| Tue 6 Nov 2001, 0:00 | | Nando's - Interim Results For The Six Months Ended |
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Nando's Group Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number:1994/007318/06)
("NGH", or "Nando's", or "the group")
Share code: NDS ISIN number: ZAE000029765
Interim results for the six months ended 31 August 2001
Headline earnings 45%
Net asset value 28%
Debt equity ratio 34%
Net finance costs 39%
Contribution from offshore operations 57%
GROUP INCOME STATEMENT
R'000 R'000 R'000
Six months ended Year ended
31 August 31 August February
2001 2000 2001
Reviewed Reviewed Audited
Revenue 221,552 237,110 471,907
Cost of sales 91,911 90,698 187,527
Gross margin 129,641 146,412 284,380
Operating costs 105,643 118,338 228,456
Operating income before
depreciation 23,998 28,074 55,924
Depreciation and amortisation 7,952 10,134 19,737
Operating income 16,046 17,940 36,187
Exceptional item - Restructuring
costs 0 2,770 3,172
Net finance costs 5,772 9,522 15,027
Associated companies
attributable share of net income 5,029 1,602 4,441
Income before taxation 15,303 7,250 22,429
Taxation 3,641 1,977 7,093
Net income 11,662 5,273 15,336
Add: Exceptional item
- Restructuring costs 0 2,770 3,172
Headline earnings 11,662 8,043 18,508
Weighted average number of
shares in issue (m) 646.59 646.59 646.59
Earnings per share (cents) 1.80 0.82 2.37
Headline earnings per share (cents) 1.80 1.24 2.86
BALANCE SHEET
R'000 R'000 R'000
Assets
Non-current assets 174,421 183,911 169,660
Property, plant and equipment 83,946 112,743 86,267
Intangibles 26,166 13,554 24,935
Investment in associate companies
and other investments 59,509 45,903 53,658
Employee share incentive scheme 4,800 11,711 4,800
Current assets 66,797 40,055 60,651
Inventory 8,837 7,853 7,423
Accounts and other receivables 43,842 32,202 37,812
Bank balances and cash 14,119 0 15,416
Total Assets 241,218 223,966 230,311
Equity and Liabilities
Share capital and premium 6,465 6,465 6,465
Retained income 48,608 24,024 36,946
Translation reserve 3,951 0 2,720
Ordinary shareholders' funds 59,024 30,489 46,131
Shareholders' loans 12,461 12,561 12,461
Shareholders' funds 71,485 43,050 58,592
Long term liabilities 54,289 64,945 55,961
Convertible debentures - employee
share incentive scheme 4,800 11,711 4,800
Deferred taxation 4,028 3,295 4,028
Current liabilities 106,616 100,965 106,930
Accounts payable, other accounts
payable and provisions 87,234 86,096 79,898
Current portion of long term
Liabilities 7,286 10,270 11,938
Taxation 10,484 4,252 7,479
Bank overdrafts 1,612 347 7,615
Total Equity and Liabilities 241,218 223,966 230,311
Net asset value per share (cents) 9.1 4.7 7.1
SUMMARISED CASH FLOW STATEMENTS
R'000 R'000 R'000
Cash generated by operations 17,208 31,328 47,257
Net finance costs (5,772) (9,522) (15,027)
Taxation paid (822) (919) (2,074)
Cashflows from operating activities 10,614 20,887 30,156
Cashflows from investing activities 416 1,284 7,579
Cashflows from financing activities (6,324) (7,044) (14,460)
Net increase in cash and cash
Equivalents 4,706 15,127 23,275
Cash and cash equivalents at
beginning of the year 7,801 (15,474) (15,474)
Cash and cash equivalents at end
of the year 12,507 (347) 7,801
STATEMENT OF CHANGES IN EQUITY
Share Retained Translation Total
Capital Income Reserve
Balance at 29 February 2000 6,465 21,610 0 28,075
Net income for the year 0 15,336 0 15,336
Translation diffrences 0 0 2,720 2,720
Balance at 28 February 2001 6,465 36,946 2,720 46,131
Net income for the period 0 11,662 0 11,662
Translation diffrences 0 0 1,231 1,231
Balance at 31 August 2001 6,465 48,608 3,951 59,024
SALIENT FEATURES
R'000 R'000 R'000
Capital commitments
- Authorised but not contracted 5,016 23,857 12,500
Capital expenditure 14,009 14,873 24,617
Operating lease commitments 2002 2003 2004 2005 Thereafter Total
Land and buildings 17,581 33,432 28,772 22,861 20,491 123,137
The Nando's Mission - The Nando's mission is to be recognised as a global
brand that consistently delivers quality, value and commitment to its
customer base. These objectives underpin the economic value of the Nando's
brand ensuring future sustainable growth in headline earnings.
Review of operations - The results of the group for the six months ended 31
August 2001, together with comparative figures, are shown alongside.
Financial overview - The group has performed in line with expectations for
the six months ended 31 August 2001.
Nando's has continued to maintain its growth path with headline earnings
increasing by 45% over the corresponding previous period. Group revenue,
which comprises sales, royalties and master franchise premiums, reduced by
6,6% primarily as a consequence of the conversion of 18 corporate stores to
franchise units. The group's store operating gross margins increased from
62% to 63% (after eliminating the effects of the receipt of master franchise
premiums). The operating cost percentages of the group improved from 49,9%
to 47,7% following continuous attention and emphasis placed on cost controls
within the group.
Net finance costs reduced by 39,4%, following the reduction in interest
bearing debt. The group's net income before taxation and before contribution
from associated companies increased by 22,1% over the corresponding previous
period which has been adjusted for restructuring costs to facilitate
meaningful comparison. The group's attributable share of the net income from
associated companies increased by 213,9% which reflects the increased
contribution from the United Kingdom operation in which the group has a 36%
interest.
The strong cashflows generated by the group reduced interest bearing debt by
R11,0 million, from R60,1 million to R49,1 million. Further reductions are
anticipated during the second half of the financial year.
The group's debt to equity ratio improved from 103% to 69%.
Following a strong operational and financial performance, the group's net
asset value improved by 28%, from 7,13 cents per share to 9,13 cents per
share.
Operational review - The group's store base increased by 12,83% from 304
stores to 343 stores. There are 159 stores (46,4% of the group's store base)
located in international markets. These stores contribute 56,9% of the
group's net income before tax (including net income from associated
companies), reflecting the group's stated objectives of becoming a global
brand. The segmental analysis shown below gives a detailed breakdown of
jurisdictional performance.
The core focus areas of the group continue to be Australia and the United
Kingdom. Both these jurisdictions reported extremely pleasing performances,
especially given the intense level of competition experienced in these
markets.
The performances of Canada, Malaysia and the Middle East region improved
over the previous year.
Trading conditions in the Middle East continue to be affected by volatile
economic and political conditions.
The group's partner in Africa, Innscor Africa Limited, has announced to its
shareholders that it is working on a commercial arrangement with a major
global oil company to implement an exclusive pan-African development of its
food service offerings housed in Innscor Regional Foods Limited ("IRF")(in
which the group has a 33.33% interest). The IRF multi-food concepts will be
located at the oil company's service stations across the African continent.
Further details will be provided to shareholders once legal formalities have
been concluded. It is anticipated that the arrangement will be formalised
prior to the end of the financial year.
The group has established a grocery presence in the United States. The
initial response from the grocery industry has been encouraging.
The restaurant industry now gives the consumer unparalleled choice - this,
in turn, has increased consumer expectations with regard to the price/value
equation. Consumers have come to expect quality food, entertainment value
and service. The Nando's Experience is continually enhanced to meet all
these criteria. This has enabled the group to improve market share and
headline earnings in an extremely competitive environment coupled with a
volatile global economy.
In October 2001, the group was ranked as South Africa's fourteenth most
global company in a survey conducted by PriceWaterhouseCoopers. This is
independent recognition of the stature and presence that the Nando's brand
has achieved in the international arena.
Contingent liability - NGH has provided a guarantee to the Industrial
Development Corporation ("IDC") in the amount of R60 million in respect of
franchises transacted and to be transacted through the IDC facility.
Accounting policies - The accounting policies adopted for purposes of this
interim report comply, and have been consistently applied in all material
respects, with South African Statements of Generally Accepted Accounting
Practice and are consistent with those used in the annual financial
statements for the year ended 28 February 2001.
Independent review by Deloitte & Touche - This interim report has been the
subject of review by our auditors, Deloitte & Touche, who have performed
this review in accordance with the guideline entitled "Guidance for Auditors
on Review of Interim Financial Information", issued by the South African
Institute of Chartered Accountants. A copy of their unqualified report is
available for inspection at the registered office of the company.
Dividend - The board has resolved not to declare an interim dividend.
Cashflows from operations will be utilised to further reduce interest
bearing debt.
Resignation of director - Leon Katz has resigned as an executive director of
the group with effect from 5 November 2001 to pursue personal interests.
Both the group and the board thank Leon for the contribution that he has
made in the twelve years that he has been associated with Nando's. Prospects
- Whilst being mindful of existing political and economic events, based on
the existing fundamentals within the group, we believe that the positive
momentum of the group will be maintained for the six months ending 28
February 2002,with the the offshore component of the group's revenue and
earnings base continuing to grow at a faster pace than the local operation.
Robert Brozin Les Perlman Sandton Chief executive officer Chief financial
officer6 November 2001
SEGMENTAL ANALYSIS
South United Australia Middle Canada
Africa Kingdom East
Total revenue 2001 148,514 0 37,129 27,197 7,999 713
Net income 2001 6,592 6,810 2,480 (1,718) 1,760
Malaysia Africa USA Total
Total revenue 2001 713 0 0 221,552
Net income 2001 713 (352) (982) 15,303
ASSETS
South Australia Middle Canada Total
Africa East
Non current 141,473 19,207 10,670 3,070 174,420
Current 42,513 9,994 9,264 5,026 66,797
Total 183,986 29,201 19,934 8,096 241,218
LIABILITIES
South Australia Middle Canada Total
Africa East
Non current 93,033 5,337 1,123 0 81,305
Current 55,260 13,929 15,550 3,689 88,428
Total 148,293 19,266 16,673 3,689 169,733
NANDO'S GROUP HOLDINGS GROUP STORE NUMBERS
28 FEBRUARY 31 AUGUST 2001
1997 1998 1999 2000 2001 TOTAL CORPORATE FRANCHISE
South Africa 100 122 142 147 160 184 70 114
Australia 7 14 32 33 48 55 16 39
United Kingdom 7 7 15 23 30 37 37 0
Israel 4 6 9 9 10 10 7 3
Canada 3 4 7 6 7 7 2 5
Malaysia 0 0 3 6 10 10 0 10
Saudi Arabia 0 0 2 2 3 3 0 3
Egypt 0 0 0 1 0 0 0 0
Botswana 3 3 3 3 4 4 0 4
Ivory Coast 0 0 0 0 1 1 0 1
Kenya 0 0 3 6 7 7 0 7
Malawi 0 0 0 1 1 1 0 1
Mocambique 0 0 0 1 1 1 0 1
Tanzania 0 0 0 0 1 1 0 1
Uganda 0 0 0 1 1 1 0 1
Zambia 0 0 0 1 2 2 0 2
Zimbabwe 13 13 18 18 18 18 0 18
Ghana 0 0 0 0 0 1 0 1
137 169 234 258 304 343 132 211
NGH has a 33.33% equity interest in Innscor Regional Foods Limited which
provides the group with further interests in an additional 38 units in Ivory
Coast, Kenya, Mocambique, Tanzania,
Uganda and Zambia, based on the Innscor multi-brand concept.
Directors: RC Brozin (CEO), M Brey*, LZ Brozin*, FOS Duarte, RAG
Enthoven, FMS Guimaraes, L Perlman, MD Radomsky, FJ Robertson*, BG
Sacks, K Utian. (*non-executive) Group Secretary: E Klynsmith
B.Com(Hons)(Acc)CA(SA)
Registered office: 64 Third Avenue, Inanda, Sandton, 2196
Transfer Secretaries: Mercantile Registrars Limited,
11 Diagonal Street, Johannesburg, 2001.
PO Box 1053, Johannesburg, 2000
Visit the Nando's website at www.nandos.com
