| Tue 15 Nov 2011, 14:00 | | 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 26 weeks ended 1 October 2011
Mr Price Group Limited
Registration number 1933/004418/06
Incorporated in the Republic of South Africa
ISIN: ZAE 000026951
JSE share code: MPC
("Mr Price" or "the company" or "the group")
UNAUDITED GROUP RESULTS AND INTERIM CASH DIVIDEND DECLARATION FOR THE 26 WEEKS
ENDED 1 OCTOBER 2011
Operating profit up 26%
Headline earnings per share up 22%
Interim dividend per share up 22%
Results
Retail sales for the 26 weeks ended 1 October 2011 increased by 10.7%, while
sales in like-for-like locations were up by 9.6%. Trading patterns were
affected by the high base set by extended school holidays associated with the
FIFA World Cup 2010 which took place in June and July of the comparable
period. Sales growth excluding these two months amounted to 14.3%. The overall
sales growth compares favourably with the 7.5% growth achieved in the retail
sector for the five months to August 2011, as reported by Statistics South
Africa.
Retail selling price inflation of 5.5% was recorded and 84.6 million units
were sold, an increase of 5.4%. Although 18 stores were opened during the
period, weighted average trading space decreased by 1.6% from the comparable
period due to planned space reductions and the closure of certain non-
performing stores. The group ended the period with 944 stores and employed 18
176 associates.
Other income grew by 14.7% primarily due to a 57.5% increase in premium income
relating to the sale of financial services products.
Total costs and expenses increased by 8.9%, a rate lower than sales growth, as
a consequence of continued tight cost control. Cost of sales rose by 10.4%
resulting in the gross margin increasing from 41.2% to 41.3% of retail sales.
Selling expenses increased by 7.5% and administrative expenses increased by
1.8%, primarily as a result of the mark-to-market of forward exchange
contracts at period end. Excluding the impact of foreign exchange fluctuations
in both periods, administrative expenses increased by 7.6%.
Profit from operating activities grew by 26.1% and the operating margin
improved from 11.3% to 12.9% of retail sales. Net finance income was lower
than the comparable period as a result of lower average cash balances and
lower average interest rates. The increase in the effective taxation rate was
largely due to the higher STC charge as a result of the significant growth in
earnings and dividends in the prior period. The impact of the lower net
finance income and the higher STC charge resulted in headline earnings per
share increasing by 22.2% to 187.3 cents.
Per the Sunday Times Top 100 Companies review, the group was placed seventh on
the JSE for share price performance over five years and tenth over ten years,
and was the top performing clothing retailer for both periods.
Trading
The Apparel chains increased sales and other income by 11.2% to R3.9 billion,
with comparable sales up by 8.8% and retail selling price inflation of 5.1%.
Operating profit grew by 19.0% to R626.6 million and the operating margin
increased from 15.4% to 16.5% of retail sales. Mr Price Apparel recorded sales
growth of 11.2% (comparable 8.8%) to R2.9 billion (55.7% of group sales) and
operating profit was well ahead of the prior period. Mr Price Sport opened
four new stores which contributed to sales increasing by 20.5% (comparable
7.6%) to R293.6 million and exceeded budgeted profitability levels. Miladys
increased sales by 6.4% to R514.7 million despite closing a net six stores.
Comparable sales growth was 9.4% which, together with excellent cost control,
resulted in a significant increase in operating profit.
The Home chains increased sales and other income by 9.7% to R1.5 billion, with
comparable sales up by 11.5% and retail selling price inflation of 6.6%.
Operating profit rose by 57.3% to R130.5 million and the operating margin
increased from 6.1% to 8.8% of retail sales. Mr Price Home increased sales by
7.8% (comparable 9.8%) to R1.0 billion. Operating results benefitted from a
slightly improved gross margin percentage and cost curtailment. Sheet Street
increased sales by 14.0% (comparable 14.9%) and operating profit significantly
exceeded both the prior year and budgeted levels.
Financial position
The cash-generative business model (81.2% of sales for the period were for
cash) has enabled the group to maintain its strong balance sheet. Despite
increased dividends, capital expenditure more than doubling and purchasing
treasury shares to the value of R211.1 million (at an average price of R64.89
per share), the group ended the period with cash resources of R900.0 million.
A strategy of increasing inventory levels in previously understocked trading
periods will position the group to take advantage of sales opportunities in
the second half of the year. Despite higher inventory levels, stock turn
increased from 6.5 times to 6.9 times.
The group has historically applied very stringent credit granting criteria and
the decision taken to extend more credit to high performing account holders
has resulted in gross trade receivables increasing by 11.6% from R854.7
million to R954.0 million. The book has continued to be well managed, with a
net bad debt to book ratio of 4.1% and is adequately provided against at
period end.
Trade and other payables were 18.0% lower than the comparable period primarily
as a consequence of the timing of period end impacting on creditor payments.
Prospects
Although volatile currency exchange rates and international stock markets have
resulted in local consumers being concerned about the future performance of
the economy, many expect that their own finances will be shielded from these
developments. Their sentiment has been positively influenced by views that
interest rates are unlikely to increase in the short term. The group expects
retail trading conditions to remain tough, but is encouraged by positive
October sales growth, which augurs well for the festive season.
Sales growth will be supported by the group actively pursuing space expansion
opportunities, the introduction of new generation stores in November in the
three Mr Price chains which are designed to further improve customers`
shopping experiences, and by opening a first test store in Nigeria in March
2012.
Shareholders and investors are reminded of the high base set in the second
half last year, which included 27 trading weeks and a strong recovery of
previously underperforming chains.
Interim cash dividend declaration
Notice is hereby given that an interim cash dividend of 93.6 cents per share,
which reflects an increase of 22.0% over the comparable period and is based on
a maintained dividend cover of 2.0 times, 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 Thursday 8 December 2011
Date trading commences `ex` the dividend Friday 9 December 2011
Record date Thursday 15 December 2011
Date of payment Monday 19 December 2011
Shareholders may not dematerialise or rematerialise their share certificates
between Friday 9 December 2011 and Thursday 15 December 2011, both dates
inclusive.
On behalf of the board
SI Bird - Chief executive officer Durban
MM Blair - Chief financial officer 15 November 2011
Directors
LJ Chiappini* (Honorary chairman), SB Cohen* (Honorary chairman),AE McArthur
(Chairman), SI Bird, MM Blair, 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
Transfer secretaries
Computershare Investor Services (Pty) Ltd
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
consolidated statement of comprehensive income
2011 2010 2011
1 October 25 September % 2 April
R`000 26 weeks 26 weeks change 53 weeks
Revenue 5 443 808 4 914 821 11 10 973 327
Retail sales 5 282 490 4 771 973 11 10 673 364
Other income 132 208 115 298 15 239 730
Retail sales and
other income 5 414 698 4 887 271 11 10 913 094
Costs and expenses 4 735 221 4 348 488 9 9 479 326
Cost of sales 3 099 043 2 806 416 10 6 201 640
Selling expenses 1 251 683 1 164 486 7 2 505 393
Administrative and
other operating
expenses 384 495 377 586 2 772 293
Profit from operating
activities 679 477 538 783 26 1 433 768
Net finance income 16 305 23 302 (30) 54 662
Profit after net
finance income 695 782 562 085 24 1 488 430
Export partnerships - - (4 226)
Profit before taxation 695 782 562 085 24 1 484 204
Taxation 242 723 192 060 26 473 950
Profit attributable
to shareholders 453 059 370 025 22 1 010 254
Other comprehensive income:
Currency translation
adjustments 1 206 (2 158) (3 941)
Defined benefit fund
net actuarial gain - - 625
Total comprehensive
income 454 265 367 867 1 006 938
Earnings per share (cents)
- basic 186.6 150.8 24 412.3
- headline 187.3 153.3 22 418.9
- core headline 187.3 153.3 22 420.6
- diluted basic 172.5 140.8 23 382.7
- diluted headline 173.2 143.1 21 388.8
- diluted core headline 173.2 143.1 21 390.4
Dividend cover (times) 2.0 2.0 - 1.6
Dividends per share
(cents) 93.6 76.7 22 252.0
consolidated statement of financial position
2011 2010 2011
R`000 1 October 25 September 2 April
Assets
Non-current assets 645 625 646 554 607 681
Property, plant and equipment 485 981 492 158 459 634
Intangible assets 92 381 71 295 79 164
Long-term receivables and
prepayments - 338 338
Defined benefit fund asset 20 241 16 795 20 241
Deferred taxation assets 47 022 65 968 48 304
Current assets 3 010 698 2 970 319 3 253 456
Inventories 1 054 502 826 807 953 666
Trade and other receivables 1 056 249 897 824 931 278
Taxation - 4 378 -
Cash and cash equivalents 899 947 1 241 310 1 368 512
Total assets 3 656 323 3 616 873 3 861 137
Equity and liabilities
Equity attributable to
shareholders 2 221 701 1 937 244 2 394 184
Non-current liabilities 185 071 175 891 179 010
Lease obligations 170 897 163 336 165 329
Deferred taxation liabilities 676 640 744
Post retirement medical
benefits 13 498 11 915 12 937
Current liabilities 1 249 551 1 503 738 1 287 943
Trade and other payables 1 203 744 1 468 635 1 241 624
Current portion of lease
obligations 39 668 35 103 40 969
Taxation 6 139 - 5 350
Total equity and liabilities 3 656 323 3 616 873 3 861 137
consolidated statement of cash flows
2011 2010 2011
1 October 25 September 2 April
R`000 26 weeks 26 weeks 53 weeks
Cash flows from operating
activities
Operating profit before
working capital changes 723 194 580 773 1 535 455
Working capital changes (264 243) 177 253 (210 002)
Net interest received 102 426 106 773 223 486
Taxation paid (223 170) (194 355) (444 241)
Net cash inflows from
operating activities 338 207 670 444 1 104 698
Cash flows from investing
activities
Receipts in respect of
long-term receivables 332 - -
Additions to and replacement
of intangible assets (25 572) (12 600) (33 838)
Proceeds on disposal of
intangible assets - - 406
Property, plant and equipment
- replacement (27 746) (33 223) (71 921)
- additions (84 654) (20 080) (49 815)
- proceeds on disposal 847 4 125
Net cash outflows from
investing activities (136 793) (65 899) (155 043)
Cash flows from financing
activities
Decrease in lease obligations (5 730) (4 713) (9 966)
Net purchase of shares by
staff share trusts (211 102) (183 609) (161 214)
Deficit on treasury share
transactions (17 921) (23 780) (64 538)
Dividends to shareholders (436 347) (319 762) (512 308)
Net cash outflows from
financing activities (671 100) (531 864) (748 026)
Change in cash and cash
equivalents (469 686) 72 681 201 629
Cash and cash equivalents
at beginning of the period 1 368 512 1 170 743 1 170 743
Exchange gains/(losses) 1 121 (2 114) (3 860)
Cash and cash equivalents
at end of the period 899 947 1 241 310 1 368 512
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.
2011 2010 % 2011
R`000 1 October 25 September change 2 April
Retail sales and
other income
Apparel 3 896 840 3 504 488 11 7 782 964
Home 1 512 520 1 378 308 10 3 119 944
Central Services 5 338 4 475 10 186
Total 5 414 698 4 887 271 11 10 913 094
Profit from operating
activities
Apparel 626 567 526 374 19 1 302 340
Home 130 496 82 973 57 271 218
Central Services (77 586) (70 564) (139 790)
Total 679 477 538 783 26 1 433 768
Segment assets
Apparel 1 821 341 1 500 770 21 1 607 267
Home 644 429 589 664 9 612 817
Central Services 1 190 553 1 526 439 1 641 053
Total 3 656 323 3 616 873 1 3 861 137
consolidated statement of changes in equity
2011 2010 2011
R`000 1 October 25 September 2 April
Total equity attributable
to shareholders at beginning
of the period 2 394 184 2 070 823 2 070 823
Total comprehensive income
for the period 454 265 367 867 1 006 938
Treasury share transactions (211 472) (198 394) (209 796)
Recognition of share-based
payments 21 071 16 710 38 527
Dividends to shareholders (436 347) (319 762) (512 308)
Total equity attributable
to shareholders at end of
the period 2 221 701 1 937 244 2 394 184
supplementary information
2011 2010 2011
1 October 25 September 2 April
Weighted average number of
shares in issue (000) 242 839 245 399 245 024
Number of shares in
issue (000) 241 603 243 465 244 845
Net asset value per share
(cents) 920 796 978
Reconciliation of core
headline earnings (R`000)
Attributable profit 453 059 370 025 1 010 254
Loss on disposal of and
impairment of property,
plant, equipment and
intangible assets 2 394 8 475 21 540
Taxation adjustment (670) (2 373) (5 395)
Headline earnings 454 783 376 127 1 026 399
Impact of export partnerships - - 4 226
Core headline earnings 454 783 376 127 1 030 625
Capital expenditure (R`000)
- expended during the period 137 972 65 903 155 574
- authorised or committed
at period end 215 862 138 037 304 683
Number of stores 944 943 937
Notes:
1. The results to 1 October 2011 are unaudited. The results to
2 April 2011 were audited byErnst & 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 2011 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 2011 annual financial statements.
This report and the supporting presentation are available on our website:
www.mrpricegroup.com
Date: 15/11/2011 14:00:01 Produced by the JSE SENS Department.
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