| Wed 24 Apr 2002, 0:00 | | L.a Group Ltd - Audited Results For The Year Ended |
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L.A. GROUP LIMITED
(Registration Number 1936/008786/06)
Audited results for the year ended February 28, 2002
Operating Income and Headline Earnings from Continuing Operations up 30%
Net Asset Value per Share up 25%
GROUP INCOME STATEMENT (R'000)
Continuing Discontinuing
% Operations Operations Total
change 2002 2001 2002 2001 2002 2001
TURNOVER 25 575 596 460 202 63 701 74 952 639 297 535 154
Operating
income
(loss)
before
depreciation
and amor-
tisation 91 902 70 224 (15 310) (3 031) 76 592 67 193
Depreciation,
goodwill and
trademark
amortisation 4 173 2 832 2 009 2 276 6 182 5 108
Operating
income
(loss)
before net
interest
paid 30 87 729 67 392 (17 319) (5 307) 70 410 62 085
Net
interest
paid 4 147 1 558 1 884 925 6 031 2 483
Operating
profit
(loss)
before
taxation 83 582 65 834 (19 203) (6 232) 64 379 59 602
Taxation 25 862 17 981 7 500 18 362 17 981
Income
(loss)
after
taxation 57 720 47 853 (11 703) (6 232) 46 017 41 621
Preference
dividends - 25 - - - 25
Income
attributable
to outside
shareholders 173 123 - - 173 123
Net income
(loss)
attributable
to ordinary
share-
holders 21 57 547 47 705 (11 703) (6 232) 45 844 41 473
Transfer
to non
distributable
reserves - 824 - - - 824
Dividend
paid 4 362 - - - 4 362 -
Retained
earnings
(accumulated
loss) 53 185 46 881 (11 703) (6 232) 41 482 40 649
Number of
ordinary
and "N"
ordinary
shares in
issue 72 633 818 72 699 218
At weighted
average 65 423 846 70 430 295
Diluted 66 450 951 70 430 295
Headline
earnings
per ordinary
and 'N'
ordinary
shares - cents
At weighted
average 30 87.75 67.26 (14.92) (8.77) 72.83 58.49
Diluted 86.39 67.26 (14.69) (8.77) 71.70 58.49
Earnings
per ordinary
and 'N'
ordinary
shares - cents
At weighted
average 87.96 67.65 (17.89) (8.77) 70.07 58.88
Diluted 86.60 67.65 (17.61) (8.77) 68.99 58.88
Dividend paid
per ordinary
and "N"
ordinary
share - cents 6.00 -
Proposed
dividend per
ordinary
and "N"
ordinary
share - cents 10.00 6.00
Net tangible
asset value
per share
- cents 25 362.13 289.98
Depreciation 5 952 4 946
Capital Expenditure 3 017 5 523
Capital commitments 6 500 2 590
RECONCILIATION OF EARNINGS PER SHARE TO HEADLINE EARNINGS PER SHARE (R'000)
2002 2001
Net income per group income statement 45 844 41 473
Goodwill and trademark amortisation 230 162
Loss on disposal of interest in subsidiary 251
Losses on sale of tangible assets 1 904 (52)
Gain on payment to vendor for
business acquired (583) (389)
Headline earnings 47 646 41 194
GROUP BALANCE SHEET (R'000)
Feb 28 Feb 28
2002 2001
ASSETS
Non-current assets
Fixed assets 9 987 14 820
Intangible assets 1 908 2 329
Loan staff share trust 1 047 1 047
Deferred taxation 28 695 28 543
41 637 46 739
Current assets
Inventories 169 838 138 898
Trade and other receivables 148 819 115 165
Taxation 626 1 318
Cash and cash equivalents 39 173 48 757
358 456 304 138
Total Assets 400 093 350 877
EQUITY AND LIABILITIES
Equity
Ordinary shareholders' equity 238 609 191 872
Outside shareholders' interest 3 253 1 950
241 862 193 822
Non-current liabilities
Non-interest bearing 8 885
Interest bearing 6 250 8 400
Deferred taxation 1 115
Current liabilities
Non-interest bearing
Vendors for businesses acquired 12 200 24 443
Trade and other payables 68 950 51 699
Taxation 9 642 3 902
Interest bearing
Vendors for businesses acquired 2 800
Short term loans 9 575 8 367
Bank overdraft 47 699 51 359
158 231 157 055
Total Equity and Liabilities 400 093 350 877
GROUP CASH FLOW STATEMENT (R '000)
2002 2001
OPERATING ACTIVITIES
Operating profit before
interest and taxation 70 410 62 085
Adjustment for non cash flow items 12 450 1 888
Cash generated by operations 82 860 63 973
Movement in working capital (47 367) (47 693)
Interest received 2 947 2 752
Interest paid (8 978) (5 235)
Dividends paid - ordinary (4 362)
Dvidends paid - preference (25)
Taxation paid (16 724) (24 555)
Net cash (outflow) inflow
from operating activities 8 376 (10 783)
INVESTING ACTIVITIES
Acquisitions of fixed assets (3 017) (5 523)
Proceeds from sale of fixed assets 1 991 150
Investment in subsidiaries (834)
Purchase of trademarks (1 900)
Loan to staff trust (383)
Net cash (outflow) inflow
from investing activities (1 026) (8 490)
FINANCING ACTIVITIES
Share issue expenses (48)
Share buy back (59) (9 021)
Preference shares redeemed (370)
Short term loans (2 215) 7 828
Payment to vendors (24 444) (35 207)
Net cash outflow from
financing activities (26 718) (36 818)
Net decrease in cash and
cash equivalents (19 368) (56 091)
Cash and cash equivalents at
beginning of year (2 602) 52 096
Effect of foreign exchange movements 13 444 1 393
Cash and cash equivalents at end of year (8 526) (2 602)
SEGMENTAL ANALYSIS (R'000)
Revenue % Result Net
2002 assets
(Liabili-
ties)
Retail 63 701 10 (17 865) 3 658
Corporate clothing 269 840 42 19 856 157 951
Branded distribution 305 756 48 43 275 84 779
Corporate royalties
and expenses 25 144 (14 564)
Total 639 297 100 70 410 231 824
2001
Retail 74 952 14 (5 567) 29 637
Corporate clothing 222 272 42 17 106 121 473
Branded distribution 237 930 44 30 648 64 241
Corporate royalties
and expenses 19 898 (44 886)
Total 535 154 100 62 085 170 465
GEOGRAPHIC ANALYSIS (R'000)
Revenue % Result % Net %
2002 assets
(Liabi-
lities)
Southern Africa 433 423 68 62 584 89 144 741 62
European community 205 874 32 7 826 11 87 083 38
Total 639 297 100 70 410 100 231 824 100
2001
Southern Africa 359 419 74 55 688 90 95 187 55
European community 139 735 26 6 397 10 75 278 45
Total 535 154 100 62 085 100 170 465 100
STATEMENT OF CHANGES IN ORDINARY SHAREHOLDERS EQUITY (R'000)
Share Non- Distri-
capital distri- butable
and butable reserves
premium reserves reserves Total
Balance at March 1,
2000 as previously
reported 44 116 2 046 84 498 130 660
Prior year adjustment -
deferred taxation 31 948 31 948
Balance at March 1,
2000 as restated 44 116 2 046 116 446 162 608
Share buy-backs (9 021) (9 021)
Capitalisation award 19 124 (19 124) -
Share issue expenses (48) (48)
Earnings attributable
to shareholders 41 473 41 473
Foreign currency
translation reserve (3 140) (3 140)
Profit transferred in
respect of UK subsidiary -
pre acquisition losses 824 (824) -
Balance as at
March 1, 2001 54 171 (270) 137 971 191 872
Share buy-backs (59) (59)
Earnings attributable
to shareholders 45 844 45 844
Dividends paid (4 362) (4 362)
Foreign currency
translation reserve,
less current and
deferred taxation 5 314 5 314
Balance at
February 28, 2002 54 112 5 044 179 453 238 609
INTRODUCTION
The L.A. Group Limited ("the Group") is one of the country's leading apparel
and footwear companies. Its main focus is the supply of corporate clothing
for both the local and international markets and the wholesale distribution
of branded clothing and footwear.
The stores which comprised the retail division were either disposed of or
closed down during the second half of the year or shortly
thereafter.
OVERVIEW
The Group performed exceptionally well during the latter part of the year.
Although trading started off slowly in the first six months, business gained
momentum as a result of higher consumer demand, the rollout of new corporate
clothing contracts and the establishment of a joint venture in the United
States of America.
Overall, Group turnover was 20 percent higher at R639-million. The local
divisions accounted for R433-million (67 percent) while the offshore
operations achieved R206-million (33 percent).
Group operating profit, after net interest paid, was 8 percent higher at R64-
million, after taking into account the loss of R19-million incurred by the
now defunct retail division and gain on the exchange rate of R13-million
(2001:R6-million).
Income after tax for the Group increased by 12 percent to R46-million
(2001:R41-million). Headline earnings per ordinary and "N" ordinary share
increased by 24,5 percent from 58 cents to 72 cents.
The results from the continuing operations consist of the corporate clothing
and branded distribution division as well as corporate activities. The
erstwhile retail division is now treated as a discontinued operation.
CONTINUING OPERATIONS
Turnover increased by 25 percent while the operating margin remained at 15
percent. Operating profit before tax was R83-million (2001:R65-million), 27
percent higher than the previous year.
Branded distribution division
This consists of Skye Products and the licensing of the Polo brand.
This division continues to be the biggest contributor to increased
sales and operating profit. Its quality brands supported by improved
operating efficiencies experienced strong consumer demand and a record
festive season. It contributed 48 percent to group turnover.The increase
in the Polo royalty flow for the year was the biggest percentage increase in
the Group. The four licensed self-standing Polo stores created an increased
awareness of the brand, which has a strong and growing appeal among a new
generation of professionals.
Following the success of the Polo brand in South Africa, the Group is
investigating opportunities for expanding into Sub-Saharan Africa where it
also owns the rights.
Management is confident that this division should continue to deliver
sustainable results in the coming financial year, notwithstanding some
concern regarding the effect of the weakening rand on operating margins.
Corporate clothing
This division contributed R270-million (2001:R222-million) in sales, which
is 23 percent higher than the previous period. This increase in sales
includes the effect of the weakening rand/pound exchange rate.
The South African division achieved its budget despite not having secured
any new major contracts. Its international counterpart, Allen & Douglas
("A&D") narrowly missed its budget as a substantial contract rolled over
into the new financial year.
Following the introduction of The African Growth and Opportunities Act
(AGOA) in the United States of America, a joint corporate clothing export
venture was established. This division is being structured to ensure our
growing commitment to exports.
Carter Harris has recently been successful in securing a number of new major
contracts including the Telkom and Shell (Spain). In the UK, "A&D" has
already secured about 80% of its projected business for the next twelve
months amounting to R180-million and has also negotiated contract renewals
to the value of R75-million over the next three years. Together with the
anticipated success of the American joint venture, it is expected that the
corporate clothing division will deliver real growth in the coming financial
year.
DISCONTINUED OPERATIONS
As advised in the interim report last year, the Group had resolved to
dispose of its LA Jean and Oxygen retail stores.
Of the total number of stores, 11 were sold to Rage Distributors, six were
individually purchased under a management/supplier arrangement, five were
sold to a consortium of store management and the balance closed down. The
division's loss, which increased from R14,3-million at the interim stage to
R19-million, which includes all costs relating to the closure of the stores,
impacted on the Group's
results.
The LA Jean and Oxygen clothing brands will now be marketed to independent
retail outlets nationwide.
FINANCIAL INFORMATION
Accounting policies
The principal accounting policies, as set out in the previous annual report,
have been consistently applied throughout the twelve months under review,
except in the following instance:
Deferred tax
In accordance with AC 102, the Group has changed its accounting policy with
regard to the treatment of deferred tax assets. It now accounts for the
asset, where its recoverability in the future is certain as well as for all
timing differences. Accordingly, the previous years figures have been
restated.
CURRENT ASSETS
Cash and Cash equivalent
Of this amount, R12,2-million is committed for the payment to the vendor of
the A&D business and R11-million is committed in respect of the re-payment
of the short-term loan.
Deferred tax
Following a change in accounting policy, a deferred tax asset has been
raised in respect of temporary differences between the accounting and tax
values of trademarks previously written off. The previous year's figures
have accordingly been restated. In addition a deferred tax asset has been
created, recognising the value of tax losses likely to be utilised in the
immediate future.
CURRENT LIABILITIES
Vendor payments
This amount comprises the R12,2-million due to the vendors of A&D, which is
payable on April 30, 2002 and R2,8-million due to the vendors of Polo,
payable on June 30, 2002.
CONTINGENT LIABILITIES
The maximum value of lease commitments beyond February 2002 in respect of
stores closed is R4,1-million. Management is in negotiation with landlords
to reach settlement or arrange for sub-letting and is confident that it will
reduce this liability.
The Group has received a summons from Platinum Holdings (Pty) Ltd for
damages to the sum of R90-million arising from the disputed agreement
relating to the sale of the stores. The board of directors, acting on legal
advice, is confident that the claim (which it regards as grossly inflated)
is unlikely to succeed as, inter alia, the conditions precedent to the sale
were not fulfilled and the deposit never paid.
OTHER
Dividend paid
A cash dividend of 6 cents per share in respect of the year ended February
28, 2001 was paid to the holders of ordinary and "N" ordinary shares
registered on Friday, July 13, 2001. In accordance with the Group's
accounting policy, this payment is only reflected in the period in which it
is paid.
Share buy back
65 400 shares were bought back and cancelled during the period under
review. The Group has the authority to buy back further shares and will
continue to review whether such action is appropriate.
Number of shares for the calculation of earnings and net asset value per
share
The current year's calculations of earnings, headline earnings, diluted
earnings and net asset value per share have been adjusted in respect of 7
269 922 shares bought back to date and not cancelled.
Exchange Rate
The average exchange rate used to translate foreign currency income and
expenditure into South African rands was R13,10: 1
(2001:R10,78: 1).
DECLARATION OF FINAL DIVIDEND
Notice is hereby given that a final dividend of 10 cents per ordinary and
"N" ordinary share has been declared in respect of the financial year ended
February 28, 2002. This dividend is payable to shareholders recorded in the
books of the Company at the close of business on Friday, July 19, 2002.
The salient dates for the final dividend are as follows:
Last day to trade (cum dividend) Friday, July 19, 2002
First date of trading (ex dividend) Monday, July 22, 2002
Record date Friday, July 26, 2002
Payment date Monday, July 29, 2002
Share certificates may not be dematerialised or re-materialised between
Monday, July 15, 2002 and Friday, July 26, 2002, both dates inclusive. On
Monday, July 29, 2002, the dividends will be electronically transferred to
the bank accounts of all certificated shareholders where this facility is
available. Where electronic fund transfer is not available or desired,
cheques dated Monday, July 29, 2002 will be posted on that date.
Shareholders who have dematerialised their share certificates, will have
their bank accounts which are linked to their CSDP or broker's safe custody
accounts, credited on July 29, 2002.
PROSPECTS
Our Group strategy is to continue to build on the solid foundation laid last
year. The Group has a strong stable of brands and plan growing without
saturating its markets.
Executive management will continue with its focus on improving efficiencies
in the businesses through the implementation of initiatives aimed at
improving synergies and sharing of information and resources.
The Group has been listed for five years and over this period its average
turnover and net profit have shown steady growth. We are committed to
remaining a listed company despite the negative market sentiment towards
shares of small capitalisation companies.
We will continue with the creation of wealth for our shareholders through
increasing the net asset value, earnings and dividends per share.
Signed on behalf of the L.A. Group
AK Peer SA Mukadam
Executive Chairman Group Managing Director
22 April 2002
Registered office
Colinton House, Fedsure Oval, Cnr Protea and Cavendish Roads,
Claremont 7700 (PO Box 3500, Cape Town, 8000)
Transfer secretaries
Computershare Services (SA) (Pty) Ltd,
(Registration No: 1998/010439/07) 2nd Floor, Edura. 41 Fox Street,
Johannesburg 2001(P O Box 61051, Marshalltown 2107)
Directors
AK Peer (Chairman), SA Mukadam (Managing Director), F Peer*,
K Chetty, J Gochin*, R Orlin, C Qunta*, I Vukic*, TP Taylor*
* Non-Executive
Company Secretary
AM Bissett
Website: www.lagroup.co.za
Share Code: LAR ISIN Code: ZAE 000028676
"N" Share Code: LAN ISIN Code: ZAE 000028684
