| Wed 10 Oct 2001, 0:00 | | Ellerine Holdings Limited - Consolidated Audited R |
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Ellerine Holdings Limited
Registration number 1968/013402/06
Consolidated Audited Results for the year ended 31 August 2001
TURNOVER UP BY 12%
OPERATING PROFIT UP BY 18%
EARNINGS PER SHARE UP BY 15%
NET ASSET VALUE PER SHARE UP BY 17%
CONSOLIDATED INCOME STATEMENT
2001 2000 %
R'000 R'000 Change
Turnover 1 944 643 1 730 769 12
Operating profit 298 392 253 484 18
Net investment income 1 267 11 061 (89)
Profit before taxation 299 659 264 545 13
Taxation (88 142) (81 169) 9
Profit after taxation 211 517 183 376 15
Earnings per share - cents 286,6 248,5 15
Headline earnings per share - cents 280,9 243,5 15
Fully diluted earnings per
share - cents 283,8 245,5 16
Dividends per share - cents 71,6 82,5 (13)
Dividend cover - times 4,0 3,0
Number of shares in issue 73 805 200 73 805 200
CONSOLIDATED BALANCE SHEET
2001 2000
R'000 R'000
ASSETS
Non-current assets 480 368 470 280
Property and equipment 198 247 201 164
Other financial assets 282 121 269 116
Current assets 1 588 464 1 319 234
Inventories 124 039 119 813
Trade and other receivables 1 405 465 1 129 464
Trade receivables 2 001 643 1 630 463
Provisions (639 769) (549 463)
1 361 874 1 081 000
Other receivables 43 591 48 464
Funds on call, bank balances
and cash 58 960 69 957
TOTAL ASSETS 2 068 832 1 789 514
EQUITY AND LIABILITIES
Shareholders' equity 1 306 345 1 115 846
Non-current liabilities 341 868 300 617
Insurance reserves 42 992 26 736
Deferred taxation 216 876 173 881
Interest bearing borrowings 82 000 100 000
Current liabilities 420 619 373 051
Trade and other payables 207 877 198 135
Bank overdrafts 212 742 174 916
TOTAL EQUITY AND LIABILITIES 2 068 832 1 789 514
Net asset value per share - cents 1 770 1 512
Current ratio 3,78 3,54
CONSOLIDATED CASH FLOW STATEMENT
2001 2000
R'000 R'000
Cash generated by operations 449 329 287 080
Working capital requirements (381 245) (224 132)
Net investment income 1 267 11 061
Taxation paid (27 742) (69 189)
Cash available from operations 41 609 4 820
Dividend paid (30 855) (57 759)
Cash retained/(utilised)
from operations 10 754 (52 939)
Net investment activities
and other (31 572) (41 020)
Decrease in net cash flow (20 818) (93 959)
STATEMENT OF CHANGES IN EQUITY
Share Non-
Share capital distributable General
R'000 capital and premium reserves reserve Total
Balance at
31 August 2000
(as restated) 3 690 44 276 55 670 17 000 1 115 846
Net profit for
the year 211 517
Gain on exchange
rate translations 9 759 9 759
Dividends (30 777)
Balance at
31 August
2001 3 690 44 276 65 429 17 000 1 306 345
SEGMENTAL REPORTING
TURNOVER
2001 2000
Furniture retail 81% 89%
Financial services 19% 11%
GEOGRAPHICAL TURNOVER
2001 2000
RSA 84% 84%
Foreign 16% 16%
OPERATING PROFIT
2001 2000
Trading 72% 86%
Financial services 17% 6%
Property income 11% 8%
GEOGRAPHICAL OPERATING PROFIT
2001 2000
RSA 75% 78%
Foreign 25% 22%
COMMENTS
TRADING ENVIRONMENT
Despite the unfavourable retail trading conditions, the board is pleased to
report very satisfactory results for the year to August 2001. These results
were achieved through the implementation of a number of revenue generating
initiatives which resulted in an increase in both market share and operating
profit.
In order to address this environment, the following initiatives were
implemented:
* A more focused and aggressive marketing thrust was adopted in order to
improve market share in a highly competitive market.
* Revenues from financial services were enhanced with the introduction of
additional maintenance products and benefits, as well as the expansion of
the term loan business under Rainbow Loans.
* The FurnCity stores were repositioned and launched as a separate business
unit with dedicated senior management targeting the middle to upper middle
income groups. FurnCity outlets have increased from 55 to 82 and are trading
above expectations.
* The number of stores in Zambia were increased to 4 and the pilot period
in regard to that market is now complete. Further expansion of the Zambian
operations is envisaged in the year ahead.
* The trading brands in the traditional business have been reduced from 4
to 3 with the elimination of the Royal brand to facilitate greater focus on
the market positioning of the 3 remaining brands, i.e. Ellerines, Town Talk
and Oxford.
* Staffing at operational level has been rationalised so that despite the
opening of 24 additional furniture and 16 new Rainbow Loans outlets, the
number of employees increased marginally as compared to August 2000.
* Inventory management has been improved and despite the increased number
of trading outlets (up by 4%) and inflation of 5%, inventories showed a
modest increase of only 3,5%.
* Considerable attention has been placed on credit granting and collection
methodologies, with the introduction and improved use of on-line external
credit bureaus. Tightened controls have been placed on certain poor
performing branches in the group and greater autonomy has been granted to
the high performers.
Results
Turnover reflects both finance charges and insurance premiums on an earned
basis and prior year comparatives have been restated accordingly. Given
market conditions the group performed well with total turnover having
increased by 12% to R1,944 billion, which is mainly attributable to the
introduction of competitively priced financial products. Financial services
have increased considerably to R361 million and constitutes 19% of the
group's turnover compared to 11% last year.
Operating profit increased by 18% to R298 million as a result of a pleasing
increase in the operating margin to 15,3% for the current period from 14,6%
in August 2000. This was achieved through a combination of improved trading
gross margins, the restructuring of customer protection insurance
arrangements and continued tight control over expenses. Net investment
income for the current year at R1,3 million has reduced from R11,0 million,
as a result of the reduction in cash held on deposit and the substantially
lower interest rates. Profit before tax increased by 13% with the after tax
profit up by 15%.
The balance sheet remains extremely strong with total assets up by 15,7% to
R2,068 billion (August 2000: R1,787 billion). The net debtors book increased
by 24,7% due to the continued increase in the contract period, the growth in
Rainbow Loans and the Zambian expansion. Partial re-insurance arrangements
implemented during the year under review have also resulted in lower
provisions for unearned premiums. Total Debtors provisions, which are still
conservative, increased by 16,4%. The net asset value per share increased to
1 770 cents (August 2000: 1 512 cents).
Despite the fact that customers are still encountering difficulties in
meeting their obligations of paying a full instalment on a regular basis,
the cash flows were nevertheless satisfactory. The net cash position at
year-end stood at R46,3 million as compared with the comparative net cash
figure of R64,2 million at August 2000, despite the additional R42 million
internal financing of growth into new business and the statutory re-
arrangement of certain insurance matters as follows:
* Expansion of Rainbow Loans R23 million
* Expansion of Zambian operations R11 million
* Outsourcing of Namibian CPI insurance R8 million
R42 million
It should, however, be noted that no interim dividend was paid as the group
has moved to an annual dividend.
Notwithstanding the above, the group has substantial debt capacity to fund
both its future growth and possible acquisitions.
Strategy for Year 2002
Arising out of an intense and technologically advanced strategy session
attended by 22 of the group's senior executives, as well as leading
consultants and practitioners in the second quarter 2001, certain strategies
have been identified for the way forward which include the following:
* The 3 chains making up the traditional business, namely, Ellerines, Town
Talk and Oxford, will be transformed into 3 separate business units with
dedicated senior management who will be targeting specific market sectors.
* Additional financial services are being introduced which will add value
for our customers, while at the same time contribute both to revenues and
provide the group with a competitive edge. These include funeral benefits,
an outsourced package of health care benefits such as HIV/AIDS assistance
through Netcare 911 and Lawcall, as well as an innovative new maintenance
product sourced internationally.
* Even greater emphasis is to be placed on the debtors book through an
objective point scoring credit granting model and the introduction of
strategically located credit control hubs manned by appropriately qualified
and experienced personnel.
* A variety of productivity initiatives in the fields of transport and
credit control.
* A highly aggressive and focused approach to the generation of quality
sales and the full use of an integrated computerised Customer Relations
Management system.
* The ongoing expansion of the new business units with particular emphasis
on FurnCity and the Oxford brand which will be targeted at consumers in LSM
categories above the group's traditional market sector.
* Investigating the possibility of making a meaningful acquisition to take
full advantage of opportunities in the marketplace.
* Continuous upgrading of the Information Technology platform to further
enhance inventory and debtors management, as well as improving advertising
and marketing initiatives and effectiveness.
Prospects
The trading environment is expected to remain difficult for the year ahead.
With our strategies in place, revenue growth should result from a more
focused approach and a further improvement in the trading margin should be
achieved due to the additional financial services being introduced.
However, with the current uncertainty of the world economic situation and
the possible impact on the South African economy, as well as the
introduction on 3 October 2001 of an additional weekly lottery draw, it is
very difficult to forecast the next 12 months.
Nevertheless, the group is budgeting for real growth in both turnover and
profitabilty in the year ahead.
Accounting Policies
Except for the amendments required by AC107 "Events after the Balance Sheet
date", accounting policies are consistent with those applied in the previous
year and are in accordance with Generally Accepted Accounting Practice.
The group has changed its accounting policy for dividends and the related
STC charge to accord with Generally Accepted Accounting Practice. The group
now accounts for dividends and STC in the period when declared. The effect
of this change is reflected in the statement of changes in equity and
comparative figures have been restated accordingly.
Declaration of Dividend
The Board of Directors has resolved to declare an annual dividend, being
dividend number 64, of 71,6 cents per share (2000: 82,5 cents per share) to
ordinary shareholders. This increases the dividend cover from three times
back to four times.
In compliance with the requirements of STRATE, the following dates are
applicable:
Last day to trade cum the dividend Friday, 7 December 2001
Date trading commences
ex the dividend Monday, 10 December 2001
Record date Friday, 14 December 2001
Date of payment on Tuesday, 18 December 2001
Certificated shareholders may not dematerialise their share certificates
between Monday, 3 December 2001 and Friday,
14 December 2001, both dates inclusive.
JSE share code: ELH
ISIN code: ZAE000022752
STRATE
The company's securities are in the process of being transferred to the new
STRATE system of electronic settlement on the JSE Securities Exchange South
Africa. Dematerialisation of the company's shares started on 1 October 2001.
Electronic trading in the company's shares will commence on 22 October 2001
with the first electronic settlement taking place on 29 October 2001. As a
consequence the company's share certificates will not be accepted for
settlement after 22 October 2001.
Full details of the transfer to STRATE were forwarded to shareholders during
August 2001.
Annual Report/Annual General Meeting
The Annual Report and Financial Statements for the year ended
31 August 2001 and Notice of the Annual General Meeting which will be held
on Friday, 7 December 2001, will be posted to shareholders on or about
Friday, 9 November 2001.
By order of the Board
Denzil McGlashan Peter Squires
Chairman Managing Director
10 October 2001
DIRECTORS
D S McGlashan* (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**)
Visit our website: www.ellerines.co.za
