| Mon 28 Jan 2002, 0:00 | | Jd Group Limited - Announcement |
|
JD GROUP LIMITED
(Reg. No. 1981/009108/06)
("the Group")
Trading update for the first four months of the 2002 financial year
In light of the prevailing economic realities and general market conditions
in the local durable credit retail market, JD Group is providing an update
on the first four-month trading period of the 2002 financial year ending
December 2001 ("the period").
As part of the Group's ongoing credit risk review and the development of its
new credit granting model, changes to the existing credit application and
evaluation process were put in place in order to ensure tighter controls.
These measures were introduced in November 2001 to reduce credit risk
exposure during the peak Christmas trading period and included increased
deposits, more conservative selection in respect of high risk customers and
a tightening of credit granting authority procedures.
By March 2002, the next phase of this process will include individual
business unit credit-scoring, taking into account their overall debt
management and collection effectiveness. By June 2002, the Group's fraud
detection capabilities will be significantly refined and electronically
calculated affordability tests will be implemented. The remainder of the
year will be committed to the re-development of the Group's credit
scorecards for use in the new branch computer system, which is currently
under development.
On 29 October 2001, the Group announced that its exposure to the lower end
of the market had been discontinued through the cessation of trade with this
segment, coupled with the discontinuance of Score as a brand. As a result
of the strategic rationalisation and restructuring programme undertaken
during the year, the new Price 'n Pride, which currently represents 10% of
group sales (previously 17%), was effectively repositioned. This also led
to a 17% reduction in the chain's account base. Sale of merchandise at the
new Price 'n Pride for the period declined 30% compared with the similar
period the previous year. While the budget for the new Price 'n Pride took
cognisance of the repositioning, the impact of the new credit granting
criteria was more severe on sales than initially anticipated. Whilst Price
'n Pride is repositioned and a new trading base is established, the Board
expects this trend to continue in the short-term.
Although the new credit granting criteria and process had the desired effect
in respect of the Group's exposure to credit risk, it adversely affected
recent sales volumes:
Year-on-Year Sales Growth per Business Unit
Russells 6%
Joshua Doore 16%
Bradlows 13%
Electric Express 12%
Price 'n Pride (30%)
Abra 178%
Group 11%
Number of stores for trading period
Beginning Ending
Russells 191 194
Joshua Doore 142 146
Bradlows 92 93
Electric Express 109 111
Price `n Pride 131 129
Abra 19 22
Group 684 695
Notwithstanding the changes in the credit granting process and the pressure
on product margins, overall sale of merchandise for the southern African
operations during the period increased by 4%. The sales split of furniture
and electrical products in monetary and unit terms over the Christmas period
remained unchanged. Inventories increased by only 3% year-on-year.
As a result of the competitive environment, the gross profit margin for the
trading period decreased by two percentage points. Cash sales increased
from 14% to 18% and cash deposit rates grew from 11% to 13%. Cash
collections were higher compared with the previous year and in line with
budget.
However, the higher cash sales and deposits together with a 2% reduction in
the usury rate to 23%, negatively impacted finance and insurance revenues.
The debtors book grew in line with the Group's revenue and arrears were
maintained at 14% at the end of the period. As anticipated, the moving
average length of the debtors book is beginning to shorten.
From the above, it is clear that earnings have been adversely affected as a
result of the conscious decision made by management to protect the Group's
asset base.
Despite the impact on earnings, the Group has a sound balance sheet and is
in a strong cash flow position with gearing levels within our target range
of 35%-50%. The Group's access to long-term funding facilities ensures that
it remains well positioned to take advantage of future opportunities.
Nedcor Alliance
During the trading period, the rollout of our Nedcor alliance continued to
proceed in line with management expectations. As noted at year-end, R28m in
loans was generated through 106 Peoples Bank "in-store points of presence".
During the period, this book increased to R81 million and the number of
outlets to 153.
Poland
The Group is pleased to report that its Polish operation, Abra, grew revenue
in excess of 178% in Rand terms and 67% in Polish Zloty terms (PLN). Like-
for-like sales growth in PLN was 9%. The continued focus on merchandising
and marketing will result in improved product margin, which remains
particularly important given the lack of additional revenue streams compared
with the southern African operations.
United Kingdom
The integration of the recently acquired BoConcept stores in Bournemouth and
Tottenham Court Road has been successfully completed and turnover of
GBP925,000 was achieved for the period. Another flagship outlet was opened
in Brighton in December 2001 with further stores planned to open in
Southampton, Cardiff and Glasgow by the end of the financial year. The
Group remains confident that BoConcept continues to present a unique
opportunity for the Group to significantly develop in the global arena.
Commenting, David Sussman, Group Executive Chairman said:
"Our commitment to the long-term well being of the Group necessitates an
ongoing review of how the business is run. It is apparent that had we not
introduced the new credit granting criteria and methodology, product sales
for the Group in southern Africa would have shown double-digit year-on-year
growth further proving the strength of our brands. We will not succumb to
the temptation of short-term gain knowing that such behaviour would
undermine our long-term sustainability. Our committed management team
recognises that this decision will positively impact the business and
protect its asset base in the medium-to-long term."
Forward-looking statements: This announcement contains certain forward-
looking statements with respect to the financial condition and results of
operations of JD Group, which by their nature involve risk and uncertainty
because they relate to events and depend on circumstances that may occur in
the future. Factors that could cause actual results to differ materially
from those in the forward-looking statements include, but are not limited
to, global, national and regional economic conditions, levels of securities
markets, interest rates, credit or other risks of lending and investment
activities, and competitive and regulatory factors.
Johannesburg, 28 January 2002
Enquiries:
JD Group Limited
Tel: + 27 (0) 11 408 0213
David Sussman, Group Executive Chairman
Jan Bezuidenhout, Director Corporate Services
College Hill Investor Relations
Tel: + 27 (0) 11 447 3030
Julia Kerr
John Paul Waites
JD GROUP LIMITED
(Reg. No. 1981/009108/06)
("the Group")
Trading update for the first four months of the 2002 financial year
In light of the prevailing economic realities and general market conditions
in the local durable credit retail market, JD Group is providing an update
on the first four-month trading period of the 2002 financial year ending
December 2001 ("the period").
As part of the Group's ongoing credit risk review and the development of its
new credit granting model, changes to the existing credit application and
evaluation process were put in place in order to ensure tighter controls.
These measures were introduced in November 2001 to reduce credit risk
exposure during the peak Christmas trading period and included increased
deposits, more conservative selection in respect of high risk customers and
a tightening of credit granting authority procedures.
By March 2002, the next phase of this process will include individual
business unit credit-scoring, taking into account their overall debt
management and collection effectiveness. By June 2002, the Group's fraud
detection capabilities will be significantly refined and electronically
calculated affordability tests will be implemented. The remainder of the
year will be committed to the re-development of the Group's credit
scorecards for use in the new branch computer system, which is currently
under development.
On 29 October 2001, the Group announced that its exposure to the lower end
of the market had been discontinued through the cessation of trade with this
segment, coupled with the discontinuance of Score as a brand. As a result
of the strategic rationalisation and restructuring programme undertaken
during the year, the new Price 'n Pride, which currently represents 10% of
group sales (previously 17%), was effectively repositioned. This also led
to a 17% reduction in the chain's account base. Sale of merchandise at the
new Price 'n Pride for the period declined 30% compared with the similar
period the previous year. While the budget for the new Price 'n Pride took
cognisance of the repositioning, the impact of the new credit granting
criteria was more severe on sales than initially anticipated. Whilst Price
'n Pride is repositioned and a new trading base is established, the Board
expects this trend to continue in the short-term.
Although the new credit granting criteria and process had the desired effect
in respect of the Group's exposure to credit risk, it adversely affected
recent sales volumes:
Year-on-Year Sales Growth per Business Unit
Russells 6%
Joshua Doore 16%
Bradlows 13%
Electric Express 12%
Price 'n Pride (30%)
Abra 178%
Group 11%
Number of stores for trading period
Beginning Ending
Russells 191 194
Joshua Doore 142 146
Bradlows 92 93
Electric Express
109 111
Price `n Pride
131 129
Abra 19 22
Group 684 695
Notwithstanding the changes in the credit granting process and the pressure
on product margins, overall sale of merchandise for the southern African
operations during the period increased by 4%. The sales split of furniture
and electrical products in monetary and unit terms over the Christmas period
remained unchanged. Inventories increased by only 3% year-on-year.
As a result of the competitive environment, the gross profit margin for the
trading period decreased by two percentage points. Cash sales increased
from 14% to 18% and cash deposit rates grew from 11% to 13%. Cash
collections were higher compared with the previous year and in line with
budget.
However, the higher cash sales and deposits together with a 2% reduction in
the usury rate to 23%, negatively impacted finance and insurance revenues.
The debtors book grew in line with the Group's revenue and arrears were
maintained at 14% at the end of the period. As anticipated, the moving
average length of the debtors book is beginning to shorten.
From the above, it is clear that earnings have been adversely affected as a
result of the conscious decision made by management to protect the Group's
asset base.
Despite the impact on earnings, the Group has a sound balance sheet and is
in a strong cash flow position with gearing levels within our target range
of 35%-50%. The Group's access to long-term funding facilities ensures that
it remains well positioned to take advantage of future opportunities.
Nedcor Alliance
During the trading period, the rollout of our Nedcor alliance continued to
proceed in line with management expectations. As noted at year-end, R28m in
loans was generated through 106 Peoples Bank "in-store points of presence".
During the period, this book increased to R81 million and the number of
outlets to 153.
Poland
The Group is pleased to report that its Polish operation, Abra, grew revenue
in excess of 178% in Rand terms and 67% in Polish Zloty terms (PLN). Like-
for-like sales growth in PLN was 9%. The continued focus on merchandising
and marketing will result in improved product margin, which remains
particularly important given the lack of additional revenue streams compared
with the southern African operations.
United Kingdom
The integration of the recently acquired BoConcept stores in Bournemouth and
Tottenham Court Road has been successfully completed and turnover of
GBP925,000 was achieved for the period. Another flagship outlet was opened
in Brighton in December 2001 with further stores planned to open in
Southampton, Cardiff and Glasgow by the end of the financial year. The
Group remains confident that BoConcept continues to present a unique
opportunity for the Group to significantly develop in the global arena.
Commenting, David Sussman, Group Executive Chairman said:
"Our commitment to the long-term well being of the Group necessitates an
ongoing review of how the business is run. It is apparent that had we not
introduced the new credit granting criteria and methodology, product sales
for the Group in southern Africa would have shown double-digit year-on-year
growth further proving the strength of our brands. We will not succumb to
the temptation of short-term gain knowing that such behaviour would
undermine our long-term sustainability. Our committed management team
recognises that this decision will positively impact the business and
protect its asset base in the medium-to-long term."
Forward-looking statements: This announcement contains certain forward-
looking statements with respect to the financial condition and results of
operations of JD Group, which by their nature involve risk and uncertainty
because they relate to events and depend on circumstances that may occur in
the future. Factors that could cause actual results to differ materially
from those in the forward-looking statements include, but are not limited
to, global, national and regional economic conditions, levels of securities
markets, interest rates, credit or other risks of lending and investment
activities, and competitive and regulatory factors.
Johannesburg, 28 January 2002
Enquiries:
JD Group Limited Tel: + 27 (0) 11 408 0213
David Sussman, Group Executive Chairman
Jan Bezuidenhout, Director Corporate Services
College Hill Investor Relations Tel: + 27 (0) 11 447 3030
Julia Kerr
John Paul Waites
