| Thu 17 Nov 2005, 8:00 | | Mr Price - Unaudited group results for the six mon |
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Mr Price - Unaudited group results for the six months to 30 September 2005
Mr Price Group Limited
Registration number 1933/004418/06
Incorporated in the Republic of South Africa
ISIN: ZAE000026951
JSE share code: MPC
UNAUDITED GROUP RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 2005
HIGHLIGHTS
HEADLINE EARNINGS PER SHARE UP 54%
DISTRIBUTION PER SHARE INCREASED BY 84%
CONTINUING OPERATIONS
REVENUE UP 24% TO R2,18 BILLION
NET PROFIT UP 58% TO R109,8 MILLION
CONSOLIDATED INCOME STATEMENT
2005 2004 2005
September September March
26 weeks 26 weeks % 52 weeks
R"000 (Restated) change (Restated)
Revenue 2 355 715 1 997 816 18 4 583 558
Continuing operations 2 184 865 1 768 568 24 4 058 055
Discontinued operations 170 850 229 248 (25) 525 503
Continuing operations
Turnover 2 169 682 1 752 024 24 4 023 414
Other income 15 183 16 544 (8) 34 641
Total revenue 2 184 865 1 768 568 24 4 058 055
Costs and expenses 2 017 525 1 659 646 22 3 710 407
Cost of sales 1 298 894 1 081 491 20 2 434 682
Selling expenses 538 635 444 129 21 945 396
Administrative and other
operating expenses 179 996 134 026 34 330 329
Profit from operating
activities 167 340 108 922 54 347 648
Net finance income 10 865 1 547 7 745
Profit before taxation 178 205 110 469 61 355 393
Taxation 68 370 41 020 67 107 160
Net profit from continuing
operations 109 835 69 449 58 248 233
Discontinued operations
Profit from operating
activities 8 350 7 344 44 848
Profit/(loss) arising from
discontinuance 2 369 (1 196) 647
Net finance (costs)/income (114) 344 849
Profit before taxation 10 605 6 492 46 344
Taxation 4 323 1 984 13 387
Net profit from discontinued
operations 6 282 4 508 39 32 957
Total group
Net profit attributable to
shareholders 116 117 73 957 57 281 190
Weighted average number of
ordinary and B ordinary
shares in issue (net of
shares held by staff share
trust) (000) 244 334 240 557 2 241 470
Earnings per share (cents)
- basic 47,5 30,7 55 116,4
- headline 48,5 31,5 54 117,1
- headline (continuing operations) 45,2 29,2 55 103,7
- diluted basic 45,1 29,8 51 112,0
- diluted headline 46,5 30,6 52 112,6
Distribution per share (cents) 24,3 13,2 84 60,0
Distribution cover (times) 2,0 2,4 (17) 2,0
CONSOLIDATED BALANCE SHEET
2005 2004 2005
September September March
R"000 (Restated) (Restated)
Assets
Non-current assets 730 525 677 597 715 847
Property, plant and equipment 287 278 261 503 277 987
Intangibles 7 741 9 162 7 581
Long-term receivables 431 196 401 754 424 882
Deferred taxation assets 4 310 5 178 5 397
Current assets 1 468 750 1 281 370 1 394 505
Inventories 543 449 581 807 568 393
Trade and other receivables 399 890 324 970 332 981
Cash and cash equivalents 525 411 374 593 493 131
Total assets 2 199 275 1 958 967 2 110 352
Equity and liabilities
Capital and reserves 1 055 807 854 305 1 040 073
Non-current liabilities 250 199 321 217 261 744
Long-term liabilities 36 333 59 396 37 232
Deferred taxation liabilities 202 759 252 039 214 107
Associates" benefits 11 107 9 782 10 405
Current liabilities 893 269 783 445 808 535
Trade and other payables and
provisions 830 372 754 455 725 353
Current portion of long-term
liabilities 1 399 463 6 552
Taxation 61 498 28 527 76 630
Total equity and liabilities 2 199 275 1 958 967 2 110 352
CONSOLIDATED CASH FLOW STATEMENT
2005 2004 2005
September September March
R"000 (Restated) (Restated)
Cash flows from operating activities
Operating profit before working
capital changes 207 020 148 759 458 642
Working capital changes 80 118 92 013 107 664
Net interest received 23 262 14 938 40 067
Distribution to shareholders (112 331) (65 937) (97 227)
Taxation paid (98 086) (11 013) (78 608)
Net cash inflows from operating
activities 99 983 178 760 430 538
Continuing operations 90 120 172 170 399 633
Discontinued operations 9 863 6 590 30 905
Cash flows from investing activities
Net advances in respect of long-term
receivables (2 721) (6 768) (73 611)
Cash flows arising on disposal of
discontinued operations 5 725 4 480 4 480
Additions to intangibles (2 548) (2 268) (2 890)
Replacement of property, plant and
equipment (48 185) (3 846) (44 344)
Additions to property, plant and
equipment (29 610) (30 623) (49 268)
Proceeds on disposal of property,
plant and equipment 6 576 170 347
Net cash outflows from investing
activities (70 763) (38 855) (165 286)
Continuing operations (73 259) (40 341) (160 644)
Discontinued operations 2 496 1 486 (4 642)
Cash flows from financing activities
(continuing operations) 5 096 (100 383) (107 736)
Proceeds from issue of share capital 10 260 9 311 17 888
Proceeds from disposal of investments
by staff share trust 888 696 836
Decrease in borrowings (6 052) (110 390) (126 460)
Net increase in cash and cash
equivalents 34 316 39 522 157 516
Cash and cash equivalents at beginning
of the period 493 131 334 389 334 389
Exchange (losses)/gains (2 036) 682 1 226
Cash and cash equivalents at end
of the period 525 411 374 593 493 131
STATEMENT OF CHANGES IN EQUITY
2005 2004 2005
September September March
R"000 NOTES (Restated) (Restated)
Total capital and reserves
at 1 April (previously stated) 1 135 154 925 214 925 214
Lease restatement and
transition to IFRS (98 487) (90 398) (90 398)
- Leases 2.1 (79 649) (74 998) (74 998)
- Foreign exchange 2.2 (1 432) (1 548) (1 548)
- Inventories 2.3 (3 928) (3 538) (3 538)
- Imputed interest 2.4 (1 964) (1 762) (1 762)
- Share-based payments 2.5 (4 337) (1 146) (1 146)
- Deferred receivables 2.6 (7 177) (7 406) (7 406)
Share options equity account 4 337 1 146 1 146
Foreign currency translation reserve (931) (878) (878)
Total capital and reserves at
1 April (restated) 1 040 073 835 084 835 084
Net profit for the period (restated) 116 117 73 957 281 190
Net profit for the period
(previously stated) 78 109 289 279
Lease restatement and transition to IFRS
- Leases 2.1 (1 753) (4 651)
- Foreign exchange 2.2 (301) 116
- Inventories 2.3 356 (390)
- Imputed interest 2.4 (560) (202)
- Share-based payments 2.5 (1 362) (3 191)
- Deferred receivables 2.6 (532) 229
Increase in share capital
and premium 10 260 9 311 17 888
Increase in share options
equity account 4 171 1 362 3 191
Distribution to shareholders (112 331) (65 937) (97 227)
(Decrease)/increase in foreign
currency translation reserv (2 483) 528 (53)
Total capital and reserves at
30 September/31 March (restated) 1 055 807 854 305 1 040 073
SEGMENTAL REPORTING
Business segments
The group"s retail activities are organised into two divisions for operational
and management purposes.
2005 2004 2005
September September % March
R"000 (Restated) change (Restated)
Revenue
Continuing operations 2 184 865 1 768 568 24 4 058 055
Apparel 1 519 592 1 246 647 22 2 847 547
Home 663 733 519 306 28 1 205 663
Central services 10 972 7 398 13 696
Eliminations (9 432) (4 783) (8 851)
Discontinued operations 170 850 229 248 (25) 525 503
Total 2 355 715 1 997 816 18 4 583 558
Profit from operating activities before
profit/(loss) arising from discontinuance
Continuing operations 167 340 108 922 54 347 648
Apparel 153 193 106 876 43 312 896
Home 38 668 19 719 96 83 311
Central services (25 737) (18 961) (35 615)
Other (102) (154) (14 973)
Eliminations 1 318 1 442 2 029
Discontinued operations 8 350 7 344 14 44 848
Total 175 690 116 266 51 392 496
SUPPLEMENTARY INFORMATION
2005 2004 2005
September September March
(Restated) (Restated)
Number of ordinary and B ordinary
shares in issue (net of shares
held by staff share trust) (000) 245 190 241 215 243 005
Net asset value per share (cents) 431 354 428
R"000
Reconciliation of headline earnings
Attributable earnings 116 117 73 957 281 190
(Profit)/loss arising from
discontinuance (2 369) 1 196 (647)
Loss on disposal and scrapping of
property, plant and equipment in
continuing operations 712 987 3 115
Taxation adjustment 4 117 (296) (934)
Headline earnings 118 577 75 844 282 724
Attributable profit from operating
activities of discontinued
operations (8 236) (5 704) (32 310)
Headline earnings (continuing
operations) 110 341 70 140 250 414
Depreciation and amortisation for
the period 43 233 41 506 83 954
Capital expenditure
- expended during the period 80 343 36 737 96 502
- authorised or committed at
period end 113 962 71 288 140 603
Borrowing powers are limited to R1 584 million and unutilized borrowing
facilities amount to R500 million.
Contingent liabilities
In giving effect to the disposal of the discontinued operations, the group may
provide support to the purchasers to secure operating lease obligations. The
maximum theoretical exposure in this regard has been quantified at R270 million
but it is estimated that, in the event that the guarantees are called upon, the
practical potential liability to the group would be reduced to approximately R31
million.
Other guarantees extended by the group amount to R60 million (September 2004 and
March 2005: R60 million).
Notes:
1. The results are not audited.
2. Impact of International Financial Reporting Standards (`IFRS") and
adjustments to interpretation of Generally Accepted Accounting Practice (`GAAP")
2.1 Circular 7/2005 issued by the South African Institute of Chartered
Accountants (`SAICA") requires that operating lease expenses be recognised on a
straight line basis over the lease term. Previously lease expenses were
recognised in accordance with the payment terms of the lease agreements. This
change in accounting policy has had a retrospective application.
2.2 In terms of IAS 21 The Effects of Changes in Foreign Exchange Rates, the
group has selected functional currencies in respect of non South African
territories. This has resulted in foreign exchange translation differences being
taken to a component of equity instead of to the income statement as previously
reported. This policy has been applied from the opening transitional balance
sheet date of 1 April 2004.
2.3 IAS 2 Inventories requires that the carrying value of inventories include
all costs of purchase, costs of conversion, and other costs incurred in bringing
inventories to their present location and condition. Accordingly, the valuation
of inventories now includes the effect of primary carriage costs to stores. This
policy has been applied with retrospective effect. Furthermore, in accordance
with the proposal by SAICA regarding the treatment of settlement discounts, the
valuation of inventories and measurement of cost of sales have been adjusted by
the relevant discounts received, with retrospective effect.
2.4 IAS 39 Financial Instruments: Recognition and Measurement (`IAS 39")
requires that imputed interest be recognised on interest free debtors.
Accordingly, a portion of the credit sales revenue has been deemed to be
interest income recognised on a time apportionment basis. This policy has been
applied with retrospective effect.
2.5 IFRS 2 Share-based Payments requires that equity settled share-based
payments transactions be measured at fair value and the cost be recognised as an
expense in the income statement over the vesting period. All share options
granted to associates after 7 November 2002 are valued using a binomial
valuation model and expensed to the income statement, with a corresponding
amount being taken to an equity reserve account.
2.6 The deferred receivables, which were previously measured at amortised cost
at the original effective interest rate at inception, have now been measured at
amortised cost using a market rate at inception in accordance with IAS 39.
2.7 The accounting treatment of the contributions to export partnerships, as
detailed in the trading statement released on 20 October 2005, is consistent
with general reporting practice being applied in this country. Confirmation is
being sought from the group"s auditors and other external parties that the
treatment is in compliance with IAS 39.
This report and the supporting presentation are available on our website:
www.mrpricegroup.com
COMMENTARY
Results
The retail sector has continued to benefit from the buoyant economic conditions
and sustained strength in consumer spending. The Mr Price group performed well
in these conditions, recording good growth in revenue and operating profits.
As reported previously, the group has, during the period under review, disposed
of its Hub and Galaxy chains. Focus now centres on the continuing operations
represented by Mr Price, Mr Price Home, Sheet Street and Miladys, all of which
recorded strong improvements in profitability during the period. The combined
revenue from these operations grew by 24% to R2,18 billion. Operating margin
improved from 6,2% to 7,7% and profit from operating activities was 54% higher
at R167,3 million. Headline earnings per share attributable to the continuing
operations grew by 55% to 45,2 cents.
After taking into account the results of the discontinued operations, group
headline earnings were 54% higher at 48,5 cents. In accordance with the group"s
policy to align cover of the interim and final distribution, the cover has been
reduced from 2,4 times to 2,0 times and this has given rise to an increase of
84% in the interim distribution.
Trading
The continuing businesses operated with weighted average trading space (average
space), which was 10% higher than in the previous interim period. Comparable
sales, which include turnover in expanded and refurbished stores in like for
like trading locations, were 18% higher.
Following on the disposal of the Hub and Galaxy chains and the planned
introduction of credit in the cash businesses, trading results are now reported
in two main divisions: Apparel (incorporating the Mr Price and Miladys chains)
and Home (incorporating the Mr Price Home and Sheet Street chains). The Apparel
division grew revenue by 22% and operating profits by 43% while the Home
division reported an increase of 28% in revenue and 96% in operating profits.
Mr Price continued with its expansion and revamp strategy and traded with
average space which was 8% greater than in the comparable period. The chain
benefited from the introduction of new merchandise categories and, with a strong
performance across all its departments, grew revenue by 22% to R1,16 billion.
Retail selling price inflation was 7% and comparable sales growth was 20%.
Mr Price Home, with an increase of 20% in average space, recorded growth in
comparable sales of 16% and in total revenue which was 26% higher at R472,7
million. The introduction of furniture has been well received by customers. Two
ultra stores with trading areas in excess of 2 000 square metres, accommodating
a more comprehensive presentation of the new furniture ranges, opened in August
in KwaZulu-Natal followed by one in Gauteng in late September. Early results
have been very positive. Another ultra store is due to open in Gauteng at the
end of November. The introduction of higher priced merchandise ranges,
particularly in furniture, contributed to price inflation of 17%.
Miladys, with a small reduction in average retail selling price, continued to
benefit from its focused merchandise offer and the increased value presented to
its customers. Total revenue, achieved with 6% greater average space, was 21%
higher at R360,7 million and comparable sales growth of 17% was recorded.
Sheet Street, which is targeted at a different customer to Mr Price Home,
increased revenue by 31% to R191 million with comparable sales growth of 16%.
The new store opening programme resulted in the chain growing average space by
8%. Retail price inflation of 57% resulted from the strategic reduction in
lower-priced hard goods merchandise.
Discontinued operations
Although the sales of the Hub and Galaxy chains were negotiated with effect from
the beginning of the financial year, final agreements were only concluded later
in the period. Trading results of these operations up to 30 July 2005 have,
consequently, been reported under discontinued operations with the profit on
discontinuance being adjusted accordingly.
Finance
The balance sheet remains strong with cash resources of R525,4 million. In terms
of the sale agreements of the Hub and Galaxy chains, proceeds of approximately
R182 million, currently reflected on the balance sheet within trade and other
receivables, are still to be received in this financial year.
The test offer of credit in Mr Price, Mr Price Home and Sheet Street has been
extended to the entire KwaZulu-Natal and Border regions. The early results have
been very positive but will continue to be monitored for a further period before
the decision is taken to roll-out to further stores. The overall debtors book
remains tightly controlled with bad debts below budgeted levels. Stock turn of
the continuing operations has improved and inventories of these divisions ended
11% higher than at the comparable period end.
The directors have resolved that, in lieu of an interim dividend, the group will
make a distribution by way of a reduction of its share premium account and
provision is made for this distribution in the accompanying declaration.
Prospects
The positive trading performance recorded in the first half has continued into
the second half of the financial year. Although operating off a higher base in
the second half, the group is well positioned to report a further growth in
earnings at the end of the financial year.
On behalf of the board
S B Cohen - Joint chairman
L J Chiappini - Joint chairman Durban
A E McArthur - Chief executive officer 17 November 2005
DECLARATION OF CASH DISTRIBUTION IN LIEU OF INTERIM DIVIDEND
Notice is hereby given that the directors have declared a cash distribution of
24,3 cents per share, in lieu of an interim dividend, for the six months ended
30 September 2005. The payment will be made by way of a reduction in the share
premium account and is in terms of the general authority to make payments to
shareholders, granted at the annual general meeting held on 28 July 2005.
The following dates are applicable:
Last date to trade "cum" the distribution Friday 2 December 2005
Date trading commences "ex" the distribution Monday 5 December 2005
Record date Friday 9 December 2005
Date of payment Monday 12 December 2005
Shareholders may not dematerialise or rematerialise their shares between 5
December 2005 and 9 December 2005, both dates inclusive.
In terms of the requirements of the Companies Act No. 61 of 1973, the directors
confirm that, after the cash distribution, Mr Price Group Limited will be able
to pay its debts as they become due in the ordinary course of business, and that
its consolidated assets, fairly valued, will exceed its consolidated
liabilities.
On behalf of the board Durban
C S Yuill - Secretary 17 November 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 director
Date: 17/11/2005 08:00:38 AM Produced by the JSE SENS Department
