| Wed 26 May 2010, 8:00 | | MPC - Mr Price Group Limited - Audited group results and cash dividend |
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MPC
MPC
MPC - Mr Price Group Limited - Audited group results and cash dividend
declaration for the year ended 31 March 2010
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")
AUDITED GROUP RESULTS AND CASH DIVIDEND DECLARATION FOR THE YEAR ENDED 31 MARCH
2010
Highlights 2010
OPERATING PROFIT
+ 20%
CORE HEPS
+ 21%
CASH FLOW FROM OPERATIONS
+ 30%
FINAL DIVIDEND
+ 37%
Consolidated statement of
comprehensive income
2010 2009
March March %
R`000 52 weeks 52 weeks change
Revenue 9 747 910 8 857 229 10
Retail sales 9 454 130 8 591 258 10
Other income 214 149 190 129 13
Retail sales and other income 9 668 279 8 781 387 10
Costs and expenses 8 676 761 7 954 199 9
Cost of sales 5 685 157 5 240 547 8
Selling expenses 2 313 226 2 104 880 10
Administrative and other
operating expenses 678 378 608 772 11
Profit from operating activities 991 518 827 188 20
Net finance income 36 761 25 757 43
Profit after net finance income 1 028 279 852 945 21
Net adjustment to contributions
to export partnerships (note 4) (164 688) 39 258 (520)
Profit before taxation 863 591 892 203 (3)
Taxation (note 4) 190 023 276 480 (31)
Profit attributable to
shareholders 673 568 615 723 9
Other comprehensive income:
Currency translation adjustments (8 979) (1 190)
Defined benefit fund net
actuarial loss (2 976) (8 926)
Total comprehensive income 661 613 605 607
Earnings per share (cents)
- basic 273.5 249.1 10
- headline 276.9 251.9 10
- core headline 285.7 236.1 21
- diluted basic 259.7 241.8 7
- diluted headline 263.0 244.6 8
- diluted core headline 271.3 229.2 18
Dividend cover (times) 1.6 1.9
Dividends per share (cents) 173.0 133.0 30
Consolidated statement of
cash flows
2010 2009
March March
R`000 52 weeks 52 weeks
Cash flows from operating activities
Operating profit before working
capital changes 1 100 117 937 825
Working capital changes 89 444 (50 242)
Net interest received 178 350 168 700
Restraint of trade - (1 667)
Taxation paid (346 467) (271 463)
Net cash inflows from operating
activities 1 021 444 783 153
Cash flows from investing activities
Net receipts in respect of long-term
receivables 42 361 14 142
Proceeds on disposal of investment
in subsidiary 18 452 -
Additions to and replacement of
intangible assets (44 816) (31 586)
Property, plant and equipment
- replacement (26 430) (110 673)
- additions (91 722) (92 111)
- proceeds on disposal 1 231 982
Net cash outflows from investing
activities (100 924) (219 246)
Cash flows from financing activities
Proceeds from disposal of investments
by staff share trust 26 40
Decrease in lease obligations (7 236) (5 054)
Sale/(purchase) of shares by staff
share trusts 25 426 (34 255)
Deficit on treasury share transactions (71 284) (28 631)
Dividends to shareholders (348 731) (299 235)
Net cash outflows from financing
activities (401 799) (367 135)
Change in cash and cash equivalents 518 721 196 772
Cash and cash equivalents at beginning
of the year 660 787 465 277
Exchange losses (8 765) (1 262)
Cash and cash equivalents at end
of the year 1 170 743 660 787
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, footwear, sportswear, 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 for 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.
2010 2009 %
R`000 March March change
Retail sales and other income
Apparel 6 878 458 6 081 677 13
Home 2 778 311 2 688 976 3
Central Services 75 716 73 747
Eliminations (64 206) (63 013)
Total 9 668 279 8 781 387 10
Profit from operating activities
Apparel 980 308 828 633 18
Home 101 147 83 275 21
Central Services (89 937) (85 905)
Eliminations - 1 185
Total 991 518 827 188 20
Segment assets
Apparel 1 509 056 1 429 953 6
Home 626 977 750 987 (17)
Central Services 1 474 211 1 089 738
Eliminations - 192
Total 3 610 244 3 270 870 10
Consolidated statement of
financial position
2010 2009
R`000 March March
Assets
Non-current assets 686 475 893 460
Property, plant and equipment 530 407 603 299
Intangible assets 69 970 45 163
Long-term receivables and prepayments 338 222 748
Defined benefit fund asset 16 795 19 009
Deferred taxation assets 68 965 3 241
Current assets 2 923 769 2 377 410
Inventories 934 671 1 002 456
Trade and other receivables 818 355 714 167
Cash and cash equivalents 1 170 743 660 787
Total assets 3 610 244 3 270 870
Equity and liabilities
Equity attributable to shareholders 2 070 823 1 764 187
Non-current liabilities 200 966 225 673
Lease obligations 180 329 145 785
Deferred taxation liabilities 782 69 926
Long-term provisions 8 462 -
Post retirement medical benefits 11 393 9 962
Current liabilities 1 338 455 1 281 010
Trade and other payables 1 310 170 1 208 450
Current provisions 4 388 -
Current portion of lease obligations 14 133 29 976
Taxation 9 764 42 584
Total equity and liabilities 3 610 244 3 270 870
Statement of changes in equity
2010 2009
R`000 March March
Equity attributable to shareholders
at 1 April 1 764 187 1 479 331
Total comprehensive income for the year 661 613 605 607
Treasury share transactions (35 772) (50 381)
Recognition of share-based payments 29 526 28 865
Dividends to shareholders (348 731) (299 235)
Equity attributable to shareholders
at 31 March 2 070 823 1 764 187
Supplementary information
2010 2009
March March
Weighted average number of shares
in issue (000) 246 320 247 175
Number of shares in issue (000) 247 298 245 946
Net asset value per share (cents) 837 717
Reconciliation of headline earnings (R`000)
Attributable profit 673 568 615 723
Loss on disposal and impairment of
property, plant and equipment and
intangible assets 10 897 9 441
Taxation adjustment (2 330) (2 440)
Headline earnings 682 135 622 724
Impact of export partnerships (note 4) 21 569 (39 258)
Core headline earnings 703 704 583 466
Capital expenditure (R`000)
- expended during the year 162 968 234 370
- authorised or committed at year end 187 058 193 034
Number of stores 962 954
Notes
1. 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.
2. The accounting policies and estimates applied are in compliance with
International Financial Reporting Standards 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 year were adopted and did not lead to any significant
changes in accounting policies.
3. There have been no adverse changes to the contingent liabilities and
guarantees provided by the company as disclosed in the 2009 annual financial
statements.
4. The net impact of the export partnerships transactions for the year is as
follows:
Interest
amortisation Net income
R`000 Net impairment for the year statement effect
Adjustments to:
Long-term receivable 202 155 (37 467) 164 688
Deferred taxation (143 119) - (143 119)
59 036 (37 467) 21 569
The taxation charge in the income statement prior to the deferred taxation
adjustment relating to the export partnerships amounted to R333.1 million and
the effective rate was 32.4%.
This report and the supporting presentation are available on our website:
www.mrpricegroup.com
RESULTS
South Africa experienced negative GDP growth in the fourth quarter of 2008 and
technically went into recession in the first quarter of 2009, emerging
tentatively in the third quarter of 2009. This period proved to be a very
difficult trading environment. Despite this, the group has continued to capture
market share and achieved sales growth of 10.0% to R9.5 billion. Comparable
sales, which include sales of expanded and relocated stores in like-for-like
locations, increased by 8.2%.
Correct fashion interpretations and merchandise calls resulted in lower
markdowns and the gross profit percentage increased from 39.0% to 39.9%. Selling
expenses were well controlled, up 9.9% as a consequence of inflation and
weighted average space growth of 4.5%. Administrative expenses, prior to the
effect of mark-to-market adjustments relating to forward exchange contracts,
were up 8.7%. Operating profit increased by 19.9% to R991.5 million and the
operating margin increased from 9.6% to 10.5%. Despite the bank rate decreasing
by 300 basis points to 6.5%, net finance income was positively affected by
increased cash balances, contributing to profit after net finance income
increasing by 20.6%.
The company took advantage of favourable exchange, interest and tax rates and in
agreement with all relevant stakeholders, terminated its involvement in export
partnerships. The elimination of this non-retail activity will also simplify the
reporting of earnings in the future. The net impact on the income statement
which includes a release from deferred taxation, is fully set out in note 4
above.
Core headline earnings per share grew by 21.0%. After accounting for the effect
of the unbundling referred to above, headline earnings per share were up 9.9%.
The board extends its appreciation to each of the group`s 17 300 associates,
whose efforts made these results possible.
TRADING
The Apparel chains increased sales and other income by 13.1% to R6.9 billion and
operating profit by 18.3% to R980.3 million. The operating margin increased from
14.0% to 14.6%. Mr Price Apparel once again delivered an excellent trading
result and grew sales by 15.9% to R5.2 billion. The division has now gained
market share for 48 consecutive months with profits well ahead of the previous
year. Miladys` annual sales were down 1.3% to R1.0 billion. Profits were lower
than the previous year, but showed an improved performance in the second half.
Mr Price Sport increased sales by 19.1% to R437.0 million and exceeded internal
profitability targets.
The Home chains` performance continued to be hampered by consumers` lower
expenditure on discretionary home purchases. Sales and other income increased by
3.3% to R2.8 billion and operating profit by 21.5%. The operating margin
increased from 3.1% to 3.7%. Mr Price Home recorded sales of R1.9 billion, an
increase of 2.6% and gained considerable market share in the second half of the
year. Operating profit improved due to an increased gross profit percentage and
tight expense control. Sales in Sheet Street increased by 4.9% to R846.4 million
and profits were in line with the previous year.
FINANCIAL POSITION
The cash flows associated with being a predominantly cash retailer (83.9% of
sales were for cash) has resulted in the financial position strengthening, and
the group ended the year with cash resources of R1.2 billion. This was mainly
attributable to an increase in operating profit before working capital changes
of 17.3%, sound inventory management and restrained capital expenditure.
Aided by Project Redgold, gross inventories were R71.8 million lower than last
year, and the group improved its stock turn from 5.5 times to 5.9 times.
Notably, the Apparel chains achieved an increase in sales of 13.1% off an
increase in inventory of only 6.5% and the Home chains achieved a reduction in
stock levels of 24.3%.
There was a continued aggressive focus on credit management and risk processes
in response to tougher economic conditions. An improved collections strategy,
coupled with a conservative credit granting philosophy resulted in the group
maintaining its leading position with regard to the state of its credit
portfolio, as highlighted by benchmarking services to which it subscribes. Net
bad debt amounted to 3.7% of credit sales or 7.0% of the debtors` book and the
provision for impairment is 9.1%.
PROSPECTS
Both the economy and consumers` personal finances remain under pressure.
Although interest rates are at a 30 year low and inflation has decreased to
within target range, cost pressures exist in relation to electricity, rates and
fuel. The recent increase in consumer confidence reported by the Bureau for
Economic Research is not yet reflected in retail sales data and the expected
slow pace of the recovery will mean another tough trading year lies ahead.
The group is cautiously optimistic given the success achieved in the second half
of the year through initiatives undertaken to improve performance as well as the
recovery prospects of the divisions hardest hit by the recession. The group will
continue looking for trading space opportunities and, in order to maintain its
historical track record of sales growth, will consider new business concepts and
opportunities, including acquisitions should the business fit be right.
Experience has confirmed that a well executed fashion-value strategy of selling
fashionable products at everyday low prices, is successful in both good and bad
economic times.
DIVIDEND POLICY
The group aims to be the top performing retailer in Africa by delivering
superior returns to shareholders. This vision will be enabled by plans to
achieve strong sales and earnings growth as well as enhancing dividends to
sustainable levels.
The group`s cash-generative business model and strong financial position,
coupled with the board`s confidence with regard to future performance, has
resulted in a reduction in dividend cover from 1.9 to 1.6 times. Accordingly,
the final dividend has increased by 36.6% and total dividends for the year by
30.0%.
FINAL CASH DIVIDEND DECLARATION
Notice is hereby given that a final cash dividend of 126.8 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 18 June 2010
Date trading commences `ex` the dividend Monday 21 June 2010
Record date Friday 25 June 2010
Date of payment Monday 28 June 2010
Shareholders may not dematerialise or rematerialise their share certificates
between Monday 21 June 2010 and Friday 25 June 2010, both dates inclusive.
On behalf of the board
SB Cohen - Joint Chairman
LJ Chiappini - Joint Chairman Durban
AE McArthur - Deputy Chairman and CEO 26 May 2010
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
SPONSOR
RAND MERCHANT BANK (a division of FirstRand Bank Limited)
TRANSFER SECRETARIES
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