| Thu 9 May 2002, 0:00 | | Nando's Group Holdings Limited - Audited Results F |
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February 2002
Nando's Group Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number:1994/07318/06)
Alpha code: NDS ISIN number: ZAE000029765
Audited Results for the year ended 28 February 2002
GROUP INCOME STATEMENT
28 February 28 February
2002 2001
Audited Audited
R' 000 R' 000
Note
Revenue 458 140 471 907
Cost of sales 175 523 187 527
Gross margin 282 617 284 380
Net operating expenses 223 048 228 456
Operating income before
depreciation 59 569 55 924
Depreciation 17 150 19 737
Operating income 42 419 36 187
Exceptional item:
Restructuring
Costs - 3 172
Net finance costs 9 126 15 027
Income before associated
Companies 33 293 17 988
attributable share of net income
Associated companies attributable
share of net income 135 4 441
Current year profit before
Taxation 12 571 4 441
Current year taxation (3 615) -
Deferred taxation adjustment 1 (8 821) -
Profit before taxation 33 428 22 429
Taxation (7 535) 7 093
Current year taxation 9 072 6 360
Deferred taxation (16 607) 733
Attributable income 40 963 15 336
Exceptional item: Restructuring
costs - 3 172
Headline earnings 40 963 18 508
Headline earnings per
share (cents) 6,34 2,86
Earnings per share (cents) 6,34 2,37
Net asset value per share (cents) 13,86 7,13
Weighted average number of
shares in issue ('000) 646 585 646 585
Note 1
United Kingdom deferred taxation
A deferred taxation liability was raised for the first time in 2002 due to a
change in UK GAAP from the partial to the comprehensive basis of accounting
for deferred taxation. This is now in line with South African GAAP.
The deferred taxation liability raised at year end is GBP2,5m with GBP0,65m
being charged to current year income and GBP1,85m being accounted as for an
adjustment to opening retained income. The group's share of the adjustment
to opening retained income has been recognised in the income statement in
the associate earnings line, effectively decreasing associate earnings by
GBP0,666m (R8,821m)
Sustainable headline earnings
Headline earnings as reported 40 963 18 508
Non recurring taxation adjustments
Deferred taxation - UK 8 821 -
Deferred taxation - Australia (15 896) -
Sustainable headline earnings 33 888 18 508
Sustainable headline earnings per share (cents) 5,24 2,86
BALANCE SHEET
28 February 28 February
2002 2001
Audited Audited
R' 000 R' 000
Assets
Non-current assets 188 569 170 938
Property, plant and equipment 89 635 86 267
Intangibles 27 168 24 935
Investments in associate companies
and other investments 49 333 53 658
Deferred taxation 17 633 1 278
Employee share incentive scheme 4 800 4 800
Current assets 90 374 60 651
Inventories 10 756 7 423
Accounts and other receivables 53 394 37 812
Bank balances and cash 26 224 15 416
Total Assets 278 943 231 589
Equity and liabilities
Share capital 6 465 6 465
Reserves 83 156 39 666
Ordinary shareholders' funds 89 621 46 131
Shareholders' loans 12 110 12 461
Shareholders' funds 101 731 58 592
Long Term Liabilities 34 283 55 961
Convertible debentures - employee
share incentive scheme 4 800 4 800
Deferred taxation 5 054 5 306
Current liabilities 133 075 106 930
Accounts payable, other accounts
payable and provisions 101 966 79 898
Current portion of long term
liabilities 18 571 11 938
Taxation 5 802 7 479
Bank overdrafts 6 736 7 615
Total Equity and Liabilities 278 943 231 589
CASH FLOW STATEMENT
R' 000 R' 000
Cash generated by operations 58 077 49 944
Net finance costs (9 126) (15 027)
Taxation paid (10 749) (2 074)
Cashflows from operating activities 38 202 32 843
Cashflows from investing activities (975) 7 579
Cash flows from financing activities (15 395) (14 460)
Net increase in cash and cash
Equivalents 21 850 25 962
Effect of foreign exchange rate changes (10 163) (2 687)
Cash and cash equivalents at beginning
of the year 7 801 (15 474)
Cash and cash equivalents at end
of the year 19 488 7 801
STATEMENT OF CHANGES IN EQUITY
R'000 R'000 R'000
Share Reserves Total
Capital
Balance at 29 February 2000 6 465 21 610 28 075
Net income for the year - 15 336 15 336
Translation differences - 2 720 2 720
Balance at 28 February 2001 6 465 39 666 46 131
Net income for the year - 40 963 40 963
Translation differences - 2 527 2 527
Balance at 28 February 2002 6 465 83 156 89 621
NANDO'S GROUP HOLDINGS GROUP STORE NUMBERS
END OF FEBRUARY 2002
1997 1998 1999 2000 2001 TOTAL Corporate Franchise
Stores Stores
South Africa 100 122 142 147 160 177 68 109
Australia 7 14 32 33 48 59 16 43
United Kingdom 7 7 15 23 30 47 47 0
Israel 4 6 9 9 10 11 8 3
Canada 3 4 7 6 7 8 2 6
Malaysia 0 0 3 6 10 13 0 13
Saudi Arabia 0 0 2 2 3 3 0 3
Pakistan 0 0 0 0 0 1 0 1
Quatar 0 0 0 0 0 1 0 1
Egypt 0 0 0 1 0 0 0 0
Botswana 3 3 3 3 4 6 0 6
Ivory Coast 0 0 0 0 1 1 0 1
Kenya 0 0 3 6 7 6 0 6
Malawi 0 0 0 1 1 1 0 1
Mo ambique 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
137 169 234 258 304 357 141 216
NGH has a 25% equity interest in Innscor Regional Foods Limited which
provides the group with further interests in an additional 34 units in
Ghana, Ivory Coast, Kenya, Mocambique, Tanzania, Uganda and Zambia, based on
the Innscor multi brand concept.
- Sustainable earnings 83.1 % increase
- Headline earnings 121.3% increase
- Net asset value 94.3% increase
- Interest bearing debt 44.5% reduction
- Net finance costs 39.3% reduction
- % contribution from offshore operations 60.4%
The Nando's Mission - Nando's core focus is the establishment, development
and operation of a chain of restaurants serving spicy, peri peri, marinated,
flame grilled chicken and associated food items under the Nando's brand.
The Nando's experience has enabled the group to improve market share and
headline earnings in an extremely competitive environment coupled with a
volatile global economy.
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.
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.
Review of operations - The results of the group for the twelve months ended
28 February 2002, together with comparative figures, are shown alongside.
Financial overview - The group has performed in line with expectations for
the twelve months ended
28 February 2002. The year under review was characterised by building a
platform for future growth in core markets based on solid fundamentals.
Nando's has continued its growth path with headline earnings increasing by
121.3 % over the corresponding previous year. The group's sustainable
earnings (calculated before the once off net benefit of deferred taxation
raised in Australia and the United Kingdom operations respectively)
increased by 83.1%, from R18.5 million to R33.9 million. Group revenue,
which comprises sales, royalties and master franchise premiums, reduced by
2.9% primarily as a consequence of the conversion of corporate stores to
franchise units. The group's store operating gross margins increased from
60.3 % to 61.7%. The operating cost percentages of the group remained static
at 48% following continuous attention and emphasis placed on cost controls
within the group.
Finance costs reduced by 39 %, following the reduction in interest bearing
debt. The group's net income before taxation and before contribution from
associated companies increased by 57.3 % over the corresponding period which
has been adjusted for restructuring costs to facilitate meaningful
comparison.
The group's attributable share of the net income from associated companies
before the raising of a deferred taxation charge following the adoption by
Nando's UK of FRS 19, increased by 101.7% which reflects the increased
contribution from the United Kingdom operation in which the group has a 36%
interest. The effect of the adoption of FRS 19 was to increase the taxation
charge of associates by R8.8 million.
The strong cashflows generated by the group reduced interest bearing debt by
R26.6 million, from
R60.1 million to R33.4 million. Further reductions are anticipated in the
future. The group's debt to equity ratio improved from 103 % to 32 %.
Following a strong operational and financial performance, the group's net
asset value improved by 94.3%, from 7.1 cents per share to 13.9 cents per
share.
Operational review - The group's store base increased by 17.4 % from 304
stores to 357 stores. There are 180 stores (50.4% of the group's store base)
located in international markets. These stores contribute
60.4 % 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 South African operations reflect the performance expected from a premium
brand.
The core focus areas of the group's expansion continue to be Australia and
the United Kingdom. The United Kingdom reported an extremely pleasing
performance, especially given the intense level of competition experienced
in that market. The Australian/New Zealand operation with 59 stores has
established a credible brand presence and delivered a satisfactory
performance in line with expectations.
The performances of Canada and Malaysia improved over the previous year.
Trading conditions in the Middle East continue to be affected by volatile
economic and political conditions, although showing significant improvement
over the previous year.
All costs incurred by the group in relation to the establishment of a retail
presence in North America have been expensed in the year under review. The
group's retail presence in the United States has resulted in the listings of
the Nando's grocery range in several supermarket chains in California. The
Nando's grocery range of products, manufactured in house by the group in
South Africa, is now exported to group companies in Australia, Canada, the
United Kingdom and the United States for sale in those markets.
Innscor Regional Foods Limited - The group's partner in Africa, Innscor
Africa Limited has announced the formal conclusion of a commercial
arrangement with ExxonMobil to implement an exclusive pan-African
development of its food service offerings housed in Innscor Regional Foods
Limited (IRF).
The IRF multi food concepts will be located at the oil company's service
stations across the African continent. The equity risk inherent in the IRF
relationship has been mitigated through the establishment of a licensing
arrangement in terms of which the group will receive 25% of all royalties
generated by the combined Nando's and Innscor operations. The ExxonMobil
agreement envisages the opening of 216 food counters on ExxonMobil sites by
December 2004. This arrangement is in addition to royalties generated by
IRF's non ExxonMobil sites. In terms of the restructure, the group was
indemnified against all claims and losses incurred by IRF which arose prior
to 31 December 2001. Claims on loan account of R10 million are to be repaid
to the group. Capital contributions are not required from NGH following this
reorganisation.
The group's shareholding in IRF was reduced from 33.33% to 25% as a
consequence of the restructure. We believe that the stature and presence of
ExxonMobil as a partner in the development of the underlying royalty
operations underpins the growth and success of the group's African
operations.
Contingent liabilities and guarantees - The group has provided guarantees to
the Industrial Development Corporation ("IDC") in the amount of R 43.6
million in respect of franchises transacted through the IDC facility. These
securities are in addition to guarantees, suretyships and other collateral
provided by individual franchsisees.
The group has pledged a deposit of GBP0.5 million to Citco Bank Nederland NV
("Citco") in respect of advances by Citco to the Nando's United Kingdom
operation.
Accounting policies - The accounting policies adopted for purposes of this
report comply, in all material respects, with South African Statements of
GAAP and are consistent with the previous year.
Dividend - The board has resolved not to declare a dividend. Cashflows from
operations will be utilised to further reduce interest bearing debt.
Prospects - Based on the existing fundamentals within the group, we believe
that the positive momentum of the group will continue.
Robert Brozin Les Perlman Sandton
Chief Executive Officer Chief Financial Officer
9 May 2002
SEGMENTAL REPORT (R'000)
South Australia Middle Canada Malaysia UK USA Africa Total
Africa East
Revenue 303 192 81 064 53 566 15 294 2 679 0 637 1 708 458 140
Operating
income before
taxation 18 162 5 848 5 212 1 442 2 679 13 409 (2 595) 1 708 45 864
% Operating
income
before
taxation to
total 39.6% 12.8% 11.4% 3.1% 5.8% 29.2% (5.7%) 3.7% 100%
Note: Revenue exclude revenues from associate companies
South Australia Middle Canada Total
Africa East
Assets
Non Current 130 752 39 199 13 672 4 945 188 569
Current 59 961 17 288 10 299 2 826 90 374
190 714 56 488 23 971 7 770 278 943
Liabilities
Non Current 49 198 6 039 975 36 56 247
Current 87 231 20 831 20 331 4 681 133 075
136 429 26 870 21 306 4 716 189 322
NAV 54 284 29 617 2 665 3 054 89 621
Directors: RC Brozin (ceo), MA Brey*, LZ Brozin*, FOSD Duarte, RAG
Enthoven*, F Guimaraes,
L Perlman, MD Radomsky, FJ Robertson*, BG Sacks, K Utian.
(*non-executive)
Registered office: 64 Third Avenue, Inanda, Sandton, 2196
Transfer Secretaries: Mercantile Registrars Limited,
11 Diagonal Street, Johannesburg, 2002
PO Box 1053, Johannesburg, 2000.
Visit the Nando's website at www.nandos.com
