| Wed 17 Nov 2004, 10:10 | | Results For The Six Months To 30 September 2004 |
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Mr Price Group Limited - Group Results For The Six Months To 30 September 2004
Mr Price Group Limited
(Registration number 1933/004418/06)
(Incorporated in the Republic of South Africa)
ISIN: ZAE000026951 JSE share code: MPC
* HIGHLIGHTS
* NET PROFIT FROM CONTINUING OPERATIONS UP 46% TO R80,7 MILLION
* OPERATING MARGIN UP 33%
* HEADLINE EARNINGS PER SHARE UP 31% TO 33,2 CENTS
* DIVIDEND PER SHARE INCREASED BY 91%
GROUP RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 2004
CONSOLIDATED INCOME STATEMENT
2004 2003 2004
September September March
26 weeks 26 weeks % 52 weeks
R`000 (Unaudited) (Unaudited) change (Audited)
Revenue 1 989 855 1 839 936 8 4 064 007
Continuing operations 1 984 534 1 818 951 9 4 033 503
Discontinuing
operations 5 321 20 985 (75) 30 504
Continuing operations
Turnover 1 966 668 1 797 351 9 3 991 386
Other income 17 866 21 600 (17) 42 117
Total revenue 1 984 534 1 818 951 9 4 033 503
Cost of sales and expenses 1 865 503 1 736 520 7 3 736 467
Profit from operating
activities 119 031 82 431 44 297 036
Net finance
income/(costs) 5 022 (1 506) 433 (633)
Profit before taxation 124 053 80 925 53 296 403
Taxation 43 392 25 752 68 90 190
Net profit from continuing
operations 80 661 55 173 46 206 213
Discontinuing operations
(Loss)/profit from
operating activities (1 051) 4 355 3 229
Loss arising from
discontinuance (1 182) (12 819) (13 712)
Net finance income/(costs) 142 (3) (2)
Loss before taxation (2 091) (8 467) (10 485)
Taxation 461 357 22
Net loss from
discontinuing operations (2 552) (8 824) 71 (10 507)
Total group
Net profit attributable
to
shareholders 78 109 46 349 69 195 706
Weighted average number
of ordinary and B
ordinary shares in
issue (net of shares
held by staff share
trust) (000) 240 557 236 039 2 237 074
Earnings per share (cents)
- basic 32,5 19,6 66 82,6
- headline 33,2 25,3 31 89,1
- diluted basic 31,5 19,2 64 80,5
- diluted headline 32,2 24,8 30 86,9
Dividend per share (cent) 13,2 6,9 91 35,0
Dividend cover (times) 2,5 3,7 (32) 2,5
CONSOLIDATED BALANCE SHEET
2004 2003 2004
September September March
R`000 (Unaudited) (Unaudited) (Audited)
Assets
Non-current assets 673 863 608 218 647 020
Property, plant and equipment 249 908 272 086 255 672
Intangibles 9 162 9 980 9 740
Long-term receivables 409 691 320 245 376 409
Deferred taxation assets 5 102 5 907 5 199
Current assets 1 287 274 1 125 596 1 208 320
Inventories 587 711 610 284 550 583
Trade and other receivables 324 970 310 920 323 348
Cash and cash equivalents 374 593 204 392 334 389
Total assets 1 961 137 1 733 814 1 855 340
Equity and liabilities
Capital and reserves 946 697 781 586 925 214
Non-current liabilities 308 842 370 019 318 125
Long-term liabilities 21 663 50 739 36 836
Deferred taxation liabilities 287 179 319 280 281 289
Current liabilities 705 598 582 209 612 001
Trade and other payables and
provisions 677 071 557 760 515 117
Short-term borrowings - 22 219 95 210
Taxation 28 527 2 230 1 674
Total equity and liabilities 1 961 137 1 733 814 1 855 340
CONSOLIDATED CASH FLOW STATEMENT
2004 2003 2004
September September March
R`000 (Unaudited) (Unaudited) (Audited)
Cash flows from operating activities
Operating profit before working
capital changes 145 479 86 897 327 462
Working capital changes 92 695 17 871 3 445
Net interest received 18 211 18 695 36 006
Taxation paid (11 013) (23 177) (125 118)
Dividends paid (65 937) (43 596) (59 639)
Net cash inflows from
operating activities 179 435 56 690 182 156
Continuing operations 186 397 53 024 183 124
Discontinuing operations (6 962) 3 666 (968)
Cash flows from investing activities
Net advances in respect of
long-term receivables (6 768) (3 215) (43 775)
Replacement of property,
plant and equipment (3 846) (5 914) (6 813)
Additions to property, plant
and equipment (30 623) (36 951) (57 881)
Additions to intangibles (2 268) (3 255) (6 019)
Proceeds on disposal of
shopfitting business 4 480
Proceeds on disposal of property,
plant and equipment 170 717 1 046
Net cash outflows from
investing activities (38 855) (48 618) (113 442)
Continuing operations (43 391) (49 082) (113 878)
Discontinuing operations 4 536 464 436
Cash (outflows)/inflows from
financing activities
(continuing operations) (100 376) (10 102) 59 253
Proceeds from issue of shares 9 311 2 817 13 131
Proceeds from disposal of
investments by staff share trusts 696 753 706
(Decrease)/increase in
borrowings (110 383) (13 672) 45 416
Net increase/(decrease) in cash
and cash equivalents 40 204 (2 030) 127 967
Cash and cash equivalents at
beginning of the period 334 389 206 422 206 422
Cash and cash equivalents at
end of the period 374 593 204 392 334 389
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
2004 2003 2004
September September March
R`000 (Unaudited) (Unaudited) (Audited)
Opening capital and reserves
as previously stated 925 214 788 918 788 918
Effect of consolidation of
staff share trusts (293) (293)
Effect of adoption of AC 133 (12 902) (12 902)
Restated opening capital and
reserves 925 214 775 723 775 723
Increase in share capital and
share premium 9 311 2 817 13 131
Effect of consolidation of staff
share trusts 293 293
Profit attributable to
shareholders 78 109 46 349 195 706
Dividends (65 937) (43 596) (59 639)
Closing capital and reserves 946 697 781 586 925 214
NOTES
1. The interim results are not audited.
2. The accounting policies applied are in compliance with South African
Statements of Generally Accepted Accounting Practice and are consistent with
those applied in the period ending September 2003, 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 contributions made by the
company to export partnerships at amortised cost.
3. Subsequent to March 2004, AC 128 Impairment of Assets, AC 129 Intangible
Assets and AC 140 Business Combinations were adopted. These statements have a
prospective application and have resulted in the cessation of the amortisation
of goodwill.
SUPPLEMENTARY INFORMATION
2004 2003 2004
September September March
(Unaudited) (Unaudited) (Audited)
Number of ordinary and
B ordinary shares in issue
(net of shares held by staff
share trust) (000) 241 215 236 578 239 066
Net asset value per share (cents) 392 330 387
R`000 R`000 R`000
Reconciliation of headline earnings
Attributable earnings 78 109 46 349 195 706
Amortisation of goodwill 184 378
Loss arising from discontinuance 1 182 12 819 13 712
Loss on disposal and scrapping of
property, plant and equipment in
continuing operations 987 610 2 145
Taxation adjustment (296) (183) (644)
Headline earnings 79 982 59 779 211 297
Depreciation and amortisation for
the period 40 656 36 155 75 540
Capital expenditure
- expended during the period 36 737 46 120 70 713
- authorised or committed at
period end 71 288 47 680 90 500
Borrowing powers are limited to R1 420 million and unutilised borrowing
facilities amount to R280 million.
Restatement of September 2003
earnings per share (cents) Basic Headline
As previously stated 20,3 26,0
Effect of consolidation of staff share trusts (0,5) (0,5)
Effect of adoption of AC 133 (0,2) (0,2)
Restated 19,6 25,3
SEGMENTAL REPORTING
Business segments
The group`s retail activities are organised into two divisions for operational
and management purposes.
2004 2003 2004
September September % March
R`000 (Unaudited) (Unaudited) change (Audited)
Revenue
Continuing operations 1 984 534 1 818 951 9 4 033 503
Cash division 1 468 084 1 344 429 9 2 980 535
Credit division 513 836 473 085 9 1 047 941
Central services 7 398 5 992 16 671
Eliminations (4 784) (4 555) (11 644)
Discontinuing operations 5 321 20 985 (75) 30 504
Total 1 989 855 1 839 936 8 4 064 007
Operating profit before loss
arising from discontinuance
Continuing operations 119 031 82 431 44 297 036
Cash division 91 811 63 029 46 206 682
Credit division 46 697 35 697 31 114 685
Central services (20 765) (16 760) (26 544)
Other (154) (161) (412)
Eliminations 1 442 626 2 625
Discontinuing operations (1 051) 4 355 (124) 3 229
Total 117 980 86 786 36 300 265
COMMENTARY
RESULTS
The retail sector has benefited from the steady decline in interest rates and
the consequent increase in consumer spending. The Mr Price group, committed to
its value retailing strategy, has continued to pass on the benefit of lower cost
prices to its customers. While this has limited sales growth in rand terms, it
has resulted in strong unit sales growth and the gain of new customers. In the
period under review, this has enabled the group, which sells predominantly on
cash terms, to produce strong improvements in the operating margin and
profitability of its continuing operations.
Sales increased by 9% despite selling price deflation of 8% and this was
achieved with unit sales growth of 19%. Gross profit margins were improved
across the group and expenses were well controlled. Profit from operating
activities was 44% higher with the operating margin improving from 4,6% to 6,1%
and profit before taxation increased by 53%. The taxation rate was higher as a
result of certain non-recurring credits in the previous period and net profit
from continuing operations rose by 46%.
During the period the company sold its shopfitting business and the trading
results and loss on discontinuance have been reflected under discontinuing
operations. The operating loss from discontinuing operations of R1,1 million
compared to the operating profit of R4,4 million in the previous period had the
effect of reducing the growth in headline earnings per share to 31%.
The decision has been taken to apply a more uniform dividend cover policy to
both interim and final dividends. The interim dividend cover has, accordingly,
been lowered to the 2,5 times cover of the previous year`s annual distribution.
This has resulted in the declaration of an interim dividend of 13,2 cents,
representing an increase of 91% on the prior year`s 6,9 cents.
TRADING
The cash division, comprising Mr Price Weekend Material, Mr Price Home and Sheet
Street, operated with a 4,4% increase in trading space. With selling price
deflation of 9%, the division sold 20% more units and increased sales by 9%.
Operating profits rose by 46% to R92 million with the operating margin improving
from 4,7% to 6,3%.
Mr Price Weekend Material achieved strong unit growth and benefited from an
improved operating margin. The expansion and revamp strategy continues to
deliver anticipated results.
The home chains (Mr Price Home and Sheet Street) extended the improved trading
performance which they recorded in the second half of the prior year.
Significant unit growth was recorded and a material improvement in profitability
was achieved.
The cash division ended the period with 539 stores.
The credit division, comprising Miladys, The Hub and Galaxy, although negatively
affected by the decrease in interest income from trade receivables, increased
operating profits by 31% to R47 million and operating margin was lifted from
7,9% to 9,4%. The division, with no additional trading space and with selling
price deflation of 4%, sold 15% more units and increased revenue by 9%. Miladys,
which represents 58% of the division`s turnover, recorded a strong performance
and was able to deliver significant growth in unit sales, operating margin and
profitability.
The Hub traded well, but the decline in interest rates impacted the income from
its trade receivables and led to the chain reporting operating profits slightly
lower than the comparable period. Galaxy built on its strong performance in the
prior year with a solid growth in operating profit.
The credit division ended the reporting period with 259 stores.
FINANCE
Cash balances were higher at R375 million at period end. This was after
repayment of the short-term borrowings of R95 million incurred at the previous
financial year end to fund the accelerated taxation payment and the investment
of R36,7 million in capital expenditure.
Inventories were lower than those reported at the end of the previous interim
period. Trade receivables were well controlled with the bad debt expense at 1,7%
of credit turnover.
PROSPECTS
The forecast inflation of 8% for summer will see the group reporting nil
inflation for the full year. Although the summer season will be matched against
a higher comparable base than was the case in the first half, the group will
report further growth in earnings at the end of the financial year.
The strong financial health of the group`s balance sheet will assist with the
planned expansion aimed at delivering group sales of R6 billion at an operating
margin of 10% by the 2007 financial year. New retail opportunities are also
being internally developed.
On behalf of the board
S B Cohen - Joint chairman
L J Chiappini - Joint chairman Durban
A E McArthur - Chief executive officer 17 November 2004
DECLARATION OF INTERIM DIVIDEND
Notice is hereby given that the directors have declared an interim dividend of
13,2 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 3 December 2004
Date trading commences `ex` the dividend Monday 6 December 2004
Record date Friday 10 December 2004
Date of payment Monday 13 December 2004
Shareholders may not dematerialise or rematerialise their shares between 6
December 2004 and 10 December 2004, both dates inclusive.
On behalf of the board Durban
C S Yuill - Secretary 17 November 2004
TRANSFER SECRETARIES
Computershare Investor Services 2004 (Pty) Ltd.,
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
