| Wed 2 May 2001, 0:00 | | Jd Group Limited - Interim Profit Announcement |
|
JD GROUP LIMITED
(Reg. No. 1981/009108/06)
("the Group")
- Strong results despite adverse trading conditions
- Revenue up 7%
- Operating income up 23%
- Attributable income up 21%
- Headline earnings per share up 20%
- Operating margin up from 16,5% to 18,9%
- Dividend up 21%
- International expansion into Poland ahead of internal target
- Alliance with Nedcor under way
- Access to significant additional funding remains available to the Group
- Group is well poised for growth
David Sussman, Executive Chairman of JD Group, said: "These results are
particularly pleasing when viewed against the backdrop of difficult trading
conditions which have defined the South African economy in recent times.
However, current market conditions are here to stay and JD Group has worked
hard to align its strategies and businesses to grow within this environment -
both in the short and long term, domestically and internationally. The Group's
success is a reflection of the dedication and vision shown by the board,
management and staff."
Interim profit announcement for the six months ended 28 February 2001
Group Income Statement
Unaudited Reviewed Unaudited Change
proforma restated proforma Reviewed versus
12 months 6 months 6 months 6 months 6 months
31 Aug 31 Dec 29 Feb 28 Feb 29 Feb
2000 1999 2000 2001 2000
R million R million R million R million %
2 083 1 170 1 133 Sale of merchandise 1 189 5
646 301 307 Finance charges earned 364 19
540 298 303 Financial services 312 3
160 81 83 Other services 96 16
3 429 1 850 1 826 Revenue 1 961 7
1 342 748 727 Cost of sales 779 7
Operating income before
588 322 321 the following items: 394 23
46 22 22 Depreciation 24
Surplus on disposal
of property,
(2) (2) (2) plant and equipment (1)
544 302 301 Operating income 371 23
(7) (3) (3) Dividends received (4)
78 31 32 Finance costs - net 46 44
473 274 272 Income before taxation 329 21
146 89 88 Taxation 106 21
Income attributable
327 185 184 to shareholders 223 21
111 651 111 058 111 185 Number of shares in 112 062 1
issue (000)
Weighted average
number of shares in
issue (000)
111 085 110 423 110 698 - basic 111 939 1
116 219 114 983 115 457 - diluted 120 161 4
Earnings per
share (cents)
295,2 167,3 166,6 - basic 199,3 20
282,1 160,7 159,7 - diluted 185,6 16
Headline earnings
per share (cents)
293,7 166,0 165,5 - basic 198,5 20
280,7 159,4 158,7 - diluted 184,9 17
Distribution to
78 47 47 shareholders (cents) 57 21
47 47 47 - Interim 57
31 - Final
15,9 16,3 16,5 Operating margin (%) 18,9 15
Group Balance Sheet
Reviewed Unaudited
Audited restated proforma Reviewed
31 Aug 31 Dec 29 Feb 28 Feb
2000 1999 2000 2001
R million R million R million R million
Assets
224 195 198 Non-current assets 233
109 105 105 Property, plant and equipment 126
- - - Goodwill 7
13 10 13 Share incentive trusts 13
102 80 80 Investments 80
- - - Deferred taxation 7
3 286 3 109 2 937 Current assets 3 790
354 350 365 Inventories 382
2 882 2 725 2 552 Accounts receivable 3 371
9 1 1 Taxation 1
41 33 19 Bank balances and cash 36
3 510 3 304 3 135 Total assets 4 023
Equity and reserves
762 750 753 Share capital and premium 770
- - - Non-distriburable reserve 4
924 809 816 Retained income 1 083
35 52 52 Shareholders for dividend 64
1 721 1 611 1 621 Shareholders' equity 1 921
- - - Outside shareholders' (1)
interest
1 106 806 938 Non -current liabilities 1 294
750 515 647 Interest bearing long 889
term liabilities
356 291 291 Deferred taxation 405
683 887 576 Current liabilities 809
679 807 529 Non interest bearing 762
- 1 1 Interest bearing -
4 79 46 Taxation 47
3 510 3 304 3 135 Total equity and liabilities 4 023
102 80 80 Directors' valuation of 80
unlisted investments
15 - - Capital expenditure -
authorised and contracted
Capital expenditure
authorised but
60 22 20 not yet contracted 40
757 774 740 Operating lease commitments 691
The Group has no other
material commitments or
contingent liabilities.
1 541,5 1 450,9 1 457,9 Net asset value per share 1 713,9
(cents)
41,2 30,0 38,8 Gearing ratio (net) (%) 44,4
Abridged Cash Flow Statement
Unaudited Reviewed Unaudited
proforma restated proforma Reviewed
12 months 6 months 6 months 6 months
31 Aug 31 Dec 29 Feb 28 Feb
2000 1999 2000 2001
R million R million R million R million
588 322 321 Cash generated by operations 398
(539) (158) (370) Increase in working capital (431)
49 164 (49) Cash utilised by operating (33)
activities
(78) (31) (32) Finance costs - net (46)
7 3 3 Dividends received 4
(94) (42) (51) Taxation paid (8)
(80) (28) (28) Dividends paid (35)
(196) 66 (157) Cash flows from operating (118)
activities
(88) (116) (38) Cash utilised in investing (12)
activities
Proceeds on issue of shares
35 24 26 (share incentive trusts) 8
(249) (26) (169) Net cash utilised (122)
Net borrowings and cash
equivalents
(460) (457) (460) at beginning of period and (731)
acquired
Net borrowings and cash
equivalents
(709) (483) (629) at end of period (853)
55 25 23 Capital expenditure incurred 36
Statement of Changes in Equity
Non- Share-
distri- holders
Share Share butable Retained for
capital premium reserve income dividend Total
Rm Rm Rm Rm Rm Rm
Balance at
30 June 1999 5 722 - 676 28 1 431
Income attributable
to shareholders 185 185
Distributable to
shareholders (52) 52 -
Paid to shareholders (28) (28)
Issue of share capital 23 23
Balance at
31 December 1999 5 745 - 809 52 1 611
Income attributable
to shareholders 150 150
Distributable to
shareholders (35) 35 -
Paid to shareholders (52) (52)
Issue of share capital 12 12
Balance at
31 August 2000 5 757 - 924 35 1 721
Income attributable
to shareholders 223 223
Distributable to
shareholders (64) 64 -
Paid to shareholders (35) (35)
Translation of
foreign entity 4 4
Issue of share
capital 1 7 8
Balance at
28 February 2001 6 764 4 1 083 64 1 921
Accounting policies
The accounting policies used in the preparation of the interim profit
announcement are consistent with those applied in the previous period ended 31
August 2000.
Disclosure requirements
The Group has not made the disclosures as required by AC127, Interim Financial
Reporting, relating to segment reporting in this interim profit announcement.
The disclosure required in terms of AC115, Segment Reporting, will be furnished
in the annual report.
Comment
Financial overview
In the period under review the Group increased revenue by 7% to R1,96bn (six
months ended 29 February 2000: R1,83bn), grew attributable income by 21% and
reported earnings of R223m (R184m). Headline earnings per share improved a
pleasing 20% to 198,5 cents. These results are a significant achievement and
confirm the success of the business strategies employed throughout the Group.
Viewed as a whole, the results achieved during the trading period exceeded
expectations. The lower end of the market experienced reduced growth due to
shifts in consumer spending towards gambling, cellular phones and, more
recently, funerals. Despite this environment, operating income improved by 23%,
with income before taxation gaining 21% and total sales of merchandise growing
by 5%. In addition to the previously mentioned shifts in consumer spending, the
Group now considers the current trading environment to be 'normal' and has
adjusted and positioned its strategies to reflect this. Cost of sales was
affected by the trading climate and an increase of 7% was recorded; sales of
merchandise grew by 5%, and the margin erosion of the previous period has
slowed considerably. Significantly, operating margin grew from 16,5% to 18,9%
due to an increase in finance charges earned, mainly due to the lengthening of
the receivables book, referred to below, and the strict management of costs.
The Group is confident that the operating margin percentage can be grown
further in the future.
Net cash generated by operations increased from R321m to R398m and working
capital increased in line with expectations, primarily due to the lengthening
of the book. The net cash utilised reduced from R169m in the comparative period
to R122m. The gearing ratio grew marginally from 41% at the previous year end
to 44%, well within the Group's stated gearing range objective of 35% to 50%.
The higher gearing ratio is due to an increase in the moving average collection
period and the interim reporting period falling on the peak inventory payment
period, the Group having paid for its November and December purchases. At
current gearing levels, the Group is utilising only 60% of available banking
facilities.
In November 1999, the Group extended the maximum customer repayment period on
the bulk of its instalment sales agreements to 24 months, in order to
ameliorate the reduced finance margin when the usury rate was adjusted downward
from 36% to 24%. Arrear percentages remained at similar levels to those of the
comparative period and, as a result, provisioning against the receivables book
is unchanged in percentage terms. Insurance cover for the Group's South African
bad debts continues to be adequate. During the period, asset management
remained strong, with southern African inventories decreasing from R365m to
R360m. Inventories of R382m now include Abra's inventories of R22m.
The Group now comprises 695 stores:
28 February 2001 31 August 2000
Russells 190 184
Joshua Doore 141 140
Bradlows 91 91
Giddys Electric Express 101 98
Score/Price 'n Pride 153 158
Abra (Poland) 19 12
Total 695 683
The Group plans to further rationalise its stores in its attempt to pre-empt
future demographic changes and to further reduce its exposure to the lower end
of the market. This strategic initiative is driven by social, economic and
environmental research commissioned by the Group in 1998 and reinforced by data
currently available from the Group's Enterprise Data Warehouse on customer and
product information. The board is confident that this shift in strategy will
position the business well for increased returns and ongoing growth in headline
earnings per share.
In accordance with the changed reporting period, it is anticipated that the
Group's revenue and profits will be generated in a ratio of approximately 55/45
between the first and second six months of each financial year.
Poland
The Group's international expansion continues through Abra in Poland. Although
sales achievements were slightly short of expectations, it is anticipated that
the region's contribution to next year's financial results will exceed
expectations. The store roll out continued, with the commissioning of a further
seven stores, now taking the total to 19. It is pleasing to report that Abra's
access to quality retail space has improved.
Despite the slowdown in the Polish economy, largely as a result of tight
exchange and interest rate conditions, economic indicators point to improved
domestic spending conditions and strengthened domestic demand in the short to
medium term. The Group remains well poised to benefit from an improvement in
the economic environment.
Nedcor alliance
The roll out of the Nedcor alliance is under way, and, to date, three existing
financial services kiosks have been converted into Peoples Bank 'in store
points of presence'. It is anticipated that the roll out will continue at a
rate of 20 conversions per month, until the initial target of 350 points of
presence is reached. The alliance provides the Group with an additional
diversified earnings stream and is expected to enhance future financial
performance.
South African Revenue Service (SARS) investigation
Further to the Group's press statement dated 20 November 2000 regarding the
Customs and Excise and VAT investigation by SARS into the retail sector,
Deloitte & Touche was commissioned to ensure that the Group's import and export
transactions comply with SARS requirements. Deloitte & Touche and SARS have
confirmed that the Customs and Excise and VAT treatment of the Group's import
and export transactions have at all times complied with the SARS requirements.
Share Transactions Totally Electronic (STRATE)
The board has decided to implement STRATE with effect from 28 May 2001. JD
Group will participate in the Share Transfer And Replacement (STAR) programme,
a service offered by Mercantile Bank Limited, in order to assist shareholders
to validate their shareholdings prior to their admission to STRATE. A formal
announcement in this regard will be published in the press on 7 May 2001 and
circulars will be posted to shareholders on the same date.
Prospects
The Group remains well positioned to achieve its financial objectives for the
year. Its activity levels for the remainder of this financial year are forecast
to strengthen. The Group's access to additional funding facilities, its
international expansion programme and pioneering strategies, together with its
intention to reduce exposure to high risk business, positions the Group ideally
to enjoy sustainable earnings growth in both the short and long term.
Dividend
Notice is hereby given that an interim dividend of 57 cents per share (dividend
number 35) has been declared in respect of the financial period ended 28
February 2001, payable on 15 June 2001, to shareholders registered in the books
of the company at the close of business on 18 May 2001.
Review by the independent auditors
The financial information has been reviewed, but not audited, by Deloitte &
Touche, whose unqualified review report is available for inspection at the
company's registered office. The report draws attention to the Group's
departure from AC127/AC115 as described under the heading "Disclosure
requirements".
For and on behalf of the board
David Sussman Gerald Volkel
Executive Chairman Financial Director
Johannesburg
2 May 2001
JDGroup Limited: Registration number 1981/009108/06
Registered office: 9th Floor, JD House, 29 De Beer Street, Braamfontein,
Johannesburg, 2001 (PO Box 4208, Johannesburg, 2000)
Transfer secretaries: Mercantile Registrars Limited, 8th Floor, 11 Diagonal
Street, Johannesburg, 2001 (PO Box 1053, Johannesburg, 2000)
Executive directors: ID Sussman (Executive Chairman), HC Strauss (Managing), JL
Bezuidenhout, NWE Thomson (British), G Volkel
Non-executive directors: ME King, D Konar, IS Levy, M Lock
Company secretary: MI Jaye CA(SA)
