| Wed 30 May 2001, 0:00 | | Mr Price Group Limited - Audited Results |
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MR PRICE GROUP LIMITED
(Formerly Specialty Stores Limited)
REG. NO. 1933/004418/06
INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA
Audited group results for the year to 31 March 2001
SALIENT FEATURES
Sales increase by 15% with cash sales rising to 79%
Market share gains continue
Adjusted headline earnings per share decline by 9%
3 stores open in Chile
Dividend maintained
Further expansion planned
CONSOLIDATED INCOME STATEMENT - R'000
2001 2000 %
53 weeks 52 weeks change
March March
Turnover 2 604 211 2 259 914 15
Other income 39 415 15 893 148
Total revenue 2 643 626 2 275 807 16
Costs and expenses 2 501 966 2 134 035 17
Profit from operating
activities before
restructuring costs 141 660 141 772 -
Restructuring costs 1 839 -
Profit from operating
activities 139 821 141 772 (1)
Finance costs 17 379 2 796
Profit before taxation 122 442 138 976 (12)
Taxation 34 318 39 309 (13)
Profit after taxation 88 124 99 667 (12)
Outside shareholders' interest 1 085 -
Net profit for the year 89 209 99 667 (10)
Preference dividends 16 16
Profit attributable to
ordinary shareholders 89 193 99 651 (10)
Weighted average number
of ordinary shares
in issue 233 896 027 230 009 515
Earnings per ordinary
share (cents) (weighted)
- basic 38,1 43,3 (12)
- headline 38,6 43,5 (11)
- adjusted headline 39,4 43,5 (9)
- diluted 37,6 42,4 (11)
Distribution per ordinary
share (cents) 12,0 12,0 -
Distribution cover (times) 3,2 3,6 (11)
CONSOLIDATED BALANCE SHEET - R'000
2001 2000
March March
Assets
Non-current assets 430 626 375 984
Property, plant and equipment 188 740 162 554
Intangibles 8 559 8 880
Long-term receivables 224 384 194 277
Deferred taxation assets 8 943 10 273
Current assets 820 768 648 702
Inventories 382 596 387 873
Accounts receivable 312 639 182 913
Bank balances and cash 125 533 77 916
Total assets 1 251 394 1 024 686
Equity and liabilities
Capital and reserves 560 715 480 309
Ordinary shareholders'
interest 560 415 480 009
Preference share capital 300 300
Outside shareholders' interest 1 -
Non-current liabilities 306 282 174 438
Long-term liabilities 106 267 507
Deferred taxation liabilities 200 015 173 931
Current liabilities 384 396 369 939
Trade and other payables
and provisions 378 063 364 365
Bank overdrafts - 343
Other current liabilities 6 333 5 231
Total equity and
liabilities 1 251 394 1 024 686
SUPPLEMENTARY INFORMATION
2001 2000
March March
Number of ordinary shares
in issue 235 379 747 231 761 660
(Prior to restructuring:
Ordinary and `N' ordinary
shares
After restructuring:
Ordinary and B ordinary
shares)
Net asset value per
ordinary share (cents) 238 207
R'000 R'000
Reconciliation of adjusted
headline earnings
Attributable earnings 89 193 99 651
Amortisation of goodwill 326 252
Loss on disposal of property,
plant and equipment 1 047 117
Taxation adjustment (314) (35)
Headline earnings 90 252 99 985
Restructuring costs 1 839 -
Adjusted headline earnings 92 091 99 985
Depreciation and amortisation
for the year - R'000 54 222 49 853
Capital expenditure - R'000
- expended during the year 81 268 74 150
- authorised or committed at
year end 68 871 96 741
Borrowing powers are limited to R841 million and unutilised borrowing
facilities amount to R250 million.
South African Statements of Generally Accepted Accounting Practice have been
applied including the early adoption of AC107. Comparative figures have
been restated where necessary.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY - R'000
2001 2000
March March
Opening capital and reserves 480 309 376 192
Effect of change in treatment
of audit fee provision
and dividend 1 417 9 056
Restated capital and reserves 481 726 385 248
Increase in share capital and
share premium 17 694 17 141
Profit attributable to
ordinary shareholders 89 193 99 651
Ordinary distribution (27 898) (21 731)
Closing capital and reserves 560 715 480 309
CONSOLIDATED CASH FLOW STATEMENT - R'000
2001 2000
53 weeks 52 weeks
March March
Cash inflows from operating
activities 177 294 110 994
Cash flow from trading 158 445 179 191
Working capital changes 19 248 (67 184)
Net interest received 16 680 8 925
Taxation paid (5 778) (2 231)
Dividends paid (11 301) (7 707)
Cash outflows from investing
activities (236 737) (104 667)
Acquisition of businesses - (1 442)
Increase in long-term
receivables (38 104) (17 921)
Repurchase of accounts
receivable from bank/
joint venture (118 001) (14 012)
Replacement of property,
plant and equipment (19 836) (27 844)
Additions to property,
plant and equipment (58 088) (41 702)
Additions to intangible
assets (2 708) (1 746)
Cash inflows from financing
activities 107 403 5 904
Net increase in cash and
cash equivalents 47 960 12 231
COMMENTS
RESULTS
Sales rose by 15% to R2,6 billion. This compares with growth of 6,1% for
clothing and footwear reported by the Retail Liaison Committee. Operating
profits, after including the net income on the interest bearing accounts
receivable which were repurchased during the year, were 1% lower than the
previous year. Higher finance charges reflected the cost of financing the
reacquired debtors and profit before tax declined by 12% to R122,4 million.
Attributable income was down by 10% to R89,2 million and headline earnings
per share, adjusted for the non-recurring restructuring costs, declined by
9% to 39,4 cents per share. The distribution to shareholders has been
maintained at 12 cents per share for the year.
TRADING
Shareholders were advised at the interim stage that an increase in earnings
would not be possible given the trading environment at that time. While
there was an improvement in trading over the last four months of the
financial year, this was not sufficient to offset the difficult trading
during the middle of last year.
Retailers were buffeted by changes in consumer spending patterns which in
turn caused higher than normal mark-downs and price deflation in the
clothing sector. The situation was aggravated by the group's high profit
growth in the previous year when a 43% increase in group attributable income
was achieved.
At the year end the number of stores in the group totalled 708 after the
opening of 65 stores during the year.
Cash division
Sales in the Cash division increased by 21%. Sales for Mr Price Weekend
Material grew by 8% and Mr Price Home and Mr Price Heroes increased sales by
81% and 290% respectively. While the profit contribution of the new
businesses was higher, Weekend Material showed a decline in profitability
for the first time in eight years, as a result of poor trading in the August
to November period. This was caused not only by the changes affecting
consumer spending on apparel but also by some incorrect merchandising
decisions. The errors were addressed and comparable sales growth in the
last four months of the financial year reflected a good recovery. Despite
the difficult conditions, total unit sales for Weekend Material and Heroes
increased by 19% over the year indicating good market share gains. During
the year two new brands were successfully launched, being "Red" surfwear and
"Yeah Baby" for infants.
The three new stores in Chile contributed profitably at branch level. As a
consequence, however, of establishment costs and regional office overheads
being spread over only three stores, a trading loss was, as expected,
recorded. Four more stores are planned for the new year. There are some
differences in weather patterns and tastes in South America and once these
differences are well understood, a faster store roll-out will be possible.
Credit division
The credit businesses held their own in the subdued credit trading
environment and increased sales by 5%. The Hub's turnover rose by 6% and
profits showed further improvement as it returned to its value retailing
roots. Sheet Street, which is now managed by The Hub, also increased
profits on a sales increase of 10%.
Milady's turnover was 9% higher but profits were lower off a high base in
the previous year. Its customer focus remained consistent and its
performance was good in the difficult trading climate.
Galaxy's sales declined by 15% and its profits were lower than the previous
year in a depressed jewellery sector.
FINANCE
The percentage of cash sales rose to 79% from 77% in the previous year.
Good control of stocks and debtors assisted the group's positive cash flow
and, despite the repurchase of the interest bearing debtors book of R118
million and the opening of 65 new stores, a net cash surplus was achieved at
year end.
RESTRUCTURING
During the year the group was restructured and its name changed from
Specialty Stores Limited to Mr Price Group Limited. In terms of the
restructuring, all Storeco shareholders received Mr Price Group shares and
Specialty `N' shares and ordinary shares were ultimately converted into Mr
Price Group ordinary shares. The control structure of the group was
maintained by the issue of B ordinary shares to the controlling
shareholders. This change in the share structure has improved the
tradeability and liquidity of the share.
PROSPECTS
Trading in the year ahead should be a little easier as most of the major
shifts in spending will have taken place and the benefits of lower tax and
interest rates should finally start to have some impact.
With Mr Price Weekend Material back on track and Heroes and Home performing
well, a strong recovery is expected for the Cash division. The Hub,
Milady's and Galaxy are also expected to improve their trading performance
and profitability.
We will be opening a further 60 stores in the new financial year, most of
which will be in the Cash division. It is expected that an increase in
profits will be achieved for the year ending March 2002.
On behalf of the board
S B Cohen - Joint chairman
L J Chiappini - Joint chairman
A E McArthur - Chief executive officer
Durban 24 May 2001
DECLARATION OF FINAL DIVIDEND
Notice is hereby given that the directors have declared a final dividend of
9,0 cents per ordinary and B ordinary share for the financial year ended 31
March 2001. Dividend cheques will be posted on or about 29 June 2001 to
shareholders registered at the close of business on Friday, 15 June 2001.
On behalf of the board
C SYuill - Secretary
Durban 24 May 2001
Transfer secretaries: Mercantile Registrars Limited, 10th Floor, 11
Diagonal Street, Johannesburg, 2001. P O Box 1053, Johannesburg, 2000.
Telephone: (011) 370 5000
This report is available on our website: www.mrpricegroup.com
MR PRICE GROUP GROWS SALES BY 15%
PRESS RELEASE
Adjusted headline earnings decline by 9% in tough climate
ÝCape Town, 30 May 2001¨ The Mr Price Group released its year-end results
today, reporting a growth in sales of 15% to R2.6-billion in a period of
major shifts in consumer spending. This compares with growth of 6.1% for
clothing and footwear reported by the Retail Liaison Committee. However,
attributable income was down 10% to R89.2-million and headline earnings per
share adjusted for non-recurring restructuring costs declined by 9.4% to
39.4 cents per share.
For the year ending 31 March 2001, operating profits prior to restructuring
costs were level with last year at R141.7-million and benefited through the
re-purchase of interest-bearing debtors during the year. This benefit was
offset by the resulting higher financing charges to fund the re-purchase,
and profit before tax declined by 12% to R122.4-million. The distribution
to shareholders was maintained at 12 cents per share for the year.
The Group's Southern African operating income prior to restructuring costs
increased by 3.4%. This was after exclusion of the benefit from the debtors
re-purchase, startup losses in Chile, a provision for the impact of a lower
share price on the Staff Share Trust and a first time provision for onerous
contracts in respect of the leases on three stores in terms of new
accounting rules.
Chief Executive Officer, Alastair McArthur said, "It is easy to blame poor
performance on cell phones, gambling, petrol price increases and other
consumer distractions. The fact is we have successfully managed to ride
through similar downturns in spending in the past and expected to do so
again notwithstanding the base of a 43% increase in earnings last year."
"Our volumes in certain fashion items in Mr Price Weekend Material were too
high and we had to slash prices and reduce margins, which had a deflationary
effect. At such low price levels it became difficult to show meaningful
sales increases. It was also difficult to anticipate the sharp decline in
consumer spending on apparel early enough, which led to excess inventory and
therefore necessitated corrective markdown action.
"At year end our stocks were below last year despite the opening of 65
stores and a 15% increase in sales. Mr Price Weekend Material has shown a
good recovery and comparable (like for like store sales) from December to
the date of this report are back to previous levels".
McArthur said it was important to note that unit sales at Mr Price Weekend
Material and Heroes had increased by 19%, indicating good market share gain,
albeit at lower prices.
Sales in the Cash division - which represents the Mr Price brand - increased
by 21%. Sales for Weekend Material grew 8% over the year, but profits
declined for the first time in eight years. The new Mr Price concepts - Mr
Price Heroes and Mr Price Home - both performed well with sales in Mr Price
Home up 81% and sales at Mr Price Heroes almost trebled. McArthur said he
was pleased with the performance and profit improvement of the two new
businesses, which gave the group further growth potential. "Mr Price Home
looks like another winner and we believe that it is a Weekend Material in
the making. With our 65 stores soon to grow to 100, it should go from
strength to strength". Mr Price Heroes had increased store numbers to 30
from 13 stores.
Mr Price also launched two new in-store brands during the year. `Yeah Baby'
heralded the company's entry into infantswear. Red Surfwear was launched on
the back of the Mr Price Pro International Surf event and sponsorship by Red
Surfwear of the Sharks rugby team which was a finalist in the Super 12.
Both new brands have been very well received. Mr Price's RT jeans continue
to be the number one selling jean in South Africa, with over three million
pairs sold last year.
The three test Mr Price stores in Chile traded profitably at branch level.
As expected, an overall trading loss was recorded, given establishment costs
and regional office overheads spread over only three stores.
"We are excited about the potential in Chile", said McArthur "and we will
open a further four stores in the new financial year. There are some
differences in weather patterns and tastes in South America, and once these
differences are well understood a faster store roll-out will be possible".
The credit businesses held their own in a subdued credit trading environment
and increased sales by 5%. Profits at the Hub showed further improvement as
it returned to its value retailing roots and sales increased by 6.4%.
Sheet Street also increased profits on a sales increase of 10.1%. Milady's
profits were lower off a high base in the previous year but its performance
was good in the difficult climate, achieving a sales increase of 9.3%.
Galaxy's profits were lower on a 15% decline in sales in a depressed
jewellery sector trading environment.
The group's percentage of cash sales rose to 79% and the positive cash flows
put the company in a strong financial position at year end. Despite the
opening of 65 stores, the Group ended the year with cash on hand of R125.5-
million. "We expect the company to produce even stronger cash flows going
forward, which will provide funds for further growth locally and
internationally" said McArthur. Debtors were also well controlled he added,
and bad debts were below budgeted levels.
The group will be opening a further 60 stores in the new financial year,
most of which will be under the Mr Price brand. "We remain confident that
our value retailing formula is the appropriate model in the changing retail
environment", said McArthur.
Commenting on prospects for the group McArthur said: "Trading in the year
ahead should be a little easier as most of the major shifts in spending will
have taken place and the benefits of lower tax and interest rates should
finally start to have some impact.
"With Mr Price Weekend Material back on track and Heroes and Home performing
well, I expect a strong recovery for the Cash division. I also expect The
Hub, Milady's and Galaxy to improve their trading performance and
profitability. Given those circumstances and provided there is no dramatic
change in the economy, an increase in profits will be achieved for the year
ending March 2002.
ENDS
For further information, please contact Tamra Veley on (021) 426 1233 or 083
251 3658 or Alice Jenner on 083 448 2650.
MR PRICE GROUP LIMITED
FIVE YEAR REVIEW
2001 2000 1999 1998 1997
R'000
Trading Results
Turnover 2 604 211 2 259 914 1 889 086 1 590 530 1 372 732
Profit from operating
activities before
restructuring
costs 141 660 141 772 111 454 87 549 56 520
Restructuring
costs 1 839 - - - -
Profit from
operating
activities 139 821 141 772 111 454 87 549 56 520
Finance costs 17 379 2 796 10 299 4 988 7 570
Profit before
taxation 122 442 138 976 101 155 82 561 48 950
Effective tax
rate 28,0% 28,3% 31,1% 32,9% 28,3%
Attributable
profit 89 193 99 651 69 998 55 769 35 045
Per ordinary and
`N' ordinary share
Headline earnings
per share (cents) 38,6 43,5 30,9 25,3 15,9
Adjusted headline
earnings per
share (cents) 39,4 43,5 30,9 25,3 15,9
Distribution to
shareholders
(cents) 12,0 12,0 9,0 7,5 5,7
Dividend cover
(times) 3,2 3,6 3,4 3,4 2,9
Net asset value
(cents) 3 238 207 170 195 173
Financial ratios
Operating
margin(%) 5,4 6,3 5,9 5,5 4,1
Debt/equity - - - - -
Note 1
South African Statements of Generally Accepted Accounting
Practice have been applied including the early adoption of AC107.
Comparative figures have been restated were necessary.
Note 2
Due to the change in financial year end, the 1997 figures are for
a period of 13 months.
Note 3
Intangibles amounting to R112,9 million were written off against
share premium during the 1999 period and the comparative net
asset values have been restated to provide a fairer comparison.
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