| Wed 11 Apr 2001, 0:00 | | Ellerine Holdings Limited - Interim Results |
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Ellerine Holdings Limited
Registration number 1968/13402/06
Interim profit statement for the six months ended 28 February 2001
CONSOLIDATED INCOME STATEMENT
6 months to February 12 months to
2001 2000 % August 2000
R'000 R'000 Change R'000
Unaudited Unaudited Audited
Total revenue 981 058 916 601 7,0 1 739 682
Operating profit 148 726 119 714 24,2 253 483
Net investment income 1 060 7 561 11 061
Profit before taxation 149 786 127 275 17,7 264 544
Taxation (45 685) (37 046) (81 770)
Profit after taxation 104 101 90 229 15,4 182 774
Number of shares in issue 73 805 200 73 805 200 73 805 200
Earnings per share - cents 141,0 122,3 15,4 247,6
Headline earnings
per share - cents 138,8 120,6 15,0 244,5
Fully diluted earnings
per share - cents 139,3 120,7 15,4 244,7
CONSOLIDATED BALANCE SHEET
August
2001 2000 2000
R'000 R'000 R'000
Assets
Non-current assets 550 676 465 757 470 280
Property and equipment 202 307 193 393 201 164
Other financial assets 348 369 272 364 269 116
Current assets 1 456 331 1 198 022 1 317 218
Total assets 2 007 007 1 663 779 1 787 498
Equity and Liabilities
Shareholders' equity 1 193 033 1 049 676 1 112 513
Non-current liabilities 318 091 261 158 300 617
Insurance reserves 31 296 22 256 26 736
Deferred taxation 186 795 138 902 173 881
Interest bearing borrowings 100 000 100 000 100 000
Current liabilities 495 883 352 945 374 368
Total equity and liabilities 2 007 007 1 663 779 1 787 498
Net asset value per share - cents 1 616 1 422 1 507
CONSOLIDATED CASH FLOW STATEMENT
August
2001 2000 2000
R'000 R'000 R'000
Cash (absorbed)/generated
by operations (65 761) (10 805) 62 948
Net investment income 1 060 7 561 11 061
Taxation paid (14 759) (44 861) (69 189)
Dividend paid (30 777) (28 046) (57 759)
Cash flows from operating activities (110 237) (76 151) (52 939)
Net investment activities (17 521) (19 089) (41 020)
Net decrease in
cash equivalents (127 758) (95 240) (93 959)
STATEMENT OF CHANGES IN EQUITY
Non-
distribut - distribut
Share Share able able General
capital premium reserves reserves reserve Total
Balance at
31 August 2000
(Audited) 3 690 40 586 55 670 995 567 17 000 1 112 513
Net profit for
the period 104 101 104 101
Gains arising
on exchange
rate difference
in the
translation
of foreign
assets 7 196 7 196
Dividend paid (30 777) (30 777)
Balance at 28
February 2001 3 690 40 586 62 866 1 068 891 17 000 1 193 033
COMMENTS
TRADING ENVIRONMENT
The trading environment continues to be challenging given the reduction of
employment in the formal sector coupled with the ongoing increase in spending
on cell phones, the national lottery, education, health care and the resumption
of payment for services. All these factors have served to increase competition
for the consumer's discretionary income.
The strategy adopted by the group to address this environment has been through
aggressive marketing and the re-engineering of the financial services aspect of
the business, resulting in an increase in operating margin. In line with our
prudent approach, the group has retained its policy of insisting on full
deposits on all transactions as we firmly believe that this not only improves
the quality of the sale, but also enhances the commitment of the customer.
Results
Revenue has been restated to reflect both finance charges and insurance
premiums on an earned basis. Whilst revenue improved by 7%, the real increase
in revenue was 12,9% after taking cognisance of the portion of insurance
premiums which are now reinsured. Operating profit was up by 24,2% as a result
of an increase in the operating margin from 13,1% in February 2000 to 15,2% for
the current period. The net investment income generated was down from R7,6
million to R1,1 million due to a reduction in cash held on deposit and lower
interest rates. As a result, profit before tax increased by 17,7%. The after
tax profit was up by 15,4% as were the earnings per share.
Current assets are up by 10,5% compared to August 2000 and it is encouraging
that due to an improvement in collections which has been evident since January,
arrears decreased by 1% of the gross debtors' ledger when compared to the prior
year. Customers nevertheless remain under pressure to meet their full
instalments on a regular basis. The group has maintained its policy of
providing fully for bad and doubtful debts.
An amount of R65,8 million was absorbed by operations including R16 million for
the expansion of Rainbow Loans and Zambia. Net borrowings as at February stood
at R63,6 million. It is anticipated that by year end there will be a material
reduction in these borrowings. With its favourable gearing and strong balance
sheet, the group has substantial debt capacity to fund its growth in the
foreseeable future. Net asset value per share increased by 13,6% to 1 616 cents
Operational Review
The core business is represented by the Ellerines, TownTalk, Oxford and Royal
stores, which constitute the entry level for consumers in the lower income
groups, where the organisation has a particularly strong market share. Despite
the challenges in this market segment, the performance of these stores is
pleasing as appears from the improvement in the operating income.
With effect from 1 March 2001, the FurnCity stores have been established as a
separate business unit which will focus on consumers in the middle income
group. There are currently 77 FurnCity stores with this number expected to grow
to 100 over the next 12 months. In time the FurnCity chain has the potential of
around 150 stores.
Financial services
These continue to play an increasingly important role in the group's
operations. The re-engineering of this segment of the business, including the
re-pricing of products offered through the group's wholly owned insurance
subsidiary to bring these in line with the market place, has significantly
enhanced the performance of the group. The expansion of products offered
through the financial services arm of the business is presently under review.
The number of Rainbow Loans outlets has increased to 46.
Prospects
The trading environment will remain a challenge. Accordingly the marketing
thrust will be maintained in order to ensure continued growth in revenue and
profitability at the operating level, coupled with maintaining a sound and
effective control of the debtors' ledger to maximise cash flows.
The FurnCity business unit will be expanded over the ensuing months and years
as the group repositions itself to become a dominant player in servicing the
middle income group.
Financial services will be expanded further by the inclusion of additional
products in meeting the aspirations of our target market and in providing
additional revenues to the group.
It is expected that in the absence of any unforeseen external factors, that the
pleasing increase in earnings should be maintained for the balance of the
financial year.
Accounting Policies
The interim report has been prepared using accounting policies which are in
accordance with Generally Accepted Accounting Practice. Such policies are
consistent with those applied in the preparation of the audited financial
statements for the year ending 31 August 2000.
In order to comply with AC 107 "Events after the balance sheet date", the group
has changed the treatment of dividends proposed, whereby dividends are now
recorded in the financial year in which they are declared. Comparative figures
have been restated for both dividends and the effects of STC.
SARS Clearance
The group voluntarily submitted to an audit of aspects of its procurement of
merchandise. Reference is made to the press announcement on 13 March 2001 in
terms whereof it was announced that the group was fully compliant with SARS
requirements both in respect of custom duties and VAT.
Management
With the challenges faced by the group over the past 12 months, it is
noteworthy that the group has not lost one senior executive and that the
succession planning of the past two years has borne fruit. Management is fully
committed to the future success and stability of the business and brings with
it a wealth of experience.
Board of Directors
During the period under review, Messrs E Ellerine and S Ellerine retired from
the board due to the demands placed on them by their own diversified business
interests. The board sincerely appreciates their contribution to the group and
acknowledges 50 years of dedicated service.
Mr DS McGlashan, who has served on the board since 1987, was appointed
non-executive chairman with effect from 19 February 2001.
Dividend
In line with the practice adopted by an increasing number of quoted companies
and in order to save costs and streamline administrative procedures, it has
been decided to declare only one dividend per annum. This dividend will be
declared on publication of the year-end results and will be payable in December
2001.
StRate
The group is scheduled to transfer to STRATE on 6 August 2001. Shareholders
will be advised of further developments in this regard over the next few months
For and on behalf of the Board
Denzil McGlashan Peter Squires
Chairman Managing Director
11 April 2001
Directors
D S McGlashan (Non-executive Chairman), P j c Squires (Managing Director), T
J Chalmers*, J Dritz**, J P du Plessis, H L Mmatli, R A Rawlings, P E I
Swartz*, A R van den Borne (Non-executive*) (Co. Secretary**)
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