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

Good morning, everybody. I'm Mark Blair, the CEO of the Mr Price Group. And on my right is Praneel Nundkumar, the CFO of the Mr Price Group. And we're here to talk about the F 2025 annual results and then obviously, about strategy and outlook. If you look at the current operating environment, I'm sure we're all very familiar with this. There's a lot of this that's been in the news lately. But if you just, first of all, think about what the global situation is, I think that graph on the bottom left-hand side really tells it all lots of spikes, lots of ups and downs and therefore, lots of volatility, but it's the steepness of that shape of the graph on the right-hand side that tells it all. But certainly, with the U.S. trade tariffs, that threatened global forecast, disrupted trade relations, potentially disrupted supply chains, and immediately put the threat of higher inflation into the market. There's still some ongoing spats, a bit of tip and tap sometimes, and we'll have to see where it all settles down. But how does that then relate to what's happening in South Africa? So if you just cast your mind back with the Government of National Unity, that created a really positive shift in sentiment in SA last year. GDP growth started sort of coming back. I'll say that in inverted commas, "coming back," 0.6%, but it was a trend during the year, and it was more positive in Q4. But really, what happened is that in early 2025, the Government of National Unity was more fragile, predominantly around the budget situation. And that obviously then started threatening green shoots of economic recovery. But overall, generally, it's quite positive, in that there's improved energy supply. You remember the good old load shedding days. The rand has stabilized after that shock, the U.S. tariff shock. I mean at one stage, it was touching on ZAR 20. Now the latest is it's recovered to below ZAR 18. So that's looking really good. And a great piece of news that we've had for some time now is that inflation is lower. It had lowered to 2.7% by March, and interest rate cuts of 75 basis points lowered the repo rate to 7.5%. So that was the business and operating environment. Now this is the consumer environment. And it's color coded for a reason. But if you look at the pre- to early 2024, that was really quite a tough trading period for everybody. Weak disposable income levels, elevated inflation, high debt servicing costs, negative real wage growth and low consumer confidence, a really tough period for business and for retailers in particular. Then I was talking about this sort of mid- to early and into '25 movement. And yes, a bit of a short-term consumer recovery. And that really -- and I suppose we saw it in our results as well, a better recovery in the second half. It's on the back of lower inflation, low debt servicing costs again. In that period, the two-pot system obviously brought money into the economy. And I'd say recovery in inverted commas there, "recovery" of consumer confidence, but it's still negative. So it's negative by less, but it was trending in the right direction. But very importantly, still not positive. And then in 2025 to date, I think household expenditure remained quite stable, and that was enabled by inflation, which is at the bottom end of the range. We've got lower fuel prices, and as I said, 2 interest rate cuts. Consumer confidence is impacted by U.S. trade threat and a potential VAT increase. So when you've got a VAT increase that did threaten us the way that it did, that obviously makes consumers less confident, and that's based on their own ability to feel that they can go out and spend. And then lower GDP growth of around 1%. The outlook was looking like can we get to 1.5% to 2%. It's now 1%. So that assumes a weaker trading environment. And I think for me, the really disappointing thing is the Q1 GDP numbers came out, and that was very low at 0.1% positive. And in fact, if it hadn't been for agriculture, the rest of the market would have -- GDP would have declined. But against that backdrop and there's some positives and some threats as I've just discussed, this is Mr Price's performance relative to the rest of the market, which in this case, is defined as the RLC. The tables depict in red, Mr Price Group's performance and the gray are the RLC performances. So if you take it year-on-year, starting on the left-hand side, F '24 to F '25, or each trading half of that period, you can see that the red lines and that sales growth are comfortably ahead of the market. And we've also said on that left-hand side that the GP margin in F '24 and F '25 grew at the same time. So that's absolutely critical for us. So consistent improvement in sales and gross margins. That gets our focus all the time and the continued outperformance of the group versus the market, and that leads to market share gains, which I'll go into a little bit later. But the great news is that the year-end is behind us, and we're now into Q1 of the new financial year. And April and May started really well for us. So remember, we said that there were some shifts in March that put Easter and school holidays into April. That certainly did pay out, but it really wasn't all about April. Both months were, I would say, equally strong. April, our sales grew 11.3% and May, our sales were up 12% exactly. So that's a good positive start to the new year for us. Praneel will go into a bit more detail on these results, but this is obviously then just the group highlights. And what you can see is our performance for the year. And because you've already digested the half year results, as last year, we've highlighted what's happened in H2, and it really does paint a wonderful picture when it's all lined up in green, highlighted in green. So H2 up 10% in revenue, EBITDA up 9.8%, operating profit increased nicely to 11.7%, so our op margin increased, and our diluted HEPS in the second half were up 12.1%, which we're very happy with, which led to a 12.7% increase in the final dividend to shareholders. What we've done in this graph is we've just -- I think either by speaking today, speaking with the investment community outside of this presentation where you're going into our integrated report, I think the thing that stands out is one is resilience and one is absolute focus. And for me, something like this really spells it out. We want to deliver consistent earnings growth through gaining market share, which must be profitable market share. And this is based on HEPS, and it's our 3 most recent results that we've announced. So it will be this year, the half year and then the previous year-end versus what's happened in the rest of the market with our competitors. Of course, there's another competitor releasing today, which we don't have their information yet, but anyway, I think it tells a good story because, a, it's consistency; and b, our performance is on the base that we've got. So there's definitely a base effect that comes into it as well. So overall, when you look at that picture, I think we can -- as a management team and as a business, I think we can be very satisfied with what we've delivered in a low growth environment, just judging what I said about GDP growth, et cetera. In terms of value creation, we opened up 184 stores, sold over 300 million units of merchandise, generated cash of ZAR 8.7 billion that left us with ZAR 4.1 billion at the end of the year and absolutely 0 debt on our balance sheet. Then on the right-hand side, that's what I was speaking a little bit earlier about, group market share gains of 50 basis points. You can see the pickup in H2 as well. Similarly, the GP margin uptick and that then trickles down to operating profit, which in H2 was up 11.7%. Okay. That's it from the overview. Praneel is now going to go through a bit more on the detailed analysis of our actual performance. Praneel?

Thanks, Mark. A very good morning to all of our investors and stakeholders joining us online this morning for the results presentation. I'm pleased to present to you the group's financial results for the 52-week period ending the 29th of March 2025. As you may have gathered already from Mark's introduction, the financial year was a tale of two halves. When we presented the interim results in November, we had already noted that there was a constrained consumer environment, which had impacted the results of the first half, but we also noted that we expected a shift in momentum in the second half. We also said at that stage that our focus was on profitable market share gains with increased GP, and I am pleased to report back today that that's exactly how the results ended up. Taking a look at the group income statement. Revenue increased 7.9% to ZAR 40.9 billion for the period. Contributing to this growth was comp sales growth of 5.7% in the second half, which was a significant improvement from the 0.4% growth noted in the first half, together with a weighted average space growth of 4.3% due to the 184 new stores that we rolled out during the year. Store sales grew 7.8% and online sales grew 7.9%. Gross profit for the period increased 9.9% to ZAR 16 billion for the year with GP margin growth of 80 basis points with a pleasing recovery in the homeware sector, which we'll speak about just now. Expenses grew 10% to ZAR 11.3 billion, and this was in line with our comments that we made at the interim results, where we said that overhead growth in the second half will be slightly higher than the first half, but that we did expect to get back into the medium target range, which was achieved. Net finance expenses decreased by 6.2%, and this was the result of the positive cash balance and the interest earned thereon during the financial year. Profit before tax increased 11% and profit after tax increased 10.7% to ZAR 3.7 billion. You will note that profit attributable to noncontrolling interest decreased by 0.8%, and this was due to the NCI reduction from the Studio 88 share repurchase, where the NCI was at 30% in F '24, reducing to 24% in F '25 and a further reduction in F '26 will take that down to 15%. Pleasingly, profit attributable to equity holders of the parent was up 11.2%. The table to the right highlights the strong performance in the second half that Mark just spoke about earlier. As you note -- as you can see, profit from operations grew 11.7% in the second half from 4% in the first half, demonstrating the achievement of a solid profit wedge in the second half through strong trade and disciplined cost management. Taking a closer look at the segmental performance now. The Apparel segment sales contribution came in at 79.7%, which was similar to last year. Retail sales for the segment grew 7.9% but accelerated to 9.8% in the second half. Operating profit grew 9.1% at a faster rate than sales, but in the second half increased to 14.6%. The segment gained market share of 50 basis points during the year, marking 2 consecutive years of market share gains. Mr Price Apparel, the biggest division within the segment at 42.5% contribution, grew market share of ZAR 700 million from competitors during the financial year, while Power Fashion remained the fastest-growing division within the segment. Studio 88 also performed strongly against a very firm base in the prior year, adding to the segment's momentum as we move into the new financial year. Having a look at the Homeware segment. Homeware segment sales contributed 16.9% to total sales, slightly down on last year. The segment continued its recovery with sales and comp sales in the second half growing 7.7% and 5.8%, respectively. Pleasing to note that all 3 divisions within this segment reflected the accelerating sales growth. The highlight, as you can see on this slide, is operating profit growing 21.9% on last year of a 6.4% sales base. And in the second half, operating profit grew 31.9% of the 7.7% sales growth. This came through significant gross margin gains and operating margin gains also. Moving on to the Telco segment. The Telco segment contributed 3.4% to group sales, slightly up from 3.2% last year. The telecom segment also had a great year, growing sales at 13.2% for the full year and in the second half with operating profit growth of 13.6%. This segment also achieved market share gains of 40 basis points according to GfK. Comp sales accelerated to 3.3% in the second half. However, units were down due to the shift from 2G devices to 3G and 4G at higher RSPs and the continuation of the feature phone sales being replaced by smartphone sales. Moving on to space growth now. It was pleasing to see the group ended stores -- the total stores at 3,030 for the year. This was due to 184 new stores, as we mentioned, being opened with new space growth of 5.1%. The bulk of the new stores were opened in the Apparel segment, almost 154 new stores there, with the Studio 88 chain opening 74 stores across its 5 trading chains. Mr Price Apparel, the core business, also opened 28 new stores and the Kids concept, our organic launch concept, another 8 stores. Power Fashion grew significantly, also growing 33 stores for the financial year. And Mr Price Cellular grew 20 new stores for the financial year. An important bar graph in the middle of the slide that I wanted to talk to you about. I thought it was important that we spend some time looking at new store returns as it's something that we always discuss with analysts after the presentation. And I think the key message that we wanted to land this year was that we've always spoken about the internal thresholds that we've set. And as you can see from the bar chart, our internal thresholds, we mentioned over the last few years, had increased, but we see new stores having a return on operating assets far exceeding the internal threshold and also far exceeding our weighted average cost of capital. These returns are backed up by a very stringent store feasibility process. And with results like these, it gives us good confidence on the capital allocated to new stores. Moving over to the GP analysis. One of the highlights of the year has been the GP margin gains that we have seen across all segments of the group and for 2 years consecutively now. We've reiterated that profitable market share was important, which came through from these GP sales results. You'll also note the medium-term targets that we spoke to you about last year. Just a reminder that these are 24-month view in terms of the targets, which we reassess annually, and these are based on our internal financial modeling. Group GP came in at 40.5%, which was 80 basis points higher than last year. And the Apparel segment grew 70 basis points to 41.2% and landed within that medium-term target range. The Apparel GP gains were due to strong merchandise execution and lower markdowns than the prior year. The homeware segment standout performance on this slide, growing 170 basis points to 42.3% and exceeding the medium-term target that we had set. It was pleasing to see that the homeware gains really reflect a recovery over the last 3 years, getting back to the highest levels that we've seen, and we do believe that this GP margin is sustainable. The Telecoms segment grew market share by 80 basis points also to 20.0% from 19.2% last year due to the introduction of the private-label Salt device, which has been gaining traction over the year. Also key to note that all 3 acquired businesses, Yuppiechef, Power Fashion and Studio 88, all reported GP margin expansion due to improved sourcing practices. Moving over to the overhead expenses. When we met in November at the interim results, I did mention that cost management was quite a key focus for me in the second half. I am pleased to report back that the expense to sales ratio came in at 27.9%, slightly lower than the targeted range of less than 28%. Total growth in overheads for the year was 10%. This was driven by employment costs growing 9.6% for the year. This came through from the strong H2 sales results that we just spoke about and linked to that higher variable incentives. We also opened 184 new stores, as we've said, which resulted in an increase in employment costs, together with minimum wage increases at the beginning of the year of 9.6%. Occupancy costs were up 12.3% due to weighted new space growth of 5.1% and the NERSA electricity increases of 12.7% during the year. Other operating costs grew 13.4%, mainly due to software and licensing costs, which were dollar-denominated and also related to our technology modernization program, where we saw investments into online and e-comm coming through in terms of enhancing the channel as well as various system integration projects during the year. Mark will talk to you a bit later in the strategy section around some of those key focus areas in the technology space. Moving on to op margin. Op margin for the group grew to 14.2%, 20 basis points up on last year and right in the middle of the medium-term target range. The apparel sector grew 10 basis points to 15.4%, also within -- just outside that range and the homeware sector grew 160 basis points to 12.1%. A nice recovery again in the homeware sector off a base of 10.5% last year. As you will note, the Apparel and homeware op margins are slightly outside the medium-term target range, but we do believe that there's opportunity for margin expansion to get into those medium-term target range moving forward. The Telecoms margins came in at 9.7%, slightly down on last year's 9.8% due to a merchandise mix in the telco space. Moving over to the balance sheet now. Gross inventory grew 10.6% for the year. This was due to early arrival of stock ahead of Easter shifting from March to April, as Mark mentioned. We managed that very tightly. Stock freshness remained high at 85%, in line with last year. And our inventory obsolescence provision came in at 6.7%, which was slightly down on last year but reflecting quite a good shape of stock at year-end. Trade and other receivables grew 5.5% due to an increase in debtors. Interest and charges, up 6.1% and credit sales up 3.8%, which we'll talk about in more detail just now. Trade and other payables were up 24.1%, impacted by creditor payment timing at year-end, but also a further expansion of the supply chain finance program that we spoke to at the half year-end. We've now converted over 85% of suppliers onto the SCF program, and it's been a great way to unlock working capital for us. Great to see that the balance sheet remains unencumbered, 0 long-term debt, and the business was very cash generative in this financial year with cash and cash equivalents up to ZAR 4.1 billion, up 48% on last year with a cash conversion ratio of just under 95%. Having a look at the cash flow movements for the year. We started the year on a balance of ZAR 2.7 billion in April. The cash generated from operations increased 8.7% to ZAR 8.5 billion. You see positive working capital from the slide that I spoke to you previously, together with net interest received increasing due to the higher cash balance during the year. Investing activities reflect almost ZAR 830 million we spent in the CapEx space, mostly aligned to new store rollouts, revamps and expansions, together with investment in technology and in the supply chain divisions. Dividends reflect a ZAR 2.1 billion payment out to shareholders, maintaining the 63% payout ratio. Under the other financing movement, you will note an ZAR 883 million movement, ZAR 453 million of this relates to the NCI acquisition of Studio 88 shares of 6%. The cash balance at year-end closed at ZAR 4.1 billion. And as I mentioned, it was up 48% from the prior year. Just reflecting on the credit growth performance for the financial year. We had noted an improved credit environment in the second half. Mark spoke to you earlier about the consumer environment that had changed during the course of the year, predominantly driven by interest rate cuts of 75 basis points in the second half. And we reacted equally by increasing our approval rate to 20.3% for the year by adjusting the scorecard. And by year-end, we were just under 24% from an approval rate perspective. We do see an opportunity here to continue growing those approval rates as we assess the operating environment. Credit sales grew 3.8% to ZAR 4.2 billion and now contributes 10.7% to total sales. The debtors book up 5.5% was well provided for in terms of the impairment provision at 13.2%, which was slightly down on last year's 13.9% and net bad debt came in at 7.8%. You will remember at half year and year-end last year, we said that we had changed the write-off point from a suitability perspective. Hence, the net bad debt is noncomp at 2.2%, but the 7.8% does reflect normalization of the net bad debt in line with historic norms. So the page I'm landing on is the highlights for F 2025. I think just to summarize it all, as a management team, we are very proud of the results that we've put out this year, taking into account the volatility in the consumer environment that we spoke about earlier over the financial year, coupled with a low GDP growth environment. The focused execution of our strategic responses resulted in 2 consecutive years of market share gains, further GP margin expansion and operating margin expansion into the midpoint of the medium-term target. For us, the most pleasing outcome was the double-digit HEPS growth for the financial year. I now hand you over to Mark, who will talk to you about the strategy and outlook. Thanks.

Thanks, Praneel. Actually, when I was talking to you a bit earlier about the sales performance post period end when I said that April was up 11.3% and May was up 12%, the fantastic piece of news that I didn't tell you was that in April, all our divisions gained market share, which has been a long time since we've had that. And certainly, the things that we've done to the businesses that we're doing less well are also starting to take hold. So overall, a very good start to the year. I'm going to talk about the strategy framework. This is something that you have definitely seen before. So I'm not going to go into all the detail. But as you know, we've got 6 strategic pillars, which we've laid out at the bottom there. And it's quite interesting when you start looking at this. These pillars were set probably 4 or 5 years ago. And when we came up and we said, let's talk about what ambitions are on stakeholder engagement, well, the first thing was let's just actually establish a function. And as I said, 4 or 5 years later, we've just been rated the third best corporate in IR by Extel who are an international crowd. And that's in the mid-cap range, excluding the mines and the likes. So I think our efforts have really been awarded, but it's just a really good example of setting out our ambition, putting everything in place to achieve it and then the results come. So strategic pillars is one thing. It's really the strategic outcomes that we're after. And as I said, you have seen this before. Profitable market share, an absolute must. We don't go and grab market share and give away margin. Obviously, then leading and supporting that will be the comp growth of our business, and comp growth is often aided by category extensions, et cetera, or by going into areas that your market share is underpenetrated and obviously, space growth. And space growth, as Praneel alluded to, is really working for us. Becoming customer obsessed and when you start looking at the accolades that we've got, leading brand equity, the customer engagement levels that we've got and the insights that we get from our customer, I think we're doing a good job in that. Part of it is external sort of assurance that's telling us that. But I still think that we've got a piece of work to do here, which is quite exciting for us, and it really does relate to the customer and data. Having a diversified offering is what sets us apart. It's differentiated fashion. We've got skills, and we've got a product offer, which we execute very well and it's value and it's fashion at the same time. So very, very hard to compete with that. But of course, when you're reading fashion, the risk is that you're reading it correctly and making the calls that you do. And that's where all our processes internally in the business come in and touch wood, we get a lot more right than we get wrong. And then focus on omnichannel. We all know about that. But I've also said over the years that it's not necessarily what we want to push out to our customers. It's where they want to shop us and they're still preferring the store environment at this stage, and that manifests itself in the proportion between -- of sales between bricks and online for this particular customer. One of the outcomes we look at is anything that we do invest in. First of all, they've got to be growth vehicles. They've got to have scalability. And I'll talk a little bit about our vision and perhaps some organic and acquisitions that we've made over the years and just reinforce why we made them and bring it back to the scalability and growth. And Praneel spoke about capital allocation and the investment criteria we do set. So that's all that's great, but then you need an internal environment, an internal backbone that enables you to do all these things as efficiently as you can. And of course, you know us as having now to put a value lens across that and do it in the Mr Price way so we can get maximum impact in a very cost-efficient way. So that talks about the whole technical and digital supply chain and any other function that we actually got in our business. Now if you get all that right, that's one thing. You've got to do it right with the right shape. So when I'm talking about shape, I'm talking about returns, and that's very key to us. We're not going to do all these things and then our returns go out the window. So that's where this word discipline comes in. And hopefully, we can get those strategic outcomes that I've spoken about, but they actually are within our tolerance bands for the returns that we've actually drive. Praneel was talking about value creation. I'll just talk now in terms of value creation for our respective stakeholders. Customers first. We're the #1 most valuable fashion value retailer in South Africa. We've got the fourth strongest overall brand in South Africa, and we're the most shopped apparel and homeware retailer in South Africa. That's on the customer front. In terms of our own people, our associates, once again, it's the second year in a row, we've been certified a Top Employer for 2025. And we have also been awarded an exceptional workplace per Gallup, and that's also for 2 years in a row. But there you can see some other key stats, over 32,000 people employed and ZAR 35 million paid in dividends to our store associates as well. Value add to our shareholders, dividends paid of ZAR 2.2 billion, a share increase of almost 30% in the year and a strong ROE of 27%, which was up 60 basis points. And then lastly, on the ESG side, supporting South Africa, 128 million units procured in South Africa, 64 million units, doesn't relate to the 128 million, but just 64 million units in total of our units have a sustainable attribute in them. And then very importantly, for -- I'll talk about value retailing, but the bang we can get for our buck in our effort that with our low-cost infrastructure and the focus that we do bring that is very pinpoint, we've got the lowest risk rating by Sustainalytics amongst the SA apparel retailers, something we're very proud of and we must push on. I'm going to go back and just talk about the vision. And this is the journey that we've been on for a couple of years now. It should be well known to most of you, but I'll just recap on a couple of really important things. We started doing research into the SA market in 2020. And without going into all the detail, we looked very carefully where we were positioned, where the gaps were and where we think we could by research and by identification, move into that space. So that was the kickoff back then. We launched a new group strategy on the back of that. And then over time, the next couple of years, we acquired Power Fashion and Yuppiechef and a bit later, Studio 88. So that happened in 2021, 2022. We also launched Organic Concept Mr Price Cellular and Kids the following year in 2023. And with a growing business with a lot more trading chains, we are obviously then carefully looking at the org design, the way we run and structure our business to make sure people had capacity to do justice to these things. That is all happening at the same time as we are going through an internal modernization. I thought I'd never have to speak about an ERP transition again, but I'll just bring it up once more. That's behind us quite a while ago. But this all happened at the time that there was a lot happening internally to us to get to that point. And of course, I guess, all the disruption that was in the markets through the events that have played out in South Africa and globally over the last few years. But if you look at the bottom right-hand corner, we're talking about performance execution and sustainable growth. It ties back to that graph that I was showing you just now, and it talks to integration, value extraction from acquisitions and scaling organic concepts. So there's a lot of opportunity in the business still, but there's also a final piece of research to identify what's going to add to that. What's -- I think the previous set of core businesses are operating very well. The acquisitions are operating very well. And now we're looking for where is more growth going to come from. So I think we can look back on that and say we actually embarked upon that process with a lot of deep thought, a lot of discipline because we ended up acquiring companies that we went after and rejected a lot of them that actually came our way. So that kind of discipline is really what sets you apart. And the performance that we've driven over the last couple of years, although the acquisitions are doing very well, it's certainly not all about the acquisitions. In fact, if I take the performance of Mr Price Apparel, whilst I'm obviously grateful for all the trading divisions that did deliver operating profit growth or met their budget this year. Unfortunately, Mr Price Apparel didn't meet their budget. They were just shy of it, but it's on a -- and they delivered a very good performance, double-digit profit growth on a double-digit base. So although they didn't meet their budget, I think the absolute key thing was the big chain in our stable is very sound, performing exceptionally well. And when you look at the operating profit rands that they added to the group this year, it's way ahead of any other division. So I think for me, a really great story. Core divisions operating well, acquisitions operating well, organic concepts operating well, and I'll go into a little bit more detail on those. This then also puts that journey into perspective. I was appointed in 2019. So this shows the company that I inherited. On the left-hand side, revenue of ZAR 22 billion. And there, you can see as well, Mr Price Apparel, 60%. The good and the bad was if Mr Price in those days overperformed, we took the upside. But if it sneezed, the whole group felt it. So we did strategically want to reduce the group's impact on one major division. And as you can see, Apparel is now 42% of group profits. But overall, all the activity in a period that had 0 economic growth in the country, all the distraction that we had, we've taken our revenue from ZAR 22 billion to ZAR 40 billion, but it's not just all about the size. The thing is the acquisitions and organic concepts have worked. So if you go into the acquisitions as a start, and I reflect back in the day when we were announcing each of these. And I think it came to the market as a bit of a surprise. What is Mr Price doing? They're cash retailer, a value retailer. They haven't got experience in acquisitions. So there's a natural skepticism. We went and told the market exactly why we had filled -- so we had analyzed the market. And in the case of something like Power Fashion, it was a very strategic fit for our business because deep value is a great place to be in South Africa, given our demographics. But not only that, it actually kept Mr Price from thinking that they always had to go lower and lower in terms of price. And of course, when you've got trend apartments and all those kind of things and product differentiation, you must be very clear of who you're competing with. But the -- I think a couple of years of trading have been under our belt now, I think all those concerns initially about should they be acquiring, did they acquire the right businesses, how we sure these businesses are going to fit have been really put to bed. If you just look at the performance, combined retail sales were up of almost ZAR 12 billion in acquisitions, was up 8.9% and even stronger at almost 12% in the second half, and they contribute almost 30% of group sales. Each of the businesses have had market share gains. Obviously, Studio 88, we can't compare it to RLC because it is an RLC for that category, but we can't compare it to the Type D retailers. We added 107 new stores, but that's -- I think the next line really tells us the scale of the businesses. So it's just slightly over ZAR 1.2 billion combined operating profit from those 3 businesses. If you look at future focus, it's no different to our own business, the original businesses, fashion differentiation and value positioning is continue -- is going to be the 2 things that continue to drive our efforts. And if you get those right, the market share gains should come. We've got extremely strong relationships externally with suppliers and in fact with brands. And we've got a great opportunity for enhanced private label expansion as well. There will be benefits of scale that do come as these businesses grow and they access the central, what we call service -- centers of excellence, all the support functions, and that will drive future efficiency for the group. The good thing is in these divisions as well, and it's very key for any acquisition. We don't buy for bulk and not interested in that at all. And if we do acquire anything, it's got to have serious long-term growth prospects ahead of it. If it doesn't, then it doesn't meet one of our key criteria, and we just don't take it any further. So that's absolutely key. So much as I just explained what happened with the acquisitions. Now there were organic concepts that I did refer to a little bit earlier as well, Mr Price Kids and Mr Price Cellular. So I don't think I'll go through all the detail here. I think the key thing is they are -- they have got good representation across our businesses. Kids, for example, is in 580 Mr Price stores, but the real strategy there is to have standalone and we did open 8 new stores in this year. Of course, we've got appetite for much more, but what we're really looking for in that chain is to have our kids business as close to the Mr Price Apparel business, the mothership, if you want to call it that. And we'd rather slow things down to try and engineer that space. So that's definitely the strategy there. But overall, nice market share gains. The business is working, and there's heaps of potential, including a hunting list of over 100 stores that we're looking at there. Mr Price Cellular was also birthed a few years ago. It's in 562 stores, 61 standalone stores as well. Market share gains have been quite spectacular for Cellular over the years. And as you can see there, 5 consecutive years of gains. And very importantly, as we've done it, looked at the mix of products and push GP and operating margins as well. The hunting list is over 200 stores. But the important thing here is that we are -- we launched 2 organic concepts. The -- unless they like these 2, in other words, they've got strong representation in the trading divisions, 581 in kids, 562 in cellular, organic concepts do take a long time to impact the group earnings. We're just very fortunate that in these 2, they got to scale quite quickly, but in perhaps a slightly different way than just pure standalones. But we are delighted that the return thresholds that we set for these 2 businesses have been exceeded. Looking at -- I think we've got good momentum in our business. Of course, we're subject to all the external influences that we spoke about earlier. But I think things are trending really in the right direction. I won't go into all this detail. Praneel did speak about segment reports, there's some duplication to some extent. But I think really what I just wanted to bed down again was the market share gains over the last 2 years, you can see it on the left-hand side and market share gains with a 80 basis point increase is really the way to go for us. So as I said, we do measure market share according to RLC. And if you just look at what we took out the market this year is ZAR 685 million, that effectively came from others. Then in the Apparel segment, also very strong performance. You can see the stats here. I won't go through them all. But I think very pleasingly, we've got 2 new directors appointed in 2 of our trading divisions. They've been in the seat for a year or so. And I'm very excited about what's coming out of just new thinking in the trading divisions. And yes, I think we're definitely trending in the right direction there. We know that the Miladys business has been suffering for a while. But I think the recent results there is also trending in the right direction. When I said that April and May sales are up, let's just call it around 12%, Miladys are actually exceeding that number. Miladys was up 10% in April and 18% in May. So that's starting to look very good. And as I said, they gained share -- market share in April. And then likewise, in the homeware sector. We have spoken for the last couple of -- the last few times when we've met for results presentations about this consolidating market share, we are by far the heavily dominant player in the sector. And post-COVID, work from home, flexi work, it just opened up the sector to other players to come in and many other doors opened. But the point is that we still hold very healthy market share, probably around 30%. And if you just read, in fact, some of those accolades in Mr Price Home, still continue to be the most loved and the highest brand equity in South Africa. We continue looking at categories that we've got opportunity in where we're underpenetrated and where we've introduced those during the year, their growth is now exceeding the divisional average, which is positive. The great thing as well is I think we've got some work to do in our overall store environments and where we have actually revamped and particularly Mr Price Home, they're showing excellent returns. So I think that's selling is something that the customer wants. When we get into next year, I think we've upped the CapEx, in fact, for the next 2 years on revamps and it's close to ZAR 350 million over the next 2 years that we're going to be spending there, not on home on its own across all our chains. But home, yes, I think the sales performance is up. You can see an increase in the number of units sold and the GPs and op margins up nicely, too. I think the same then starts playing out for Sheet Street. A lot of work went down into really strategically looking at that assortment, and we've made changes. And this is one division where we had held back some CapEx until they got that offer right, they're now in the place where they're ready to get CapEx again. In that, and it's something that we have to do and something that has driven the increased profit, the increase in profit is we've actually taken a very hard look at their store footprint and consolidated some of that and closed some stores there. That closure will go into next year as well. But of course, when you close, I'm not too worried about top line performance. Obviously, it's the bottom line that improves when you close those lossmakers. And if your new stores are then performing, then that starts a great sequence that should play out for some time. But overall, good momentum in that business. Of course, that's the trading divisions. And the things that enable the trading divisions to do what they do, certainly, one of them is tech, and I've spoken about the whole modernization program. We've done the ERP transition. In fact, to cloud, I didn't mention that. And that whole transition to cloud is something that's going to have a continued effort as is decoupling our legacy estate from -- and moving to best-of-breed and modernizing our whole infrastructure. So our plans are very detailed there. And any mistakes that we did make in the past, I believe we've now made them. And the learnings are ingrained. Over time, we'll slowly integrate the new divisions, but it doesn't -- it's going to be a very specific part of integration, and I'm talking from an IT perspective. It could be that they use elements of what we use, but it doesn't mean that everyone is going to convert to the same ERP, et cetera, and we'll just go about it in a very considered way and not change for the sake of changing. It's got to be a good reason. And then obviously, like any other company globally, I would say, just carrying on to focus very heavily on cybersecurity, given breaches that have taken place recently across the globe. When it comes to -- you do know that we've got our advanced team. So all the focus on AI and machine learning, we've shared it, in fact, quite a couple of examples with you at Capital Markets Day, but that whole area is going to get an added focus so that it really takes us forward and leapfrog some of our -- the things that we can do there. So really looking forward to what's going to come out of it, enhanced focus from our advanced team. And then likewise, we're not saying that we had an opportunity, it's around CRM and the customer and the analysis of the data, et cetera. And some of these changes may include or opportunities that will be unlocked potentially through our organizational design changes as well. If you look at supply chain, another key enabler. Yes, I think our supply chain and our operations, this is an area that we really do excel through all the disruption, I think we've managed this process very well. So hats off to our supply chain team. When you -- so we've just broken it down between Natal, Gauteng and the Western Cape. And there, you can see the scale of our operations. At present, Hammersdale has got 62,000 square meters and Power Fashion 11,000 square meters. Gauteng has got Studio 88 of 10,000 square meters, Gosforth Park of 30,000 square meters and the Western Cape is the Yuppiechef DC. It doesn't mean that that's our only facilities. There's more than 12 depots that we've got around the country in conjunction with our logistics partners, but these are our primary areas. So the plan is that in KwaZulu-Natal, although it's got a capacity to move to 100,000 square meters, the plan is not to do that at Hammersdale. Over time, we can incorporate Power Fashion. That will be in the next 2 years. That will go into the Hammersdale DC. So we'll get some efficiencies and processes there, but that can happen at the same time as -- so within the current constraint of 62,000 square meters. What we've rather done than focus all our operations and all, I guess, the risk at the end of the day on one site, one key site. We've decided to de-risk it and rather have a secondary facility in Johannesburg, and that is the Gosforth Park, which will effectively run as with the same capabilities as Hammersdale. Studio 88 doesn't necessarily mean it's going to move into Gosforth Park because we do own the Studio 88 facility. But certainly there, what we will do is make sure that Studio 88 start to utilize some of the software and the systems that we get a lot of value from in our stable. And then the Western Cape, yes, that just completes that triangulation. But -- so you'll see that there's a bit of CapEx required there. It's going to be about ZAR 620 million. It's -- we're looking at delivery in H2 2026. But it's important that don't get too worried about what this capital expenditure is. It's there and it's got an overall mindset that we're going to incur this capital expenditure. It's -- one of the things it's going to do is enhance the growth in the business and therefore, the actual cost per unit of moving and storing our merchandise. The aim is to either keep it flat or reduce it per unit, which I think would be an excellent outcome. I've been speaking about resilience all morning, so is Praneel. And it's all really around the businesses and the business model that we've got. We often get questions, well, how long can you carry on growing for? And I'll say this that when I started at Mr Price in 2006, those questions were being asked at that time. The fact is we've got good brands that have got legs. We've acquired brands that have got legs, and we've actually started organic concepts that have got good legs. But we have to be very strict about making sure we're being true to our business model. And part of that is pricing, part of it is value, part of it is fashion. And when the currency moves around, we've got to then make sure that we're always correctly positioned with our price and our value relative to our competition. So when the rand improves, we don't just take all that margin. We pass it through to the customer as well when it moves in the right direction for the customer that is. So we're defending our market share categories, and we've identified many other departments where I said we are underpenetrated, so we can grow. Praneel spoke about our credit. We've been very conservative on credit for, I think, a very good reason. We will grow as the data suggests that we should, and we'll follow that trend. And we started the very early stages of releasing a bit of credit into the market, but certainly not risky at all. Protect and leverage the Mr Price, the whole halo of the Mr Price brand. Our space growth opportunities are across all our chains. As I said a little bit earlier now, we're actually in the position where all our chains can get new store CapEx where it wasn't the case in the last 12 months and extracting material sourcing gains from group scale and integration. And just one example of that is new businesses that we've got and the introduction to existing suppliers in our stable to them has had really good outcomes. Yes. And then just finally, continued operating leverage through group scale. As we get bigger, we get more efficient. We've got this ingrained cost discipline in our business. And I spoke a little bit about org design later. So at the end of the day, that's our plan to conserve and expand high return profiles. If there was an acquisition that would dent our group metric in any way, of course, the plan is to correct that. So it's positively so that, that division acquired or company acquired is a program to increase its own operating margin. So it shouldn't be long term at all. This is our -- we spoke about this extensively at Capital Markets Day. This is the APEX strategy team. And I explained a little bit earlier about the focus that we had going back a number of years researching the SA market. We've landed what we've landed and then now there's a piece of work to -- that we're doing to make sure that we are quite clear about where we're going to target and what's going to drive the next wave of growth for us. But I just wanted to sort of address something that I heard quite recently in the market in that we've often spoken about our vision. Our vision is to be the most valuable retailer in South Africa. That's by market cap. But I just want to clarify that the vision hasn't got a date to it. So if you had to say what time frames are you looking? I'm certainly looking way beyond my tenure. It could be a 20-year vision. So I think investors mustn't get nervous that we're about to do a big transaction because we need to get to this vision as soon as possible. That's certainly not in our heads. And it's certainly not the way we've acted in the last couple of years. If you look at the size of the businesses we've acquired, I think that will sort of tell the story. So we don't have an appetite for a big deal at all. And we will continue to look for opportunities that meet our criteria, many of which we've actually shared with you already. But I just wanted to dispel that absolute notion that we're looking for a big deal to substantially increase our scale. I'll just reiterate, it's all about long-term growth in sales and profitable growth. So if a big deal comes and it substantially changes the business, it probably is unlikely that it would give us that. So I hope we're clear on that. Praneel spoke a lot about capital allocation. I think this is an area where I think we do apply ourselves very diligently because ultimately, at the end of the day, we've only got a certain amount of capital, and we need to put it into areas that are going to generate the best return. There, you can see the CapEx on the right-hand side, what we spent last year in F '25 and what we plan to spend in the new year. So you can see the shift and the ramp-up. But part of that is a little bit more going to technology and a little bit more going into supply chain. That was the Gauteng project that I was talking about as well, but still a very healthy amount going to store CapEx because -- and this is really key because the stores that we're getting and opening are working. At the moment, we think that's slowing down, store CapEx will slow down. So we look at that very, very carefully. And at this point, I think there's absolutely no reason for us to think about changing our dividend payout ratio of 63%. It's been there for many years, and it's certainly still affordable to the company. So all in all, we expect to open about 3% to 4% space growth, around about 200 stores next year. And although we just had a payout for one tranche of the Studio 88 acquisition, in fact, last week, there's the final buyout of the remaining 15% that will take place this time next year. So I come back to top quartile returns and metrics again. And these are the targets that we actually have shared with the market. First of all, if you see that achieved that green block, the fact that there's lots of ticks there means we're doing a good job on these. Of course, it is a range, so we can always do a much better job, but we're firmly within the ranges that we did set. Stock turn, we didn't achieve that target. Praneel spoke about some of the timing of stock inputs, but that's certainly a big one for us going forward. But we have revised some of these targets. Our ROE, we were at the range of 24% to 26%. We've moved that up, as you can see. The cash conversion ratio, we've moved up slightly. And the expenses, we've actually kept the same -- well, in our minds, the same range, but we've just moved the parameters a bit 27.5% to 28.5%, but very happy, nevertheless with where we are with the metrics. And then yes, I think just looking at being proudly South African and the input that we do give to the local market and really what's transpired and enabled that is how we've actually performed over the last 39 years. There, you can see retail sales compound growth, HEPS compound growth of 18% and total shareholder returns compounding at 32%. That's, I guess, for the investment side. But then looking at investing in SA. And all these time frames aren't all coterminous. They identified at the bottom of time frames that relate to. But just look at the sheer impact of our Jumpstart employment programs, 29,000 people, removing 158 million plastic bags from circulation, buying over 100 billion units locally and corporate tax, and this is just corporate tax without battling ZAR 15 billion. These all talk to a major, major investment in SA and certainly that we're doing our part to try and grow the economy and do better. So I guess the last section on the outlook, the uncertain macro is still there. The volatile consumer environment is still there. Although interest rates are low. Is it enough? We just seriously need GDP growth to create a better environment for us. There's lower input costs, which is great. And with the rand as we're at, we've actually hedged it out to the end of the year. So our merchants have got certainty. So we'll have to see how all these things settle in the next 3 to 6 months. Hopefully, the sooner the better. But we'll just close off by saying that, once again, there's really good momentum in the business. The areas that we're struggling are now look like they're back on track. We started the new year on a really good footing in terms of its overall growth. We're gaining market share, and we've delivered double-digit earnings growth. So I've got to look back on this year and say pretty satisfied, but that was last year, fully focused on the year ahead. Thank you.

Thank you for all of the questions that have come through. We'll try and get through as many as we can in the next sort of 10, 15 minutes or so. Mark, just to start with a question about market share gains. Is there any sense around potentially where the businesses gain share and from who? And also just a question about tracking market share outside of the RLC, is there any insight that we have outside of the RLC?

Look, it's often difficult to say who we're getting market share from. So perhaps the obvious place to start would be those that are talking about sales growth, but aren't talking about market share growth. Exactly how much is coming from the listers or the independents, it's always hard to estimate. I think you've got to go get it from the source. The market share growth outside the RLC, it's only really Sport and Studio 88. And the only thing we can really do there is compare those 2 to Type D retailers SA. And I think it would prove that both are doing very well and in particular, Studio 88.

Just sticking on competitor landscape. There's a number of questions around the higher taxes on Shein. Have they materialized? Has Mr Price benefited from this?

Once again, it's quite hard to say because -- I mean, the one thing I think all of us have seen on Shein is the social media outrage that's now taken place because of higher prices. So it does make us feel comfortable that the new legislation has been applied correctly. I think it's still a bit erratic. So I don't think it's across the board. And yes, if I look at our own e-com sales, it grew slightly ahead of our store sales. So there must be some positive impact and pickup. But yes, I think it's also got to play itself out. The thing with online sales is I think as soon as you're buying something and you're not paying full price because you're not paying duties, a customer like ours would be prepared to go online to buy. Whether you then get the quality that you thought you're getting is another question. But certainly, I think the differentiation for us because we obviously offer e-com, it's only 2.5% of our business. But our customers want to go to our stores to see our product and feel it and try it on. And when you give them that, they go for it. It's only that in Shein, you couldn't buy in stores so they're forced to go online. And although we were -- I mean, it's obvious that we were one of the parties impacted. The average income of a Shein customer, and I'm just saying it is an average, so they are below and above, isn't really in our target sector. It is above our target sector. So yes, I think it's hats off to the authorities for implementing that. And I just hope it carries on.

Praneel, just a couple of questions, which I'll follow -- let's start with cost growth. I'll follow up with 1 or 2 after that. Just a sense of cost growth in FY '26, any particular outliers to consider? Yes, and we'll move on to some other medium-term target questions after that.

Cool. Thanks so much, Matt. From a cost growth perspective, I think the best indication I can give you is to look at the medium-term target range that we spoke about just now on Mark's slide. We've had lots of engagement with analysts and investors. And the outcome was rather than just an absolute number where we said less than 28% in the past, we've created a range now so that you can understand and model in that space. So that range of 27.5% to 28.5% is where our focus will be, and that's where we will obviously try and kind of land costs in F '26. I think it's also important, Mark mentioned some lower input costs coming through. So we'll manage that as it gets into the business. But we also spoke about some investments that we're doing like other listed retailers in the technology space, in the cybersecurity space. And you've also seen our plans for the DC, where we're trying to ensure that we have sufficient growth capability in that center of excellence. So yes, if I just round it up to say that the medium-term target is where -- is what you should be thinking about because that's certainly where I'm also aiming to land for F '26.

On the topic of medium-term target, there have been a number of questions just around some targets increasing, some remaining the same. If you could just give a bit of color around the thinking around medium-term targets and how we land on them.

Sure. Thanks for that question. So the medium-term targets for us is quite important because we have actually modeled that out in our financial model. So it's not just a number that we pick. Where we've seen that we are achieving the targets like in the homeware sector, you would have seen that the GP number over 42% is higher than the target, then we've obviously reset the target range to 41% to 43%. So I think it's quite important to understand that the medium term for us is a 24-month view and where we've achieved targets, we'll set them higher, similar to ROE. And I think that's the key thing. I think we're just trying to give more guidance to the investor community in terms of what the shape of the business looks like, also understanding that we've had acquisitions over the last 5 years that may have altered some of the metrics historically. So I think that you must take comfort that we will continuously look at the targets and where we achieve them, we will reset them, but it's always based on the data and the forward views of the business.

Praneel, while I got you, one more. Credit growth, just the outlook on credit growth and the appetite for more growth in the current consumer environment.

Yes. Thanks, Matt. So Mark also mentioned the consumer environment is a bit uncertain. We know there's some support for the consumer environment with lower inflation, lower interest rates, which create a good opportunity for us. And we've seen the same in the other data points that we look at from a credit market perspective. Our approval rates are already ticking up slightly. We said that for this year, we'd want to land closer to the mid-20s, call it, 25% from an approval rate perspective. But even in a better consumer environment, we will diligently apply our scorecards to make sure that bad debt is not running away from us. So I'm quite comfortable that we will see a lift in the approval rates, which then should allow credit into the business. I think it's important to understand also that it's a very databased approval rate. So as you can imagine, the different brands in the business have different customer segments. And some customer segments are obviously at higher LSM, for example, and higher income groups. So while the average approval rate would get to 25%, in some brands like Miladys, the approval rate is actually higher than that, but the average for the group comes back to 25%. I hope that gives you some color.

I think it also comes back to the fact that the South African consumer, although there's a lot of things pointing in the right direction. I spoke earlier about interest rates and the like, that's all positive. But it doesn't mean that the SA consumer is in a good financial position yet. So still very cautious. We've got to see that things progress in the direction that we want. Test releasing credits, as Praneel was talking about. But certainly, right now, I think there's got to be a lot more to happen on the consumer disposable income front for us to be more aggressive.

Just a question with regards to higher CapEx and the balance between supporting growth versus managing returns. Just some commentary around what is driving the CapEx.

Yes. Look, I think the question about incurring the CapEx and cost growth and all that kind of stuff is one of the reasons, in fact, that I put in the presentation that if you just take what we're going -- putting into our supply chain, although the CapEx is there, I did say that the objective was to keep the cost per unit that we manage and move around the same or lower. And that's not me just saying things. That's backed up by all the data and all the information that we've got. And in fact, it went into the business case for us to even approve the distribution center. Then with technology, you've got some critical things to just keep the lights on and be -- have a safe environment, for example. And then you've got things that you're going to invest in, that are going to create opportunities in the business for top line or margin enhancement. So all I will say that even any technology investment that we make goes through the same investment committee, got to stand up and deliver the returns, present it and they've got to meet investment thresholds. So you've got to be able to determine the impact that it's going to have on the business and quantify it, and that goes through a rigorous process.

Mark, just shifting to the topic of stock in relation to a good April and May and just generally, the effect of where winter landed and the health of the current stock and then just some broader comments around supply chain operations, Durban ports, just how those have unfolded.

Yes. I think I could encapsulate all that and say I'm happy. It's certainly looking a lot better than it was a year ago. Just to take you back, what we had done because we've obviously got set lead times, particularly for imported product, which is roughly half our product. But with all the disruption, either containers or vessels, we are putting increased lead times into our system, which really we don't want to do. Lead times are long enough without it. But the speed in which vessels are now coming, the pace in which they're going through the port has improved. The port still has to -- still on the project to get more gantries and equipment. That's a longer-term plan, but they have got some -- some new ones. So in fact, what we can do is we can start releasing some of those buffers that we put in those extra buffers into our supply chain. In fact, we've done it already. And overall, I'd like the port to be maybe 12 months ahead of where they are right now. But it looks like there's commitment, there's action. And importantly, we can see the positive impact being felt. And as I'll say, and I think I've said it before, we've got excellent relationships with the port. So it just enables a very positive flow of movement out of the port to us. And the shape of our stock, it was up 10%. It's definitely manageable. The quality of the stock is good. And yes, overall, they're very satisfied.

Praneel questions, a number of questions just around, firstly, expansion of margins and recognizing margin expansion in FY '25 and then looking ahead to FY '26, particularly the support in the GP margin and just the input levers into that.

Yes. Thanks, Matt. I think we did -- Mark did have a slide that spoke about the GP margin opportunity, the fact that there is also a low markdown base from F '25. I think what's quite important to us, even though there might be some lower input costs, we have to manage and protect our value position quite carefully in the market. So as we said, we will be -- where we can, we will protect customers from inflation. But I think that the key focus is on those medium-term target ranges again. I think, as I said, we have some opportunity to get more into the middle of those target ranges for some of the trading divisions, and that's where the focus will go.

There have been a number of questions regarding cash balance and capital allocation, just to read a particular question, just which covers it. So just give me a second. Just relating to the conversation with relation to capital allocation and acquisitions. Are there many acquisition opportunities there in South Africa? Or given the lack of economic growth in South Africa, are you looking at offshore businesses? There have been a number of questions around this. So maybe just use that one as a guide.

Yes. Look, I think the thing for us is -- and it's nothing new. It's a situation that's been around for many years is -- and I think one of the other CEOs, in fact, I think it was 91 the other day, was talking about this dog-eat-dog situation in South Africa. You've got low economic growth. You've got a lot of consolidation in the retail industry. And I guess the question is, well, how long can you continue keeping -- eating market share and someone's going to lose it. So you're always going to be on top of your game. So of course, the question comes, how long can that continue? If you ask are there anything sort of that we're looking at in SA, I think we did 3 really good transactions. I think if there was anything else, it would be probably much smaller than the ones that we've done and more tactical in nature, but with really good reason and growth prospects for considering something. But we get -- I can't give you a number. I've lost count. The number of things that cross our desk from local and international and it could be acquisitions, could be -- would you like to partner with us? As I said, I've lost count of. We've -- and we -- I think that's one area that we're very good. We say no quickly if we need to say no. But until that phase of research that I've spoken about that we're through that properly, then I think that will be the time that we can sort of communicate clear plans. Otherwise, I'm communicating research without being able to back it up with any clear guidance on it.

Great. Thanks, Mark. Thanks, Praneel. Thank you, everybody, for joining today. Thank you for all of the questions. If we haven't covered them, we do have some scheduled engagements early next week. So we will continue to cover questions then. And if there's anything needed immediately, I can follow up with you today. I'm aware that it's a busy day for retail and another presentation to go to. So thank you for joining, and we'll talk to you soon.

Thanks, everyone.

Thanks, everyone.