| Tue 16 Oct 2001, 0:00 | | L.a. Group Limited - Unaudited Interim Results For |
|
August 31, 2001
L.A. GROUP LIMITED
(Registration Number 1936/008786/06)
Share code : LAR
ISIN : ZAE000028676
UNAUDITED INTERIM RESULTS for the six months ended AUGUST 31, 2001
LA Group is a leading wholesale distributor of apparel and footwear in niche
markets and supplies corporate and career wear to major local and
international companies. The company also operates two retail chains that
supply fashion wear to the teenage and adult fashion market.
The company comprises the following business divisions:
Branded Distribution
Skye Products distributes a wide range of leading branded clothing and
footwear to independent retailers and chain stores.
The Group also owns the well-known Polo trademark for southern and sub-
Saharan Africa, which it licenses to third parties in return for royalty
income.
Corporate Clothing
Consisting of Carter Harris in South Africa and the United Kingdom and Allen
& Douglas (A&D) in the UK, the corporate clothing division provides
corporate and career wear to a wide range of predominantly blue chip local
and international companies.
Retail Clothing
Comprising the LA Jean Company and Oxygen chains, the retail division
provides high fashion clothing and accessories to fashion conscious
individuals.
OVERVIEW OF THE PERIOD
Ongoing market and economic volatility continues to impact on the sector and
affect the disposable income of consumers. Currency weakness has also
resulted in further pressure on costs and margins.
Despite these demanding trading conditions, Group turnover for the period
under review increased by 6%, while Group operating profit before net
interest charges decreased by R6.3-million from R33.5-million to R27.2-
million for comparable periods, this should be viewed against the R8.9-
million loss attributed to the retail division before intergroup charges and
an exceptional charge of R5-million in relation to this division as it is
now accounted for as a discontinuing operation.
This loss has also impacted on operating margins, resulting in a decrease
from 12.9% last year to 9.9% for the period under review.
The increase of R41-million in stock and debtors is mainly the result of
planned stockpiling for the festive season trading and the roll out of
recently acquired UK corporate clothing contracts respectively. Certain
footwear suppliers are also in the process of relocating their production
facilities from the USA to the Far East in order to increase competitiveness
and it was deemed prudent to overstock these items to avoid the possibility
of shortages.
DIVISIONAL OVERVIEW
Branded Distribution
Skye Products continues to perform in line with expectations despite
demanding retail market conditions. The company remains on track to attain
its budget for the financial year.
The Polo trademark has met its warranted royalty income, and awareness of
Polo as an upmarket fashion brand continues to grow steadily. We are
therefore confident that the royalty flow will increase further from the
four licensed stores and other licensees in the coming months.
Corporate Clothing
While the South African Corporate Clothing company, Carter Harris, was
awarded new contracts during the period, delivery of these contracts has
been deferred, which has impacted on the division's performance. We are
confident that this division will make up the shortfall as these contracts
and additional new contracts which have been secured are implemented in the
second half of the financial year.
It has been a difficult six months for corporate clothing in the United
Kingdom, but despite this, our overseas corporate clothing operation
continues to be shortlisted for a number of new contracts, which we hope to
secure in the second half. The sourcing and sales teams have been augmented
with new appointments to give us the competitive edge.
Subsequent to the reporting period a joint venture has recently been
established in the United States of America for the distribution of
corporate clothing. The initial response has been most encouraging.
Retail Division
Retail consumer operations remain one of the hardest hit industries in South
Africa at present and trading in the LA Jean Company and Oxygen stores
remains disappointing. Against this backdrop, and further to our statement
in our annual report, the Group is looking at ways of reducing its
investment in the direct retail market.
To this end, two retail stores have been fully franchised and negotiations
are currently underway regarding some of the remaining stores. This has
proven a slow process and, while trading will continue through the festive
period, group management is focused on accelerating the franchising and
disposal initiatives, which we anticipate to be completed by February 28,
2002.
In terms of AC117 (discontinuing operations), the retail division is treated
as a discontinuing operation and a R5-million exceptional charge for
impairment loss in respect of its assets and provisions in respect of lease
contracts has been made. The carrying amount of the assets of the retail
division was R28.7-million and its liabilities were R28.0-million. The
retail division cash inflow from operating activity is R664 000, cash
outflow from investing activities R196 000 and cash inflow from financing
activities R292 000.
FINANCIAL INFORMATION
Accounting Policies
The principal accounting policies, as set out in the Group annual report of
February 28, 2001 have been consistently applied throughout the period under
review.
Dividends
As per the April 2001 announcement, a dividend of six cents per share in
respect of the year ended February 28, 2001 was paid to the holders of
ordinary and "N" ordinary shares on 13 July 2001. In accordance with the
Group's accounting policy, this payment is only reflected in the results for
the period in which it is paid.
Share buy back
No shares have been bought back during the period under review. The Group
has the authority to buy back shares and will continue to review whether
such action is appropriate.
Cash and Cash equivalent
Of this amount, R7-million is committed to the payment of the vendor of the
A&D business and R7.4-million is committed in respect of the payment of
short term, loan used to settle the amount due to outside shareholders in
the UK operation.
Long-term liabilities
R8.4-million remains payable to the vendor of Polo in respect of the final
settlement for the exclusive ownership of the brand in southern Africa. An
agreement has been reached with the vendor whereby this sum will be paid off
over three annual payments of R2.8-million each, the first of which is due
in June 2002. Only R5.6-million of this total amount is shown under long-
term liabilities, with the balance of R2.8-million (being the first payment)
reflected under vendor
payments.
Current liabilities - Vendor payments
The amount comprises the R2.8-million payment due to the vendor of Polo in
June, 2002, R5-million to the vendor of Carter Harris, which is payable on
February 28, 2002 and R7-million due to the vendor of Allen & Douglas, which
is payable on April 30, 2002.
Earnings per share
The earnings and headline earnings per ordinary and "N" ordinary
share have been adjusted in respect of the shares bought back.
PROSPECTS
While we were heartened by the reduction in interest rates and the resulting
improvement in consumer confidence, any potential gains have been negated by
recent international political events, which have had an adverse effect on
our currency and consequently on the Groups margins.
On the Corporate Clothing front, we anticipate an increase in secured
contracts from the local and international operations (UK and USA) and look
forward to steady growth from this division.
In view of the current market, a economic conditions, and currency
volatility it is difficult to project earnings for the year but management
remains confident of achieving sustainable earnings.
On behalf of the directors
AK Peer
Executive Chairman and CEO
SA Mukadam
Financial and Deputy Managing Director
Secretary and registered office
AM Bissett
Colinton House
Fedsure Oval
Cnr Protea and Cavendish Roads
Claremont 7700
(PO Box 3500, Cape Town, 8000)
Transfer secretaries
Mercantile Registrars Limited
(Registration No: 1987/003382/06)
10th floor, 11 Diagonal Street
Johannesburg, 2001
(PO Box 1053, Johannesburg, 2000)
GROUP INCOME STATEMENT (R'000)
Unaudited Audited
Six months 12 months to
to August 31 February 28
2001 2000 2001
INCOME STATEMENT
REVENUE 274 332 258 895 535 154
- continuing operations 240 216 225 194 460 202
- discontinued operations 34 116 33 701 74 952
OPERATING INCOME BEFORE
DEPRECIATION AND
AMORTISATION 35 421 35 834 67 272
Depreciation, goodwill and
trademark amortisation 3 171 2 246 5 187
Impairment losses
and provisions 5 000
OPERATING INCOME BEFORE
NET INTEREST RECEIVED 27 250 33 588 62 085
Net interest (paid)
received (2 234) 51 (2 483)
OPERATING PROFIT (LOSS)
BEFORE TAXATION 25 016 33 639 59 602
- continuing operations 38 987 33 741 65 777
- discontinuing operations (13 971) (102) (6 175)
Taxation 10 601 8 145 13 878
INCOME AFTER TAXATION 14 415 25 494 45 724
Preference dividends - 11 25
Income attributable to
outside shareholders 170 269 123
NET INCOME ATTRIBUTABLE TO
ORDINARY SHAREHOLDERS 14 245 25 214 45 576
Transfer to non
distributable reserves - - 824
Dividend paid (4 362) - -
RETAINED EARNINGS 9 883 25 214 44 752
Number of ordinary and
"N" ordinary
shares in issue 72 699 218 72 699 218 72 699 218
at weighted issue 65 429 296 72 660 550 70 430 295
fully diluted 66 819 201 72 660 550 70 430 295
Headline earnings per of ordinary and
"N" ordinary shares - cents
weighted average 22.38 34.23 64.31
fully diluted 21.92 34.23 64.31
Earnings per ordinary and
"N" ordinary shares - cents
weighted average 21.77 34.70 64.71
fully diluted 21.32 34.70 64.71
Weighted headline earnings
per ordinary and "N" ordinary
shares from continuing
operations - cents 43.74 35.39 74.05
Proposed cash distribution
per ordinary and "N"
ordinary share - cents 6.00
Net tangible asset value
per share - cents 258 208 247
Capital expenditure
incurred - R'000 1 536 1 841 5 523
Capital commitments - R'000 1 054 2 122 2 590
SUMMARISED GROUP CASH FLOW STATEMENT (R '000)
Unaudited Audited
Six months 12 months to
to August 31 February 28
2001 2000 2001
Cash flows from
operating activities (4 170) (14 265) (10 783)
Cash used in investing
activities (1 499) (4 483) (8 490)
Cash flows from
financing activities (18 056) (15 400) (36 818)
Net decrease in cash
and cash equivalents (23 725) (34 148) (56 091)
Cash and cash equivalents
at beginning of period (2 602) 52 096 52 096
Effect of foreign
exchange movements (117) 1 393
Cash and cash equivalents
at end of period (26 444) 17 948 (2 602)
SUMMARISED GROUP BALANCE SHEET (R '000)
Unaudited Audited
August 31 August 31 February 28
2001 2000 2001
ASSETS
Non-current assets
Fixed assets 14 183 14 079 14 820
Intangible assets 2 117 3 095 2 329
Loan staff share trust 1 063 675 1 047
Deferred taxation 697 697
18 060 17 849 18 893
Current assets
Inventories 163 720 142 607 138 898
Trade and other receivables 139 377 119 306 115 165
Taxation 976 1 318
Cash and cash equivalents 26 842 35 103 48 757
330 915 297 016 304 138
Total Assets 348 975 314 865 323 031
EQUITY AND LIABILITIES
Equity
Ordinary shareholders'
equity 171 234 154 364 164 027
Outside shareholders'
interest 2 500 1 939 1 950
Preference shareholders - 370
173 734 156 673 165 977
Non-current liabilities
Non-interest bearing - 9 337 8 885
Interest bearing 6 212 8 400 8 400
Current liabilities
Non-interest bearing
Vendors for businesses
acquired 14 783 23 774 24 443
Provision for
discontinuing operation 5 000
Trade and other payables 74 415 62 877 51 698
Taxation 10 501 15 360 3 902
Interest bearing
Vendors for businesses
acquired 2 800
Short term loans 8 244 21 289 8 367
Bank overdraft 53 286 17 155 51 359
175 241 158 192 157 054
Total Equity and Liabilities 348 975 314 865 323 031
STATEMENT OF CHANGES IN ORDINARY SHAREHOLDERS' EQUITY (R'000)
Unaudited Audited
August 31 August 31 February 28
2001 2000 2001
Balance at beginning
of period 164 027 130 660 130 660
Capitalisation award 19 125 19 125
Share issue expenses (53) (48)
Distribution paid/declared (4 362) (19 125) (19 125)
Profit attributable to
ordinary shareholders 19 245 25 214 45 576
Provision for
discontinuing operation (5 000)
Foreign currency
translation reserve (2 676) (275) (3 140)
Share buy back (1 182) (9 021)
171 234 154 364 164 027
DEPRECIATION AND AMORTISATION (R'000)
Unaudited Audited
August 31 August 31 February 28
2001 2000 2001
Assets that have been depreciated and amortised as follows:
Depreciation 2 737 2 199 5025
Trademarks 95 32 142
Goodwill 339 15 20
3 171 2 246 5 187
RECONCILIATION OF EARNINGS TO HEADLINE EARNINGS (R'000)
Unaudited Audited
August 31 August 31 February 28
2001 2000 2001
Net earnings per
income statement 14 245 25 214 45 576
Goodwill and trademark
amortisation 434 47 162
Profit on sale of assets (34) (52)
Gain on payment of vendor
for business acquired (389) (389)
HEADLINE EARNINGS 14 645 24 872 45 297
SEGMENTAL INFORMATION (R '000)
Primary segments
Unaudited 6 months to August 31, 2001
Corporate Consoli-
Branded clothing Retail dated
REVENUE
Revenue from external
customers 116 026 122 260 34 116 272 402
Revenue from other
segments and
corporate royalty 143 1 930
Total Revenue 116 169 122 260 34 116 274 332
RESULTS
Segment results 23 202 5 190 (14 304) 14 088
Corporate royalties
and unallocated
corporate expense 13 162
Operating income 27 250
Interest received 1 582
Interest expense (3 816)
Outside shareholders interest (170)
Taxation expense (10 601)
Net income 14 245
Unaudited 6 months to August 31, 2000
Corporate Consoli-
Branded clothing Retail dated
REVENUE
Revenue from
external customers 102 463 121 433 33 701 258 895
Revenue from other
segments and corporate
royalty 1 979 - 1 298
Total Revenue 104 442 121 433 33 701 258 895
RESULTS
Segment results 16 604 8 088 (231) 24 461
Corporate royalties and
unallocated corporate expense 9 127
Operating income 33 588
Interest received 1 440
Interest expense (1 389)
Outside shareholders interest (269)
Preference dividend (11)
Taxation expense (8 145)
Net income 25 214
Audited - 12 months to February 28, 2001
Corporate Consoli-
Branded clothing Retail dated
REVENUE
Revenue from
external customers 234 197 222 272 74 952 531 421
Revenue from other
segments and
corporate royalty 4 241 - 3 733
Total Revenue 238 438 222 272 74 952 535 154
RESULTS
Segment results 30 648 17 106 (5 567) 42 187
Corporate royalties and
unallocated corporate expense 19 898
Operating income 62 085
Interest received 2 697
Interest expense (5 180)
Outside shareholders interest (123)
Preference dividend (25)
Taxation expense (13 878)
Net income 45 576
SECONDARY SEGMENTS
Unaudited Audited
August 31 August 31 February 28
2001 2000 2001
TURNOVER
South Africa 193 993 183 360 395 419
International 80 339 75 535 139 735
274 332 258 895 535 154
OPERATING PROFIT
South Africa 22 099 26 627 55 688
International 5 151 6 961 6 397
27 250 33 588 62 085
