Mr Price to spend R550 million on expansion in 2019

DURBAN – Mr Price expects to spend R550million, funded by cash reserves, as capital expenditure in the financial year 2019, which would include opening 48 stores and the acquisition of 12 Kenyan franchise stores.

The retailer disclosed this during its full-year results presentation on Friday.

The group opened 57 new stores in the year to end March and traded from 1258 corporate-owned stores at year-end.

It said the balance sheet strength and the cash-generative business model would also support its strategic acquisition strategy in selected markets.

“The balance sheet remains in a healthy position, with free cash flow increasing by 71.8percent to R3billion, and cash resources of R2.7bn at year-end. Inventories are in good shape and the debtors’ book continues to perform well, with a net bad-debt-to-retail- book ratio of 5.9percent and an impairment provision of 7.7percent,” the group said.

However, it said the key focus areas in the medium term would be to deliver on its strategic enablement IT and supply chain projects.

“These enhancements are imperative in order for us to realise trading opportunities locally and to trade effectively internationally, including Africa, where recovering commodity prices are expected to be supportive of increased consumer spending,” the group said.

Mr Price reported an increase in diluted headline earnings per share for the year to end March of 21.1percent to 1075.4 cents a share.

Chief executive Stuart Bird said: “This was a solid performance by a dedicated and talented team, who refocused and delivered after the under-performance of the previous year.”

Total revenue increased by 8percent to R21.3bn, with retail sales increasing by 7.6percent, and comparable stores increasing by 5.6percent to R20bn.

Cash sales grew by 8.4percent, and the group said this constituted 83.7percent of total sales, while credit sales increased by 4.1percent.

Online sales increased by 11.5percent, with MRP Apparel, South Africa’s number 1 ranked fashion retailer on several social media platforms, recording growth of 31.9percent.

Local store sales were up 8.3percent, while non-South African store sales increased by 3.8percent. Net trading space increased by 2.1percent.

Bird said the group was proud of the resilience of its business model and the character shown by its associates in challenging times, and remained cautiously optimistic about the future.

“In our major market, South Africa, there is renewed hope of more robust economic growth. However, many structural challenges remain that will not be fixed overnight. Although the vastly improved business and consumer confidence is welcoming, we believe that the consumers’ ability to spend is still restricted,” he said.

Mr Price operates four divisions: Apparel, Home, Financial Services, and Cellular and Central Services.

The group declared a final gross cash dividend of 414.10c a share for the year, declared from income reserves.

Mbuso Mbuli, an equity analyst at Absa Asset Management, said they expected Mr Price to report the strongest results within the retail sector due to its soft base and self-correction drive to fix merchandise mistakes made in the past two years’ exposure to the South African construction industry.

Mr Price shares closed 1.85percent higher on the JSE on Friday at R255.65.