Mr Price Group Limited (MRP) Earnings Call Transcript & Summary

Good morning, everybody, and welcome to the Mr Price Group year-end results for the year ended 31st of March, in our case the 2nd of April, 2022. We are doing this virtually, as you can see. And hopefully, this is the last time that we need to. We really look forward to getting back on the road at the half year results this coming November. Just in terms of the overall content, I'll talk a little bit about setting the scene, some highlights on performance. Mark Stirton, our CFO, will then unpack the performance in a lot more detail. And then I'll start talking longer term in terms of our vision, our strategy and our prospects. So just the highlights and summary. First of all, revenue growth, up 26%. And within that number, sold some 276 million units, a staggering number, and that's up 35% on the year. Within that sales growth as well we've had and we've spoken about at lengths over the last couple of years, about our new organic growth departments. They now contribute 4.5% of sales to the group. A lot of them are quite materially rolled out at this stage. There is still some upside to come. So we'll do that at the pace that we've set. Very pleasingly, we've -- as we've spoken about at some length and had separate presentations about them, Power Fashion and Yuppiechef were brought into our fold over the last year or so and both of those proved to be earnings accretive to the group during the period. Overall, our market share was up 140 basis points. We opened 130 new stores, and there's really a significant effort on the real estate front. Because not only did we open those stores, we reopened 96 of the looted stores as a result of the civil unrest last July. Our operating profit exceeded ZAR 4 billion by some way for the first time, and we increased our operating margin by 100 basis points. Overall, our HEPS was up 26%. Dividend, as you can see it's slightly lower. The only reason for that is that last year, the dividend was based on a full 53-week period, and therefore, it's a slightly lower growth rate in the current year. Very proud about our industry-leading ROE, 28.9%, it's something that we -- that we do monitor and we do aim to keep up at those levels. And -- yes, I think it's great at the end of the day that we've had all this activity, we spent all the CapEx that we've spent on the stores, we've bidded down and landed 2 acquisitions. And we've still got ZAR 4.6 billion cash on our balance sheet and we're free of financing debt. In fact, it's quite a thing worth noting that we haven't gone to the market for any kind of equity raise. So rights issues, all those kind of things, for over 30 years, so that's also something to note. On the top line there, all those little red bars, you can see many of the things that we've had to face as a business this year. I think they are factors that are known to all of you, and they are not all South African issues. These -- many of these are global issues as well. So I won't go into them. You can read what they are. But I think for us as a business, it's about us being clear about what our prospects are, the things we choose to do and how differentiated we are. Starts off with the vision and the strategy; we'll talk about that later, but we are clear on what we want to do. And we have got the business model that, in a very constrained environment, which I think we're going to go into, that we've got the model that will suit that. No doubt there will be some trading down and we've got differentiation once those customers do trade down. We've got a representation across industry segments, and customer segments. And as you will see, when we go into some of the statistics a little bit later, our customers are highly engaged and highly loyal. And I guess that's reinforced by some of the external surveys, our results and all -- underpinning that is our differentiated fashion, the experience we give them. And you will see just now, we've also had nice gains in our quality of our merchandise. Also, we'd certainly look as a business to execution. That's really high on our agenda. I think our performance track record speaks for itself. We'll go through some of that. We've spoken at length about metrics. I think in many metrics, we top the sector, and it's our aim to be there. Some of the metrics we are prepared to reduce slightly as we bring in new businesses in search for growth, and as we grow our own businesses, but overall, we still aim to be top quadrant in our metrics and as I said, very strong cash balance. Yes. Once again, we've spoken to you at length about the civil unrest, but just an update on exactly where we are. At the end of FY '22, the financial year-end, we had opened 96 stores of the 111 stores that were damaged. Some of those will open in the current year. You can see 5 of those of the remainder and 10 only in the financial -- the next financial year. Those were the centers had been damaged quite badly. So in terms of the actual insurance claim process -- and first of all, in terms of SASRIA, we received payment of ZAR 296 million that covered our stock write-offs, our cash losses and our PPE losses, our equipment and our store equipment losses. Obviously, the stock is a rand for rand replacement. The cash is rand for rand. But the PPE losses, because of the book value versus the insurance proceeds, there is a differential, but that differential is added back for headline earnings. So to be clear, the headline earnings is net of any gain in the current year that arose on the insurance claim for PPE. As a completely separate insurance claim, that's the business interruption, when our stores were down and couldn't trade during that period. We've received an interim payment of ZAR 92 million that hasn't been recognized in income in these numbers. The claim is not finalized. And we do expect it to be quite a bit more than that. And that will be recognized in income, hopefully, the first half of the new financial year, once the claim is actually finalized with our insurers. Looking a little bit closer at some of the numbers then. As I said, and I'll talk predominantly for that -- to that middle column, the 52 on 52-week column. Revenue up, as I said, 26%; EBITDA up 27.7% and 24.5% in the second half. And there you can see a very strong gain in operating profit. If you just cast your eyes down and then you'd relate that operating profit gain of 34% to the HEPS gain of 25.9%, that's that add back in terms of insurance and some other smaller items that I was talking about a bit earlier. And there you see the dividend per share up 20%. I think it's worthwhile also mentioning that your performance is always relative to your base. So if you just look at -- first of all, let's look at the base. So go to that left-hand -- the table on the left and at the bottom, you see FY 2021. You can see in the H2, we grew 8.2% when the market actually declined 0.5% per RLC, and in Q4, we grew 12.4%. So just cast your eye at that table to the F '22 column. And it's the one on the left, excluding acquisitions, on those base numbers that we just spoke about, we grew 7.3% on the 8.2% in the base. And in Q4, we grew double digits, 10.3% on the base of 12.4%. So high base with still decent growth in this year and that was excluding acquisitions. If you then look on the right-hand side, including acquisitions, you can see that we grew 18% in H2, and even higher, in Q4, we grew 19.3%. That's on the sales line. In the financial year with everything that went on, just to remind you that we actually posted earnings growth. It was a 53-week period. But we posted earnings growth of 2% when most of the market was in steep decline. Okay. I'll hand over to Mark and he will go through the detailed results now.

Good morning, everyone. Thanks for joining us. The set performance, as obviously you got the 52 and a 53-week, like Mark spoke about. We got 53 weeks in the base. So everything I'm going to say going forward is going to be on 52-week basis. There's obviously the acquisitions that sit in the numbers. So I'm going to try help you navigate through all of that. But just it would be remiss of me not to say that this type of results -- and I know Mark will talk about it later, it could only be done by just some exceptional people within our business. We've got a saying in our business, it's ordinary people doing extraordinary things. There's some extraordinary people doing extraordinary things. And I think we're very grateful as the management to be able to lean on people to try and produce these results that don't come very easy, particularly in this type of climate. The first thing I want to just highlight to you is, we're very proud of what we call the profit wedge, other guys call it the operating leverage. And I've called out there in that red block there. Just how you can see that retail sales grew 26.5%. This is obviously on a 52-week basis, gross margin 18.2%. Expenses were well contained at 16.6%, which gave us that operating leverage of 34.1%. Profit attributed to shareholders, if you cast your eye down to the bottom, was 32.8%, which is obviously close to the earnings per share number. And yes, that's an exceptional performance in this climate. Fine, and if you cast your eye to the right, we just want to call out the H2 performance. And if you look at our base, you can see that the base was also quite strong. And yet we've been able to grow off quite a strong base, which we're actually quite proud of and we believe it's just a continuing strength from the first half, which, as you know, contained the April and a bit of May closures in the COVID base. So that -- obviously, our first half was strongly influenced by that, but the performance was continued into the second half, which we are very proud of. Just take you through some of the drivers. Mark spoken about the retail sales growth, so I'm not going to go into that too much detail. Its suffice to say that our comparable growth was up 14.1%. From a geography perspective where do we trade? RSA still continues to be our predominant market in line with our strategy to concentrate on this market. We know it well. It's at 92.8%. I've got a slide in the back of the deck -- ancillary slide, which talks about our contribution from Africa. In RSA, we grew 26.3% and the rest of Africa, we grew 22%, with a strong second half performance, as you can see on the right-hand side of that. From a channel perspective, bricks grew at 25.4% and 17.3% in the second half. And online, coming off a big base of 64.1% growth, grew 48.2% supplemented by introduction of Yuppiechef into the group. So bricks make up 97.1%. Say it differently, that online makes up 2.9% of our retail sales. From a tender-type perspective. Cash, we continue to be a cash-focused business. Even the acquisitions are also primarily cash-based businesses that we don't have our credit offering in them. They grew 26.4% and with credit growing at 23.6%, but it's coming off a very low base. And I'll explain to you a little bit about the credit story later. The second half is growing at 18.4% cash and 15.7% credit, which was a strong performance from the credit continuing. Again, there's base effects there that are also stimulating the credit growth. Excluding acquisitions, I called out the cash is 14.3%. Merchandise, we obviously sold, Mark alluded to how many units we sold -- 276 million units, 35% up and a strong performance into the second half, excluding acquisitions was 10% up. RSP inflation, it does look strange at minus 6.4%, but that is the introduction of Power Fashion who has items that are obviously of great value, and that's at minus 6.4%. But if you exclude acquisitions, we were at 5.5%, which is in line with inflation. On the segmental performance, strong Apparel and FS & Telecoms performance where the Home segment was up against a significant sales and profit base in H2. So if you look at that, our graph on the right-hand side, you'll see the Apparel performance for the full year and for H2 was very strong. And coming off a strong base in H2, the Home segment grew also nicely at 15.6% and 14.6%. H2 was a slightly softer performance. But if you can see on the far right column, you'll see their performance in H2 was very strong. And we gained considerable market share in Home in the prior period. And our Financial Services & Telecoms segment had an amazing performance, 22% up in RSOI and 85.3%. I'll speak to you a little about the collection performance and the write-offs in the prior period were high. And that, obviously, this year, we were able to contain that and we were able to also improve our collections and recovery in the books in a much healthier place. On the left-hand side, you can see the wagon wheel there. And part of our strategy is to not have so much reliance on one big division. You can see that Apparel is at now at 51.2% with the introduction of Power, which is that browny red color, that's at 6.4%, which is very much in line with our Miladys and Sheet Street businesses and even Sport are now at that sort of contribution level. So you can see we're starting to reduce our reliance on any single one division. From a space growth perspective, this is really some of the hero of the story. And again, it would be remiss to not call out like Mark did on just the amazing performance of our real estate division, they really had an exceptional year. We had one of the highest store openings on record, 130 stores. That's up 62.5% on a 5-year average, which was around 80%. We opened 96 of the 111. And Power Fashion store footprint grew over 20%, and I think that was even soft for us, because of all the looting and they were particularly affected by that. Annualized weighted average space growth was 12.5%. But if you exclude the acquisitions, was 3.2%. We renewed 371 new leases. We had some base reversions. And escalations were in line with CPI, which has helped us to keep our costs in line. Our store base continues to give us amazing returns and the average payback is 12 to 18 months. And we have one of the industry-leading trading densities at over 36,000. We now trade off 1,721 stores and 884,000 square meters. From a gross profit analysis, I suppose this is where most of you are wanting a lot more color. You can see that, and we spoke about it at the first half that we write-off ZAR 159.3 million worth of inventory as a result of the civil unrest. And we obviously, introduced Power and Yuppie into the base. If you exclude those 2 businesses, the GP was up at 42.4% on a total basis, which is in line with the prior year of 42.5%. Some other factors that were affecting the GP margin is that we had strong markdown performance in the prior base, albeit that -- I think our markdown performance in this year was equally as strong. But it did obviously being up against that base did have an impact. And our strategic move into the Telecoms segment and product mix is there. You would have seen in the prior slide that we opened one cellular store, and I'm sure Mark will speak to little bit later about on the growth side that there's some exciting opportunities there after our test store was launched. And obviously, with all the global pressures despite our very, I would say, our hedging strategies on FX and on our containers -- container costs were very good, there were some inflationary pressure that came through there. From an overhead expense, I think the top line here sums up how we operate our business. As every decision made every day must support our value routes. And that's how every associate in our business thinks or we hope to think and you can see it in the numbers. Total expenses were up 16.4%. If you exclude the acquisitions, we were up 6.2%. But what I'm most proud of, as you can see, on a 2-year basis, if you take out all the chop and the noise from the various things, bearing in mind that we've -- and we don't have a BI claim in these numbers, so we carried all the cost of the stores that were not trading. And obviously, the store write-off assets and cash that sits in that number was at 4.6%, which is in line with inflation effect, probably below inflation. Several of the COVID-19 austerity measures we were able to sustain, but obviously not traveling and various aspects like that do start to come back into the numbers. But I think we've got a very different mentality on how we execute. And I think I'm confident that a lot of those costs will come back at a much slower pace than in the past. You can see our operating costs were particularly were -- this year were flat, and in fact, slightly declined. And that was mainly as a reduction in bad debt and increase in recoveries, as I spoke about earlier. From a balance sheet perspective, this is -- we build our balance sheet and we drive our income statement. We build our balance sheet. You can see there's 2 major callouts there and that's the move in inventory. And obviously, Mark spoke about our cash balance at ZAR 4.6 billion, which is -- remains very strong. But as you know, and Mark will allude, will speak to a little bit later, obviously, the allocation of cash to the Studio 88 acquisition will obviously reduce that balance. And obviously, we'll generate cash in the meantime. So just getting on to the stock and higher stock levels were held to mitigate supply chain risk and our ERP go-live, which took place on the 2nd of April. And we introduced new high category -- a new categories and higher cellular handset stock was also a part of the business growth. And if you exclude those 2 -- exclude GIT, our stock was up 9.7% and exclude acquisitions and GIT, we were only up 6.1%, which I think is a great performance in this when you think about the level of inflation that's coming through from input costs, which we were able to maintain. From a cash flow perspective, we opened cash at ZAR 4.9 billion, and we closed at ZAR 4.6 billion. It's about ZAR 300 million move. If you think about the Yuppie acquisition was ZAR 402 million, pretty much flat in that regard. Outside of -- so there were 2 elements that did have a negative impact on cash generation if you want to call it that, the major one was working capital. As I spoke about, that mainly came through from stock where we had the higher GIT numbers. But that's obviously -- I'll speak a little bit more about working capital shortly. But we're not concerned about that at all and it was a tactical move that we implemented there. And from a dividend perspective, in the prior period, we obviously -- the dividend flow from the COVID -- from 2020 only came through. Didn't have a final dividend in 2020. So now the dividend growth is 254.9% as a result of having both dividend cash flows this financial period. Credit growth, I spoke to a little bit earlier, come in and give you more color on our credit growth. As you know, we are not -- we are predominantly a cash-based retailer, but credit is important. We stimulate the business with credit growth. We don't -- we're not reliant on credit growth. You can see that our credit sales were up at ZAR 3.7 billion, 23.6% up. Our applications is there was high appetite in the market as people start to get through the fears of COVID and applications are up 54%, which is also a testament to our product that we believe that people are finding appealing. And -- but what we have done is we've maintained or there and thereabouts our approval rate at 33.1%. And we -- what I will say last year, we had -- we took some write-offs in the book. And we had a really healthy credit book coming into this financial period. And you can see the existing base grew 19.7% with increased credit activity and higher basket sizes. Just pop this slide in. It's a slide that we normally put in and particularly on the TransUnion just to see where the credit market is. You can start to see that whilst it's still above the 50% line on that graph on the left-hand side, credit growth still remains healthier or less with credit health but it is on decline. And we're very conscious of that and we won't bend our criteria. In fact, I think we've even tightened our criteria slightly again. But the right-hand side is really what should give you most comfort. When you look at our -- the ratio that [ principals ] which retains the face of credit for February 2022, the good-to-bad ratio was 10:1 versus the market's 4:1. So we had 10 -- for every -- we had 10 good accounts for every one bad account. Our cycle 4 was also similarly vector difference to the rest of the market. And it just goes to show that we're not reliant on credit to stimulate our growth. We use it just very, very -- at 13.9% of our contribution, it's obviously very low. And we've obviously -- we've communicated before, we have a [ Brita ] principle, a 80/20 principle. We believe that we -- there is room for growth in credit. But we won't aggressively move into credit growth, particularly in this environment, which we're quite cautious of. Trade receivables were up 15% for the year at ZAR 2.2 billion. Net book bad debt were at 6%. And it was well-covered by our impairment provision of 9.1%, which is significantly down on March '21. And that's, as I said a little bit earlier, we've had strong credit recoveries and collection performance. The book is in a healthy place. But it's an area that we believe that there is opportunity. But we're not going to aggressively pursue. So I'm going to hand over to Mark for the strategy section.

Great. Thanks, Mark. Let's start off with the vision. You are aware of this. It's not a vision that we're going to achieve next year or the year after that, it is a long-term vision. But really what it does, it sets the benchmark, and it calls out our people and so that we can actually focus our efforts on the big things that are going to move the needle over a long period of time. As we much said about the acquisitions we've made recently. I think we've been very selective in the opportunities that we have pursued. There, you can see them on the right-hand side once again, Yuppiechef and Power, which are in the business already and Studio 88 group, which I'll talk a little bit about. Hopefully, that will come in towards the halfway point of the new financial year. But the point I wanted to make was that we do have a history of starting businesses, acquiring businesses over the long term. And I think this just gives you a sense of exactly that picture. Sheet Street was an acquisition, Mr Price Mobile. We bought out the minority interest some years ago. There's been a lot of start-up businesses. And this is only when you look at the businesses and the brands. There's a whole another page and more that you could then talk about in terms of the sub-brands that we've actually introduced in our businesses. And I'll tell you a little bit about that as well. But something that within that picture, something that we're very proud of is that compound growth rate record, track record over 36 years, growing strongly in double-digits at 17.5% per annum. Moving into the strategy itself and these are the pillars that we'll talk about individually. I'm not going to go through all the details you can read in your time, your own time. But I will pull out a few key things. Stakeholder Engagement, hopefully, they're on dialing and has been the recipient of my enhanced efforts in this front. But stakeholder engagement does go way beyond shareholders and investors and the investment community. It's all our stakeholders. And I think this is an area, in particular, when you're looking at suppliers, associates and investors that there's been tangible evidence of our success in this area. Landlords, we're planning a landlord date later in this year. But I think our relationships with them are good as well. But I think for me, the highlight was if you look at the Intellidex awards on the right-hand side, we placed third overall for best market communication on the JSE. So a lot of effort's gone into it. It's been recognized, but we third and we realized that there's still some way to go. So we're going to continue to increase our efforts on that side. But really, the strategy and what we've spoken about over a while now is that the strategy is based on growth. Good questions all the time in this constrained environment, what can you do to your costs and that kind of stuff? Maybe Mark can speak to that about a bit later. But for us, the strategy is really around growth. We've got very clear plans on where we want to invest. And this growth mindset opens up great opportunities in our business as well. So what we have seen within that is strong sales growth post-COVID restrictions, the inclusion of Power and Yuppiechef, which I'll go into just now. I mentioned the organic concepts and products that we've launched now 4.5% of group sales. And some of those, you can see on the right-hand side there, those are the sub-brands that I was speaking about. And obviously, there are more in addition to that. Continued gains in market share as part of our strategy. And a big thing is this omnichannel experience and I'll chat about that as well just now. Part of our 25.9% HEPS growth is the quality of the earnings. And it's really come about by a strong trading performance, hasn't been marked the detail that our debtors provision have come down. But that's because we had really strong collections. And we still got data between our bad debt write-off and our provision. But these results are actually from a good trading performance, not overly influenced by releases of provisions built up in prior years. Yes, I have touched on the metrics. And it is a big area of focus for us, as I've said. You would have seen this table before. So I'm not going to talk about it. The message that I wanted to leave you with was that we are not pursuing acquisitions at the expense of everything else. It's a balanced approach to growth and it starts off with our existing business. So on the top, you can see what the comp store growth and what we do there. And it's really all around gaining market share in South Africa, applying retail science to what we do, focusing on omnichannel and that is a critical thing that omnichannel experience. I'll show you over the page, that 65% of our apparel online orders are click and collect. There's a strong correlation between that and shoppers coming in store. To drive comp growth, people have shoppers have to have a good store experience, there's a rejuvenation project underway. And everything that we do is empirical. It's based on research and surveys, et cetera. And anything that we do as well, we want to test it before we actually scale it and go live in any big way. Then we'll look for non-comp growth. So Mark spoken about space growth, new departments we've opened and really -- and extending those. And then it comes to acquisitions. And those acquisitions, we obviously don't want things that will compete with our existing businesses. We want to make sure that they're adding new products to new businesses into our fold. And yes, as I said, the 3 that we have chosen, we're very selective. There we literally have been dozens crossing our desk that we haven't pursued. And I firmly believe that we've got the right ones. And then, there's new organic concepts. So these will be targeting new customers and new segments or underpotentialized high-growth opportunities within our existing business. And as I said, test first before anything. So that's the framework that we do. It's a well-balanced framework. And hopefully, we'll leave you with a strong view that it's -- we've got a lot of growth in our business without just focusing on acquisitions all the time. We're going to stick with this opportunities matrix because this is something that you've seen. I think you're well versed with it. And we can certainly talk through it at a fairly high level. But let's just talk about the top right-hand quadrant there on the heading, just to tell you what we're really focused on for the F '23 financial year. And as I've just said, it actually starts with strong execution in our existing businesses. That's where the lion share. We've got well-established processes. We know our customers. We know where we differentiated and we know how to take advantage of opportunities. The focus will also be about integration of Power Fashion and Yuppiechef, I already said that they were earnings accretive. I'll go through them individually in a sec, focusing on onboarding the Studio 88 group, they're not ours yet. But obviously, that will be an area of focus for us and testing new organic concepts. So if we then just take your eyes down to the opportunities metric itself. There, you can see the ones that the opportunities that we have closed out in terms of acquisitions on the apparel side at priced fairly Power Fashion and Yuppiechef on the home side. And there you can see the clear differentiation in market segment and why those 2 made sense. Studio 88 on the left-hand side under apparel is under that aspirational value niche sector. And incidentally, we think there are other areas in that sector that we couldn't -- that would be attractive to us. It's not -- it hasn't progressed any to any extent past initial discussions. So it's not deep studies that are done. But I think we've identified the areas where there are opportunities in that sector. You can see between apparel and homewares is a little black box here with an opportunity straddling both apparel and homewares. I guess if we had to accurately reposition it, we skewed much more towards the apparel side. But that is a concept, an organic concept that we will be trialing later on in this year. That's very well progressed. And yes, I'd say it's probably around the halfway mark or slightly before that, so very excited about that. And if you look at financial services and telecoms, there's an opportunity, it's only one of many. But you would have seen a standalone cellular store. We only had one that was on test, a very nice little concept that's far exceeded its feasibility. And we were now very confident about rolling that out and that rollout will now commence. That's only one opportunity within that FS and telecom space. But it's the one that we're confident and happy to talk to you about now. So there's a lot to do in that space. When I just said what the 2023 focus areas are, those are them. But of course, there's another level of study underneath that then starts looking at the rest of the black boxes and those opportunities and starting to filter them into the ones worth looking at and those that we'll drop and not look at. I said I'll speak about Power Fashion. You would recall that it was the most heavily impacted division by the civil unrest last year. And at the heart of that, roughly half of Power Fashion stores were closed. And that was really just because of the location that they were at. So yes, I mean, they really struggled in the first half, but absolutely delighted that they bounced back strongly in the second half. And I think we gave the message at the November results presentation that we thought it was back. In fact, we ended up on the second half on a profitability basis anyway, achieving 97% of our profit target for the second half, which was an amazing comeback considering we still weren't operating from all the stores that we looted, so really strong second half performance. I think that the vision is really energized. We've strengthened the management team. And they really are a very capable and high-performing team and we're expecting big things from that division. Yes, store footprint, we're looking for greater than 500 stores as our first target by 2026. And this is going to be material in terms of. I'm going to give you a sense, after I've spoken about Yuppiechef. How are we thinking about those 2 entities combined and the growth prospects? But Yuppiechef on its own, it's not a big business. It's turning over between ZAR 400 million and ZAR 450 million. But it's positioning and its growth prospects that really appeal to us as did exactly what the business stands for and its tech skills that it's got in the business. So that was effective 1 August. Yes, it really performed in line with management expectations. We've done quite a lot of work. And we've already communicated this to you about growing the soft assortment because it's a business that's very well known for its hard and for its kitchenware. But it's a soft that you can get real differentiation and well progressed on that. And there's a really good opportunity there to increase the margins in that business, too, as you go into softs and you go more into private label product as well. Not only do you do that enhanced margins, but you enhanced your differentiation. Unfortunately, we had to go through an unexpected management change. But in fact, just like Power Fashion, I'm delighted with the team that's remaining. We've appointed a new Managing Director from within the team. We spent a lot of time with the team. And I can tell you they're a capable, engaged and energized bunch of people, so really excited about the opportunities there. And just to point out as well that the tech skills remain. They've got very strong tech skills and they're engaged and very excited about what the plans are in that business, once again earnings accretive. And I said that I'd come and talk about growth prospects for these 2 businesses. That's Power and Yuppiechef. And to give you a sense of scale, they're roughly turning over on an annualized basis. So just remember that's not all in our numbers for this year because of the effective dates. But on an annualized basis, they're turning over roughly ZAR 2.5 billion a year. And if you look at the 5-year plans for those businesses, we want to take a ZAR 2.5 billion to ZAR 7.5 billion in the next 5 years. We obviously can't talk too much about Studio 88. We've basically told you what we can at this stage. Everything has gone according to plan at the moment. We are awaiting comp approval. And we're hopeful that that will take place in the month of September this year. So the likely effective date would probably be the 1st of October, assuming everything goes according to plan. So we have just reiterated what we've already shared with you. It's a business of scale ZAR 5.6 billion revenue for the last year and 711 stores. And obviously, when we take it over, the 711 stores would be quite away in excess of that. But just to repeat as well, our acquisition represents 70% of the business. And management are retained and have got a 30% stake that there's an opportunity to -- for us to increase our stake over a number of years. So the retention will be in place for the management team. So yes, I think with Studio 88, we can talk to you once the business in our fold. But we really can't give you more insights in a business that isn't ours at this stage. Looking at e-commerce. If you look over the last couple of years, in fact, 5 years, compound growth rates touching 40% growth. Mark said it is supplemented by Yuppiechef's inclusion. But you can there see a very strong growth of 48% against a strong base of 64%. One of the things that we did this year; we upgraded our e-com platform to Magento 2. Yes, it's still a Magento product, but it really was a significant upgrade. And that was we brought about a lot of improvements in that. But what I'm saying a little bit earlier about e-com, it's a small channel but don't underestimate how critical it is to the group and the whole omnichannel experience. Yes, it's -- when you start looking at some of these stats, I guess, customer engagement and that's the 65% that you see there of Mr Price apparel orders are click and collect. When you look at -- and this is a survey done -- it's a publication from a similar web. When you look at the traffic market share for the last year, we are actually in second place as a group, 13.3%; second only to take a lot, which almost dominates close to 50% of the market. But we do have the #1 ranked omnichannel fashion app in South Africa. We've got 1.1 million average monthly app users and 5.9 million social media followers. I think this all stats to reinforce what we've said over a long period of time with you. And when you're looking at the traffic in the top 5, it is only Mr Price and -- that had actually gained traffic during the year. Capital allocation is key for us. I think we've got a reputation of making our investments work and being conservative in applying that. And here, you can see how we've actually applied that over the last 3 years. Starting off with store CapEx increase to 2022. And if you then play that forward into 2023, we're forecasting CapEx of around ZAR 900 million in the new financial year. And you can see there what -- how that is allocated within store CapEx, within the CapEx. And I guess the highlight is space growth of between 6% and 8%, excluding Studio 88. So yes, a big number of store, 180 to 200 stores that we anticipate opening in the new financial year. Acquisitions the black bar in 2021 was Power Fashion, then Yuppiechef and Mark mentioned ZAR 3.3 billion payable around the half year mark in relation to Studio 88. We did look at share buybacks last year. And it is something that we do continue to consider. And we had put a program in place that to buy back shares in F '21. But as we said you at the time, the market then moved. And although we had a much bigger appetite, we're in a closed period. So we couldn't change the pricing parameters and that's what we ended up buying back. And then the dividends, no change to our dividend payout ratio expected. The black bar there that you can see is really just the dip as a result of not paying a final dividend in the F '21 year. We're very focused on our brand and the brand promise and really talking about the brand promise to our customers. And that's what it's all about price, quality, fashion, convenience and experience. I guess, whatever you do in that space, talks to whether you're gaining market share or not and what your customers think of your brand. So we increased market share by 150 basis points. We've increased our brand equity, our Net Promoter Scores and our brand value scores. Mark spoke about introducing our one store credit card, very pleasingly. And I suppose this is one of the things that if you do -- if you do see a shopping down to value in a constrained environment, not only do they get the benefits of differentiated fashion at a really good price, but the advancements that Mr Price apparel, in particular, has made in their merchandise quality scores has been very encouraging. Store revamp program will certainly enhance the customer experience. And it's not just about revamps; it's about the navigation of the store and how you actually find the item and the department that you want. And we have invited the most valuable fashion apparel retailer in South Africa. That's actually by 2 independent sources. The first one is Kantar BrandZ and the second is Brand Finance, so very proud of those. In the last 3 months, Mr Price Apparel was voted the most shopped fashion retailer in South Africa with 5.7 million shoppers. So this really just highlights the products that we're putting in front of our people, our customers, their engagement with the brand. And as you'll see, it's not all just about fashion and price. There's a lot of social things that we're doing to increase the perception of our brand as well. Being recognized as a value champion and getting that point across. Remember, it's the value champion. So value includes all those things that I'm speaking about it a minute ago. Mr Price Apparel and Mr Price Home, our 2 biggest divisions, hold the highest brand equity in their sector. And they've got the leading position on the fashion value matrix in terms of really where they want to be positioned. So if you look at all those attributes, brand equity, whether on the fashion value metrics, conversion to purchase and top of mind awareness, our 2 big divisions are top in this segment. I think we've made incredible strides in our people. Mark was speaking about the agility and ability just to get things done. Over the last 2 years and really reinforced this year was not only the launch of our vision and our strategy, but it's reinforcing our DNA and our guiding principles. We're absolutely delighted that an engagement survey that we ran very, very recently, in fact, this financial year -- this calendar year, not only did we get a huge number of people completing the survey, but those completing the survey, 77% said that they were engaged. So that is an incredible result compared to international benchmarks. And if you've got an engaged workforce, you can be agile. And if you've got new initiatives, you could efficiently implement those initiatives because your people know why you're doing it and they can get behind it. We appointed a new Chief People Officer in January. And she's making her mark felt already with some further, I think, great things to come. And it's one thing having a bold vision and a strategy to execute it. But one of the key things that we're now focusing on is our organizational design process to make sure that we've actually got the structures and the people in place to realize our ambitions. So that's a project that will probably take about 6 months, that has started. And it really starts with understanding the guiding principles that we want to run the business on and how we want to make decisions and how we want to evolve decision-making further into the business; very excited about the potential outcomes of that. Of course, what it means is that your leaders are then focused on leading the business and on the execution of the vision and the strategy to a much greater extent. One of the things that we implemented in F '21 was a new LTIP scheme. Those have been well received and obviously aimed at not only rewarding but retaining our talent. We've made big strides on employment equity. And you can see there that in the last year, 99% of our hires in store were African, colored and Indian and 84% of our head office placements were too. So very, very proud of that, so 71%. We paid out ZAR 28 million in dividends to participants in the partner share scheme. That's been fully funded from -- by the group since this inception in 2006. So for our -- what we'd call our internal BEE scheme, we didn't go to the market for funding of that either. Lots been said about integration of the acquisitions. I have said before that it is an integration-light approach. We'll integrate the elements that we think should be integrated, but to me, it already starts around people. So as we bring in new businesses is how do we actually have an environment that allows them to retain their own culture, their own value system. But by influencing, but by being influenced by the Mr Price ethos and the things that we actually hold there as well. So I think that's progressing very nicely. But it's not a heavy-handed integration approach at this stage where it's integrating systems and all things like that. On the innovation and technology front, we've been very busy on that front. One of the highlights, I guess, was the -- I mean, we've been in -- on this -- and many of you will know this, on a new ERP journey for many, many years. In fact, I think the ERP journey probably started before a year out, but it's been really a number of years. And we actually went live in the new -- at the beginning of the new financial year. So that was a massive milestone for us. And really, what was about and why we had to make that is our own in-house legacy systems had served us well over the years. But I think posed a risk for us in the way the architecture setup and was certainly not ideal to scale further. And that led to the decision to then replace those legacy systems with an Oracle ERP I spoke about a re-platforming of Magento 2. And then Mr Price Advance, that's our retail intelligence team, implemented a best-in-class data warehouse system. And we -- what that is, it's a warehouse so that all our information is in one place, you've got one form of the truth. And therefore, it should be accurate and that eventually should lead to better and quicker decision-making. That same team is also the team that's tasked with implementing our RPA and AI. And they're starting to make some good advancements on that front. So when we look at -- the focus in the new financial year, it's really building on the backbone that we've just put in place. The go-live issues with the ERP will be settled hopefully in the first quarter. And that's a normal timeframe for ERPs. And once that's done, I think it's an exciting future because we can not only focus on the implementation of the rest of our retail modernization program. But the whole tech team then starts thinking more about innovation and that's the really exciting phase. On the sustainability front, we take -- we do take this important -- it is very important to us. And I was linking it back to what the customers see in the brand. We appointed an ESG Director to oversee our sustainability objectives. We've got a roadmap of all the things that we want to achieve and when we want to achieve them. And in terms not only are the items and directors short-term incentives, there's actually 10 sustainability indicators on the LTIP programs as well. Yes, to me, this is a great page. It just really gives the highlights on the ESG front. You can read those in your own time. But whether it's social, environmental or economic I think, big progress on those fronts. We've got a social responsibility to help those in need. That's the red block. You can see what we've done there. Environmental on that side, we removed 29 million plastic shoppers' bags from circulation during the year and 35 million items that we sold contain sustainable materials. On the black box here, I think that's really -- that's powerful that we're the only value retailer, including the FTSE/JSE Responsible Investment Top 30 Index. And in fact, the only SA retailer that's a member of ethical trade initiative ETR as well. If you look at the gray block, we procured ZAR 4.3 billion worth of merchandise locally. That's in South Africa's borders. That represents 38.2% of all our procurement. If you then consider that we've got a lot of neighboring countries that we do procure from so if you look at the [ SAF ] and Customers Union, then that 38.2% goes to just over 50%. So in talk to agility and speed and ability to get into product, I think that 50% talks to a great number. Looking ahead, I mean I don't think we have to speak a lot about global events. As I said when I opened up the presentation, a lot of global events, but a lot of local events, too. But just to list them, the global issues are the Russia-Ukraine war, the China lockdown, supply chain issues and not just U.S. inflation, but inflation across the board globally. We have to continue with handling load-shedding. Unemployment, although I believe they aren't putting a lot of -- officials aren't putting a lot of faith behind the unemployment statistics, but we did see a tick up in this last report. So that is -- it's in the right direction, but a very unsustainable position overall to be in. The social unrest matter is -- happened last year. Whether it will reoccur, we have to just be very vigilant and aware of that and then natural disasters like flooding that we've had and raising CPI. So that's a big list on its own before we start getting into exchange rates and cotton prices and oil prices and everything. But certainly that rising inflation and unemployment means I think we're going to be entering a very really challenging year next year. Fortuitously or not fortuitously because it's our process, we have hedged out for a large portion of the year. So that will add some kind of stability and positive impact on that front. But despite that, with all the other cost pressures, we are expecting high-single-digit inflation -- product inflation in the New Year. I think when you look at all those challenges, it is quite daunting. But I think you've got to look at the execution and the team as well. And I think we've got a record of being agile, making our decisions based on partnership and trust and I guess, executing well in an environment that's very messy. As things tighten up, we do think that we have got the business model to succeed. More consumers are likely to look for more value. I spoke about our position on that at length. We do put the customer at the center. And I think really, we have got not only differentiated fashion. But we've got essentials and core businesses that we can also defend our position there as well. Spoken about the store openings that we've got in the New Year, but I wanted to provide a little bit of guidance on GP because there's been quite a lot of questioning on that front. Where has your GP been historically with the new businesses coming in, where do you see that ending up? And I don't want to give you a blended rate, so because there's another business about to enter the fold as well hopefully. But let me just rather speak about our existing businesses. We've said it for some time that our target is 42%, nothing has changed, it's still 42%. But obviously, it's 42%, but we'll have to take into account current market conditions because that's a number net of markdowns. Then markdowns will be informed by the stock that you've got, by the competitive position that you've got and by the quality of the product that you've got. I just want to reemphasize again that if you got a differentiated product, you hopefully don't have to then mark down. Your biggest concern is just fashion risk and not competitive risk. Looking at acquisitions, the 2 businesses that we have acquired, their margins are in the 38% to 40% range, and Studio 88 will come and we'll give you some guidance on their margins when I think it's right to do that. But certainly, it's within our targets to start improving those margins in those businesses. Some of these things like product mix, private label, improved markdown performances, all those kind of things. So I think we've got the business model to succeed. The areas that we are going into are in terms of certainly the acquisitions are noncompeting with us, as I've said. And I think as a business, there's a lot of energy because there's a lot of momentum in the strategy implementation. Looking out at the year ahead. Q1 trading update, we will speak at a later date. But like we've heard in the market as well from some competitors, May sales growth, in our case, has also been below expectations. So we will speak to you in a more detailed fashion about that at the appropriate time. And just to give you a heads up, we are planning on a landlord day and an ESG Investor Day later in the year, and our comments team will then reach out and engage you and let you know of those dates well in advance. But for us, that's -- there's a lot of items on there to be concerned about from a consumer and a macro point of view. We just really got to focus on execution and the things that we do well and what our business stands for. And whilst it might be a bit gloomy to think about some of these events that are unfolding, we just got to fall back on, well, how we performed in the long term. And if you look on the graph on the left-hand side, and these are 10-year compound growth rates. On the vertical access, our HEPS and on the horizontal access, our share price versus our competitors' were in the top right-hand quadrant, which is the place that you want to be. Then look at our metrics, and I've spoken about our intense focus on those matters. And we seemed to be well ahead of the pack and we intend to keep it that way, too. And then, in the last 4 years, 2017 to 2021, because that's the information that we've got for our competitor set, we've been the only retailer to post an earnings compound growth rate, that's we've got a plus in front of it. The rest are negative. And then, once again, track records and looking at the 36-year compound growth rate of 19.5% is something that we're very proud of and, I guess, sets the scene for our new aggressive ambitions that we've got in the long term. Okay. Then we're going to supporting information, which is available for your information, but we won't be presenting it. And at this stage, I'm happy to take questions.

Morning, everybody. Thank you for all of the questions. I have grouped them together just in the most frequently asked ones. And most frequently asked one is just around a little bit more color on post-year-end trade with some comments just being around social ground payments, the performance relative to the market and other comments made generally in the retail sector.

I'm finding it quite difficult to actually understand trade. Obviously we kind of speak numbers because we haven't disclosed those numbers, and we'll do so at our trading update. But I mentioned that we had an ERP go live. So that's gone live in this period. These things are never the smoothest things. So items can influence trade. But I think there's been a lot of them -- there's still a lot of uncertainty around exactly what's happening with the social distress payments to customers, the relief payments. That grant of ZAR 350 million hasn't been paid and hasn't -- I believe it wasn't paid in April and May. And I believe that it is due to be paid mid-June again or to start that process. And I think the challenge there was that the authorities had to introduce a means test so that people could access the grants correctly. But if you sort of look at the trends month-on-month, April started off very strongly, then softened in the latter part. May was below expectations, but now June looks like it's better than May. So within the whole context -- and of course, you've got, I think, a consumer that's getting nervous. Costs are coming at them, there's inflation, food inflation is rising. So I think there's a lot of things coming into play, and we just got to be very vigilant and stick to our execution.

Just linked to the second -- your comments on the second part of that question, just around the impact of the rising inflationary environment on discretionary retail. Just your thoughts on the outlook and how that will play out in the year ahead.

I said a little bit earlier that I think we're going to have a very challenging year. I think for any retailer to not think that would be highly unusual. And there are just so many potential headwinds. And I think they're very well-documented in this presentation and others. So I think there's a lot of things hitting the consumer, inflation in it, whether it's fuel and food. Those are the 2 basic things that's going to hurt. But as I said, the counter to that is, as a retailer, can we perform better than the pack? We're heavily focused on retail -- on value retail. And as I said as well in our value retail portfolio, we believe we've got differentiation. So that should be a stand-on.

There've been a number of questions just around the credit environment. Mark, and I'll pose this one to you. I'll just read the question which sort of covers a lot of the other questions, which is, how should we think about the consumer credit health, credit capacity and the ability for this tender to offer unexpected growth into the next 6 months as nondiscretionary inflation picks up, particularly consumers within the middle-income segment of the market? There was just some other questions as well around the 1 store card facility and whether that means extension of credit into the acquired businesses as well.

Yes. I think I said it in the presentation, we're not reliant on credit. We use credit to stimulate. So -- but that being said, we personally have experienced better recoveries and better collections. But we do the -- [indiscernible] we've got to rely on the data and TransUnion, and are seeing the credit environment start to tighten. I think there is -- there was a note out by ABSA the other day, and just in terms of the global thing, how a global theme that disposable income and household savings are starting to shrink. And they said that South Africa is a market that's ahead of the world because they already had low savings rates. So I think for us, we're fortunate enough that we're 86% cash, and our acquisitive businesses are cash-related. So I feel that it's not an area that we -- is as important to us. And I suppose it might be more important to our competitors. But we feel that the credit environment, you have to be very cautious in this environment.

I'd just like to add to that, I concur with what Mark just said. But in the Power Fashion business, you've got to ask the question, why would we want to open up credit? Certainly, we like the cash generation that Mark was talking about. It's entirely cash. And in the case of Power Fashion, we've got enough growth on the runway without worrying about trying to boost that by rolling out credit. When it comes to Yuppiechef, that seems to be an obvious area where -- sorry, and then the other thing in Power Fashion, in a lower-margin business, we don't want to grow credit sales and then absorb a bad debt write-off on a low-margin business. That's just a lousy formula. Power Fashion on the -- Yuppiechef on the other hand, with an increasing margin business and the things that I spoke about a little bit earlier, with a high-income customer, that is potentially an area that we could look at credit. However, that is a very niche customer. They can't -- we'd have to make 100% sure that when they gauge us on our credit front, that those contact points is a Yuppiechef engagement. It's not a Mr Price engagement. We don't want to cross those lines for those customers. But although that may be an opportunity down the line, I can safely say that for the next 12 months, it's not anything on our radar to introduce credit to that business.

And I think just to say again, to help Mark also on this point is, I mean, Lay-by for us has been a great stimulation of credit tenant, and it's a low-risk risk form of credit for the consumer. And we're also seeing and we're investigating that to pay now -- take now, pay later type schemes, obviously, these are all of our books. Yes, all of those are additional items that we're using to facilitate the sale.

Great. Just a number of questions around global supply chain and stability. Is that stabilizing, a comment just around the supply chain dynamics and impact on the business?

Yes. It's obviously got a huge impact. And our shipping team has certainly felt the brunt of that. But I think they've done a remarkable job. And one of these things that when issues start surfacing, or you think they might start surfacing, you preempt them. So what we had done is, we actually built buffers into our processes, brought forward stock where we needed to. And obviously, you look at your stock timing of your inputs and the whole stock flow. So it has been a disruption because it's just not on the supply side or closing of ports or lockdowns in China. We've been able to get around that. So when Shanghai was locked down, we entered Ningbo and we used other ports, so that wasn't the whole issue. But then once it's on the vessel and the time -- when the vessel departs, the time it takes to get journey when it gets here, is it able to use the Durbin Court, or does it actually get rerouted to Cape Town, those are all challenges that we've been faced with. But I think to date, I think we've done a reasonable job in navigating.

Okay. There have been a number of questions just around the store growth and the momentum into this year and then the forecast into FY '23. So just if possible to get a sense around, is that across the business, particular divisions? I mean how long do you feel that this run rate is going to be maintained for?

It comes back to the investment thresholds that we've put in place. When we've opened stores, and we did speak about it a bit earlier, the payback period is very short. So that is something we want to maintain. We required higher ROIs in excess of our cost of capital. So nothing's really changed on that. Exactly what the RR threshold is, I think is where we've applied some discretion. But that's not to say that we are just going and chasing space either. Our space has to perform for us. I can't go and chase space with low metrics, if I say overall as a group, we're trying to maintain our metrics. So the ZAR 180 million to ZAR 200 million that we spoke about is throughout the business. I think in absolute pure terms, this financial year, Mr Price had the most. I think next year, Yuppiechef -- Power Fashion is going to have the most. But there's a very good spread throughout the businesses.

Great. I think that covers most of the broad themes for now. There are other questions that have come through. So thank you for those. You are welcome to e-mail those directly to me, and I will come back to you over the next week or so. Otherwise, the link to this presentation and the slides are available on the group website. Thank you very much for joining today. Cheers.

Thanks, everybody, and nice having you.