| Thu 31 May 2007, 8:00 | | MPC - Mr Price Group Limited - Audited Group Resul |
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MPC
MPC
MPC - Mr Price Group Limited - Audited Group Results: Year Ended 31 March 2007
And dividend declaration
MR PRICE GROUP LIMITED
Registration number 1933/004418/06
Incorporated in the Republic of South Africa
ISIN: ZAE000026951 & JSE share code: MPC
AUDITED GROUP RESULTS FOR YEAR ENDED 31 MARCH 2007
Highlights
* COMPARABLE HEADLINE EARNINGS PER SHARE UP 27%
* COMPARABLE RETAIL SALES UP 24%
* DISTRIBUTIONS PER SHARE UP 25%
* 80 NEW STORES OPENED
The comparable increase is calculated on a base year adjusted to exclude the
impact of the 53rd week
COMMENTARY
RESULTS
The strong economic environment that has prevailed during recent years has
continued to fuel consumer demand and the group is reaping the benefits of its
store expansion and revamp programme embarked upon almost five years ago. Cash
retailers, in particular, are benefiting fully from the trading conditions which
initially favoured credit-oriented chains.
The current year saw the successful launch of two new concepts, namely
Mr Price Sport and the Franchise division. The existing retail chains, Mr Price,
Mr Price Home, Miladys and Sheet Street, all performed well during the year
under review, and recorded improvements in operating profit.
Compared against 53 weeks in the previous year, headline earnings per share
increased by 19%. However, comparable headline earnings per share which compare
52 weeks against 52 weeks was up by 27%.
In order to aid comparison and assess true performance, the balance of this
commentary is relative to a 52 week base, thereby excluding the impact of the
additional trading week in the prior year.
Retail sales from continuing operations grew by 24% to R6,1 billion for the year
ended March 2007. Comparable store sales grew by 11,6% and weighted average
trading space by 17,8%. The favourable trading conditions outlined above have
allowed the group to adopt an investment approach that should further extend our
excellent track record of profitable sales growth and increased shareholder
wealth, whilst maintaining the operating margin above 10%. These additional
investments include the:
* anticipated start-up losses of the two new concepts referred to above;
* increase in structural costs following the expansion into the new
distribution centre in Durban;
* implementation of a Voice over Internet Protocol (VOIP) communication system,
which duplicates costs in the transitional year, but substantially reduces costs
and improves communication in future periods; and
* incurring of additional salary costs relating to new concepts as well as
Project Redgold, an initiative aimed at supply chain improvement.
Operating margin growth was inhibited by the abovementioned investments, the
benefits of which will be felt in future years.
The total distribution of 101,0 cents per share, based on a cover of 1,9 times,
represents an increase of 25% on last year`s 81,0 cents per share. The compound
annual growth in distributions to shareholders over the past five years has been
41%. In lieu of a final dividend, the group will make a distribution by way of a
reduction of its share premium account.
TRADING
The apparel chains (Mr Price, Mr Price Sport and Miladys) grew sales by 20%,
with retail selling price inflation of 3,4%. Operating profits grew by 22%.
Sales in the home chains (Mr Price Home and Sheet Street) were 32% higher, with
retail selling price inflation of 14,3%. Operating profits were 29% higher. The
number of stores operated by the group increased from 761 to 829.
The Mr Price chain grew sales by 19,1% to R3,1 billion with weighted average
trading space growing by 10,3%. Comparable sales were 14,7% higher with retail
selling price inflation of 3,8%. The division tested a new store design concept
which generated sales well in excess of feasibility, and which will be rolled
out further in the forthcoming year. Improvements in merchandise assortments,
the positive performance of departments such as footwear and ladies
intimatewear, coupled with excellent fashion interpretations, resulted in a
strong profit performance which has continued into the new financial year.
Mr Price Sport opened eight stores during the latter part of the year, which
generated sales of R63 million off a closing trading space of 10 334 square
metres. The market has embraced this value-offer of sporting apparel, footwear
and equipment and although positive store contributions are being generated, the
division has not yet reached the critical mass that enables the costs of the
full infrastructure to be recovered.
Miladys sales were 12,8% higher at R0,9 billion, with a growth in weighted
average trading space of 9,0% and comparable sales growth of 4,5%. The division
experienced retail selling price deflation of 3,0% and a 17,7% growth in units.
The store revamp programme continued in the current year and 60% of stores now
sport the new look, which has produced a marginal return on operating assets in
excess of 30%.
Mr Price Home grew sales by 30% to R1,5 billion and weighted average trading
space increased by 31,1% during the year. With retail selling price inflation of
18,7%, caused by the growing contribution of furniture and other changes in
merchandise mix, comparable sales were 9,4% higher. Building on the success of
the ultra stores (>2 500 square metres) in the prior year, the division opened
three super stores of 6 000 square metres each during the year, one in November
2006 and two in March 2007 and these stores are trading above targeted levels.
Sheet Street increased sales by 39% to R0,6 billion with weighted average
trading space increasing by 27,2%. Comparable sales were 12,0% higher with
retail selling price inflation of 5,4%. The number of units sold increased by
28,2%.
Mr Price Franchising opened a Mr Price test store in Lusaka, Zambia in October
2006 and in Maputo, Mozambique shortly after year end. The sales generated by
the Zambian store were well in excess of our expectations, placing the store
performance in the upper quartile had it been an owned Mr Price store. A further
eight franchise stores have been confirmed for opening in Africa in the new
financial year, with several other opportunities being explored in both Africa
and the Middle East.
FINANCE
The balance sheet remains strong with cash resources of R570,9 million. These
resources and future cash flows will allow the group to continue its expansion
programme and capital expenditure of approximately R1,5 billion is planned to be
invested in new stores, expansions, revamps and new concepts over the next five
years.
During the year the group completed the roll-out of credit to the former cash
divisions. Despite the debtors book growing to R450 million, cash sales as a
percentage of total sales has only dropped marginally from 89% to 84% and the
group is expected to remain a predominantly cash retailer. Bad debt less
recoveries amounted to 2,3% of credit sales or 5,1% of the debtors book, with an
impairment provision of 7,8% of the debtors book at year end.
PROSPECTS
Prospects for the coming year are positive and another year of earnings growth
is anticipated. The group has set revised five year targets of R15 billion
revenue and an operating margin in excess of 12%. The revenue targets are
planned to be achieved via a mix of expanded and new stores, as well as new
concepts, two of which are expected to be launched over the next two years.
On behalf of the board
S B Cohen - Joint chairman
L J Chiappini - Joint chairman Durban
A E McArthur - Chief executive officer 31 May 2007
DECLARATION OF CASH DISTRIBUTION
The directors have proposed a cash distribution to shareholders of 70,6 cents
per ordinary and unlisted B ordinary share, in lieu of a final dividend for the
year ended 31 March 2007, by way of a reduction of the share premium account
(`the distribution`). The distribution is in terms of the general authority
granted to directors at the annual general meeting held on 27 July 2006.
The following dates are applicable:
Last date to trade `cum` the distribution Friday 22 June 2007
Shares trade `ex` the distribution Monday 25 June 2007
Record date Friday 29 June 2007
Payment to shareholders on Monday 2 July 2007
Shareholders may not dematerialise or rematerialise their share certificates
between Monday 25 June 2007 and Friday 29 June 2007, both dates inclusive.
On behalf of the board Durban
C S Yuill - Group secretary 31 May 2007
DIRECTORS
L J Chiappini* (Joint chairman), S B Cohen* (Joint chairman), A E McArthur
(Chief executive officer), S A Ellis (Joint managing director), S van Niekerk
(Joint managing director), M M Blair, K Getz*, C Hultzer*, M R Johnston*, Prof.
L J Ring* (USA), W J Swain*, C S Yuill
*Non-executive director
TRANSFER SECRETARIES
Computershare Investor Services 2004 (Pty) Ltd
SPONSOR
Rand Merchant Bank (a division of FirstRand Bank Limited)
Consolidated Income Statement
2007 2006
March March %
R`000 52 weeks 53 weeks change
Revenue 6 225 595 5 302 880 17
Continuing operations 6 154 963 5 066 681 21
Discontinued operations - 170 850
Finance income 70 632 65 349 8
Continuing operations
Retail sales 6 056 757 5 007 591 21
Other income 98 206 59 090 66
Total revenue 6 154 963 5 066 681 21
Costs and expenses 5 542 311 4 532 616 22
Cost of sales 3 632 203 2 991 146 21
Selling expenses 1 472 949 1 170 475 26
Administrative and other operating
Expenses 437 159 370 995 18
Profit from operating activities 612 652 534 065 15
Net finance income 32 806 31 087 6
Profit after net finance income 645 458 565 152 14
Net amortised cost adjustment of
contributions to export partnerships 26 706 15 201 76
Profit before taxation 672 164 580 353 16
Taxation 193 050 193 489 -
Profit from continuing operations 479 114 386 864 24
Discontinued operations
Profit from operating activities - 8 350
Profit arising from discontinuance 33 1 376
Net finance income/(costs) 37 (98)
Profit before taxation 70 9 628
Taxation 20 4 022
Profit from discontinued operations 50 5 606
Total group
Profit attributable to shareholders 479 164 392 470 22
Weighted average number of shares in
issue (net of shares held by staff
share trust) (000) 250 553 245 697 2
Earnings per share (cents)
(52 weeks on 53 weeks)
- basic 191,2 159,7 20
- headline 191,8 161,7 19
- diluted basic 183,0 152,8 20
- diluted headline 183,6 154,7 19
(52 weeks on 52 weeks)
- basic 191,2 149,3 28
- headline 191,8 151,3 27
- diluted basic 183,0 142,8 28
- diluted headline 183,6 144,7 27
Distribution cover (times) 1,9 2,0
Distributions per share (cents) 101,0 81,0 25
Statement of changes in equity
2007 2006
R`000 March March
Total equity attributable to shareholders at
1 April 1 025 647 770 951
Shares issued 14 279 30 856
Recognition of share-based payments 9 432 6 776
Currency translation adjustments (368) (3 897)
Profit for the year 479 164 392 470
Transfer to insurance reserve (2 142)
Increase in insurance reserve 2 142
Defined benefit fund net actuarial gain 4 969
Distributions to shareholders (216 315) (171 509)
Total equity attributable to shareholders 1 316 808 1 025 647
Consolidated Balance Sheet
2007 2006
R`000 March March
Assets
Non-current assets 712 485 570 810
Property, plant and equipment 464 082 344 007
Intangible assets 5 335 6 137
Long-term receivables and prepayments 216 161 216 096
Defined benefit fund asset 24 045
Deferred taxation assets 2 862 4 570
Current assets 1 781 177 1 456 029
Inventories 741 229 535 467
Trade and other receivables 469 003 296 039
Cash and cash equivalents 570 945 624 523
Total assets 2 493 662 2 026 839
Equity and liabilities
Equity attributable to shareholders 1 316 808 1 025 647
Non-current liabilities 231 263 280 340
Lease obligations 112 663 101 673
Deferred taxation liabilities 110 784 171 554
Post retirement medical benefits 7 816 7 113
Current liabilities 945 591 720 852
Trade and other payables 821 139 550 904
Current portion of lease obligations 20 215 16 347
Taxation 104 237 153 601
Total equity and liabilities 2 493 662 2 026 839
Segmental reporting
Business segments
The group`s retail activities are organised into two divisions for operational
and management purposes.
2007 2006
March March %
R`000 52 weeks 53 weeks change
Revenue from continuing
and discontinued operations
Continuing operations 6 154 963 5 066 681 21
Apparel 4 039 248 3 431 000 18
Home 2 098 975 1 615 855 30
Central services 58 618 34 649
Eliminations (41 878) (14 823)
Discontinued operations - 170 850
Total 6 154 963 5 237 531 18
Profit from operating activities of
continuing and discontinued operations
Continuing operations 612 652 534 065 15
Apparel 505 551 442 031 14
Home 171 998 143 569 20
Central services (65 343) (53 960)
Other (1 891) (155)
Eliminations 2 337 2 580
Discontinued operations - 8 350
Total 612 652 542 415 13
Consolidated Cash Flow Statement
2007 2006
March March
R`000 52 weeks 53 weeks
Cash flows from operating activities
Operating profit before working capital changes 697 853 606 135
Working capital changes (98 551) (132 027)
Net interest received 92 168 65 427
Restraints of trade - (48 333)
Taxation paid (303 525) (162 284)
Net cash inflows from operating activities 387 945 328 918
Continuing operations 387 995 319 356
Discontinued operations (50) 9 562
Cash flows from investing activities
Net advances in respect of long-term receivables (8 044) (59 154)
Acquisition of subsidiary - (4 800)
Disposals of discontinued operations - 187 670
Additions to and replacement of intangible assets (3 824) (3 799)
Property, plant and equipment
- replacement (48 812) (106 708)
- additions (177 166) (61 056)
- proceeds on disposal 465 145
Net cash outflows from investing activities (237 381) (47 702)
Continuing operations (237 381) (231 455)
Discontinued operations - 183 753
Cash flows from financing activities
(continuing operations)
Proceeds from issue of share capital 14 279 30 856
Proceeds from disposal of investments by
staff share trust 303 726
Decrease in lease obligations (1 958) (6 550)
Distributions to shareholders (216 315) (171 509)
Net cash outflows from financing activities (203 691) (146 477)
Change in cash and cash equivalents (53 127) 134 739
Cash and cash equivalents at beginning of
the year 624 523 493 131
Exchange losses (451) (3 347)
Cash and cash equivalents at end of the year 570 945 624 523
Supplementary information
2007 2006
March March
Number of shares in issue (000)
(net of shares held by staff share trust) 251 882 248 756
Net asset value per share (cents) 523 412
Reconciliation of headline earnings (R`000)
Attributable profit 479 164 392 470
Profit from discontinuance (33) (1 376)
Loss on disposal of property, plant and
equipment in continuing operations 2 102 3 187
Taxation adjustment (589) 3 098
Headline earnings 480 644 397 379
Capital expenditure
- expended during the year 229 802 171 563
- authorised or committed at year end 297 292 181 485
Notes:
1. The results have been audited by Ernst & Young Inc. A copy of their
unqualified audit report is available for inspection at the company`s registered
office.
2. There has been no material change to the guarantees provided by the company
as disclosed in the 2006 annual financial statements.
3. The accounting policies and estimates applied are in compliance with IFRS
and are consistent with those applied in the 2006 annual financial statements,
except for:
* the adoption of the revised IAS 39 Financial Instruments : Recognition and
Measurement in respect of financial guarantee contracts;
* the change in accounting policy in respect of the treatment of actuarial
gains and losses arising from the group`s defined benefit fund in terms of IAS
19 Employee Benefits; and
* the change in estimate relating to the amortisation period of restraint of
trade payments made in the prior year.
The net impact of these changes on profit for the year was not material.
This report and the supporting presentation are available on our website:
www.mrpricegroup.com
Date: 31/05/2007 08:00:03 Produced by the JSE SENS Department.
