| Wed 12 Nov 2008, 10:29 | | MPC - Mr Price - Unaudited group results and interim cash dividend declaration |
|
MPC
MPC
MPC - Mr Price - Unaudited group results and interim cash dividend declaration
for the six months to 30 September 2008
MR PRICE GROUP LIMITED
Incorporated in the Republic of South Africa
Registration number 1933/004418/06
ISIN: ZAE000026951
JSE share code: MPC
("Mr Price" or "the company" or "the group")
UNAUDITED GROUP RESULTS AND INTERIM CASH DIVIDEND DECLARATION FOR THE SIX MONTHS
TO 30 SEPTEMBER 2008
Highlights
- Retail sales up 19%
- Operating profit up 15%
- Diluted headline earnings per share up 11%
- Further gains in market share recorded
Commentary
RESULTS
Retail sales for the six months ended September 2008 grew by 18,6% to R3,9
billion. Comparable sales, which include sales of expanded and relocated stores
in like-for-like locations, were up 8,9%. Profit from operating activities
increased by 14,9% and the operating margin decreased from 8,0% to 7,7% of
retail sales. Headline earnings per share, which grew by 8,1% and fully diluted
headline earnings per share, which increased by 11,0%, were impacted by the
following:
- The final dividend for the 2008 financial year, which was declared and paid
in the current period, incurred a Secondary Tax on Companies charge, whilst in
the comparable period the distribution from share premium did not. This resulted
in a 32,2% increase in taxation; and
Certain share trusts utilised company grants of R150,5 million to acquire shares
in the second half of the prior financial year to partially cover options
awarded. This resulted in a reduction in net finance income but also a lower
weighted average number of shares in issue.
These results should be evaluated in the light of the turbulent local and global
economic environments that we are currently experiencing. South African
consumers are cash-strapped as a result of increases in the costs of food, fuel,
debt servicing, healthcare and municipal rates. Consumer confidence is now well
below the 25 year average. The resulting financial pressures have dramatically
affected sales in the retail sector, which have been in a downward trend from
late 2006 and have seen a decrease in real terms since the beginning of the
calendar year. However, as a value retailer, Mr Price Group has been able to
withstand the effects of these headwinds better than most. The group has opened
66 new stores and has created in excess of 750 new jobs in the last 12 months.
The interim dividend has been set at 40,2 cents per share which reflects an
increase of 10,1% over the comparable period and is based on a maintained
interim cover of 2,2 times. The group intends to maintain its cover of 1,9 times
at year end.
TRADING
The trading results for the group are reported in two main segments, Apparel and
Home.
The Apparel chains (Mr Price, Miladys and Mr Price Sport), which constitute
68,4% of group sales, grew sales by 21,0% to R2,7 billion, with retail selling
price inflation of 4,1%. Operating profits increased by 20,1% to R323,4 million
and the operating margin of 12,2% was comparable with the prior period.
Mr Price grew sales by 19,3% to R2,0 billion on an increase in weighted average
trading space of 5,8%. Comparable sales were 15,3% higher and the division
recorded retail selling price inflation of 5,0%. Once again, excellent fashion
interpretations and the fashion-value appeal resulted in the division achieving
growth in market share as measured by the Retailers Liaison Committee (RLC). The
number of units sold exceeded 40 million, representing an increase of 12,4%.
Independent market research conducted in July 2008 confirmed that Mr Price
continues to be the most loved apparel retailer and most frequented clothing
chain.
Miladys increased sales by 12,4% to R0,5 billion, with a growth in weighted
average trading space of 9,0% and comparable sales growth of 7,0%. The division
experienced retail selling price inflation of 1,7% and a 10,7% growth in the
number of units sold. As a result of the success of the three stand-alone Rene
Taylor stores, the division plans to open a further six such stores by year end.
Mr Price Sport opened six stores, bringing the total stores operated by the
division to 29. Sales of R165,3 million were generated off a weighted average
trading space of 37 888 m2.
Sales in the Home chains (Mr Price Home and Sheet Street), which constitute
31,6% of group sales, were up 14,2% to R1,2 billion and retail selling price
inflation of 3,7% was recorded. This segment has been the most affected by the
reduction in consumer spend on semi-durable products, however both chains
continued to gain market share. Higher markdowns and carriage costs, coupled
with slower trading in homewares resulted in operating profits being 35,3% lower
at R22,9 million.
Mr Price Home grew sales by 14,6% to R0,9 billion and weighted average trading
space increased by 30,1%. Retail selling price inflation of 2,5% was recorded
and comparable sales were 1,6% lower. Unit sales were 4,4% higher. Initiatives
are in place to improve profitability.
Sheet Street increased sales by 13,4% to R0,4 billion, with weighted average
trading space increasing by 14,3%. Comparable sales were 3,4% higher with retail
selling price inflation of 6,5%. The number of units sold increased by 6,0%. The
new store layout and wrap is proving very successful and a phased rollout is
underway.
Mr Price Franchising opened an additional seven stores in the Mr Price and Mr
Price Home formats, bringing the total to 14.
FINANCE
The balance sheet remains strong with cash resources of R365,5 million. Our
business model, which generates strong cash flows (84,1% of sales in the current
period were for cash) will finance our future growth.
The debtors book has grown from R542,3 million at the previous year end to
R609,6 million, an increase of 12,4%. The group is reaping the rewards of the
focus placed on collections and the strategic decision taken to grant credit
cautiously to customers of the former cash chains. Despite the economic
hardships being experienced by consumers and the relative immaturity of the
debtors book, bad debts net of recoveries (excluding collection costs) have
decreased from 8,6% of debtors balances at year end to 7,1%. The book remains
adequately provided for at the end of the reporting period.
Inventories have been well managed, increasing by 12,0% relative to an increase
in retail sales of 18,6%. The group improved its stock turn from 5,2 times to
5,4 times during the difficult trading conditions.
PROSPECTS
It is uncertain as to when the economic threats will abate and consumer
confidence will be revived. In the meantime, the Mr Price Group will continue to
enhance its value proposition to customers.
The second half will continue to be a challenging trading period. However as a
value retailer, the group is well placed to gain further market share with our
fashionable products at everyday low prices. Growth in earnings for the year
should be achieved, provided there is no further deterioration in spending
patterns.
On behalf of the board
SB Cohen - Joint chairman
LJ Chiappini - Joint chairman Durban
AE McArthur - Chief executive officer 12 November 2008
INTERIM CASH DIVIDEND DECLARATION
Notice is hereby given that an interim cash dividend of 40,2 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` dividend Friday 28 November 2008
Date trading commences `ex` dividend Monday 1 December 2008
Record date Friday 5 December 2008
Date of payment Monday 8 December 2008
Shareholders may not dematerialise or rematerialise their share certificates
between Monday 1 December 2008 and Friday 5 December 2008, both dates inclusive.
On behalf of the board Durban
CS Yuill - Group secretary 12 November 2008
DIRECTORS
WR Jardine resigned from the board with effect from 29 August 2008. On 1
September 2008 SI Bird, RM Motanyane, SEN Sebotsa and M Tembe were appointed to
the board and AE McArthur was appointed Deputy chairman while retaining his
position as Chief executive officer.
LJ Chiappini* (Joint chairman), SB Cohen* (Joint chairman),
AE McArthur (Deputy chairman and Chief executive officer),
SA Ellis (Joint managing director), S van Niekerk (Joint managing
director), MM Blair (Chief financial officer), SI Bird, K Getz*,
MR Johnston*, RM Motanyane*, NG Payne*, Prof. LJ Ring* (USA),
MJD Ruck*, SEN Sebotsa*, WJ Swain*, M Tembe*, CS 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 2008
September September % March
R`000 26 weeks 26 weeks change 52 weeks
Revenue 4 000 252 3 372 849 19 7 421 124
Retail sales 3 879 423 3 271 293 19 7 203 640
Other income 90 652 67 489 34 146 176
Retail sales and
other income 3 970 075 3 338 782 19 7 349 816
Costs and expenses 3 669 691 3 077 451 19 6 633 636
Cost of sales 2 380 291 1 968 373 21 4 364 432
Selling expenses 992 276 844 116 18 1 765 698
Administrative and
other operating
expenses 297 124 264 962 12 503 506
Profit from operating
activities 300 384 261 331 15 716 180
Net finance income 10 102 12 649 (20) 23 096
Profit after net
finance income 310 486 273 980 13 739 276
Net adjustment to
contributions to
export partnerships 19 629 17 594 12 30 255
Profit before taxation 330 115 291 574 13 769 531
Taxation 113 836 86 097 32 218 588
Profit attributable
to shareholders 216 279 205 477 5 550 943
Weighted average number
of shares in issue
(net of shares held
by staff share trusts)
(000) 247 299 253 336 (2) 252 599
Earnings per share (cents)
- basic 87,5 81,1 8 218,1
- headline 88,2 81,6 8 219,0
- diluted basic 85,3 77,1 11 209,9
- diluted headline 86,0 77,5 11 210,8
Distribution cover (times) 2,2 2,2 - 1,9
Distributions per
share (cents) 40,2 36,5 10 116,0
segmental reporting
Business segments
The group`s retail activities are organised into two divisions for operational
and management purposes.
2008 2007 2008
September September % March
R`000 26 weeks 26 weeks change 52 weeks
Retail sales and
other income
Apparel 2 725 234 2 244 866 21 4 943 547
Home 1 239 894 1 084 385 14 2 394 968
Central services 21 756 19 059 49 402
Eliminations (16 809) (9 528) (38 101)
Total 3 970 075 3 338 782 19 7 349 816
Profit from operating activities
Apparel 323 437 269 280 20 669 603
Home 22 917 35 419 (35) 117 853
Central services (46 860) (44 408) (73 255)
Eliminations 890 1 040 1 979
Total 300 384 261 331 15 716 180
consolidated balance sheet
2008 2007 2008
R`000 September September March
Assets
Non-current assets 895 714 771 077 846 334
Property, plant and
equipment 599 138 503 515 566 176
Intangible assets 23 899 12 898 25 471
Long-term receivables
and prepayments 244 045 228 162 225 439
Defined benefit fund asset 28 632 24 045 28 632
Deferred taxation assets - 2 457 616
Current assets 1 932 652 1 865 312 1 945 182
Inventories 932 580 832 417 909 094
Trade and other
receivables 634 577 517 995 570 811
Taxation - 11 875 -
Cash and cash
equivalents 365 495 503 025 465 277
Total assets 2 828 366 2 636 389 2 791 516
Equity and liabilities
Equity attributable
to shareholders 1 504 634 1 379 574 1 479 331
Non-current liabilities 233 896 235 948 241 142
Lease obligations 132 598 115 827 125 846
Deferred taxation
liabilities 92 244 111 893 106 686
Post retirement medical
benefits 9 054 8 228 8 610
Current liabilities 1 089 836 1 020 867 1 071 043
Trade and other payables 1 056 868 1 001 081 1 034 118
Current portion of
lease obligations 28 922 19 786 22 764
Taxation 4 046 - 14 161
Total equity and
liabilities 2 828 366 2 636 389 2 791 516
statement of changes in equity
2008 2007 2008
R`000 September September March
Total equity attributable
to shareholders at
1 April 1 479 331 1 316 808 1 316 808
Shares issued - 214 060 214 060
Treasury share
transactions (5 211) (186 865) (357 296)
Recognition of share-
based payments 13 967 12 047 28 238
Currency translation
adjustments (973) (891) 242
Profit for the period 216 279 205 477 550 943
Defined benefit fund
net actuarial gain - - 1 504
Distributions to
shareholders (198 759) (181 062) (275 168)
Total equity
attributable to
shareholders 1 504 634 1 379 574 1 479 331
consolidated cash flow statement
2008 2007 2008
September September March
R`000 26 weeks 26 weeks 52 weeks
Cash flows from
operating activities
Operating profit
before working
capital changes 356 016 301 695 800 311
Working capital changes (70 796) 38 247 (43 897)
Net interest received 73 874 60 989 127 875
Restraints of trade - - (2 500)
Taxation paid (131 059) (187 413) (303 015)
Net cash inflows from
operating activities 228 035 213 518 578 774
Cash flows from investing
activities
Net receipts in respect of
long-term receivables 844 1 691 3 021
Additions to and replacement
of intangible assets (3 733) (9 894) (25 816)
Property, plant and
equipment
- replacement (60 853) (32 559) (66 807)
- additions (50 841) (72 361) (167 341)
- proceeds on disposal 752 1 138 1 923
Net cash outflows from
investing activities (113 831) (111 985) (255 020)
Cash flows from financing
activities
Proceeds from issue
of share capital - 13 911 13 911
Proceeds from disposal
of investments by
staff share trust 20 58 117
Decrease in lease
obligations (2 373) (1 506) (3 322)
Purchase of shares by
staff share trusts - - (150 468)
Deficit on treasury
share transactions (11 929) - (14 668)
Distributions to
shareholders (198 759) (181 062) (275 168)
Net cash outflows from
financing activities (213 041) (168 599) (429 598)
Change in cash and cash
equivalents (98 837) (67 066) (105 844)
Cash and cash equivalents
at beginning of
the period 465 277 570 945 570 945
Exchange (losses)/gains (945) (854) 176
Cash and cash equivalents
at end of the period 365 495 503 025 465 277
supplementary information
2008 2007 2008
September September March
Number of shares in
issue (net of shares
held by staff share
trusts) (000) 247 292 254 850 247 332
Net asset value per
share (cents) 608 541 598
Reconciliation of headline
earnings (R`000)
Attributable profit 216 279 205 477 550 943
Loss/(profit) from
Discontinuance - 3 (15)
Loss on disposal of
property, plant and
equipment 2 514 1 632 3 151
Taxation adjustment (704) (473) (914)
Headline earnings 218 089 206 639 553 165
Capital expenditure (R`000)
- expended during the
period 115 427 114 814 259 964
- authorised or committed
at period end 184 201 263 813 243 140
Number of stores 925 859 896
Number of full-time
associates 9 998 9 491 9 794
Notes:
1. The September results are unaudited. The results at March 2008 were audited
by Ernst & Young Inc.
2. The company has been irrevocably indemnified by the new owners of the Hub
chain in respect of any amount that may be payable as a result of previously
providing guarantees in respect of operating lease obligations. There have been
no other material changes to the guarantees provided by the company as disclosed
in the 2008 annual financial statements.
3. 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 2008 annual financial statements.
This report and the supporting presentation are available on our website:
www.mrpricegroup.com
Date: 12/11/2008 10:29:01 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
