| Wed 27 Mar 2002, 0:00 | | Homechoice Holdings Limited - Audited Financial Re |
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31 December 2001
HomeChoice Holdings Limited
Registration number 1991/005430/06
JSE share code: HCH ISIN number: ZAE000011409
Audited financial results for the year ended 31 December 2001
Group income statement
Restated
Year ended Year ended
31/12/01 31/12/00
R'000 R'000
Revenue 604 130 645 070
Gross profit 263 896 300 828
Expenses (325 905) (298 058)
Operating (loss)/profit (62 009) 2 770
Interest paid (18 831) (8 826)
Interest received 1 663 831
Operating loss after interest (79 177) (5 225)
Taxation (22 626) (3 304)
Attributable loss (56 551) (1 921)
Weighted average shares in issue ('000) 135 577 135 577
Headline (loss)/earnings per share (cents) (39,5) 0,3
Loss per share (cents) (41,7) (1,4)
Diluted loss per share (cents) (41,7) (1,4)
R'000 R'000
Headline (loss)/earnings is determined
as follows:
Attributable loss (56 551) (1 921)
Adjusted for:
Employee share trust loan written down 3 064 1 163
Malawi closure cost - 1 127
Headline (loss)/earnings (53 487) 369
Group balance sheet
Restated
Year ended Year ended
31/12/01 31/12/00
R'000 R'000
Assets
Fixed and other non-current assets
Property, plant and equipment 15 320 13 533
Intangible assets 1 310 1 601
Loan to Employee Share Trust 1 328 4 392
17 958 19 526
Current assets
Inventory 51 071 76 341
Trade receivables 426 454 458 743
Other receivables and prepayments 9 799 10 459
Bank 107 9
487 431 545 552
Total assets 505 389 565 078
Equity and liabilities
Capital and reserves 299 570 356 066
Non-current liabilities
Interest bearing long-term liabilities 863 22
Deferred tax 25 476 48 108
26 339 48 130
Current liabilities
Interest bearing current liabilities 122 242 93 474
Non-interest bearing current liabilities 57 238 67 408
179 480 160 882
Total liabilities 205 819 209 012
Total equity and liabilities 505 389 565 078
Abridged cash flow statement
Restated
Year ended Year ended
31/12/01 31/12/00
R'000 R'000
Cash utilised by operations (9 428) (69 113)
Net interest paid (17 835) (6 278)
Taxation refund/(paid) 2 505 (767)
Net cash outflow from operating activities (24 758) (76 158)
Net cash outflow from investing activities (2 749) (3 013)
Net cash outflow from financing activities (377) (17 800)
Net decrease in cash and cash equivalents (27 884) (96 971)
(Bank overdraft)/Cash and cash equivalents
at beginning of year (93 425) 3 546
Bank overdraft at end of year (121 309) (93 425)
Statement of changes in equity
R'000
Share Share Distributable
capital premium reserves Total
R'000 R'000 R'000 R'000
Balance at 31 December 1999 1 336 214 677 140 095 356 108
Prior year adjustment - - (1 639) (1 639)
Balance at 31 December 1999
as restated 1 336 214 677 138 456 354 469
Net loss for the year - - (1 921) (1 921)
Goodwill adjustment - - 3 556 3 556
Capitalisation issue 20 (20) - -
Share issue expenses - (38) - (38)
Balance at 31 December 2000 1 356 214 619 140 091 356 066
Balance at 31 December 2000
as previously reported 1 356 214 619 146 515 362 490
Prior year adjustment - - (6 424) (6 424)
Net loss for the year - - (56 551) (56 551)
Goodwill adjustment - - 55 55
Balance at 31 December 2001 1 356 214 619 83 595 299 570
Other financial information
Restated
Year ended Year ended
31/12/01 31/12/00
Debt/equity ratio (:1) 0,41 0,26
Depreciation - property, plant, equipment
and intangible assets (R'000) 6 132 7 619
Capital expenditure (R'000) 11 274 7 472
Capital commitments (R'000)
- authorised 305 75
- authorised and contracted for 594 7 004
Shares in issue at end of period ('000) 135 577 135 577
Net asset value per share (cents) 221,0 262,6
Note: The borrowing powers of the Group are not limited in terms of the
Articles of Association of the Group companies.
Operating loss is stated after charging R85,5 million for additional
doubtful debt provisioning and R3,1 million write-down of loan to the
employee share trust. The tax effect of these charges is to reduce the
taxation expense by R25,7 million.
Commentary
Trading results
HomeChoice has, as previously indicated, been focusing on a consolidation
process. Revenue, therefore, declined marginally by 6% to R605 million.
The mass market consumer has been negatively influenced by excessive credit
extension through banks, micro-lending and retailers. As a consequence,
delinquency levels have deteriorated as evidenced recently by other
companies' bad debt experiences.
Given the current economic environment, a decision was taken by the board to
value the book on a more prudent contractual ageing basis, rather than the
recency of payment basis previously used.
The above factors resulted in an additional doubtful debt provision of R86
million.
The year's trading was also negatively affected by the postal strike action
in March, the substantial decline of the rand and unanticipated processing
problems caused by the implementation of new enterprise wide computer
systems. These problems have subsequently been resolved.
Net gearing costs at R17 million were higher compared to the previous year,
due to the effects of utilising higher level of borrowings to fund working
capital requirements.
The combined effect of the above resulted in an attributable loss of R56
million.
Cash flow and banking facilities
As predicted, the Group for the second half of the financial year produced a
positive operating cash flow, which has served to reduce creditors and bank
borrowings by R37 million from June 2001. This trend is expected to continue
during 2002 particularly in the second half of the year, and the board
anticipates that bank borrowings will decline by year end.
The Group and its bankers have successfully negotiated a security sharing
agreement between the principal lender banks to support their facilities
granted to the Group. The borrowing facilities have been agreed, and any
amendment requires unanimous agreement of the banks. Such facilities, which
are considered more than adequate for the planned operations of the Group
for the current financial year, are R130,5 million and will be reduced to
R100 million by year end in light of the expected positive operating
cashflows. Provision of a cession of debtors and a notarial bond with a
maximum value of R60 million, over HomeChoice (Pty) Ltd's unsecured moveable
assets have been granted as security for these facilities.
Change in accounting policy
The Group has changed its accounting policy in respect of customer returns.
Previously physical returns were accounted for as and when received.
Provision is now made for future anticipated returns. The impact of the
change was to decrease opening distributable reserves by R6,4 million split
between 2000 - R4,7 million, and prior years - R1,6 million. The effect on
the current year is to decrease the loss after taxation by R1,9 million.
Contingent liability
There continues to be no further significant developments with respect to
the South African Revenue Service 1999 claim for customs duty and VAT of R10
million and forfeitures of R21 million. A court date during May 2002 has
been set at the Pretoria Supreme Court, to consider our application to set
aside the claim. Based on substantial evidence and senior legal counsel
opinion, the board remains confident the claim is invalid.
Directorate
Mr KDM Warburton and Ms D Paterson, who in terms of the Articles of
Association retire at the next annual general meeting, have indicated that
they will not be available for re-election.
Ms D Paterson with effect from 30 April 2002 has resigned from her executive
responsibility over the merchandise department. Ms Paterson will, in future,
consult to the Group on various merchandise aspects.
Prospects
The principal focus for 2002 will be to continue the process of
consolidation, considerably tighten credit criteria, improve collections and
cash flow and reduce costs.
Trading results and cash flows to the date of this report are in line with
expectations.
Revenue for the year is planned to decline and the board is confident the
corrective measures being taken will restore the Group to profitability.
On behalf of the board
RE Garratt JC Hubbard
Executive chairman Financial director
Cape Town
27 March 2002
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
RE Garratt, MY Guttler, JC Hubbard, WG Morrissey, D Paterson, DA Walker, J
Whitehouse, KDM Warburton*, AGW Williamson*
* (Non executive)
