| Fri 31 Aug 2001, 0:00 | | Wooltru - Preliminary Report And Further Cautionar |
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Wooltru Limited
Share Code: WLO ISIN Code: ZAE000007993
Share Code: WLN ISIN Code: ZAE000008744
Share Code: WLOP ISIN Code: ZAE000008009
Share Code: WLP1 ISIN Code: ZAE000008017
Preliminary Report and Further Cautionary Announcement 30 June 2001
Good progress has been made towards reaching the objective of being able to
distribute to shareholders the listed investments of the group, dispose of
the unlisted investments, and do a complete unbundling of the proceeds to
shareholders.
In the interim results commentary dated 6 March 2001, Wooltru informed
shareholders that there were certain key issues that needed to be resolved
before it would be possible to proceed with an unbundling. The most
significant of these issues related to intra-group guarantees, in particular
those relating to CNA and to promissory notes issued by Masstores (Pty)
Limited.
The management of Wooltru have addressed the internal issues and the Wooltru
Board is now pleased to announce that agreement has been reached on all the
major matters that required resolution prior to the unbundling. The
implementation of these agreements is well under way; the most significant
of which will result in Wooltru being released of its guarantees in respect
of the Masstores promissory notes in the first week of September. Other
agreements which release Wooltru from further guarantees relating to other
company properties have also been signed and are being implemented. Closure
is expected within the next month.
In addition, Wooltru has made significant progress in regard to the disposal
of its unlisted investments, with several agreements already either signed,
or under discussion. Further detail is given on each of the investments in
the discussion below. The Wooltru borrowings have been reduced from R550,0
million to R326,7 million, as at 28 August 2001.
On the successful completion of the signed agreements, which is expected to
be within the next month, Wooltru will have a sufficient degree of certainty
and liquidity to enable it to unbundle at least 95% of the listed
investments in Woolworths, Truworths and Massmart. Furthermore, once the
other remaining assets have been disposed of, it should be possible to make
a distribution of the remaining listed investments and a final cash
distribution to shareholders.
Progress update
CNA
CNA was sold on 1 March 2001 for R150,0 million. R16,0 million has been
received in cash and R84,6 million is secured by guarantees payable on 30
June 2002. The balance is secured over equity within the restructured CNA
group and is payable on 31 May 2002. The sale is not subject to any profit
warranties. As mentioned in the interim results, the purchase price is
subject to adjustment, based on the final determination of inventories and
trade payables as at 1 March 2001. These figures, which have been audited,
could result in a further R42,0 million benefit to Wooltru group companies,
R15,0 million of which is due to Wooltru and is receivable by 31 December
2001.
In total, the losses incurred by Wooltru in respect of its investment in
CNA, amounted to R900,7 million, made up as follows:
Goodwill written off R360,9 million
Trading losses R392,2 million
Net assets written off R147,6 million
inthebag
The group's business-to-consumer e-commerce venture, undertaken in
partnership with Woolworths, was successfully launched in October 2000.
However, because of the decision to unbundle, it is no longer appropriate
for Wooltru to continue to develop inthebag.
Because the success of inthebag is closely linked to Woolworths, an offer
from Woolworths for the purchase of inthebag was accepted. The effective
date of the sale is 1 July 2001 and the consideration received was R25,9
million. Total costs to Wooltru relating to inthebag, net of proceeds,
amounted to R37,5 million.
Properties
The disposal of the group's property portfolio is well under way. To date,
properties to the value of R151,3 million have been sold. Agreements of sale
have been signed for a further R218,5 million of property, which includes
the Kensington retail development. Accordingly, R118,5 million is expected
to be received by the end of September with a further R100,0 million
expected during November. A further R30,0 million expenditure is required to
complete these projects.
Wooltru Properties is currently considering written offers for other
properties amounting to a further R41,7 million. Negotiations are under way
for the conclusions of these offers.
The balance of the portfolio will continue to be actively marketed and has
been written down, where necessary, to values that will enable it to be
disposed of during the coming year. These remaining properties are
anticipated to realise R33,0 million.
WIB
Wooltru Insurance Brokers has been disposed of to a trust representing the
interests of the trading companies within the group. A final dividend of
R1,0 million has been paid to Wooltru from this company subsequent to the
year end.
Affinity Logic
Wooltru has received an offer for its investment in Affinity Logic. The
Board has accepted the offer in principle, but there remain a number of
conditions that must be negotiated before the sale can be concluded.
The directors' valuation of Affinity Logic has been reduced to R135,6
million, primarily as a result of the decline in the ratings of IT
companies. The directors are confident that the disposal of Wooltru's 32,5%
interest in Affinity Logic will realise, at least, a pro-rata share of this
valuation.
Masstores promissory notes
The last major item that is receiving attention is the replacement of
certain guarantees given by Wooltru to back a series of promissory notes
issued by Masstores. As mentioned above, agreement has been reached with all
the holders of these notes that will enable the Wooltru guarantee to be
released, as a result of which, this contingent liability will fall away.
Wooltru head office
The remaining material assets held by Wooltru consist primarily of loans to
the Wooltru share trust. As part of the unbundling, the share trust will be
wound down, and the loans repaid to Wooltru. An amount of R148,0 million is
expected to be recovered in the process.
Prospects
The value of Wooltru is no longer related to its earning potential, but is a
function of the realisable value of its investments.
The value of the listed assets will be determinable by reference to their
share prices as quoted on the JSE Securities Exchange South Africa. What
remains of the property portfolio is expected to realise R74,7 million.
Topics will be sold during the course of the coming year and shareholders
will be kept informed on progress towards this end.
Topics has a book value of R47,9 million and a net asset value of R100,8
million. The final consideration receivable will depend on the trading
results going forward and the state of the retail market at the time of its
sale.
It is not anticipated that any of these remaining investments will require
significant additional funding before being disposed of. However, in order
to enable Wooltru to wind down its operations and dispose of the remaining
assets, the existing banking facilities, which rely on the Wooltru asset
base before unbundling, must be re-negotiated. Provided sufficient progress
has been made in the disposal of the unlisted investments within the next
few weeks, the new banking facilities should not impact on the unbundling.
It is possible, however, that a small number of listed shares may need to be
held back as security against these facilities until the unlisted
investments have been fully disposed of, whereafter the shares would be
distributed. Shareholders will be kept informed.
The debt, which is carried by Wooltru head office, will be repaid from the
proceeds of the disposals of all the above unlisted investments and the
repayments from the share trust.
Wooltru will remain listed until all assets have been disposed of. At that
time, Wooltru will be voluntarily wound-up and it is anticipated that a
final cash distribution will be made to shareholders. It is hoped that this
may be achieved by the end of the current financial year.
Results for the year under review
Group results
The three listed operating companies, Woolworths Holdings Limited, Massmart
Holdings Limited and Truworths International Limited, each produced good
results in a tough period of retail trading. Their combined contribution to
Wooltru's headline earnings increased by 29%, from R254,7 million to R328,2
million.
The contribution from the discontinuing operations was impacted negatively
by the underperformance and write-down of stock at CNA, by the start-up
costs of inthebag and a reduced contribution from the property portfolio.
Earnings from continuing operations disclose the effects of the poor
performance of Topics and the expenditure incurred in restructuring the
group as a result of the decision to unbundle.
The results of the group are summarised in the table below.
Headline Earnings Wooltru's share
2001 2000
Rm Rm
Listed investments 328,2 254,7
(Woolworths, Truworths, Massmart)
Discontinuing operations (171,5) (16,1)
(CNA, inthebag, Properties)
Continuing operations (61,3) 7,2
(Topics, Affinity Logic, Wooltru)
Wooltru Group headline earnings 95,4 245,8
Decrease (%) (61)
Headline earnings per share (cents) 20,2 54,3
Decrease (%) (63)
Comparability with prior years
Income statement and balance sheet items can not be directly compared on a
line by line basis with prior years for the following reasons:
* The following entities have been treated as discontinuing: CNA, which was
sold on 1 March 2001. inthebag, Wooltru Insurance Brokers and the major
portion of the land and buildings, which have been disposed of subsequent to
the year-end.
* Massmart listed on 4 July 2000 and is no longer consolidated as a
subsidiary, but its results are incorporated as an associate.
Listed Investments
Woolworths
Woolworths Holdings' headline earnings grew by 22,3% to R290,7 million,
during the period under review. Revenue grew by 10,7% to R7,4 billion and
net profit before exceptional items grew by 10,3% to R433,8 million.
The turnaround in Woolworths' performance in South Africa, which commenced
18 months ago, has been sustained. Turnover grew by 11,9% to R5,9 billion
and profit before tax and exceptional items grew by 22,9% to R465,3 million.
These results reflect the improvement in the textile business, the expansion
of the franchise business in Africa and the Middle East and the continuing
growth of the foods business.
Country Road showed a small increase in turnover of 2,5% to R1,1 billion.
Profit before tax and exceptional items declined from a profit of R14,6
million to a loss of R31,5 million. Management is committed to restoring
this business to profitability.
The management of Woolworths Holdings expects further steady improvements in
its profits.
Truworths International
Truworths International's headline earnings from continuing operations
increased by 22,7% to R203,1 million. Revenue from continuing operations
grew by 12,8% to R1,7 billion, resulting in a 25,5% increase in operating
profit before exceptional items to R295,9 million.
Truworths coped with lower inflation, changing patterns in consumer spending
and the tough retail environment by concentrating on responsible growth
strategies, enlarging the range of unique retail formulae and further
advancing their cost containment strategies. Truworths' management is
confident that, by focusing on core competencies, Truworths will continue to
counter prevailing conditions and will show reasonable growth in earnings in
the year ahead.
Massmart
Wooltru's effective holding in Massmart has been diluted from 63,6% to 40,8%
as a result of the sale of its Massmart convertible debentures, effective 1
January 2000, and the listing of Massmart in July 2000.
Massmart achieved a 66% increase in comparable headline earnings, to R212,3
million. Turnover increased by 8,7% to R11,3 billion and net profit before
tax and exceptional items grew to R275,2 million.
These results were attained primarily through a 33% increase in trading
profits before tax by Makro and a 20% increase by CCW.
Massmart's particular approach to mass distribution is well suited to the
changing South African market place. On the basis of a slow-down in economic
recovery, Massmart management is confident that they will continue to
deliver growth in earnings per share, which will be at the forefront of the
retail sector.
The acquisition by Massmart of Jumbo Cash & Carry and 22 Browns and Weirs
Stores from Rebhold is dependent upon approval by the Competition
Commission. If the transaction is approved, Wooltru's headline earnings will
increase by R1,5 million to R96,9 million, and headline earnings per share
will increase by 0,3 cents to 20,5 cents per share. There is no impact on
disclosed revenue due to Massmart being an associate.
Discontinuing operations
CNA
The CNA group results for the period ended 28 February 2001 include the
results of Constantia Greetings. Group revenue for the eight-month period
under review decreased marginally by 3,2%, to R792,3 million compared to the
same period last year. Net loss before exceptional items increased from a
loss of R34,5 million to a loss of R124,3 million.
These results include an increase of R74,7 million in stock provisions as a
result of a change in the basis of valuing stock, due to the implementation
of SAP Retail, and the need to write-down unsaleable stock in anticipation
of the sale of CNA.
inthebag
Trading to date has met expectations. Start-up costs, amounting to R55,7
million, were written off, in anticipation of the disposal of inthebag.
Following the sale of inthebag to Woolworths, the group's final net loss
relating to this operation will amount to R37,5 million.
Wooltru Properties
Properties' contribution to group earnings, at the operational level, is
59,8% lower than last year at R8,0 million.
Headline earnings have shown a loss of R5,4 million against last year's
earnings of R19,9 million. This is mainly due to write-offs relating to
development properties in anticipation of their sale as well as an increase
in costs and a decrease in revenue associated with the disposal of land and
buildings.
Continuing businesses
Topics
Topics' contribution to group earnings deteriorated considerably during the
year under review. Revenue decreased by 9,5% to R328,9 million and net
profit before exceptional items deteriorated from a profit of R7,7 million
last year to a loss of R28,2 million. Headline earnings decreased to a loss
of R21,3 million.
Over-optimistic budgeting and poor stock control in the previous year left
the business heavily over-stocked. The cost of clearance has had a very
significant impact on profitability. The consequent imbalance of ranges over
the critical Christmas period, which resulted in poor sales, were further
contributors to the poor results.
A new top management team has been appointed and they are refocusing the
business to concentrate on core merchandise departments, and reinforcing
discipline and procedures with a particular emphasis on stock control.
The changes that have been implemented should see the start of a return to
profitability in the year ending June 2002.
Affinity Logic
Affinity Logic continues to perform in line with budget. E-Commerce
consulting services grew ahead of expectations. Significant capital
investments are being made in the current year to increase service delivery
capacity. These budgeted investments will have a negative short-term impact
on earnings but will enhance the company's long-term competitive position.
The company has provided for exceptional losses in the current year
associated with the restructure and exit from certain investments as a
result of the impending change in the shareholding of Affinity Logic due to
Wooltru's decision to unbundle.
Wooltru head office
The decision to ultimately close down the Wooltru head office has resulted
in exceptional expenditure being incurred in terminating all contingent
liabilities arising from Wooltru guarantees, collapsing the existing central
corporate structure and in restructuring the head office. It is anticipated
that a further provision of R120,0 million will be necessary to cover these
commitments, including operating expenses, interest and closure costs to the
date of liquidation.
The Wooltru Executive Share Incentive Scheme will be unwound as a result of
the decision to unbundle and discussions are being initiated with
participants, which will bring this to conclusion during the next financial
year.
Wooltru's borrowings, as at 28 August 2001, amounted to R326,7 million,
allocated as follows: Topics R46,1 million, Properties R34,5 million and
Wooltru R246,1 million.
Dividend
The board is committed to a process of complete unbundling. Accordingly, the
directors have resolved to declare no further ordinary dividends, other than
those that will be paid out in specie with the distribution of the listed
assets and from the net proceeds received from the ultimate realisation of
the remaining assets. Therefore, no interim dividend was paid and no final
dividend is proposed.
Strate
The share capital of Wooltru will be transferred to the new STRATE system of
electronic settlement on the JSE Securities Exchange South Africa (JSE) on
10 December 2001. Electronic trading of the shares commences on 7 January
2002 with settlement of electronic trades taking place on 14 January 2002.
Consequently, the company's share certificates will no longer be good for
delivery in respect of the transactions entered into on the JSE on or after
Monday 10 December 2001. Shareholders are encouraged to submit their shares
promptly for conversion into electronic form in the interests of efficiency
and security.
Cautionary announcement
On 17 August 2001 Wooltru released a cautionary announcement which advised
shareholders to exercise caution in dealing in their Wooltru ordinary and
`N' ordinary shares pending an announcement regarding the unbundling
strategy following the Wooltru board meeting, held on 27 August 2001.
Implementation of this strategy will proceed as soon as certain matters
still in process have been resolved. Wooltru ordinary and `N' ordinary
shareholders are therefore urged to continue to exercise caution in dealing
in their shares.
The audited group results were approved by the directors on 27 August 2001.
JB Rabb JD Newton
Managing Director Finance Director
Directorate and administration
Wooltru Limited: (Registration number 1936/008278/06)
Chairman: L A Tager*
Directors: J B Rabb (Managing), M J Lamberti, D M Lubner*, M S Mark,
J D Newton, S N Susman, J C van der Horst*
*Non-executive
Company secretary: R J McWilliams
Registered office: 5 Corporation Street, Cape Town 8001, South Africa
Postal address: PO Box 671, Cape Town 8000, South Africa
Web site: http://www.wooltru.co.za
Transfer secretaries:
Mercantile Registrars Limited, 10th Floor, 11 Diagonal Street, Johannesburg,
2001, South Africa
PO Box 7184, Johannesburg 2000, South Africa
Transfer Secretaries (Pty) Limited, Shop 12, Kaiserkrone Centre, Post Street
Mall, Windhoek, Namibia
PO Box 2401, Windhoek, Namibia
Sponsor: Merrill Lynch South Africa (Pty) Ltd
Abridged income statement
Year ended 30 June
2001 2000
Restated
Notes Rm Rm
Revenue 4 2 887,1 13 795,5
Continuing operations 366,7 407,5
Discontinuing operations 2 520,4 13 388,0
Cost of sales (1 334,2) (10 522,6)
Gross profit 1 552,9 3 272,9
Continuing operations 203,5 235,8
Discontinuing operations 1 349,4 3 037,1
Depreciation and amortisation (86,8) (161,8)
Occupancy costs (266,1) (653,9)
Employment costs (494,7) (1 223,1)
Other operating costs (560,6) (747,7)
Profit from operations 144,7 486,4
Continuing operations (18,0) 98,1
Discontinuing operations 162,7 388,3
Finance costs (75,2) (122,2)
Continuing operations (58,8) (30,9)
Discontinuing operations (16,4) (91,3)
Share of associates and joint
venture profit 5 214,8 126,7
Continuing operations - 3,7
Discontinuing operations 214,8 123,0
Net profit before exceptional items 284,3 490,9
Exceptional items 6 (168,0) 101,2
Continuing operations (458,9) 62,5
Discontinuing operations 290,9 38,7
Net profit before taxation 116,3 592,1
Taxation (72,8) (119,3)
Continuing operations 10,7 (4,8)
Discontinuing operations (83,5) (114,5)
Net profit after taxation 43,5 472,8
Minority interests (108,8) (35,4)
Continuing operations (8,0) (0,9)
Discontinuing operations (100,8) (34,5)
Net (loss)/profit attributable to
ordinary shareholders (65,3) 437,4
Continuing operations (533,0) 250,7
Discontinuing operations 467,7 186,7
Number of shares issued (millions) 475,9 465,4
Weighted average number of shares (millions) 472,3 452,9
(Loss)/earnings per share (cents) (13,8) 96,6
Diluted (loss)/earnings per share (cents) (14,5) 96,2
Headline earnings per share (cents) 7 20,2 54,3
Headline (loss)/earnings per share
from continuing operations (cents) 7 (13,0) 1,6
Dividend per share (cents) -* 37,0
Dividend cover (based on headline
earnings per share) - 1,5
* The board is committed to a process of complete unbundling. Accordingly,
the directors have resolved to declare no further ordinary dividends, other
than those that will be paid out of the net proceeds received from the
realisation of assets, as part of this process. The 2000 dividend per share
is in respect of the interim dividend of 20 cents per share declared on 29
February 2000 and the final dividend of 17 cents per share declared on 29
August 2000.
Abridged cash flow statement
Year ended 30 June
2001 2000
Restated
Rm Rm
Cash flow from operating activities
Cash flow from trading 121,4 438,7
Working capital movements (98,6) (317,5)
Net investment income 124,7 66,2
Taxation paid (101,3) (124,9)
Dividends paid (64,3) (67,6)
Net cash outflow from operations (18,1) (5,1)
Cash flow from investing activities
Net investment in property, plant and equipment (5,7) (276,1)
Net investment in subdiaries and businesses 3,9 (83,5)
Net loans and other investments (39,7) 391,7
Proceeds on restructuring of profit guarantees 60,0 -
Settlement of long-term liability: interest-free - (41,5)
Net cash inflow/(outflow) from
investing activities 18,5 (9,4)
Cash flow from financing activities
Shares issued 45,0 216,0
Long-term borrowings (repaid)/raised (325,2) 27,4
Net cash (outflow)/inflow from
financing activities (280,2) 243,4
Net (decrease)/increase in cash and
cash equivalents (279,8) 228,9
Net cash of associate no longer consolidated 83,8 -
Net cash outflow on discontinuance - (76,9)
Effect of exchange rate changes - (6,1)
Cash and cash equivalents at
beginning of period 215,9 70,0
Cash and cash equivalents at end of period 19,9 215,9
Abridged balance sheet
30 June
2001 2000
Restated
Notes Rm Rm
assets
Non-current assets 2 292,9 2 782,6
Property, plant and equipment 344,9 929,4
Investment in associates 9 1 546,7 968,9
Other investments 9 57,7 75,6
Loans 340,6 523,4
Deferred tax 3,0 285,3
Current assets 1 458,4 3 752,1
Inventories 255,1 1 886,9
Trade and other receivables 841,5 1 594,0
Bank balances and cash equivalents 361,8 271,2
Total assets 3 751,3 6 534,7
Equity and liabilities
Equity 2 819,0 3 196,8
Ordinary shareholders' interest 2 402,5 2 559,6
Preference share capital 1,5 1,5
Minority interests 415,0 635,7
Non-current liabilities 168,0 646,0
Long-term liabilities: interest-bearing - 327,9
Long-term liabilities: interest-free 14,9 100,1
Retirement benefit obligations 30,0 53,3
Deferred tax 123,1 164,7
Current liabilities 764,3 2 691,9
Short-term liabilities: interest-bearing 282,5 32,1
Trade and other payables 367,4 2 575,2
Amount owing to associate and joint venture 59,4 23,2
Taxation 55,0 61,4
Total equity and liabilities 3 751,3 6 534,7
Net asset value per share (cents 505 550
Abridged statement of changes in
ordinary shareholders' interest
Year ended 30 June
2001 2000
Restated
Notes Rm Rm
Ordinary shareholders' interest 2 559,6 2 106,6
Change in accounting policies prior
year adjustment 8 - 36,7
Movements for the period:
Share capital and share premium on
issue of shares 40,6 115,7
Recognised gains and losses
Accumulated (loss)/profit (181,1) 161,8
Net (loss)/profit attributable to
ordinary shareholders (65,3) 437,4
Distribution to ordinary shareholders (43,6) (63,7)
Premium on acquisition and intangible
assets written off - (85,0)
Transfer to non-distributable reserves (72,2) (126,9)
Non-distributable reserves (16,6) 138,8
Exchange difference on translation of
foreign entities 9,1 13,4
Revaluation of land and buildings (18,0) -
Sale of land and buildings (79,9) (1,5)
Transfer from accumulated profit 72,2 126,9
Ordinary shareholders' interest at
end of period 2 402,5 2 559,6
Notes
1. The basis of preparation of the financial information complies with South
African Generally Accepted Accounting Practice and the accounting policies
used are consistent with those applicable for the 30 June 2000 financial
statements other than those mentioned in note 8.
2. The directors intend calling a shareholders' meeting in respect of the
distribution in specie of the investments in Woolworths, Truworths
International and Massmart. CNA was sold on 1 March 2001. inthebag, Wooltru
Insurance Brokers and the major portion of the land and buildings have been
disposed of subsequent to the year-end. These have therefore been disclosed
as discontinuing operations.
3. On 4 July 2000 Massmart listed and changed from being a subsidiary to an
associate. The effect of this is that Massmart is no longer consolidated on
a line by line basis in the income statement and balance sheet, but included
in share of associates and joint venture profit in the income statement and
investment in associates in the balance sheet.
2001 2000
Rm Rm
4. Revenue (refer note 3)
Sales, royalties and franchise fees 2 702,4 13 555,6
Interest received 116,6 161,9
Dividends received 8,7 12,8
Rental 44,4 45,3
Other 15,0 19,9
2 887,1 13 795,5
2001 2000
Rm Rm
5. Share of associates and joint venture profit
includes dividends received from
associates of 77,1 36,2
6. The exceptional items relate to:
Net increase in attributable shareholders
funds on variations in interests in
subsidiaries, associates and
joint venture 181,3 208,9
Loss on disposal of CNA (162,6) -
Termination of IT contract (90,9) -
Closure of Constantia Greetings,
a division of CNA (30,2)
Unbundling expenses (7,6) -
Profit on sale of land and buildings 75,5 1,6
Property developments write down (13,5) -
Impairment of assets (8,6) (11,0)
Provision for dimunition of loan to share
incentive scheme trust (34,3) -
Restructuring of profit guarantees (35,0) -
Provision against loan to joint venture (25,6) -
Distribution from discontinuing operation
- Sportsgirl 15,0 -
Loss on disposal of JFK (2,2) -
Restructuring of operations (9,6) -
Onerous contracts (1,4) -
Payment in respect of Ivano (2,5) -
Restraints of trade (1,0) (8,3)
Loss on discontinuance - Sportsgirl - (146,4)
Surplus on sale of Massmart debentures - 48,2
Impairment of investment previously
reversed in group - 11,0
Distribution from share incentive scheme trust - 14,7
Other (1,4) (3,1)
(154,6) 115,6
Share of associates and joint venture
exceptional items
IT asset write off (6,0) -
Impairment of assets (5,4) (4,1)
Other (2,0) -
Restructuring costs - (14,2)
Surplus on disposal of Namibian stores - 3,6
Surplus on sale of investment - 0,3
(168,0) 101,2
Taxation 17,9 0,4
Minorities (15,1) 76,0
(165,2) 177,6
7. Headline earnings per share are calculated
as follows:
Net (loss)/profit attributable to
ordinary shareholders (65,3) 437,4
Net exceptional items (note 6) 165,2 (177,6)
Re-inclusion of certain restructuring costs
in exceptional items (4,1) -
Reversal of property development write
down in exceptional items (13,5) -
Re-inclusion of associates' restructuring
costs in exceptional items - (14,2)
Associates' goodwill write off 0,3 -
Loss on sale of plant and equipment 12,8 0,2
Headline earnings 95,4 245,8
Headline earnings per share (cents) 20,2 54,3
Headline (losses)/earnings per share from
continuing operations are calculated
as follows:
Headline earnings 95,4 245,8
Headline earnings from discontinuing
Operations (156,8) (238,7)
Headline (losses)/earnings from
continuing operations (61,4) 7,1
Headline (losses)/earnings per share from
continuing operations (cents) (13,0) 1,6
8. In order to comply with AC 130 - Provisions, Contingent Liabilities and
Assets, the group changed its accounting policies with regard to leave pay
to one of full provision, and for dividends, and the related secondary tax
on companies, to recording them in the period in which they are declared,
rather than in the period for which the dividend is recommended. The group,
except for Woolworths, an associate, changed its policy with respect to
providing for post-retirement medical aid liabilities from one of no
provision to one of full provision as recommended by AC116 - Employee
Benefits. This results in the cost of the post-retirement benefits being
recognised during the period of employment and the present value of the
unfunded liability being raised. Massmart changed the basis of valuing a
trademark. This resulted in the balance sheet value for deferred tax and the
corresponding non-distributable reserve being restated. Massmart changed the
basis of consolidating a subsidiary, due to it currently operating under
severe long-term restrictions that significantly impair its ability to
transfer funds to the parent, from one of fully accounting for its results
to one of cost accounting. The changes in accounting policies have been
accounted for retrospectively and accordingly a prior year adjustment has
been processed and comparative figures restated. The effects are as follows:
2001 2000
Rm Rm
Effect on opening shareholders' interest:
Opening accumulated profit as previously
reported 428,0
Changes in accounting policies:
- deferred tax 10,0
- Makro Zimbabwe deconsolidation (6,8)
- leave pay (18,1)
- post-retirement benefits (23,0)
- dividends 34,2
424,3
Minorities 11,7
Opening accumulated profit as restated 436,0
Non-distributable reserves as previously
Reported 553,0
Changes in accounting policy:
- deferred tax 28,7
Non-distributable reserves as restated 581,7
Current and comparative period
profit effects:
Changes in accounting policies:
- Makro Zimbabwe deconsolidation - (8,8)
- leave pay (0,2) 0,3
- post-retirement benefits (1,4) (6,6)
- dividends 2,7 (0,1)
Consequential impact on exceptional items - (4,7)
1,1 (19,9)
Taxation 0,1 5,7
Minorities (0,1) 4,2
Net profit/(loss) attributable to ordinary
Shareholders 1,1 (10,0)
Dividends (21,7) (10,6)
Transfer from non-distributable reserves 4,1 10,9
Premium on acquisition and intangible
assets written off - 0,8
Recognised gains and losses (16,5) (8,9)
9. Investment in associates and other
investments include:
listed investments of 1 550,3 982,5
with a market value of 2 249,9 1 422,6
and unlisted investments of 54,1 62,0
which the directors value at 67,8 290,3
10. Commitments in respect of capital
expenditure:
approved by directors 104,3 213,9
contracted for 33,9 1,7
11. The group leases the majority of its land and buildings and a small
amount of equipment under operating leases. The lease agreements of certain
of the group's store and related premises provide for a minimum annual
rental payment and additional payments determined on the basis of turnover.
At the period end, the group's future minimum operating lease commitments
were as follows:
Expiring within one year 172,6 501,7
Expiring later than one but not later
than five years 599,9 2 104,9
Expiring after five years 1 123,4 2 553,5
Contingent liabilities amount to 1 915,0 -
The Massmart prommissory notes are reflected under the above leases for June
2000 and in contingent liabilities for June 2001.
Subsequent to the financial year end, Truworths International received
revised assessments from South African Revenue Service (SARS) in respect of
the 1996 to 1999 years, in terms of which the loan elements of Truworths
International's former offshore investments have been subjected to transfer
pricing adjustments in terms of section 31(2) of the Income Tax Act.
The additional liability arising from the assessments amounts to R11,6
million with a further R3,7 million in respect of STC. Management's view,
which is supported by independent tax opinion, is that the loans should not
be subjected to the adjustments, and accordingly, an objection to the
assessments will shortly be lodged with SARS.
12. Unutilised banking facilities
amount to 2 085,5 2 619,6
There is no limit on the group's authority to raise interest-bearing
debt.
13. Certain comparative figures have been regrouped and restated.
14. The financial information in this preliminary report has been audited by
Ernst & Young and Nkonki Sizwe Ntsaluba.
