UPDATE 1-S.Africa's Mr Price to buy local retailer despite HY profit slump

Published 2020/11/26, 09:27
Updated 2020/11/26, 09:30
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(Recasts with details on deal, earnings, comments and background)

JOHANNESBURG, Nov 26 (Reuters) - South African retailer Mr Price MRPJ.J reported on Thursday a 25% decline in half-year headline earnings as lockdown curbs dented sales, but floated plans to acquire a local apparel value retailer for $105 million to expand its market share.

The size of the deal is about 4% of the market capitalisation, the budget clothing and homeware retailer said. According to Refinitiv data, Mr Price's market capitalisation stood at 39.7 billion rand ($2.63 billion) as of Wednesday's close, valuing the deal at 1.6 billion rand ($105.79 million).

Mr Price did not disclose the name of the local clothing retailer, but said more details will be announced later in the day.

Basic headline earnings per share (HEPS)- the main profit measure in South Africa - fell to 333.5 cents in the 26 weeks ended Sept. 26 from 443.2 cents last year.

The company's headline earnings were weighed down by the impact of the coronavirus-induced lockdown, which cost it 1.8 billion rand in lost sales in April.

Total revenue from continuing operations fell 14.4% to 9.2 billion rand, with retail sales declining 14.8%.

The retailer also plans to launch three categories - baby wear, school gear and novelty and gifting - under its clothing business in the second half of its 2021 financial year.

"These new high-growth categories should provide additional market share growth and extend the group's exceptional value offering," the company said.

Mr Price, which also sells sportswear, said it will no longer be funding its immediate growth opportunities with a capital raise, as a result of stronger-than-anticipated cash position, but instead will use its existing cash resources.

The retailer had said in May that it wanted to raise an undisclosed amount of capital via a share issue for acquisitions and growth opportunities. group declared an interim dividend of 210.1 cents per share.

($1 = 15.1130 rand)

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