| Wed 11 Nov 2009, 8:00 | | MPC - Mr Price Group Limited - Unaudited group results and interim cash dividend |
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MPC
MPC
MPC - Mr Price Group Limited - Unaudited group results and interim cash dividend
declaration for the six months to 30 September 2009
MR PRICE GROUP LIMITED
Registration number 1933/004418/06
Incorporated in the Republic of South Africa
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 2009
Highlights
Retail sales +11%
Continued growth in market share
Improvement in operating margin
Cash generated from operations +36%
Headline earnings per share +15%
Interim dividend per share +15%
RESULTS
Despite the global recession and the resulting tough trading environment, the
group`s retail sales for the six months ended 30 September 2009 grew by 10.8% to
R4.3 billion. This performance should be evaluated against the sales growth
achieved in the retail sector, as reported by Statistics South Africa for the
five month period to August, which were as follows:
total retail sales +4.7%;
textiles, clothing and footwear +3.2%; and
household furniture and appliances -5.2%.
Through the fashion value appeal of its merchandise, the group has continued to
gain market share, as measured by the Retailers` Liaison Committee (RLC).
Comparable sales, which include sales of expanded and relocated stores in like-
for-like locations, were up 9.2%. These sales levels were achieved off an
increase in gross inventories of only 2.2%.
Other income rose by 12.9% mainly as a result of increased interest received
from debtors and premium income relating to the sale of financial service
products. Administrative expenses were up 13.3%, affected by a mark-to-market
loss on forward exchange contracts as a consequence of the strengthening Rand.
Excluding this accounting charge, administrative expenses increased by 9.8%.
Profit from operating activities increased by 14.0% and the operating margin
increased from 7.7% to 8.0% of retail sales. Net finance income increased by
41.6% due to higher average cash balances than the comparable period. Headline
earnings per share increased by 15.1% to 101.5 cents.
The group increased its net weighted average trading space by 6.1% and ended the
period with 951 stores. The group now employs almost 19 000 associates and has
continued to create employment opportunities during an economic recession.
The interim dividend has been set at 46.2 cents per share which reflects an
increase of 14.9% over the comparable period and is based on a maintained
interim cover of 2.2 times.
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
71.3% of group sales, grew sales by 15.1% to R3.0 billion, with retail selling
price inflation of 6.3%. Comparable sales were up 11.7%. Operating profits
increased by 19.1% to R385.2 million and the operating margin increased from
12.2% of retail sales in the comparable period to 12.6%.
Mr Price grew sales by 20.3% to R2.4 billion on an increase in weighted average
trading space of 6.9%, which was an exceptional performance given the trading
conditions. Comparable sales were 17.9% higher and the division recorded retail
selling price inflation of 8.7%. The division`s merchandise strategy, aided by
sophisticated IT capabilities, enabled it to continue the trend of achieving
growth in market share as measured by the RLC. The number of units sold
increased by 10.6% to 44.4 million.
Miladys sales decreased by 5.9% to R471.9 million, with a growth in weighted
average trading space of 10.5%. The division experienced retail selling price
inflation of 3.5%. While the trading environment inhibited sales, the internal
factors that led to a drop in units sold of 9.0% have been addressed and an
improved operating performance in the second half is expected.
Mr Price Sport generated sales of R193.6 million, an increase of 17.1%.
Comparable sales were up 10.1% and weighted average trading space grew by
8.3%.The initiatives put in place last year to accelerate performance are
proving successful. During the period, the division exceeded its own financial
and operational targets through an improved stock turn, lower markdowns and a
higher gross profit percentage. Independent market research commissioned in July
2009 highlighted that Mr Price Sport has the highest affinity amongst sport
retailers and the division ranked first in top-of-mind awareness, both of which
are significant milestones given the relative newness of the brand.
Sales in the Home chains (Mr Price Home and Sheet Street) were up 4.4% to R1.2
billion and retail selling price inflation of 10.5% was recorded. Comparable
sales were up 3.6%. This segment continues to be the most affected by the
reduction in consumer spend on semi-durable products, however both chains
maintained market share. Operating profits declined to R4.4 million and the
operating margin reduced from 1.9% to 0.4% of retail sales.
Mr Price Home generated sales of R834.4 million, an increase of 4.2%. Retail
selling price inflation of 11.0% was recorded and comparable sales were up 5.5%.
Although the division maintained its gross profit percentage, the performance
was negatively affected by the drop in unit sales of 4.0%. Weighted average
trading space increased by 2.0%.
Sheet Street increased sales by 4.7% to R384.0 million and comparable sales were
down 0.5%. Retail selling price inflation of 9.5% was recorded and weighted
average trading space increased by 7.0%. Profitability was impacted by increased
markdowns and a decrease in unit sales of 4.2%.
Mr Price International opened an additional four stores in the Mr Price and Mr
Price Home formats, bringing the total to 21. These test stores have to date
proved that there is strong demand for the group`s merchandise. Extensive
research and planning is now underway that will enable entry to selected markets
with an appropriate business model and streamlined business and logistics
processes.
FINANCIAL POSITION
The cash-driven business model, whereby 82.6% of sales are for cash, will enable
the group to retain a healthy balance sheet. Cash generated from operating
activities increased by 36.3% to R310.9 million and cash resources rose to
R635.2 million.
Although the debtors book has increased by 21.7% to R741.6 million, the group
has continued its cautious credit granting approach. Annualised bad debts net of
recoveries increased from 7.1% to 7.4% of debtors and the provision for
impairment has been conservatively set at 8.6% of the book. Independent
statistics confirm that the ageing profile of the debtors` book continues to be
the industry benchmark.
Gross inventories were well managed and the group stock turn improved from 5.4
times to 5.8 times during a challenging trading period, aided by the continued
progress being made by Project Redgold.
PROSPECTS
The reduction in interest rates of 500 basis points since December 2008, as well
as a decreasing inflation rate, will continue to ease the plight of the South
African consumer. There will be a delayed impact for this to materially increase
consumer spending and the tough trading climate is expected to continue well
into 2010. However, the group is well positioned to capture further market share
with its fashionable products at everyday low prices.
On behalf of the board
SB Cohen - Joint chairman
LJ Chiappini - Joint chairman Durban
AE McArthur - Deputy chairman and chief executive officer 11 November 2009
INTERIM CASH DIVIDEND DECLARATION
Notice is hereby given that an interim cash dividend of 46.2 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` the dividend Friday 27 November 2009
Date trading commences `ex` the dividend Monday 30 November 2009
Record date Friday 4 December 2009
Date of payment Monday 7 December 2009
Shareholders may not dematerialise or rematerialise their share certificates
between Monday 30 November 2009 and Friday 4 December 2009, both dates
inclusive.
On behalf of the board Durban
CS Yuill - Group secretary 11 November 2009
DIRECTORS
LJ Chiappini* (Joint chairman), SB Cohen* (Joint chairman), AE McArthur (Deputy
chairman and chief executive officer), SI Bird (Deputy chief executive officer),
MM Blair, SA Ellis, K Getz*, MR Johnston*, RM Motanyane*, NG Payne*, Prof. LJ
Ring* (USA), MJD Ruck*, SEN Sebotsa*, WJ Swain*, M Tembe*, S van Niekerk, CS
Yuill
*Non-executive director
TRANSFER SECRETARIES
Computershare Investor Services (Pty) Ltd
SPONSOR
Rand Merchant Bank (a division of FirstRand Bank Limited)
consolidated statement of financial position
2009 2008 2009
R`000 September September March
Assets
Non-current assets 877 706 895 714 893 460
Property, plant and equipment 558 714 599 138 603 299
Intangible assets 56 153 23 899 45 163
Long-term receivables and prepayments 239 658 244 045 222 748
Defined benefit fund asset 19 009 28 632 19 009
Deferred taxation assets 4 172 - 3 241
Current assets 2 373 854 1 932 652 2 377 410
Inventories 967 550 932 580 1 002 456
Trade and other receivables 771 090 634 577 714 167
Cash and cash equivalents 635 214 365 495 660 787
Total assets 3 251 560 2 828 366 3 270 870
Equity and liabilities
Equity attributable to shareholders 1 756 256 1 504 634 1 764 187
Non-current liabilities 228 122 233 896 225 673
Lease obligations 152 522 132 598 145 785
Deferred taxation liabilities 65 155 92 244 69 926
Post retirement medical benefits 10 445 9 054 9 962
Current liabilities 1 267 182 1 089 836 1 281 010
Trade and other payables 1 225 051 1 056 868 1 208 450
Current portion of lease obligations 35 760 28 922 29 976
Taxation 6 371 4 046 42 584
Total equity and liabilities 3 251 560 2 828 366 3 270 870
consolidated income statement
2009 2008 2009
September September % March
R`000 26 weeks 26 weeks change 52 weeks
Revenue 4 439 216 4 000 252 11 8 857 229
Retail sales 4 299 954 3 879 423 11 8 591 258
Other income 102 380 90 652 13 190 129
Retail sales and other income 4 402 334 3 970 075 11 8 781 387
Costs and expenses 4 060 037 3 669 691 11 7 954 199
Cost of sales 2 618 698 2 380 291 10 5 240 547
Selling expenses 1 104 842 992 276 11 2 104 880
Administrative and other
operating expenses 336 497 297 124 13 608 772
Profit from operating activities 342 297 300 384 14 827 188
Net finance income 14 305 10 102 42 25 757
Profit after net finance income 356 602 310 486 15 852 945
Net adjustment to contributions to
export partnerships 18 734 19 629 (5) 39 258
Profit before taxation 375 336 330 115 14 892 203
Taxation 128 209 113 836 13 276 480
Profit attributable to shareholders 247 127 216 279 14 615 723
Weighted average number of
shares in issue (net of shares held by
staff share trusts) (000) 245 964 247 299 (1) 247 175
Earnings per share (cents)
- basic 100.5 87.5 15 249.1
- headline 101.5 88.2 15 251.9
- diluted basic 96.3 85.3 13 241.8
- diluted headline 97.3 86.0 13 244.6
Distribution cover (times) 2.2 2.2 - 1.9
Distributions per share (cents) 46.2 40.2 15 133.0
consolidated cash flow statement
2009 2008 2009
September September March
R`000 26 weeks 26 weeks 52 weeks
Cash flows from operating activities
Operating profit before working
capital changes 394 904 356 016 937 825
Working capital changes (3 351) (70 796) (50 242)
Net interest received 83 169 73 874 168 700
Restraints of trade - - (1 667)
Taxation paid (163 831) (131 059) (271 463)
Net cash inflows from operating activities 310 891 228 035 783 153
Cash flows from investing activities
Net receipts in respect of long-term
receivables 2 426 844 14 142
Proceeds on disposal of investment in
consolidated entity 18 452 - -
Additions to and replacement of
intangible assets (19 383) (3 733) (31 586)
Property, plant and equipment
- replacement (11 629) (60 853) (110 673)
- additions (47 736) (50 841) (92 111)
- proceeds on disposal 1 136 752 982
Net cash outflows from investing activities (56 734) (113 831) (219 246)
Cash flows from financing activities
Proceeds from disposal of investments
by staff share trust 16 20 40
Decrease in lease obligations (3 412) (2 373) (5 054)
Purchase of shares by staff share trusts - - (34 255)
Deficit on treasury share transactions (37 199) (11 929) (28 631)
Distributions to shareholders (233 024) (198 759) (299 235)
Net cash outflows from financing activities (273 619) (213 041) (367 135)
Change in cash and cash equivalents (19 462) (98 837) 196 772
Cash and cash equivalents at beginning
of the period 660 787 465 277 465 277
Exchange losses (6 111) (945) (1 262)
Cash and cash equivalents at end of
the period 635 214 365 495 660 787
consolidated statement of comprehensive income
2009 2008 2009
R`000 September September March
Profit attributable to shareholders 247 127 216 279 615 723
Treasury share transactions (30 908) (5 211) (50 381)
Recognition of share-based payments 15 125 13 967 28 865
Currency translation adjustments (6 251) (973) (1 190)
Defined benefit fund net actuarial loss - - (8 926)
Total comprehensive income for the period,
net of taxation 225 093 224 062 584 091
statement of changes in equity
2009 2008 2009
R`000 September September March
Total equity attributable to shareholders
at 1 April 1 764 187 1 479 331 1 479 331
Total comprehensive income for the period 225 093 224 062 584 091
Distributions to shareholders (233 024) (198 759) (299 235)
Total equity attributable to shareholders 1 756 256 1 504 634 1 764 187
segmental reporting
For management purposes, the group is organised into business units based on
their products and services, and has three reportable segments as follows:
- The Apparel segment retails clothing, sportswear, footwear, sporting
equipment and accessories;
- The Home segment retails homewares; and
- The Central Services segment provides services to the trading segments
including information technology, internal audit, human resources, group real
estate and finance.
Management monitors the operating results of its business units separately for
the purpose of making decisions about resource allocation and performance
assessment. Segment performance is evaluated based on operating profit or loss.
Net finance income and income taxes are managed on a group basis and are not
allocated to operating segments.
2009 2008 2009
September September % March
R`000 26 weeks 26 weeks change 52 weeks
Retail sales* and other income
Apparel 3 144 075 2 725 234 15 6 081 677
Home 1 252 511 1 239 894 1 2 688 976
Central services 25 496 21 756 73 747
Eliminations (19 748) (16 809) (63 013)
Total 4 402 334 3 970 075 11 8 781 387
Profit from operating activities
Apparel 385 154 323 437 19 828 633
Home 4 400 22 917 (81) 83 275
Central services (47 257) (46 860) (85 905)
Eliminations - 890 1 185
Total 342 297 300 384 14 827 188
Segment assets
Apparel 1 476 651 1 314 558 12 1 429 953
Home 699 326 717 866 (3) 750 987
Central services 1 075 583 795 750 1 089 738
Eliminations - 192 192
Total 3 251 560 2 828 366 15 3 270 870
* Includes franchise sales
supplementary information
2009 2008 2009
September September March
Number of shares in issue
(net of shares held by staff share
trusts) (000) 245 990 247 292 245 946
Net asset value per share (cents) 714 608 717
Reconciliation of headline earnings (R`000)
Attributable profit 247 127 216 279 615 723
Loss on disposal and impairment of property,
plant and equipment 3 379 2 514 9 441
Taxation adjustment (946) (704) (2 440)
Headline earnings 249 560 218 089 622 724
Capital expenditure (R`000)
- expended during the period 78 748 115 427 234 370
- authorised or committed at period end 139 228 184 201 193 034
Number of stores 951 925 954
Notes:
1. The September results are unaudited. The results at March 2009 were audited
by Ernst & Young Inc.
2. 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 2009 financial statements. All new and revised Standards and
Interpretations that became effective during the period were adopted and
did not lead to any significant changes in accounting policies.
3. As noted in the 2009 annual financial statements, the company and other
interested parties are exploring the potential of unbundling the export
partnership structures. These negotiations are still in progress and, if
implemented, may result in a once-off impairment to the carrying value of
the long-term receivable.
4. There have been no material changes to the contingent liabilities and
guarantees provided by the company as disclosed in the 2009 annual
financial statements.
This report and the supporting presentation are available on our website:
www.mrpricegroup.com
Date: 11/11/2009 08:00:01 Produced by the JSE SENS Department.
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