Retail chain Mr Price announced on Monday that agreement has been reached for the sale of The Hub division, comprising 12 departmental stores and two shoe stores.
The purchaser of The Hub is a consortium of management and a private investor supported by a leading financial institution. The transaction, which is effective from March 27 this year, is subject to the conclusion of due diligence and certain conditions precedent.
The Hub recorded sales of R345-million in the past financial year.
Mr Price recently also disposed of the Galaxy Jewellery chain.
The group said the cash generated from the sales of The Hub and Galaxy will be invested in the group’s expansion programme for its remaining chains and other new concepts in the pipeline.
The remaining chains achieved combined sales of R4-billion in the 2005 financial year: Mr Price (R2,2-billion); the home chains, Mr Price Home and Sheet Street (R1,2-billion); and Miladys (R0,6-billion).
In the 2005 financial year, the two chains that have been sold contributed approximately 13 cents to the reported group headline earnings of 120,4 cents, and the sales were concluded at prices close to net asset value.
The group’s long-term sales and profit targets will not be significantly affected and the disposals will have a positive effect on the group’s return on equity.
Commenting on the two transactions, CEO Alastair McArthur said: “While Galaxy and The Hub are good businesses with long track records, their current return on investment is below the high level achieved by the group’s other successful business models.
“Significant investment in these two chains cannot be justified at present and thus their growth prospects are limited inside our group. They can, however, be very successfully and profitably run as independent private companies.
“The sales will allow our management team to focus on the four major retail brands in the group — Mr Price, Mr Price Home, Sheet Street and Miladys. These chains all have great growth potential and no further disposals are contemplated,” said McArthur. — I-Net Bridge