| Wed 15 Nov 2006, 11:00 | | Mr Price - Unaudited Group Results for the Six Mon |
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MPC
MPC
Mr Price - Unaudited Group Results for the Six Months to 30 September
2006 and dividend declaration
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 2006
Highlights
- CONTINUING OPERATIONS
- RETAIL SALES UP 23% TO R2,7 BILLION
- OPERATING PROFIT UP 25% TO R209 MILLION
- CORE HEADLINE EARNINGS PER SHARE UP 37%
- DISTRIBUTION PER SHARE INCREASED BY 25%
Commentary
RESULTS
The established retail chains (Mr Price, Mr Price Home, Miladys and Sheet
Street) have all recorded strong growths in sales and profitability. Customers
continued to respond well to the larger format stores developed in terms of the
group"s expansion strategy and to the strong value offering in the chains.
Retail sales from continuing operations grew by 23% to R2,679 billion with
comparable sales (which include sales of expanded and relocated stores in like-
for-like locations) 12% higher. Growth in weighted average trading space was
17%. The operating margin from continuing operations, although impacted by the
start-up costs for the new Mr Price Sport operation, was maintained at last
year"s improved level. Operating profit from continuing operations increased by
25% to R209 million. An improvement in the effective tax rate was mainly
attributable to a reduced STC charge consequent upon payment of the 2006 final
distribution out of share premium. Headline earnings per share rose 32% to 67,9
cents off the base of 51,6 cents (which was adjusted in terms of the accounting
restatement referred to below).
As at the last year end, comparison with the prior period"s results has been
affected by the sale of two non-core operations, The Hub and Galaxy Jewellers,
in the previous year and the accounting restatement of contributions to export
partnerships made in compliance with International Financial Reporting
Standards.
Core headline earnings, which exclude the impact of the abovementioned matters,
grew by 37% to 61,9 cents per share. While it is the group"s intention to make
distributions to shareholders which are covered two 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, which represents an
increase of 25% at the interim stage.
TRADING
The trading results of the group are reported in two main segments, Apparel and
Home.
The Apparel division (Mr Price, Miladys and Mr Price Sport) increased sales by
17% and operating profit was 20% higher.
The Mr Price chain grew sales by 16% to R1,349 billion with comparable sales
growth of 12%. Retail selling price inflation was 1%. The chain continued to
invest in its expansion and revamp programme, trading in 11% greater weighted
average space during the period.
Miladys, with retail selling price deflation of 5%, grew sales by 17% to R406
million and comparable sales by 8%. The chain recorded a 20% growth in unit
sales which is indicative of the positive market share gains.
Mr Price Sport opened two test stores towards the end of the period and early
indications are positive.
The Home division (Mr Price Home and Sheet Street) increased sales by 38% and
operating profit by 59%.
Mr Price Home"s new extended product assortments, which now include furniture,
continue to perform well. The larger format stores (>2 500 square metres) opened
in the prior financial year have been well supported by customers. The chain
grew sales by 35% to R636 million with comparable sales growing by 16%. Weighted
average trading space increased by 33%. As reported previously, the growing
contribution of the higher-priced furniture merchandise accounted for the retail
selling price inflation of 18%.
Sheet Street performed very well. The chain grew weighted average trading space
by 25%, having opened 22 stores nationally during the period. Sales were 46%
higher at 279 million with comparable sales growth of 16%. Retail selling price
inflation of 6% was recorded.
FINANCE
The balance sheet remains strong with cash resources of R442 million. Cash flows
were negatively impacted by higher stock levels attributable to the build up of
inventories for stores opening in the third quarter of the financial year, and
higher trade receivables arising from the national roll out of credit. Capital
expenditure of R107 million was also funded.
The launch of credit into Mr Price, Mr Price Home, Sheet Street and Mr Price
Sport has delivered the anticipated results. Although the credit offer remains
tightly controlled, the growth in the account base continues to provide the
chains with access to new customers and an increase in the average basket size
evidenced in credit transactions. The trade receivables book has grown to R361
million, with bad debt at forecasted levels.
PROSPECTS
It is anticipated that rising interest rates will slow the growth in consumer
spending. Furthermore, trading in the second half will be more challenging given
the high base in the previous year which also incorporated a 53rd week.
The Mr Price group, however, as a value retailer selling largely for cash, is
not typically impacted by a tightening of retail trading conditions to the same
degree as credit retailers. The group does not, therefore, expect that Christmas
trading will be significantly dampened and further growth in earnings for the
second half of the year is anticipated.
Insofar as the introduction of the quotas on imports from China is concerned,
the group, along with other retailers, believes that both the rationale and the
planned methodology for the imposition of the quotas are flawed. While it is not
possible at this stage to assess all the implications, all necessary steps will
be taken to minimise the impact on customers, especially those from lower income
groups who will be most affected by the higher prices that will result from the
introduction of quotas.
On behalf of the board
S B Cohen - Joint chairman
L J Chiappini - Joint chairman Durban
A E McArthur - Chief executive officer 15 November 2006
DIVIDEND Declaration AND CASH DISTRIBUTION OUT OF SHARE PREMIUM
Notice is hereby given that an interim cash dividend of 10,4 cents per share and
a cash distribution out of share premium of 20,0 cents per share, in lieu of a
dividend, (collectively `the distribution"), has been awarded to the holders of
ordinary and unlisted B ordinary shares. The total value awarded to shareholders
amounts to 30,4 cents per share. The cash distribution out of share premium is
in terms of the general authority granted to directors at the annual general
meeting held on 27 July 2006.
The following dates are applicable:
Last date to trade `cum" the distribution
Friday 1 December 2006
Date trading commences `ex" the distribution
Monday 4 December 2006
Record date Friday 8 December 2006
Date of payment Monday 11 December 2006
Shareholders may not dematerialise or rematerialise their share certificates
between Monday 4 December 2006 and Friday 8 December 2006, both dates inclusive.
On behalf of the board Durban
C S Yuill - Secretary 15 November 2006
Directors
L J Chiappini* (Joint chairman), S B Cohen* (Joint chairman),
A E McArthur# (Chief executive officer), S A Ellis# (Joint managing director), S
van Niekerk# (Joint managing director),
M M Blair#, K Getz*, C Hultzer*, M R Johnston*, Prof. L J Ring* (USA), W J
Swain*, C S Yuill#
*Non-executive director #Executive director
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),
1 Merchant Place, Cnr Fredman Drive and Rivonia Road, Sandton, 2196.
P O Box 786273, Sandton, 2146.
Consolidated INCOME STATEMENT
2006 2005 2006
September September March
26 weeks 26 weeks % 53 weeks
R"000 (Restated) change
Revenue 2 745 883 2 386 006 15 5 284 842
Continuing
operations 2 710 107 2 184 865 24 5 048 643
Discontinued
operations - 170 850 170 850
Finance income 35 776 30 291 18 65 349
Continuing operations
Retail sales 2 679 021 2 169 682 23 5 007 591
Other income 31 086 15 183 105 41 052
Total revenue 2 710 107 2 184 865 24 5 048 643
Costs and expenses 2 501 400 2 017 525 24 4 514 578
Cost of sales 1 601 357 1 298 894 23 2 980 810
Selling expenses 669 728 538 635 24 1 159 329
Administrative and
other operating
expenses 230 315 179 996 28 374 439
Profit from
operating activities 208 707 167 340 25 534 065
Net finance income 16 846 10 865 55 31 087
Profit after net
finance income 225 553 178 205 27 565 152
Net amortised cost
adjustment of
contributions to
export partnerships 14 877 7 601 96 15 201
Profit before
taxation 240 430 185 806 29 580 353
Taxation 71 532 68 370 5 193 489
Net profit from
continuing operations 168 898 117 436 44 386 864
Discontinued operations
Profit from
operating activities - 8 350 - 8 350
(Loss)/profit arising
from discontinuance (10) 2 369 1 376
Net finance income/(costs) 33 (114) (98)
Profit before taxation 23 10 605 9 628
Taxation 9 4 323 4 022
Net profit from
discontinued operations 14 6 282 5 606
Total group
Net profit attributable
to shareholders 168 912 123 718 37 392 470
Weighted average
Number of ordinary
and unlisted B ordinary
shares in issue(net
of shares held by staff
share trust)(000) 249 860 244 334 2 245 697
Earnings per ordinary
and unlisted B ordinary
share (cents)
- basic 67,6 50,6 34 159,7
- headline 67,9 51,6 32 161,7
- core headline 61,9 45,2 37 152,2
- diluted basic 65,2 48,5 34 152,8
- diluted headline 65,4 49,5 32 154,7
- diluted core headline 59,7 43,3 38 145,5
Distribution/s per
share (cents) 30,4 24,3 25 81,0
Consolidated BALANCE SHEET
2006 2005 2006
September September March
R"000 Restated)
Assets
Non-current assets 657 282 469 004 570 810
Property, plant and
equipment 398 812 287 278 344 007
Intangible assets 6 721 7 741 6 137
Long-term receivables
and prepayments 228 757 169 675 216 096
Pension fund asset 19 698
Deferred taxation assets 3 294 4 310 4 570
Current assets 1 534 030 1 468 750 1 456 029
Inventories 695 388 543 449 535 467
Trade and other
receivables 396 594 399 890 296 039
Cash and cash equivalents 442 048 525 411 624 523
Total assets 2 191 312 1 937 754 2 026 839
Equity and liabilities
Equity attributable to
shareholders 1 086 279 794 286 1 025 647
Non-current liabilities 257 870 314 739 280 340
Lease obligations 106 610 100 873 101 673
Deferred taxation
liabilities 143 797 202 759 171 554
Post retirement
medical benefits 7 463 11 107 7 113
Current liabilities 847 163 828 729 720 852
Trade and other payables
and provisions 737 099 756 067 550 904
Current portion of
lease obligations 19 751 11 164 16 347
Taxation 90 313 61 498 153 601
Total equity and
liabilities 2 191 312 1 937 754 2 026 839
Consolidated CASH FLOW STATEMENT
2006 2005 2006
September September March
26 weeks 26 weeks 53 weeks
R"000 (Restated)
Cash flows from
operating activities
Operating profit before
working capital changes 256 543 207 020 606 135
Working capital changes (77 609) 80 118 (132 027)
Net interest received 41 833 23 262 65 427
Restraints of trade - - (48 333)
Taxation paid (161 310) (98 086) (162 284)
Net cash inflows from
operating activities 59 457 212 314 328 918
Continuing operations 59 506 202 451 319 356
Discontinued operations (49) 9 863 9 562
Cash flows from
investing activities
Net advances in respect
of long-term receivables (2 347) (2 721) (59 154)
Acquisition of subsidiary - - (4 800)
Disposals of discontinued
operations - 5 725 187 670
Additions to intangible
assets (2 963) (2 548) (3 799)
Replacement of property,
plant and equipment (38 899) 48 185) (106 708)
Additions to property,
plant and equipment (65 059) (23 175) (61 056)
Proceeds on disposal of
property, plant and equipment 20 141 145
Net cash outflows from
investing activities (109 248) (70 763) (47 702)
Continuing operations (109 248) (73 259) (231 455)
Discontinued operations - 2 496 183 753
Cash flows from financing
activities(continuing
operations)
Proceeds from issue
of share capital 8 372 10 260 30 856
Proceeds from disposal
of investments by staff
share trust 93 888 726
Decrease in lease
obligations and loan (901) (6 052) (6 550)
Distribution/s to
shareholders (140 515) (112 331) (171 509)
Net cash outflows from
financing activities (132 951) (107 235) (146 477)
Net (decrease)/increase
in cash and cash
equivalents (182 742) 34 316 134 739
Cash and cash equivalents
at beginning of the period 624 523 493 131 493 131
Exchange gains/(losses) 267 (2 036) (3 347)
Cash and cash equivalents
at end of the period 442 048 525 411 624 523
Statement OF CHANGES IN EQUITY
2006 2005 2006
Notes September September March
R"000 (Restated)
Total equity attributable
to shareholders
at 1 April
(previously stated) 1 025 647 1 040 073 770 951
Net amortised cost adjustment
of contributions
to export partnerships 3 (269 122)
Total equity attributable
to shareholders at 1 April 1 025 647 770 951 770 951
Net profit for the period 168 912 123 718 392 470
Net profit for the period
previously stated) 116 117
Net amortised cost adjustment
of contributions to
export partnerships 3 7 601
Shares issued 8 372 10 260 30 856
Recognition of share-
based payments 3 542 4 171 6 776
Distribution/s to shareholders (140 515) (112 331) (171 509)
Currency translation adjustments 405 2 483) (3 897)
Recognition of pension
fund asset 4 19 698
Insurance reserve 218
Total equity attributable
to shareholders 1 086 279 794 286 1 025 647
Segmental REPORTING
Business segments
The group"s retail activities are organised into two divisions for operational
and management purposes.
2006 2005 2006
September September March
26 weeks 26 weeks % 53 weeks
R"000 (Restated) change
Revenue from continuing
And discontinued
operations
Continuing operations 2 710 107 2 184 865 24 5 048 643
Apparel 1 791 207 1 519 592 18 3 431 000
Home 918 670 663 733 38 1 615 855
Central services 7 431 10 972 16 611
Eliminations (7 201) (9 432) (14 823)
Discontinued operations - 170 850 170 850
Total 2 710 107 2 355 715 15 5 219 493
Profit from operating
activities of continuing
and discontinued
operations
Continuing operations 208 707 167 340 25 534 065
Apparel 183 341 153 193 20 442 031
Home 61 333 38 668 59 143 569
Central services (37 191) (25 737) (53 960)
Other (9) (102) (155)
Eliminations 1 233 1 318 2 580
Discontinued operations - 8 350 8 350
Total 208 707 175 690 19 542 415
Supplementary INFORMATION
2006 2005 2006
September September March
(Restated)
Number of ordinary and unlisted
B ordinary shares in issue (net
of shares held by staff share
trust)(000) 250 720 245 190 248 756
Net asset value per
share (cents) 433 324 412
R"000
Reconciliation of headline and
core headline earnings
Net attributable profit 168 912 123 718 392 470
Loss/(profit) from discontinuance 10 (2 369) (1 376)
Loss on disposal and scrapping of
property, plant and equipment in
continuing operations 884 712 3 187
Taxation adjustment (256) 4 117 3 098
Headline earnings 169 550 126 178 397 379
Net amortised cost adjustment of
contributions to export
partnerships (14 877) (7 601) (15 201)
Net attributable profit from
operating activities of
discontinued operations (24) (8 236) (8 252)
Core headline earnings 154 649 110 341 373 926
Depreciation and amortisation
for the period 50 766 43 233 87 266
Capital expenditure
- expended during the period 106 921 73 908 171 563
authorised or committed at
period end 140 879 113 962 181 485
Borrowing powers are limited to R1 629 million and unutilised borrowing
facilities amount to R448 million.
Contingent liabilities
In giving effect to the disposal of the discontinued operations, the group has
provided support to the purchasers:
as security for operating lease obligations. The maximum theoretical exposure in
this regard has been quantified at R193 million but it is estimated that, in the
event that guarantees are called upon the practical potential liability to the
group would be reduced, through sub-leasing and conversion to own use, to
approximately R43 million.to guarantee the performance of trade receivables sold
to the purchasers of Galaxy Jewellers for a period of three years, subject to a
maximum of R27 million. The receivables are ceded back to the company in the
event of the guarantee being called upon.
Other guarantees extended by the group amount to R91 million (March 2006: R87
million).
Notes:
The results are not audited.
The accounting policies applied are in compliance with International Financial
Reporting Standards and are consistent with those applied in the latest annual
financial statements.
As referred to in the announcement of the results for the six months to 30
September 2005, the group sought external advice to ensure that the accounting
treatment of its participation in export partnerships was in compliance with IAS
39. Following on an evaluation of the advice received, the policy was changed at
the financial year end in respect of the discount rate applied to the
contributions made in order to arrive at an amortised cost value.
The discount rate adopted represents a combination of the risk free rate and a
risk premium established at the date that each contribution was made to the
partnerships, whereas this was previously calculated using an effective interest
rate. The results for the six months to 30 September 2005 have been restated
accordingly.
As a result of approval being obtained from the Financial Services Board for the
nil surplus scheme submitted in respect of the group"s defined benefit pension
fund, a pension fund asset has been recognised on the balance sheet at 30
September 2006 with a corresponding amount being credited to equity.
This report and the supporting presentation are available on our website:
www.mrpricegroup.com
Date: 15/11/2006 11:00:13 AM Produced by the JSE SENS Department
