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JDG
JDG
JDG - JD GROUP - Audited results for the year ended 31 August 2010
JD Group Limited
("JD" or "the Company" or "the Group") Registration number: 1981/009108/06
Share code: JDG ISIN: ZAE000030771
Attributable earnings of R501m up from R75m (R413m excluding tax
settlement)
HEPS of 303.6 cents up from 44.4 cents (251.5 cents excluding tax
settlement)
Dividends per share of 150 cents up from 41 cents in 2009
Debtors cost R753 million (down 32 %)
Commentary
Business environment
At the release of the Group`s interim results we indicated that over the
last 18 months much work had been completed internally to reposition the
business for the longer term. We also commented that the catalyst for
growth in top line sales was largely dependent on job creation. While we
have only seen a 3% increase in sales for the full year, we have certainly
experienced a much improved second half of the financial year with sales up
6,7% on the same period in 2009. Another area where we have seen a
significant improvement in performance, is in the Financial Services
division where the centralisation of debtors management undertaken in 2009
bore fruit, with debtors costs down 32% on 2009.
Our furniture retail division had a much improved second six months with
sales up a respectable 9%. The annual performance was however negatively
impacted by the poor festive season trading period in 2009 where sales were
down 6%.
The repositioning of Hi-Fi Corporation continues to gain momentum. Sales in
the second six months were up 16% and 13 of the 34 stores are now in the
new format. Much work has also been completed on the merchandise range and
brand positioning. Incredible Connection continues to trade well but the
effect of the stronger Rand on selling prices has impacted on our ability
to aggressively grow top line sales.
Abra, our Polish chain, has experienced tough trading conditions brought
about by a slowing economy and a reduction in the availability of consumer
credit. That being said, the last four months have shown reasonable top
line sales growth. The strong Rand against the Polish Zloty has also
negatively impacted on the chain`s annual performance.
Financial review
General
The financial results are a tale of two halves. The first six months was
negatively affected by a very poor festive season trading period with
headline earnings down 25% to 141 cents per share against 189 cents per
share in 2009 (excluding the impact of the tax settlement of R338 million).
On the other hand, the second half of the financial year was a most
rewarding period. The further bedding down of the business model has
continued unabated and this is evidenced by the significantly improved
operating profit during this period, from R176 million in 2009 to R400
million in 2010.
The key features of the annual results are the following:
- Headline earnings per share of 304 cents (2009: 251 cents per share
excluding the impact of the tax settlement of R338 million).
- Headline earnings per share generated in the second half of the year of
163 cents compares favourably with the 63 cents reported for the same
period in 2009.
- An increase in operating profit of 20% to R772 million (2009: R646
million).
- A reduction in debtors cost to R753 million (2009: R1,1 billion).
- A year-on-year increase in operating expenses of only 4,9%.
Particularly noteworthy was the performance of our Financial Services
division where notwithstanding the pressure on revenue, operating profit of
R592 million was achieved (2009: R351 million).
The Group also successfully contained costs, with total expenses increasing
only 1,5% if the R37 million of foreign exchange costs and the R122 million
impact of consolidating Blake and Maravedi for nine months in the prior
period, are excluded.
Traditional Retail
The Traditional Retail division, although impacted by the December 2009
trading results, has produced pleasing results during the second half of
the financial year. Operating profit in the second half increased
significantly on the back of sales growth of 9%. We are also very pleased
with the traction being achieved in the areas of margin, merchandise and
operational disciplines.
Cash Retail
The Cash Retail division experienced an acceptable year with sales up 8,3%.
The impact of lower imported prices across all major categories, together
with some margin compression as a result of aggressive pricing at Hi-Fi
Corporation, resulted in a reduction in operating profit of R28 million for
the division as a whole.
Financial Services
The 69% increase in operating profit in this division was achieved mainly
due to the significant improvement in our credit risk profile on the back
of our very efficient centralised credit granting and collections
activities, culminating in a year-on-year reduction in debtors cost of 36%.
International
The results of Abra were impacted by the prolonged effects of the recession
experienced in Poland and the strengthening of the Rand against the Polish
Zloty.
New Business Development
Our New Business Development division comprising Blake and Maravedi has
started to deliver results. The intense focus on the operations and
collection activities of Maravedi is bearing fruit with a significant
improvement in the level of first-payment defaulters.
Balance Sheet and Cash Flow
The Group continues to generate strong cash flows from trading converting
84% of its operating profit into cash. R265 million was utilised in growing
the debtors book and R84 million was utilised to increase inventory levels
ahead of the festive season.
The strong balance sheet reflects interest bearing debt, net of cash
balances, of R667 million. This is a gearing ratio of 12,9% which provides
the Group with a solid base to fund future growth.
Board of directors
Mervyn King resigned from the Board with effect from 1 July 2010 to focus
on governance and other regulatory issues. The Group wishes to thank Mervyn
for his loyal and dedicated contribution to the Group and wish him well in
his future endeavours.
The Board is pleased to announce that Jacques Schindehutte has been
appointed to the Board as an independent non-executive director with effect
from 10 November 2010. Jacques is the past financial director of Absa Group
Limited and has a wealth of experience that will add significant value and
bring new insights to Board deliberations.
Prospects
The performance of the Group over the past six months gives reason for an
optimistic outlook for the forthcoming year. All divisions are well
positioned to maximise this festive seasons trading.
Audit opinion of the independent auditors
The auditors, Deloitte & Touche, have issued their opinion on the Group`s
financial statements for the year ended 31 August 2010. The audit was
conducted in accordance with International Standards on Auditing. They have
issued an unmodified audit opinion. These summarised provisional financial
statements have been derived from the Group financial statements and are
consistent in all material respects with the Group financial statements. A
copy of their audit report is available for inspection at the Company`s
registered office. Any reference to future financial performance included
in this announcement, has not been reviewed or reported on by the Company`s
auditors.
Dividend
The directors have declared a final dividend of 80 cents (2009: 41 cents)
per share for the period ended 31 August 2010.
In accordance with the settlement procedures of Strate, the following dates
will apply to the final dividend:
Last day to trade cum dividend Friday, 3 December 2010
Trading ex dividend commences Monday, 6 December 2010
Record date Friday, 10 December 2010
Dividend payment date Monday, 13 December 2010
Share certificates may not be dematerialised or rematerialised between
Monday, 6 December 2010 and Friday, 10 December 2010, both days inclusive.
By order of the Board
I David Sussman Grattan Kirk Bennie van Rooy
Executive Chairman Chief Executive Officer Financial Director
12 November 2010
Condensed Group income statement
Audited Audited
12 months 12 months
ended ended
31 August 31 August
2010 2009 Change
R million R million %
Sale of merchandise 9 520 9 244 3
Finance charges earned 1 575 1 505 5
Financial services 1 180 1 254 (6)
Other services 949 919 3
Revenue 13 224 12 922 2
Cost of sales 6 727 6 428 5
Operating expenses 4 972 4 739 5
Administration and other expenses 1 203 1 102
Depreciation and amortisation 193 197
Employees 2 227 2 103
Marketing 354 361
Occupancy 755 706
Share-based payment 26 24
Transport and travel 217 249
Surplus on disposal of property,
plant and equipment (3) (3)
Operating profit before debtors costs 1 525 1 755 (13)
Debtors costs (note 2) 753 1 109 (32)
Operating profit 772 646 20
Investment income 4 9
Finance income 80 184
Finance costs (181) (272)
Share of losses of associates - (12)
Profit before taxation 675 555 22
Taxation 167 475 (65)
Profit for the year 508 80 535
Attributable to:
Shareholders 501 75
Minorities 7 5
508 80
Earnings per share (cents)
- basic 304,9 45,8
- diluted 301,4 45,6
Condensed Group statement of other comprehensive income
Audited Restated
12 months 12 months
ended ended
31 August 31 August
2010 2009
R million R million
Profit for the year 508 80
Exchange differences on translating foreign (31) (38)
operations
Total comprehensive income for the year 477 42
Attributable to:
Shareholders 470 37
Minorities 7 5
477 42
Condensed Group statement of changes in equity
Audited Restated
31 August 31 August
2010 2009
R million R million
Share capital and premium 1 779 1 779
Opening balance 1 779 1 779
Treasury shares (378) (411)
Opening balance (411) (435)
Shares purchased by share incentive trust (18) -
Proceeds on disposal of shares by share 27 16
incentive trust
Loss on disposal of treasury shares 24 8
Share-based payment reserve 80 77
Opening balance 77 122
Share-based payment 26 24
Transfer to retained income (23) (69)
Non-distributable reserves 78 89
Opening balance 89 123
Translation of foreign entities (31) (38)
Transfer from retained income 20 4
Retained earnings 3 464 3 230
Opening balance 3 230 3 157
Profit attributable to shareholders 501 75
Loss on disposal of treasury shares (24) -
Distributable to shareholders (255) (70)
Distributable to share incentive trust 9 3
Transfer from share-based payment reserve 23 69
Transfer to non-distributable reserves (20) (4)
Shareholders for dividend 131 67
Opening balance 67 67
Distributable to shareholders 255 70
Distributable to share incentive trust (9) (3)
Paid to shareholders (189) (70)
Paid to share incentive trust 7 3
Shareholders equity 5 154 4 831
Minority shareholders` interest 34 27
Opening balance 27 -
Minority interest arising on acquisition - 21
Profit attributable to minorities 7 5
Dividends paid to minorities - (1)
Funding received from minorities - 2
Total equity 5 188 4 858
Condensed Group balance sheet
Audited Restated
31 August 31 August
2010 2009
R million R million
Assets
Non-current assets 1 617 1 673
Property, plant and equipment 767 756
Goodwill (note 3) 493 493
Intangible assets (note 3) 212 256
Investments and loans 30 92
Deferred taxation 115 76
Current assets 7 664 7 249
Inventories 1 575 1 491
Trade and other receivables (note 4) 5 276 4 910
Financial assets - 8
Taxation 34 104
Bank balances and cash 779 736
Total assets 9 281 8 922
Equity and liabilities
Equity and reserves
Share capital and premium 1 779 1 779
Treasury shares (378) (411)
Non-distributable and other reserves 158 166
Retained earnings 3 464 3 230
Shareholders for dividend 131 67
Shareholders` equity 5 154 4 831
Minority shareholders` interest 34 27
Total equity 5 188 4 858
Non-current liabilities 1 057 1 299
Interest bearing long-term liabilities 922 878
Non-interest bearing long-term liability 75 83
Deferred taxation 60 338
Current liabilities 3 036 2 765
Trade and other payables (note 5) 2 424 2 141
Provisions - 12
Interest bearing liabilities 502 486
Financial liabilities 4 3
Taxation 84 112
Bank overdraft 22 11
Total equity and liabilities 9 281 8 922
Directors` valuation of unlisted investments 30 92
Capital expenditure authorised and contracted 155 72
Capital expenditure authorised and not yet 234 98
contracted
Operating lease commitments 1 480 1 538
Net asset value per share (cents) 3 022,8 2 833,5
Gearing ratio (net) (%) 12,9 13,2
Supplementary information
Audited Audited
12 months 12 months
ended ended
31 August 31 August
2010 2009
R million R million
Reconciliation of headline earnings
Profit attributable to shareholders 501 75
Surplus on disposal of property, plant and (3) (3)
equipment
Taxation thereon 1 1
Headline earnings 499 73
Number of shares in issue (000) 170 500 170 500
Treasury shares held (000) (6 208) (6 757)
Number of shares held outside the Group (000) 164 292 163 743
Weighted average number of shares in issue (000)
- basic 164 314 163 245
- diluted 166 253 164 114
Headline earnings per share (cents)
- basic 303,6 44,4
- diluted 300,1 44,2
Distribution to shareholders (cents) 150 41
- Interim 70 -
- Final (proposed) 80 41
Operating margin (%) 5,8% 5,0%
The earnings and headline earnings per share are calculated in R thousands
as opposed to R million.
Condensed Group cash flow statement
Audited Restated
12 months 12 months
ended ended
31 August 31 August
2010 2009
R million R million
Cash flows from operating activities 62 (15)
Cash generated by trading 980 871
Increase in working capital (334) (325)
Cash generated by operations 646 546
Investment income 4 9
Finance costs - net (92) (109)
Taxation paid (314) (393)
Cash available from operating activities 244 53
Dividends paid (182) (68)
Cash flows from investing activities (99) (431)
Acquisition of subsidiary companies - (234)
Investment and loan receipts 62 1
Proceeds on disposal of property, plant and 27 20
equipment
Additions to property, plant and equipment (188) (218)
Cash flows from financing activities 69 36
Proceeds on disposal of treasury shares by share 27 16
incentive trust
Acquisition of shares by share incentive trust (18) -
Proceeds from minority shareholders` loans - 2
raised
Long-term borrowings raised 633 929
Long-term borrowings repaid (527) (762)
Finance lease liabilities repaid (46) (149)
Net increase/(decrease) in cash and cash 32 (410)
equivalents
Cash and cash equivalents at beginning of year 725 1 135
Cash and cash equivalents at end of year 757 725
Capital expenditure incurred 188 218
Notes
1. Accounting policies
The condensed financial information has been prepared in accordance with
the framework concepts and the measurement and recognition requirements of
International Financial Reporting Standards (IFRS), the AC 500 standards as
issued by the Accounting Practices Board and the information as required by
IAS 34: Interim Financial Reporting, the JSE Listings Requirements and the
Companies Act. The report has been prepared using accounting policies that
comply with IFRS which are consistent with those applied in the financial
statements for the year ended 31 August 2009, except for the adoption of
the following new or revised accounting standards and interpretations:
- Amendment to IAS 1 - Presentation of Financial Statements
- IFRS 2 - Share-based Payment
- IFRS 3 - Business Combinations
- IFRS 7 - Financial instruments: Disclosure
- IFRS 8 - Operating Segments
- IAS 23 - Borrowing Costs
- IAS 27 - Consolidated and Separate Financial Statements
- IAS 32 - Financial Instruments: Presentation
- IFRIC 15 - Agreements for the Construction of Real Estate
- IFRIC 16 - Hedges of a Net Investment in a Foreign Operation
- IFRIC 17 - Distribution of Non-cash Assets to Owners
The adoption of these standards had no material impact on the Group.
Audited Restated
12 months 12 months
ended ended
31 August 31 August
2010 2009
R million R million
2. Debtors costs
(Decrease)/increase in impairment provision (177) 52
Bad debts written off 930 1 057
753 1 109
3. Goodwill and intangible assets
Goodwill comprises:
Goodwill 493 347
Goodwill arising on acquisition of subsidiaries - 146
during the period
493 493
Intangible assets comprise:
Intangible assets 256 256
Intangible assets arising on acquisition of - 42
subsidiaries during the period
Amortisation for the current period (44) (42)
212 256
4. Trade and other receivables
Instalment sale receivables (a) 5 224 4 959
Other loans and advances 27 26
Trade receivables 42 70
Total instalment sale and trade receivables 5 293 5 055
Less: Impairment provision (586) (761)
Net instalment sale and trade receivables 4 707 4 294
Other receivables 569 616
Total instalment sale and trade and other 5 276 4 910
receivables
Provisions as a percentage of total instalment 11,1% 15,1%
sale and trade receivables (%)
In accordance with industry norms, amounts due from instalment sale
receivables after one year are included in current assets. The credit terms
of instalment sale receivables range from 3 to 36 months.
(a) Classified as loans and receivables and carried at amortised cost.
5. Trade and other payables
The directors consider the carrying amount of trade and other payables to
approximate their fair values.
The credit period of trade payables ranges between 7 and 120 days.
6. Diluted earnings and headline earnings per share
The number of shares for diluted earnings purposes has been calculated
after considering the dilutive impact of share options and the cash value
to be received in future, in respect of unissued shares granted to
employees.
7. Related parties
The Group entered into various transactions with related parties which
occurred under terms that are no more favourable than those arranged with
independent third parties.
8. Subsequent events
No significant events other than those disclosed in this announcement have
occurred in the period between 31 August 2010 and the date of this
announcement.
9. Restatements of amounts previously reported for 2009
In terms of IFRS 3, the Group has been reporting provisional amounts in
connection with the acquisition of Blake and Maravedi during December 2008.
The fair values of the assets and liabilities acquired as a part of these
transactions, as previously disclosed, have been finalised during the
current period. The finalisation has resulted in the restatement of certain
balance sheet amounts previously reported as follows:
31 August
2009
R million
Goodwill
Balance as previously reported 455
Restatement impact 38
Balance as currently reported 493
Trade and other receivables
Balance as previously reported 4 952
Restatement impact (42)
Balance as currently reported 4 910
Minority shareholders` interest
Balance as previously reported 31
Restatement impact (4)
Balance as currently reported 27
Segmental analysis - business divisions
Traditional Retail Financial Services
Year ended 31 August 2010 2009 2010 2009
Revenue Rm 5 339 5 203 2 880 2 980
Operating profit Rm 182 202 592 351
Depreciation Rm 32 43 16 9
Total assets Rm 1 016 1 003 4 961 4 247
Total current Rm 1 249 1 051 323 66
liabilities
Capital expenditure Rm 44 40 23 15
Operating margin % 3,4 3,9 20,6 11,8
Total sale of Rm 4 619 4 473
merchandise
Share of Group sale of % 48,5 48,4
merchandise
Credit sales Rm 3 162 3 185
Percentage of total % 68,5 71,2
Cash sales Rm 1 457 1 288
Percentage of total % 31,5 28,8
Number of stores 949 935 949 935
Revenue per store R000 5 626 5 565 3 035 3 187
Retail square meterage 495 584 505 843 55 065 56 200
Revenue per square Rand 10 773 10 286
metre
Number of employees 8 928 8 037 4 093 4 895
Revenue per employee R000 598 647 704 609
Instalment sale Rm 4 804 4 638
receivables
Impairment provision Rm 461 641
Bad debts written off Rm 872 1 044
Receivables` arrears Rm 910 889
Deposit rate on credit % 7,6 11,8
sales
Collection rate % 6,1 6,0
Average length of the 16,4 16,7
book Months
#Elimination of interdivisional origination fees.
*Restated - refer note 9.
+Maravedi and Blake consolidated for 9 months.
Segmental analysis - business divisions
Cash Retail International
Year ended 31 August 2010 2009 2010 2009
Revenue 4 308 3 976 634 843
Operating profit 190 218 12 58
Depreciation 46 36 5 5
Total assets 507 897 232 245
Total current liabilities 619 515 112 124
Capital expenditure 56 59 6 11
Operating margin 4,4 5,5 1,9 6,9
Total sale of merchandise 4 282 3 955 619 816
Share of Group sale of 45,0 42,8 6,5 8,8
merchandise
Credit sales
Percentage of total
Cash sales 4 282 3 955 619 816
Percentage of total 100,0 100,0 100,0 100,0
Number of stores 92 90 74 69
Revenue per store 46 826 44 178 8 568 12 217
Retail square meterage 90 617 83 722 56 180 46 757
Revenue per square metre 47 541 47 491 11 285 18 029
Number of employees 3 608 3 575 856 845
Revenue per employee 1 194 1 112 741 998
Instalment sale
receivables
Impairment provision
Bad debts written off
Receivables` arrears
Deposit rate on credit
sales
Collection rate
Average length of the
book
#Elimination of interdivisional origination fees.
*Restated - refer note 9.
+Maravedi and Blake consolidated for 9 months.
Segmental analysis - business divisions
New Business Dev Corporate
Year ended 31 August 2010 2009*+ 2010 2009*
Revenue 527 400 #(464) #(480)
Operating profit 27 (3) (231) (180)
Depreciation 24 24 26 38
Total assets 397 444 2 168 2 086
Total current liabilities 442 532 291 477
Capital expenditure 15 17 44 76
Operating margin 5,1 (0,8)
Total sale of merchandise
Share of Group sale of
merchandise
Credit sales
Percentage of total
Cash sales
Percentage of total
Number of stores
Revenue per store
Retail square meterage
Revenue per square metre
Number of employees 2 018 3 343 539 552
Revenue per employee 261 120
Instalment sale 420 321
receivables
Impairment provision 125 120
Bad debts written off 58 13
Receivables` arrears 112 74
Deposit rate on credit - -
sales
Collection rate 6,3 5,4
Average length of the 15,8 18,6
book
#Elimination of interdivisional origination fees.
*Restated - refer note 9.
+Maravedi and Blake consolidated for 9 months.
Segmental analysis - business divisions
Group
Year ended 31 August 2010 2009*
Revenue 13 224 12 922
Operating profit 772 646
Depreciation 149 155
Total assets 9 281 8 922
Total current liabilities 3 036 2 765
Capital expenditure 188 218
Operating margin 5,8 5,0
Total sale of merchandise 9 520 9 244
Share of Group sale of 100,0 100,0
merchandise
Credit sales 3 162 3 185
Percentage of total 33,2 34,5
Cash sales 6 358 6 059
Percentage of total 66,8 65,5
Number of stores 1 115 1 094
Revenue per store 11 860 11 812
Retail square meterage 697 446 692 522
Revenue per square metre 18 961 18 659
Number of employees 20 042 21 247
Revenue per employee 660 608
Instalment sale 5 224 4 959
receivables
Impairment provision 586 761
Bad debts written off 930 1 057
Receivables` arrears 1 022 963
Deposit rate on credit 7,6 11,8
sales
Collection rate 6,1 6,0
Average length of the 16,3 16,8
book
#Elimination of interdivisional origination fees.
*Restated - refer note 9.
+Maravedi and Blake consolidated for 9 months.
Administration
Executive directors ID Sussman (chairman), AG Kirk (chief executive
officer), KR Chauke, Dr HP Greeff, ID Thompson, BJ van Rooy
Non-executive director IS Levy
Independent non-executive directors VP Khanyile (lead independent non-
executive), Dr D Konar, M Lock, MJ Shaw, JH Schindehutte, GZ Steffens
Company secretary JMWR Pieterse
Registered office 11th Floor, JD House, 27 Stiemens Street, Braamfontein,
Johannesburg, 2001
(PO Box 4208, Johannesburg, 2000)
Telephone +27 11 408 0408
Facsimile +27 11 408 0604
Email: info@jdg.co.za
Transfer secretaries Computershare Investor Services (Proprietary) Limited
70 Marshall Street, Johannesburg, 2001
Telephone +27 11 370 5000
Facsimile +27 11 688 5238
ADR depository File number 82-4401, The Bank of New York Mellon
Corporation, One Wall Street, New York, NY 10286 United States of America
Telephone +1 212 495 1284 Facsimile +1 212 635 1121
Sponsor PSG Capital (Proprietary) Limited, Ground Floor, DM Kisch House,
Inanda Greens Business Park,
54 Wierda Road West, Wierda Valley, Sandton, 2196
Telephone +27 11 784 1712
Facsimile +27 11 784 4755
Independent auditors Deloitte & Touche
Date: 15/11/2010 07:05:13 Produced by the JSE SENS Department.
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