| Thu 22 Feb 2001, 0:00 | | Pepkor Limited - Interim Results |
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INTERIM RESULTS
This report to shareholders on the results for the six months to 31 December
2000 is Pepkor's first since its comprehensive restructuring, approved by
shareholders on 31 October 2000.
The main features of this restructuring were the disappearance of Pepkor's
ultimate holding company, Pepgro, and the distribution to shareholders of
Pepkor's stake in Shoprite and the British retail group Brown & Jackson plc.
Remaining in Pepkor are the three wholly-owned subsidiaries Pep, Ackermans and
the Australian operation Best & Less. The chairman, Dr C H Wiese, still holds
the controlling interest in the group. All three the subsidiaries are clothing
retail chains focused on the cash discount market, the traditional market in
which Pepkor has been operating since its establishment and which represents
its core strength.
Operational review
In evaluating the results it should be noted that the figures for the six
months to 31 December 1999 include the results of Cashbuild and Stuttafords,
both of which were sold only at the beginning of 2000. Precise comparisons are
therefore not possible. The exceptional items mainly arise from the
restructuring of Pepkor and are non-recurring costs.
Pep
Pep continued its strong recovery of the past 12 months, posting an excellent
increase of 39,3% in operating profit on turnover that increased 19,7%. This
was due to improvements made over a wide spectrum. These included better
focused marketing, improved and more fashionable merchandise, the better
presentation of merchandise in cleaner, neater stores, and a highly visible
in-store emphasis on price. Upgraded IT systems also helped to further improve
stock planning and distribution.
During the period under review, Pep continued its policy of establishing a
stronger presence in urban shopping centres in middle-income areas. Seven new
branches were opened in such locations.
Operations elsewhere in Africa expanded, with 13 new stores opened. However,
exchange rate losses in Ghana, Malawi and Zambia had an adverse effect on
profitability.
Although relatively sound growth is foreseen in the second half of the year, it
will probably not be of the same magnitude as in the first six months, while
profit margins will be under pressure.
Ackermans
During the period under review, Ackermans showed excellent sales growth given
the prevailing retail climate, managing to increase turnover by 17,4%. The
chain's basic ranges sold very well, especially babywear under the brand, ABC
Baby Company, which has become one of the largest in this sector in the South
African retail trade. Costs were stringently contained and the chain was able
to report a 17,6% growth in operating profit.
Seventeen new stores were opened during the period under review, bringing the
chain's total number of outlets to 245. Ten new stores are planned for the next
six months, one of these being a second stand-alone, Hang Ten store to be run
on a pilot basis, a decision taken on the strength of the excellent reception
enjoyed by this popular Californian lifestyle range in Ackermans stores. The
chain is continuing its policy of focusing on the South African market, and no
expansion to other African countries is foreseen.
Due to the current tough trading conditions turnover growth in the second half
of the year will more likely mainly come from the new stores.
Best & Less
The introduction of 10% goods and services tax (GST) on 1 July 2000 in
Australia and the advent of the Olympic Games both had an extremely negative
effect on sales. Consumer resistance to price increases necessitated by GST was
so strong that this chain, like many other Australian retailers, was compelled
to absorb the impact of the increased prices and revert to the original prices.
As a result, like for like sales dropped 8,5% compared with the six months to
31 December 1999.
Other factors adversely affecting sales were fuel price increases, high
interest rates and consumers paying for shares in Telstra, the largest listing
ever in Australia.
The business climate is expected to improve in the second half of the year,
with normal business conditions returning during the winter. The impact of GST
is decreasing, and interest rates and fuel prices are showing a downward trend.
Thanks to excellent product ranges and a highly competitive pricing policy, the
chain is expected to achieve a turnaround in sales and profitability before the
end of the financial year.
Comparative figures
The comparative pro forma figures in the income statement for the six months
ended 31 December 1999 and the year ended 30 June 2000, and in the balance
sheet on 30 June 2000, represent the group's figures after adjustments made for
investments distributed to the company's shareholders in terms of the
restructuring. The comparative pro forma figures for the year ended 30 June
2000 are based on the audited annual financial statements.
No pro forma comparative figures for the six months ended 31 December 1999 are
included in either the cash flow statement nor the statement of changes in
shareholders' funds, as the group in its present form was only constituted on 1
July 2000.
Accounting policies
The interim report was prepared in accordance with statement AC 127: Interim
financial reporting and the Fourth Schedule to the South African Companies Act.
The accounting policies are in all material respects in accordance with those
adopted in the annual financial statements for the year ended 30 June 2000.
Comments on the results
Net interest paid
Net interest of R42 million paid in respect of the current year compares
unfavourably with net income of R5 million during the corresponding period of
the previous year as a result of significantly larger working capital
requirements during the present reporting period. The finance charges
comparison is further negatively affected by the cash flow aspects of the
unbundling transaction being effective from 6 November 2000, while the pro
forma comparative figures were compiled on the basis that this cash flow had
already taken place at the beginning of the financial period.
Exceptional items
Exceptional items are made up as follows (R'million):
Loss on sale and write-off of listed
investments and properties (21,1)
Provision for loss arising from put option in respect
of Shoprite Holdings Limited shares (114,9)
Provision for losses resulting from financing of
share incentive trusts (106,1)
Total (242,1)
Taxation
During the period ended 31 December 1999 the effective tax rate amounted to
only 10,5% as a result of the utilisation of available tax losses, while
deferred tax assets were created on 30 June 2000 in respect of remaining tax
losses. At present, the group is therefore fully taxable at current rates, and
the current year tax charge is therefore by no means comparable with those of
previous periods.
Prospects
The Board believes that the current tight trading conditions will continue in
the second half of the financial year, but nevertheless expects to achieve
satisfactory results.
Declaration of dividend
Notice is hereby given that an interim dividend of 9 cents (1999: 50 cents) per
share is payable on 23 March 2001 to shareholders registered in the company's
register at the close of business on Friday, 9 March 2001.
The dividend of 50 cents declared for the six months to 31 December 1999
relates to the larger group, which at that stage also held the investments in
Shoprite and Brown & Jackson.
By order of the Board
C H Wiese C Stassen
Chairman Managing director
23 February 2001
Pepkor Limited (Registration number: 1965/007765/06)
36 Stellenberg Road, Parow Industria 7490
This information is also available at
www.pepkor.co.za
Segmental analysis
Unaudited Unaudited
6 months to 6 months to
31/12/00 31/12/99
(R'000) Pro forma
Turnover
Pep 1 370 372 1 144 414
Ackermans 537 470 457 830
Best & Less 595 432 586 357
Continued operations 2 503 274 2 188 601
Stuttafords - 201 300
Cashbuild - 553 038
2 503 274 2 942 939
Operating profit
Pep 103 563 74 352
Ackermans 42 677 36 295
Best & Less 7 441 22 128
Financing and head office (11 359) (4 310)
Continued operations 142 322 128 465
Stuttafords - 16 784
Cashbuild - 11 683
142 322 156 932
Geographical spread of operating profit
Africa 134 881 134 804
Australia 7 441 22 128
142 322 156 932
Consolidated income statement
Unaudited Unaudited 12 months
6 months to 6 months to Change to
31/12/00 31/12/99 % 30/06/00
(R'000) Pro forma Pro forma
Turnover 2 503 274 2 942 939 5 287 095
Continued operations 2 503 274 2 188 601 14 4 173 076
Operations disposed of - 754 338 1 114 019
Operating profit 142 322 156 932 235 030
Continued operations 142 322 128 465 11 208 219
Operations disposed of - 28 467 26 811
Net interest paid 42 315 (5 033) (31 675)
Profit before exceptional
items 100 007 161 965 (38) 266 705
Exceptional items (242 076) (27 069) (73 281)
(Loss)/profit before
taxation (142 069) 134 896 193 424
Taxation 34 043 14 174 (31 179)
Taxation on normal
activities 34 043 14 174 (30 105)
Taxation on exceptional items - - (1 074)
(Loss)/profit after
taxation (176 112) 120 722 224 603
Outside shareholders'
Interest 4 042 13 865 18 244
Attributable to normal
activities 4 042 15 196 17 878
Attributable to exceptional
Items - (1 331) 366
Net (loss)/profit (180 154) 106 857 206 359
Earnings per share (cents)
- before exceptional items 27,9 59,7 (53) 126,4
- after exceptional items (81,2) 48,1 93,0
- headline earnings 28,3 60,1 (53) 125,7
Dividend (cents per share) 9,0 50,0 80,0
Dividend cover - before
exceptional items (times) 3,1 1,2 1,6
Number of shares for
calculation of earnings
per share ('000) 221 936 221 936 221 936
Consolidated balance sheet
Unaudited
31/12/00 30/06/00
(R'000) Pro forma
Non-current assets 719 546 662 983
Fixed assets 482 508 406 661
Investments 178 465 179 937
Deferred taxation 58 573 76 385
Current assets 2 003 611 1 807 424
Inventories 1 543 233 1 283 776
Accounts receivable 100 942 187 547
Bank balances and cash 359 436 336 101
Total assets 2 723 157 2 470 407
Ordinary shareholders' funds 1 001 242 1 099 259
Preference share capital 92 -
Outside shareholders' interest 28 814 65 380
Non-current liabilities 87 308 115 737
Long-term loans 41 109 69 021
Deferred taxation 6 346 6 817
Other non-current liabilities 39 853 39 899
Current liabilities 1 605 701 1 190 031
Short-term loans and bank overdrafts 475 746 382 386
Other current liabilities 1 129 955 807 645
Total shareholders' funds and liabilities 2 723 157 2 470 407
Consolidated cash flow statement
Unaudited
6 months to
(R'000) 31/12/00
Cash flow from operations 145 619
Dividends paid (68 449)
Cash retained from operations 77 170
Investment activities (119 375)
Net acquisition of fixed assets (120 173)
Other investment activities 798
Net cash flow (42 205)
Financing activities 65 540
Proceeds from share issue 92
Net debt raised 65 448
Increase in bank balances and cash 23 335
Supplementary information
Unaudited Unaudited
6 months to 6 months to
31/12/00 31/12/99
(R'000) Pro forma
1. Depreciation for the period 44 326 51 422
2. Dividends received included in
net interest paid 5 286 5 322
3. Capital expenditure for the period 131 065 98 191
4. Calculation of headline earnings
Net (loss)/profit (180 154) 106 857
Attributable exceptional items 242 076 25 738
Loss on sale and scrapping of
fixed assets after taxation and outside
shareholders' interest 840 792
62 762 133 387
Unaudited
31/12/00 30/06/00
Pro forma
5. Number of shares in issue ('000) 221 936 221 936
6. Net asset value per share (cents) 451,1 495,3
7. Investments
Listed investments at cost less amounts
written off 5 314 22 274
Unlisted investments at cost less amounts
written off and directors' valuation 90 106 82 667
Loans 83 045 74 996
178 465 179 937
Listed investments at market value 5 314 38 090
8. Capital commitments 72 100 142 692
9. Contingent liabilities 195 299 186 600
Consolidated statement of changes in shareholders' funds
Unaudited
6 months to
(R'000) 31/12/00
Balance at 1 July 2000 1 099 259
Unbundling adjustments 38 628
Exchange rate adjustments 63 484
Net loss for the period (180 154)
Provision for dividend (19 975)
Balance at 31 December 2000 1 001 242
