - Women’s Clothing (23 May – 3 Jun 16) Maintained competitive position y/y Pricing Is As Strong As Ever R6 000 70% Woolworths 82% 54% Truworths Average price (full RSP) of shopping bag 51% R5 000 Foschini 35% Woolworths 44% 24% Truworths Cotton On 22% 21% R4 000 H&M Foschini 7% Cott
Slide 28: Areas Re-inforced
Areas Re-inforced Excellence in execution Re-inforced merchandise processes and disciplines Strengthened and restructured the business and merchandise leadership teams Price and fashion value Re-inforce the value perception - balance between price and quality Potential quality, pricing and m
Slide 29: mrpSport Results
2016 2015 % change Retail sales R634m R560m 13.3% Comparable sales 2.1% 3.6% Unit sales 5.5m 5.7m (3.4%) RSP inflation 16.9% 2.8% Weighted average space growth 6.7% 7.0% Trading density R23 113m-2 R21 382m-2 8.1% Continued strong performance in our Maxed fitness brand with comp sales up 13% Exce
Slide 30: Miladys Results
2016 2015 % change Retail sales R582m R654m (11.0%) Comparable sales (12.4%) (1.7%) Unit sales 3.3m 4.0m (19.3%) RSP inflation 10.4% 5.3% Weighted average space growth 0.4% 1.4% Trading density R21 158m-2 R22 748m-2 (7.0%) Refocused on our niche customer to ensure that we provide a versatile wardr
Slide 31: mrpHome Results
2016 2015 % change Retail sales R1 590m R1 567m 1.5% Comparable sales (0.7%) 3.4% Unit sales 15.3m 18.0m (15.1%) RSP inflation 19.1% 8.5% Weighted average space growth (3.4%) (2.1%) Trading density R25 529m-2 R23 828m-2 7.1% Living softs department performed best. As expected, the more discretiona
Slide 32: Sheet Street Results
2016 2015 % change Retail sales R680m R654m 4.0% Comparable sales 3.3% 3.1% Unit sales 7.9m 8.5m (7.7%) RSP inflation 12.7% 4.3% Weighted average space growth (0.3%) 1.5% Trading density R28 818m-2 R27 571m-2 4.5% Strongest sales growth in livingroom department of 7.4% Improved GP% and overheads
Slide 33: International Growth
International Growth mrp 2 large stores opened in Oct 15 in Australia. Full range has provided clarity as to which product categories perform best Considering smaller format test store Launching Magento online platform - fulfillment from Eastlands store mrpHome Opened 350m2 store on 20 Oct 1
Slide 34: Australia
Australia Northlands Shopping Centre, Melbourne, Australia 33
Slide 35: Prospects
Prospects Annual closing trading space expected to increase by 3.2% - H2 26 new stores, 22 expansions & 11 reductions - further expansion opportunities may arise as competitors tackle densities - focused on introducing quality new space (vs quantity). The group has highest 5 year CAGR in trading d
Slide 36: Thank You
Thank You 35
Slide 37: Normalised earning reconciliation
Normalised earning reconciliation 1 October 2016 26 September 2015 % change R'm Statutory Adjustment Normalised Statutory Adjustment Normalised Statutory Normalised Retail sales and other income 9 131 9 131 8 983 8 983 1.6 1.6 Costs and expenses 7 880 (34) 7 846 7 538 103 7 641 4.5 2.7 Cost of sales