| Wed 26 May 2004, 8:16 | | ROUP RESULTS FOR THE YEAR ENDED 31 MARCH 2004 |
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MR PRICE GROUP LIMITED - AUDITED GROUP RESULTS FOR THE YEAR ENDED 31 MARCH 2004
MR PRICE GROUP LIMITED
Registration number 1933/004418/06
Incorporated in the Republic of South Africa
ISIN:ZAE 000026951
JSE share code:MPC
Highlights
TURNOVER UP 14% TO R4 BILLION WITH PRICE DEFLATION OF 7%
UNIT SALES UP 23%
HEADLINE EARNINGS PER SHARE UP 25%
DIVIDEND PER SHARE INCREASED BY 40%
STRONG CASH FLOWS
Audited group results for the year ended 31 March 2004
CONSOLIDATED INCOME STATEMENT
2004 2003 %
R`000 March March change
Revenue 4 064 007 3 603 741 13
Continuing operations 4 051 733 3 558 172 14
Discontinuing operations 12 274 45 569 (73)
Continuing operations
Turnover 4 009 616 3 514 566 14
Other income 42 117 43 606 (3)
Total revenue 4 051 733 3 558 172 14
Costs and expenses 3 754 549 3 291 843 14
Profit from operating activities 297 184 266 329 12
Net finance costs 638 10 679 (94)
Profit before taxation 296 546 255 650 16
Taxation 90 212 78 993 14
Net profit from continuing operations 206 334 176 657 17
Discontinuing operations
Profit/(loss) from operating activities 3 081 (16 763)
Loss arising from discontinuance (13 712) -
Net finance income 3 77
Net loss from discontinuing operations (10 628) (16 686) 36
Total group
Net profit attributable to ordinary
shareholders 195 706 159 971 22
Weighted average number of ordinary
and B ordinary shares in issue
(net of shares held by staff
share trust) (000) 237 074 235 272 1
Earnings per ordinary share (cents) (weighted)
- basic 82,6 68,0 21
- headline 89,1 71,1 25
- diluted 80,5 66,9 20
Distribution per ordinary share (cents) 35,0 25,0 40
Distribution cover (times) 2,5 2,8 (11)
CONSOLIDATED BALANCE SHEET
2004 2003
R`000 March March
Assets
Non-current assets 647 020 599 677
Property, plant and equipment 255 672 267 619
Intangibles 9 740 9 211
Long-term receivables 376 409 318 133
Deferred taxation assets 5 199 4 714
Current assets 1 208 320 1 112 789
Inventories 550 583 574 211
Trade and other receivables 323 348 332 156
Cash and cash equivalents 334 389 206 422
Total assets 1 855 340 1 712 466
Equity and liabilities
Capital and reserves 925 214 788 625
Non-current liabilities 318 125 360 420
Long-term liabilities 36 836 63 535
Deferred taxation liabilities 281 289 296 885
Current liabilities 612 001 563 421
Trade and other payables and provisions 515 117 519 827
Short-term borrowings 95 210 23 095
Taxation 1 674 20 499
Total equity and liabilities 1 855 340 1 712 466
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
2004 2003
R`000 March March
Opening capital and reserves 788 625 673 010
Effect of consolidation of staff share trusts - (7 438)
Effect of adoption of AC 133 (12 902) -
Restated opening capital and reserves 775 723 665 572
Increase in share capital and share premium 13 131 1 625
Effect of consolidation of staff share trusts 293 7 145
Profit attributable to ordinary
shareholders 195 706 159 971
Ordinary distribution to shareholders (59 639) (45 688)
Closing capital and reserves 925 214 788 625
CONSOLIDATED CASH FLOW STATEMENT
2004 2003
R`000 March March
Cash flows from operating activities
Operating profit before working capital
changes 327 462 286 057
Working capital changes 3 445 (111 113)
Net interest received 36 006 28 294
Taxation paid (125 118) (12 059)
Dividends paid (59 639) (45 688)
Net cash inflows from operating activities 182 156 145 491
Continuing operations 181 879 154 487
Discontinuing operations 277 (8 996)
Cash flows from investing activities
Net advances in respect of long-term
receivables (43 775) (49 668)
Replacement of property, plant and
equipment (6 813) (27 149)
Additions to property, plant and equipment (57 881) (130 482)
Additions to intangible assets (6 019) (6 223)
Proceeds on disposal of property, plant
and equipment 1 046 4 337
Net cash outflows from investing
activities (113 442) (209 185)
Continuing operations (114 031) (208 955)
Discontinuing operations 589 (230)
Cash inflows/(outflows) from financing
activities (continuing operations) 59 253 (14 297)
Proceeds from issue of shares 13 131 1 625
Proceeds from disposal of investments
by staff share trusts 706 7 283
Increase/(decrease) in borrowings 45 416 (23 205)
Net increase/(decrease) in cash and
cash equivalents 127 967 (77 991)
Cash and cash equivalents at beginning
of the year 206 422 284 413
Cash and cash equivalents at end of
the year 334 389 206 422
SUPPLEMENTARY INFORMATION
2004 2003
March March
Number of ordinary and B ordinary shares
in issue (net of shares held by staff
share trust) (000) 239 066 235 580
Net asset value per ordinary share (cents) 387 335
R`000 R`000
Reconciliation of headline earnings
Attributable earnings 195 706 159 971
Amortisation of goodwill 378 368
Loss arising from discontinuance 13 712 -
Loss on disposal and scrapping of
property, plant and equipment in
continuing operations 2 145 10 001
Taxation adjustment (644) (3 000)
Headline earnings 211 297 167 340
Depreciation and amortisation for the year 75 540 70 790
Capital expenditure
- expended during the year 70 713 163 854
- authorised or committed at year end 90 500 69 190
Borrowing powers are limited to R1 388 million and unutilised borrowing
facilities amount to R250 million.
SEGMENTAL REPORTING
Business segments
The group`s retail activities are organised into two divisions for operational
and management purposes.
The main constituent of `Other` is the group`s shopfitting business.
2004 2003 %
R`000 March March change
Revenue
Continuing operations 4 051 733 3 558 172 14
Cash division 2 980 535 2 547 455 17
Credit division l 047 941 990 594 6
Central services 16 671 12 437
Other 49 674 93 104
Eliminations (43 088) (85 418)
Discontinuing operations 12 274 45 569 (73)
Total 4 064 007 3 603 741 13
Operating profit before loss arising from discontinuance
Continuing operations 297 184 266 329 12
Cash division 206 682 165 223 25
Credit division 114 685 110 263 4
Central services (26 544) (13 733)
Other (264) 13 352
Eliminations 2 625 (8 776)
Discontinuing operations 3 081 (16 763) 118
Total 300 265 249 566 20
NOTES
1.The accounting policies applied are in compliance with South African
Statements of Generally Accepted Accounting Practice and are consistent with
those applied in the 2003 annual financial statements, with the exception of the
adoption of AC 133 Financial Instruments: recognition and measurement and the
amendment of the definition of subsidiaries to include staff share trusts as a
result of a ruling issued by the JSE`s GAAP Monitoring Panel. Comparative
figures have been restated in accordance with the transitional provisions of AC
132 Consolidated Financial Statements. An adjustment to opening retained income
has been made in accordance with AC 133 to reflect the contributions made by the
company to export partnerships at amortised cost.
2.The results for the year ended 31 March 2004 have been audited by Ernst &
Young. Their unqualified opinion is available for inspection at the company`s
registered office.
COMMENTARY
GROUP RESULTS
A noticeable feature of the trading environment during the year under review has
been the dramatic appreciation of the rand against the US dollar along with the
significant reduction in local interest rates. Although impacting on the first
half margins, the strategic decision to reduce selling prices, particularly in
the home chains, led to a 23% growth in unit sales. The group performed well to
counter the rapidly changing and challenging conditions with a strong second
half in which operating profits grew by 26% compared to the growth of 9% in the
first half.
For the year the group`s turnover from continuing operations increased by 14% to
R4 billion despite price deflation of 7%, compared with growth of 11,5% reported
by the Retail Liaison Committee. Operating profit from continuing operations
ended 12% higher at R297 million. The strong cash flows generated by the group,
driven by the predominantly cash businesses and effective working capital
management, saw net finance costs improve to R0,6 million from the previous
year`s levels of R10,7 million. Headline earnings per share rose by 25% to 89,1
cents. A final dividend to shareholders of 28,1 cents per share has been
declared resulting in an annual dividend of 35,0 cents which is 40% up on last
year`s 25,0 cents.
TRADING
The cash division comprising Mr Price Weekend Material, Mr Price Home and Sheet
Street, contributed 74% of the group`s total revenue. The division, despite
deflation of 7%, increased unit sales by 26% and reported a 17% growth in
revenue to end the year at R3 billion with comparable sales growth of 9%.
Operating profits ended the year 25% higher at R207 million and the operating
margin improved to 6,9% from 6,5% in the previous year.
Mr Price Weekend Material traded extremely well throughout the year and achieved
significant growth in profits and market share. The chain continues to be
innovative and energetic with the goal of exceeding customer expectations.
In the home chains (Mr Price Home and Sheet Street) margins were impacted in the
first half by the reduction in selling prices. Strong unit growth with restored
operating margins in the second half helped the home chains report a significant
improvement in second half operating profits. This positive trading trend has
continued into the new financial period.
The cash division continued with its successful formula of expanding existing
stores and, with new stores opened, grew its net trading space by 10% to 207 032
square metres, and brought its total number of outlets to 537.
The credit division, comprising Miladys, The Hub and Galaxy contributed 26% of
the group`s revenue. The division increased revenue by 6% to R1 billion with
comparable sales up 5%. Operating profits at R115 million were 4% up on last
year with Miladys, the major chain in this division, recording a modest increase
in profits off a strong base of a 50% increase in the prior year.
The Hub, although impacted by a decrease in interest income from trade
receivables attributable to the lower interest rates, reported good growth in
operating profits. Galaxy, following a strong prior year performance, also
recorded good growth in profitability.
Debtors were again well controlled with bad debts below budgeted levels. The
credit division ended the year with 263 stores.
FINANCE
After capital expenditure of R71 million, the group`s cash and cash equivalents
ended strongly at R334 million.
The group increased its cash sales percentage to 85% and continues to generate
significant levels of cash from operations. This strong cash position provides a
solid platform to fund further expansion programmes, brand and assortment
extensions and the accelerated taxation payments referred to below. This also
facilitates the reduction in dividend cover from 2,8 to 2,5 times.
CLOSURE OF CHILE STORES
As reported at half year, the Chile stores were closed during this reporting
period. Operating profits of R3 million benefited from the reversal of onerous
contract provisions of R5 million. Closure costs of R13,7 million have been
incurred and no further material costs are anticipated. The closure costs do not
impact on headline earnings.
RESOLUTION OF TAXATION ISSUES
As disclosed in previous annual reports, the company has participated in export
partnerships over the past 17 years. The company has now concluded an agreement
with SARS which has cleared all queries raised concerning the company`s
participation in these partnerships without altering the tax payable, but which
accelerates the payment of certain deferred taxation already provided for. The
agreement will not result in any increase in the company`s normal tax charge and
will have no material impact on the company`s earnings in the future.
An initial accelerated taxation payment of R100 million on 31 March 2004 was
committed to, and the agreement provides for further accelerated taxation
payments totalling R160 million to be spread over subsequent years. The tax
consequences for the company flowing from the partnerships will be
correspondingly lower in the years following the acceleration. The earlier
taxation payments will be funded by the strong positive cash flows of the group.
While the company`s view, supported by legal and tax advice, is that the tax
treatment of the export partnerships has been correct, the agreement with SARS
has been concluded in the interests of avoiding the possibility of protracted
litigation and the diversion of management.
PROSPECTS
The group aims to focus on its South African operations and continue its
expansion programme and product extensions which have yielded positive results.
In addition, possible investment in other Southern African countries as well as
abroad will continue to be investigated.
The group is well positioned to continue its positive trading trend which should
enable it to report a further growth in earnings at the end of the next
financial year.
On behalf of the board
S B Cohen - Joint chairman
L J Chiappini - Joint chairman Durban
A E McArthur - Chief executive officer 26 May 2004
DECLARATION OF FINAL DIVIDEND
Notice is hereby given that the directors have declared a final dividend of 28,1
cents per share to the holders of ordinary and the unlisted B ordinary shares.
The following dates are applicable:
Last date to trade `cum` the dividend Friday 18 June 2004
Date trading commences `ex` the dividend Monday 21 June 2004
Record date Friday 25 June 2004
Date of payment Monday 28 June 2004
Shareholders may not dematerialise or rematerialise their shares between
21 June 2004 and 25 June 2004, both dates inclusive.
On behalf of the board Durban
C S Yuill - Secretary 26 May 2004
Computershare Investor Services 2004 (Pty) Limited,
70 Marshall Street, Johannesburg, 2001.
P O Box 61051, Marshalltown, 2107.
Telephone: (011) 370 5000
SPONSOR
Rand Merchant Bank (A division of FirstRand Bank Limited) Corporate Finance,
1 Merchant Place, Cnr Fredman Drive and Rivonia Road, Sandton, 2196.
P O Box 786273, Sandton, 2146.
Directors: L J Chiappini (Joint chairman), S B Cohen (Joint chairman),
A E McArthur (Chief executive officer), C Hultzer, M R Johnston,
Prof. L J Ring (USA), W J Swain, C S Yuill, N P Woodroffe (alternate)
This report and the supporting presentation are available on our website:
www.mrpricegroup.com
Date: 26/05/2004 08:00:20 AM Produced by the JSE SENS Department
