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Unaudited Results for 26 Weeks ended 30 September 2023, Dividend Declaration and Change in Directors' Responsibility
MR PRICE GROUP LIMITED
Registration number 1933/004418/06
Incorporated in the Republic of South Africa
ISIN: ZAE 000200457
LEI number: 378900D3417C35C5D733
JSE and A2X share code: MRP
("Mr Price" or "the company" or "the group")
UNAUDITED INTERIM GROUP RESULTS FOR THE 26 WEEKS ENDED 30 SEPTEMBER 2023, CASH DIVIDEND
DECLARATION AND CHANGE IN DIRECTORS' RESPONSIBILITY
This short-form announcement is the responsibility of the Mr Price Group Limited board of directors and is a summary of the
information in the detailed results announcement available on:
https://senspdf.jse.co.za/documents/2023/JSE/ISSE/MRPE/23112023.pdf and https://www.mrpricegroup.com and does not
contain full or complete details. These documents and the results presentation to the investment community are available on
the group's website at www.mrpricegroup.com and copies may be requested from the company secretary
(jcheadle@mrpg.com or +27 31 310 8000) at the company's registered office. Any investment decision in relation to the
company's shares should be based on the full announcement.
MR PRICE GROUP LIMITED REPORTS INTERIM RESULTS FOR THE 26 WEEKS ENDED 30 SEPTEMBER 2023
Mr Price today released its interim results for the 26 weeks ended 30 September 2023 ("Period"), during which the group
recorded growth in revenue of 26.4% to R16.8bn. This performance includes the recently acquired Studio 88 Group (S88),
effective 4 October 2022, excluding which revenue grew 3.5% to R13.7bn.
Basic and headline earnings per share of 448.8 cents and 449.9 cents were down 10.3% and 9.3% respectively. Diluted
headline earnings per share decreased 9.6% to 439.5 cents against growth in the prior period of 10.8%. An interim dividend
of 283.5 cents per share was declared, maintaining the 63% pay-out ratio.
Results were characterised by the same challenging circumstances that carried over from H2 in the prior financial year. In the
FY2023 results announcement in June 2023 and the Q1 trading update issued in July 2023, shareholders were cautioned
about the impacts of several disruptive events and the inclusion of S88 in group results:
- Loadshedding, was four times higher in Q1 than the same period in the prior year. During this period the group spent
R140m to accelerate its back-up power solutions (60% of core business had back-up power at the start of Q1) and
achieved 100% coverage by the end of the first quarter. The group estimates a loss of 60 000 trading hours from
loadshedding in H1, equivalent to approximately R190m in revenue;
- The poor economic and consumer retail environments, including double digit inflation in food and public transport
which impacted the value customer more severely, coupled with rising interest rates;
- Elevated inventory levels in the sector resulted in a highly promotional retail environment, which adversely impacted
the group's EDLP model. Higher markdowns were required to clear excess inventory which impacted gross profit
margins; and
- Studio 88 trades at a lower GP% than the group, and has an earnings profile materially weighted to H2.
Pleasingly, there was a significant momentum shift in Q2, with sales growth improvements in all sales channels, tender types
and geographies, resulting in market share gains, and an uplift in GP%. The positive market share trend continued into H2,
with market share up 70 basis points (bps) in October 2023, according to the RLC.
Group results summary
Group revenue grew 26.4% to R16.8bn. This included retail sales of R16.1bn increasing 27.8%, other income of R607m
improving 13.3% and finance income of R57m declining 55.6%, due to the acquisition of S88 which was funded entirely from
cash resources. Retail sales excluding S88 grew 3.8% (Q1: 0.9%; Q2: 7.1%) and comparable store sales decreased 0.8%
(Q1: -3.8; Q2: 2.6%).
Store sales increased 28.8% (excluding S88: 4.1%). Online sales decreased 3.2% (excluding S88: -5.7%), against double-
digit growth of 11.2% in the prior period. The group's omni-channel strategy enables profitable online growth to support a value
business, while ensuring that it continues to serve the needs and shopping preferences of its customers. Total unit sales
increased 8.0% (excluding S88: -1.1%). Group Retail selling price (RSP) inflation increased to 19.1% due to the inclusion of
the higher price point merchandise in S88, excluding which, RSP inflation was 5.4%.
The store footprint advanced to a total of 2 809 stores, increasing by 121 new stores (63 new stores from the existing business
and 58 from S88), across the group's 13 trading chains. Weighted average trading space increased 28.5% (excluding S88
5.6%), and the group's return thresholds, which are well in excess of its cost of capital, are being achieved.
Cash sales constituted 87.8% of group retail sales and increased 32.0% (excluding S88: 3.8%). Credit sales growth of 3.3%
reflected the group's caution regarding the deteriorating credit environment and the implementation of its strict credit granting
criteria, limiting new account growth accordingly. Transunion's Consumer Credit Index (Q2 2023) reported its lowest level on
record, and although credit applications received increased 14.2%, the approval rate decreased to 18.6% from 27.1% in the
prior year.
The gross profit margin declined by 170bps to 38.6%. This was impacted by higher markdowns, (particularly in Q1), the
inclusion of S88 which operates at a lower margin than the group and further currency depreciation. Excluding S88 gross profit
margin was down 100bps due to the impact of Q1 (-350bps) but recovered strongly in Q2, up 190bps on the prior year, as
excess inventory was cleared, and fresh summer inputs took effect. Pleasingly, Power Fashion, Yuppiechef and the Telecoms
business all grew their gross profit margin during H1, while those same businesses, as well as Mr Price Apparel and Sheet
Street achieved gains in Q2.
Total expenses increased 33.6%, and 6.1% excluding S88. Profit from operating activities decreased 0.4% to R1.9bn and the
operating margin decreased 320bps to 11.5% of retail sales and other income (RSOI). Net finance expense was 88.3% higher
at R336m, due to lower bank interest received because of the S88 acquisition consideration being paid in cash, and an
increase in interest on lease liabilities due to the take on of S88 rental agreements and new store openings. This resulted in
profit before tax, which still includes 100% of S88's profit's (i.e., prior to deducting non-controlling interests) declining 9.5% to
R1.6bn. Management is confident that the margin contraction during the Period is temporary and is mainly attributable to Q1
performance and S88's earnings being weighted to H2.
Segmental performance
Retail sales growth Comparable
sales growth
Incl. S88 Excl. S88 Cont. to retail
H1 FY2024 vs H1 FY2023 sales
Apparel segment 37.9% 5.1% 0.5% 78.8%
Home segment -1.0% -1.0% -5.5% 17.9%
Telecoms segment 7.9% 7.9% 2.7% 3.3%
Total group 27.8% 3.8% -0.8%
The Apparel segment retail sales increased 37.9% to R12.7bn (excluding S88: +5.1%) and comparable retail sales increased
0.5%. The impact of loadshedding and the retail sector challenges in Q1 are reflected in the segment's comparable sales
decreasing 3.5% over these months. In Q2, comparable sales increased 5.2% and the segment gained 50bps of market share
according to RLC. The group's largest division, Mr Price Apparel, led the recovery performance and reached its highest
September market share level on record. Power Fashion continued to deliver strong double-digit sales growth, healthy
comparable sales growth and gained market share in each month of the Period, while S88 continued to deliver double digit
sales growth.
The Homeware segment retail sales decreased 1.0% to R2.9bn and comparable retail sales decreased 5.5%. This was an
improved performance from H2 FY2023 and like the Apparel segment, the Homeware segment delivered better results in Q2
than Q1 with improved sales and gross margin momentum. Yuppiechef delivered double digit sales growth and an improved
margin performance than the prior period. As previously communicated, the segment has faced a prolonged period of
intensified competitor activity, bringing about structural changes to the market. Management is confident that the biggest
impact has been realised and is clear on its plans to continue defending its dominant market share position.
The Telecoms segment retail sales increased 7.9% to R533m and comparable sales grew 2.7%. The standalone Mr Price
Cellular stores continue to outperform feasibilities. Cellular handsets and accessories gained 120bps of market share
according to GfK.
The Financial Services segment revenue increased 10.3% to R444m. Debtors' interest and fees increased 14.5% due to a
higher average debtors' book and a further 50bps increase in the repo rate over the Period. Despite tightening the credit
granting scorecard and lowering the account approval rate, consumer debt serviceability was constrained by affordability
challenges and net bad debt to book ratio increased to 10.0%. The impairment provision increased to 10.5% (H1 FY2023:
7.9%).
The group placed a sharp focus on inventory management to ensure that it traded out of its excess stock carry from FY2023
and exited winter in a clean position. Excluding S88 stock was up 2.1%, in line with management's expectation. Stock
freshness (0 - 3 months ageing) at the end of the Period was 81.7%. The inclusion of S88 inflated the group's gross closing
inventory position which was up 64.3%. The group anticipates being in a negative inventory growth position by the end of
FY2024.
Capital expenditure of R637m was primarily allocated towards new stores and the installation of back-up power solutions over
Q1. The group remains highly cash generative, and its cash conversion ratio increased to 81.4% as it ended the Period with
available cash of R1.1bn. The unencumbered position of the balance sheet continues to support its focus on growth, and its
identified capital allocation opportunities.
Outlook
South African consumers are likely to remain constrained into 2024 as the recovery in employment has lagged economic
activity and real wage growth has been negative. The recent improvements in consumer price inflation, fuel prices, currency
exchange rates and unemployment will bring some respite to business and consumers. The interest rate cycle is anticipated
to turn positive by mid-2024, which will alleviate consumer pressure. Electricity supply remains a risk to economic activity,
however there is expectation that the loadshedding intensity moderates.
An increasing risk to business in South Africa is the instability of port operations. The company will continue to take the
necessary steps to minimise this impact and management is satisfied that the group has adequate stock levels for the
upcoming festive season.
The group's fashion-differentiation, EDLP model and deep knowledge of the South African consumer has enabled it to
withstand many historical economic cycles and periods of increased competition. Its core brands have recently been voted
the most valuable apparel retailer in South Africa, the most shopped retailer, the coolest clothing store in SA and the most
loved homeware retailer in SA by various independent sources. This external recognition, and the unwavering support of its
28 000 associates and suppliers, provides the group with confidence that the positive momentum experienced in Q2, can
continue into H2 and beyond. Its acquisitions have been earnings accretive to date and there are several attractive growth
opportunities available. This includes Mr Price Kids, which now has a total of 16 standalone stores which are exceeding
expectations and has the potential to be a significant retail chain for the group.
Annual capital expenditure of R1.4bn is anticipated and the group plans to open approximately 140 new stores during the
remainder of FY2024, which will be the primary channel of capital allocation.
Retail sales post the reporting period reflected a tougher October for the sector. According to the RLC, the comparable total
market declined 1.5% while the group recorded positive retail sales growth of 2.3%, gaining 70bps of market share. Retail
sales improved in the first two weeks of November, up 6.2%.
A voluntary trading update covering Q3 FY2024 (October to December 2023) will be released in January 2024.
INTERIM CASH DIVIDEND DECLARATION
Notice is hereby given that an interim gross cash dividend of 283.5 cents per share was declared for the 26 weeks
ended 30 September 2023, a 9.3% decrease against the prior year. As the dividend has been declared from income
reserves, shareholders, unless exempt or who qualify for a reduced withholding tax rate, will receive a net dividend
of 226.80000 cents per share. The dividend withholding tax rate is 20%.
The issued share capital at the declaration date is 256 791 496 listed ordinary and 6 792 786 unlisted B ordinary
shares. The tax reference number is 9285/130/20/0.
The salient dates for the dividend will be as follows:
Last date to trade 'cum' the dividend Monday 11 December 2023
Date trading commences 'ex' the dividend Tuesday 12 December 2023
Record date Thursday 14 December 2023
Payment date Monday 18 December 2023
Shareholders may not dematerialise or rematerialise their share certificates between Tuesday, 12 December 2023
and Thursday, 14 December 2023, both dates inclusive.
Shareholders should note that dividend payments will be paid via electronic transfer into t he bank accounts of
shareholders whose banking details are held by the company's transfer secretaries, Computershare Investor Services
(Pty) Ltd. Shareholders whose bank account details are not held by Computershare are requested to provide such
details to Computershare on 0861 100 950 to enable payment of the dividend and all future dividends. Where
shareholders do not provide the transfer secretaries with their banking details, the dividend will not be forfeited, but
will be marked as "unclaimed" in the share register until the shareholder provides the transfer secretaries with the
relevant banking details for payout.
The dividend was approved by the Board in Durban.
DIRECTORS
SB Cohen* (Honorary Chairman), NG Payne* (Chairman), MM Blair (CEO), P Nundkumar (CFO), N Abrams*,
MJ Bowman*, JA Canny*, RJD Inskip*, D Naidoo*, H Ramsumer*, LA Swartz*
* Non-executive director
CHANGE IN DIRECTORS' RESPONSIBILITY
In compliance with section 3.59 of the JSE Listings Requirements, shareholders are advised of the below changes to the
composition of the Company's committees.
Remuneration and Nominations Committee
Richard Inskip, who joined the board of directors in July 2023, has been appointed as a member of the Remuneration and
Nominations committee with effect from 1 December 2023.
Risk and IT Committee
Neill Abrams, who transitioned from alternate director in September 2023, has been appointed as a member of the Risk and
IT committee also effect from 1 December 2023.
Durban
23 November 2023
JSE Equity Sponsor and Corporate Broker
Investec Bank Limited
Date: 23-11-2023 07:05:00
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