| Wed 14 Nov 2007, 8:00 | | MPC - Mr Price Group - Unaudited Group Results For |
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MPC
MPC
MPC - Mr Price Group - Unaudited Group Results For The Six Months
To 30 September 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
UNAUDITED GROUP RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 2007
COMMENTARY
RESULTS
Retail sales for the six months ended September 2007 grew by 22,1% to R3,3
billion. Comparable sales, which include sales of expanded and relocated stores
in like-for-like locations, grew by 11,3%.
The buoyant economic environment that has been enjoyed by retailers in recent
years has been curtailed by the following factors:
- seven interest rate increases within the last eighteen months, resulting in
the prime lending rate increasing by 33,3% from 10,5% to 14,0%;
- the effects of the introduction of the National Credit Act in June 2007 on
consumers; and
- the general cost of living increases which are reflected by food inflation
in excess of 11,0% and an increasing fuel price.
These factors led to a slowdown in sales growth from June onwards.
Operating profit prior to net finance income and amortised cost adjustments
relating to contributions to export partnerships increased by 25,2% to R261,3
million and the operating margin increased from 7,8% to 8,0% of retail sales.
Headline earnings per share rose by 20,2% to 81,6 cents per share.
The interim distribution has been set at 36,5 cents per share which reflects an
increase of 20,1% over the comparable period. The interim distribution cover has
been maintained at 2,2 times.
TRADING
The trading results for the group are reported in two main segments, Apparel and
Home.
The Apparel chains (Mr Price, Mr Price Sport and Miladys) grew sales by 23,8% to
R2,2 billion, with retail selling price inflation of 10,8% and increased
operating profits by 46,9% to R269,3 million. The operating margin increased
from 10,4% to 12,3% of sales, driven mainly by the excellent performance across
all departments of the Mr Price division.
Sales in the Home chains (Mr Price Home and Sheet Street), which constitute a
third of group sales, were 17,1% higher at R1,1 billion with retail selling
price inflation of 15,3%. Consumers, especially those with home loans, reduced
their spending on home products as their disposable income decreased.
Operating profits of R35,4 million were 42,3% lower and the operating margin
decreased from 6,7% to 3,3% of sales. Profit margins were impacted by abnormal
charges of R27,4 million relating to start up losses in the recently established
furniture operation and a new business concept, a change in the basis of
allocating carriage and distribution centre costs to divisions and the
duplication of communication charges whilst in a transition phase to VOIP. Had
these additional charges not been incurred, the operating margin would have been
6,0%.
The Mr Price chain grew sales by 22,7% to R1,7 billion with weighted average
trading space growing by 6,8%. Comparable sales were 21,1% higher with retail
selling price inflation of 12,4% as a result of the mix of more fashionable
goods at higher prices. The division sold 9,4% more units than in the comparable
period. Excellent fashion interpretations resulted in a strong trading
performance across all departments, resulting in lower markdowns and enhanced
profitability.
Mr Price Sport opened a further four stores during the period, bringing the
total operated to twelve. Sales of R82,3 million were generated off a weighted
average trading space of 14 845 square metres. A further eleven stores are
planned to open prior to Christmas and the division is expected to reach
critical mass soon, which will enable the costs of the full infrastructure to be
recovered.
Miladys sales were 10,0% higher at R446,1 million, with a growth in weighted
average trading space of 8,9% and comparable sales growth of 4,8%. The division
experienced retail selling price inflation of 3,6% and a 7,2% growth in units
sold. The store revamp programme continued in the current year and 60% of stores
now sport the new look.
A stand-alone Rene Taylor test store, which caters for the fuller-figured woman
has proved very successful and further such stores are planned.
Mr Price Home grew sales by 17,4% to R746,0 million and weighted average trading
space increased by 30,4%. Retail selling price inflation was 15,9%, caused by
the growing contribution of furniture. Comparable sales were 0,5% lower and
were, as expected, affected by the opening of large new generation stores in
close proximity to existing smaller stores. Unit sales were 1,9% higher.
Sheet Street increased sales by 16,4% to R324,5 million with weighted average
trading space increasing by 26,6%. Comparable sales were 0,2% higher, with
retail selling price inflation of 13,9% caused by changes in merchandise mix.
The number of units sold increased by 2,1%.
The two Mr Price test stores opened by the Franchise Division in Maputo,
Mozambique and Lusaka, Zambia have continued to trade ahead of expectation. In
addition to opening further Mr Price franchise stores, the group plans to test
Mr Price Home and Sheet Street franchise stores in other Southern African
countries during this financial year.
FINANCE
The balance sheet remains strong with cash resources of R503,0 million. These
resources and future cash flows will allow the group to continue its expansion
programme and approximately R1,5 billion is planned to be invested over the next
five years in new stores, store expansions and new concepts.
The group opened a net 60 new stores totalling 65 302 square metres over the
last 12 months, increasing the weighted average trading space by 19,2%. In
addition, a further 1 354 jobs have been created and the group now employs 12
840 permanent and casual employees.
The debtors book has grown from R450,2 million at the previous year end to
R518,9 million, an increase of 15,3%. The ratio of cash sales has been
maintained at 86%. With the introduction of credit into the former cash chains,
net bad debt, which includes the costs of recovery, increased from 2,3% of
credit sales at the previous year end to 5,1%. The debtors book is adequately
provided for at period end.
PROSPECTS
It is anticipated that the effects of the economic factors referred to above
have not yet fully impacted consumers. This, coupled with the high base set by
the excellent 2006 December trading, will result in a challenging retail
environment, especially in the home stores, which at this stage have been more
affected.
Our primarily cash value retailing model and limited exposure to retail credit
should result in the group being able to weather the slower growth in consumer
spending better than most and we continue to expect a real growth in earnings
for the year.
Notwithstanding the change in market trading conditions, the group remains
committed to its growth strategies of increasing space and developing new
concepts.
For and on behalf of the board
S B Cohen - Joint non-executive chairman
L J Chiappini - Joint non-executive chairman
A E McArthur - Chief executive officer
Durban 14 November 2007
DIVIDEND DECLARATION AND CAPITAL REDUCTION OUT OF SHARE PREMIUM
Notice is hereby given that an interim cash dividend of 23,0 cents per share and
a capital reduction out of share premium of 13,5 cents per share, in lieu of a
dividend, (collectively `the distribution`), has been awarded to the holders of
ordinary and unlisted B ordinary shares. The total value to be distributed to
shareholders amounts to 36,5 cents per share. The capital reduction out of share
premium is in terms of the general authority granted to directors at the annual
general meeting held on 31 August 2007.
The following dates are applicable:
Last date to trade `cum` the
distribution Friday 30 November 2007
Date trading commences `ex` the
distribution Monday 3 December 2007
Record date Friday 7 December 2007
Date of payment Monday 10 December 2007
Shareholders may not dematerialise or rematerialise their share certificates
between Monday 3 December 2007 and Friday 7 December 2007, both dates inclusive.
On behalf of the board Durban
C S Yuill - Group secretary 14 November 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*, W R Jardine*, M R Johnston*, N G
Payne*, Prof. L J Ring* (USA), M J D Ruck*, W J Swain*, C S Yuill.
*Non-executive director
TRANSFER SECRETARIES SPONSOR
Computershare Investor Rand Merchant Bank (a division of
Services 2004 (Pty) Ltd FirstRand Bank Limited)
HIGHLIGHTS
RETAIL SALES UP 22% TO R3,3 BILLION
OPERATING PROFIT UP 25% TO R261 MILLION
HEADLINE EARNINGS PER SHARE UP 20%
DISTRIBUTION PER SHARE INCREASED BY 20%
Consolidated Income Statement
2007 2006 2007
September September % March
R`000 26 weeks 26 weeks change 52 weeks
Revenue and finance
income 3 372 849 2 755 819 22 6 225 595
Retail sales and
other income 3 338 782 2 720 043 23 6 154 963
Finance income 34 067 35 776 (5) 70 632
Retail sales 3 271 293 2 679 021 22 6 056 757
Other income 67 489 41 022 65 98 206
Total revenue 3 338 782 2 720 043 23 6 154 963
Costs and expenses 3 077 451 2 511 346 23 5 542 278
Cost of sales 1 968 373 1 610 828 22 3 632 203
Selling expenses 844 116 664 854 27 1 472 949
Administrative and other
operating expenses 264 962 235 664 12 437 126
Profit from operating
activities 261 331 208 697 25 612 685
Net finance income 12 649 16 879 (25) 32 843
Profit after net
finance income 273 980 225 576 21 645 528
Net amortised cost
adjustment of
contributions to
export partnerships 17 594 14 877 18 26 706
Profit before taxation 291 574 240 453 21 672 234
Taxation 86 097 71 541 20 193 070
Profit attributable to
Shareholders 205 477 168 912 22 479 164
Weighted average number
of shares in issue (net
of shares held by staff
share trusts) (000) 253 336 249 860 1 250 553
Earnings per share (cents)
- basic 81,1 67,6 20 191,2
- headline 81,6 67,9 20 191,8
- diluted basic 77,1 65,2 18 183,0
- diluted headline 77,5 65,4 19 183,6
Distributions per share
(cents) 36,5 30,4 20 101,0
Distribution cover (times) 2,2 2,2 - 1,9
Consolidated Balance Sheet
2007 2006 2007
R`000 September September March
Assets
Non-current assets 771 077 657 282 712 485
Property, plant and equipment 503 515 398 812 464 082
Intangible assets 12 898 6 721 5 335
Long-term receivables and
prepayments 228 162 228 757 216 161
Defined benefit fund asset 24 045 19 698 24 045
Deferred taxation assets 2 457 3 294 2 862
Current assets 1 865 312 1 534 030 1 781 177
Inventories 832 417 695 388 741 229
Trade and other receivables 517 995 396 594 469 003
Taxation 11 875 - -
Cash and cash equivalents 503 025 442 048 570 945
Total assets 2 636 389 2 191 312 2 493 662
Equity and liabilities
Equity attributable to
shareholders 1 379 574 1 086 279 1 316 808
Non-current liabilities 235 948 257 870 231 263
Lease obligations 115 827 106 610 112 663
Deferred taxation liabilities 111 893 143 797 110 784
Post retirement medical
benefits 8 228 7 463 7 816
Current liabilities 1 020 867 847 163 945 591
Trade and other payables 1 001 081 737 099 821 139
Current portion of lease
obligations 19 786 19 751 20 215
Taxation - 90 313 104 237
Total equity and
Liabilities 2 636 389 2 191 312 2 493 662
Consolidated Cash Flow Statement
2007 2006 2007
September September March
R`000 26 weeks 26 weeks 52 weeks
Cash flows from operating activities
Operating profit before
working capital changes 301 695 256 543 697 853
Working capital changes 38 247 (77 609) (98 551)
Net interest received 60 989 41 833 92 168
Taxation paid (187 413) (161 310) (303 525)
Net cash inflows from
operating activities 213 518 59 457 387 945
Cash flows from investing activities
Net receipts/(advances) in respect
of long-term receivables 1 691 (2 347) (8 044)
Additions to and replacement
of intangible assets (9 894) (2 963) (3 824)
Property, plant and equipment
- replacement (32 559) (38 899) (48 812)
- additions (72 361) (65 059) (177 166)
- proceeds on disposal 1 138 20 465
Net cash outflows from
investing activities (111 985) (109 248) (237 381)
Cash flows from financing activities
Proceeds from issue of
share capital 13 911 8 372 14 279
Proceeds from disposal of
investments by staff
share trust 58 93 303
Decrease in lease obligations (1 506) (901) (1 958)
Distributions to
Shareholders (181 062) (140 515) (216 315)
Net cash outflows from
financing activities (168 599) (132 951) (203 691)
Change in cash and cash
equivalents (67 066) (182 742) (53 127)
Cash and cash equivalents at
beginning of the period 570 945 624 523 624 523
Exchange (losses)/gains (854) 267 (451)
Cash and cash equivalents at
end of the period 503 025 442 048 570 945
Segmental reporting
Business segments
The group`s retail activities are organised into two divisions for operational
and management purposes.
2007 2006 2007
September September % March
R`000 26 weeks 26 weeks change 52 weeks
Revenue
Apparel 2 244 866 1 791 207 25 4 039 248
Home 1 084 385 918 670 18 2 098 975
Central services 19 059 17 367 58 618
Eliminations (9 528) (7 201) (41 878)
Total 3 338 782 2 720 043 23 6 154 963
Profit from operating activities
Apparel 269 280 183 341 47 505 551
Home 35 419 61 333 (42) 171 998
Central services (44 408) (37 201) (65 310)
Other - (9) (1 891)
Eliminations 1 040 1 233 2 337
Total 261 331 208 697 25 612 685
Statement of changes in equity
2007 2006 2007
R`000 September September March
Total equity attributable to
shareholders at 1 April 1 316 808 1 025 647 1 025 647
Shares issued 214 060 8 372 14 279
Treasury shares (200 149)
Taxation relating to
grants to share trusts 13 284
Recognition of share-based
payments 12 047 3 542 9 432
Currency translation
adjustments (891) 405 (368)
Profit for the period 205 477 168 912 479 164
Transfer to insurance
reserve (148) - (2 142)
Increase in insurance reserve 148 218 2 142
Defined benefit fund net
actuarial gain - 19 698 4 969
Distributions to
Shareholders (181 062) (140 515) (216 315)
Total equity attributable
to shareholders 1 379 574 1 086 279 1 316 808
Supplementary information
2007 2006 2007
September September March
Number of shares in issue
(net of shares held by
staff share trusts) (000) 254 850 250 720 251 882
Net asset value per
share (cents) 541 433 523
Reconciliation of headline
earnings (R`000)
Attributable profit 205 477 168 912 479 164
Loss/(profit) from
discontinuance 3 10 (33)
Loss on disposal of property,
plant and equipment 1 632 884 2 102
Taxation adjustment (473) (256) (589)
Headline earnings 206 639 169 550 480 644
Capital expenditure (R`000)
expended during the
period 114 814 106 921 229 802
authorised or committed
at period end 263 813 140 879 297 292
Number of stores 859 799 829
Number of employees 12 840 11 486 12 624
Notes:
The September results are unaudited. The results at March 2007 were audited by
Ernst & Young.
The accounting policies applied are in compliance with International Financial
Reporting Standards and IAS 34 Interim Financial Reporting and are consistent
with those applied in the 2007 annual financial statements.
There has been no material change to the guarantees provided by the company as
disclosed in the 2007 annual financial statements.
This report and supporting presentation are available on our website:
www.mrpricegroup.com
Date: 14/11/2007 08:00:01 Produced by the JSE SENS Department.
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