| Wed 5 Mar 2008, 12:32 | | SHF - Steinhoff - Unaudited Interim Results For Th |
|
SHF
SHF
SHF - Steinhoff - Unaudited Interim Results For The Six Months Ended
31 December 2007 and dividend declaration
STEINHOFF INTERNATIONAL HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration no. 1998/003951/06)
Ordinary share code: "SHF"
ISIN: ZAE000016176
("Steinhoff")
Unaudited interim results for the six months ended 31 December 2007
HIGHLIGHTS
- HEADLINE EARNINGS INCREASE BY 35%
- HEADLINE EARNINGS PER ORDINARY SHARE INCREASE BY 22%
- OPERATING MARGIN INCREASED TO 9,6%
- STRONG BALANCE SHEET WITH GEARING REDUCED TO 27%
- TURNAROUND ACHIEVED IN UK RETAIL
CONDENSED CONSOLIDATED INCOME STATEMENT
Notes Six months Restated(1) % Year
ended Six months change ended
31 Dec ended 30 June
2007 31 Dec 2007
Unaudited 2006 Audited
R`000 Unaudited R`000
R`000
Revenue 20 570 051 17 886 012 15 34 228
573
Operating 2 331 267 1 873 009 24 3 932
profit before 691
depreciation
and capital
items
Depreciation (356 641) (357 118) (720
539)
Operating 1 974 626 1 515 891 30 3 212
profit before 152
capital items
Capital items 1 (132 926) (2 359) (234
500)
Earnings 1 841 700 1 513 532 22 2 977
before 652
interest,
dividend
income,
associated
earnings and
taxation
Net finance (237 139) (235 064) (453
charges 827)
Dividend 303 10 815 24 209
income
Earnings 1 604 864 1 289 283 24 2 548
before 034
associated
earnings and
taxation
Share of 24 166 47 923 67 159
profit of
associate
companies
Profit before 1 629 030 1 337 206 22 2 615
taxation 193
Taxation (162 853) (197 593) (325
208)
Profit for the 1 466 177 1 139 613 29 2 289
period from 985
continuing
operations
Profit for the - 70 722 142 552
period from
discontinued
operations
Profit on - - 541 903
disposal of
discontinued
operations
Profit for the 1 466 177 1 210 335 21 2 974
period 440
Attributable
to:
Equity holders 1 455 087 1 176 072 24 2 969
of the parent 621
Minority 11 090 34 263 4 819
interest
Profit for the 1 466 177 1 210 335 21 2 974
period 440
Headline 120,4 99,0 22 214,1(2)
earnings per
ordinary share
(cents)
Diluted 117,1 97,5 20 206,3(2)
headline
earnings per
ordinary share
(cents)
From
continuing and
discontinued
operations:
Basic earnings 110,6 99,1 12 241,9
per share
(cents)
Fully diluted 107,8 96,7 11 233,0
earnings per
share (cents)
From
continuing
operations:
Basic earnings 110,6 92,9 19 184,3
per share
(cents)
Fully diluted 107,8 90,6 19 177,1
earnings per
share (cents)
Number of 1 308 445 1 139 826 15 1 256
shares in 453
issue (`000)
Weighted 1 263 494 1 141 224 11 1 188
average number 015
of shares in
issue (`000)
Earnings 2 1 397 002 1 130 446 24 2 873
attributable 508
to ordinary
shareholders
(R`000)
Headline 3 1 521 574 1 130 082 35 2 542
earnings 990
attributable
to ordinary
shareholders
(R`000)
Average 9,8000 9,2834 6 9,4103
currency
translation
rate
(rand:euro)
ADDITIONAL INFORMATION
(1)Prior year figures have been restated to reflect the effects of
provisionally determined and changes to fair values of prior year business
combinations, early adoption of IFRIC 11, the group`s discontinued
operations, change in accounting policy related to common control
transactions and reclassifications.
(2)Headline earnings and diluted headline earnings per ordinary share were
restated for both 31 December 2006 and 30 June 2007 in accordance with
Circular 8/2007 - Headline Earnings, effective for financial periods ending
on or after 31 August 2007.
Note 1: Capital items
Closure costs (1 033) (922) (177 994)
Goodwill adjustments 5 833 (3 973) -
Impairments (139 131) - (81 901)
(Loss)/profit on scrapping (3 682) 4 537 (8 523)
of rental fleet vehicles
Profit on disposal of - - 978
business
Profit/(loss) on disposal 5 087 (2 001) 32 940
of property, plant and
equipment
(132 926) (2 359) (234 500)
Profit on disposal of - - 541 903
discontinued operations
Capital items included in - 177 (6 678)
discontinued operations
(132 926) (2 182) 300 725
Note 2: Earnings
attributable to ordinary
shareholders
Earnings attributable to 1 455 087 1 176 072 2 969 621
equity holders
Dividend entitlement on non- (58 085) (45 626) (96 113)
redeemable cumulative
preference shares
(including STC)
1 397 002 1 130 446 2 873 508
Note 3: Headline earnings
calculation
Earnings attributable to 1 455 087 1 176 072 2 969 621
equity holders
Adjustment for:
Capital items (note 1) 132 926 2 182 (300 725)
Taxation effects on capital (7 433) (1 215) (28 798)
items
Share of minorities in - - (995)
capital items
Profit on disposal of (921) (1 331) -
property, plant and
equipment included in share
of associate income
Dividend entitlement on non- (58 085) (45 626) (96 113)
redeemable cumulative
preference shares
(including STC)
Headline earnings for the 1 521 574 1 130 082 2 542 990
period attributable to
ordinary shareholders
CONDENSED CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
Restated(1)
Six months Six months Year
ended ended ended
31 Dec 31 Dec 30 June
2007 2006 2007
Unaudited Unaudited Audited
R`000 R`000 R`000
Actuarial (losses)/gains (33 487) - 37 709
recognised in equity
Exchange differences on (52 665) 128 010 248 662
consolidation of foreign
subsidiaries
Cash flow hedges (10 917) (14 830) (50 357)
recognised in equity
Net (expense)/income (97 069) 113 180 236 014
recognised directly in
equity
Profit for the period 1 466 177 1 210 335 2 974 440
Total recognised income 1 369 108 1 323 515 3 210 454
and expense for the
period
Attributable to:
Equity holders of the 1 358 018 1 289 252 3 205 635
parent
Minority interest 11 090 34 263 4 819
1 369 108 1 323 515 3 210 454
CONDENSED CONSOLIDATED BALANCE SHEET
Restated(1)
31 Dec 31 Dec 30 June
2007 2006 2007
Unaudited Unaudited Audited
R`000 R`000 R`000
ASSETS
Non-current assets
Property, plant and 8 905 822 6 141 246 7 998 870
equipment and biological
assets
Intangible assets and 10 175 770 8 696 797 10 247 043
goodwill
Investments and loans 4 306 185 3 740 726 3 217 203
Deferred taxation assets 757 646 498 183 706 213
24 145 423 19 076 952 22 169 329
Current assets
Accounts receivable,
short-term loans and
other
current assets 8 170 794 7 057 998 6 848 698
Inventories 3 582 708 3 391 889 3 451 445
Cash and cash 5 097 482 5 470 444 5 064 987
equivalents
16 850 984 15 920 331 15 365 130
Total assets 40 996 407 34 997 283 37 534 459
EQUITY AND LIABILITIES
Capital and reserves
Ordinary share capital 17 835 197 11 747 514 16 232 948
and reserves
Preference share capital 1 042 474 1 041 552 1 042 474
18 877 671 12 789 066 17 275 422
Minority interest 28 482 772 742 82 121
Total equity 18 906 153 13 561 808 17 357 543
Non-current liabilities
Deferred taxation 1 106 517 1 086 172 991 324
liabilities
Interest-bearing long- 8 766 573 8 041 267 7 261 391
term liabilities
Other long-term 594 316 561 034 418 321
liabilities and
provisions
10 467 406 9 688 473 8 671 036
Current liabilities
Net interest-bearing 5 020 782 3 637 749 3 974 843
liabilities
Accounts payable, 6 602 066 8 109 253 7 531 037
provisions and other
current liabilities
11 622 848 11 747 002 11 505 880
Total equity and 40 996 407 34 997 283 37 534 459
liabilities
Net asset value per 1 363 1 031 1 292
ordinary share (cents)
Gearing ratio (net) (%) 27 46 24
Closing exchange rate 9,9782 9,2226 9,5735
(rand:euro)
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Restated(1)
Six months Six months Year
ended ended ended
31 Dec 31 Dec 30 June
2007 2006 2007
Unaudited Unaudited Audited
R`000 R`000 R`000
Operating profit before 2 320 506 1 960 015 3 929 485
working capital changes
Net changes in working (1 432 005) (1 315 231) (475 637)
capital
Cash generated from 888 501 644 784 3 453 848
operations
Net finance costs (237 139) (235 064) (453 827)
Dividends paid (54 731) (40 706) (86 603)
Dividends received 11 140 22 124 51 537
Taxation paid (160 681) (199 198) (377 878)
Net cash inflow from 447 090 191 940 2 587 077
operating activities
Net cash outflow from (1 998 817) (2 099 607) (1 943 674)
investing activities
Net cash 1 467 736 2 330 429 (649 852)
inflow/(outflow) from
financing activities
Net (decrease)/increase (83 991) 422 762 (6 449)
in cash and cash
equivalents
Effects of exchange rate 116 486 (9 746) 14 008
changes on cash and cash
equivalents
Cash and cash 5 064 987 5 057 428 5 057 428
equivalents at beginning
of period
Cash and cash 5 097 482 5 470 444 5 064 987
equivalents at end of
period
SEGMENTAL ANALYSIS
Restated(1)
Six months Six months Year
ended ended ended
31 Dec 31 Dec 30 June
2007 2006 2007
Unaudited Unaudited % Audited
R`000 R`000 change R`000
Revenue
Retail activities
- Household goods 4 325 244 4 327 857 - 9 175 267
and building
supplies
- Motor vehicles 6 415 793 6 289 962 2 11 699 666
and finance
Manufacturing and 9 382 425 7 153 914 31 13 786 631
sourcing of
household goods
and related raw
materials
Logistical 2 347 753 1 925 310 22 3 784 845
services
Corporate services
- Brand management 146 177 135 946 275 472
- Investment 121 157 86 893 176 074
participation
- Central treasury 386 924 92 676 369 510
and other
activities
23 125 473 20 012 558 16 39 267 465
Intersegment (2 555 422) (2 126 546) (5 038 892)
eliminations
20 570 051 17 886 012 15 34 228 573
Operating profit
before capital
items
Retail activities
- Household goods 292 969 99 938 193 255 128
and building
supplies
- Motor vehicles 247 366 205 165 21 464 108
and finance
Manufacturing and 1 027 455 870 150 18 1 682 973
sourcing of
household goods
and related raw
materials
Logistical 181 679 158 108 15 313 845
services
Corporate services
- Brand management 146 177 135 946 275 412
- Investment 121 157 86 893 176 035
participation
- Central treasury 127 522 117 917 374 000
and other
activities
2 144 325 1 674 117 28 3 541 501
Intersegment (169 699) (158 226) (329 349)
eliminations
1 974 626 1 515 891 30 3 212 152
Restated(1)
31 Dec 31 Dec 30 June
2007 2006 2007
Unaudited Unaudited Audited
R`000 % R`000 % R`000
Total assets
Retail activities
- Household goods 5 555 158 16 5 543 148 20 7 665
and building 963
supplies
- Motor vehicles 2 816 970 8 2 786 405 10 2 519
and finance 547
Manufacturing and 14 782 414 42 11 345 719 40 11 534
sourcing of 491
household goods and
related raw
materials
Logistical services 4 021 528 12 2 886 637 10 3 705
085
Corporate services
- Brand management 2 666 019 8 2 526 768 9 2 623
039
- Investment 3 778 008 11 2 860 081 10 2 354
participation 667
- Central treasury 1 184 794 3 385 217 1 966 975
and other
activities
34 804 891 28 333 975 100 31 369
100 767
RECONCILIATION OF TOTAL ASSETS PER SEGMENTAL ANALYSIS TO TOTAL ASSETS PER
BALANCE SHEET
Restated(1)
31 Dec 31 Dec 30 June
2007 2006 2007
Unaudited Unaudited Audited
R`000 R`000 R`000
Total assets per balance 40 996 407 34 997 283 37 534 459
sheet
Less:
Cash and cash equivalents (5 097 482) (5 470 444) (5 064 987)
Investments in associate (747 220) (806 415) (866 282)
companies
Investment in preference (177 500) (180 000) (177 500)
shares
Interest-bearing (169 314) (206 449) (55 923)
investments and loans
Total assets per segmental 34 804 891 28 333 975 31 369 767
analysis
GEOGRAPHICAL INFORMATION
Restated(1)
31 Dec 31 Dec 30 June
2007 2006 2007
Unaudited Unaudited Audited
R`000 % R`000 % R`000 %
Revenue
United 3 867 851 19 3 676 215 20 7 652 119 22
Kingdom
European 5 128 497 25 3 573 988 20 6 610 368 19
Union
Pacific Rim 1 318 472 6 1 392 575 8 2 662 821 8
Southern 10 255 231 50 9 243 234 52 17 303 265 51
Africa
20 570 051 100 17 886 012 100 34 228 573 100
Non-current
assets
United 5 810 002 24 4 144 978 22 5 991 828 27
Kingdom
European 7 638 648 32 7 625 883 40 6 422 771 29
Union
Pacific Rim 1 296 777 5 1 066 168 5 1 173 434 5
Southern 9 399 996 39 6 239 923 33 8 581 296 39
Africa
24 145 423 100 19 076 952 100 22 169 329 100
SELECTED EXPLANATORY NOTES
STATEMENT OF COMPLIANCE
The condensed interim financial information for the half-year ended 31
December 2007, have been prepared in accordance with International Financial
Reporting Standards (IFRS), the interpretations adopted by the International
Accounting Standards Board (IASB), and the requirements of the South African
Companies Act. This set of condensed interim financial statements are
presented in compliance with IAS 34 - Interim Financial Reporting, and should
be read in conjunction with the annual financial statements for the year
ended 30 June 2007.
BASIS OF PREPARATION
The condensed interim financial statements are presented in thousands of
South African rands (R`000) on the historical-cost basis, except for certain
assets and liabilities which are carried at amortised cost, and derivative
financial instruments and biological assets which are stated at their fair
value.
ACCOUNTING POLICIES
The accounting policies adopted in preparation of the condensed interim
financial information are consistent with those of the annual financial
statements for the year ended 30 June 2007.
RESTATEMENT OF COMPARATIVE FIGURES
In accordance with IAS 8 - Accounting Policies, Changes in Accounting
Estimates and Errors, comparative periods have been restated to reflect the
following changes:
Discontinued operations - In June 2007 Steinhoff sold its entire South
African furniture manufacturing and import interests. The comparative income
statement has been restated to show the discontinued operation separately
from continuing operations.
Common control transactions - premiums and discounts arising on subsequent
purchases from, or sales to minority interest in subsidiaries - Previously,
any increases and decreases in ownership interest in subsidiaries without a
change in control were recognised as equity transactions. Accordingly, any
premiums or discounts on subsequent purchases of equity instruments from, or
sales of equity instruments to minorities were recognised directly in equity
of the parent shareholder. During the previous financial year, the group
changed its policy and these premiums or discounts are now treated in line
with the group`s policy on goodwill.
IFRIC 11 - IFRS 2 - Group and Treasury Share Transactions - This
interpretation is required to be applied to accounting periods commencing on
or after 1 March 2007. The group adopted this interpretation in the previous
financial year.
IFRS 8 - Operating segments - This standard is required to be applied to
accounting periods commencing on or after 1 January 2009, with early
application encouraged. The group elected for early application of IFRS 8 in
the previous financial year, in the interest of improved disclosure.
Steinhoff UK Retail Limited (formerly Homestyle Group Plc) - Comparative
periods have been restated to reflect the at-acquisition (30 June 2005)
restatement of accounting inconsistencies and misstatements in Steinhoff UK
Retail Limited.
RESTATEMENTS
Six months
ended
31 Dec 2006
R`000
Reconciliation of equity
Equity previously reported 13 469 632
Common control transactions 38 883
Share-based payments 138 350
Steinhoff UK Retail Limited (85 057)
Equity after adjustments 13 561 808
Reconciliation of profit for the period
Profit for the period from continuing operations 1 210 335
as previously reported
Discontinued operations (70 722)
Profit for the period from continuing operations 1 139 613
as restated
Certain reclassifications have been made to align prior year disclosures with
current year classifications.
COMMENTARY
REVIEW OF RESULTS
The growth in operating profits across all segments, reflects another period
of sound performance and growth. The period under review had been
challenging.
RETAIL ACTIVITIES: HOUSEHOLD GOODS AND BUILDING SUPPLIES
The United Kingdom (UK) retail operations had a good result, especially
against the background of the turnaround to profitability achieved by the
retail division, comprising Harveys, Cargo and Beds Division (Bensons, Bed
Shed and Sleepmaster). The retail division`s performance should be viewed in
perspective to a substantial reduction in net trading space caused by the
closure of loss-making stores and Beds concessions lost. The results
confirmed that the remedial steps previously taken have successfully
addressed some key supply chain issues that adversely impacted on the
business in the past. Improvements include: improved image, changed product
offerings, staff training, aggressive advertising and better supply chain and
customer complaint management which resulted in enhanced service levels,
shorter lead times and substantially reduced goods returns levels. The
rationalisation of distribution centres and optimisation of logistics
capacity utilisation and management changes have also had the desired
results. The entire property portfolio is being actively managed in terms of
store closures, trading space reductions and re-allocations in order to
optimise the coverage of the entire retail division`s footprint. Due to its
importance, it is appropriate to report on Harveys` Winter Sale results, even
though they do not fall within the reporting period. Confirmed sale orders
at good margins, over the period from December 2007 to February 2008
represent an 8% year-on-year increase which were achieved with 5% fewer staff
and 8% less trading space. These results are in contrast to the trading
updates of listed competitors which announced like-for-like sales figures
over the comparable period ranging from 16% to 22% down on last year. The
Cargo chain achieved pleasing results.
In the Pacific Rim region, trading conditions had been challenging due to
economic factors adversely affecting furniture sales. Although the Freedom
chain had a difficult six months, particularly in New Zealand, performance
subsequent to the reporting date has been much improved. BayLeatherRepublic
continued its strong performance and delivered good results. The bedding
specialist chain, Snooze, is well on track to improve its performance after
management changes and replacement of some franchisees in Western Australia.
The discontinuation of BaySwiss was completed and the roll-out of the new
Freedom At Home stores is continuing. During the review period, a number of
significant projects have been completed which should lead to much improved
results in the near future. These projects include the consolidation of group
logistics and distribution head offices and the relocation and restructure of
manufacturing facilities in Sydney, all of which were completed on time and
within budget.
The Hungarian retail operations performed satisfactorily and further shop
roll-outs will be undertaken in conjunction with our retail partners in the
German region.
Pennypinchers and Timbercity had a satisfactory result and initiatives are
ongoing to expand their footprint across all appropriate areas in South
Africa.
RETAIL ACTIVITIES: MOTOR VEHICLES AND FINANCE
The Unitrans motor retail division outperformed the industry, benefiting from
its sales mix of lower- to middle-end passenger vehicles and light commercial
vehicles, as well as the shift towards increased workshop sales and spare
parts. Hertz performed well and service levels have improved substantially.
MANUFACTURING AND SOURCING OF HOUSEHOLD GOODS AND RELATED RAW MATERIALS
The group`s UK manufacturing and raw material interests, overall, achieved a
good result and benefited from increased intra-group trading levels with the
UK`s own retail division.
The European manufacturing and sourcing division performed well and continued
to benefit from increased intra-group trading. Steinhoff continues to benefit
from market share gains in the German region brought about by the
consolidation trend prevalent in that region, its geographic reach and
flexibility in terms of product sourcing, breadth of product offering,
logistics and brand-related competitive advantages. The wholesale and trading
joint venture in the Benelux and German region performed exceptionally well
and the growth of the Henders & Hazel store-within-a-store concept continued
unabated.
In eastern Europe, all Polish manufacturing facilities in the mass and
discount upholstery segment is being consolidated, which together with the
Ukraine factories, stand to benefit substantially from increased supply into
our mass market and discount retail alliance partners` distribution bases in
the German region.
In order to counter the adverse effects of the Zloty strength relative to the
Euro and the labour migration situation in Poland, all administration and
distribution functions will be centralised in a new tax-free zone at Rzepin
in Poland. This initiative which is expected to be completed towards the end
of 2008, is anticipated to result in substantial cost savings for the Polish
production facilities.
The international sourcing operations continue to grow substantially due to
increased intra-group trading levels. This division also benefited the group
as a result of the strength of the Euro, British Pound and Australian Dollar,
relative to the US Dollar as the principal sourcing currency.
PG Bison Holdings (Proprietary) Limited achieved excellent results in a
market where demand still outstrips supply, notwithstanding production
capacity constraints, particularly in respect of medium density fibreboard.
The new chipboard plant at Ugie in the North Eastern Cape produced its first
particle board on 13 December 2007, one month ahead of schedule and within
budget. It is particularly pleasing to report that the plant, with a capacity
of 1 000 m3 per day, has already achieved a production output of 700 m3 per
day of top quality product which compares with equivalent product standards
available in Europe.
The results of the South African raw material division were adversely
affected by the slowdown in consumer spending on furniture and other
household goods products in South Africa.
LOGISTICAL SERVICES
Unitrans Supply Chain Services division benefited from good quality new
contracts gained to counter the effects of higher fixed operating costs.
Although the new contracts that were not budgeted for required higher capital
expenditure, the quality of these contracts provides great comfort in terms
of market positioning and service levels of this division. The passenger
division also achieved good results and has an exciting pipeline for new
business. The UK logistics division was restructured and after the
substantial top-management changes recently effected, is expected to return
to profitability by the end of the current financial year.
CORPORATE SERVICES
Brand ownership and management remains an important competitive priority and
delivered the desired results. Steinhoff`s investment participation
activities achieved good results and are expected to grow from the expansion
of the related retail bases. The group`s treasury activities relating to cash
management, interest rate and currency exposures risk management are integral
to the operating activities, and have contributed substantially to operating
income, as well as increased group-related volume rebates and other sundry
income. The corporate services segment also includes income in respect of the
property portfolio recently acquired and property-related services which are
undertaken centrally at corporate level.
PERFORMANCE
Subsequent to the reporting period, the South African Rand (ZAR) exchange
rate declined substantially. This augers well for ZAR-denominated
profitability in respect of the remainder of the current financial year. The
average exchange rate used for converting Euro income and expenditure to ZAR
for the period under review was R9,80: 1 Euro compared to R9,2834: 1 Euro in
respect of the corresponding six months of the previous financial year.
The group`s revenues increased by 15% from R17 886 million to R20 570
million, notwithstanding the continued increase in intra-group sales, in line
with the business model of vertical integration. The group generated 50%
(2006: 48%) of its revenues in currencies other than South African Rand,
principally Euro, British Pound and Australian Dollar. The actual foreign
revenue achieved in currencies other than South African Rand, but denominated
in Euro, increased by 14% from Euro 903 million to Euro 1 033 million.
Headline earnings attributable to ordinary shareholders grew by 35% to R1 522
million, compared to R1 130 million in the six months ended 31 December 2006.
Headline earnings per ordinary share increased by 22% to 120,4 cents (2006:
99,0 cents) with basic earnings per ordinary share from continuing and
discontinued operations, increasing 12% to 110,6 cents (2006: 99,1 cents).
The difference between the reported headline and basic earnings per ordinary
share is largely attributable to an impairment provision against the group`s
carrying value of its listed associate company, Amalgamated Appliance
Holdings Limited. The weighted average number of ordinary shares in issue
during the period increased by 11% to 1 263 million (2006: 1 141 million),
mainly as a result of the 133 million shares issued, in respect of the
Homestyle and Unitrans minority transactions undertaken during the latter six
months of the 2007 financial year.
Ordinary shareholders` funds at 31 December 2007 amounted to R17 835 million
(30 June 2007:
R16 233 million). The net asset value per ordinary share increased to 1 363
cents per share from 1 031 cents per share as at 31 December 2006. This
increase is stated after the payment, in November 2007, of a 50 cents cash
distribution per share from share premium account, amounting to R650 million.
The group generated R889 million (2006: R645 million) cash from operations.
Cash generation is calculated after taking into account the net increase in
working capital of R1 432 million (2006: R1 315 million) in line with the
increased activity levels and the end of calendar year trading cycle. The net
increase in working capital should be viewed in the context of the continued
settlement practices that allows the group to secure attractive discounts and
best buying prices of raw materials and household goods products.
The group`s average operating margin improved to 9,6% (2006: 8,5%), mainly
due to the turnaround to profitability of the UK retail operations, as well
as the beneficial impact on the group`s margins, given the relative strength
of the Euro, British pound and Australian Dollar against the US Dollar. The
group continues to benefit from enhanced efficiencies throughout the supply
chain, capacity utilisation as a result of improved economies of scale and
the favourable terms of sourced products sold through the retail distribution
base.
Net finance charges for the period at R237 million (2006: R235 million),
remained stable due to improved working capital management throughout all
divisions, and increased interest income earned on funding provided to
suppliers and retail alliance partners.
At 31 December 2007, Steinhoff had net interest-bearing debt of R5?133
million (31 December 2006: R5 863 million) resulting in a debt: equity ratio
of 27% (31 December 2006: 46%), well within the group`s self-imposed
covenants. The Board is particularly pleased to advise that the guaranteed
registered South African bond of R1 billion was redeemed on 28 February 2008
and re-financed by 5-year senior unsecured fixed rate notes at a favourable
cost, notwithstanding the adverse conditions prevailing in financial markets
(refer "Corporate Activity" below).
The group`s taxation charge was R163 million (2006: R198 million),
translating to an average tax rate of 10% (2006: 14,8%), mainly attributable
to group tax relief benefits that are now available to the UK operations
after Steinhoff UK Retail Limited`s return to profitability and the creation
of a single UK tax group. As a result of the lower statutory tax rates
applicable in certain jurisdictions and the favourable tax dispensations and
allowances available to the group, notably in Poland and in respect of the
North Eastern Cape Forests Joint Venture (NECF) project, management expect
the average tax rate not to exceed 15% of pre-tax income for the foreseeable
future.
As reflected in the segmental analysis, the group benefited substantially
from improved operating margins, particularly in respect of the retail of
household goods and building supplies segment of the business, with a margin,
before inter-segment eliminations, of 6,8% (2006: 2,3%). This improvement was
largely attributable to the turnaround achieved in the UK retail division.
The intra-group trading levels have also increased to 11,1% (2006: 10,6%) of
group sales, before inter-segment eliminations, in line with the business
model of vertical integration.
CORPORATE ACTIVITY
The group concluded, or is in the process of concluding the following
corporate transactions:
- PG Bison acquired the entire issued share capital of, and all shareholders`
claims against, Woodchemicals SA (Proprietary) Limited (Woodchem), a producer
of resin. Resin is a raw material used in the manufacturing of particle
board. The acquisition of Woodchem now makes PG Bison totally self-sufficient
in respect of its resin requirements for the foreseeable future.
- PG Bison acquired from the Industrial Development Corporation of South
Africa Limited, its remaining interests in the NECF, together with its shares
in, and loan claims against, Goeiehoop Farming (Proprietary) Limited. The
aggregate purchase consideration was settled by the delivery of 4 289 105
Steinhoff shares which were held as treasury shares, at a price of 2273 cents
per share.
- On 21 November 2007 Unitrans Services (Proprietary) Limited, a wholly owned
subsidiary of Steinhoff, issued R1 billion senior unsecured fixed rate notes
(UTR02) due on 21 November 2012, and bearing interest at a fixed rate of
10,49% per annum payable six monthly in arrears on 21 May and 21 November of
each year. The proceeds have been used to re-finance the guaranteed
registered bonds (SHF01) of R1 billion issued in the Steinhoff Africa group,
which were redeemed on 28 February 2008.
- During the period under review, the group continued to expand its retail
participation relationships with key retail alliance partners in continental
Europe. Apart from the financial merits of these arrangements, the group`s
manufacturing and sourcing operations are increasingly benefiting from the
resultant increased supply into the related retail distribution bases.
- Shareholders are referred to the announcement dated 10 December 2007
wherein salient details of an empowerment transaction involving a 20% equity
shareholding in Steinhoff Africa were presented. The Steinhoff Board is
pleased to report that the required debt funding facilities for the proposed
transaction have been procured. However, given the current weakened financial
markets and macro-economic conditions worldwide, Steinhoff, in liaising with
its empowerment partners, have resolved to continue with the implementation
of the proposed transaction albeit at a somewhat more measured pace given the
initial time line proposed. All parties remain committed to a mutually
beneficial transaction that will be implemented in the near future. Further
details will be announced in due course.
OUTLOOK
Retail activities: household goods and building supplies
In the UK, management continues to focus on business improvement strategies
to sustain and further improve on the positive results achieved. These
strategies include ongoing management of the property portfolio, continued
efforts to reduce lead times, enhanced product availability of fast moving
items and increased coverage of all trading facias. The difficulties
currently experienced by competitors create opportunities.
The restructured Pacific Rim operations should deliver stable results for the
foreseeable future.
In continental Europe, possible joint ventures with retail alliance partners
present interesting opportunities for expanding the group`s geographic
coverage also into new territories, outside of the German and Austrian
regions.
It is planned to expand the South African retail footprint of PG Bison`s
Pennypinchers and Timbercity trade retail operations, in line with the
group`s vertical integration strategies.
Retail activities: motor vehicles and finance
In South Africa the motor retail division should continue to deliver positive
results, albeit not at the same growth levels as in the past.
MANUFACTURING AND SOURCING OF HOUSEHOLD GOODS AND RELATED RAW MATERIALS
The group`s UK manufacturing and raw material interests are continuing to
grow from increased intra-group supply and, in the case of Pritex, as a
result of its increased penetration of the automotive and industrial sectors
and exports into new markets outside of the UK.
In continental Europe, Steinhoff`s manufacturing and sourcing interests stand
to further benefit from the continued consolidation and expanded retail
alliances, as well as the retructuring and cost-saving initiatives undertaken
in respect of the Polish operations.
The sourcing activities in Asia are anticipated to grow further and are
driven at top-executive level to maximise scale benefits and synergistic
opportunities available within the group.
PG Bison`s NECF project presents exciting strategic possibilities in terms of
import replacement and market share gains.
The South African raw material interests stand to benefit from the
diversification into new markets for its products, in addition to the
furniture and household goods sector.
LOGISTICAL SERVICES
The southern African logistics operations are well placed to benefit from new
contracts gained in the Unitrans Supply Chain Services and passenger
divisions. After the changes effected to the UK logistics division,
management is confident about the prospects of a return to profitability of
this division as an integral part of all activities in the UK.
CORPORATE SERVICES
The group`s corporate services segment, including brand management,
investment participations and treasury and other activities, are integral to
the success of the group`s regional strategies.The resultant competitive
advantages are anticipated to preserve the group`s profitable growth
prospects for the current financial year and thereafter.
GENERAL
As a general statement as far as all of the South African operations are
concerned, it is noted that the recent power outages may affect Steinhoff`s
operations in South Africa. Where possible, stand-by generators are being
installed and other contingency plans are in place to prevent any material
business disruptions that may arise as a result of load shedding
Management expects to achieve growth in headline earnings for the remainder
of the current financial year.
DIRECTORATE
In line with good Corporate Governance Practice, it has been agreed that Mr
Bruno Steinhoff, the Company`s executive chairman, will resign from his
executive duties with effect from 1 April 2008. He will remain on as non-
executive chairman until September 2008 in order to afford the Nominations
Committee sufficient time to consider the appointment of an independent non-
executive director as chairman of the Board. Bruno has agreed to remain
available on a consultancy basis with a view to concluding and/or assisting
on projects, especially relating to the increasing retail initiatives in the
European Union. After this change to the Board and the recent appointment of
Mrs Yolanda Cuba and Mr Dave Brink as independent non-executive directors,
the Board will comprise of five executive directors and eight non-executive
directors.
In addition, Mr Jannie Mouton has resigned from, and will be succeeded by Mr
Dave Brink as a member of the Audit and Risk Committee.
ORDINARY DIVIDEND
It is the group`s policy to declare cash distributions once a year after its
financial year-end at 30 June.
On behalf of the board of directors
BE Steinhoff MJ Jooste
Chairman Chief executive officer
5 March 2008
STEINHOFF INVESTMENT HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1954/001893/06)
(JSE share code: SHFF)
(ISIN code: ZAE 000068367)
Preference shareholders are referred to the above results of Steinhoff for a
full appreciation of the consolidated results and financial position of
Steinhoff Investments.
DECLARATION OF DIVIDEND NUMBER 5 TO PREFERENCE SHAREHOLDERS
The Board of Steinhoff Investments has resolved to declare a dividend of
516,47 cents per preference share in respect of the period from 1 July 2007
up to and including 31 December 2007 (the dividend period), payable on
Tuesday, 29 April 2008, to those preference shareholders recorded in the
books of the company at the close of business on Friday, 25 April 2008. This
dividend has been determined on the basis of 75% of the prime bank overdraft
lending rate of ABSA Bank Limited prevailing over the dividend period,
applied to the nominal value plus premium (of R100,00 per preference share,
in the aggregate).
The dividend is payable in the currency of South Africa.
Last date to trade cum dividend Friday, 18 April 2008
Shares trade ex dividend Monday, 21 April 2008
Record date Friday, 25 April 2008
Payment date Tuesday, 29 April 2008
No dematerialisation or rematerialisation of preference shares may take place
between Monday, 21 April 2008 and Friday, 25 April 2008, both dates
inclusive.
On Tuesday, 29 April 2008, the preference dividend will be electronically
transferred to the bank accounts of preference shareholders. Preference
shareholders who have dematerialised their shares will have their accounts
credited on Tuesday, 29 April 2008.
PROPOSED TAXATION AMENDMENTS
In the budget speech delivered by the Honourable Minister of Finance on 20
February 2008 (read with a media statement issued by the Department: National
Treasury and the South African Revenue Service) more details on the second
phase of the conversion of Secondary Tax on Companies (STC) to a shareholder
dividend tax were announced. In the first phase of the reform STC was reduced
from 12,5% to 10% with effect from 1 October 2007.
The second phase of the reform entails the actual conversion into a dividend
tax on shareholders. The implementation of the second phase of the reform
requires the renegotiation of specific international tax treaties in which
the withholding tax on dividends is currently limited to zero per cent. It is
anticipated that the second phase will be completed by 2009.
The dividend tax will be a final withholding tax of 10% and will apply to all
non-corporate shareholders and non-resident corporate shareholders. Depending
on the negotiation of treaty rates, the dividend withholding tax rate
applicable to distributions to non-resident shareholders may be lower than
the 10% rate. Furthermore, all STC credits accumulated prior to the
implementation of the second phase of the reform will be forfeited.
During phase one of the reform there is no additional taxation in the hands
of the preference shareholders but during phase two it may result in an
additional cost for certain preference shareholders and an equivalent benefit
for Steinhoff Investments. The preference shareholders are accordingly
advised that until such time as the legislation is promulgated, legal opinion
and appropriate tax advice obtained, it is not possible to determine exactly
what the impact will be on the cumulative non-redeemable non-participating
preference shares issued by Steinhoff Investments.
A further announcement in this regard will be made once the detailed
legislation is published and duly considered.
On behalf of the board of directors
D Konar JHN van der Merwe
Non-executive director Executive director
5 March 2008
OTHER NOTES
1. CORPORATE GOVERNANCE
Steinhoff has embraced the recommendations of King Report on Corporate
Governance and strives to provide reports to shareholders that are timely,
accurate, consistent and informative.
2. SOCIAL RESPONSIBILITY
Steinhoff continues to be recognised for its corporate social investment
activities. Management remains committed to the related initiatives and is
conscious of the needs in this regard.
A number of social responsibility projects are continuing.
3. HUMAN RESOURCES
A good working relationship is maintained with the relevant unions. Ongoing
skills and equity activities continue to ensure compliance with current
legislation.
Plans continue in terms of initiatives embarked upon that contribute to
broader skills development and sourcing appropriately qualified staff on an
ongoing basis.
4. RELATED PARTY TRANSACTIONS
The company entered into various related party transactions. These
transactions are no less favourable than those arranged with third parties.
5. FURTHER EVENTS
No significant events have occurred in the period between the reporting date
and the date of this report.
For more detail on the group`s listed investments, shareholders are referred
to the results and/or corporate announcements and financial information of:
- Amalgamated Appliance Holdings Limited - 10 March 2008 www.amap.co.za
- KAP International Holdings Limited - 4 March 2008
www.kapinternational.com
ADMINISTRATION
STEINHOFF INTERNATIONAL HOLDINGS LIMITED
Registration number: 1998/003951/06
(Incorporated in the Republic of South Africa)
JSE share code: SHF ISIN code: ZAE000016176
(Steinhoff or the company or the group)
Registered office: 28 Sixth Street, Wynberg, Sandton, 2090, Republic of South
Africa
Tel: +27 (11) 445 3000 Fax: +27 (11) 445 3094
Transfer secretaries: Computershare Investor Services (Proprietary) Limited
70 Marshall Street, Johannesburg, 2001
Company secretary: SJ Grobler
Auditors: Deloitte & Touche
Sponsor: PSG Capital (Proprietary) Limited
Directors: BE Steinhoff^* (chairman), MJ Jooste (chief executive officer), DE
Ackerman^, DC Brink^, YZ Cuba^, CE Daun^*, D Konar^, JF Mouton^, FJ Nel, FA
Sonn^, IM Topping#, DM van der Merwe, JHN van der Merwe
Alternate directors: JNS du Plessis, HJK Ferreira, SJ Grobler, KJ Grove, A
Kruger-Steinhoff^*
#British *German ^non-executive
www.steinhoffinternational.com
To view results on mobile www.steinhoff.mobi
Date: 05/03/2008 12:32:32 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
