| Wed 15 Nov 2006, 11:01 | | Mr Price Group posts good performance at the half |
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MPC
MPC
Mr Price Group posts good performance at the half year
Mr Price Group Limited
Registration number 1933/004418/06
Incorporated in the Republic of South Africa
ISIN: ZAE000026951
JSE share code: MPC
("the Mr Price Group")
MR PRICE GROUP POSTS GOOD PERFORMANCE AT THE HALF YEAR
- Operating profit from continuing operations +25%
- HEPS +32%
- Interim dividend +25%
(Cape Town, 15 November 2006) Value retailer Mr Price today released
improved results for the 26 weeks ending 30 September 2006, with sales of
continuing operations up by 23% to R2.7 billion and core headline earnings
per share up by 37%.
Mr Price Group CEO Alastair McArthur said: "Despite the recent rise in
interest rates, trading has been good. As a predominantly cash retailer,
the group has not been greatly affected by tighter trading conditions.
Mr Price, Mr Price Home, Miladys and Sheet Street all recorded strong
growths in sales and profitability. Group comparable sales (which includes
sales of expanded and relocated stores in like for like locations) were up
by 12%, while operating profit from continuing operations increased by 25%
to R209-million. Headline earnings per share were up 32% to 67.9 cents
with the tax charge benefiting mainly from a reduced STC charge,
attributable to a distribution out of share premium. The operating margin
from continuing operations was maintained at last year"s improved levels
notwithstanding start up costs for the new Mr Price Sport operation.
As at the last year end, comparison with the previous year"s interims has
been affected by the sale of the non-core operations (The Hub and Galaxy
Jewellers) in the previous year and the accounting restatements in relation
to participation in export partnerships in terms of IFRS (International
Financial Reporting Standards). Core headline earnings per share which
excluded the impact of these two factors, had increased by 37% to 61.9
cents per share.
While it is the group"s intention to make distributions to shareholders
which are covered 2 times by headline earnings, regard has been had to the
distortion in the first half caused by the reduced STC charge and the
accounting restatement referred to above. The interim distribution has
therefore been set at 30,4 cents per share giving an increase of 25% at the
interim stage.
The Apparel division (Mr Price, Miladys and Mr Price Sport) grew retail
sales by 17% to R1.8-billion with operating profit up by 20% to R183-
million.
The Mr Price chain grew sales by 16% to R1.3-billion with comparable sales
growth of 12%. The chain continued to invest in its expansion and revamp
programme and increased its trading space by a weighted average of 11%.
Miladys grew sales by 17% to R406-million and comparable sales by 8%. The
chain recorded a 20% growth in unit sales, indicating positive market share
gains.
Mr Price Sport opened two test stores towards the end of the period and
early indications from these stores are positive with sales exceeding
expectations. The innovative shopping environment and low prices were
enthusiastically received by sports loving customers, intent on better
value. McArthur confirmed that the group intended opening a further four
Mr Price Sport stores before Christmas in Johannesburg, Kempton Park,
Pretoria and Ballito.
The Home division (Mr Price Home and Sheet Street) increased retail sales
by 38% to R914-million and operating profits by 59% to R61-million.
Mr Price Home"s more extended product assortments which now include
furniture, continue to perform well. The larger format stores (plus 2,500
sqm) opened in the prior financial year had been well supported by
customers. The chain grew sales by 35% to R636-million and comparable
sales grew by 16% with weighted average space growing by 33%.
Sheet Street also performed very well. The chain opened 22 stores
nationally during the period, growing weighted average trading space by
25%. Retail sales were 46% higher at R279-million with comparable sales
growth of 16%.
The balance sheet remains strong with cash resources of R442-million.
McArthur said that cash flows had been impacted by higher stock levels due
to the build up of inventories for new store openings in the third quarter
and higher trade receivables from the national roll out of credit. Capital
expenditure of R107-million was also funded.
The launch of credit into the cash chains has achieved expectations and a
significant increase in the average basket size has been evident in credit
transactions. Credit sales in the cash chains are 8% and the group
continues to remain a predominantly cash operation. Bad debt remains at
forecast levels.
Commenting on the group"s expansion programme, McArthur said: "Our large
and expanded stores continued to be the top performers in terms of profit
contribution to the group. There is no question that these stores allow
customers a better shopping experience and facilitate vast improvements in
merchandise presentation.
"In the past six months we added 26,204 sqm in retail space to the company,
69% of which was represented by new stores and 31% by expansions. The
expanded stores are working particularly well in the Mr Price Home
operation, where the space is badly needed to properly display the
increasing assortment of furniture.
"We opened two 3,000 sqm ultra stores in October and will open a 6,000 sqm
super store with a full assortment of furniture during November. We are
actively seeking increased space for all our top performing stores in the
group."
McArthur also announced that the group had opened its first franchised
store in Zambia during October and that the store had had a very successful
opening and was trading well. "This is our first test of franchising and
the initial results are encouraging. We will be testing a further franchise
store in Maputo in March early in the new year."
McArthur said that quotas on imports of goods from China would not affect
the second half. However, he said that the group is opposed to the
introduction of these quotas because the consequences of their introduction
had not been fully considered.
"We strongly maintain - and independent research supports - that quotas
would lead to a dramatic rise in the price of clothing, an increase in the
rate of inflation and consequently higher interest rates. They would also
lead to costly administration, port congestion and a jump in illegal
importing."
"The introduction of quotas has been justified on the basis of incorrect
job loss figures for the clothing manufacturing sector. More importantly,
these job losses have been caused in large part by the strengthening of the
Rand and the drop in export orders, rather than by the import of apparel
from China, despite what people are being led to believe."
He said that the Mr Price Group was requesting the commissioning of a
complete impact study. He was confident that once the impact study had been
undertaken, reason would prevail and quotas would be reconsidered. He added
that the weakening of the Rand would reverse the job losses in the clothing
manufacturing sector.
McArthur said that an impact study would also show that the apparel retail
sector had in fact created more jobs than were lost in apparel
manufacturing and that over the past three years, apparel retailers had
invested billions of Rand in the economy, with much of that in the
development of new stores which in turn created further jobs in the
construction industry.
"The retail sector needs a strong and globally competitive clothing and
textile manufacturing industry. All major retailers are working with
manufacturers to achieve this."
The group had introduced new share schemes during the period under review
which had been well received. As a consequence of these new schemes,
coupled with the existing schemes, the group"s historically disadvantaged
staff members will have a 7% interest in the equity of the group via shares
they owned and share options.
"It is our intention to further increase staff participation in the
shareholding of the Mr Price group. It is very much part of our partnership
philosophy," said McArthur.
Looking forward to the second half of the year, McArthur said that although
rising interest rates are expected to slow the growth in consumer spending,
he did not believe this would dampen Christmas trading significantly.
Trading in the second half would, however, be more challenging given the
higher base of the previous year which also incorporated a 53rd week.
Nevertheless he expected further growth in earnings for the second half of
the year.
"As a cash value retailer, we are well positioned for any softening that
might occur, especially given that customers turn to value during tougher
times. However, we do not expect the dramatic swings in interest rates and
consequent trading conditions that we experienced in previous downturns. We
remain very confident about our business prospects for the long-term and
will continue to expand our stores and grow our trading base. We have four
excellent retail chain concepts and the launch of Mr Price Sport has added
the potential of another exciting growth vehicle. We are continuing to
explore other opportunities for new retail concepts that could leverage our
value retailing model and our brand."
ENDS
For further information, please contact Tamra Veley on 083 251 3658.
Date: 15/11/2006 11:01:12 AM Produced by the JSE SENS Department
