| Mon 15 Nov 2010, 14:14 | | MPC - Mr Price Group Limited - Unaudited group results and interim cash |
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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 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")
UNAUDITED GROUP RESULTS AND INTERIM CASH DIVIDEND DECLARATION FOR THE SIX
MONTHS TO 30 SEPTEMBER 2010
RESULTS
The group increased retail sales for the six months ended 30 September 2010 by
11.0% to R4.8 billion, compared to the total retail sector, which grew by 7.0%
for the five months ended 31 August 2010, as reported by Statistics South
Africa. Sales in like-for-like locations were up by 7.5% and weighted average
trading space increased by 2.4%. The group sold more than 80 million units
during the period, a growth of 9.7% and merchandise inflation of 1.4% was
recorded. At period end, the group employed 17 688 associates.
Other income rose by 12.6% due to interest received on a higher debtors book
and an increased take up rate of financial services products.
Costs and expenses were tightly controlled, increasing by 7.1%, well below the
increase in sales. The gross profit percentage increased from 39.1% to 41.2%,
primarily as a result of reduced markdowns. Administrative and other operating
expenses, which were impacted by certain once-off costs and higher performance
based incentive provisions, increased by 12.2%. Excluding these costs, the
increase would have been 2.0%. Profit from operating activities increased by
57.4% to R538.8 million and the operating margin increased from 8.0% to 11.3%
of retail sales. Despite lower interest rates, net finance income rose by
62.9% due to higher average cash balances.
In the current period, the net adjustment to contributions to export
partnerships was nil due to the unbundling reported in the prior financial
year. Core headline earnings per share, which excludes this impact, and which
is indicative of true trading performance, increased by 63.4% as against 16.9%
at the interim stage last year.
These results have been generated by the continued profit growth of the Mr
Price Apparel chain, which constitutes 56.3% of group sales, as well as
improved operating performances by all other divisions.
In line with the reduction in dividend cover in the prior financial year, the
interim cover has been lowered from 2.2 times to 2.0 times. This has resulted
in an increase in the interim dividend of 66.0% to 76.7 cents per share. Year
end dividend cover is not expected to exceed 1.6 times.
TRADING
The Apparel chains increased sales and other income by 11.5% to R3.5 billion.
Operating profit of R517.5 million was up by 34.4%, resulting in the operating
margin increasing from 12.6% to 15.2% of retail sales. Weighted average
trading space increased by 4.6% and trading density was up by 6.3%. Mr Price
Apparel recorded sales growth of 12.0% and once again exceeded budgeted
profitability levels. Mr Price Sport increased sales by 25.9% and a 38.7%
increase in gross profit contributed to a significant improvement in financial
performance. Miladys sales increased by 2.5%, however an improved gross margin
and limitation of expense growth to 4.3%, enabled the division to record a
substantial increase in operating profit.
The Home chains achieved a 10.0% increase in sales and other income to R1.4
billion and the operating margin increased to 6.1%. Trading density improved
by 9.6% as a result of an improved sales performance and a reduction in
weighted average trading space of 1.0%. Mr Price Home increased sales by 11.5%
and Sheet Street by 6.7%. Steps taken last year to enhance the performance of
these chains, improved gross margin percentages and cost curtailment all
impacted favourably on the financial results.
FINANCIAL POSITION
The group`s financial position has remained strong. A high cash sales
component (82.3%), stringent expense control, sound inventory management and
restrained capital expenditure have resulted in cash flows generated by
operations increasing by 115.7% to R670.4 million. During the period, certain
share trusts utilised grants to acquire shares in the market to partially
satisfy options granted. In total 3.8 million shares were acquired at an
average price of R47.55. Cash balances of R1.2 billion and the company`s high
cash generating ability are available to fund future operational requirements
and growth.
Gross inventories decreased by 14.5% and stock turn improved from 5.8 times to
6.5 times. This was achieved through correct merchandise calls and the
continued positive impact of Project Redgold.
Gross trade receivables increased by 15.9% to R874.2 million and the group is
reaping the benefits of having implemented a cautious credit granting
philosophy over an extended period. In line with the positive collections
being experienced in the retail industry, net bad debts decreased to 4.7% of
book from 7.4% in the prior period.
Trade and other payables increased by 19.9% mainly due to the timing of
payments to trade creditors.
PROSPECTS
Consumers will benefit from interest rates which are at a 30 year low, a
strong Rand, low inflation rate and in certain sectors, salary and wage
increases in excess of CPI. These benefits will be partly offset by increases
in the price of electricity and the increasing level of unemployment.
Initiatives undertaken last year to enhance the profitability of the chains
which were underperforming impacted favourably on the second half of the year
ended 31 March 2010. As a result of the higher base, the group does not expect
the same level of earnings growth in the second half of the current financial
year. It is anticipated that the trading climate will remain challenging in
the short term. The group`s focus will be to continue to diligently execute
its strategy of offering customers fashionable merchandise at everyday low
prices.
INTERIM CASH DIVIDEND DECLARATION
Notice is hereby given that an interim cash dividend of 76.7 cents per share
has been declared to the holders of ordinary and unlisted B ordinary shares.
The following dates are applicable:
Last date to trade `cum` the dividend Thursday 9 December 2010
Date trading commences `ex` the dividend Friday 10 December 2010
Record date Friday 17 December 2010
Date of payment Monday 20 December 2010
Shareholders may not dematerialise or rematerialise their share certificates
between Friday 10 December 2010 and Friday 17 December 2010, both dates
inclusive.
On behalf of the board
AE McArthur (chairman) Durban
SI Bird (chief executive officer) 15 November 2010
DIRECTORS
LJ Chiappini* (honorary chairman), SB Cohen* (honorary chairman), AE McArthur
(chairman), SI Bird (chief executive officer), MM Blair (chief financial
officer), N Abrams+, TA Chiappini-Young+, SA Ellis+, K Getz*, MR Johnston*, RM
Motanyane*, NG Payne*, Prof. LJ Ring+ (USA), MJD Ruck*, SEN Sebotsa*, WJ
Swain*, M Tembe*
*Non-executive director +Alternate director
The following changes to the Board of Directors took place on 26 August 2010:
- LJ Chiappini and SB Cohen were appointed honorary chairmen;
- AE McArthur was appointed chairman;
- SI Bird was appointed chief executive officer;
- N Abrams, TA Chiappini-Young, SA Ellis and Prof. LJ Ring were
appointed alternate directors; and
- S van Niekerk retired from the company and CS Yuill retired
from the board.
TRANSFER SECRETARIES
Computershare Investor Services (Pty) Ltd
SPONSOR
Rand Merchant Bank (a division of FirstRand Bank Limited)
consolidated statement of comprehensive income
2010 2009 2010
September September % March
R`000 26 weeks 26 weeks change 52 weeks
Revenue 4 914 821 4 439 216 11 9 747 910
Retail sales 4 771 973 4 299 954 11 9 454 130
Other income 115 298 102 380 13 214 149
Retail sales and
other income 4 887 271 4 402 334 11 9 668 279
Costs and expenses 4 348 488 4 060 037 7 8 676 761
Cost of sales 2 806 416 2 618 698 7 5 685 157
Selling expenses 1 164 486 1 104 842 5 2 313 226
Administrative and
other operating
expenses 377 586 336 497 12 678 378
Profit from operating
activities 538 783 342 297 57 991 518
Net finance income 23 302 14 305 63 36 761
Profit after net
finance income 562 085 356 602 58 1 028 279
Net adjustment to
contributions to
export partnerships - 18 734 (164 688)
Profit before taxation 562 085 375 336 50 863 591
Taxation 192 060 128 209 50 190 023
Profit attributable
to shareholders 370 025 247 127 50 673 568
Other comprehensive income:
Currency translation
adjustments (2 158) (6 251) (8 979)
Defined benefit fund
net actuarial loss - - (2 976)
Total comprehensive
income 367 867 240 876 53 661 613
Earnings per share (cents)
- basic 150.8 100.5 50 273.5
- headline 153.3 101.5 51 276.9
- core headline 153.3 93.8 63 285.7
- diluted basic 140.8 96.3 46 259.7
- diluted headline 143.1 97.3 47 263.0
- diluted core headline 143.1 90.0 59 271.3
Dividend cover (times) 2.0 2.2 1.6
Dividends per share (cents) 76.7 46.2 66 173.0
segmental reporting
For management purposes, the group is organised into business units based on
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.
2010 2009 % 2010
R`000 September September change March
Retail sales and
other income
Apparel 3504 488 3 144 075 11 6 878 458
Home 1 378 308 1 252 511 10 2 778 311
Central Services 30 106 25 496 75 716
Eliminations (25 631) (19 748) (64 206)
Total 4 887 271 4 402 334 11 9 668 279
Profit from operating activities
Apparel 517 487 385 154 34 980 308
Home 82 973 4 400 1 786 101 147
Central Services (61 677) (47 257) (89 937)
Total 538 783 342 297 57 991 518
Segment assets
Apparel 1 500 770 1 476 651 2 1 509 056
Home 589 664 699 326 (16) 626 977
Central Services 1 526 439 1 075 583 1 474 211
Total 3 616 873 3 251 560 11 3 610 244
consolidated statement of financial position
2010 2009 2010
R`000 September September March
Assets
Non-current assets 646 554 877 706 686 475
Property, plant and equipment 492 158 558 714 530 407
Intangible assets 71 295 56 153 69 970
Long-term receivables and
prepayments 338 239 658 338
Defined benefit fund asset 16 795 19 009 16 795
Deferred taxation assets 65 968 4 172 68 965
Current assets 2 970 319 2 373 854 2 923 769
Inventories 826 807 967 550 934 671
Trade and other receivables 897 824 771 090 818 355
Taxation 4 378 - -
Cash and cash equivalents 1 241 310 635 214 1 170 743
Total assets 3 616 873 3 251 560 3 610 244
Equity and liabilities
Equity attributable to
shareholders 1 937 244 1 756 256 2 070 823
Non-current liabilities 175 891 228 122 200 966
Lease obligations 157 427 152 522 180 329
Deferred taxation liabilities 640 65 155 782
Long-term provisions 5 909 - 8 462
Post retirement medical benefits 11 915 10 445 11 393
Current liabilities 1 503 738 1 267 182 1 338 455
Trade and other payables 1 468 635 1 225 051 1 310 170
Current provisions - - 4 388
Current portion of lease
obligations 35 103 35 760 14 133
Taxation - 6 371 9 764
Total equity and liabilities 3 616 873 3 251 560 3 610 244
statement of changes in equity
2010 2009 2010
R`000 September September March
Total equity attributable to
shareholders at 1 April 2 070 823 1 764 187 1 764 187
Total comprehensive income
for the period 367 867 240 876 661 613
Treasury share transactions (198 394) (30 908) (35 772)
Recognition of share-based
payments 16 710 15 125 29 526
Dividends to shareholders (319 762) (233 024) (348 731)
Total equity attributable to
shareholders at period end 1 937 244 1 756 256 2 070 823
consolidated statement of cash flows
2010 2009 2010
September September March
R`000 26 weeks 26 weeks 52 weeks
Cash flows from operating
activities
Operating profit before
working capital changes 580 773 394 904 1 100 117
Working capital changes 177 253 (3 351) 89 444
Net interest received 106 773 83 169 178 350
Taxation paid (194 355) (163 831) (346 467)
Net cash inflows from
operating activities 670 444 310 891 1 021 444
Cash flows from investing
activities
Net receipts in respect of
long-term receivables - 2 426 42 361
Proceeds on disposal of
investment in subsidiary - 18 452 18 452
Additions to and replacement
of intangible assets (12 600) (19 383) (44 816)
Property, plant and equipment
- replacement (33 223) (11 629) (26 430)
- additions (20 080) (47 736) (91 722)
- proceeds on disposal 4 1 136 1 231
Net cash outflows from
investing activities (65 899) (56 734) (100 924)
Cash flows from financing
activities
Proceeds from disposal of
investments by staff
share trust - 16 26
Decrease in lease obligations (4 713) (3 412) (7 236)
(Purchase)/sale of shares by
staff share trusts (183 609) - 25 426
Deficit on treasury share
transactions (23 780) (37 199) (71 284)
Dividends to shareholders (319 762) (233 024) (348 731)
Net cash outflows from
financing activities (531 864) (273 619) (401 799)
Change in cash and cash
Equivalents 72 681 (19 462) 518 721
Cash and cash equivalents at
beginning of the period 1 170 743 660 787 660 787
Exchange losses (2 114) (6 111) (8 765)
Cash and cash equivalents at
end of the period 1 241 310 635 214 1 170 743
supplementary information
2010 2009 2010
September September March
Number of shares in issue (000) 243 465 245 990 247 298
Weighted average number of
shares in issue (000) 245 399 245 964 246 320
Net asset value per share
(cents) 796 714 837
Reconciliation of headline
earnings (R`000)
Attributable profit 370 025 247 127 673 568
Loss on disposal and impairment
of property, plant and
equipment 8 475 3 379 10 897
Taxation adjustment (2 373) (946) (2 330)
Headline earnings 376 127 249 560 682 135
Impact of export partnerships - (18 734) 21 569
Core headline earnings 376 127 230 826 703 704
Capital expenditure (R`000)
- expended during the period 65 903 78 748 162 968
- authorised or committed at
period end 138 037 139 228 187 058
Number of stores 943 951 962
Notes:
1. The September results are unaudited. The results at March 2010
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 2010 annual 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. There have been no adverse changes to the contingent
liabilities and guarantees provided by the company as disclosed
in the 2010 annual financial statements.
This report and the supporting presentation are available on our website:
www.mrpricegroup.com
Date: 15/11/2010 14:14:07 Produced by the JSE SENS Department.
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