Morning, everybody. I'm Mark Blair, the CEO of the Mr Price Group, and on my right is Praneel Nundkumar, the CFO of the Mr Price Group. We're here to talk about the F2025 annual results and then, obviously, about strategy and outlook. If you look at the current operating environment, I'm sure we're all very familiar with this. There's a lot of this that's been in the news lately. If you just, first of all, think about what the global situation is, I think that graph on the bottom left-hand side really tells it all. Lots of spikes, lots of ups and downs, and therefore lots of volatility. It's the steepness of that shape of the graph on the right-hand side that tells it all.
Certainly, with the U.S. trade tariffs, that threatened global forecasts, disrupted trade relations, potentially disrupted supply chains, and immediately put the threat of higher inflation into the market. There's still some ongoing spats, a bit of tit and tat sometimes, and we'll have to see where it all settles down. How does that then relate to what's happening in South Africa? If you just cast your mind back with the government of national unity, that created a really positive shift in sentiment in South Africa last year. GDP growth, solid sort of coming back, I'll say that in inverted commas, coming back 0.6%, but it was a trend during the year, and it was more positive in Q4.
Really what happened is that in early 2025, the government of national unity was more fragile, predominantly around the budget situation, and that obviously then started threatening green shoots of economic recovery. Overall, generally, it is quite positive in that there is improved energy supply. You remember the good old load-shedding days? The rand has stabilized after that shock, the U.S. tariff shock. I mean, at one stage, it was touching on ZAR 20. Now, the latest is it has recovered to below ZAR 18, so that is looking really good. A great piece of news that we have had for some time now is that inflation is lower. It had lowered to 2.7% by March, and interest rate cuts of 75 basis points lowered the repo rate to 7.5%. That was the business and operating environment. Now, this is the consumer environment, and it is color-coded for a reason.
If you look there, the pre to early 2024, that was really quite a tough trading period for everybody. Weak disposable income levels, elevated inflation, high debt servicing costs, negative real wage growth, and low consumer confidence. Really tough period for business and for retailers in particular. I was talking about this sort of mid to early and into 2025 movement, and yeah, a bit of a short-term consumer recovery. That really, I suppose we saw it in our results as well, a better recovery in the second half. On the back of lower inflation, low debt servicing costs again, in that period, the two-part system obviously brought money into the economy. We say recovery in inverted commas here, recovery of consumer confidence, but it is still negative. It is negative by less, but it was trending in the right direction.
Very importantly, still not positive. In 2025 to date, I think household expenditure remained quite stable, and that was enabled by inflation, which is at the bottom end of the range. We have lower fuel prices and, as I said, two interest rate cuts. Consumer confidence is impacted by U.S. trade threat and the potential VAT increase. When you have a VAT increase that did threaten us the way that it did, that obviously makes consumers less confident, and that is based on their own ability to feel that they can go out and spend. Lower GDP growth of around 1%, that the outlook was looking like, can we get to one and a half to two? It is now one. That assumes a weaker trading environment.
I think for me, the really disappointing thing is the Q1 GDP numbers came out, and that was very low, at 0.1%+ . In fact, if it had not been for agriculture, the rest of the market would have GDP would have declined. Against that backdrop, and there are some positives and some threats, as I have just discussed, this is Mr Price's performance relative to the rest of the market, which in this case is defined as the RLC. The tables depict in red Mr Price Group's performance, and the gray are the RLC performances. If you take it year on year, starting on the left-hand side, F2024 to F2025, or each trading half of that period, you can see that the red lines and that sales growth are comfortably ahead of the market.
We have also said on that left-hand side that the GP margin in F2024 and F2025 grew at the same time. That is absolutely critical for us. Consistent improvement in sales and gross margins gets our focus all the time, and the continued outperformance of the group versus the market leads to market share gains, which I will go into a little bit later. The great news is that the year end is behind us, and we are now into Q1 of the new financial year, and April and May started really well for us. Remember we said that there were some shifts in March that put Easter and school holidays into April. That certainly did pay out, but it really was not all about April. Both months were, I would say, equally strong. April, our sales grew 11.3%, and May, our sales were up 12% exactly.
That's a good positive start to the new year for us. Praneel will go into a bit more detail on these results, but this is obviously then just the group highlights, and what you can see is our performance for the year. Because you've already digested the half-year results last year, we've highlighted what's happened in H2, and it really does paint a wonderful picture when it's all lined up in green, highlighted in green. H2, up 10% in revenue, EBITDA up 9.8%, operating profit increased nicely to 11.7%. Our up margin increased, and our diluted HEPS in the second half were up 12.1%, which we're very happy with, which led to a 12.7% increase in the final dividend to shareholders.
What we've done in this graph is we've just, I think, either by speaking today, speaking with the investment community outside of this presentation, whether you're going to our integrated report, I think the thing that stands out is one is resilience, and one is absolute focus. For me, something like this really spells it out. We want to deliver consistent earnings growth through gaining market share, which must be profitable market share. This is based on HEPS, and it's our three most recent results that we've announced. Excuse me. It'll be this year, the half-year, and then the previous year end versus what's happened in the rest of the market with our competitors.
Of course, there's another competitor releasing today, which we don't have their information yet, but anyway, I think it tells a good story because A, it's consistency, and B, our performance is on the base that we've got. There's definitely a base effect that comes into it as well. Overall, when you look at that picture, I think we can, as a management team and as a business, I think we can be very satisfied with what we've delivered in a low-growth environment, just judging what I said about GDP growth, et cetera. In terms of value creation, we opened up 184 stores, sold over 300 million units of merchandise, generated cash of ZAR 8.7 billion that left us with ZAR 4.1 billion at the end of the year, and absolutely zero debt on our balance sheet.
On the right-hand side, that's what I was speaking a little bit earlier about, group market share gains of 50 basis points. You can see the pickup in H2 as well. Similarly, the GP margin upkick, and that then trickles down to operating profit, which in H2 is up 11.7%. Okay, that's it from the overview. Praneel's now going to go through a bit more on the detailed analysis of our actual performance. Praneel?
Thanks, Mark. A very good morning to all of our investors and stakeholders joining us online this morning for the results presentation. I'm pleased to present to you the group's financial results for the 52-week period ending the 29th of March, 2025. As you may have gathered already from Mark's introduction, the financial year was a tale of two halves. When we presented the interim results in November, excuse me, we had already noted that there was a constrained consumer environment, which had impacted the results of the first half, but we also noted that we expected a shift in momentum in the second half. We also said at that stage that our focus was on profitable market share gains with increased GP, and I'm pleased to report back today that that's exactly how the results ended up.
Taking a look at the group income statement, revenue increased 7.9% to ZAR 40.9 billion for the period. Contributing to this growth was comp sales growth of 5.7% in the second half, which was a significant improvement from the 0.4% growth noted in the first half, together with a weighted average space growth of 4.3% due to the 184 new stores that we rolled out during the year. Store sales grew 7.8%, and online sales grew 7.9%. Gross profit for the period increased 9.9% to ZAR 16 billion for the year, with GP margin growth of 80 basis points, with a pleasing recovery in the homeware sector, which we'll speak about just now.
Expenses grew 10% to ZAR 11.3 billion, and this was in line with our comments that we made at the interim results, where we said that overhead growth in the second half will be slightly higher than the first half, but that we did expect to get back into the medium target range, which was achieved. Net finance expenses decreased by 6.2%, and this was the result of the positive cash balance and the interest earned thereon during the financial year. Profit before tax increased 11%, and profit after tax increased 10.7% to ZAR 3.7 billion. You will note that profit attributable to non-controlling interest decreased by 0.8%, and this was due to the NCI reduction from the Studio 88 share repurchase, where the NCI was at 30% in 2024, reducing to, excuse me, 24% in F2025, and a further reduction in F2026 will take that down to 15%.
Pleasingly, profit attributable to equity holders of the parent was up 11.2%. The table to the right highlights the strong performance in the second half that Mark just spoke about earlier. As you note, as you can see, profits from operations grew 11.7% in the second half from 4% in the first half, demonstrating the achievement of a solid profit wedge in the second half through strong trade and disciplined cost management. Taking a closer look at the segmental performance now, the apparel segment sales contribution came in at 79.7%, which was similar to last year. Retail sales for the segment grew 7.9% but accelerated to 9.8% in the second half. Operating profit grew 9.1%, excuse me, at a faster rate than sales, but in the second half increased to 14.6%.
The segment gained market share of 50 basis points during the year, marking two consecutive years of market share gains. Mr Price apparel, the biggest division within the segment at 42.5% contribution, grew market share of ZAR 700 million from competitors during the financial year, while Power Fashion remained the fastest growing division within the segment. Studio 88 also performed strongly against a very firm base in the prior year, adding to the segment's momentum as we move into the new financial year. Having a look at the homeware segment, homeware segment sales contributed 16.9% to total sales, slightly down on last year. The segment continued its recovery with sales and comp sales in the second half growing 7.7% and 5.8% respectively. Pleasing to note that all three divisions within this segment reflected the accelerating sales growth.
The highlight, as you can see on this slide, is operating profit growing 21.9% on last year off a 6.4% sales base, and in the second half, operating profit grew 31.9% off the 7.7% sales growth. This came through significant gross margin gains and operating margin gains also. Moving on to the telco segment, the telco segment contributed 3.4% to group sales, slightly up from 3.2% last year. The telecom segment also had a great year, growing sales at 13.2% for the full year and in the second half, with operating profit growth of 13.6%. This segment also achieved market share gains of 40 basis points according to GfK. Comp sales accelerated to 3.3% in the second half; however, units were down due to the shift from 2G devices to 3G and 4G at higher RSPs and the continuation of the feature phone sales being replaced by smartphone sales.
Moving on to space growth now, it was pleasing to see the group ended the total stores at 3,030 for the year. This was due to 184 new stores, as we mentioned, being opened with new space growth of 5.1%. The bulk of the new stores were opened in the apparel segment, almost 154 new stores there, with the Studio 88 chain opening 74 stores across its five trading chains. Mr Price Apparel, the core business, also opened 28 new stores, and the Kids concept, our organic launch concept, another eight stores. Power Fashion grew significantly, also growing 33 stores for the financial year, and Mr Price Cellular grew 20 new stores for the financial year. An important bar graph in the middle of the slide that I wanted to talk to you about.
I thought it was important that we spend some time looking at new store returns, as it is something that we always discuss with analysts after the presentation. I think the key message that we wanted to land this year was that we have always spoken about the internal thresholds that we have set, and as you can see from the bar chart, our internal thresholds we mentioned over the last two years had increased, but we see new stores having a return on operating assets far exceeding the internal threshold and also far exceeding our weighted average cost of capital. These returns are backed up by a very stringent store feasibility process, and with results like these, it gives us good confidence on the capital allocated to new stores.
Moving over to the GP analysis, one of the highlights of the year has been the GP margin gains that we have seen across all segments of the group and for two years consecutively now. We've reiterated that profitable market share was important, which came through from these GP sales results. You'll also note the medium-term targets that we spoke to you about last year. Just a reminder that these are 24-month view in terms of the targets, which we reassess annually, and these are based on our internal financial modeling. Group GP came in at 40.5%, which was 80 basis points higher than last year, and the apparel segment grew 70 basis points to 41.2% and landed within that medium-term target range. The apparel GP gains were due to strong merchandise execution and lower markdowns than the prior year.
The homeware segment stands out performance on this slide, growing 170 basis points to 42.3% and exceeding the medium-term target that we had set. It was pleasing to see that the homeware gains really reflect a recovery over the last three years, getting back to the highest levels that we've seen, and we do believe that this GP margin is sustainable. The telecom segment grew market share by 80 basis points also to 20.0% from 19.2% last year due to the introduction of the private label Salt device, which has been gaining traction over the year. Also key to note that all three acquired businesses, Yuppiechef, Power Fashion, and Studio 88, all reported GP margin expansion due to improved sourcing practices.
Moving over to the overhead expenses, when we met in November at the interim results, I did mention that cost management was quite a key focus for me in the second half. I'm pleased to report back that the expense-to-sales ratio came in at 27.9%, slightly lower than the targeted range of less than 28%. Total growth in overheads for the year was 10%. This was driven by employment costs growing 9.6% for the year. This came through from the strong H2 sales results that we just spoke about and linked to that higher variable incentives. We also opened 184 new stores, as we've said, which resulted in an increase in employment costs together with minimum wage increases at the beginning of the year of 9.6%. Occupancy costs were up 12.3% due to weighted new space growth of 5.1% and the NERSA electricity increases of 12.7% during the year.
Other operating costs grew 13.4%, mainly due to software and licensing costs, which were dollar denominated and also related to our technology modernization program, where we saw investments into online and e-com coming through in terms of enhancing the channel, as well as various system integration projects during the year. Mark will talk to you a bit later in the strategy section around some of those key focus areas in the technology space. Moving on to up margin, up margin for the group grew to 14.2%, 20 basis points up on last year and right in the middle of the medium-term target range. The apparel sector grew 10 basis points to 15.4%, also within just outside that range, and the homeware sector grew 160 basis points to 12.1%. A nice recovery again in the homeware sector off a base of 10.5% last year.
As you'll note, the apparel and homeware margins are slightly outside the medium-term target range, but we do believe that there's opportunity for margin expansion to get into those medium-term target range moving forward. The telecom margins came in at 9.7%, slightly down on last year's 9.8% due to a merchandise mix in the telco space. Moving over to the balance sheet now, gross inventory grew 10.6% for the year. This was due to early arrival of stock ahead of Easter shifting from March to April, as Mark mentioned. We managed that very tightly. Stock freshness remained high at 85%, in line with last year, and our inventory obsolescence provision came in at 6.7%, which was slightly down on last year, but reflecting quite a good shape of stock at year-end.
Trade and other receivables grew 5.5% due to an increase in debtors, interest and charges up 6.1%, and credit sales up 3.8%, which we'll talk about in more detail just now. Trade and other payables were up 24.1%, impacted by creditor payment timing at year-end, but also a further expansion of the supply chain finance program that we spoke to you at the half-year end. We've now converted over 85% of suppliers onto the SCF program, and it's been a great way to unlock working capital for us. Great to see that the balance sheet remains unencumbered, zero long-term debt, and the business was very cash-generative in this financial year, with cash equivalents up to ZAR 4.1 billion, up 48% on last year, with a cash conversion ratio of just under 95%.
Having a look at the cash flow movements for the year, we started the year on a balance of ZAR 2.7 billion in April. The cash generated from operations increased 8.7% to ZAR 8.5 billion. You see positive working capital from the slide that I spoke to you previously, together with net interest received increasing due to the higher cash balance during the year. Investing activities reflect almost ZAR 830 million we spent in the CapEx space, mostly aligned to new store rollouts, revamps, and expansions, together with investment in technology and in the supply chain divisions. Dividends reflect a ZAR 2.1 billion payment out to shareholders, maintaining the 63% payout ratio. Under the other financing movement, you will note an ZAR 883 million movement. ZAR 453 million of this relates to the NCI acquisition of Studio 88 shares of 6%.
The cash balance at year-end closed at ZAR 4.1 billion, and as I mentioned, it was up 48% on the prior year. Just reflecting on the credit growth performance for the financial year, we had noted an improved credit environment in the second half. Mark spoke to you earlier about the consumer environment that had changed during the course of the year, predominantly driven by interest rate cuts of 75 basis points in the second half, and we reacted equally by increasing our approval rate to 20.3% for the year by adjusting the scorecard, and by year-end, we were on just under 24% from an approval rate perspective. We do see an opportunity here to continue growing those approval rates as we assess the operating environment. Credit sales grew 3.8% to ZAR 4.2 billion and now contributes 10.7% to total sales.
The debtors book up 5.5% was well provided for in terms of the impairment provision at 13.2%, which was slightly down on last year's 13.9%, and net bad debt came in at 7.8%. You will remember at half-year and year-end last year, we said that we had changed the write-off point from a suitability perspective. Hence, the net bad debt is non-comp at 2.2%, but the 7.8% does reflect normalization of the net bad debt in line with historic norms. The page I am landing on is the highlights for F2025. I think just to summarize it all, as a management team, we are very proud of the results that we have put out this year, taking into account the volatility in the consumer environment that we spoke about earlier over the financial year, coupled with a low GDP growth environment.
The focused execution of our strategic responses resulted in two consecutive years of market share gains, further GP margin expansion, and operating margin expansion into the midpoint of the medium-term target. For us, the most pleasing outcome was the double-digit HEPS growth for the financial year. I now hand you over to Mark. We'll talk to you about the strategy and outlook. Thanks.
Thanks, Praneel. Actually, when I was talking to you a bit earlier about the sales performance post-period end, when I said that April was up 11.3% and May was up 12%, excuse me, the fantastic piece of news that I did not tell you was that in April, all our divisions gained market share, which has been a long time since we've had that. Certainly, the things that we've done to our businesses that were doing less well are also starting to take hold.
Overall, a very good start to the year. I'm going to talk about the strategy framework. This is something that you have definitely seen before, so I'm not going to go into all the detail, but as you know, we've got six strategic pillars, which we've laid out at the bottom there. It's quite interesting when you start looking at this. These pillars were set probably four or five years ago, and when we came up and we said, "Let's talk about what our ambitions are and stakeholder engagement," the first thing was, "Let's just actually establish a function." As I said, four or five years later, we've just been rated the third-best corporate in IR by Excel, who are an international crowd. That's in the mid-cap range, excluding the mines and the like.
I think our efforts have really been rewarded, but it's just a really good example of setting out our ambition, putting everything in place to achieve it, and then the results come. Strategic pillars is one thing. It's really the strategic outcomes that we're after. As I said, you have seen this before. Profitable market share, an absolute must. We don't go and grab market share and give away margin. Obviously, then leading and supporting, that will be the comp growth of our business, and comp growth is often aided by category extensions, etc., or by going to areas that your market share is under-penetrated, and obviously, space growth. Space growth, as Praneel alluded to, is really working for us.
Becoming a customer-obsessed, and when you start looking at the accolades that we've got, leading brand equity, the customer engagement levels that we've got, and the insights that we get from our customer, I think we're doing a good job in that. Part of it's external sort of assurance that's telling us that, but I still think that we've got a piece of work to do here, which is quite exciting for us, and it really does relate to the customer and data. Having our diversified offering is what sets us apart. It's differentiated fashion. We've got skills, and we've got a product offer which we execute very well, and it's value and it's fashion at the same time.
Very hard to compete with that, but of course, when you're reading fashion, the risk is that you're reading it correctly and making the calls that you do, and that's where all our processes and turning the business come in. Touch wood, we get a lot more right than we get wrong. Focus on omnichannel. We all know about that, but I've also said over the years that it's not necessarily what we want to push out to our customers. It's where they want to shop us, and they're still preferring the store environment at this stage, and that manifests itself in the proportion of sales between bricks and online for this particular customer. One of the outcomes we look at is anything that we do invest in. First of all, they've got to be growth vehicles. They've got to have scalability.
I'll talk a little bit about our vision and perhaps some organic acquisitions that we've made over the years and just reinforce why we made them and bring it back to the scalability and growth. Praneel spoke about capital allocation and the investment criteria that we do set. All that's great, but then you need an internal environment, an internal backbone that enables you to do all these things as efficiently as you can. Of course, you know us as having now to put a value lens across that and do it in the Mr Price way so we can get maximum impact in a very cost-efficient way. That talks about the whole technical and digital supply chain and any other function that we actually got in our business. Now, if you get all that right, that's one thing.
You've got to do it right with the right shape. When I'm talking about shape, I'm talking about returns, and that's very key to us. We're not going to do all these things, and then our returns go out the window. That's where this word discipline comes in, and hopefully, we can get those strategic outcomes that I've spoken about, but they actually are within our tolerance bands for the returns that we've actually driven. Praneel was talking about value creation. I'll just talk now in terms of value creation for our respective stakeholders. Customers first. We're the number one most valuable fashion value retailer in South Africa. We've got the fourth strongest overall brand in South Africa, and we're the most shopped apparel and homeware retailer in South Africa. That's on the customer front.
In terms of our own people, our associates, once again, it's the second year in a row we've been certified a top employer for 2025, and we've also been awarded an exceptional workplace per Gallup, and that's also for two years in a row. There you can see some other key stats. Over 32,000 people employed and ZAR 35 million paid in dividends to our store associates as well. Value add to our shareholders, dividends paid of ZAR 2.2 billion, share increase of almost 30% in the year, and a strong ROE of 27%, which was up 60 basis points. Lastly, on the ESG side, supporting South Africa, 128 million units procured in South Africa. 64 million units doesn't relate to the 128, but just 64 million units in total of our units have a sustainable attribute in them.
Very importantly, for I'm talking about value retailing, but the bang we can get for our buck and our effort that with our low-cost infrastructure and the focus that we do bring that is very pinpoint, we've got the lowest risk rating by Sustainalytics amongst the SA apparel retailers, something we're very proud of and we must push on. I am going to go back and just talk about the vision. This is the journey that we've been on for a couple of years now. It should be well known to most of you, but I'll just recap on a couple of really important things.
We started doing research into the SA market in 2020, and without going into all the detail, we looked very carefully where we were positioned, where the gaps were, and where we think we could, by research and by identification, move into that space. That was the kickoff back then. We launched a new group strategy on the back of that, and over time, the next couple of years, we acquired Power Fashion and Yuppiechef and a bit later, Studio 88. That happened in 2021, 2022. We also launched organic concept Mr Price Cellular and Kids the following year in 2023. With a growing business with a lot more trading chains, we are obviously then carefully looking at the org design, the way we run and structure our business to make sure people have capacity to do justice to these things.
That was all happening at the same time as we were going through an internal modernization. I thought I'd never have to speak about an ERP transition again, but I'll just bring it up once more. That's behind us quite a while ago, but this all happened at the time that there was a lot happening internally to us to get to that point. Of course, I guess all the disruption that was in the markets through the events that have played out in South Africa and Globe over the last few years. If you look at the bottom right-hand corner, we're talking about performance execution and sustainable growth. It ties back to that graph that I was showing you just now, and it talks to integration and value extraction from acquisitions and scaling organic concepts.
There is a lot of opportunity in the business still, but there is also a final piece of research to identify what is going to add to that. I think the previous set of core businesses are operating very well. The acquisitions are operating very well, and now we are looking for where more growth is going to come from. I think we can look back on that and say we actually embarked upon that process with a lot of deep thought, a lot of discipline, because we ended up acquiring companies that we went after and rejected a lot of them that actually came our way. That kind of discipline is really what sets you apart. The performance that we have driven over the last couple of years, although the acquisitions are doing very well, it is certainly not all about the acquisitions. In fact, if I take the performance of Mr Price.
Apparel, whilst I'm obviously grateful for all the trading divisions that did deliver operating profit growth or met their budget this year, unfortunately, Mr Price apparel didn't meet their budget. They were just shy of it, but they delivered a very good performance, double-digit profit growth on a double-digit base. Although they didn't meet their budget, I think the absolute key thing was the big chain in our stable is very sound, performing exceptionally well. When you look at the operating profit rands that they added to the group this year, it's way ahead of any other division. I think for me, a really great story. Core divisions operating well, acquisitions operating well, organic concepts operating well, and I'll go into a little bit more detail on those. This then also puts that journey into perspective.
I was appointed in 2019, so this shows the company that I inherited. On the left-hand side, revenue of ZAR 22 billion. There you can see as well, Mr Price Apparel, 60%. The good and the bad was if Mr Price in those days overperformed, we took the upside, but if it sneezed, the whole group felt it. We did strategically want to reduce the group's impact on one major division. As you can see, apparel is now 42% of group profits. Overall, all the activity in a period that had zero economic growth in the country, all the distraction that we had, we've taken our revenue from ZAR 22 billion to ZAR 40 billion, but it's not just all about the size. The thing is the acquisitions and organic concepts have worked.
If you go into the acquisitions as a start, and I reflect back on the day when we were announcing each of these, I think it came to the market as a bit of a surprise. What is Mr Price doing? A cash retailer, a value retailer. They have not got experience in acquisitions. There is an actual skepticism. We went and told the market exactly why we had filled. We had analyzed the market, and in the case of something like Power Fashion, it was a very strategic fit for our business because deep value is a great place to be in South Africa given our demographics. Not only that, it actually kept Mr Price from thinking that they always had to go lower and lower in terms of price.
Of course, when you've got trend departments and all those kind of things and product differentiation, you must be very clear of who you're competing with. I think a couple of years of trading have been under our belt now. I think all those concerns initially about should they be acquiring, did they acquire the right businesses, how are we sure these businesses are going to fit have been really put to bed. If you just look at the performance, combined retail sales were up almost ZAR 12 billion in the acquisitions. It was up 8.9% and even stronger at almost ZAR 12 billion in the second half, and they contribute almost 30% of group sales. Each of the businesses have had market share gains.
Obviously, Studio 88, we can't compare to RLC because there isn't an RLC for that category, but we can compare it to the type D retailers. We added 107 new stores, but that's, I think the next line really tells us the scale of the businesses. It is just slightly over ZAR 1.2 billion combined operating profit from those three businesses. If you look at future focus, it is no different to our own business, the original businesses. Fashion differentiation and value positioning is going to be the two things that continue to drive our efforts. If you get those right, the market share gains should come. We have got extremely strong relationships externally with suppliers and with, in fact, with brands, and we have got a great opportunity for enhanced private label expansion as well.
There will be benefits of scale that do come as these businesses grow and they access the central, what we call centers of excellence, all the support functions, and that will drive future efficiency for the group. The good thing is in these divisions as well, and it's very key for any acquisition, we don't buy for bulk and not interested in that at all. If we do acquire anything, it's got to have serious long-term growth prospects ahead of it. If it doesn't, then it doesn't meet one of our key criteria, and we just don't take it any further. That's absolutely key. Much as I just explained what happened with the acquisitions, now there were organic concepts that I did refer to a little bit earlier as well, Mr Price Kids and Mr Price Cellular.
I do not think I'll go through all the detail here. I think the key thing is they have got good representation across our businesses. Kids, for example, is in 580 Mr Price stores, but the real strategy there is to have standalones, and we did open eight new stores in this year. Of course, we've got an appetite for much more, but what we're really looking for in that chain is to have our Kids business as close to the Mr Price Apparel business, the mothership, if you want to call it that, and we'd rather slow things down to try and engineer that space. That is definitely the strategy there, but overall, nice market share gains, the business is working, and there's heaps of potential, including a hunting list of over 100 stores that we're looking at there. Mr Price Cellular was also birthed a few years ago.
Excuse me. It is in 562 stores, 61 standalone stores as well. Market share gains have been quite spectacular for Cellular over the years, and as you can see there, five consecutive years of gains. Very importantly, as we have done it, looked at the mix of products and pushed GP and operating margins as well. The hunting list is over 200 stores. The important thing here is that we launched two organic concepts. Unless they like these two, in other words, they have strong representation in the trading divisions, 581 in Kids, 562 in Cellular, organic concepts do take a long time to impact the group earnings. We are just very fortunate that in these two, they got to scale quite quickly, perhaps in a slightly different way than just pure standalones. Yeah, delighted that the return thresholds that we set for these two businesses have been exceeded.
Looking at, I think we've got good momentum in our business. Of course, we're subject to all the external influences that we spoke about earlier, but I think things are trending really in the right direction. I won't go into all this detail. Praneel did speak about segment reports as there's some duplication to some extent, but I think really what I just wanted to bed down again was the market share gains over the last two years. There you can see it on the left-hand side. Market share gains with an 80 basis point increase is really the way to go for us. As I said, we do measure market share according to RLC, and if you just look at what we took out of the market this year, it's ZAR 685 million that effectively came from others. Then in the apparel segment, also very strong performance.
You can see the stats here when I go through them all, but I think very pleasingly, we've got two new directors appointed in two of our trading divisions. They've been in the seat for a year or so, and I'm very excited about what's coming out of just new thinking in those trading divisions. Yeah, I think we're definitely trending in the right direction there. We know that the MILADYS's business has been suffering for a while, but I think the recent results there are also trending in the right direction. When I said that April and May sales are up, let's just call it around 12%, MILADYS are actually exceeding that number. MILADYS was up 10% in April and 18% in May. That is starting to look very good. As I said, they gained market share in April.
Okay, then likewise in the homeware sector, we have spoken for the last couple of the last few times when we've met for results presentations about this consolidating market share. We are by far the heavily dominant player in the sector, and post-COVID, work from home, flexi work, it just opened up the sector to other players to come in, and many other doors opened. The point is that we still hold very healthy market share, probably around 30%. If you just read, in fact, some of those accolades in Mr Price Home, still continue to be the most loved and the highest brand equity in South Africa. We continue looking at categories that we've got opportunity in, where we're underpenetrated, and where we've introduced those during the year, their growth is now exceeding the divisional average, which is positive.
The great thing as well is I think we've got some work to do in our overall store environments and where we have actually revamped, and particularly in Mr Price Home, they're showing excellent returns. I think that's sending you something that the customer wants. When we get into next year, I think we've upped the CapEx, in fact, for the next two years on revamps, and it's close to ZAR 350 million over the next two years that we're going to be spending there. Not on home on its own, across all our chains. Home, yeah, I think the sales performance is up. You can see an increase in the number of units sold and the GPs and op margins up nicely too. I think the same then starts playing out for Sheet Street.
A lot of work went down into the really strategically looking at that assortment, and we've made changes. This is one division where we had held back some CapEx. They got that offer right. They're now in the place where they're ready to get CapEx again. In that, and it's something that we have to do, and something that has driven the increased profit, the increase in profit, is we've actually taken a very hard look at their store footprint and consolidated some of that and closed some stores there. That closure will go into next year as well. Of course, when you close, I'm not too worried about top-line performance. Obviously, it's the bottom line that improves when you close those loss makers. If your new stores are then performing, then there starts a great sequence that should play out for some time.
Overall, good momentum in that business. Of course, that's the trading divisions, and the things that enable the trading divisions to do what they do, certainly one of them is tech. I've spoken about the whole modernization program. We've done the ERP transition. In fact, to cloud, did not mention that. That whole transition to cloud is something that's going to have our continued effort, as is decoupling our legacy estate from and moving to best of breed and modernizing our whole infrastructure. Our plans are very detailed there. Any mistakes that we did make in the past, I believe we've now made them. The learnings are ingrained. Over time, we'll slowly integrate the new divisions, but it's going to be very specific parts of integration, and I'm talking from an IT perspective.
It could be that they use elements of what we use, but it does not mean that everyone's going to convert to the same ERP, et cetera. We will just go about it in a very considered way and not change for the sake of changing. There has got to be a good reason. Obviously, like any other company globally, I would say, just carrying on to focus very heavily on cybersecurity given breaches that have taken place recently across the globe. When it comes to, you do know that we have got our advance team. All the folks on AI and machine learning, we have shared it, in fact, quite a couple of examples with you at Capital Markets Day, but that whole area is going to get an added focus so that it really takes us forward and leapfrogs some of the things that we can do there.
So really looking forward to what's going to come out of it, enhanced focus from our advance team. Likewise, we're not saying that we had an opportunity. It's around CRM and the customer and then analysis of the data, et cetera. Some of these changes may include or opportunities that will be unlocked potentially through organizational design changes as well. If you look at supply chain, another key enabler. Yeah, I think our supply chain and our operations, this is an area that we really do excel. Through all the disruption, I think we've managed this process very well. Hats off to our supply chain team. We've just broken it down between Natal, Gauteng, and the Western Cape. There you can see the scale of our operations. At present, Hammarsdale's got 62,000 sq m and Power Fashion 11,000 sq m in KZN.
Gauteng has got Studio 88 of 10,000 sq m and Gosforth Park of 30,000 sq m. And the Western Cape is the Yuppiechef DC. It does not mean that that is our only facilities. There are more than 12 depots that we have got around the country in conjunction with our logistics partners, but these are our primary areas. The plan is that in KwaZulu-Natal, although it has got a capacity to move to 100,000 sq m, the plan is not to do that at Hammarsdale. Over time, we can incorporate Power Fashion. That will be in the next two years. That will go into Hammarsdale DC, so we will get some efficiencies and processes there. That can happen at the same time as within the current constraint of 62,000 sq m.
What we've rather done than focus, excuse me, all our operations and all our, I guess, the risk at the end of the day on one site, one key site. We've decided to de-risk it and rather have a secondary facility in Johannesburg, and that is the Gosforth Park, which will effectively run with the same capabilities as Hammarsdale. Studio 88 doesn't necessarily mean it's going to move into Gosforth Park because we do own the Studio 88 facility. Certainly there, what we will do is make sure that Studio 88 start to utilize some of the software and the systems that we get a lot of value from in our stable. The Western Cape, yeah, that just completes that triangulation. You'll see that there's a bit of CapEx required there. It's going to be about ZAR 620 million.
Yeah, and we're looking at delivery in H2 2026. It is important that you do not get too worried about what this capital expenditure is. It is there, and it has an overall mindset that we are going to incur this capital expenditure. One of the things it is going to do is enhance the growth in the business and therefore the actual cost per unit of moving and storing our merchandise. The aim is to either keep it flat or reduce it per unit, which I think would be an excellent outcome. I have been speaking about resilience all morning, so has Praneel, and it is all really around the businesses and the business model that we have. We often get questions, "How long can you carry on growing for?" I will say this, that when I started at Mr Price in 2006, those questions were being asked at that time.
The fact is we've got good brands that have got legs. We've acquired brands that have got legs, and we've actually started organic concepts that have got good legs. We have to be very strict about making sure we're being true to our business model. Part of that is pricing, part of it is value, part of it is fashion. Now, when the currency moves around, we've got to then make sure that we're always correctly positioned with our price and our value relative to our competition. When the rand improves, we don't just take all that margin. We pass it through to the customer as well when it moves in the right direction for the customer, that is. We're defending high market share categories, and we've identified many other departments where we have said we are underpenetrated so we can grow.
Praneel spoke about our credit. We've been very conservative on credit for, I think, a very good reason. We will grow as the data suggests that we should, and we'll follow that trend. We started at very early stages of releasing a bit of credit into the market, but certainly not risky at all. Protect and leverage the whole halo of the Mr Price brand. Our space growth opportunities are across all our chains. As I said a little bit earlier now, we're actually in the position where all our chains can get new store CapEx, where it was not the case in the last 12 months. Extracting material sourcing gains from group scale and integration. Just one example of that is new businesses that we've got and the introduction to existing suppliers in our stable to them has had really good outcomes.
Yeah, and then just finally, continued operating leverage through group scale. As we get bigger, we get more efficient. We've got this ingrained cost discipline in our business. I spoke a little bit about org design later. At the end of the day, it's our plan to conserve and expand high return profiles. If there was an acquisition that would dent our group metric in any way, of course, the plan is to correct that positively so that the division acquired or company acquired is a program to increase its own operating margin. It shouldn't be long-term at all. We spoke about this extensively at Capital Markets Day. This is the Apex strategy team. I explained a little bit earlier about the focus that we had going back a number of years researching the SA market.
We've landed what we've landed, and then now there's a piece of work that we're doing to make sure that we are quite clear about where we're going to target and what's going to drive the next wave of growth for us. I just wanted to sort of address something that I heard quite recently in the market, in that we've often spoken about our vision. Our vision is to be the most valuable retailer in South Africa. That's by market cap. I just wanted to clarify that the vision hasn't got a date to it. If you had to say, "What timeframes are you looking?" I'm certainly looking way beyond my tenure. It could be a 20-year vision. I think investors mustn't get nervous that we're about to do a big transaction because we need to get to this vision as soon as possible.
That's certainly not in our heads. It's certainly not the way we've acted in the last couple of years. If you look at the size of the businesses we've acquired, I think that will sort of tell the story. We don't have an appetite for a big deal at all. We'll continue to look for opportunities that meet our criteria, many of which we've actually shared with you already. I just wanted to dispel that absolute notion that we're looking for a big deal to substantially increase our scale. I'll just reiterate. It's all about long-term growth in sales and profitable growth. If a big deal comes and it substantially changes the business, it probably is unlikely that it would give us that. I hope we're clear on that. Praneel spoke a lot about capital allocation.
I think this is an area where I think we do apply ourselves very diligently because ultimately, at the end of the day, we've only got a certain amount of capital, and we need to put it into areas that are going to generate the best return. There you can see the CapEx on the right-hand side, what we spent last year in F2025 and what we plan to spend in the new year. You can see the shifts and the ramp-up. Part of that is a little bit more going into technology and a little bit more going into supply chain. That was the Gauteng project that I was talking about as well. Still a very healthy amount going into store CapEx because—this is really key—the stores that we're getting and opening are working. At the moment, we think that's slowing down.
Store CapEx will slow down. We look at that very, very carefully. At this point, I think there is absolutely no reason for us to think about changing our dividend payout ratio of 63%. It has been there for many years, and it is certainly still affordable to the company. All in all, expect to open about 3%-4% space growth, around 200 stores next year. Although we just had a payout for one transfer of the Studio 88 acquisition, in fact, last week, there is the final buyout of the remaining 15% that will take place this time next year. I come back to top quartile returns and metrics again. These are the targets that we have actually shared with the market.
First of all, if you see that achieved, that green block, the fact that there's lots of ticks there means we're doing a good job on these. Of course, there is a range, so we can always do a much better job. We are firmly within the ranges that we did set. Stock turn, we did not achieve that target. Praneel spoke about some of the timing of stock inputs, but that is certainly a big one for us going forward. We have revised some of these targets. Our ROE, we were at the range of 24%-26%. We have moved that up, as you can see. The cash conversion ratio, we have moved up slightly. The expenses, we have actually kept the same—in our minds, the same range, but we have just moved the parameters a bit—27.5%-28.5%.
Very happy, nevertheless, with where we are with the metrics. Yeah, I think just looking at being proudly South African and the input that we do give to the local market and really what has transpired and enabled that is how we have actually performed over the last 39 years. There you can see retail sales compound growth, HEPS compound growth of 18%, and total share returns compounding of 32%. That is, I guess, for the investment side. Looking at investing in SA , all these timeframes are not all coterminous. They identify at the bottom what timeframes they relate to. Just look at the sheer impact of our jumpstart employment programs. 29,000 people, removing 158 million plastic bags from circulation, buying over 100 billion units locally, and corporate tax—and this is just corporate tax without VAT—and you are having a ZAR 15 billion.
These all talk to major, major investments in SA , and certainly that we're doing our part to try and grow the economy and do better. I guess the last section on the outlook, the uncertain macro is still there. The volatile consumer environment is still there. Although interest rates are low, is it enough? We just seriously need GDP growth to create a better environment for us. There are lower input costs, which is great. With the rand where we're at, we've actually hedged it out to the end of the year. Merchants have got certainty. We will have to just see how all these things settle in the next three to six months. Hopefully, the sooner the better. We will just close off by saying that, once again, there is really good momentum in the business. The areas that were struggling now look like they're back on track.
We started the new year on a really good footing in terms of its overall growth. We're gaining market share, and we've delivered double-digit earnings growth. I've got to look back on this year and say pretty satisfied, but that was last year, fully focused on the year ahead. Thank you.
Great morning, everybody. Thank you for all of the questions that have come through. We'll try and get through as many as we can in the next sort of 10 minutes-15 minutes or so. Mark, just to start with the question about market share gains, is there any sense around potentially where in the business is gain share and from who? Also just a question about tracking market share outside of the RLC, is there any insight that we have outside of the RLC?
Look, it's often difficult to say who you're getting market share from. Perhaps the obvious place to start would be those that are talking about sales growth but aren't talking about market share growth. Exactly how much is coming from the listed or the independents, it's always hard to estimate. I think you've got to go get it from the source. The market share growth outside of the RLC, it's only really sport and Studio 88. The only thing we can really do there is compare those two to type D retailers, which that's SA. I think it would prove that both are doing very well, and in particular, Studio 88.
Just looking on competitor landscape, there's a number of questions around the higher taxes on Shein have been materialized. Has Mr Price benefited from this?
Once again, it's quite hard to say because, I mean, the one thing I think all of us have seen on Shein is the social media outrage that's now taken place because of higher prices. It does make us feel comfortable that the new legislation has been applied correctly. I think it's still a bit erratic, so I don't think it's across the board. Yeah, if I look at our own e-com sales, it grew slightly ahead of our store sales. There must be some positive impact and pickup. Yeah, I think it's also got to play itself out. The thing with online sales is, I think as soon as you're buying something and you're not paying full price because you're not paying duties, a customer like ours would be prepared to go online to buy.
Whether you then get the quality that you thought you were getting is another question. Certainly, I think the differentiation for us, because we obviously offer e-com, it's only 2.5% of our business. Our customers want to go to our stores to see our product and feel it and try it on. When you're given that, they go for it. It's only that Shein, you couldn't buy in stores for that, so they're forced to go online. Although we were, I mean, it's obvious that we were one of the parties impacted, the average income of a Shein customer, and I'm just saying it is an average, so they are below and above, isn't really in our target set. It is above our target set. Yeah, I think it's hats off to the authorities for implementing that. Yeah, I just hope it carries on.
Praneel, just a couple of questions, which I'll follow. Let's start with cost growth. I'll follow up with one or two after that. Just a sense of cost growth in FY2026, any particular outliers to consider? Yeah, and we'll move on to some other medium-term target questions after that.
Cool. Thanks so much, Matt. From a cost growth perspective, I think the best indication I can give you is to look at the medium-term target range that we spoke about just now on Mark's slide. We've had lots of engagement with analysts and investors, and the outcome was rather than just an absolute number where we said less than 28% in the past. We've created a range now so that you can understand and model in that space. That range of 27.5%-28.5% is where our focus will be, and that's where we will obviously try and kind of land costs in F2026. I think it's also important Mark mentioned some lower input costs coming through, so we'll manage that as it gets into the business.
We also spoke about some investments that we're doing, like other listed retailers in the technology space, in the cybersecurity space. You have also seen our plans for the DC, where we're trying to ensure that we have sufficient growth capability in that center of excellence. Yeah, if I just rounded up to say that the medium-term target is what you should be thinking about, because that's certainly where I'm also aiming to land for F2026.
On the topic of medium-term target, there have been a number of questions just around some targets increasing, some remaining the same. If you could just give a bit of color around the thinking around medium-term targets and how we land on them.
Sure. Thanks for that question. The medium-term targets for us is quite important because we have actually modeled that out in our financial models. It is not just a number that we pick. Where we have seen that we are achieving the targets, like in the homeware sector, you would have seen that the GP number, over 42%, is higher than the target. We have obviously reset the target range to 41%-43%. I think it is quite important to understand that the medium term for us is a 24-month view, and where we have achieved targets, we will set them higher, similar to ROE. I think that is the key thing. I think we are just trying to give more guidance to the investor community in terms of what the shape of the business looks like.
Also understanding that we've had acquisitions over the last five years that may have altered some of the metrics historically. I think that you must take comfort that we will continuously look at the targets, and where we achieve them, we will reset them. It is always based on the data and the forward views of the business.
Praneel, while I got you, one more. Credit growth, just the outlook on credit growth and the appetite for more growth in the current consumer environment.
Yeah, thanks, Matt. Mark also mentioned the consumer environment is a bit uncertain. We know there's some support for the consumer environment with lower inflation, lower interest rates, which create a good opportunity for us. We've seen the same in the other data points that we look at from a credit market perspective. Our approval rates are already ticking up slightly. We said that for this year, we'd want to land closer to the mid-20s, call it 25% from an approval rate perspective. Even in a better consumer environment, we will diligently apply our scorecards to make sure that bad debt is not running away from us. I'm quite comfortable that we will see a lift in the approval rates, which then should allow credit into the business. I think it's important to understand also that it's a very data-based approval rate.
As you can imagine, the different brands in the business have different customer segments, and some customer segments are obviously at higher LSM, for example, and higher income groups. While the average approval rate would get to 25%, in some brands like MILADYS, the approval rate is actually higher than that, but the average for the group comes back to 25%. I hope that gives you some color.
I think it also comes back to the fact that the South African consumer, although there's a lot of things pointing in the right direction, I spoke earlier about interest rates and the like. That's all positive, but it doesn't mean that the SA consumer is in a good financial position yet. Still very cautious. We've got to see that things progress in the direction that we want. Test releasing credits as Praneel was talking about. Certainly right now, I think there's got to be a lot more to happen on the consumer disposal income front for us to be more aggressive.
Just a question with regards to higher CapEx and the balance between supporting growth versus managing returns. Just some commentary around what is driving the CapEx.
Yeah, look, I think the question about incurring the CapEx and cost growth and all that kind of stuff is one of the reasons, in fact, that I've put in the presentation that if you just take what we're putting into our supply chain, although the CapEx is there, I did say that the objective was to keep the cost per unit that we manage and move around the same or lower. That's not really the same thing. That's backed up by all the data and all the information that we've got. In fact, it went into the business case for us to even approve the distribution center. With technology, you've got some critical things to just keep the lights on and have a safe environment, for example.
You have things that you are going to invest in that are going to create opportunities in the business for top line or margin enhancement. Although I will say that even any technology investment that we make goes to the same investment committee who has to stand up and deliver the returns, present it, and they have to meet investment thresholds. You have to be able to determine the impact that it is going to have on the business and quantify it, and that goes through a rigorous process.
Mark, just shifting to the topic of stock in relation to a good April and May, and just generally the effect of where winter's landed and the health of the current stock, and then just some broader comments around supply chain operations, Durban ports, just how those have unfolded.
Yeah, I think I could encapsulate all that and say I'm happy. It's certainly looking a lot better than it was a year ago. Just to take you back, what we had done, because we've obviously got set lead times, particularly for imported product, which is roughly half our product. With all the disruption, see the containers or vessels, we're putting increased lead times into our system, which really we don't want to do. Lead times are long enough without it. The speed in which vessels are now coming, the pace in which they're going through the port has improved. The port still has to, it's still on the project to get more gantries and equipment. That's a longer-term plan, but they have got some new ones.
In fact, what we can do is we can start releasing some of those buffers that we put in, those extra buffers into our supply chain. In fact, we've done it already. Overall, I'd like the port to be maybe 12 months ahead of where they are right now, but it looks like there's commitment, there's action, and importantly, we can see the positive impact being felt. As I'll say, and I think I've said it before, we've got excellent relationships with the port. It just enables a very positive flow of movement out of the port to us. The shape of our stock, okay, it was up 10%. It's definitely manageable. The quality of the stock's good. Yeah, overall, we're very satisfied.
Praneel, a number of questions just around, firstly, expansion of margins and recognizing margin expansion in FY 2025, and then looking ahead to FY 2026, particularly just to pull within the GP margin and just the input levers into that.
Yeah, thanks, Matt. I think we did, Mark did have a slide that spoke about the GP margin opportunity, the fact that there is also a low markdown base from F2025. I think what's quite important to us, even though there might be some lower input costs, we have to manage and protect our value position quite carefully in the markets. As we said, where we can, we will protect customers from inflation. I think that the key focus is on those medium-term target ranges again. I think, as I said, we have some opportunity to get more into the middle of those target ranges for some of the trading divisions, and that's where the focus will go. Thanks.
Yeah, there've been a number of questions regarding cash balance and capital allocation. Just to read a particular question, just which covers it. Sorry, just give me a second. Just relating to the conversation with relation to capital allocation and acquisitions, are there many acquisition opportunities left in South Africa, or given the lack of economic growth in South Africa, are you looking at offshore businesses? There've been a number of questions around this, so maybe just use that one as a guide.
Yeah, look, I think the thing for us is, and it's nothing new. It's a situation that's been around for many years. I think one of the other CEOs, I think, in fact, I think it was at Ninety One the other day, was talking about this dog-eat-dog situation in South Africa. You've got low economic growth. You've got a lot of consolidation in the retail industry. I guess the question is, how long can you continue keeping eating market share? Someone's got to lose it, so you've always got to be on top of your game. Of course, the question comes, how long can that continue? If you asked if there's anything sort of that we're looking at in SA, I think we did three really good transactions.
I think if there was anything else, it would be probably much smaller than the ones that we've done and more tactical in nature, but with really good reason and growth prospects for considering something. We get, I can't give you a number, I've lost count now. The number of things that cross our desk from local and international, and it could be acquisitions, could be, would you like to partner with us, as I say, I've lost count. I think that's one area that we're very good. We say no quickly if we need to say no. Until that phase of research that I've spoken about, that we do that properly, then I think that will be the time that we can sort of communicate clear plans. Otherwise, I'm communicating research without being able to back it up with any clear guidance on it.
Great. Thanks, Mark. Thanks, Praneel. Thank you, everybody, for joining today. Thank you for all of the questions. If we haven't covered them, we do have some scheduled engagements early next week, so we will continue to cover questions then. If there's anything needed immediately, I can follow up with you today. I'm aware that it's a busy day for retail and another presentation to go to. Thank you for joining, and we'll talk to you soon.
Thank you.
Thanks everyone.