| Wed 25 May 2005, 9:30 | | Mr Price Group Limited - Mr Price reports excellen |
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Mr Price Group Limited - Mr Price reports excellent results for the full year
Mr Price Group Limited
Registration number 1933/004418/06Incorporated in the Republic of South Africa
ISIN: ZAE000026951
JSE share code: MPC
(`the group`)MR PRICE REPORTS EXCELLENT RESULTS FOR THE FULL YEAR
Net profit + 41%: Heps + 35%: Dividends + 71%
(Cape Town, 25 May 2005) Value retailer Mr Price Group today announced a 33%
increase in operating profit from continuing operations to R395.6-million withprofit after tax from continuing operations up by 41% to R289.9-million.
Headline earnings per share were up 35% to 120.4 cents. The annual dividends
are 71% up on the previous year at 60 cents per share following a final dividend
of 46.8 cents.The group ended the year with growth in turnover from continuing operations of
13% at R4.5-billion with comparable sales growth of 10%. Gross margins have
improved and together with well controlled store operating costs, contributed to
these good results. The group`s comparable operating margin increased from7.4% to 9.1%. Deflation of 8% in the first half of the current year worked its
way out of the system and the group ended the year with selling price deflation
of below 1%.
As a result of the continued strength of the operating cash flows, the groupearned net interest income of R15.2-million compared with last year`s net
interest paid of R0.6-million.
CEO Alastair McArthur commented `The group`s balance sheet remains strong with
cash on hand of R493.1-million. Positive cash flows have allowed the dividendcover to be reduced from 2.5 to 2.0 times. Stock turns continue to improve and
net stocks have ended 5% up notwithstanding sales growth of 13%. The debtor`s
book remains tightly controlled with bad debts below budgeted levels.`
This strong operating performance and increase in asset turns have contributedto 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%.
The cash division (Mr Price Weekend Material, Mr Price Home and Sheet Street)
grew sales by 14% to R3.4-billion with comparable sales growth of 10%, andincreased its operating profits by 51%. The cash division`s operating margin
reflected a significant improvement 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% and recorded a strong increase in operating profits.`This chain performed particularly well in the second half, growing comparable
sales by 13%. The early winter results from the first two months of the 2006
financial year indicate that this strong trend is continuing,` said McArthur.
The home chains (Mr Price Home and Sheet Street) grew sales by 25% withcomparable sales growths of 17% and significantly improved their operating
profits.
`Our home chains, with combined sales of R1.2-billion continue to be the
dominant player in their market and the successful tests of new merchandiseassortments indicate that there are still significant growth opportunities in
this area. This strong performance has also continued into the new financial
period.`
The credit division (Miladys, The Hub and Galaxy) increased revenue by 11% toR1.2-billion with comparable sales growth of 10%. Operating profit increased by
20% 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 increase revenue by 14% withcomparable sales growth of 12%. Despite selling price deflation of 8%
attributable to the lower pricing strategy, Miladys grew unit sales by 24% to
deliver a strong operating profit performance.
The Hub, with revenue growth of 6%, continued to be negatively impacted by thedecline in interest from debtors. The Hub consequently ended with slightly lower
operating profits than the prior year. Galaxy grew revenue by 10% during the
current year with comparable sales growth of 8% and further growth in operating
profits.Looking ahead, McArthur said that the strategy of expanding store trading space
launched three years ago had proved extremely successful with expansions during
the current year generating an annualised marginal return of 75% on operating
assets.`There is potential to expand many more of the group`s stores and we expect to
increase space by a further 50% over the next five years. This, in combination
with the productivity initiatives in systems and logistics, will provide the
momentum for significant earnings growth,` said McArthur.Mr Price Weekend Material and Mr Price Home have been testing the offer of
credit in certain stores in response to the continued demand from customers.
This test of credit will be extended to further stores.
The company is also making progress with several new retail concepts, the firstof which will be tested in August, while a further concept will be tested during
next year.
`While we currently have plenty of growth and profit potential in our existing
business, we are looking for additional value concepts capable of being rapidlyrolled out in future years,` said McArthur.
The group remains confident of meeting its sales target of R6-billion at an
operating margin of 10% by the 2007 year end.
`If we take into account the further space expansion, planning systems andlogistics improvements and the planned new concepts, there is a need to set a
new, more challenging target. We have therefore set an extended target to
achieve R10-billion in turnover by 2010 with further improvement in operating
margin. `With respect to the current financial year, the company confirmed that the
positive trading trend in the second half of the 2005 financial year had
continued into the first quarter of the new financial year. With most of the
group`s summer orders placed by the end of May, it is unlikely that anysignificant weakening of the rand against the US dollar would impact on pricing
in the new financial period. The recent reduction in interest rates and the low
inflationary environment suggested that positive trading conditions would
continue during most of the 2006 financial year.`Fortunately, the group`s strong value offer performs as well in declining
market conditions as it does in buoyant cycles should there be a softening,`
commented McArthur.
`Through our strong commitment to our value retailing principles, the group iswell positioned to deliver further growth in earnings at the end of the 2006
financial year,` said McArthur.
ENDS
For further information, please contact Tamra Veley on 083 251 3658.Durban
25 May 2005Date: 25/05/2005 09:12:09 AM Produced by the JSE SENS Department
