| Tue 27 Aug 2002, 0:00 | | Pepkor Limited - Group Results For The 12 Months E |
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Pepkor Limited - Group results for the 12 months ended 30 June 2002
Pepkor Limited
Group results for the 12 months ended 30 June 2002
Turnover
R6 066 million up 27%
Operating profit
R336 million up 68%
Earnings per share
123,8 cents up 141%
Group income statement
Reviewed Audited
52 weeks to 53 weeks to Change
(R`000) 30/06/02 30/06/01 %
Turnover 6 066 438 4 762 412 27
Operating profit 335 989 200 097 68
Net investment income/
(interest paid) 91 764 (32 609)
Investment income 35 016 91 129
Interest paid (117 855) (151 415)
Exchange rate gain 174 603 27 677
Profit before exceptional items 427 753 167 488 155
Exceptional items 71 933 (252 886)
Amortisation of goodwill (2 221) (801)
Profit/(loss) before taxation 497 465 (86 199)
Taxation 143 395 46 371 209
Taxation on normal activities 142 960 46 371
Taxation on exceptional items 435 -
Profit/(loss) after taxation 354 070 (132 570)
Outside shareholders` interest 10 092 7 243
Net profit/(loss) 343 978 (139 813)
Earnings per share (cents)
- before exceptional items 123,8 51,3 141
- after exceptional items 155,0 (63,0)
- headline earnings 124,7 51,7 141
Dividend (cents per share) 24,0 18,0 33
Dividend cover - before
exceptional items (times) 5,2 2,9
Number of shares for calculation
of earnings per share (`000) 221 936 221 936
Group balance sheet
Reviewed Audited
(R`000) 30/06/02 30/06/01
Non-current assets 955 226 514 828
Fixed assets 486 503 388 764
Goodwill 96 600 18 873
Investments 323 339 59 840
Deferred taxation 48 784 47 351
Current assets 2 017 192 1 901 082
Inventories 1 244 174 1 306 166
Accounts receivable 94 643 56 585
Bank balances and cash 678 375 538 331
Total assets 2 972 418 2 415 910
Ordinary shareholders` funds 1 291 415 980 087
Preference share capital 92 92
Outside shareholders` interest 23 420 19 839
Non-current liabilities 63 002 67 078
Long-term loans 1 202 12 877
Deferred taxation 17 189 14 168
Other non-current liabilities 44 611 40 033
Current liabilities 1 539 489 1 348 814
Short-term loans and
bank overdrafts 514 376 494 337
Other current liabilities 1 080 113 854 477
Total shareholders` funds
and liabilities 2 972 418 2 415 910
Group statement of changes in shareholders` funds
Reviewed Audited
52 weeks to 53 weeks to
(R`000) 30/06/02 30/06/01
Balance at 1 July 980 087 1 162 283
Unbundling adjustments - 41 085
Exchange rate adjustments 11 737 3 087
Net profit/(loss) for the year 343 978 (139 813)
Dividends paid (44 387) (86 555)
Balance at 30 June 1 291 415 980 087
Supplementary information
Reviewed Audited
52 weeks to 53 weeks to
(R`000) 30/06/02 30/06/01
1. Depreciation for the year 110 163 91 000
2. Dividends received included in
net investment income 8 212 8 348
3. Capital expenditure for the year 191 742 122 833
4. Calculation of headline earnings
Net profit/(loss) 343 978 (139 813)
Attributable exceptional items (71 498) 252 886
Amortisation of goodwill 2 221 801
Loss on sale and scrapping of
fixed assets after taxation and
outside shareholders` interest 2 110 837
276 811 114 711
30/06/02 30/06/01
5. Number of shares issued (`000) 221 936 221 936
6. Net asset value per share (cents) 581,9 441,6
7. Investments
Listed investments at cost less
amounts written off 292 217 3 720
Unlisted investments at cost less amounts
written off and directors` valuation 7 444 40 697
Loans 23 678 15 423
323 339 59 840
Listed investments at market value 292 217 3 720
8. Contingent liabilities 79 179 156 355
9. Capital commitments 59 337 162 904
10. Operating lease commitments 1 435 090 1 200 397
Group cash flow statement
Reviewed Audited
52 weeks to 53 weeks to
(R`000) 30/06/02 30/06/01
Cash flow from operations 746 652 213 803
Dividends paid (46 122) (90 140)
Cash retained from operations 700 530 123 663
Investment activities (568 850) 22 668
Net acquisition of fixed assets (183 425) (13 427)
Other investment activities (385 425) 36 095
Net cash flow 131 680 146 331
Financing activities 8 364 55 899
Proceeds from share issue - 92
Net debt raised 8 364 55 807
Increase in bank balances and cash 140 044 202 230
Segmental analysis
Reviewed Audited
52 weeks to 53 weeks to
(R`000) 30/06/02 30/06/01
Turnover
Pep 3 055 396 2 570 013
Ackermans 1 180 820 1 027 853
Best & Less 1 830 222 1 164 546
6 066 438 4 762 412
Operating profit
Pep 220 139 148 805
Ackermans 75 177 63 983
Best & Less 53 980 5 053
Financing, investments and
head office (13 307) (17 744)
335 989 200 097
Geographical spread of operating profit
South Africa 239 657 147 817
Rest of Africa 42 352 47 225
Australia 53 980 5 053
335 989 200 097
Segmental analysis - graph information
Turnover
Pep 50%
Ackermans 30%
Best & Less 20%
Operating profit
Pep 63%
Ackermans 22%
Best & Less 15%
Operational review
Despite the inflation pressures which characterised especially the second half
of the year, all three chains in the group - Pep and Ackermans in South Africa
and Best & Less in Australia - performed substantially better than in 2001. All
three have shown that they are excellently equipped to compete in a highly
challenging discount market. Ackermans increased its profit from an already
substantial base while a remarkable turnaround was effected at Best & Less.
However, because it is at this stage still by far the biggest business unit, it
is the performance of Pep that is of decisive importance for Pepkor`s results.
And in the year under review this chain surpassed all expectations.
The year saw far-reaching changes at top management level. It is, however, an
indication of the depth and quality of management in the group that despite the
unavoidable disruption caused by such changes it could still produce results
more than justifying the confidence of investors.
Pep
This company improved its business on many fronts and is now well positioned for
further growth. Not only did it increase operating profit by 48% to R220 million
- this despite the fact that the financial year had one trading week less than
2001 - but it also increased its operating margin to 7,2%. In addition, Pep
strengthened its balance sheet impressively, and generated a positive cash flow
from operations of R437 million.
As in the first half of the year, Pep`s results were positively affected by
currency gains which arose, inter alia, because of the weakening of the rand
against the currencies of certain African countries in which Pep operates. These
gains, which amounted to R74 million, were accompanied by positive cash flow
from these African countries which reduced the chain`s exposure in those
countries.
The current results flow from sustained initiatives introduced by management
over the past three years, which revitalised the business. Every aspect was
addressed, from stock holding and store locations to information and
distribution systems. So effective was the distribution system developed that it
received the national award for the best logistic system.
Staff and staff training received special attention, and the company has
surpassed its empowerment objectives with ease. In the course of the year Pep
was also adjudged in an annual survey as the best South African retailer to work
for. However, Pep is not only popular with staff but also its target market.
Research has shown that the chain has grown market share 20% during the past 2
years while acceptance of the brand increased from 59% in 1999 to 80% in 2002.
Store locations are also extensively researched. During the past three years 170
stores in South Africa were moved to better locations. An increasing number is
opening in shopping malls targeting Pep`s market.
Sales of cellular products, mostly air time which is discounted on an ongoing
basis, are still increasing strongly and now represent more than 11% of total
turnover.
In the past year Pep performed very well in neighbouring countries such as
Namibia and Botswana, but in Ghana, Malawi, Mozambique and Zambia, which are
managed as a unit, the company suffered a loss due to stock write-offs. The
expectation is that despite the poorly performing economies of countries such as
Ghana and Malawi, Pep`s operations in these countries will be profitable in the
new financial year.
Ackermans
Where the other two chains are at present characterised by dynamic change,
Ackermans is at this stage a more stable business, growing solidly and at an
acceptable pace, maintaining satisfactory profit margins and producing an
excellent return on capital employed.
Its vitality is confirmed by its strong growth in the number of stores during
the period under review. It opened 18 new stores, eight of them Hang Ten stand-
alone units, and now operates a total of 274 outlets. The excellent turnover
generated by the new stores is further proof of the high level of acceptance the
trusted Ackermans brand enjoys amongst consumers.
Margins came under pressure as the reporting period was one week shorter and due
to additional distribution costs caused by growing pains experienced in
implementing a new distribution strategy.
During the year Ackermans also started to expand its textile department
considerably. This department, for years a mainstay of the business, in recent
times receded slightly into the background. It is now receiving renewed
attention as a product range that can stimulate sales and generate sound
margins.
A strong focus was placed on the improvement of information and distribution
systems. Much attention has been devoted to refining the planning and
distribution system to stock stores countrywide in the shortest possible time.
Best & Less
The impressive turnaround effected in the group`s Australian chain is clearly
reflected in the results: an operating profit of almost R54 million as against
R5 million the previous year, achieved on a turnover which grew 57% from R1,16
billion to R1,83 billion.
As in the case of Pep this excellent performance also flowed from improvements
effected in all areas of the business. Merchandise quality and control in
particular played an important role. The objective is to offer the right product
at the right price; in addition, to bring the latest fashion on the sales floor
in the shortest possible time and, in doing so, to reach a younger market. One
of the steps taken to achieve the latter was the acquisition of the sole rights
in Australia to Mango, a popular brand with its target market.
To achieve the above objectives Best & Less reduced its number of suppliers and
entered into strategic alliances with the remaining ones. And as it is not easy
to increase prices in the highly competitive Australian retail market, the focus
was on optimising the supply chain.
In the period under review 14 stores were opened, mainly in Victoria and Western
Australia, and the chain now operates 122 stores which are located almost
exclusively in shopping centres. Although trading space was more readily
available during the past financial year due the economic downturn, the shortage
of trading space remains a problem in Australia. A trading format about half the
size of its conventional stores is being tested with a view to expanding that to
Australia`s rural areas.
Accounting policy
The annual financial statements have been prepared mainly on the historical cost
basis in accordance with South African Statements of Generally Accepted
Accounting Practice. In all material respects the accounting policies conform
with those adopted in the previous financial year, except as set out below.
In accordance with the new statement AC135: Investment property, depreciation on
fixed property is provided for on the straight-line method over not more than 50
years. The comparative figures in the income statement for the 53 weeks to 30
June 2001, as well as in the balance sheet at 30 June 2001, have been restated
accordingly. This change in accounting policy only has a minor effect, with
earnings per share (before exceptional items) for the 53 weeks to 30 June 2001
dropping from the previously published 51,6 cents to 51,3 cents, while the net
asset value per share at 30 June 2001 reduced from the previous 443,5 cents to
441,6 cents.
The group`s auditors, PricewaterhouseCoopers Inc., reviewed the group results.
Their unqualified report is available on request from the company secretary.
Comments on the results
Net investment income
The decline in the value of the rand during the financial year benefited net
investment income considerably. Rand-denominated foreign debt funding the
group`s foreign interests produced an exchange rate gain of R175 million.
Exceptional items
During the previous financial year provisions were created in respect of loans
to share incentive trusts and the put option in respect of shares in Shoprite
Holdings Limited. In this year writebacks of these provisions amount to R89
million as a result of increases in share prices. Impairment write-offs on fixed
property amount to R17 million.
Prospects
As long as food inflation remains at its present high level it must unavoidably
affect clothing sales to consumers with a low disposable income. At both Pep and
Ackermans initiatives are in place to ensure further strong growth. In addition,
Pepkor`s Australian chain has been placed on a solid growth path to higher
profits. The Board therefore expects the group to achieve real earnings growth
(excluding finance currency gains) for at least the first six months of the new
financial year.
Declaration of dividend
Notice is hereby given that the board has declared a final dividend of 13 cents
per ordinary share for the year to 30 June 2002. The dividend will be payable on
Monday, 30 September 2002.
In terms of the requirements of STRATE Thursday, 19 September 2002, is the last
day on which the shares can be traded cum dividend. As from Friday, 20 September
2002, shares will trade ex dividend. The record date is Friday, 27 September
2002.
Share certificates may not be dematerialised or rematerialised between Friday,
20 September 2002, and Friday, 27 September 2002, both dates inclusive.
By order of the board
CH Wiese PJ Erasmus
Chairman Managing director
Pepkor Limited (Registration number: 1965/007765/06)
36 Stellenberg Road, Parow Industria 7490
JSE share code: PEP ISIN number: ZAE000005344
Date: 27/08/2002 01:47:00 PM Produced by the JSE SENS Department
