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MR PRICE GROUP LIMITED - STRONG INTERIM RESULTS FROM MR PRICE GROUP LTD MR PRICE GROUP LIMITED Registration number 1933/004418/06 (Incorporated in the Republic of South Africa) ISIN: ZAE000026951 JSE Code: MPC STRONG INTERIM RESULTS FROM MR PRICE GROUP LTD Pre-tax profit of continuing operations +53%; headline eps up 31%; interim dividend +91% (Cape Town, 17 November 2004) Value retailer Mr Price has improved profitability for the half year to September 30, with operating profits of continuing operations up 44% to R119 million and pre-tax profits up by 53% to R124 million. After adjusting for discontinuing operations, headline earnings per share were up by 31%. A lower interim dividend cover has led to the dividend being increased by 91%. CEO Alastair McArthur said these results had been achieved despite continued price deflation of 8% in the first half which had been countered by unit sales growth of 19%. Sales of continuing operations were up by 9% to R1.97 billion. He said that gross profit margins had improved across the group and costs had been well controlled. `These factors have led to the group growing its first half operating margin from 4.6% to 6.1%. The increase of 33% in the operating margin is a positive trend in our business and I expect this trend of rising operating margins to continue.` The strong cash flows had resulted in the group recording net finance income of R5 million, compared with finance cost of R1.5 million reported in the prior period. Cash sales as a percentage of turnover remained at 85%. The company reported that it had sold its shopfitting business, and the loss from discontinuing operations in the period under review amounted to R1.1 million compared to a profit in the previous year of R4.4 million. This had the effect of reducing headline earnings growth from 43% to 31%. The dividend cover had been reduced from 3.7 to 2.5 times in line with the cover of the previous year`s annual distribution. The interim dividend declared had, accordingly, been increased to 13.2 cents compared with the previous year`s 6.9 cents, an increase of 91%. Stocks and debtors were again well controlled with stocks lower than the previous year at the interim stage. Bad debts were below 2% of credit sales, which is well below the average bad debt figure for apparel retailers. This indicated that credit granting policy and management was not being eased in an environment where credit sales appeared to be rising faster than cash sales. In the cash division (Mr Price Weekend Material, Mr Price Home and Sheet Street) operating profits were up by 46% to R91.8 million on sales of R1.47 billion, with the operating margin up from 4.7% to 6.3%. The expansion and revamp continues to deliver excellent results and recently opened mega stores such as those in Claremont, Cape Town have exceeded expectations. The division increased space by 4.4% over the period. In the credit division (Miladys, The Hub and Galaxy) where there was no increase in trading space, profits were up by 31% to R46.7 million on sales of R514 million with the operating margin up from 7.9% to 9.4% . Miladys in particular showed a significantly improved performance. Looking forward, McArthur said that it was expected that the positive trading environment would continue into the second half where the group was up against a higher comparable base than in the first half. Inflation for the second half was expected to be 8% and flat for the full year. He was confident that the group would report a further growth in annual earnings at the end of the financial year. Commenting on the longer term prospects, McArthur said: `the rise in interim operating margins indicates that we are on track to achieve our stated goal of an annual operating margin of 10% on sales of R6 billion by the 2007 financial year. Furthermore, new retail opportunities which will afford additional growth potential are being developed internally.` ENDS For further information, please contact Tamra Veley on 083 251 3658.
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