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Summary of audited group results and final cash dividend declaration for the 53 weeks ended 2 April 2016
MR PRICE GROUP LIMITED
Registration number 1933/004418/06
Incorporated in the Republic of South Africa
ISIN: ZAE 000200457
JSE share code: MRP
(“Mr Price” or “the Company” or “the Group”)
SUMMARY OF AUDITED GROUP RESULTS AND FINAL CASH DIVIDEND DECLARATION FOR THE 53 WEEKS ENDED 2 APRIL 2016
PRESS RELEASE
MR PRICE GROUP LIMITED CONTINUES EARNINGS GROWTH
[Durban, 31 May 2016] Mr Price Group today announced increases in diluted headline earnings per share of 17.1% to 1 012.9 cents and dividends per share of 15.0% to 667.0 cents for the 53 weeks ended 2 April 2016.
The Company has achieved 30-year compound annual growth rates in HEPS of 23.0% and DPS of 24.6%. For the first time, Group sales exceeded R20 billion and earnings exceeded 1 000 cents per share, both numbers representing important milestones for the Company.
On a 52-week comparable basis (used for commentary hereafter), diluted headline earnings per share increased by 14.6% to 991.2 cents and the operating margin increased from 17.1% to 18.2% of retail sales and other income (RSOI).
“We are very satisfied with these results, particularly after considering the headwinds that we confronted in terms of the subdued economy, changes in credit legislation, challenges in key African economies and the high base in our main apparel division,” said CEO Stuart Bird. “What is important is that performance in the core South African market was excellent, with operating profit growth of 20.8% absorbing the impact of underperforming and new businesses.”
Total revenue grew by 8.4% to R19.6bn, with retail sales increasing by 8.0% (comparable stores 4.2%) to R18.7bn. Cash sales were 9.2% higher, while credit growth of 2.3% was inhibited by the introduction of new credit regulations last September which slowed new account growth. Retail selling price inflation was 7.0% and unit sales were up by 1.0% to 231.1m. By opening 45 new stores and expanding 26, new space introduced grew by 4.7%, while net of closures and reductions, space was up 3.1%. Other income, derived mainly from the financial services business, MRP Money, increased by 21.5% to R882.3m.
The Group gross profit margin of 41.4% was 0.2% lower than last year. Despite having to deal with exchange rate weakness and volatility, the merchandise gross profit percentage was held in line with last year at 41.9%. The cellular gross margin, which had a higher contribution to Group gross profit than previously, increased to 6.4%, mainly due to critical mass being achieved in MRP Mobile. Selling and administration expenses were well controlled and grew by 3.4% and profit from operating activities increased by 15.5%.
The Apparel chains increased RSOI by 8.8% to R13.9bn. Operating profit rose by 10.2% to R2.6bn and the operating margin increased from 18.3% to 18.5%. Sales in MRP Apparel were up 9.7% (comparable 5.2%) to R11.1bn on a high base, with comparable sales growths in 2014 and 2015 of 13.0% and 12.8% respectively. Operating profit was well ahead of the prior year, with the GP% in line with the prior year and expenses growing at a slower rate than sales. MRP Sport grew sales by 13.8% (comparable 5.3%) to R1.3bn. An improved GP% and cost curtailment resulted in an excellent increase in operating profit. Miladys reported a decrease in sales of 1.9% (comparable -2.5%) to R1.4bn. Trading in this higher margin credit business was also impacted by a strategic change in the merchandise assortment, which will benefit the business in the long term, as will the change in its leadership. Although operating profit was down on the previous year, the division remains a significant profit contributor to the Group.
The Home chains increased RSOI by 5.7% to R4.8bn. Operating profit rose by 18.1% to R767.6m and the operating margin increased from 14.2% to 15.9%. MRP Home, which targets customers in the upper LSM 8-10 range, delivered results that were well ahead of budget and the prior period, despite muted sales growth of 5.9% (comparable 3.9%). The division improved their GP% and were exemplary in cost control. Sheet Street’s sales grew by 5.3% (comparable 3.9%) to R1.4bn, while operating profit also reflected double-digit growth.
Local online sales grew by 63.6% and the business is now generating positive returns. All three MRP brands are now full omni-channel retailers.
MRP Money grew insurance income by 12.2%, mobile (cellular) by 58.7% and interest and fees by 9.4%. Bad debts improved from 6.2% to 5.4% of the debtors’ book, however, in a tightening economic climate, the impairment provision has been set at 7.3%. MRP Mobile achieved profitability in the second half, contributing to the division reporting another year of strong profit growth.
Significant resources have been allocated to realising continued long-term profit growth. MRP Apparel’s 2 test stores in Australia are making progress, and experience gained, albeit over a short trading period, is improving the alignment of the product assortment to seasonality and consumer needs. Improved store operating metrics are being targeted in order to develop a scalable blueprint. MRP Home will open a test store in Australia in October. Locally, the new 57 000 m2 distribution centre is on plan to open next year, while good progress is being made with the implementation of the new enterprise technology systems. “The Company’s strong cash generation and healthy balance sheet have easily absorbed the impact of these investments, which are important platforms for expansion,” said Bird.
The consumer environment is expected to remain challenging in the next financial year. A weak exchange rate impacts all apparel retailers and higher product inflation in the first half is expected to impact unit growth. “As a value retailer, our prices will rise less, so comparatively speaking, we are well positioned. Our resilient business model has allowed us to ride through several tough business cycles in past years. The Mall of Africa opened recently with a full complement of local and international retailers. The Group successfully opened 5 stores in the centre including a 2 100 m2 MRP Apparel store which achieved sales which were double their highest ever store opening figures.
In the year ahead we will aim to deliver wanted merchandise at great value, manage our working capital and execute on our key projects. We will continue to think long term while being focused on delivering in the short term,” said Bird.
About Mr Price Group Limited
A high-growth, omni-channel, fashion value retailer:
- Targeting younger customers in the mid to upper LSM categories
- Retailing predominantly own branded merchandise
- 83% of sales are for cash
- 1 200 owned and franchised stores and online channels offering full product assortments
- Market capitalisation of R45bn
- Included in MSCI Emerging Markets Index
- Included in JSE Top 40 and Socially Responsible Investment Index
- 3rd in Financial Mail Top Companies 2015
- 17th in Business Times Top 100 Companies, highest ranked retailer
ENDS
Contact
Investor Relations
Helen Grosvenor
Mr Price Group Ltd
hgrosvenor@mrpg.com
+27 31 310 8000
SUMMARY AUDITED GROUP RESULTS AND FINAL CASH DIVIDEND DECLARATION FOR THE 53 WEEKS ENDED 2 APRIL 2016
FINAL CASH DIVIDEND DECLARATION
Notice is hereby given that a final gross cash dividend of 419.0 cents per share has been declared for the 53 weeks ended 2 April 2016, an increase of 13.7%. The increase in the final dividend is lower than headline earnings growth due to the increase in the dividend payout ratio at the interim stage and is based on the 53 week results. As the dividend has been declared from income reserves, shareholders, unless exempt or who qualify for a reduced withholding tax rate, will receive a net dividend of 356.150 cents per share.
The issued share capital at the declaration date is 255 995 880 listed ordinary and 10 945 081 unlisted B ordinary shares. The tax reference number is 9285/130/20/0.
The salient dates for the dividend are as follows:
Last date to trade 'cum' the dividend Friday 17 June 2016
Date trading commences 'ex' the dividend Monday 20 June 2016
Record date Friday 24 June 2016
Payment date Monday 27 June 2016
Shareholders may not dematerialise or rematerialise their share certificates between Monday, 20 June 2016 and Friday, 24 June 2016, both dates inclusive.
On behalf of the board
NG Payne – Chairman Durban
SI Bird - Chief Executive Officer 23 May 2016
DIRECTORS
SB Cohen* (Honorary Chairman), NG Payne* (Chairman), SI Bird (Chief Executive Officer), MM Blair (Chief Financial Officer), N Abrams*^, SA Ellis^, K Getz*, MR Johnston*, RM Motanyane*, D Naidoo*, MJD Ruck*, WJ Swain*
* Non-executive director ^ Alternate director
TRANSFER SECRETARIES
Computershare Investor Services (Pty) Ltd
SPONSOR
Rand Merchant Bank (a division of FirstRand Bank Limited)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
2016 2015
2 Apr 28 Mar %
R’m 53 weeks 52 weeks change
Revenue 20 004 18 099 10.5
Retail sales 19 038 17 285 10.1
Other income 885 726 21.9
Retail sales and other income 19 923 18 011 10.6
Costs and expenses 16 320 14 935 9.3
Cost of sales 11 314 10 186 11.1
Selling expenses 3 848 3 602 6.8
Administrative and other
operating expenses 1 158 1 147 0.9
Profit from operating
activities 3 603 3 076 17.1
Net finance income 81 87 (7.0)
Profit before taxation 3 684 3 163 16.5
Taxation 1 042 878 18.7
Profit after taxation 2 642 2 285 15.6
Loss attributable to non-
controlling interests 3 8
Profit attributable to equity
holders of parent 2 645 2 293 15.4
Other comprehensive income:
Currency translation adjustments 31 (26)
Defined benefit fund net
actuarial losses (2) (8)
Net loss on hedge accounting (85) -
Total comprehensive income 2 589 2 259 14.6
Earnings per share (cents)
- basic 1 046.5 917.3 14.1
- headline 1 057.8 919.7 15.0
- diluted basic 1 002.1 862.9 16.1
- diluted headline 1 012.9 865.1 17.1
Dividend payout ratio (%) 63.1 63.1
Dividends per share (cents) 667.0 580.0 15.0
SEGMENTAL REPORTING
IFRS 8 requires operating segments to be identified on the basis of internal reporting about components of the Group that are regularly reviewed by the chief operating decision makers (CODM)to allocate resources and to assess performance. The CODM has been identified as the Group’s prescribed officers.
The mrpMoney division, which includes the Financial Services and Cellular operations, was, for the first time, classified as a separate reporting segment with the comparatives being restated accordingly.
For management purposes, the Group is organised into business units based on their products and services, and has four reportable segments, as follows:
- The Apparel segment retails clothing, sportswear, footwear, sporting equipment and accessories;
- The Home segment retails homewares;
- The Financial Services and Cellular segment manages the Group’s trade receivables and sells financial services and mobile products; and
- The Central Services segment provides services to the trading segments, including information technology, internal audit, human resources, group real estate and finance.
Segment performance is evaluated based on operating profit or loss. Net finance income and income taxes are managed on a group basis and are not allocated to operating segments.
2016 2015 %
R'm 2 Apr 28 Mar change
Restated
Retail sales and other income
Apparel 14 139 12 737 11.0
Home 4 922 4 565 7.8
Financial Services and
Cellular 854 702 21.6
Central Services 8 7 3.2
Total 19 923 18 011 10.6
Profit from operating activities
Apparel 2 630 2 333 12.8
Home 793 650 22.1
Financial Services and
Cellular 345 259 33.2
Central Services (165) (166) 0.8
Total 3 603 3 076 17.1
Segment assets
Apparel 2 424 1 851 31.0
Home 696 619 12.4
Financial Services and
Cellular 2 001 1 912 4.7
Central Services 2 942 3 485 (15.6)
Total 8 063 7 867 2.5
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
2016 2015
R’m 2 Apr 28 Mar
Assets
Non-current assets 2 241 1 364
Property, plant and equipment 1 672 838
Intangible assets 373 328
Long-term receivables and prepayments 18 6
Defined benefit fund asset 41 40
Deferred taxation assets 137 152
Current assets 5 822 6 503
Inventories 2 168 1 741
Trade and other receivables 2 136 1 874
Reinsurance assets 99 124
Cash and cash equivalents 1 419 2 764
Total assets 8 063 7 867
Equity and liabilities
Equity attributable to shareholders 5 620 5 021
Non-current liabilities 244 213
Lease obligations 174 170
Deferred taxation liabilities 8 4
Long-term liabilities 36 15
Post-retirement medical benefits 26 24
Current liabilities 2 199 2 633
Trade and other payables 1 987 2 116
Reinsurance liabilities 30 46
Current portion of lease obligations 60 63
Derivative financial instruments 118 -
Taxation 4 408
Total equity and liabilities 8 063 7 867
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
2016 2015
2 Apr 28 Mar
R’m
Total equity attributable
to shareholders at beginning
of the year 5 021 3 922
Total comprehensive income for
the year 2 589 2 259
Treasury share transactions (500) 83
Recognition of share-based payments 105 105
Dividends to shareholders (1 592) (1 340)
Non-controlling interest (3) (8)
Total equity attributable to
shareholders at end of the year 5 620 5 021
CONSOLIDATED STATEMENT OF CASH FLOWS
2016 2015
2 Apr 28 Mar
53 weeks 52 weeks
R’m
Cash flows from operating activities
Operating profit before working
capital changes 3 596 3 039
Working capital changes (813) (422)
Net interest received 465 442
Taxation paid (1 340) (795)
Net cash inflows from operating
activities 1 908 2 264
Cash flows from investing activities
Net (advances)/receipts in respect
of long-term receivables (12) 1
Purchase of Zambian franchise - (30)
Additions to and replacement of
intangible assets (119) (121)
Property, plant and equipment
- replacement (104) (138)
- additions (921) (172)
- proceeds on disposal 2 4
Net cash outflows from investing
activities (1 154) (456)
Cash flows from financing activities
Increase in long-term liabilities 22 9
Net (purchase)/sale of shares by staff
share trusts (421) 322
Deficit on treasury share transactions (132) (267)
Dividends to shareholders (1 592) (1 340)
Net cash outflows from financing
activities (2 123) (1 276)
Change in cash and cash equivalents (1 369) 532
Cash and cash equivalents at
beginning of the year 2 764 2 252
Exchange gains/(losses) 24 (20)
Cash and cash equivalents at end
of the year 1 419 2 764
SUPPLEMENTARY INFORMATION
2016 2015
2 Apr 28 Mar
Weighted average number of
shares in issue (000) 252 786 249 990
Number of shares in issue (000) 253 530 252 449
Net asset value per share (cents) 2 217 1 989
Reconciliation of headline
earnings (R’m)
Attributable profit 2 645 2 293
Loss on disposal and impairment
of property, plant and equipment
and intangible assets 40 8
Taxation adjustment (11) (2)
Headline earnings 2 674 2 299
Notes:
1. These preliminary consolidated results, for which the Directors take full responsibility and which is not itself audited, have been correctly extracted from the audited annual financial statements upon which Ernst & Young Inc. has issued an unqualified opinion. A copy of the opinion and the Group annual financial statements are available for inspection at the Company’s registered office. The results have been prepared under the supervision of Mr MM Blair, CA(SA), Chief Financial Officer.
2. The accounting policies and estimates applied are in compliance with IFRS including IAS 34 Interim Financial Reporting, as well as the SAICA Financial Reporting Guides and Financial Pronouncements as issued by the Financial Reporting Standards Council and are consistent with those applied in the 2015 annual financial statements. All new and revised Standards and Interpretations that became effective during the period were adopted and did not lead to any material changes in accounting policies.
3. From January 2016, the Group qualified to apply the principles of hedge accounting per IAS 39. The Group uses forward exchange contracts as hedges of its exposure to foreign currency risk in forecast transactions. The effective portion of the gain or loss on the hedging instrument is recognised in other comprehensive income (OCI) in the accounting hedge reserve, while any ineffective portion is recognised immediately in the statement of profit and loss. Amounts recognised as OCI are transferred to profit and loss when the hedged transaction affects profit or loss, or when a forecast sale occurs. Any resultant asset or liability is recognised as “Derivative financial instruments” in the statement of financial position under current assets or current liabilities depending on the position at year end.
4. The financial statements have been prepared in accordance with the Companies Act of South Africa.
5. During the 2009 financial year, the Company was advised by SARS that it intended holding the Company accountable as the ‘deemed importer’ in relation to the underpayment of import duties in 2005 and 2006 by one of its previous suppliers to the value of R43.6 million. The Company submitted a formal response to SARS’ letter on 18 September 2009. SARS responded to the Company’s denial of liability on 24 April 2015, more than 5 years later, and demanded that the Company settle the alleged liability, the value of which had been revised to R74.4 million. On 13 October 2015 the Company filed a formal appeal against SARS’ letter of demand. SARS' Customs National Appeals Committee (CNAC) is required to notify the Company of their decision within 90 working days from the date of appeal, however only responded on 24 May 2016. the CNAC has determined that, due to the complexity of the matter, a meeting is required to ascertain the issues that are agreed upon by the parties and the issues that are still in dispute. This meeting is likely to take place in July 2016. The Company’s view, supported by legal advice, is to impugn the Commissioner’s decision. No adjustments have been made to the financial statements as the Directors are of the opinion that it is unlikely that any liability will be incurred.
IMPACT OF THE 53RD WEEK
The Group manages its retail operations on a 52 week retail calendar basis and, as a result, a 53rd week is required every five years for calendar realignment purposes.
Pro-forma 52 week financial information is provided to facilitate comparison against the 52 week prior year.
CONSOLIDATED STATEMENT OF PROFIT AND LOSS
2016 53rd 52
2 Apr week weeks
R’m 53 weeks adjustments pro-forma
Revenue 20 004 376 19 628
Retail sales 19 038 373 18 665
Other income 885 3 882
Retail sales and other income 19 923 376 19 547
Costs and expenses 16 320 326 15 594
Cost of sales 11 314 232 11 082
Selling expenses 3 848 29 3 819
Administrative and other
operating expenses 1 158 65 1 093
Profit from operating
activities 3 603 50 3 553
Net finance income 81 - 81
Profit before taxation 3 684 50 3 634
Taxation 1 042 16 1 026
Profit after taxation 2 642 34 2 608
Loss attributable to non-
controlling interests 3 - 3
Profit attributable to equity
holders of parent 2 645 34 2 611
Earnings per share (cents)
- basic 1 046.5 1 032.9
- headline 1 057.8 1 035.2
- diluted basic 1 002.1 989.1
- diluted headline 1 012.9 991.2
Notes:
1. The accounting policies adopted by the Group in the latest audited financial statements, which have been prepared in accordance with IFRS, have been used in preparing the pro-forma 52 week information.
2. The 53rd week adjustments are calculated with reference to actual turnover and cost of sales for the 53rd week (27 March to 2 April 2016), expenses based on an assessment of management information and an effective tax rate of 31.0%, all attributable to the appropriate segments.
3. The calculation of earnings per share and headline earnings per share for the pro-forma 52 week period is based on the weighted average number of shares in issue during the year.
4. This information is the responsibility of the Directors. The Group’s external auditors have issued a limited assurance report on the pro-forma 52 week information. A copy of their report is available for inspection at the Company’s registered office.
31 May 2016
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