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unaudited group results and interim cash dividend declaration for the six months to 30 september 2008
Highlights Commentary RESULTS The final dividend for the 2008 financial year, which was declared and paid in the current period, incurred a Secondary Tax on Companies charge, whilst in the comparable period the distribution from share premium did not. This resulted in a 32,2% increase in taxation; and Certain share trusts utilised company grants of R150,5 million to acquire shares in the second half of the prior financial year to partially cover options awarded. This resulted in a reduction in net finance income but also a lower weighted average number of shares in issue. These results should be evaluated in the light of the turbulent local and global economic environments that we are currently experiencing. South African consumers are cash-strapped as a result of increases in the costs of food, fuel, debt servicing, healthcare and municipal rates. Consumer confidence is now well below the 25 year average. The resulting financial pressures have dramatically affected sales in the retail sector, which have been in a downward trend from late 2006 and have seen a decrease in real terms since the beginning of the calendar year. However, as a value retailer, Mr Price Group has been able to withstand the effects of these headwinds better than most. The group has opened 66 new stores and has created in excess of 750 new jobs in the last 12 months. The interim dividend has been set at 40,2 cents per share which reflects an increase of 10,1% over the comparable period and is based on a maintained interim cover of 2,2 times. The group intends to maintain its cover of 1,9 times at year end.
TRADING The Apparel chains (Mr Price, Miladys and Mr Price Sport), which constitute 68,4% of group sales, grew sales by 21,0% to R2,7 billion, with retail selling price inflation of 4,1%. Operating profits increased by 20,1% to R323,4 million and the operating margin of 12,2% was comparable with the prior period. Mr Price grew sales by 19,3% to R2,0 billion on an increase in weighted average trading space of 5,8%. Comparable sales were 15,3% higher and the division recorded retail selling price inflation of 5,0%. Once again, excellent fashion interpretations and the fashion-value appeal resulted in the division achieving growth in market share as measured by the Retailers Liaison Committee (RLC). The number of units sold exceeded 40 million, representing an increase of 12,4%. Independent market research conducted in July 2008 confirmed that Mr Price continues to be the most loved apparel retailer and most frequented clothing chain. Miladys increased sales by 12,4% to R0,5 billion, with a growth in weighted average trading space of 9,0% and comparable sales growth of 7,0%. The division experienced retail selling price inflation of 1,7% and a 10,7% growth in the number of units sold. As a result of the success of the three stand–alone René Taylor stores, the division plans to open a further six such stores by year end. Mr Price Sport opened six stores, bringing the total stores operated by the division to 29. Sales of R165,3 million were generated off a weighted average trading space of 37 888 m2. Sales in the Home chains (Mr Price Home and Sheet Street), which constitute 31,6% of group sales, were up 14,2% to R1,2 billion and retail selling price inflation of 3,7% was recorded. This segment has been the most affected by the reduction in consumer spend on semi-durable products, however both chains continued to gain market share. Higher markdowns and carriage costs, coupled with slower trading in homewares resulted in operating profits being 35,3% lower at R22,9 million. Mr Price Home grew sales by 14,6% to R0,9 billion and weighted average trading space increased by 30,1%. Retail selling price inflation of 2,5% was recorded and comparable sales were 1,6% lower. Unit sales were 4,4% higher. Initiatives are in place to improve profitability. Sheet Street increased sales by 13,4% to R0,4 billion, with weighted average trading space increasing by 14,3%. Comparable sales were 3,4% higher with retail selling price inflation of 6,5%. The number of units sold increased by 6,0%. The new store layout and wrap is proving very successful and a phased rollout is underway. Mr Price Franchising opened an additional seven stores in the Mr Price and Mr Price Home formats, bringing the total to 14. FINANCE The debtors book has grown from R542,3 million at the previous year end to R609,6 million, an increase of 12,4%. The group is reaping the rewards of the focus placed on collections and the strategic decision taken to grant credit cautiously to customers of the former cash chains. Despite the economic hardships being experienced by consumers and the relative immaturity of the debtors book, bad debts net of recoveries (excluding collection costs) have decreased from 8,6% of debtors balances at year end to 7,1%. The book remains adequately provided for at the end of the reporting period. Inventories have been well managed, increasing by 12,0% relative to an increase in retail sales of 18,6%. The group improved its stock turn from 5,2 times to 5,4 times during the difficult trading conditions. PROSPECTS The second half will continue to be a challenging trading period. However as a value retailer, the group is well placed to gain further market share with our fashionable products at everyday low prices. Growth in earnings for the year should be achieved, provided there is no further deterioration in spending patterns. On behalf of the board SB Cohen - Joint chairman
INTERIM CASH DIVIDEND DECLARATION Notice is hereby given that an interim cash dividend of 40,2 cents per share has been awarded to the holders of ordinary and unlisted B ordinary shares. The following dates are applicable: Shareholders may not dematerialise or remateri |
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