| Wed 28 May 2008, 8:00 | | MPC - Mr Price Group Limited - Audited group results for the year ended 31 March |
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MPC
MPC
MPC - Mr Price Group Limited - Audited group results for the year ended 31 March
2008 and cash 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 THE YEAR ENDED 31 MARCH 2008 AND CASH DIVIDEND
DECLARATION
Highlights
Retail sales up 19%
Operating profit up 17%
67 new stores opened
Diluted headline earnings per share up 15%
Distributions per share increased by 15%
Return on equity 40%
Commentary
RESULTS
The buoyant economic environment that has been enjoyed by retailers in recent
years has ended. In the second half of the year, increases in interest rates,
food and fuel prices as well as property rates, all led to decreased spending,
particularly on durable and semi-durable products. Despite this, group profit
from operating activities increased by 16,9% to R716,2 million.
The group`s operating margin decreased from 10,1% to 9,9% as a result of the
impact of the abovementioned changes in the economic environment on the
homewares divisions. Further growth in operating margin was inhibited by the
investments made in the new businesses of Kids, Furniture, Sport and
Franchising. If the impact of these new concepts is excluded in both years, the
operating margin would have been 11,6% in the current year. These new
investments are important for the group`s future growth in order to maintain its
compound annual growth rate in headline earnings per share of 23% over the past
22 years.
The group achieved a return on equity of 39,6% and diluted headline earnings per
share increased by 14,8% to 210,8 cents per share.
Independent market research conducted during the year confirmed that Mr Price is
now the most loved and most frequented clothing retailer in South Africa. Mr
Price Home was voted the most loved homewares retailer. This supported the
market share statistics supplied by the Retailers Liaison Committee which
highlighted that both the Apparel and Home divisions continued to increase their
market share during these difficult times.
The final dividend has been set at 79,5 cents per share which brings the total
distribution for the year to 116,0 cents per share, maintaining our cover at 1,9
times.
TRADING
The Apparel division (Mr Price, Miladys and Mr Price Sport) delivered excellent
results, growing sales by 21,8% with retail selling price inflation of 10,6%.
The operating margin improved from 12,7% to 13,8% of sales.
Mr Price grew sales by 19,7% to R3,7 billion with an increase in weighted
average trading space of 6,5%. Comparable sales were 16,2% higher, with retail
selling price inflation of 11,6%. Inflation was driven by changes in the mix of
goods sold, with increases in sales of higher price point units such as pants
and jackets. The division sold 6,7% more units than in the prior year. Once
again, excellent fashion interpretations led to a strong performance across all
departments. In addition the opening of eight new `express` stores, a concept
which enables Mr Price to enter trading areas not previously considered through
lower operating, capital expenditure and rental costs, has proved very
successful. The margins achieved are similar to the existing business and
significant growth in the number of these stores is expected. This, together
with the benefits realised through the implementation of Project Redgold on
merchandise processes and systems, has resulted in lower markdowns and another
year of enhanced profitability.
Miladys has once again produced a solid set of trading results. Sales were
10,2% higher at R945 million, with comparable sales growing 4,7%. The division
opened 12 stores and grew weighted average trading space by 8,9%. Unit sales
growth was 5,7% and the division experienced retail selling price inflation of
4,7%. The stand-alone Rene Taylor stores opened during the course of the year
produced excellent trading results and the concept will be rolled out further in
the next financial year.
Mr Price Sport opened a further 15 stores. The division now operates out of 23
stores and is approaching critical mass. Sales of R240 million were achieved
from a weighted average trading space for the year of 22 396mSquared. Retail
selling price deflation of 0,7% was recorded and was mostly the result of
changes in selling price points to increase the division`s value proposition as
well as a reduction in the sale of higher ticket items brought about by
consumers` lower disposable incomes.
The Home division (Mr Price Home and Sheet Street) has been the most affected by
the changes in spending patterns and recorded an increase in sales of 13,5% with
retail selling price inflation of 12,4%. The operating margin was impacted by
the newer Furniture and Kids departments, the changes in the basis of allocation
of distribution costs and the duplicate charges incurred while transitioning to
a VOIP communication system and decreased from 8,2% to 5,0% of sales.
Mr Price Home grew sales by 12,9% to R1,6 billion with an increase in weighted
average trading space of 28,5%. Unit sales decreased by 0,3%, and retail selling
price inflation of 12,4% was recorded, mainly due to the increasing sales
contributions from the Furniture and Kids departments and the continued
influence of value packs. Comparable sales were 0,7% lower than the previous
year as a result of the impact of the opening of large new generation stores in
close proximity to existing smaller stores. In addition, the tightening of
consumer spending patterns on home products led to lower sales growth and higher
markdowns.
Sheet Street increased sales by 15,0% to R736 million, with comparable sales
growth of 0,7%. The division increased weighted average trading space by 22,6%
and opened 26 new stores. Unit sales increased by 1,6% and retail selling price
inflation of 12,6% was recorded, primarily as a consequence of changes to the
merchandise mix. Action taken to broaden the assortment to appeal to more
customer lifestyles, and to freshen the brand with a new store layout and wrap,
has resulted in an improved sales performance since the commencement of the 2008
calendar year.
The group opened a net 67 stores, bringing the total store number to 896 at year
end, and gross trading space surpassed the half a million square metres mark,
finishing the year on 517 547m2. Over the past year the group created nearly 700
jobs and is employing an increasing number through its Jump Start Project which
is targeted at unemployed matriculants.
Mr Price Franchising successfully opened six stores in three African countries,
across the Mr Price, Mr Price Home and Sheet Street brands, to bring the total
franchise stores to seven. Sales have far exceeded expectations, confirming our
view of franchising being an exciting growth opportunity. A further 15 franchise
stores are planned for the coming financial year, including a test of the Mr
Price Home brand in the Middle East.
FINANCE
The cash resources of R465,3 million, coupled with the cash flows attributable
to being a predominantly cash retailer, are expected to finance our future
growth plans.
At the introduction of the new share schemes last year, it was announced that
shares would be purchased by the share trusts, subject to market conditions. To
that end, shares to the value of R150,5 million were acquired by certain staff
share trusts during the second half of the year, in order to partially cover
options awarded. This had the effect of reducing finance income.
The debtor book increased by 20,5% to R542,3 million at year end. As a result
of consumers` tightening financial situations and the bulk of the book being
relatively immature following the rollout of credit last year, net bad debts
excluding collection costs has increased to 8,6% of debtors. The debtors
provision has been set at 9,0% of the debtors book at year end. Improved
collections, and not the growth of the debtors book, will be the focus in the
new financial year.
PROSPECTS
We are trading in difficult times, which are likely to get even tougher. Under
these economic circumstances, shoppers tend to shop for value and therefore, as
a value retailer, the group is well placed to attract more customers with our
fashionable products at everyday low prices.
The cash sales ratio has remained at 84% and therefore the group is not
dependent upon credit sales to grow its revenues. In addition, the Apparel
division contributes 67% of sales and 85% of profits and its excellent
performance has continued into the new year. Although exposed to the impact of
reduced semi-durable purchases, the Home division, which represents one third of
group sales, is responding to the changes in consumer spending by further
enhancing its value positioning.
The group is well placed to increase market share over the medium term and is
optimistic about achieving growth in earnings in the forthcoming year.
On behalf of the board
S B Cohen - Joint chairman
L J Chiappini - Joint chairman Durban
A E McArthur - Chief executive officer 28 May 2008
FINAL DIVIDEND DECLARATION
Notice is hereby given that a final cash dividend of 79,5 cents per share has
been awarded to the holders of ordinary and unlisted B ordinary shares.
The following dates are applicable:
Last date to trade `cum` the dividend Friday 20 June 2008
Date trading commences `ex` the dividend Monday 23 June 2008
Record date Friday 27 June 2008
Date of payment Monday 30 June 2008
Shareholders may not dematerialise or rematerialise their share certificates
between Monday 23 June 2008 and Friday 27 June 2008, both dates inclusive.
On behalf of the board Durban
C S Yuill - Group secretary 28 May 2008
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
Computershare Investor Services (Pty) Ltd
SPONSOR
Rand Merchant Bank (a division of FirstRand Bank Limited)
consolidated income statement
2008 2007 %
R`000 March March change
Revenue 7 421 124 6 225 595 19
Retail sales 7 203 640 6 056 757 19
Other income 146 176 98 206 49
Retail sales and other income 7 349 816 6 154 963 19
Costs and expenses 6 633 636 5 542 278 20
Cost of sales 4 364 432 3 632 203 20
Selling expenses 1 765 698 1 472 949 20
Administrative and other
operating expenses 503 506 437 126 15
Profit from operating
activities 716 180 612 685 17
Net finance income 23 096 32 843 (30)
Profit after net finance income 739 276 645 528 15
Net adjustment to
contributions to export
partnerships 30 255 26 706 13
Profit before taxation 769 531 672 234 14
Taxation 218 588 193 070 13
Profit attributable to
shareholders 550 943 479 164 15
Weighted average number of
shares in issue (net of
shares held by staff share
trusts) (000) 252 599 250 553 1
Earnings per share (cents)
- basic 218,1 191,2 14
- headline 219,0 191,8 14
- diluted basic 209,9 183,0 15
- diluted headline 210,8 183,6 15
Distribution cover (times) 1,9 1,9 -
Distributions per share (cents) 116,0 101,0 15
consolidated balance sheet
2008 2007
R`000 March March
Assets
Non-current assets 846 334 712 485
Property, plant and equipment 566 176 464 082
Intangible assets 25 471 5 335
Long-term receivables and prepayments 225 439 216 161
Defined benefit fund asset 28 632 24 045
Deferred taxation assets 616 2 862
Current assets 1 945 182 1 781 177
Inventories 909 094 741 229
Trade and other receivables 570 811 469 003
Cash and cash equivalents 465 277 570 945
Total assets 2 791 516 2 493 662
Equity and liabilities
Equity attributable to shareholders 1 479 331 1 316 808
Non-current liabilities 241 142 231 263
Lease obligations 125 846 112 663
Deferred taxation liabilities 106 686 110 784
Post retirement medical benefits 8 610 7 816
Current liabilities 1 071 043 945 591
Trade and other payables 1 034 118 821 139
Current portion of lease obligations 22 764 20 215
Taxation 14 161 104 237
Total equity and liabilities 2 791 516 2 493 662
consolidated cash flow statement
2008 2007
R`000 March March
Cash flows from operating activities
Operating profit before working capital
changes 800 311 697 853
Working capital changes (43 897) (98 551)
Net interest received 127 875 92 168
Restraints of trade (2 500) -
Taxation paid (303 015) (303 525)
Net cash inflows from operating
activities 578 774 387 945
Cash flows from investing activities
Net receipts/(advances) in respect of
long-term receivables 3 021 (8 044)
Additions to and replacement of
intangible assets (25 816) (3 824)
Property, plant and equipment
- replacement (66 807) (48 812)
- additions (167 341) (177 166)
- proceeds on disposal 1 923 465
Net cash outflows from investing
activities (255 020) (237 381)
Cash flows from financing activities
Proceeds from issue of share capital 13 911 14 279
Proceeds from disposal of investments
by staff share trust 117 303
Decrease in lease obligations (3 322) (1 958)
Purchase of shares by staff share trusts (150 468) -
Deficit on treasury share transactions (14 668) -
Distributions to shareholders (275 168) (216 315)
Net cash outflows from financing
activities (429 598) (203 691)
Change in cash and cash equivalents (105 844) (53 127)
Cash and cash equivalents at
beginning of the year 570 945 624 523
Exchange gains/(losses) 176 (451)
Cash and cash equivalents at end
of the year 465 277 570 945
statement of changes in equity
2008 2007
R`000 March March
Total equity attributable to
shareholders at 1 April 1 316 808 1 025 647
Shares issued 214 060 14 279
Treasury share transactions (357 296) -
Recognition of share-based payments 28 238 9 432
Currency translation adjustments 242 (368)
Profit for the year 550 943 479 164
Defined benefit fund net actuarial gain 1 504 4 969
Distributions to shareholders (275 168) (216 315)
Total equity attributable to
shareholders at 31 March 1 479 331 1 316 808
segmental reporting
Business segments
The group`s retail activities are organised into two divisions for operational
and management purposes.
2008 2007 %
R`000 March March change
Retail sales and other income
Apparel 4 943 547 4 039 248 22
Home 2 394 968 2 098 975 14
Central services 49 402 58 618
Eliminations (38 101) (41 878)
Total 7 349 816 6 154 963 19
Profit from operating
activities
Apparel 669 603 505 551 32
Home 117 853 171 998 (31)
Central services (73 255) (65 310)
Other - (1 891)
Eliminations 1 979 2 337
Total 716 180 612 685 17
supplementary information
2008 2007
R`000 March March
Number of shares in issue (net of shares
held by staff share trusts) (000) 247 332 251 882
Net asset value per share (cents) 598 523
Reconciliation of headline earnings (R`000)
Attributable profit 550 943 479 164
Profit from discontinuance (15) (33)
Loss on disposal of property, plant
and equipment 3 151 2 102
Taxation adjustment (914) (589)
Headline earnings 553 165 480 644
Capital expenditure
- expended during the year 259 964 229 802
- authorised or committed at year end 243 140 297 292
Number of stores 896 829
Number of full-time associates 9 794 9 106
Notes:
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.
There has been no material change to the guarantees provided by the company as
disclosed in the 2007 annual financial statements.
The accounting policies and estimates applied are in compliance with IFRS
including IAS 34 Interim Financial Reporting and are consistent with those
applied in the 2007 annual financial statements. All new and revised Standards
and Interpretations that became effective during the year were adopted and did
not lead to any changes in accounting policies.
This report and the supporting presentation are available on our website:
www.mrpricegroup.com
Date: 28/05/2008 08:00:01 Produced by the JSE SENS Department.
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