| Wed 25 May 2005, 8:12 | | Mr Price - Audited group results for the year ende |
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Mr Price - Audited group results for the year ended 31 March 2005
Mr Price Group Limited
Registration number 1933/004418/06Incorporated in the Republic of South Africa
ISIN: ZAE000026951
JSE share code: MPC
(`the group` or `the company`)Audited group results for the year ended 31 March 2005
HIGHLIGHTS
- NET PROFIT FROM CONTINUING OPERATIONS UP 41%
- COMPARABLE OPERATING MARGIN RISES TO 9,1%- HEADLINE EARNINGS PER SHARE UP 35%
- DIVIDENDS PER SHARE INCREASED BY 71%
CONSOLIDATED INCOME STATEMENT
2005 2004 % March March change
R`000
Revenue 4 566 337 4 064 007 12
Continuing operations 4 560 741 4 033 503 13Discontinuing operations 5 596 30 504 (82)
Continuing operations
Turnover 4 525 558 3 991 385 13
Other income 35 183 42 118 (16)Total revenue 4 560 741 4 033 503 13
Cost of sales and expenses 4 165 174 3 736 467 11
Profit from operating activities 395 567 297 036 33
Net finance income/(costs) 15 023 (633)Profit before taxation 410 590 296 403 39
Taxation 120 655 90 190 34
Net profit from continuing operations 289 935 206 213 41
Discontinuing operations(Loss)/profit from operating activities (1 051) 3 229
Profit/(loss) arising from discontinuance 688 (13 712)
Net finance income/(costs) 168 (2)
Loss before taxation (195) (10 485)Taxation 461 22
Net loss from discontinuing operations (656) (10 507)
Total group
Net profit attributable to shareholders 289 279 195 706 48Weighted average number of
ordinary and B ordinary
shares in issue (net of
shares held by staff share trust) (000) 241 470 237 074 2
Earnings per share (cents)
- basic 119,8 82,6 45
- headline 120,4 89,1 35- diluted basic 115,2 80,5 43
- diluted headline 115,8 86,9 33
Dividends per share (cents) 60,0 35,0 71
Dividend cover (times) 2,0 2,5 (20)CONSOLIDATED BALANCE SHEET
2005 2004
March March
R`000Assets
Non-current assets 712 089 647 020
Property, plant and equipment 267 276 255 672
Intangibles 7 581 9 740Long-term receivables 432 057 376 409
Deferred taxation assets 5 175 5 199
Current assets 1 401 548 1 208 320
Inventories 575 436 550 583Trade and other receivables 332 981 323 348
Cash and cash equivalents 493 131 334 389
Total assets 2 113 637 1 855 340
Equity and liabilitiesCapital and reserves 1 135 154 925 214
Non-current liabilities 259 222 327 257
Long-term loans - 36 836
Associates` benefits 10 405 9 132Deferred taxation liabilities 248 817 281 289
Current liabilities 719 261 602 869
Trade and other payables and provisions 636 974 505 985
Short-term loans 5 657 95 210Taxation 76 630 1 674
Total equity and liabilities 2 113 637 1 855 340
CONSOLIDATED CASH FLOW STATEMENT
2005 2004 March March
R`000
Cash flows from operating activities
Operating profit before working capital changes 453 622 327 462Working capital changes 107 238 3 445
Net interest received 46 664 36 006
Taxation paid (78 608) (125 118)
Dividends paid (97 227) (59 639)Net cash inflows from operating activities 431 689 182 156
Continuing operations 431 740 183 124
Discontinuing operations (51) (968)
Cash flows from investing activitiesAdvances in respect of long-term receivables (73 611) (43 775)
Investment in property, plant and equipment (93 612) (64 694)
Investment in intangibles (2 890) (6 019)
Proceeds on disposal of shopfitting business 4 480Proceeds on disposal of property, plant and equipment 347 1 046
Net cash outflows from investing activities (165 286) (113 442)
Continuing operations (169 822) (113 878)
Discontinuing operations 4 536 436Cash (outflows)/inflows from financing activities
(continuing operations) (107 661) 59 253
Proceeds from issue of shares 17 888 13 131
Proceeds from disposal of investments by staffshare trusts 836 706
(Decrease)/increase in loans (126 385) 45 416
Net increase in cash and cash equivalents 158 742 127 967
Cash and cash equivalents at beginning of the year 334 389 206 422Cash and cash equivalents at end of the year 493 131 334 389
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
2005 2004
March MarchR`000
Opening capital and reserves 925 214 775 723
Increase in share capital and share premium 17 888 13 131
Effect of consolidation of staff share trusts - 293Profit attributable to shareholders 289 279 195 706
Dividends (97 227) (59 639)
Closing capital and reserves 1 135 154 925 214
NOTES1. The accounting policies applied are in compliance with South African
Statements of Generally Accepted Accounting Practice and are consistent with
those applied in the 2004 annual financial statements, with the exception of the
adoption of IFRS 3 Business Combinations, AC 128 Impairment of Assets and AC 129Intangible Assets. IFRS 3 Business Combinations prescribes that goodwill should
no longer be amortised, but should rather be tested for impairment on an annual
basis. The adoption of these statements has had no retrospective effect on the
comparative figures.2. The results for the year ended 31 March 2005 have been audited by Ernst &
Young. Their unqualified opinion is available for inspection at the company`s
registered office.
SUPPLEMENTARY INFORMATION 2005 2004
March March
Number of ordinary and B ordinary shares in issue
(net of shares held by staff share trust) (000) 243 005 239 066Net asset value per share (cents) 467 387
R`000 R`000
Reconciliation of headline earnings
Attributable earnings 289 279 195 706Amortisation of goodwill 378
(Profit)/loss arising from discontinuance (688) 13 712
Loss on disposal and scrapping of property,
plant and equipment in continuing operations 3 115 2 145Taxation adjustment (935) (644)
Headline earnings 290 771 211 297
Depreciation and amortisation for the year 82 252 75 540
Capital expenditure- expended during the year 96 502 70 713
- authorised or committed at year end 140 603 90 500
Borrowing powers are limited to R1 703 million and
unutilised borrowing facilities amount to R500 million.SEGMENTAL REPORTING
Business segments
The group`s retail activities are organised into two
main divisions for operational and management purposes. 2005 2004 %
March March change
R`000
RevenueContinuing operations 4 560 741 4 033 503 13
Cash division 3 394 189 2 980 535 14
Credit division 1 161 708 1 047 941 11
Central services 13 695 16 671Eliminations (8 851) (11 644)
Discontinuing operations 5 596 30 504
Total 4 566 337 4 064 007 12
Operating profit before profit/(loss) arising from discontinuance
Continuing operations 395 567 297 036 33
Cash division 312 135 206 682 51
Credit division 137 113 114 685 20Central services (40 737) (26 544)
Other (14 973) (412)
Eliminations 2 029 2 625
Discontinuing operations (1 051) 3 229Total 394 516 300 265 31
COMMENTARY
RESULTS
The retail sector continued to benefit from the favourable environment of lowerinterest rates and good growth in consumer disposable income. The sector has
also been experiencing a downward trend in semi-durable inflation since 2002.
The Mr Price group grew turnover from continuing operations by 13% to R4,5
billion, with comparable sales growth of 10%. The deflation of 8% experienced inthe first half of the current year worked its way out of the system and the
group ended the year with marginal selling price deflation of below 1%. Gross
profit margins improved and this, in conjunction with well controlled store
costs, contributed to operating profit from continuing operations growing by 33%to R395,6 million. The comparable operating margin from continuing operations
increased from 7,4% to 9,1%.
The group earned net finance income of R15,2 million compared with net finance
costs of R0,6 million in the previous year as a result of the continued strengthof the operating cash flows. Profit before taxation increased by 44% to R410,4
million. Headline earnings per share rose by 35% to 120,4 cents. The dividend
cover has been reduced from 2,5 times to 2,0 times with total dividends for the
period raised by 71% to 60 cents per share. The final dividend has beenincreased by 67% to 46,8 cents per share.
TRADING
Cash division
The cash division grew sales by 14% to R3,4 billion with marginal inflation andcomparable sales growth of 10%. Operating profits increased by 51% to R312,1
million. Lower input prices were attributable to changes in the merchandise mix,
the stabilisation in the value of the rand and the increasing strength of the
division`s purchasing power. Unit sales increased by 14% in the current yearfollowing on the 26% growth achieved in the prior year. The division`s operating
margin improved significantly from 6,9% to 9,2%.
Mr Price Weekend Material increased sales by 9% to R2,2 billion with growth in
comparable sales of 7%. Strong growth in operating profits was recorded. Thechain performed particularly well in the second half, growing comparable sales
by 13% during this period. The early winter results suggest that this strong
trend has continued into the new year.
The home chains (Mr Price Home and Sheet Street) increased sales by 25% withinflation of 3% and comparable sales growths of 17%. Improved gross profit
margins were achieved with reduced markdowns and lower shrinkage and this,
allied to the strong sales performance, led to a significant improvement in
operating profits. The home chains with combined sales of R1,2 billion, continueto be the dominant player in their market and the successful tests of new
assortments indicate that there are still significant growth opportunities. This
strong performance has also continued into the new financial period.
The group remains committed to its expansion programme and has added 41 500square metres since the launch of this strategy in 2002. In the current
financial period the Mr Price brand expanded 36 stores. The overall results of
these stores improved significantly, with a 57% increase in sales, an increase
in operating profit of 79% and an annualised marginal return on operating assetsof 75%. Given these positive results, the group has set the further target of
increasing its existing trading space by 50% by the 2010 financial year.
The Mr Price Weekend Material and Mr Price Home chains have been testing a
credit offer in response to the continued demand from customers. This test isbeing extended to further stores.
The cash division ended the year with 544 stores.
Credit division
The credit division increased revenue by 11% to R1,2 billion with comparablesales growth of 10%. Operating profit was 20% higher and the operating margin
improved from 11,3% to 12,1%.
Miladys further improved its merchandise offer and introduced increased value
into its pricing structure. These improvements assisted the chain to increasecomparable sales by 12% and total revenue by 14%. Despite selling price
deflation of 8%, the chain grew unit sales by 24% and recorded a strong
operating profit performance.
The Hub, with revenue growth of 6%, continued to be negatively impacted by thedecline in interest rates, with a reduction in the interest received from trade
receivables. The chain consequently ended the year with operating profits which
were slightly lower than the prior year.
Galaxy grew revenue by 10% with comparable sales growth of 8% and reportedanother strong performance for the third consecutive financial period.
The credit division ended the year with 272 stores.
FINANCE
The group`s balance sheet remained strong with cash on hand of R493,1 million.With improved stock turn, net stocks ended only 5% higher notwithstanding the
sales growth of 13%.
The total trade and other receivables were 3% higher at R333 million. Trade
debtors grew by 8% and remained tightly controlled with bad debts below budgetedlevels. The strong operating performance and increase in asset turns has
contributed to the group growing the return on equity from 24,7% to 28,2% and
the return on operating assets from 46,8% to 71,6%.
Deferred taxation liabilities and long-term receivables were adjusted for thechange in the corporate taxation rate and this, together with the effect of the
discontinuance losses in the prior year, contributed to the slight reduction in
the tax rate.
DISCONTINUED OPERATIONDuring the year the non-core shopfitting business was sold to the operation`s
management with no material loss.
PROSPECTS
The group previously set targets to achieve revenue of R6 billion and anoperating margin of 10% in the 2007 financial year. The current year`s results
reflect progress towards achieving this goal and an extended target has been set
to achieve turnover of R10 billion, with a further improvement in the operating
margin, in the 2010 financial year.The positive trading trend in the second half of the 2005 financial year has
continued into the first quarter of the new financial year. The recent reduction
in interest rates and the low inflationary environment should ensure that
positive trading conditions continue through most of the 2006 financial year.With the bulk of the group`s summer orders placed by the end of May, it is
unlikely that any significant weakening of the rand against the US dollar will
impact on the margins for the financial year ending March 2006.
With its strong commitment to value retailing principles, the group is wellpositioned to deliver further growth in earnings at the end of the next
financial year.
On behalf of the board
S B Cohen - Joint chairmanL J Chiappini - Joint chairman Durban
A E McArthur - Chief executive officer 25 May 2005
This report and the supporting presentation are available on our website:
www.mrpricegroup.com.Graphs illustrating operating margin, headline earnings per share and dividends
per share for the last five years can be seen in the press announcement, to be
published in the Business Day, Beeld and Business Report on 26 May 2005 and on
the website as mentioned above.DECLARATION OF FINAL DIVIDEND
Notice is hereby given that the directors have declared a final dividend
of 46,8 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 17 June 2005
Date trading commences `ex` the dividend Monday 20 June 2005
Record date Friday 24 June 2005Date of payment Monday 27 June 2005
Shareholders may not dematerialise or rematerialise their shares between
20 June 2005 and 24 June 2005, both dates inclusive.
On behalf of the board DurbanC S Yuill - Secretary 25 May 2005
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),S A Ellis+, K Getz*, C Hultzer*, M R Johnston*, Prof. L J Ring* (USA),
W J Swain*, S van Niekerk+, C S Yuill+, N P Woodroffe* (alternate)
*Non-executive director +Executive directorDate: 25/05/2005 07:31:00 AM Produced by the JSE SENS Department
