| Fri 1 Jun 2007, 15:22 | | MPC-Mr Price Group Limited- Press Release - Posts |
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MPC
MPC
MPC-Mr Price Group Limited- Press Release - Posts Strong Results At The Year End
MR PRICE GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1933/004418/06)
ISIN: ZAE000026951
JSE share code: MPC
Comparable results show headline earnings +27%; Sales +24% to R6-billion;
dividend +25%
(Cape Town, 31 May 2007) Value retailer Mr Price today announced strong trading
results for the 52 weeks ending 31 March 2007.
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 were up by 27%. To aid comparison and assess
true performance in commenting on its results, the group has used the comparable
figures which compare an equal number of weeks in each year.
During the year, the group launched its new sport operation Mr Price Sport and
established Mr Price Franchising to cater for its African and Middle East
expansion.
All the established chains showed strong gains in sales and profitability. CEO
Alastair McArthur said: "It was a good trading year. We were coming off a high
base in the previous year and higher interest rates had started to impact
spending, although less so for cash retailers."
Sales for the group grew 24% to a record R6-billion with comparable store sales
growing by 11.6%. The distribution for the year exceeded 100 cents for the
first time at 101 cents with cover at 1.9 times. This represented an increase of
25% on last year`s 81 cents and the compound annual growth in distribution to
shareholders over the last 5 years has been 42%.
The operating margin was maintained above 10% despite several investments for
the future which resulted in costs that inhibited operating margin growth.
"Our strategy is to make investments and decisions which might impact short-term
profitability but in the longer term are good for the business. Establishment of
the sport and franchising divisions and the introduction of Voice Over Internet
Protocol (VOIP) are typical examples. If we simply focus on short-term
performance we will limit the long-term potential of the company.
The global retail stage is littered with the wrecks of retail organisations who
failed to innovate and update their retail concepts. In a retail market that is
changing more rapidly than ever before, we cannot afford short-term thinking.
Our focus is to maintain the 23% compound annual growth in earnings achieved
over the past 21 years."
The apparel chains, (Mr Price, Mr Price Sport and Milady`s) grew sales by 20%
and operating profits by 22%. In the home chains (Mr Price Home and Sheet
Street) sales were up 32% with operating profits up 29%.
The group has continued with its expansion programme, growing space by 19% to
378 000 square meters and increasing the number of stores from 761 to 829.
Mr Price grew sales by 19% to R3.1-billion with comparable sales up 14.7%,
showing strong improvements in profitability. The chain launched a new store
design concept which will be rapidly rolled-out to further stores.
Mr Price Home grew sales by 30% to R1.5-billion, with comparable sales up 9.4%.
Three new superstores of 6 000 sqm each were opened during the past year with
considerable success. The larger stores allow fuller assortments of furniture
to be displayed and all are trading well above targeted levels.
Miladys` sales were 12.8% higher at R0.9-billion with comparable sales up 4.5%
following further price deflation. Additional stores were revamped bringing to
60% the number of stores that have already been given the new look.
Sheet Street grew sales by 39% to R0.6 billion with comparable sales of 12%. 43
new stores were opened to bring the total number of stores in the chain to 196.
A major event in the year was the launch of the new Mr Price Sport concept,
which received a very favourable response from customers. Following the launch
of two test stores in August and September last year, a further six stores were
opened by year end. Store sizes average 1 500 sqm. Sales of R63-million were
generated in this short period.
Marketing authentic sports apparel and equipment under both private and
international brands, the chain has carved a value niche in this sector of the
market with densities and store profitability above anticipated levels.
Additional stores will be opened to cover total overheads and achieve critical
mass.
Another important development was the launch of the Mr Price Franchising
division. After several years of research, the first franchise store opened in
Lusaka, Zambia to an enthusiastic response. A further franchise store was
successfully opened in Maputo, Mozambique in early May 2007.
"We see franchise stores as a further growth opportunity for the group. Our
franchise model is a low-cost, low-risk one in which goods and fixtures are paid
for upfront or bank guaranteed. We will be concluding further franchises in a
number of African countries in the course of the coming year and are looking at
opportunities in other countries.
The balance sheet remains strong with cash resources of R571-million. These
resources and future cash flows will allow the group to continue their expansion
programme, and approximately R1.5-billion of capex is planned to be invested in
new store expansions, revamps and new concepts over the next five years.
While the debtors book grew to R450-million following the completed roll-out of
credit in the former cash divisions, cash sales as a percentage of total sales
dropped only marginally from 89% to 84%, and the group is expected to remain a
predominantly cash retailer in the years ahead. Net bad debt amounted to 2.3%
of credit sales and is adequately provided for.
Looking ahead, the group expects the coming year to be a positive one with
another year of earnings growth. The group has revised its five year targets to
R15-billion in revenue with an operating margin in excess of 12%. These targets
are planned to be achieved by 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.
Improvements in margin were also expected through the groups enhanced supply
chain initiatives.
"The group is at a very interesting stage in its development. Our more
established apparel chains like Mr Price and Milady`s are achieving double-digit
margins, while our newer businesses like Mr Price Home, Sheet Street and Mr
Price Sport are getting there. We believe that there is still a lot of margin
potential waiting to be reaped as these young businesses start reaching critical
mass."
He said the group would continue with its successful space expansion strategy
and would double its trading over the next five years
"These and other initiatives like superstores, sport and franchising, have
encouraged us to lift our sales and profit horizons," said McArthur.
ENDS
For further information, please contact Tamra Veley on 083 251 3658 or Dominique
van Onselen on 082 802 8184.
Date: 01/06/2007 15:22:00 Produced by the JSE SENS Department.
