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JDG
JDG
JDG - JD Group - Reviewed results for the six months ended 28 February 2011
JD Group Limited:
("JD" or "the Company"
or "the Group")
Registration number: 1981/009108/06
Share code: JDG
ISIN: ZAE000030771
Reviewed Results
R7 463m Revenue up 9% 2010: R6 835m
202,9 cents Headline earnings per share up 44% 2010: 141,1 cents
R515m Operating profit up 38% 2010: R372m
100 cents Dividend per share up 43% 2010: 70 cents
Commentary
Business environment
JD Group is pleased to report the continued improvement in the financial results
for the period under review with Headline Earnings increasing 44%. The separated
Financial Services and Furniture Retail divisions continue to pay dividends as
both divisions are now totally focussed on their core competencies, both
strategically and operationally.
While much work remains to be done in respect of maximising the ultimate
potential of the Group, key tangible improvements have been realised in the last
six months. Most areas of the business have shown a real improvement over the
past period.
Trading in the Furniture Retail division was particularly pleasing with sales up
18% and operating profit up 133% to R294 million. Despite the effects of
significant price deflation in the Cash division, sales were up by a respectable
7,1%. This resulted in a 24% increase in operating profit to R97 million.
Margins across the Group have continued to improve as has the performance of the
receivables with overall debtors costs down 15%. The above resulted in the Group
increasing profit before tax by 46% to R482 million.
Financial review
General
The improved financial performance experienced during the second half of 2010
continued during the first six months of the 2011 financial year with pleasing
results reported in most areas of the business.
The key features of the interim results are the following:
Revenue up 9,2% to R7,5 billion (2010: R6,8 billion)
A 38,4% increase in operating profit to R515 million (2010: R372 million)
The reduction in debtors cost (including Maravedi) to R384 million (down from
R454 million in 2010)
Headline earnings per share of 202,9 cents (2010: 141,1 cents)
Dividend per share of 100 cents (2010: 70 cents)
An 11% increase in merchandise sales to R5,5 billion (2010: R5,0 billion)
Traditional Retail
Particularly encouraging was the performance of our Furniture Retail division
where an operating margin of 8,9% (2010: 4,5%) was achieved. The strong sales
growth of 18% was further supported by a 1,6% improvement in gross margin to
35,8%. The division generated an operating profit of R294 million (2010: R126
million).
Cash Retail
The Cash Retail division reported satisfactory results, characterised by a 7,1%
year-on-year growth in sales and a 0,8% improvement in gross margin to 23,5%.
This resulted in operating profit up 24% from R78 million in 2010 to R97 million
in 2011. This was achieved despite the impact of the strong Rand and the
competitive environment, which resulted in price deflation of up to 16% in
certain product categories. The repositioning of Hi-Fi Corporation has also
yielded improved results.
Financial Services
The strong sales growth from the Furniture division contributed to a 10,5%
increase in receivables from R4,9 billion to R5,4 billion. It was particularly
pleasing to see a further reduction in debtors cost from R427 million in 2010 to
R344 million in 2011 and the impairment ratio reducing from 12,6% to 8,8%. The
division generated an operating profit of R242 million (2010: R239 million).
Revenue grew marginally due to the impact of the lower interest rates.
International
The results of Abra were impacted by the prolonged effects of the recession
experienced in Poland and the impact of adverse weather conditions on deliveries
particularly over the festive season.
New Business Development
The New Business Development division consists of Blake and Maravedi. This
division outperformed the results of 2010 and reported a much improved operating
profit. It is pleasing to note that the operating profit generated by Blake is
as a result of the execution of the strategy implemented over the past year.
Balance Sheet and Cash Flow
Cash generated by trading increased from R480 million to R635 million during the
period as a result of the substantial increase in operating profit. R676 million
was utilised in growing the receivables book. R142 million was invested in the
acquisition of property, plant and equipment for the centralisation of the
Distribution Centres and the roll-out of the new ERP systems in Traditional
Retail and Financial Services.
The cash invested in operating activities was funded by an additional R384
million of long-term borrowings raised during the period.
The strong balance sheet reflects net interest bearing debt of R1,3 billion at a
gearing ratio of 25,2% which provides a very solid basis to fund future growth.
Acquisition of Unitrans Auto, Steinbuild and the disposal of Abra
The transaction announced on 14 March 2011 will bring further complementary
diversification to the Group. It has always been our stated objective to make
the Group less reliant on the Furniture division by introducing other businesses
that cater for the middle mass market. In addition, the transaction facilitates
the Group`s strategy of diversifying our channel and product offering in the
Financial Services division. Steinhoff`s global sourcing capabilities will
further enhance the Group`s ability to compete in the market place. The
shareholders meeting is expected to take place on 23 June 2011. It is
anticipated that the outcome of the Competition Commission findings will be
available before 30 June 2011.
Prospects
The performance of the first six months gives us reason for an optimistic
outlook for the second half.
Board of directors
Mr IS (Ivan) Levy sadly passed away on 5 February 2011. The Board of Directors
is at present not King III compliant as the non-executive directors are not in
the majority. The Group`s Nominations Committee has, however, identified
suitable non-executive candidates and Board appointments are imminent.
Review by the independent auditors
The financial information presented has been reviewed, but not audited by
Deloitte & Touche, whose unmodified review report is available for inspection at
the Company`s registered office.
Dividend
The directors have declared an interim dividend of 100 cents per share for the
six- month period ended 28 February 2011.
In accordance with the settlement procedures of Strate, the following dates will
apply to the interim dividend:
Last day to trade cum dividend Friday, 17 June 2011
Trading ex dividend commences Monday, 20 June 2011
Record date Friday, 24 June 2011
Dividend payment date Monday, 27 June 2011
Share certificates may not be dematerialised or re-materialised between Monday,
20 June 2011 and Friday, 24 June 2011, both dates inclusive.
By order of the Board
I David Sussman Grattan Kirk Bennie van Rooy
Executive Chairman Chief Executive Officer Financial Director
13 May 2011
Condensed Group income statement
Audited Reviewed Reviewed
12 months 6 months 6 months
ended ended ended
31 August 28 February 28 February
2010 2011 2010 Change
R million R million R million %
9 520 Sale of 5 535 4 993 11
merchandise
1 575 Finance charges 794 792 -
earned
1 180 Financial 624 567 10
services
949 Other services 510 483 6
13 224 Revenue 7 463 6 835 9
6 727 Cost of sales 3 857 3 551 9
4 972 Operating 2 707 2 458 10
expenses
1 203 Administration 640 603
and other
expenses
193 Depreciation and 111 101
amortisation
2 227 Employees 1 205 1 063
354 Marketing 217 199
755 Occupancy 399 373
26 Share-based 16 12
payment
217 Transport and 118 107
travel
(3) (Surplus)/loss on 1 -
disposal of
property, plant
and equipment
1 525 Operating profit 899 826 9
before debtors
costs
753 Debtors costs 384 454 (15)
(note 2)
772 Operating profit 515 372 38
84 Investment and 30 40
finance income
(181) Finance costs (64) (81)
- Share of profits 1 -
of associates
675 Profit before 482 331 46
taxation
167 Taxation 148 99 49
508 Profit for the 334 232 44
period
Attributable to:
501 Shareholders 333 231
7 Minorities 1 1
508 334 232
Earnings per
share (cents)
304,9 - basic 202,4 140,9
301,4 - diluted 199,6 139,1
Condensed Group statement of other comprehensive income
Audited Reviewed Reviewed
12 months 6 months 6 months
ended ended ended
31 August 28 February 28 February
2010 2011 2010
R million R million R million
508 Profit for the period 334 232
(31) Exchange differences on 8 (4)
translating foreign
operations
477 Total comprehensive 342 228
income for the period
Attributable to:
470 Shareholders 341 227
7 Minorities 1 1
477 342 228
Supplementary information
Audited Reviewed Reviewed
12 months 6 months 6 months
ended ended ended
31 August 28 February 28 February
2010 2011 2010
R million R million R million
Reconciliation of headline
earnings
501 Profit attributable to 333 231
shareholders
(3) (Surplus)/loss on disposal 1 -
of property, plant and
equipment
1 Taxation thereon - -
499 Headline earnings 334 231
170 500 Number of shares in issue 170 500 170 500
(000)
(6 208) Treasury shares held (000) (5 108) (5 981)
164 292 Number of shares held 165 392 164 519
outside the Group (000)
Weighted average number of
shares in issue
(000)
164 314 - basic 164 580 164 047
166 253 - diluted 166 848 166 275
Headline earnings per share
(cents)
303,6 - basic 202,9 141,1
300,1 - diluted 200,1 139,2
150 Distribution to 100 70
shareholders (cents)
70 - Interim (proposed) 100 70
80 - Final
5,8 Operating margin (%) 6,9 5,4
The earnings and headline earnings per share are calculated in R thousands as
opposed to R million.
Condensed Group balance sheet
Audited Reviewed Reviewed
31 August 28 February 28 February
2010 2011 2010
R million R million R million
Assets
1 617 Non-current assets 1 635 1 648
767 Property, plant and 809 750
equipment
493 Goodwill (note 3) 493 493
212 Intangible assets (note 3) 193 234
30 Investments and loans 30 92
- Interest in associate 1 -
company
115 Deferred taxation 109 79
7 664 Current assets 8 522 7 603
1 575 Inventories 1 730 1 629
5 276 Trade and other 5 952 5 190
receivables (note 4)
- Financial assets - 1
34 Taxation 423 85
779 Bank balances and cash 417 698
9 281 Total assets 10 157 9 251
Equity and liabilities
Equity and reserves
1 779 Share capital and premium 1 779 1 779
(378) Treasury shares (310) (369)
158 Non-distributable and 191 184
other reserves
3 464 Retained earnings 3 593 3 315
131 Shareholders for dividend 165 115
5 154 Shareholders` equity 5 418 5 024
34 Minority shareholders` 33 28
interest
5 188 Total equity 5 451 5 052
1 057 Non-current liabilities 1 627 1 374
922 Interest bearing long-term 1 136 953
liabilities
75 Non-interest bearing long- 71 80
term liability
60 Deferred taxation 420 341
3 036 Current liabilities 3 079 2 825
2 424 Trade and other payables 2 350 2 167
(note 5)
- Provisions - 6
502 Interest bearing 643 547
liabilities
4 Financial liabilities 1 1
84 Taxation 85 96
22 Bank overdraft - 8
9 281 Total equity and 10 157 9 251
liabilities
30 Directors` valuation of 30 92
unlisted investment
155 Capital expenditure 143 83
authorised and contracted
234 Capital expenditure 899 98
authorised and not yet
contracted
1 480 Operating lease 1 545 1 534
commitments
3 022,8 Net asset value per share 3 177,6 2 946,6
(cents)
12,9 Gearing ratio (net) (%) 25,2 16,1
Condensed statement of changes in equity
Audited Reviewed Reviewed
31 August 28 February 28 February
2010 2011 2010
R million R million R million
1 779 Share capital and premium 1 779 1 779
1 779 Opening balance 1 779 1 779
(378) Treasury shares (310) (369)
(411) Opening balance (378) (411)
(18) Shares purchased by share - -
incentive trust
27 Proceeds on disposal of 38 21
shares by share incentive
trust
24 Loss on disposal of 30 21
treasury shares
80 Share-based payment 96 89
reserve
77 Opening balance 80 77
26 Share-based payment 16 12
(23) Transfer to retained - -
income
78 Non-distributable reserves 95 95
89 Opening balance 78 89
(31) Translation of foreign 8 (4)
entities
20 Transfer from retained 9 10
income
3 464 Retained earnings 3 593 3 315
3 230 Opening balance 3 464 3 230
501 Profit attributable to 333 231
shareholders
(24) Loss on disposal of (30) (21)
treasury shares
(255) Distributable to (170) (119)
shareholders
9 Distributable to share 5 4
incentive trust
23 Transfer from share-based - -
payment reserve
(20) Transfer to non- (9) (10)
distributable reserves
131 Shareholders for dividend 165 115
67 Opening balance 131 67
255 Distributable to 170 119
shareholders
(9) Distributable to share (5) (4)
incentive trust
(189) Paid to shareholders (136) (70)
7 Paid to share incentive 5 3
trust
5 154 Shareholders equity 5 418 5 024
34 Minority shareholders` 33 28
interest
27 Opening balance 34 27
7 Profit attributable to 1 1
minorities
- Dividends paid to (2) -
minorities
5 188 Total 5 451 5 052
Condensed Group cash flow statement
Audited Reviewed Reviewed
12 months 6 months 6 months
ended ended ended
31 August 28 February 28 February
2010 2011 2010
R million R million R million
62 Cash flows from operating (600) (118)
activities
980 Cash generated by trading 635 480
(334) Increase in working capital (898) (402)
646 Cash generated/(utilised) (263) 78
by operations
4 Investment income - 1
(92) Finance costs - net (37) (37)
(314) Taxation paid (166) (93)
244 Cash available from (466) (51)
/(utilised by) operating
activities
(182) Dividends paid (134) (67)
(99) Cash flows from investing (134) (74)
activities
62 Investment and loan - -
receipts
27 Proceeds on disposal of 8 7
property, plant and
equipment
(188) Additions to property, (142) (81)
plant and equipment
69 Cash flows from financing 394 157
activities
27 Proceeds on disposal of 38 21
treasury shares by share
incentive trust
(18) Acquisition of shares by - -
share incentive trust
633 Long-term borrowings raised 519 292
(527) Long-term borrowings repaid (135) (132)
(46) Finance lease liabilities (28) (24)
repaid
32 Net increase/(decrease) in (340) (35)
cash and cash equivalents
725 Cash and cash equivalents 757 725
at beginning of period
757 Cash and cash equivalents 417 690
at end of period
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 in accordance with 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 2010, except for the adoption of the following new or
revised accounting standards and interpretations:
- IAS 27 - Consolidated and Separate Financial Statements: Transitional
provisions
- IAS 32 - Financial Instruments: Presentation - Classification of Rights Issue
- IFRIC 19 - Extinguishing Financial Liabilities with Equity Instruments
The adoption of these standards had no material impact on the Group.
Audited Reviewed Reviewed
12 months 6 months 6 months
ended ended ended
31 August 28 February 28 February
2010 2011 2010
R million R million R million
2. Debtors costs
(177) Decrease in impairment (43) (18)
provision
930 Bad debts written off 427 472
753 384 454
3. Goodwill and intangible assets
Goodwill comprises:
493 Carrying value at 493 493
beginning of period
493 Carrying value at end of 493 493
period
Intangible assets
comprise:
256 Carrying value at 212 256
beginning of period
(44) Amortisation for the (19) (22)
current period
212 Carrying value at end of 193 234
period
4. Trade and other receivables
5 224 Instalment sale 5 663 5 258
receivables (a)
27 Other loans and advances 135 33
42 Trade receivables 47 74
5 293 Total instalment sale 5 845 5 365
and trade receivables
(586) Less: Impairment (543) (743)
provision
4 707 Net instalment sale and 5 302 4 622
trade receivables
569 Other receivables 650 568
5 276 Total trade and other 5 952 5 190
receivables
11,1 Provisions as a 9,3 13,8
percentage of total
instalment 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 six 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 30 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 have occurred in the period between 28 February 2011 and
the date of this announcement, other than the transaction referred to in the
commentary above.
Segmental report - business divisions
6 months ended 28 February Traditional Retail
2011 2010
Revenue Rm 3 309 2 777
Operating profit Rm 294 126
Depreciation Rm 27 20
Total assets Rm 1 188 965
Total current liabilities Rm 1 266 1 162
Capital expenditure Rm 44 9
Operating margin % 8,9 4,5
Total sale of merchandise Rm 2 830 2 399
Share of Group sale of % 51,1 48,1
merchandise
Credit sales Rm 1 874 1 614
Percentage of total % 66,2 67,3
Cash sales Rm 956 785
Percentage of total % 33,8 33,7
Number of stores 970 946
Retail square meterage 500 125 503 167
Number of employees 9 092 8 871
Instalment sale receivables Rm
Impairment provision Rm
Bad debts written off Rm
Receivables` arrears Rm
Deposit rate on credit sales %
Collection rate %
#Elimination of interdivisional commissions and origination fees.
Segmental report - business divisions (continued)
6 months ended 28 February Financial Services
2011 2010
Revenue Rm 1 510 1 427
Operating profit Rm 242 239
Depreciation Rm 10 7
Total assets Rm 5 633 4 630
Total current liabilities Rm 317 122
Capital expenditure Rm 8 22
Operating margin % 16,0 16,7
Total sale of merchandise Rm
Share of Group sale of merchandise %
Credit sales Rm
Percentage of total %
Cash sales Rm
Percentage of total %
Number of stores 970 946
Retail square meterage 55 569 55 908
Number of employees 4 180 4 011
Instalment sale receivables Rm 5 275 4 872
Impairment provision Rm 466 612
Bad debts written off Rm 339 455
Receivables` arrears Rm 963 925
Deposit rate on credit sales % 5,6 8,3
Collection rate % 6,4 5,9
#Elimination of interdivisional commissions and origination fees.
Segmental report - business divisions (continued)
6 months ended 28 February Cash Retail
2011 2010
Revenue Rm 2 426 2 267
Operating profit Rm 97 78
Depreciation Rm 25 22
Total assets Rm 1 123 1 050
Total current liabilities Rm 675 660
Capital expenditure Rm 26 28
Operating margin % 4,0 3,4
Total sale of merchandise Rm 2 417 2 257
Share of Group sale of % 43,7 45,2
merchandise
Credit sales Rm
Percentage of total %
Cash sales Rm 2 417 2 257
Percentage of total % 100,0 100,0
Number of stores 94 91
Retail square meterage 93 362 92 261
Number of employees 3 665 3 537
Instalment sale receivables Rm
Impairment provision Rm
Bad debts written off Rm
Receivables` arrears Rm
Deposit rate on credit sales %
Collection rate %
#Elimination of interdivisional commissions and origination fees.
Segmental report - business divisions (continued)
6 months ended 28 February International
2011 2010
Revenue Rm 293 341
Operating profit Rm 5 7
Depreciation Rm 3 3
Total assets Rm 193 200
Total current liabilities Rm 64 72
Capital expenditure Rm 4 3
Operating margin % 1,7 2,1
Total sale of merchandise Rm 288 337
Share of Group sale of % 5,2 6,7
merchandise
Credit sales Rm
Percentage of total %
Cash sales Rm 288 337
Percentage of total % 100,0 100,0
Number of stores 74 72
Retail square meterage 52 004 53 000
Number of employees 841 890
Instalment sale receivables Rm
Impairment provision Rm
Bad debts written off Rm
Receivables` arrears Rm
Deposit rate on credit sales %
Collection rate %
#Elimination of interdivisional commissions and origination fees.
Segmental report - business divisions (continued)
6 months ended 28 February New Business Dev
2011 2010
Revenue Rm 233 265
Operating profit Rm 6 -
Depreciation Rm 11 12
Total assets Rm 573 390
Total current liabilities Rm 61 112
Capital expenditure Rm 7 4
Operating margin % 2,6 -
Total sale of merchandise Rm
Share of Group sale of %
merchandise
Credit sales Rm
Percentage of total %
Cash sales Rm
Percentage of total %
Number of stores
Retail square meterage
Number of employees 1 958 3 355
Instalment sale receivables Rm 388 386
Impairment provision Rm 77 131
Bad debts written off Rm 88 17
Receivables` arrears Rm 91 103
Deposit rate on credit sales % 11,0 10,3
Collection rate % 6,6 6,4
#Elimination of interdivisional commissions and origination fees.
Segmental report - business divisions (continued)
6 months ended 28 February Corporate Group
2011 2010 2011 2010
Revenue Rm 7 463 6 835
(308)# (242)#
Operating profit Rm (129) (78) 515 372
Depreciation Rm 35 37 111 101
Total assets Rm 1 447 2 016 10 157 9 251
Total current Rm 696 697 3 079 2 825
liabilities
Capital expenditure Rm 53 15 142 81
Operating margin % 6,9 5,4
Total sale of Rm 5 535 4 993
merchandise
Share of Group sale % 100,0 100,0
of merchandise
Credit sales Rm 1 874 1 614
Percentage of total % 33,9 32,3
Cash sales Rm 3 661 3 379
Percentage of total % 66,1 67,7
Number of stores 1 138 1 109
Retail square 701 060 704 336
meterage
Number of employees 537 543 20 273 21 207
Instalment sale Rm 5 663 5 258
receivables
Impairment provision Rm 543 743
Bad debts written off Rm 427 472
Receivables` arrears Rm 1 054 1 028
Deposit rate on % 6,2 8,4
credit sales
Collection rate % 6,4 6,0
#Elimination of interdivisional commissions and origination fees.
Administration Executive directors: ID Sussman (chairman),
AG Kirk (chief executive officer), KR Chauke, Dr HP Greeff,
ID Thompson, BJ van Rooy.
Independent non-executive directors: VP Khanyile (lead independent ), Dr D
Konar, M Lock, MJ Shaw, JH Schindehutte,
GZ Steffens Company secretary: JMWR Pieterse Independent auditors:
Deloitte & Touche 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
www.jdgroup.co.za
Date: 16/05/2011 07:05:35 Produced by the JSE SENS Department.
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