APRIL 2012 MARCH - Mr Price Group

APRIL 2012 MARCH - Mr Price Group

                                                              TAKE AN INSIDE
                                                                LOOK AT OUR
                                                                   MR PRICE

                                                            ONLINE SALES

                                                     PLATFORM LAUNCHED -

                           2012                         GROUP POSITIONS

                           MARCH                       ITSELF FOR THE NEXT
                                                     PHASE OF ITS GROWTH
   Test stores in
   Nigeria and Ghana
   deliver strong results
APRIL 2012 MARCH - Mr Price Group
“A celebration                                   WELCOME
of the individuals who                                    TO THE
   make it all happen”                                    MR PRICE
                                           STUART BIRD
APRIL 2012 MARCH - Mr Price Group
06 Scope and Boundary

  07 2013 Highlights

     08 2013 Under Review

        10 Our Business

           12 Our Footprint

              14 Business Overview

                 26 Stakeholder Engagement

                       29 Chairman’s Report
                          31 CEO's Report                                                                    REPORT
                              32 CFO's Report

                                37 Divisional Performance Indicators         46 Divisional Reviews

                                   38 Report on Our People                      60 Corporate Governance

                                      44 Stories of Our People                      68 Board Risk Committee Report                                                    DIVISIONAL
                                                                                       70 Audit and Compliance Committee Report                                       REVIEWS
                                                                                          72 Internal Audit Report

                                                                                             74 Social, Ethics, Transformation and
                                                                                                Sustainability Committee Report

                                                                                                  78 Social Report

                                                                                                     80 Remuneration Report

                                                                                                        93 Board of Directors

                                                                                                            94 Shareholder Information

                                                                                                               95 Declaration of Final Cash Dividend

                                                                                                                     96 Approval of the Annual Financial Statements

                                                                                                                        97 Report of the Independent Auditor

                                                                                                                           98 Report of the Directors

                                                                                                                               102 Abridged Financial Statements

                                                                                                                                  108 Administration and Contact Details

                                                                       OUR PEOPLE
                                                                                                                                     109 Definitions and Glossary

                                                                                                                                         110 Notice of Annual General Meeting

                                                                                                                                            115    Form of Proxy


APRIL 2012 MARCH - Mr Price Group
                                                                                                                                                                                                       ANNUAL INTEGRATED REPORT 2013:
                                                                                                                                                                                                                      2013 HIGHLIGHTS
                                 Scope                                                                                                                       HIGHLIGHTS
WHERE WE’RE AT...               and Boundary
          About the report
          The Group is committed to integrating social, environmental and governance performance                                              OPERATING PROFIT
          with financial performance in accordance with the King Code of Governance for South
          Africa, 2009 (King III). Issues that have a material impact on the Group have been
          included. This year's report has been produced in a more concise manner, including only
          abridged financial statements. Additional information is available on the Group's website

          Scope and boundary
                                                                                                          HEADLINE EARNINGS PER SHARE
          This Annual Integrated Report, for the 52 week period ended 30 March 2013, includes
          the consolidated financial results of Mr Price Group Limited trading in South Africa and its

          African operations in Botswana, Namibia, Lesotho, Swaziland, Ghana and Nigeria as well
          as the income received from its franchise operations trading elsewhere in Africa. Pages 12                                   27 YEAR CAGR IN HEPS
          and 13 illustrate the geographical representation of retail operations.

          The Group’s Strategic Planning Framework and the Global Reporting Initiative (GRI) served
          as guidance to identify issues material to its long-term sustainability. Relevant disclosures
          include those pertinent to corporate-owned operations but exclude franchise operations.
          The Group’s social initiatives are focused on South African national priorities.
                                                                                                                                           DIVIDENDS PER SHARE
          The Annual Financial Statements have been prepared on the historic cost and going
                   concern bases, and are prepared in accordance with the International Financial
                   Reporting Standards (IFRS) and in the manner required by the Companies Act of
                   South Africa (71 of 2008) and the JSE Listings Requirements.                                                              RETURN ON EQUITY
                     The Group’s consolidated Annual Financial Statements were audited by the
                     external auditor, Ernst & Young Inc. Their unqualified report can be found online
                     as part of the consolidated Annual Financial Statements.

                     The South African Broad-Based Black Economic Empowerment (B-BBEE)
                                                                                                                                            CASH RESOURCES OF
                                                                                                                                                                                        R1.2 BILLION
                     accreditation level has been externally verified by a SANAS accredited
                     organisation, BEESCORE (Pty) Ltd.

                     The Board is satisfied with the level of integrated reporting, but recognises
                     that it is premature to subject the Annual Integrated Report to external
                                                                                                                                           ASSOCIATES EMPLOYED
                                                                                                                                                                                        19 384
                     assurance at this point. The Group’s Internal Audit Division has verified the
                     selected disclosures contained in the Social, Ethics, Transformation and
                     Sustainability Committee Report (page 74) and the Report on our People                                          700                                                                                                          120
                     (page 38). The external auditors have verified the information in the Remuneration
                     Report (page 80).                                                                                               600

                      Directors’ responsibility                                                                                      500
          The Board acknowledges its responsibility to ensure the integrity of the integrated report.
                                                                                                              HEPS and DPS (cents)

                                                                                                                                                                                                                                                        Share price (rand)
          The Board has applied its mind to the integrated report and confirms that it addresses                                     400
          all material issues, and presents fairly the integrated performance of the Group and its                                                                                                                                                60
          impacts. The integrated report has been prepared in line with best practice pursuant to the                                300
          recommendations of the King III Code (principle 9.1). The Board authorised the integrated
          report for release on 22 May 2013.                                                                                                                                                                                                      40

                                                                                                                                     100                                                                                                          20

                                                                                                                                            2003   2004   2005        2006        2007   2008      2009           2010   2011       2012   2013

                                                                                                                                                          Headline earnings per share       Dividends per share           Share price

         NG Payne			SI Bird			MM Blair
         Chairman			                    Chief Executive Officer		       Chief Financial Officer
APRIL 2012 MARCH - Mr Price Group
                                                                                                                                                               ANNUAL INTEGRATED REPORT 2013:
                                                                                                                                                                           2013 UNDER REVIEW
  MaintainedB-BBEE Level 6 Compliance.
  Exceeded 1 000 corporate-owned stores.

  R16.4 million paid                                                                             Successful first year
  in dividends to Mr Price Partners Share Scheme participants.                                       performance of

                                                                                               stores in Ghana
                                                                                                   and Nigeria

                                                                                                        AND ACCOLADES
                          People Management
 The Group has invested in smart software solutions (Ceridian Dayforce Human Capital
                                                                                                         2012 - Mr Price Group            2012 - Mr Price Group            2012 - Mr Price Group
 Management System, Cornerstone Learning Management System and VIP Payroll)
                                                                                                       Ranked 2nd in Sunday Times       Ranked 5th in Sunday Times         Ranked top of the JSE for
 enabling world class people support to the business as the Group continues to expand
 locally and internationally.                                                                          Top 100 Companies 2012           Top 100 Companies 2012             total shareholder returns
                                                                                                        (5 year compound growth         (10 year compound growth         over 10 years by the Sunday
                                                                                                       rate in share price 43.2%).      rate in share price 44.2%).          Times in May 2012.

                                         Mr Price Online
 Launched on the 30th July 2012, at a high profile event held at Mr Price Head Office
 that included South Africa’s who’s-who in the fashion and media industry, www.mrp.com                    2012 - Mr Price Group           2012 - Mr Price Group             2012 - Mr Price Group
 has enjoyed an almost fairy tale experience to date. Constant and positive social media                Included in MSCI Emerging        Finalist of the World Retail          Investment Analyst
 feedback is testament to the fact that Mr Price has set the benchmark in online shopping in                 Markets Index from             Awards 2012 in the                Society Awards 2012
 South Africa, so much so that it also became the most searched retail brand on Google in                       May 2012.               Emerging Market Retailer of         Mr Price Group was voted
 South Africa for 2012, despite only launching 7 months into the year.                                                                       the Year category.         leader in corporate reporting in
                                                                                                                                                                          the consumer services sector.

Facebook Likes           Twitter Followers             Site Visits            Page Views
209 418                  14 768                        2 949 827              33 024 760                                              2012 - RedCap Foundation
                                                                                                                           The RedCap Foundation’s YoungHeroes programme received an Honorable
                                                                                                                           Mention in the Africa category at the IPN Global Best Awards. This award
                                                                                                                           recognises the programme’s achievements under the category of “partnerships
                                                                                                                           that support health, wellbeing and learning in Africa.”
APRIL 2012 MARCH - Mr Price Group
                                                                                                                                                      ANNUAL INTEGRATED REPORT 2013:
                                                                                                                                                                        OUR BUSINESS
                                                                               NUMBER OF
                                NUMBER OF STORES                  DETAILS      ASSOCIATES          PRODUCT OFFERING                                            CUSTOMERS AND POSITIONING

                                           384                                    10 398
                                                         Average store size                        Clothing, footwear, accessories, underwear              Marketing is pitched at 16 to 24 year olds who want to
                                                                   624m2                           and maternitywear                                       keep abreast of the latest international trends at exceptional
                                                                                                                                                           prices. LSM range 6 to 10.

                                             53                                     1 224
                                                         Average store size                        Sporting apparel, equipment, footwear and               Value-minded sporting families who enjoy performance,
                                                                   891m2                           accessories                                             quality, comfort and fit, whether they are participants or
                                                                                                                                                           spectators. LSM range 6 to 10.

                                            189                                    1 964
                                                         Average store size                        Classic and updated women’s clothing,                   Young-at-heart women aged 40+ years who have fashion
                                                                   326m2                           footwear, intimatewear, cosmetics and                   sensibility and require differentiated trends that offer style
                                                                                                   accessories                                             and co-ordination. LSM range 6 to 10.


Looking good...
                                            150                                    3 335
                                                         Average store size                        Home textiles, homeware, furniture and                  Contemporary lifestyle customers, aged 18 and upwards,
                                                                   920m2                           kids’ merchandise                                       all with a young-at-heart attitude. LSM range 6 to 10.

                                           253                                       1 597
                                                         Average store size                        Bedroom, living room and bathroomware                   Middle-income consumers looking to co-ordinate their homes
                                                                   195m2                                                                                   tastefully but responsibly. LSM range 5 to 8.


                                             26                                          7*
                                                         Average store size                        Clothing, footwear, accessories, underwear              The franchise stores operate the same business model as
                                                                   514m2                           and maternitywear. Home textiles, homeware              the corporate-owned stores.
                                                                                                   and furniture
                                                                               * Head office
                                                                                 associates only
                  FINANCIAL SERVICES

                                               Credit and financial services                       Granting of credit, management and collection of        Cards available are as follows:
                                          available in all South African and                       debtors book and identification and marketing of        • Mr Pricemoney (Mr Price Apparel, Mr Price Home,
                                                            Namibian stores                        financial services products                               Mr Price Sport)
                                                                                                                                                           • Miladys
                                                                                                                                                           • Sheet Street
                  CENTRAL SERVICES

                                                                                                   Provides the following services to the trading divisions:
                                                                                                   • Information technology,
                                                                                                   • Internal audit,
                                                                                                   • Human resources,
                                                                                                   • Real estate,
                                                                                                   • Financial,
                                                                                                   • Risk and governance, and
                                                                                                   • Sustainability

                                          1 055                                   19 384
APRIL 2012 MARCH - Mr Price Group
FOOTPRINT                                                                                                                                                                                                                                                                                     MR PRICE GROUP LIMITED
                                                                                                                                                                                                                                                                                     ANNUAL INTEGRATED REPORT 2013:
                                                                                                                                                                                                                                                                                                      OUR FOOTPRINT
                                                                               GAUTENG                                                   LIMPOPO

                                                                                                                                                   Mr Price Apparel - 16



                                                                                                                                                                 Mr Price Home - 8






                                                                                                                                                                    Mr Price Sport - 1








                                                                                                                                                                          Sheet Street - 15





                                                                                                                                                                                       Miladys - 10

                                                                                              FREE STATE                                                                                                                                                            MPUMALANGA

                                                   NORTH WEST                                                                                                                                                                                                32 - Mr Price Apparel
                                                                                               Mr Price Apparel - 18                                                                                                                                                                       253
                                                                                                     Mr Price Home - 7                                                                                                                    50
                                                                                                                                                                                                                                                             8 - Mr Price Home

                                                                                                                                                                                                                                                             1 - Mr Price Sport            189
                                                      Mr Price Apparel - 27                          Mr Price Sport - 3
                                                         Mr Price Home - 7                                                                                                                                                                                   23 - Sheet Street
                                                                                                       Sheet Street - 13

                                                          Mr Price Sport - 2                                                                                                                                                                                 18 - Miladys
                                                                                                           Miladys - 17
                                                           Sheet Street - 16
                                                                                                                                                                                                                                                                                                                   STORES IN AFRICA
                                                              Miladys - 14
                                                                                                                                                                                                                                                                                         Mr Price Apparel
                                                                                                                                                                                                                                                                                           Mr Price Home
                                    NORTHERN CAPE                                               66
                                                                                                                                                                                                                                                                                           Mr Price Sport                  BOTSWANA
                                                                                                                                                                                                                                                                                              Sheet Street
                           13 - Mr Price Apparel                                                                                                                                                                                                                                                                                   3
                           4 - Mr Price Home                                                                                                                                                                                                                                                                                   2
                                                                                                                                                                        56 - Mr Price Apparel
                           1 - Mr Price Sport
                                                                                                                                                                        17 - Mr Price Home

                           7 - Sheet Street                                                                                                                                                                                                                                                             2
                                                                                                                                                                        8 - Mr Price Sport
                           6 - Miladys                                                                                                                                                                                                                                                                  2

                                                                31                                                         58                                           35 - Sheet Street                                                                                                                        STORES

                                                                STORES                                                     STORES
                                                                                                                                                                       38 - Miladys                                                                                                                                            NAMIBIA



                                                                                                                                                                                                                                                                                           LESOTHO                                     4



                                      149                                                                                  83
                                       STORES                                                                              STORES                                                                                                                                                                                                  NIGERIA










                                                                                                                                                                                                                                                   EASTERN CAPE                                                   1


                                                       WESTERN CAPE








                                                                                                                                                                                                                           Miladys - 13
                                                                                                                                     Mr Price Apparel - 33

                                                                                                                                                             Mr Price Home - 10

                                                                                                                                                                                  Mr Price Sport - 3

                                                                                                                                                                                                       Sheet Street - 24





APRIL 2012 MARCH - Mr Price Group
                                                                                                                                                                                                          ANNUAL INTEGRATED REPORT 2013:
                                                                                                                                                                                                                      BUSINESS OVERVIEW
                                                                                                                                OVER THE PAST 27 YEARS,
                                                                                                                        THE GROUP HAS DELIVERED STRONG
                                                                                                                         GROWTH IN EARNINGS, DIVIDENDS

                                                                                                                                       AND SHARE PRICE
                                                                                                                                                                                                                                Ordinary people doing extraordinary
                                                                                                                       500                                                                           100
                                                                                                                                                                                                                                things. Passion is our engine. It is the positive

                                                                                                HEPS and DPS (cents)

                                                                                                                                                                                                           Share price (rand)
                                                                                                                                                                                                                                attitude and enthusiasm of all our associates
                                                                                                                       400                                                                           80
                                                                                                                                                                                                                                who approach each day bright-eyed, smiling
                                                                                                                                                                                                                                and projecting a positive image – believing
                                                                                                                       300                                                                           60
                                                                                                                                                                                                                                work is fun.

                                                                                                                       200                                                                           40

                                                                                                                       100                                                                           20

                                                                                                                                                                                                                                The heart of our business. The success of
                                                                                                                                                                                                                                our business has been, and will continue
                                                                                                                                            HEPS           DPS             Share Price
                                                                                                                                                                                                                                to be, built on our ability to add value to
                                                                                                                                  27 year compound annual growth rate - HEPS: 23.5% DPS 25.3%                                   our customers’ lives. But it is more than just
                                                                                                                                                                                                                                price. It's about quality, fashionability, being
                                                                                                                                                                                                                                in stock of the wanted item and delighting
                                                                                                                       OUR DREAM                                                                                                our customers by doing more than what is
                                                                                                                       To become a top performing international retailer.

                                                                                                                       OUR PURPOSE
                                                                                                                       To add value to our customers’ lives and worth to our partners’ lives,
                                                                                                                       whilst caring for the communities and the environments in which we operate.                              PARTNERSHIP
                                                                                                                                                                                                                                Sharing the ownership and success of the
                                                                                                                       OUR VALUES                                                                                               Company with all our associates and
        WE ARE A HIGH GROWTH                                                                                                                                                                                                    fostering solid and long-term partnerships
                                                                                                                       PASSION - VALUE - PARTNERSHIP                                                                            with our suppliers. Without our customers,
           SOUTH AFRICAN-BASED      The Group retails apparel, homeware and sportswear
                                    in 2 business segments of ‘Apparel’ and ‘Home’.                                    These are the 3 key values upon which the Group has been built. They are the                             we don’t have a business and they are one
                                    ‘Apparel’ includes the Mr Price, Mr Price Sport and                                foundation stones of the business and never change. By staying true to PASSION,                          of our most valued partners. We partner with
  FASHION-VALUE RETAILER, SELLING   Miladys brands and ‘Home’ includes the Mr Price Home                               VALUE and PARTNERSHIP we ensure that we are building a sustainable business as                           our community by investing in strategic
                                    and Sheet Street brands.                                                           we progress towards our vision of being a top performing international retailer and                      initiatives that improve the lives of those who
PREDOMINANTLY FOR CASH. WITH A                                                                                         fulfilling the dream for our partners – our Mr Price family.                                             are less fortunate, particularly children and
                                    The Group launched its online sales platform in July                                                                                                                                        youth.
       MARKET CAPITALISATION OF     2012 and also offers financial services to its customers.

       R29.4 BILLION AT YEAR END,   The Group operates 1 029 corporate-owned stores in                                       GOVERNANCE
                                    South Africa, Botswana, Namibia, Swaziland and                                           Good governance and ethical and effective leadership are considered critical to the
         THE GROUP RANKED 46TH      Lesotho with recent corporate store expansion into West                                  Group’s success and sustainability. The Group is therefore committed to “Governance
                                    Africa, namely Nigeria and Ghana. The Group has 26                                       beyond Compliance” and to the adoption, integration and embedding of the spirit and
                     ON THE JSE.    franchise operations trading elsewhere in Africa                                         principles of governance as opposed to simply responding to and complying with rule sets
                                    namely Kenya, Malawi, Mauritius, Mozambique,                                             and recommended codes. The Group considers good governance to be a natural extension
                                    Rwanda, Tanzania, Uganda and Zambia. More                                                of its values and has structured and organised itself in order to give effect to its commitment
                                    information on these international operations can be                                     to robust governance. More information on the Group’s governance strategy and activities
                                    found in the International Review on page 56.                                            during the period can be found in the Corporate Governance Review on page 60.
APRIL 2012 MARCH - Mr Price Group
                                                                                                                                                                                                                                     MR PRICE GROUP LIMITED
                                                                                                                                                                                                                            ANNUAL INTEGRATED REPORT 2013:
                                                                                                                                                                                                                                        BUSINESS OVERVIEW
                                                   GROUP’S EXISTENCE……

       OUR                                                FASHION - QUALITY - PRICE
                                                          Being a value retailer means lower mark-ups in order to offer ‘everyday low
                                                                                                                                               OUR JOURNEY
                                                                                                                                               The Group has consistently delivered exceptional growth, however it still views itself as a growing company with great prospects. Over the

                                                          prices’. This results in large order quantities and higher sales volumes that keep   last few years the Group has been heavily focused on driving operational performance and specifically, improving the operating margins

                                                          input prices low.                                                                    of underperforming divisions. Although considerable success has been achieved to date, further margin improvements are expected in the
                                                          Maintaining a low overhead structure is imperative to delivering acceptable          future. The Group has moved into the investment and growth phases of the journey. This will support its dream and includes expansion into
                                                          operating margins. The Company seeks to balance this with incurring costs            new trading formats such as online and new markets beyond South African borders.
                                                          often ahead of revenue generation which will support future growth.
                                                          The Group's long-term thinking requires it to invest substantially in information
                                                          technology and supply chain. This underpins the growth strategy in order to                2010             2011             2012             2013               2014              2015            2016              2017
                                                          preserve the proud track record of earnings growth.
                                                                                                                                                                 BUSINESS IN ‘FIX UP’ MODE

                                                                                                                                                                                                                   INVEST IN SYSTEMS, LOGISTICS, SUPPLIERS

                                                                                                                                                                                                                                     GROWTH PHASE

                                                                                                                                                     FIX                                            INVEST                                       GROW


                                                                                                                                                 • Address areas of weakness and 		             • Have a suitable infrastructure in place.    • To be an internationally competitive
                                                                                                                                                   opportunity, particularly in the 		            A powerful engine which is revving 		         retailer, with robust topline growth and
                                                                                                                                                   underperforming divisions                      and ready to go                               foreign revenue increasing at a higher
                                                                                                                                                                                                                                                rate than locally
                                                                                                                                                 • Capture market share, improve trading        • Enhanced processes, systems and
                                                                                                                                                   densities and increase operating               infrastructure to support the next phase    • Extend track record of HEPS growth
                                                                                                                                                   margin %                                       of growth                                     of CAGR greater than 20%

          OUR BUSINESS                                                               THE GROUP IS FOCUSED
          MODEL                                                                      ON REMAINING A                                                                                                          PROGRESS

          IS SYNONYMOUS                                                              CASH-DRIVEN RETAILER.

                                                                                                                                                 Since 2010:                                    • Group has committed to R2.5 billion 		      • Research and testing of new markets is
          WITH OFFERING                                                              THE AIM IS TO MAINTAIN                                      • Trading densities have increased from          capital expenditure over the next 5 		        currently underway

          FASHIONABLE                                                                A CASH SALE
                                                                                                                                                    R18 492m-2 to R24 979m-2                      years, including R1 billion for a new
                                                                                                                                                                                                  ERP system and distribution centre
          MERCHANDISE AT                                                             CONTRIBUTION OF AT                                          • Operating margin has increased from
                                                                                                                                                   10.5% to 15.6%
          EVERYDAY LOW                                                               LEAST 75%. THIS YEAR
          PRICES.                                                                    CASH SALES WERE 80.4%
                                                                                     (81.4%) OF TOTAL SALES.                                   The Group has adopted an integrated approach to strategy, risk management, performance and sustainability. It is committed to the
                                                                                     THIS LEVEL OF CASH SALES ENSURES THAT THE                 alignment of “profit, people and planet” as it pursues its vision to become a top performing international retailer.
                                                                                     GROUP IS:
• Fashion research, specialist trend teams and frequent                                                                                        The following focus areas which are detailed on pages 18 to 24 are relevant to the Group's ability to create and sustain value in the
  international travel                                                               • Less impacted by the cyclical nature of retail
                                                                                                                                               longer term, and thereby achieve its vision:
• Active dialogues through digital and social media                                  • Less exposed to bad debt (as it does not have the
                                                                                       challenge of collecting a large debtors’ book)          1. Sustainable growth in targeted markets
• Responding to customers’ changing fashion needs
• Thorough product testing before making large                                       • Not dependent on releasing more credit into the         2. Building people capacity
  merchandise commitments                                                              market to drive turnover, particularly during poor
                                                                                       economic times                                          3. Focus on the value model
• Slow selling merchandise is marked down and sold to
  make way for new fresh merchandise. Product is not 		                              • Able to fund future growth without gearing. Strong      4. Business systems, supply chain and resourcing capability enhancements
  accumulated for an ‘end of season’ sale, so there are 		                             cash flows will support increased capital
  everyday low prices                                                                  expenditure and maintain an appropriate dividend        5. Sustainable local development
                                                                                       pay-out ratio
APRIL 2012 MARCH - Mr Price Group
South African consumers moving up the LSM curve (the rising                      sector growth and job creation. This will in turn lead to an increase
                                                                                                                                                                                                                                                  MR PRICE GROUP LIMITED
                                                                                                                                                                                                                                         ANNUAL INTEGRATED REPORT 2013:
                                                                                                                                                                                                                                                     BUSINESS OVERVIEW
middle class) have directly benefited the Group’s topline growth,                in consumer spending which is expected to grow from US$860
profitability and total shareholder returns. These increases are                 billion (2011) to US$1.4 trillion by 2020. Other factors such as a
expected to continue, mainly in the LSM 4 -10 categories, which                  faster population growth rate of 875 million (2011) growing to          WHERE WE ARE GOING
includes the Group’s direct target market, LSM 6 -10.                            1.2 billion (2025), urbanisation increasing from 36% (2011) to
                                                                                 an estimated 50% (2030) and the rapidly expanding new middle            • Grow market share in established markets. South
A key consideration in focusing on international growth is to                    class (growing by over 3.1% per year), will as a result of improved
decrease dependence on one specific market and develop a more                    living standards, increasingly need apparel, homeware and
                                                                                                                                                           African “home base” is still key to the Group’s
diversified business.                                                            sportswear. Africa will be the new retail growth story within the         future and holds exciting growth prospects. It is the
                                                                                 next decade. (Source: Global McKinsey Institute, World Bank,              foundation which will fund infrastructure and
The trends which have driven economic development in other                       African Development Bank)
emerging economies are beginning to take hold in Africa.
Sub-Saharan Africa (SSA), driven by commodity availability,                      The growth of the internet has also presented retailers with the
a youthful workforce, recent discoveries of oil and gas on the                   opportunity to enter new markets without the need to commit to          • Open further stores in West Africa (Nigeria and Ghana),
eastern seaboard and the continued supply of agricultural products               building a large and expensive network of stores. The Group’s             and research specific African countries for direct
to international markets is expected to grow at a faster rate than               research is focused on the right business model to enter new
the western world. Foreign direct investment into Africa will                    territories with either online or a mixture of online and bricks and
                                                                                                                                                           investment opportunities;
continue to grow exponentially. This will lead to further private                mortar stores.
                                                                                                                                                         • Research other international markets to identify
KEY IMPERATIVE                                                     RESPONSE                                                                                additional growth opportunities;
                                                                                                                                                         • Launch Mr Price Apparel online
New generation store design to be rolled out.                      The new generation store design is currently being rolled out and has been              internationally, with specific focus on
                                                                   positively received by customers.                                                       Australia, New Zealand and the UK in the
                                                                   The number of new generation stores that have been opened during the year is            first half of the new financial year;
                                                                   as follows:
                                                                   Mr Price Apparel                      23
                                                                   Mr Price International                 1                                              • Launch Mr Price Home, Sheet Street and
                                                                   Mr Price Sport                         9
                                                                   Miladys                               12                                                Mr Price Sport online in South Africa within
                                                                   Mr Price Home                         17                                                the next year; and
                                                                   Sheet Street                          42
In recent years, the focus has been on improving divisional        This process is well underway and the Group now has a greater appetite to take        • Enhance the level of marketing, product
performance by driving up trading densities.                       on new attractive trading space – the right sized store with the right rental
                                                                                                                                                           testing and linking with customers via
• Target gross new space of 5% per annum;                                                                                                                  social media.
                                                                   Gross new trading space was increased by 3.8% (closing) and 3.6% (weighted
                                                                   average) during the current year. However, prior to planned space reductions
• Reduce space in oversized stores, (Mr Price Sport and            and store closures, new space opened amounted to growth of 6.2% (closing
  Mr Price Home had many overspaced stores); and                   space).
                                                                                                                                                         OUR CHALLENGES AND OPPORTUNITIES                                          OUR RESPONSE
                                                                   Mr Price Sport reduced its store space by 3 095m² and Mr Price Home reduced
• Expand stores where trading densities are too high.              by 4 158m², the latter remaining a continuing opportunity over the next 5 years.
                                                                                                                                                                                                                                   Focused 'research and test' strategy for international markets.
                                                                   This has had a positive impact on store performance, with Mr Price Sport              Assessing the emerging market opportunity, including Africa.
                                                                   reducing space in 4 stores by 42% but increasing sales by 8% and profit by 69%                                                                                  Strengthen management teams in key growth areas.
(Mr Price Apparel’s trading density of R31 466m² is high by
industry standards, especially for a value retailer. Up to a 3rd   and Mr Price Home reducing space in 4 stores by 29% but increasing profit by
of its stores are considered too small, which negatively impacts   26%.                                                                                  Availability and cost of retail infrastructure and space. Engaging with
                                                                                                                                                                                                                                   Multi-channel approach to expansion, which integrates traditional
shopper experience and results in lost sales opportunities).                                                                                             the new generation consumer, who is becoming increasingly “switched
                                                                                                                                                                                                                                   stores, E-commerce and mobile. Stringent store feasibility process.
                                                                   This year, Mr Price Apparel expanded by 2 781m², evidencing that this will still      on” and demands convenience in their shopping.
                                                                   be an opportunity area for many years to come.
                                                                                                                                                                                                                                   Maintain focus on target customers and continue to increase market
TEST NEW CHANNELS                                                  The Mr Price Apparel online site, www.mrp.com, was successfully launched in           Increased urbanisation and rising middle class.
                                                                   South Africa in July 2012. The objective was clear – make online shopping as
                                                                   convenient for the customer as possible. To this end, the online offer was made       Increased globalisation, including increased entry of international       Continue to focus on the fashion-value business model, and increased
                                                                   available both on the web and on mobile devices. Multiple delivery methods and
                                                                                                                                                         retailers into South Africa.                                              product design and test strategy.
                                                                   6 payment options were offered.

                                                                                                                                                                                                                                   The Group’s strategy in terms of building supply chain, systems and
INTERNATIONAL RESEARCH ON OWNED STORES IN                          The corporate ownership model and structure for international operations was          Infrastructure, systems and people capacity and maturity.
AFRICA                                                             established. Test stores were opened in Nigeria and Ghana, which have traded                                                                                    people are well established and clear.
                                                                   very well.
                                                                                                                                                         South African social and economic landscapes.                             Sales growth strategy will lessen dependence on one country.
The Group recognises that skilled and committed people, who have
                                                                                                                                                                                                                                                     MR PRICE GROUP LIMITED
                                                                                                                                                                                                                                            ANNUAL INTEGRATED REPORT 2013:
                                                                                                                                                                                                                                                        BUSINESS OVERVIEW
high passion for their work, drive a successful business. The ability of
leadership to respond to opportunities and threats, to build strong team
structures supporting future expansion, and to effectively rollout the new                                                                              3. FOCUS ON THE VALUE MODEL
Human Capital Management (HCM) system is key to achieving goals.
                                                                                                                                                        VALUE is a foundation stone of the business model and this will never change. By staying true to this the Group ensures
With ongoing expansion and business systems improvements,                                                                                               that it is building a lean, sustainable business in a more constrained world. Adding value to our customers’ lives is our purpose and this is
management of change is an essential competency to ensure that                                                                                          achieved through an ongoing focus on improved efficiencies.
company values and corporate ‘DNA’ are retained. Effective
communication will be vital to ensure that associates understand and
are energised by the various opportunities, in both work and careers.                                                                                    KEY IMPERATIVE                                                RESPONSE

    KEY IMPERATIVE                                              RESPONSE                                                                                 Continue to improve operational performance by                Although the Group’s operating margin has shown strong growth, it was impacted by
                                                                                                                                                         maintaining low overhead structures and improving             the performance of certain divisions.
    GROW THE          HUMAN         CAPITAL     RESOURCE,                                                                                                operating margins.
                                                                                                                                                         The initial operating margin targets were:                    The initial targets were achieved with the exception of Mr Price Sport, and revised
                                                                                                                                                                                                                       medium-term targets are:
    • Emerging leadership and key skills development.           • Identified areas that required strengthening and implemented various                   Mr Price Sport             10%                                >15%
                                                                  initiatives such as new e-learning modules, internship programmes, and                 Mr Price Home              10%                                >15%
                                                                  emerging leader development.                                                           Sheet Street               10%                                >15%
                                                                                                                                                         Miladys                    15%                                >20%
                                                                • Improved skills sourcing and attraction.
                                                                                                                                                                                                                       There are still opportunities to further improve the operating margin of
                                                                • Built a robust succession plan, which is constantly updated as people                                                                                Mr Price Apparel, however the magnitude of the improvement is not at the same scale
                                                                  development takes place.                                                                                                                             as the other divisions.

                                                                • Identified appropriate structures for the key teams impacted by the Group’s            Identify cost savings to offset the financial impact of the   A number of cost saving initiatives were identified and are currently being progressed,
                                                                  expansion plans.                                                                       increased investment in business systems and supply           including:
                                                                                                                                                         chain.                                                        • Enhanced tender process;
    • Focused development of previously-disadvantaged                                                                                                                                                                  • Energy initiatives to reduce cost and consumption;
      associates for middle and senior management               • Actively managed and monitored Employment Equity goals.                                                                                              • Review of sport sponsorships;
      succession, which will feed the 'pipeline' into top                                                                                                                                                              • Rollout of the Ceridian Dayforce Labour Scheduling System, which was implemented
      management.                                                                                                                                                                                                         in 114 stores (aims to better align associate working hours with peak trading
                                                                                                                                                                                                                          periods and thereby improve the customer experience and turnover whilst reducing
                                                                                                                                                                                                                          overtime); and
    Research and implement           new      Human   Capital   Selected an appropriate HCM system and started implementation of the labour                                                                            • Focus on rental negotiations and a more stringent new store feasibility process.
    Management (HCM) system.                                    scheduling and payroll components. Conducted workplace training and change
                                                                management to enable business outcomes.
                                                                                                                                                         Keep input prices low.                                        Refer to point 4 on page 22.

•     Focus on leadership development, including Employment Equity;
                                                                                                                                                        WHERE WE ARE GOING
•     Build and train new skills required to support the Group’s future growth;
•     Monitor and manage changes to processes and roles as a result of business systems improvements; and                                               There will be continued emphasis on operating performance to achieve the desired level of margins, despite the Group’s strategic focus
•     Continue to rollout the HCM system, labour scheduling module to all stores in the next financial year and implement the learning 		               moving to the investment and growth phases. Although these investments are expected to result in higher short-term costs, they represent
      management module.                                                                                                                                significant opportunities to further improve efficiencies, costs optimisation and topline growth over the longer term.

    OUR CHALLENGES AND OPPORTUNITIES                                          OUR RESPONSE
                                                                                                                                                         OUR CHALLENGES AND OPPORTUNITIES                                            OUR RESPONSE
    Attraction and retention of key skills.                                   Continued focus on embedding the Group’s values and DNA in order
                                                                              to position the Group as a preferred employer. Continuation of share       Significant investment in building future capabilities.                     Investment in a new Enterprise Resource Planning (ERP) system and
                                                                              schemes, in which all associates can partake, is a strong incentive and                                                                                distribution centre.
                                                                              retention mechanism.
                                                                                                                                                         Resourcing model, availability and cost of local manufacturing              Continuing to build a robust supply base that focuses on maintaining
    Leadership development and succession, including senior and               Focus on building future leaders and strong pools of talent to feed the    capabilities.                                                               and developing local suppliers and entering into strategic partnerships.
    merchant leadership.                                                      succession pipeline.
                                                                                                                                                         Support Centre infrastructure and costs.                                    Continued focus on maintaining a low cost structure and tendering
    Associate engagement and empowerment.                                     Process re-engineering to improve efficiencies, release capacity and                                                                                   process for larger input costs.
                                                                              enhance the work environment.
                                                                                                                                                         Availability and cost of retail space.                                      Developing a multi-channel approach to retailing, which includes
    Transformation.                                                           Continued focus on transforming and empowering the workforce.                                                                                          growth in traditional retail space, E-commerce and mobile.
                                                                              The medium to long-term plan is to train and develop middle
                                                                              management levels, rather than to 'buy in' at top levels.                  Labour efficiency.                                                          Implementation of the Ceridian Dayforce Labour Scheduling System.
                                                                                                                                                                                                                                          MR PRICE GROUP LIMITED
                                                                                                                                                                                                                                 ANNUAL INTEGRATED REPORT 2013:
                                                                                                                                                                                                                                             BUSINESS OVERVIEW
                                                                                                                                                   WHERE WE ARE GOING
The Group’s future growth and profitability strategies are
dependent on an agile and low cost end-to-end supply chain.                                                                                         The Group plans to implement a new
Visibility of product throughout the supply chain is crucial in
order to create an effective network that responds to changes in                                                                                    Enterprise Resource Planning (ERP) system
demand and supply thereby ensuring optimal product
availability at acceptable cost.                                                                                                                    and construct a new and enlarged distribution
The major IT projects support the business growth strategy, the                                                                                     centre (DC) facility over the next 3 years,
key drivers being: a more flexible and agile supply chain to
reduce costs, getting merchandise to market timeously and                                                                                           which will require a significant capital
enabling the ability to trade internationally. This enables the
Group to trade competitively whilst complying with all local and                                                                                    investment of almost R1 billion.
cross border regulations.

The underlying technical architecture to support all these new,
more complex and distributed applications needs to be                                                                                               The implementation of the 1st ‘test division’
                                                                                                                                                    for the new ERP system is scheduled for May 2014,
                                                                                                                                                    with the remainder of the Group’s divisions
 KEY IMPERATIVE                                           RESPONSE
                                                                                                                                                    following thereafter. The new distribution facility is
 Continue to enhance supply chain efficiency, capacity
 and responsiveness to enable the Group’s expansion
                                                          • The size of the new single facility distribution centre has been determined and the
                                                            location identified. The land has been acquired, subject to the necessary               scheduled to be operational in August 2015
 plans and reduce the impact of rising fuel prices.         approvals, which are in progress. Building design and material handling
                                                            equipment installation planning has commenced.
                                                                                                                                                    and the project contains several key milestones
                                                          • International consolidation centres operated by 3rd parties are being used. The
                                                            consolidation of merchandise at source with shipment directly to point of customer
                                                            demand is key to reducing cost and lead times. The elimination of the current
                                                                                                                                                    over this period.
                                                            double duty scenario whereby import duty is incurred into South Africa and then
                                                            again in foreign markets is key to reducing selling prices in those territories.

                                                          • A new 5 year contract, effective 1 April 2013, has been signed with the Group’s
                                                            outbound store carriage service provider.                                              OUR CHALLENGES AND OPPORTUNITIES                                        OUR RESPONSE

                                                                                                                                                   Ability to develop a more balanced and sustainable resourcing model.    Continue to develop and partner with our suppliers to build a supply
 Information technology and business systems innovation   • A project to define business information needs and business processes was
 to support business growth and achieve increased                                                                                                                                                                          chain that provides continuity of supply at best cost whilst being flexible
                                                            initiated. The outcome was an improved business process model for all aspects of
 capabilities and efficiencies.                             merchandise, taking global supply chain and global trading into account.                                                                                       to changing customer demands.

                                                          • A strategic IT capability assessment was conducted. The key outcome was the            IT alignment and capability to support the Group strategy and vision.   Continued focus on IT governance, business alignment and strategic IT
                                                            need for a new ERP backbone and merchandise planning and allocation system,                                                                                    roadmap.
                                                            both of which will enable efficient processes to be adopted, and global
                                                            requirements to be met. The application solutions and implementation partners          Change impact of migrating to a new ERP system and introducing new      Deployed a focused team and partnered with specialists. Robust due
                                                            have been selected with the project starting in the new financial year.                business processes.                                                     diligence, project governance and change management processes
                                                                                                                                                                                                                           were undertaken to minimise business disruption. A phased
                                                                                                                                                                                                                           implementation plan is being adopted, with the new system being
 Product sourcing and enhanced level of engagement        The Group is reviewing its resourcing strategy, including building strategic
 with key suppliers.                                      relationships with key suppliers, to improve on time and in full order delivery rates,                                                                           tested in a smaller division (Mr Price Sport) before being rolled out to
                                                          reduce lead times and enhance visibility and flexibility.                                                                                                        the remaining areas of the business.

                                                                                                                                                   DC capacity and change impact on our people of relocating the DC to     The new DC project has been set up as a major project, with a focused
                                                                                                                                                   a new location.                                                         team and partnership with specialists. This includes sound due
                                                                                                                                                                                                                           diligence, project governance and change management processes.

                                                                                                                                                   Skills and proficiency, including leadership, to support planned        Continued focus on skills development and/or skills acquisition,
                                                                                                                                                   changes.                                                                including through partnership with specialists.
The Group is identifying opportunities to implement strategic initiatives to develop
                                                                                                                                                                                                                                           MR PRICE GROUP LIMITED
                                                                                                                                                                                                                                  ANNUAL INTEGRATED REPORT 2013:
                                                                                                                                                                                                                                              BUSINESS OVERVIEW
the capacity of local suppliers. By building capacity in South Africa, the Group
supports the local economy and enables flexibility in the supply chain.                                                                                                                      Key indicators have been identified to measure the
                                                                                                                                                                                             Group’s economic, social and environmental progress.
Social investment is made through the Group’s donation to RedCap Foundation and
RedCap Sport, which continue to implement innovative solutions to address
challenges in the South African education system in partnership with the National
Department of Basic Education.

The Group has recently joined forces with the JobsFund and other organisations to promote job creation in South Africa. This is being
achieved through the Group’s Enterprise Development Strategy and the efforts of RedCap Foundation to support strategic skills development
through the JumpStart Programme. Refer to the Social Report on page 78 for further details.

 KEY IMPERATIVE                               RESPONSE
                                                                                                                                                       ECONOMIC                                                     Unit              2013              2012            2011             2010
 Continue to invest in the community.         • RedCap Foundation’s JumpStart Project was awarded its 1st tranche of the JobsFund’s R17.5
                                                million grant to upscale the programme. 745 young people were placed into jobs over a 6               Retail sales                                                  R’m              13 266            11 767          10 673            9 454
                                                month period.
                                                                                                                                                      Headline earnings per share                                   cents              635.5            503.0            418.9           276.9
                                              • The RedCap Centres of Excellence introduced the YoungHeroes Programme (focused on physical            Operating margin                                               %                  15.6             14.8             13.4             10.5
                                                education and school sport) to 6 provinces in 2012.
                                                                                                                                                      Dividends per share                                           cents              398.0            314.0            252.0           173.0
                                              • The various initiatives of the RedCap Schools Project produced an improvement in learner results      Share price (closing)                                         Rand             116.99             94.34            63.38           39.80
                                                of 10% - 13% and teacher content knowledge by 15% - 17%.
                                                                                                                                                      Return on net worth                                            %                  46.4             43.8             42.2             32.5
                                              • The High School Soccer Programme was implemented in 6 provinces.                                      Cash sales as a % of total sales                               %                  80.4             81.4             83.8             83.9

 Build a sustainable local supply base.       A loan was made to a local shoe manufacturer to assist them to grow their business output and            SOCIAL
                                              become a strategic supplier. The impact will be:
                                              • Growth in jobs; and                                                                                   Total number of people employed                                                19 384            17 894          17 887           17 300
                                              • Skills development in the footwear manufacturing industry.                                            Staff turnover                                                 %                  21.5             22.6             22.1             25.7
                                                                                                                                                      Black staff as a % of total permanent staff                    %                    94               91               89               90
 Support sustainable B-BBEE.                  The Group maintained B-BBEE Level 6 Compliance due to its on-going investment in skills development,
                                                                                                                                                      Promotions of black people as a % of total promotions          %                  87.1             85.2             78.2             82.7
                                              enterprise development, socio-economic development and local procurement.
                                                                                                                                                      Investment in people learning and development                 R’m                 30.8            25.1*              9.9              7.0
                                                                                                                                                      Black people participating in learning and development         %                    88               87               83               78
WHERE WE ARE GOING                                                                                                                                    B-BBEE rating                                                 Level                  6                 6               6    Not measured
• Continue to invest in RedCap Foundation and RedCap                          • Identify further Enterprise Development opportunities to              Corporate Social Investment                                   R’m                 16.7             13.0             11.4              7.4
  Sport Programmes;                                                             support capacity building and skills needs of local suppliers
                                                                                to the Group; and                                                     Enterprise Development Investment                             R’m                 23.2             21.4              1.5    Not measured
• Develop the skills of unemployed youth to support the local
  footwear and clothing manufacturing sector;                                 • Continue to support sustainable B-BBEE taking into
                                                                                consideration the amendments to the BEE Codes of Good                  ENVIRONMENTAL
                                                                                                                                                      Carbon emissions (estimated)                              CO2e tonnes         210 786

 OUR CHALLENGES AND OPPORTUNITIES                                         OUR RESPONSE
                                                                                                                                                     *2012 onwards, includes capital expenditure as per BEE recognition criteria.
 Poor education levels and a lack of skills hamper business growth.       RedCap Foundation’s JumpStart Project, with regular monitoring and
                                                                                                                                                     NOTE: The accuracy of the Group’s carbon footprint has been enhanced in 2013 as the data is more complete. It is expected that this
                                                                          evaluation of programme impact.
                                                                                                                                                     will be further enhanced in 2014 as meters are being installed in stores to accurately record electricity consumption. Refer to the energy
 Lack of physical education and sport offered in schools.                 RedCap Sport initiatives with regular monitoring and evaluation of         and carbon footprint section of the Social, Ethics, Transformation and Sustainability Committee Report on page 74 for
                                                                          programme impact.                                                          more details.

 Lack of competitiveness and skills in the South African manufacturing    Investment and participation in a local retail manufacturing skills
                                                                                                                                                     OTHER INDICATORS: Additional indicators of the Group’s performance can be found under “Divisional Performance Indicators” on page
 industry.                                                                training facility and Enterprise Development initiatives.
                                                                                                                                                     37, and under “The 6 Year Review” which can be found on the Group’s website.
 Change impact of impending revised Codes of Good Practice.               Respond, where possible, to the new Codes of Good Practice and
                                                                          re-align initiatives to ensure compliance.
                                                                                                                                                                                        ANNUAL INTEGRATED REPORT 2013:
                                                                                                                                                                                            STAKEHOLDER ENGAGEMENT
                                                                                          KEY STAKEHOLDERS            HOW WE ENGAGE                   WHAT WE ENGAGE ON            ISSUES RAISED                   RESPONSES AND OUTCOMES
                           The Group recognises the importance of stakeholder             AND WHY THEY ARE                                                                         DURING THE YEAR
                           engagement to ensure the long-term sustainability of           IMPORTANT TO US
                           the business. This process ensures greater transparency,       SHAREHOLDERS AND            Annual General Meetings         Company performance          Clarification around            The issues requiring clarification have been
                           as key stakeholder issues are identified and addressed.        THE INVESTMENT                                                                           certain issues related to the   detailed in the Remuneration Report on page 80
                                                                                          COMMUNITY                   Meetings throughout             Retail sector trends and     remuneration of Directors
                                                                                                                      the year with local and         issues

                                                                                          To provide details          international analysts and                                   Growth in unsecured credit      The Group's strategy is to remain a cash based
                                                                                          regarding company           investors                       Dividend policy              and the impact on               retailer and in recent times has restricted its credit
                                                                                          preformance and the                                                                      consumers and the               growth – refer to the CFO’s Report on page 32
                                                                                          business strategy           Results announcements           Share price performance      Company                         for details
                                                                                                                      and presentations to the
                                                                                                                      Investment Analysts Society     Future prospects             Concern regarding the           Companies in South Africa have, over the years,
                                                                                                                      in Johannesburg and Cape                                     social and economic             developed mechanisms and strategies to cope
                                                                                                                      Town and roadshows to           Strategy                     situation in South Africa       with doing business in an environment such as
                                                                                                                      the UK and USA                                                                               ours and the resultant volatile currency. While this
                                                                                                                                                                                                                   is not ideal, the country has coped with far worse

                                                                                                                      SENS announcements                                                                           situations. The Group has managed to achieve a
                                                                                                                                                                                                                   compound rate of HEPS growth over the last 27
                                                                                                                      Trading updates                                                                              years of 23.5%, and has performed well during
                                                                                                                                                                                                                   periods of Rand weakness and poor economic
                                                                                                                      Group website                                                                                conditions

                                                                                                                      Annual Integrated Report                                                                     The Group’s strategy is to grow both locally and
                                                                                                                                                                                                                   internationally, and to reduce dependence on 1

                                                                                          CUSTOMERS                   Traditional, digital and        Brand perception and         Range, availability and         Continuously offer core and fashion products,
                                                                                                                      social media                    expectations                 quality of products             improve availability of wanted merchandise
                           The Group defines stakeholders as those individuals,           To understand our
                           groups of individuals or organisations who affect              customers’ needs,           E-commerce                      Fashion trends               Customer service                Continued focus on quality through enhanced
                                                                                          increase market share and                                                                                                quality assurance processes
                           and/ or could be affected by the Group’s activities,           enhance the brand           Customer and market             Customer service             Credit facilities
                           products, services and performance. Each key                                               surveys                                                                                      Continued focus on associate service levels
                                                                                                                                                      Customer safety              Customer interest in and

           DEFINITION OF
                           stakeholder group has a business owner who is the                                          Customer service hotline                                     interaction with the Group      Responsible credit facilities are available to
                                                                                                                                                      Community support and        via social media                qualifying customers
                           individual in the Group primarily accountable for                                          Advertising campaigns and       fundraising through the
                           managing the relationship with the particular                                              competitions                    RedCap Foundation and                                        Launch of www.mrp.com in July 2012
  ASSOCIATE AND PARTNER:   stakeholder or stakeholder group.                                                          Store associates' interaction
                                                                                                                      with customers
                                                                                                                                                      RedCap Sport

                           The table on page 27 provides information on the               ASSOCIATES AND              Induction programme             People development and       Pay and employee benefits       Letters distributed to all associates detailing total

                                                                                          PARTNERS                                                    training                                                     cost to company, including updated share option
                           Group’s key stakeholders. Although we have not listed          (our people)                Team meetings                                                                                information
                           the communities in which we operate and certain                                                                            Health and safety            Training and development

                                                                                          To enhance associates’      Training needs analyses         performance                  opportunities                   Increased use of technology to address issue of
                           government departments with whom we have a                     sense of value and                                                                                                       time to train e.g. e-learning, social learning etc.
                                                                                          commitment and to align     Results presentations           Wellness programmes
                           relationship in this table, it is important to note that the   associates to the Group                                                                                                  New learning management system being
        MR PRICE GROUP.    Group acts in a responsible and compliant manner
                           towards these stakeholders.
                                                                                          strategy                    Performance reviews             Remuneration, benefits and
                                                                                                                                                                                                                   implemented to give associates greater access to
                                                                                                                                                                                                                   learning and developmental opportunities
                                                                                                                      Career planning
 WE THEREFORE REFER TO     Social media has become critical to successful
                                                                                                                      Internal media – Red Cap
                                                                                                                      radio and TV
                                                                                                                                                      Transformation and
                                                                                                                                                      employment equity
                                                                                                                                                                                                                   Divisional learning development plans aligned to
                                                                                                                                                                                                                   business strategies

    OUR CO-WORKERS AS      engagement in the retail environment. Real-time mass
                           communication can be leveraged as an advantage, for
                                                                                                                      Fireside chats
                                                                                                                                                      Financial performance

                                                                                                                                                      Business Code of Conduct
                                                                                                                                                                                                                   Divisional and Group succession plans developed

                                                                                                                                                                                                                   Equity goals and plans set

                                                                                                                      Culture survey
                           example to gauge consumer opinion on an issue or                                                                           Culture survey results                                       Career plan development
                           merchandise, but it can also have the opposite impact                                      Whistleblowers’ hotline

                                                                                                                                                      Vision, dreams and beliefs                                   Refer to the Report on our People on page 38 for
                           in the event of an unpleasant experience. The Group                                        Awards events                                                                                detailed engagement activities
                           recognises this importance, in particular the link
   SHARE OPTIONS, THEY     between new technologies and the age profile of
                           its target market. The international trend is for an
                                                                                          SUPPLIERS                   Supplier meetings and
                                                                                                                                                      Monitoring and evaluating
                                                                                                                                                                                   Non-deliveries                  Investment in supplier performance management
                                                                                          To provide performance                                                                   Supplier performance and
         ARE GENERALLY     integrated omni-channel approach to communicating
                           with customers, presenting a consistent look, feel,
                                                                                          feedback and information
                                                                                          regarding the future
                                                                                          direction of the Group
                                                                                                                      Strategic partnerships

                                                                                                                      Quality audits
                                                                                                                                                      Order quantities and
                                                                                                                                                      product cost and quality

                                                                                                                                                                                   Product cost and quality
                                                                                                                                                                                                                   Partnership agreements and service level

        REFERRED TO AS     and experience. Several new and exciting initiatives                                       Supplier days
                                                                                                                                                      Future growth and
                                                                                                                                                      expectations of the Group    Investment in local supply
                                                                                                                                                                                                                   Increased strategic supplier meetings

                                                                                                                                                                                                                   Enterprise development and socio-economic
                           are underway, including the recent launch of
                                                                                                                      Distribution Centre (DC)        Real estate requirements                                     investment initiatives
                           www.mrp.com.                                                                               tours                           and rentals                  B-BBEE compliance

                                                                                                                                                      Enterprise development
                                                                                                                                                      and socio-economic
                                                                                                                                                      development opportunities

                                                                                                                                                      DC delivery requirements
                                                                                                                            ANNUAL INTEGRATED REPORT 2013:
                                                                                                                                        CHAIRMAN'S REPORT
                                              REPORT                                                               NIGEL PAYNE

                                                            n behalf of the Board, I am privileged to report to our
                                                            shareholders, people, customers, suppliers and all other
                                                            stakeholders. We believe that the best way to align all
                                                            interests is by relentlessly pursuing our long-term vision,
                                              whilst daily living out the dreams and beliefs that have sustained our
                                              compound growth in headline earnings per share over more than a
                                              quarter of a century.                                                       As I indicated in my 2012 report, the Board has approved a number
                                                                                                                          of significant capital investments in support of the Group’s 5 year
                                              Our purpose is to add value to our customers’ lives and worth to our        business plans and budgets, specifically in supply chain and logistics
                                              partners’ lives. Our dream or vision is to become a top performing          in support of internationalisation and the expansion of our channels to
                                              international retailer. Our customers continue to be delighted by our       market. Greater detail on these initiatives can be found in the CEO’s
                                              fashion-value offering, as reflected in our results to March 2013,          Report on page 31.
                                              thereby enabling us to continue to build momentum towards realising
                                              our dream. We value the ongoing support of our ever-increasing              Once again, the Board robustly assessed itself, the Board Committees
                                              customer base and recognise that we only win when our customers             and the contribution of each Director. Whilst the overall assessment
                                              win.                                                                        was positive, areas for improvement were identified and are being
                                                                                                                          addressed. Thank you to Lead Independent Director, Bobby Johnston,
                                              The values and ‘golden rules’ in support of our dream are clearly           for his tireless efforts in this regard. Significant additional information

                                              defined and widely communicated throughout the Group. These are             in relation to our corporate governance is presented in the integrated
                                              the foundations upon which our success has been built, and can              report and on our website.
                                              only be changed after diligent challenge and debate by the Board.
                                              This forms the basis of our 'DNA', which harnesses the talents of our       A new Memorandum of Incorporation, aligned to the revised South
                                              people and enables them to do extraordinary things.                         African Companies Act, was approved by more than 80% of votes
                                                                                                                          cast at the 2012 Annual General Meeting. The Board has noted that
ADD   VALUE   TO   OUR   CUSTOMERS’   LIVES   The Board strives to strike an appropriate balance between
                                              governance and entrepreneurship. This is facilitated by a management
                                                                                                                          some shareholders, particularly those based in the United States of
                                                                                                                          America, voted against the provision for the non-rotation of executive
                                              team that is transparent and a strong focus on eliminating under-           Directors, which is in line with South African corporate governance
                                              performance. The Board continues to work closely with executive             guidelines. The Board devotes significant attention to the selection,
                                              management in refining strategy. We focus on those risks that are the       retention, performance and reward of our executives, and I encourage
                                              most crucial to our future and we have a risk appetite that facilitates

                                                                                                                          shareholders who have comments in this regard to address them to
                                              entrepreneurship in pursuit of our dream. However, we are cautious          me via the Company Secretary.
                                              in the implementation thereof, taking time to test, evaluate, modify
                                              where necessary and retest before committing significant capital to
                                              implementation.                                                             I encourage stakeholders to familiarise
                                                                                                                          themselves with our educational and
ADD   WORTH   TO   OUR    PARTNERS’   LIVES   Our Board Committee structures ensure rigorous debate around,
                                              and control over, major issues of strategy and risk, whilst allowing        other corporate social investment
                                              management the flexibility to act quickly in a dynamic retail
                                              environment. Having the founders of the Mr Price Group, Laurie
                                                                                                                          initiatives, as detailed in the Social
                                              Chiappini and Stewart Cohen, involved in these processes continues          Report on page 78.
                                              to add considerable value.
                                                                                                                          We have an unwavering commitment to honest business practices.
                                              The global and South African economies remain under pressure.               Our daily practices, as well as our contracts with our business
                                              However, opportunities exist in Africa and other emerging markets,          partners, make it very clear that we do not pay bribes, overtly or
                                              where our offering is particularly well suited. Whilst we anticipate        covertly, nor do we tolerate third parties doing so on our behalf. Any
                                              that the next few years will be challenging, our strong balance sheet,      business partner who suspects otherwise is welcome to contact either
                                              business model, cash flows and talent pool will enable us to continue       the CEO or myself in confidence.
                                              to invest for the future.
                                                                                                                          Professor Larry Ring retired from the Board at the end of March, after
                                              Our very pleasing operational and financial performance reported            15 years of valuable service. In addition to his input on international
                                              on by the CEO, Stuart Bird, and CFO, Mark Blair, reflect the efforts of     retailing trends, the Babson principles he taught to our management
                                              over 19 000 people, a large portion of whom are shareholders in             teams over the years, and which he will continue to teach, have been
                                              the Company. Our ‘growth through shared value’ approach serves us           a contributing factor in the Group’s success. The Board records its
                                              particularly well in tougher economic times, as our people recognise        sincere appreciation for the contribution he has made to our Group.
                                              that it is our customers who pay their salaries. The Board believes that
                                              the Group’s remuneration structures, as detailed in the Remuneration        The Board, management and all associates will continue to focus on
                                              Report on page 80, remain appropriate, and that they have been              adding value to our customers’ lives as we build for the future and
                                              fairly applied during the past year.                                        strive towards our vision.
                                                                                   ANNUAL INTEGRATED REPORT 2013:
                                                                                                      CEO'S REPORT
REPORT                                                                       STUART BIRD

  O           ur ambition is to be a top performing international retailer
              as measured against our global peers. By achieving this,
              we will not only grow in our existing markets, which
have now attracted many new international retailers, but also in
                                                                                  Investing for the future
                                                                                  We are investing heavily for the future, not just in new stores and our
the markets we enter in the future. While the local and global retail             online business, but also in our systems and supply chain capabilities.
environments continued to bring many challenges, Mr Price Group                   While our in-house legacy core systems have served us well, we
yet again grew sales and profit, delivering a solid performance in a              realised that to achieve our future ambitions we would need to
difficult environment.                                                            consider acquiring an IT solution that would enable all our future
                                                                                  plans. We have completed the research, specification and vendor
Our formula of great fashion and quality at excellent prices has stood            evaluation and selection phases and are now entering the design
us in good stead over the years and will continue to be what drives us            and implementation phases. The project is expected to be completed
as we grow in our existing markets and enter new frontiers. Relentless            in 24 months’ time.
focus on this is what will maintain our earnings track record into the
future.                                                                           Progress on the development of a new distribution centre is well
                                                                                  underway, with the completion of the identification and procurement
Current trade                                                                     of the site. Once zoning is obtained, the build can start. Completion
While the Mr Price Apparel division had a difficult trading period in             date is expected to be August 2015. The work on resourcing and
the 3rd quarter, much of which can be ascribed to internal issues, we             shipping from source is also progressing well. This will allow us to
are pleased to report that a good recovery was subsequently made.                 eliminate significant costs in the form of double duties, shipping and
The division also successfully spearheaded 2 major projects, being                handling, making us more competitive as we enter new markets.
the expansion into Africa and the launch of our online business.
                                                                                  The Mr Price spirit
Our African expansion is not expected to result in a dramatic short-              The results achieved in the past, as well as those we hope to achieve
term growth; however, we believe that many African countries are on               in the future, are and will be, as a direct consequence of our people
strong economic growth paths that will see a significant expansion                and the culture we have in our business. Our culture is built on
of their middle classes, to whom our fashion-value offer will appeal.             Passion, Value and Partnership, with a high performance ethos.
By establishing our brand and infrastructure early in these growing
markets, we see significant potential in the medium to long-term.                 Investing in our people is critical to our future success. Over the
                                                                                  past year we trained over 9 300 of our associates, of whom 88%
During the year, a store was opened in Lagos, Nigeria and another                 were black, completing over 22 000 training courses. One of the
in Accra, Ghana. Within their 1st year of trade, these stores have                biggest training interventions we undertook last year was about our
performed well, even after including the set up and regional costs.               culture, with the update of our Dreams and Beliefs together with
While our results are pleasing, we intend to further improve our value            the Milestones of the past. This was delivered to every one of our
proposition through supply chain enhancements. We will open further               associates in the Group.
new stores in Nigeria this year and another in Ghana early in the
next financial year and we are actively looking for additional sites.             Good progress has been made in achieving employment equity
                                                                                  targets. We do not view our transformation strategy as being one of
At the end of July 2012, we launched our online business                          a quick fix, but a medium-term one of building and investing in our
through the Mr Price Apparel division. The launch was                             internal pool of candidates who can successfully transition to senior
ambitious in that the full assortment was available immediately;                  positions.
it was completely omni-channel, fully mobile enabled as well as
allowing the customer 6 options to pay. In addition, delivery                     The way ahead
was guaranteed within 48 hours, but in reality it is below                        There is no doubt that the economic and consumer environment will
24 hours. The launch has been very successful, delivering a dynamic,              continue to be a challenge, both at home and abroad. Nonetheless,
appealing, world-class site, with South Africa being an important                 we are confident that our formula of great fashion and quality at
environment in which to develop our capability. The way ahead is                  excellent prices will not only keep our customers happy, but will
to now open the site to the global environment, with specific focus               attract many more new ones, both in geographies we currently trade
on certain countries, as well as bringing the other divisions onto our            and in new territories.
online offering.
                                                                                  In closing, I would like to thank all of our dedicated associates across
The other divisions have delivered strong results this past year. They            the Group, for not only delighting our customers and achieving the
are past their turnaround strategies and have grown well off what                 results we have, but also for making this such a special environment
have now become solid bases and expect further growth ahead.                      of which to be a part.
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