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Group results for the 26 weeks ended 30 September 2017, cash dividend declaration and board committee appointment
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”)
UNAUDITED INTERIM GROUP RESULTS FOR THE 26 WEEKS ENDED 30 SEPTEMBER 2017, CASH DIVIDEND DECLARATION AND APPOINTMENT OF AUDIT & COMPLIANCE COMMITTEE MEMBER
PRESS RELEASE
MR PRICE GROUP LIMITED REPORTS H1 EARNINGS GROWTH (26 weeks ended 30 September 2017)
[Durban, 20 November 2017] Mr Price today announced an increase in diluted headline earnings per share of 23.6% to 434.1 cents and interim dividend per share of 22.3% to 279.0 cents.
”We’re pleased with the resilience of our business model and fortitude shown by our associates. They produced really solid results in extremely challenging trading conditions and I am proud of the way they have responded,” said CEO Stuart Bird.
Total revenue rose 6.7% to R9.8bn as total retail sales of R9.1bn increased 6.4% and finance and other income increased by 11.2% to R643.3m. Sales in comparable stores were up 4.6%. Cash sales grew 7.2% and constitute 82.4% of total sales while credit sales were 5.1% higher. Retail selling price inflation was 2.6% and 97m units were sold, an increase of 4.2%. Weighted average trading space growth was in line with last year at 2.3%. The number of stores opened during the trading period increased by 24 to 1 240.
Total input cost growth was limited to 3.9%, with the improvement in gross profit margin of 280 basis points to 42.0% providing leverage to drive operating profit growth of 22.0% to R1.5bn. The operating margin increased by 200 basis points to 15.7% of retail sales and other income (RSOI).
Earnings growth was driven by MRP Apparel, Miladys and MRP Money. Earnings in the Home chains and MRP Sport declined. These chains’ retail merchandise is more discretionary in nature and hence the results are reflective of weak consumer confidence and a low growth economy. “Product execution and value proposition have remained strong, but they were up against a strong performance in the comparable period, when double digit increases in operating profits were achieved,” said Bird.
The Apparel chains’ RSOI increased by 9.0% to R6.9bn. Operating profit increased by 42.5% (PY decrease of 26.7%) to R1.1bn and the operating margin improved from 12.3% to 16.1%. Sales in MRP Apparel grew 10.2% (comparable 7.8%) to R5.6bn. In South Africa, store and online sales were up 10.5% and 29.7%, respectively. Non South African sales were up 6.2%. The division has the highest number of Facebook fans and Instagram followers in the SA fashion retail sector, while YouTube views have more than doubled. “With regard to the impact of foreign retailers, our numbers show that our sales growth is generally better in locations where we compete with them,” said Bird. Miladys sales increased by 11.9% (comparable 11.8%) to R651.8m and despite the positive overall performance, there are still merchandise opportunities to capitalise on. MRP Sport grew sales by 1.5% (comparable -4.6%) to R644.0m.
The Home chains’ RSOI decreased by 0.6% to R2.3bn. Operating profit decreased by 16.2% to R304.7m and the operating margin decreased from 15.9% to 13.4%. Sales in MRP Home were down 2.0% (comparable -3.4%) to R1.6bn, but would have been flat had it not been for the temporary closure of a flagship store due to storm damage. Sheet Street grew sales by 2.1% (comparable 1.1%) to R694.7m.
MRP Money recorded an increase in interest and credit related charges of 6.6% and insurance products of 15.2%. Cellular revenue was 5.0% lower due to product mix changes which delivered higher profitability.
The balance sheet remains strong, with cash generated from operations increasing by 15.9% to R1.3bn and cash resources of R1.6bn. Inventories are 2.6% higher and are in better shape than last year. The debtors book remains well controlled, with a retail net bad debt to book ratio of 5.9% and an impairment provision of 7.3%.
“We successfully transitioned to our new distribution facility in Hammarsdale on time and within budget and focus will now be aimed at realising the longer term financial benefits therefrom,” Bird added.
The company is very concerned about the potential impact relating to sovereign ratings reviews and political outcomes. However the positive early signs of summer trading are encouraging, with October sales increasing by 8.3% and further momentum being gained going into November.
ENDS
Contact
Investor Relations
Matt Warriner
Mr Price Group Ltd
MWarriner@mrpg.com
+27 31 310 8818
UNAUDITED INTERIM GROUP RESULTS FOR THE 26 WEEKS ENDED 30 SEPTEMBER 2017 AND CASH DIVIDEND DECLARATION
INTERIM CASH DIVIDEND DECLARATION
Notice is hereby given that an interim gross cash dividend of 279.00 cents per share has been declared for the 26 weeks ended 30 September 2017. 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 223.20000 cents per share. The dividend withholding tax rate is 20%.
The issued share capital at the declaration date is 256 295 727 listed ordinary and 8 645 234 unlisted B ordinary shares. The tax reference number is 9285/130/20/0.
The salient dates for the dividend will be as follows:
Last date to trade 'cum' the dividend Tuesday 5 Dec 2017
Date trading commences 'ex' the dividend Wednesday 6 Dec 2017
Record date Friday 8 Dec 2017
Payment date Monday 11 Dec 2017
Shareholders may not dematerialise or rematerialise their share certificates between Wednesday, 6 December 2017 and Friday, 8 December 2017, both dates inclusive.
The dividend was approved on behalf of the Board on 17 November 2017 in Durban by:
NG Payne – Chairman
SI Bird - Chief Executive Officer
DIRECTORS
SB Cohen* (Honorary Chairman), NG Payne* (Chairman), SI Bird (CEO),
MM Blair (CFO), N Abrams*^, MJ Bowman*, SA Ellis^, K Getz*, MR Johnston*, RM Motanyane-Welch*, D Naidoo*, MJD Ruck*
* Non-executive director ^ Alternate director
SPONSOR
Rand Merchant Bank (a division of FirstRand Bank Limited)
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
2017 2016 2017
30 Sep 1 Oct 1 Apr
R’m Restated*
Assets
Non-current assets 2 600 2 458 2 577
Property, plant and equipment 2 076 1 903 2 130
Intangible assets 448 399 356
Long-term receivables
and other investment 18 38 23
Defined benefit fund asset 48 41 48
Deferred taxation assets 10 77 20
Current assets 6 249 5 480 6 338
Inventories 2 159 2 104 2 102
Trade and other receivables 2 275 2 104 2 207
Derivative financial instruments 22 - 14
Reinsurance assets 212 174 129
Taxation 21 - 63
Cash and cash equivalents 1 560 1 098 1 823
Total assets 8 849 7 938 8 915
Equity and liabilities
Equity attributable to shareholders 6 616 5 552 6 729
Non-current liabilities 301 235 335
Lease obligations 171 158 199
Deferred taxation liabilities 52 1 59
Long-term liabilities 51 48 51
Post retirement medical benefits 27 28 26
Current liabilities 1 932 2 151 1 851
Trade and other payables 1 852 1 733 1 713
Derivative financial instruments - 135 31
Reinsurance liabilities 33 30 41
Current portion of lease obligations 46 63 21
Taxation 1 190 6
Bank overdrafts - - 39
Total equity and liabilities 8 849 7 938 8 915
*Restated as a result of a voluntary change in accounting policy as explained in note 7.
CONDENSED CONSOLIDATED INCOME STATEMENT
2017 2016 2017
30 Sep 1 Oct % 1 April
R’m 26 weeks 26 weeks change 52 weeks
Revenue 9 778 9 167 6.7 19 763
Retail sales 9 135 8 588 6.4 18 575
Other income 576 543 6.0 1 104
Retail sales and other income 9 711 9 131 6.3 19 679
Costs and expenses 8 185 7 880 3.9 16 631
Cost of sales 5 411 5 347 1.2 11 365
Selling expenses 2 104 1 914 9.9 3 995
Administrative and other
operating expenses 670 619 8.1 1 271
Profit from operating
activities 1 526 1 251 22.0 3 048
Net finance income 67 35 89.5 82
Profit before taxation 1 593 1 286 23.9 3 130
Taxation 454 365 24.5 867
Profit after taxation 1 139 921 23.7 2 263
Profit attributable to
non-controlling interests (1) - -
Profit attributable to equity
holders of parent 1 138 921 23.6 2 263
Weighted average number of
shares in issue 258 196 254 562 1.4 255 793
Earnings per share (cents)
- basic 440.9 361.8 21.9 884.6
- headline 442.9 362.3 22.2 911.4
- diluted basic 432.1 350.7 23.2 861.9
- diluted headline 434.1 351.2 23.6 887.9
Dividends per share (cents) 279.0 228.2 22.3 667.0
Dividend payout ratio 63.0 63.0 73.2
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
2017 2016 2017
30 Sep 1 Oct 1 Apr
26 weeks 26 weeks 52 weeks
R’m Restated*
Profit attributable to equity
holders of parent 1 138 921 2 263
Other comprehensive income:
Items that may be reclassified
subsequently to profit or loss:
Currency translation adjustments (4) (71) (83)
Net gain/(loss) on hedge accounting 32 (38) 68
Items that will not be reclassified
subsequently to profit or loss:
Defined benefit fund net
actuarial (loss)/gain (1) (1) 2
Total comprehensive income 1 165 811 2 250
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
2017 2016 2017
30 Sep 1 Oct 1 Apr
R’m Restated*
Total equity attributable
to shareholders at beginning
of the period 6 729 5 620 5 620
Total comprehensive income for
the year 1 165 811 2 250
Treasury share transactions (187) 151 435
Recognition of share-based payments 65 59 112
Dividends to shareholders (1 157) (1 089) (1 688)
Non-controlling interest 1 - -
Total equity attributable to
shareholders at end of the period 6 616 5 552 6 729
*Restated as a result of a voluntary change in accounting policy as explained in note 7.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
2017 2016 2017
30 Sep 1 Oct 1 Apr
R’m 26 weeks 26 weeks 52 weeks
Cash flows from operating activities
Operating profit before working
capital changes 1 492 1 159 3 081
Working capital changes (1) (176) (251)
Net interest received 251 206 433
Taxation paid (421) (50) (689)
Net cash inflows from operating
activities 1 321 1 139 2 574
Cash flows from investing activities
Net receipts /(advances) in respect of
long-term receivables 6 (20) (4)
Acquisition of other investment - - (1)
Additions to and replacement of
intangible assets (63) (45) (96)
Property, plant and equipment
- replacement (61) (13) (121)
- additions (79) (338) (588)
- proceeds on disposal - 2 1
Net cash outflows from investing
activities (197) (414) (809)
Cash flows from financing activities
Increase in long-term liabilities - 12 15
Net (purchase)/sale of shares by staff
share trusts (130) 392 1 027
Net deficit on treasury share
transactions (61) (302) (692)
Dividends to shareholders (1 157) (1 089) (1 688)
Net cash outflows from financing
activities (1 348) (987) (1 338)
Change in cash and cash equivalents (224) (262) 427
Cash and cash equivalents at
beginning of the period 1 784 1 419 1 419
Exchange losses - (59) (62)
Cash and cash equivalents at end
of the period 1 560 1 098 1 784
SEGMENTAL REPORTING
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 cellular products; and
- The Central Services segment provides services to the trading segments, including information technology, internal audit, human resources, group real estate and finance.
Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. 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.
2017 2016 % 2017
R’m 30 Sep 1 Oct change 1 April
Retail sales and other income
- Apparel 6 891 6 319 9.0 13 685
- Home 2 267 2 281 (0.6) 4 914
- Financial Services
and Cellular 545 524 3.9 1 064
- Central Services 8 7 17.1 16
Total 9 711 9 131 6.3 19 679
Profit from operating activities
- Apparel 1 111 779 42.5 1 994
- Home 305 364 (16.2) 822
- Financial Services
and Cellular 202 181 11.2 387
- Central Services (92) (73) 25.3 (155)
Total 1 526 1 251 22.0 3 048
Segment assets*
- Apparel 2 371 2 310 2.7 2 371
- Home 821 707 16.1 771
- Financial Services
and Cellular 2 217 2 068 7.2 2 120
- Central Services 3 440 2 853 20.5 3 653
Total 8 849 7 938 11.5 8 915
*Segment assets at 1 October 2016 have been restated as a result
of a voluntary change in accounting policy as explained in note 7.
SUPPLEMENTARY INFORMATION
2017 2016 2017
30 Sep 1 Oct 1 Apr
Total number of shares issued (000) 264 941 264 941 264 941
Number of Ordinary shares (000) 255 796 255 196 255 196
Number of B Ordinary shares (000) 9 145 9 745 9 745
Less: shares held by share trusts (000) 7 137 9 664 6 352
Net number of shares in issue (000) 257 804 255 277 258 589
Weighted average number of
shares in issue (000) 258 196 254 562 255 793
Net asset value per share (cents)* 2 566 2 175 2 602
Reconciliation of headline
earnings (R’m)
Attributable profit 1 138 921 2 263
Loss on disposal and impairment
of property, plant and equipment
and intangible assets 7 2 95
Taxation adjustment (2) (1) (27)
Headline earnings 1 143 922 2 331
* Net asset value per share (cents) at 1 October 2016, previously
2166c has been restated as a result of a voluntary change in accounting policy as explained in note 7.
Notes:
1. The results at September 2017 and 2016, for which the directors take full responsibility, have not been audited. The abridged consolidated results at 1 April 2017, which are not itself audited, have been correctly extracted from the audited annual financial statements upon which Ernst & Young Inc. issued an unqualified opinion. The results were prepared under the supervision of Mr MM Blair, CA(SA), Chief Financial Officer.
2. The financial statements have been prepared in accordance with the Companies Act of South Africa.
3. On 19 May 2017 the company received notification from the National Credit Regulator specifying that it has been referred to the National Consumer Tribunal (NCT) as a consequence of allegedly contravening the National Credit Act (NCA). The alleged contravention came as a result of charging club fees that were prohibited by the NCA as they did not form part of a closed list of fees that were pre-determined by the NCA. The company lodged an opposing affidavit on 8 June 2017. The NCA sent through their replying affidavits on 18 July 2017. Pleadings closed on 18 July 2017 in terms of the NCT rules. The company has formally requested the NCT to stay the matter (ie not progress it) until the Edcon appeal (brought by the NCT) has been handed down. No response has been received from the NCT. Legal advice is that the NCR has no rational basis for the relief sought.
4. The fair value of FECs as calculated by the banks is measured using a forward pricing model. The significant inputs into the Level 2 fair value of FECs are yield curves, market interest rates and market foreign exchange rates. The estimated fair values of recognised financial instruments approximate their carrying amounts.
5. Deacons East Africa Plc has accepted an offer from the group to purchase the Mr Price franchise in Kenya which consists of 9 Mr Price Home and Mr Price Apparel stores (including 3 combo stores). The purchase is subject to a number of conditions that include a due diligence process, and approvals from regulatory authorities and the shareholders of Deacons. The parties are working towards the fulfilment of these conditions.
6. John Swain retired as an independent non-executive director and as a member of both the Audit and Compliance and Remuneration and Nominations committees on 31 August 2017.
7. 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 2017 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.
During the second half of last financial year, the group voluntarily changed its treatment of amounts previously recognised in equity for cash flow hedge accounting from the recycling method to the basis adjustment method. IAS 39 Financial Instruments: Recognition and Measurement allows both methods.
For cash flow hedge accounting, gains or losses from fair value adjustments are recognised in other comprehensive income (OCI). The group previously applied the recycling method where the amounts in OCI were reclassified to profit or loss when the hedged item affected profit or loss.
The group has voluntarily changed to the basis adjustment method in an effort to provide more reliable information to the users of the annual financial statements. The result of the change is that when the hedged item is a non-financial asset or non-financial liability, the amounts recognised in OCI are transferred to the initial carrying amount of the non-financial asset or liability. The amounts are still recognised to profit or loss when the items are sold.
In terms of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, the change in accounting policy needs to be applied retrospectively. The half year results at 1 October 2016 for the condensed consolidated statement of financial position, the condensed consolidated statement of other comprehensive income, the condensed consolidated statement of changes in equity and segment assets have been restated accordingly. There was no impact on the condensed consolidated income statement, the condensed consolidated cash flow or on basic and diluted earnings per share.
There is no adjustment to 1 April 2017 results as these were presented in terms of the new accounting policy.
The adjustment for each financial line item affected for the period is presented as follows:
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
2016 2016
1 Oct 1 Oct
26 weeks 26 weeks
R’m Previously Adjustment Restated
Assets
Non-current assets 2 458 - 2 458
Property, plant and equipment 1 903 - 1 903
Intangible assets 399 - 399
Long-term receivables and
other investment 38 - 38
Defined benefit fund asset 41 - 41
Deferred taxation assets 77 - 77
Current assets 5 449 31 5 480
Inventories 2 073 31 2 104
Trade and other receivables 2 104 2 104
Reinsurance assets 174 - 174
Cash and cash equivalents 1 098 - 1 098
Total assets 7 907 31 7 938
Equity and liabilities
Equity attributable to shareholders 5 530 22 5 552
Non-current liabilities 235 - 235
Lease obligations 158 - 158
Deferred taxation liabilities 1 - 1
Long-term liabilities 48 - 48
Post retirement medical benefits 28 - 28
Current liabilities 2 142 9 2 151
Trade and other payables 1 733 - 1 733
Derivative financial instruments 135 - 135
Reinsurance liabilities 30 - 30
Current portion of lease obligations 63 - 63
Taxation 181 9 190
Total equity and liabilities 7 907 31 7 938
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
2016 2016
1 Oct 1 Oct
26 weeks 26 weeks
Previously
R’m reported Adjustment Restated
Profit attributable to equity
holders of parent 921 - 921
Other comprehensive income:
Items that may be reclassified
subsequently to profit or loss:
Currency translation adjustments (71) - (71)
Net (loss)/gain on hedge accounting (60) 22 (38)
Items that will not be reclassified
subsequently to profit or loss:
Defined benefit fund net
Actuarial loss (1) - (1)
Total comprehensive income 789 22 811
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
2016 2016
1 Oct 1 Oct
26 weeks 26 weeks
Previously
R’m reported Adjustment Restated
Total equity attributable
to shareholders at beginning
of the period 5 620 - 5 620
Total comprehensive income for
the year 789 22 811
Treasury share transactions 151 - 151
Recognition of share-based payments 59 - 59
Dividends to shareholders (1 089) - (1 089)
Total equity attributable to
shareholders at end of the period 5 530 22 5 552
APPOINTMENT OF AUDIT & COMPLIANCE COMMITTEE MEMBER
Following the retirement of John Swain at the August 2017 AGM, Mark Bowman was appointed as a member of the Group’s Audit & Compliance Committee (the “Committee”) on 14 November 2017.
Mark is an independent non-executive director of the Company appointed to the board of directors of the Company on 28 February 2017.
In compliance with the Companies Act, 71 of 2008, Mark’s appointment as a member of the Committee will be put to shareholders for approval at the August 2018 AGM.
20 November 2017
Sponsor:
Rand Merchant Bank (a division of FirstRand Bank Limited)
This report and the supporting presentation are available on our website: www.mrpricegroup.com
Date: 20/11/2017 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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