| Thu 26 Jul 2001, 0:00 | | Homechoice Holdings - Interim Results For The Six |
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Registration number 1991/005430/06
Interim results for the six months ended 30 June 2001
Group income statement
Pro forma
Unaudited Unaudited Unaudited Audited
six months six months six months 12 months
ended ended ended ended
30 June 2001 30 June 2000 30 June 2000 31 Dec 2000
R'000 R'000 R'000 R'000
Revenue 317 147 303 351 303 351 655 797
Operating profit 40 538 41 380 46 663 85 701
Interest paid (9 210) (2 220) (2 220) (8 826)
Interest received 800 35 35 831
32 128 39 195 44 478 77 706
Exceptional items
Employee Share Trust
loan written down - - - 1 163
Malawi closure costs - 727 727 1 432
Revised provision for
doubtful debts and
customer acquisition costs - - - 73 500
Profit after interest and
exceptional items 32 128 38 468 43 751 1 611
Taxation 9 697 10 360 11 945 (1 253)
Attributable profit 22 431 28 108 31 806 2 864
Weighted average
shares in issue ('000) 135 577 135 577 135 577 135 577
Headline earnings
per share (cents) 16.5 21.3 24.0 41.8
Earnings per
share (cents) 16.5 20.7 23.5 2.1
Diluted earnings
per share (cents) 16.5 20.7 23.5 2.1
Headline earnings
is determined as follows:
Attributable
profit (R'000) 22 431 28 108 31 806 2 864
Adjusted for:
Employee Share Trust loan
written down (R'000) - - - 1 163
Malawi closure
Costs (R'000) - 727 727 1 127
Revised provision
for doubtful debts
and customer
acquisition
costs (R'000) - - - 51 450
Headline
earnings (R'000) 22 431 28 835 32 533 56 604
Group balance sheet
Unaudited Unaudited Audited
six months six months 12 months
ended ended ended
30 June 2001 30 June 2000 31 Dec 2000
R'000 R'000 R'000
ASSETS
Non-current assets
Plant and equipment 10 106 16 167 13 533
Intangible assets 1 456 1 747 1 601
Property investment loan 6 200 - -
Employee share trust 4 392 5 528 4 392
22 154 23 442 19 526
Current assets
Inventory 87 818 74 960 76 341
Trade receivables 529 842 474 052 467 921
Other receivables and prepayments 20 050 18 437 7 953
Taxation 2 614 2 191 2 506
640 324 569 640 554 721
Total assets 662 478 593 082 574 247
EQUITY AND LIABILITIES
Capital and reserves 384 977 387 882 362 490
Non-current liabilities
Interest bearing
long-term liabilities 883 - 22
Deferred taxation 60 550 60 589 50 862
61 433 60 589 50 884
Current liabilities
Interest bearing current
liabilities 123 643 69 036 93 465
Non-interest bearing
current liabilities 92 425 75 575 67 408
216 068 144 611 160 873
Total liabilities 277 501 205 200 211 757
Total equity and liabilities 662 478 593 082 574 247
Other financial information
Debt/equity ratio (:1) 0.32 0.18 0.26
Depreciation - fixed assets (R'000) 3 749 3 738 7 619
Capital expenditure (R'000) 3 757 6 361 7 472
Capital commitments:
- authorised (R'000) 3 147 1 114 75
- authorised and
contracted for (R'000) - 356 7 004
Shares in issue at
end of period ('000) 135 577 135 577 135 577
Net asset value per share (cents) 284.0 286.1 267.4
Abridged cash flow statement
Unaudited Unaudited Audited
six months six months 12 months
ended ended ended
30 June 2001 30 June 2000 31 Dec 2000
R'000 R'000 R'000
Cash inflow from operations 44 277 49 674 91 750
Working capital requirements (60 791) (96 944) (160 863)
Net interest paid (8 219) (2 185) (6 278)
Taxation received/(paid) 5 - (767)
Net cash outflow from
operating activities (24 728) (49 455) (76 158)
Net cash outflow from
investing activities (4 380) (5 418) (3 013)
Net cash outflow from
financing activities (99) (17 709) (17 800)
Net decrease in cash
and cash equivalents (29 207) (72 582) (96 971)
Cash and cash equivalents
at beginning of period (93 425) 3 546 3 546
Cash and cash equivalents
at end of period (122 632) (69 036) (93 425)
No statement of changes in equity is included due to the fact that the only
adjustment to equity outside of retained earnings is goodwill reversed of
R56 000.
Commentary
Trading results
The Board decided that, after years of rapid growth, the group would during
2001 focus on consolidation, process efficiencies and improvement to cash
flows.
Revenue increased by 4.6% to R317.1 million, operating profit of R40.5
million fell by R842 000 compared to pro forma June 2000 and operating
margin declined to 12.8% (2000: 13,1%).
The postal strike and associated disruptions in March cost the group
approximately R10 million in lost revenue and some R2 million in operating
profit due to the reduced customer responses caused by the strike. The group
was consequently also forced to delay certain marketing activities which
resulted in significant revenue being delayed.
In addition, the costs of implementing our new computer systems and the
removal of bulk postal rebates affected operating profits for the six month
period.
A higher net interest charge of R8.4 million due to increased borrowings and
an increase in the effective tax rate of 3,2%, due to the loss of certain
foreign tax advantages, resulted in attributable profit declining by 20.2%
and headline earnings per share by 22.5 %.
The Board considers these results satisfactory given the current challenges
that are facing the South African retail environment.
Working capital management
Cash flow
The focus on cash flow has resulted in the net operating cash outflow before
interest reducing from R47.3 million to R16.5 million and overall cash
outflow from R72,6 million to R29.2 million.
This improving trend is expected to continue in the next six months. The
gearing ratio has increased to 32% which is well within the self-imposed
maximum of 40%. The gearing ratio is expected to improve by year end.
Trade receivables
Trade receivables have increased by 13.2% since December 2000, largely due
to the effect of the post office strike delaying significant turnover to
June.
The ageing of trade receivables and cash collection rates remain consistent
with prior experience. The group's conservative accounting policy for bad
debt remains in force and the debtor exposure is adequately provided for.
Inventory
Inventory levels are R12.9 million higher than June 2000. However, the
ageing of inventory is current and overall levels will be significantly
reduced in the second six months.
Pro forma comparatives
For effective comparison pro forma amounts have been provided representing
the restated results for the six months to 30 June 2000 which reflects the
change in the basis of estimating the provision for doubtful debts and
customer acquisition costs. This change was implemented during the latter
part of 2000 and full details are provided in the 2000 annual financial
statements.
All accounting policies are consistent with those applied during 2000.
Contingent liability
No further significant developments have occurred with respect to the South
African Revenue Services 1999 claim for customs duty and VAT of R10 million
and forfeitures of R21 million. Based on substantial evidence and senior
legal counsel opinion the Board remains confident the claim is invalid.
Prospects
The Board anticipates that the difficult retail climate will continue for
the next six months. This, together with the current year's focus on process
efficiencies and cash flow improvement, will result in headline earnings per
share being less than the previous year of 41.8 cents.
On behalf of the Board
R E Garratt J C Hubbard
Executive chairman Financial director
Cape Town
26 July 2001
Registered address
200 Main Road, Claremont 7708
Private Bag X150, Claremont 7735
Tel: (021) 680-1000 Fax: (021) 680-1001
Transfer secretaries
Mercantile Registrars Limited
11 Diagonal Street, Johannesburg 2001
Directors
R E Garratt, M Y G ttler, J C Hubbard, W G Morrissey, D Paterson,
D A Walker, K D M Warburton*, A G W Williamson*
(* Non Executive)
This information is also available on our website at
http://www.homechoice.co.za
